Sportscene Group Inc. — Interim / Quarterly Report 2021

Jul 15, 2021

==> picture [175 x 58] intentionally omitted <==

Interim Condensed Consolidated Financial Statements

SPORTSCENE GROUP INC.

As at and for the 13-week and 39-week periods ended May 30, 2021 and May 24, 2020 (unaudited and not reviewed by the Company's external independent auditors)

SPORTSCENE GROUP INC.

Interim Condensed Consolidated Statements of Comprehensive Income

(in thousands of Canadian dollars, except for loss per share and number of outstanding shares)

(unaudited)

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Revenues (Note 5)	13,822	16,672	41,319	89,723
Cost of sales	8,182	9,623	24,875	36,441
Selling and administrative expenses, excluding amortization (Note 6	5,371	8,618	14,560	46,419
Other(gains)losses(Note 7)	(71)	5,062	(483)	4,752
Earnings (loss) before financial expenses, amortization,
net loss (income) of joint ventures and income tax	340	(6,631)	2,367	2,111
Amortization (Note 6)	670	2,392	3,623	7,237
Financial expenses (Note 8)	80	503	808	1,551
Net loss(income)ofjoint ventures(Note 12)	140	204	280	(206)
	890	3,099	4,711	8,582
Loss before income tax expense	(550)	(9,730)	(2,344)	(6,471)
Income tax recovery	(109)	(2,592)	(553)	(1,773)
Net and comprehensive loss	(441)	(7,138)	(1,791)	(4,698)
Net and comprehensive loss attributable to:
The Company’s shareholders	(443)	(7,082)	(1,779)	(4,638)
Non-controllinginterests	2	(56)	(12)	(60)
Net and comprehensive loss	(441)	(7,138)	(1,791)	(4,698)
Loss per share (in dollars) (Note 9):
Basic	(0.05)	(0.83)	(0.21)	(0.54)
Diluted	(0.05)	(0.83)	(0.21)	(0.54)
Weighted average number of outstanding Class A shares
(in thousands) (Note 9):
Basic(1)	8,568	8,548	8,557	8,548
Diluted(1)	8,568	8,548	8,557	8,548

See accompanying notes to interim condensed consolidated financial statements.

2

SPORTSCENE GROUP INC. Consolidated Statements of Changes in Shareholders’ Equity

(in thousands of Canadian dollars, except number of outstanding shares)

(unaudited)

Number of shares Share capital Stock-based compensation reserve Retained earnings Total Shareholders’ equity attributable to the Company’s shareholders	Non- controlling interests Total shareholders' equity
(in thousands) $ $ $ $ Balance as at August 25, 2019 8,548 4,510 556 33,289 38,355 Net and comprehensive loss - - - (4,638) (4,638) Contributions from and distributions to shareholders: Stock-based compensation - - 128 - 128 Dividends - - - (1,282) (1,282) Changes in interests in subsidiaries: Fair value of non-controlling interest at the business acquisition date - - - - -	$ $ 115 38,470 (60) (4,698) - 128 - (1,282) 107 107
Balance as at May 24, 2020 8,548 4,510 684 27,369 32,563	162 32,725
Balance as at August 30, 2020 8,548 4,510 723 28,144 33,377 Net and comprehensive loss - - - (1,779) (1,779) Contributions from and distributions to shareholders: Stock-based compensation (Note 14) - - 37 - 37 Issuance of shares following the exercise of stock options (Note 14) 20 71 (16) - 55 Changes in interests in subsidiaries: Shares redeemed from non- controllingshareholders - - - (530) (530)	45 33,422 (12) (1,791) - 37 - 55 305 (225)
Balance as at May 30, 2021 8,568 4,581 744 25,835 31,160	338 31,498

See accompanying notes to interim condensed consolidated financial statements.

3

SPORTSCENE GROUP INC.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

(unaudited)

	May 30,	August 30,
	2021	2020
	$	$
Assets
Current assets
Cash and cash equivalents (Note 15 (c))	8,446	8,390
Accounts receivable	8,635	11,490
Income tax receivable	641	361
Inventories	2,931	2,617
Prepaid expenses	968	458
Currentportion of notes receivable(Note 10)	50	-
Total current assets	21,671	23,316
Notes receivable and other assets (Note 10)	827	1,249
Property, plant and equipment	37,409	39,451
Intangible assets	5,298	5,738
Right-of-use assets (Note 11)	19,326	21,607
Deferred tax asset	4,553	4,212
Investments in joint ventures (Note 12)	2,470	3,279
Goodwill	9,138	9,138
Total assets	100,692	107,990
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities	12,713	15,598
Income tax payable	86	381
Deferred revenues and credits	928	1,120
Current portion of lease liabilities (Note 11)	3,823	4,605
Currentportion of long-term debt(Note 13)	696	733
Total current liabilities	18,246	22,437
Lease liabilities (Note 11)	20,497	22,930
Long-term debt (Note 13)	26,614	25,119
Contingent consideration	2,217	2,127
Deferred revenues and credits	1,155	1,562
Deferred tax liability	465	393
Total liabilities	69,194	74,568
Shareholders’ equity (Note 14)
Share capital	4,581	4,510
Stock-based compensation reserve (Note 14)	744	723
Retained earnings	25,835	28,144
Shareholders’ equity attributable to the Company’s shareholders	31,160	33,377
Non-controllinginterests	338	45
Total shareholders’ equity	31,498	33,422
Commitments, guarantees and contingencies (Note 16)
Total liabilities and shareholders’ equity	100,692	107,990

See accompanying notes to interim condensed consolidated financial statements.

4

SPORTSCENE GROUP INC.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

(unaudited)

	13	weeks ended	weeks ended	39	weeks ended
	May 30,	May 24,		May 30,	May 24,
	2021	2020		2021	2020
	$	$		$	$
Operating activities
Net and comprehensive loss	(441)	(7,138)		(1,791)	(4,698)
Adjustments to reconcile net loss to cash
flows from operating activities:
Other (gains) losses without cash effect (Note 7)	(50)	5,154		(314)	4,679
Amortization of property, plant and equipment (Note 6)	973	1,360		2,926	4,006
Amortization of right-of-use assets, before deduction of
government assistance (Notes 6 and 11)	869	831		2,276	2,633
Amortization of intangible assets (Note 6)	172	201		486	598
Net loss (income) of joint ventures (Note 12)	140	204		280	(206)
Dividends received from joint ventures (Note 12)	-		-	65	350
Stock-based compensation (Note 6)	31	38		37	128
Financial expenses recognized in net loss (Note 8)	80	503		808	1,551
Financial expenses paid	(44)	(474)		(699)	(1,465)
Income tax expense recognized in net loss	(109)	(2,592)		(553)	(1,773)
Income taxpaid	(117)	(45)		(292)	(423)
	1,504	(1,958)		3,229	5,380
Net change in non-cash working capital items, net of acquisitions
and disposals of subsidiaries(Note 15(a))	2,189	2,238		(532)	2,719
	3,693	280		2,697	8,099
Financing activities
Proceeds from issuance of long-term debt (Note 15 (b))	817	560		817	560
Change in revolving credit (Note 15 (b))	(2,418)	3,288		1,064	4,355
Repayment of long-term debt (Note 15 (b))	(148)	(122)		(442)	(541)
Repayment of lease liabilities, net of incentives received (Note 11)	(1,231)	(117)		(3,210)	(1,897)
Issuance of Class A shares	-		-	55	-
Dividend paid to Class A shareholders	-		-	-	(1,282)
Shares redeemed from non-controllingshareholders(Note 4)	-		-	(225)	-
	(2,980)	3,609		(1,941)	1,195
Investing activities
Business combinations, net of cash and
cash equivalents acquired	-		-	-	(1,234)
Investments in joint ventures (Note 12)	-		-	(200)	-
Proceeds from disposal of investments in joint ventures (Note 12)	150		-	1,135	-
Change in notes receivable	(334)	276		(337)	(1,164)
Acquisitions of property, plant and equipment	(328)	(1,997)		(1,269)	(4,687)
Proceeds from disposal of property, plant and equipment	-	1,616		4	1,727
Acquisitions of intangible assets	(22)	(14)		(33)	(136)
	(534)	(119)		(700)	(5,494)
Increase in cash and cash equivalents	179	3,770		56	3,800
Cash and cash equivalents,beginningofperiod	8,267	588		8,390	558
Cash and cash equivalents, end ofperiod	8,446	4,358		8,446	4,358

See accompanying notes to interim condensed consolidated financial statements.

5

SPORTSCENE GROUP INC.

Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

Index	Page
1. Description of business	7
2. Statement of compliance	7
3. Significant accounting policies	8
4. Business combinations	9
5. Revenues	10
6. Expenses by nature	10
7. Other (gains) losses	11
8. Financial expenses	11
9. Loss per share	12
10. Notes receivable and other assets	12
11. Lease arrangements	13
12. Investments in joint ventures	14
13. Long-term debt	15
14. Shareholders’ equity	15
15. Supplementary cash flows information	16
16. Commitments, guarantees and contingencies	17
17. Related party transactions	17
18. Segmented information	19
19. Financial instrument disclosures	21

6

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

1. Description of business

Sportscene Group Inc. (the “Company” or “Sportscene”), which has its head office at 1180 Place Nobel, suite 102 in Boucherville (Québec), J4B 5L2, was incorporated under the Canada Business Corporations Act on September 15, 1983. Sportscene is a public company since 1985 and its shares trade on the TSX Venture Exchange, under the ticker symbol SPS.A. The “Company” or “Sportscene” designate, as the case may be, Sportscene Group Inc. and/or one or more of its subsidiaries or joint ventures.

Since 1984, Sportscene operates a chain of sports entertainment-themed resto-bars in Québec: La Cage – Brasserie Sportive ( “La Cage” ). Besides the operation, franchising and development of this chain, the Company operates other banners restaurants, sells branded products in grocery stores, offers event catering services and operates a sports complex.

2. Statement of compliance

The unaudited interim condensed consolidated financial statements (the “consolidated financial statements”) are prepared in accordance with International Accounting Standard 34 ("IAS 34"), Interim Financial Reporting as issued by the International Accounting Standards Board ("IASB"). They are intended to provide an update on annual consolidated financial statements. Therefore, they do not contain all disclosures required by International Financial Reporting Standards ("IFRS") for annual financial statements. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended August 30, 2020, and accompanying notes.

The IFRS accounting policies that are set out in Note 3 of the Company’s consolidated financial statements for the year ended August 30, 2020 were consistently applied to all periods presented.

The preparation of financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant are disclosed in Note 4 of the Company’s audited consolidated financial statements for the year ended August 30, 2020 and remained unchanged for the 13 and 39-week periods ended May 30, 2021.

The Board of Directors approved these interim condensed consolidated financial statements on July 15, 2021.

Impact of COVID-19

Since the beginning of the third quarter of 2020, the Company has been impacted by the COVID-19 pandemic and government mandated closures of non-essential services. As a result, approximately half of the corporate restaurants and substantially all of the joint venture and franchise-owned locations were completely closed from mid-March to mid-June 2020. Those that continued operations offered only take-out meals and home delivery, with all dining rooms closed in accordance with government directives. As of October 1, 2020, the restaurants had to close their dining rooms for a second time as a result of the new government guidelines, which were in effect in several regions of Quebec, for almost the entire period ending May 30, 2021. The sports complex and the event caterer also had to suspend their activities. On the other hand, retail sales activities were maintained and experienced growth following an expansion of the portfolio of supermarket banners offering La Cage and Moishes brand products.

In response to the disruption caused by COVID-19, the Company has tightly managed its liquidity by reducing fixed costs to a minimum (concession from its lenders for $1.2 million), suspending dividends, negotiating new payment terms with its suppliers, drawing $7,500,000 on the revolving credit available in the fourth quarter of 2020, and negotiating new terms of its financing agreement. For the 13-week and 39-week periods ended May 30, 2021, the Company had access to the Canada Emergency Wage Subsidy Program ("CEWS"), and the Canada Emergency Rent Subsidy Program ("CERS"). The Company also had access to the Emergency Assistance Program for Small and Medium-Sized Businesses ("PAUPME"). Combined, these government assistance measures totalled $5,366,000 and $11,342,000 for the 13-week and 39-week periods ended May 30, 2021, respectively. These amounts have been recorded in the interim consolidated statement of comprehensive income (Notes 6, 8 and 13).

7

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

2. Statement of compliance (continued)

Impact of COVID-19 (continued)

While the measures taken to maintain adequate liquidity while dining room closures are in effect considered sufficient for the foreseeable future, the future effect of the COVID-19 pandemic on the economy and businesses in general remains uncertain. The medium and long-term impact of the current crisis on the Company will depend on the future government measures affecting non-essential services, the various government financial assistance programs, the support obtained from creditors and lessors, consumer behavior and general state of the economy following the COVID-19 pandemic (particularly household debt and levels of disposable income). Financial measures that may be required by the Company and its franchisees include, but are not limited to, securing sufficient financial support from governments and creditors, securing rent relief from lessors and easing of covenants by financial institutions.

In the context of the COVID-19 pandemic and the resulting economic uncertainty, the Company has reviewed the estimates, judgments and assumptions previously used in the preparation of its condensed interim consolidated financial statements of the 13 and 39-week periods ended May 30, 2021. Those that have an impact on the Company’s financial information were:

• The assessment of the existence of impairment indicators of non-current assets and goodwill, of cash-generating units (“CGU”) or groups of CGUs and the assumptions used in calculating their recoverable amount when performing impairment tests was necessary. Despite the closure of dining rooms decreeded by government authorities for an unspecified amount of time, no impairment charge was recognized for the 13 and 39-week periods ended May 30, 2021 due to the Company’s ability to access government assistance programs and to the residual duration of the leases which are long enough to generate cash flows allowing to recover the net carrying value of the assets. Depending on the evolution of the COVID-19 pandemic and its impact on the Company's operating results and financial position, further revisions of the assumptions used, in particular at the level of the future estimates of operating results, may be necessary and could have a significant impact on the final assessment of the carrying value of the Company’s assets.

• The determination of the Company's eligibility for various government programs, including for the CEWS, which is deducted from the employee benefits expenses, and for the CERS and PAUPME, which led to a reduction of occupancy charges and amortization of right-of-use assets (Note 6) and a reduction of interest on lease liabilities (Notes 6, 8 and 13).

The impact of the COVID-19 pandemic on management's judgments and estimates are described in Note 4 of the Company’s consolidated financial statements for the year ended August 30, 2020 , while the effects on the liquidity risk are described in Note 19 of these interim financial statements.

3. Significant accounting policies

a) Basis of presentation

The Company’s accounting policies presented in Note 3 of the audited consolidated financial statements for the year ended August 30, 2020 were applied in the preparation of the interim condensed consolidated financial statements for the 13 and 39-week periods ended May 30, 2021 and May 24, 2020.

b) Basis of preparation

The Company’s consolidated financial statements were prepared on the historical cost basis, except the following items:

• the contingent consideration is measured at fair value; and

• · lease liabilities are measured at the present value of the future lease payments.

8

GROUPE SPORTSCENE INC.

Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

3. Significant accounting policies (continued)

c) Quarterly trends and seasonality

Traditionally, the operations of the Company have been relatively correlated with sporting events, resulting in a stronger third quarter each year. In recent years, the repositioning of the La Cage banner has contributed to reducing the relative importance of the “event” component in the Company’s business model, thereby helping to reduce the seasonality of the Company’s activities. Nevertheless, it is better to review results for the year as a whole or to compare the results of one quarter with those for the corresponding quarter of the previous year than to compare the results of two successive quarters.

d) New accounting standard applied in 2021

Amendments to IFRS 16 - Leases (« IFRS 16 »)

In reaction to the COVID-19 pandemic, the IASB published an amendment to IFRS-16 whereby entities who are awarded rent reliefs are not required to consider them as a change to lease contracts if they are a direct consequence of the COVID-19 pandemic and meet certain requirements:

• The revised contingent consideration is roughly equal or lower than the original contingent consideration;

• the rent relief concerns payments which are due at the latest on June 30, 2022; and,

• no other major amendments have been made to the lease obligation.

The Company has applied this easing measure to all admissible rent reliefs, which total $228,000 and $1,186,000 respectively for the 13 and 39-week periods ended May 30, 2021.

Definition of a business (amendments to IFRS 3)

In October 2018, the IASB issued amendments to IFRS 3, Business Combinations , which apply to annual reporting periods beginning on or after January 1, 2020. These amendments clarify the definition of a business for purposes of determining whether an acquisition should be accounted for as a business combination or as an asset acquisition. These amendments make the new definition of a business narrower, which could result in fewer business combinations being recognized. The amendments also include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The adoption of the amendments to IFRS 3 by the Company as of August 31, 2020 had no effect on its condensed interim consolidated financial statements for the 13 and 39-week periods ended May 30, 2021.

4. Business combinations

Fiscal 2021

During the 39-week period ended May 30, 2021, the Company redeemed the non-controlling interest of two La Cage restaurants for $225,000.

9

GROUPE SPORTSCENE INC.

Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated) (unaudited)

5. Revenues

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Restaurants – La Cage	4,229	6,642	12,555	53,062
Restaurants – Other banners	505	590	1,859	5,959
Franchising revenues	706	318	1,960	3,673
Royalties for the National Advertising Fund	113	81	346	767
Construction contracts	22	-	43	1,739
Retail activities	7,998	8,498	23,588	18,921
Others	249	543	968	5,602
	13,822	16,672	41,319	89,723

6. Expenses by nature

The distribution by nature of some charges in the interim condensed consolidated statement of comprehensive income is as follows:

	13	weeks ended	weeks ended		39 weeks ended	39 weeks ended
	May 30,	May 24,		May 30,	May 24,
	2021	2020		2021	2020
	$	$		$	$
Employee benefits expenses
Current salaries and other benefits	5,433	4,817		14,476	28,838
Defined contribution plans	48	45		130	126
Stock-based compensation	31	38		37	128
Termination benefits	345	43		378	53
Government assistance	(2,366)	(898)		(6,908)	(2,280)
	3,491	4,045		8,113	26,865
Occupancy costs	567	921		2,134	2,811
Government assistance relating to occupancy costs	(1,243)		-	(2,094)		-
Eligible rent relief	(228)		-	(1,186)		-
Transfer to the National Advertising Fund	113	81		346	767
Other selling and administrative expenses	2,671	3,571		7,247	15,976
Selling and administrative expenses, excluding amortization	5,371	8,618		14,560	46,419
Amortization
Amortization of property, plant and equipment	973	1,360		2,926	4,006
Amortization of right-of-use assets(1)	(475)	831		211	2,633
Amortization of intangible assets	172	201		486	598
	670	2,392		3,623	7,237

(1) For the 13 and 39-week periods ended May 30, 2021, $1,344,000 and $2,065,000 of government assistance were deducted from the amortization of right-of-use assets.

Other selling and administrative expenses include, but are not limited to, marketing and operating expenses for all operating segments.

10

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

6. Expenses by nature (continued)

In addition, the Company received tax credits related to the statement of tips, the workplace apprenticeship program and the Canada Emergency Wage Subsidy ("CEWS") as government contributions. The latter amounts to $2,346,000 and $6,484,000, respectively, for the 13 and 39-week periods ended May 30, 2021. The total amount of the government assistance received is deducted from the employee benefits expenses.

The Company was also eligible to the Canada Emergency Rent Subsidy ("CERS") for an amount of $538,000 and $2,376,000 respectively for the 13 and 39-week periods ended May 30, 2021. In addition, the Company qualified for the provincial Emergency Assistance Program for Small and Medium-Sized Businesses ("PAUPME") in the amount of $3,019,000 for the 13-week and 39-week periods ended May 30, 2021. Of these amounts, $2,094,000 has been applied against occupancy costs, $2,065,000 against amortization of right-of-use assets and $699,000 against interest on lease obligations (Note 8). The Company also benefited from lessors' relief for a total amount of $1,186,000 for the same period, which was deducted from occupancy charges.

As at May 30, 2021, amounts of $1,367,000 and $873,000 were receivable from CEWS and CERS, respectively, and are included under "accounts receivable" on the interim condensed consolidated statement of financial position. The Company believes that there is reasonable assurance that the amount not yet received will be cashed from the Canadian federal government based on the eligibility criteria met.

7. Other (gains) losses

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Loss on impairment of property, plant and equipment	-	4,635	-	5,135
Loss on disposal of property, plant and equipment	-	418	157	638
Gain on disposal of investments in joint ventures (Note 12)	(50)	-	(471)	-
Gain on business combinations	-	-	-	(1,195)
Closing costs of restaurants	-	9	-	174
Gain on lease termination	(21)	-	(169)	-
	(71)	5,062	(483)	4,752

8. Financial expenses

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Interest on long-term debt	198	105	558	432
Accretion load of the contingent consideration	31	29	91	86
Interest on lease liabilities(1)	(182)	273	72	840
Other financial expenses	33	96	87	193
	80	503	808	1,551

(1) For the 13 and 39-week periods ended May 30, 2021, $433,000 and $699,000 of government assistance were deducted from interest on lease liabilities.

11

GROUPE SPORTSCENE INC.

Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated) (unaudited)

9. Loss per share

Basic earnings (loss) per share are calculated by dividing net income available to holders of Class A shares by the weighted-average number of Class A shares outstanding during the period.

Diluted earnings (loss) per share are calculated using the weighted-average number of outstanding Class A shares adjusted to include the potentially dilutive effect of the stock options.

The following table sets forth the computation of basic and diluted loss per share:

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Net loss attributable to the Company’s
shareholders (in thousands of Canadian dollars)	(443)	(7,082)	(1,779)	(4,638)
Weighted average number of outstanding
Class A shares (in thousands)	8,568	8,548	8,557	8,548
Dilutive effect of stock options (in thousands)	-	-	-	-
Weighted average number of dilutive
outstandingClass A shares(in thousands)	8,568	8,548	8,557	8,548
Loss per share (in Canadian dollars):
Basic	(0.05)	(0.83)	(0.21)	(0.54)
Diluted	(0.05)	(0.83)	(0.21)	(0.54)

For the 39-week period ended May 30, 2021, 522,000 stock options (622,000 stock options for the period ended May 24, 2020) with an antidilutive effect were excluded from the calculation of diluted loss per share. However, these options could have a dilutive effect on earnings (loss) per share in future periods.

10. Notes receivable and other assets

	May 30,	August 30,
	2021	2020
	$	$
Tax credits receivable	87	775
Notes receivable, interest free and without specific repayment terms	31	31
Balance of sale receivable, interest free, payable in monthly instalments,
maturing in March 2024	142	-
Advances to National Advertising Fund(1)	351	156
Deferred charges related to a lease	266	287
	877	1,249
Less: currentportion	50	-
	827	1,249

.

(1) The balance corresponds to the National Advertising Fund's net assets, which were an accumulated deficit of $351,000 as at May 30, 2021 (August 30, 2020 - $156,000).

12

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated) (unaudited)

11. Lease arrangements

Leases entered into by the Company relate primarily to premises used for restaurant activities and are generally for a term of ten to fifteen years upon signature. None of the Company's leases contain an option to purchase premises.

Right-of-use assets

The following table shows the change in the carrying value of the right-of-use assets during the 13 and 39-week periods ended:

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Balance, beginning of the period	19,945	23,846	21,607	24,522
Business combinations	-	-	-	728
Renewals	-	-	269	658
Tenant inducement	-	(57)	(101)	(317)
Lease modifications	250	-	(173)	-
Amortization before deduction of government
assistance (Note 6)	(869)	(831)	(2,276)	(2,633)
Impairment loss(Note 9)	-	(225)	-	(225)
Balance,end of theperiod	19,326	22,733	19,326	22,733

Lease liabilities

The following table shows the change in the balance of lease liabilities during the 13 and 39-week periods ended:

	13	13	weeks ended	weeks ended		39 weeks ended
	May 30,		May 24,		May 30,	May 24,
	2021		2020		2021	2020
	$		$		$	$
Balance, beginning of the period	25,301		27,355		27,535	27,984
Business combinations		-		-	-	753
Renewals		-		-	269	658
Lease modifications	250		204		(173)	(195)
Repayments	(1,231)		(256)		(3,311)	(1,897)
Balance,end of theperiod	24,320		27,303		24,320	27,303
					May 30,	August 30,
					2021	2020
					$	$
Current(1)					3,823	4,605
Non-current					20,497	22,930
Lease liabilities,end of theperiod					24,320	27,535

(1) The balance of the current portion of lease liabilities includes an amount of $921,000 of unpaid rent arrears (August 30, 2020 - $1,744,000) due to ongoing negotiations with lessors following the negative economic consequences resulting from the COVID-19 pandemic.

13

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

12. Investments in joint ventures

The interim condensed consolidated financial statements of the Company include its share of the assets, liabilities, revenues and expenses and cash flows of joint ventures. The Company’s share is as follows:

	May 30,	August 30,
	2021	2020
	$	$
Assets
Current(1)	1,366	1,884
Non-current(2)	5,011	5,990
	6,377	7,874
Liabilities and shareholders’ equity
Current liabilities (1)(2)	895	1,166
Non-current liabilities (1)(2)	3,012	3,429
Shareholders’ equity	2,470	3,279
	6,377	7,874

(1) As at May 30, 2021, current assets include a cash and cash equivalents balance of $711,000 (August 30, 2020 - $1,168,000) and current and noncurrent liabilities include long-term debt (including its current portion) of $2,348,000 (August 30, 2020 - $2,472,000).

(2) As at May 30, 2021, non-current assets include right-of-use assets of $70,000 (August 30, 2020 - $528,000) and current and non-current liabilities include lease liabilities (including its current portion) of $72,000 (August 30, 2020 - $537,000).

	13	weeks ended		39 weeks ended	39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Revenues	530	684	2,138	6,326
Cost of sales, selling and administrative
expenses (excluding amortization)	525	726	1,962	5,762
Income (loss) before financial expenses, amortization,
(gains) losses and income tax	5	(42)	176	564
Amortization,financial expenses and other(gains)losses	176	193	515	314
(Loss) income before income tax	(171)	(235)	(339)	250
Income tax (recovery) expense	(31)	(31)	(59)	44
Net(loss)income ofjoint ventures	(140)	(204)	(280)	206
			May 30,	May 24,
			2021	2020
			$	$
Investment in the net assets of joint ventures, beginning of the	period		3,279	4,341
Share of net (loss) income			(280)	206
Less: dividends/withdrawal received from joint ventures			(65)	(350)
			2,934	4,197
Down payments			200		-
Proceeds from disposal of investments in joint ventures			(664)		-
Conversion of investments in joint ventures through
business combinations achieved in stages			-	(1,008)
Investment in net assets ofjoint ventures, end of theperiod			2,470	3,189

During the 13-week periods ended May 30, 2021, the Company sold investments in a joint venture for $150,000, generating a gain of $50,000 (Note 7).

14

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

12. Investments in joint ventures (continued)

During the 39-week periods ended May 30, 2021, the Company sold investments in two joint ventures for a total consideration of $1,135,000, wich $142,000 were still receivable at the date thereof, generating a combined gain of $471,000 (Note 7).

13. Long-term debt

During the 39-week period ended May 30, 2021, the revolving credit drawn increased by $1,064,000, which bears interest at the prime rate. In addition, during the same period, the debt incurred under the Canadian Business Emergency Account ("CEBA") established by the federal government in the previous fiscal year increased by $280,000. This debt is interestfree and repayment of the balance of the loan on or before December 31, 2022, will result in the forgiveness of 25% of this loan, up to a maximum of $140,000.

During the 13-week period ended May 30, 2021, via the Emergency Assistance Program for Small and Medium-Sized Businesses ("PAUPME"), the Company incurred $3,019,000 of new debt bearing interest at 3% and repayable over a 36month period, following a 12-month principal repayment moratorium. A portion of this loan could be forgiven with the additional support of the Assistance for Businesses in Regions Under Maximum Alert ("ABRUMA"), which now enhances the PAUPME program, if certain criteria are met by the Company. Sportscene believes that there is reasonable assurance that $2,482,000 of this loan will be forgiven based on the eligibility criteria met. Accordingly, this amount is applied against occupancy costs, amortization and financial expenses for the 13 and 39-week periods ended May 30, 2021 (Note 6), and $537,000 is recorded as long-term debt.

As at May 30, 2021, an amount of $17,686,000 was drawn on the revolving credit, and the residual availability was $7,314,000. At the same date, the Company was in compliance with all financial ratios.

14. Shareholders’ equity

Stock option plan

During the 39-week period ended May 30, 2021, no Class A stock options were granted (2020 - 40,000 stock options). Moreover, the cancellation of 80,000 stock options following the departure of an officer resulted to the reversal of a compensation expense of $50,000, which explains the low stock-based compensation expense of $37,000 for the 39week period ended May 30, 2021. In addition, 20,000 options were exercised during the same period, thus bringing to 522,000 the number of options outstanding giving the holder the right to acquire Company shares at a weighted average exercise price of $3,29 per share.

15

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

15. Supplementary cash flow information

a) Net change in non-cash operating working capital items

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Accounts receivable	808	52	2,855	252
Inventories	(231)	480	(314)	329
Prepaid expenses	(147)	136	(510)	(151)
Other assets	(33)	(167)	709	1,024
Accounts payable and accrued liabilities	2,151	2,026	(2,673)	1,474
Deferred revenues and credits	(359)	(289)	(599)	(209)
	2,189	2,238	(532)	2,719

b) Change in long-term debt

	13	weeks ended			39 weeks ended
	May 30,	May 24,	May 30,		May 24,
	2021	2020	2021		2020
	$	$	$		$
Balance at the beginning of the period	29,053	17,582	25,852		16,159
Increase in long-term debt	817	560	817		560
Repayment of long-term debt	(148)	(122)	(442)		(541)
Change in revolving credit	(2,418)	3,288	1,064		4,355
Business combinations	-	-		-	775
Conversion of debt in non-controllinginterests	6	-	19		-
Balance at the end of theperiod	27,310	21,308	27,310		21,308

c) Cash and cash equivalents

In the interim condensed consolidated statements of cash flows, cash and cash equivalents include:

	May 30,	August 30,
	2021	2020
	$	$
Cash and cash equivalents	893	870
Short-term investments	7,553	7,520
	8,446	8,390

d) Non-cash transactions

The Company carried out the following investing and financing transactions that had no effect on cash and are therefore not reflected in the interim condensed consolidated statements of cash flows:

	13	weeks ended		39 weeks ended
	May 30,	May 24,	May 30,	May 24,
	2021	2020	2021	2020
	$	$	$	$
Acquisitions of property, plant and equipment financed by:
Accounts payable and accrued liabilities	(22)	(212)	(212)	699
Business combinations financed by:
Conversion of interest previously held in the joint ventures	-	-	-	1,008
Long-term debt	-	-	-	100

16

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

16. Commitments, guarantees and contingencies

Guarantees

The Company has guaranteed the debts of joint ventures for a maximum amount of $567,000 (August 30, 2020 - $1,281,000).

17. Related party transactions

As at May 30, 2021, the Company had two controlling shareholders, holding directly or indirectly 74% of the shares of the Company with voting rights. The remaining shares and voting rights were held by multiple shareholders, none of whom held a significant number of voting rights. The dividends to be paid must first be approved by the Board of Directors.

Key management includes the members of the Board, President and Chief Executive Officer, Vice President, Retail and Vice President, Operating and Restaurant. Other related parties include close family members of key management personnel and entities controlled by the key management personnel.

In the normal course of business, the Company enters into transactions with its subsidiaries and joint ventures. Under IFRS, all transactions with subsidiaries are eliminated using the full consolidation method. The unrealized gains and losses on assets disposal by joint ventures are eliminated on a pro rata basis to the percentage interest the Company holds in the joint venture. All related party transactions are assessed at market value.

Details on transactions and balances between the Company and its related parties are presented below:

				13 weeks ended	13 weeks ended
				May 30,	2021
		Key	Other related
	Joint ventures	management	parties	Total
	$	$		$	$
Revenues
Franchises	10	-		-	10
Royalties for the National Advertising Fund	5	-		-	5
Others	22	-		-	22
	37	-		-	37
Operating expenses
Employee benefit expenses	-	207		30	237
Stock-based compensation	-	31		-	31
	-	238		30	268
				13 weeks ended
				May24,	2020
		Key	Other related
	Joint ventures	management	parties	Total
	$	$		$	$
Revenues
Franchises	43	-		-	43
Royalties for the National Advertising Fund	28	-		-	28
Lease	7	-		-	7
Others	47	-		-	47
	125	-		-	125
Operating expenses
Employee benefit expenses	-	102		4	106
Stock-based compensation	-	38		-	38
	-	140		4	144

17

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

17. Related party transactions (continued)

			39 weeks ended	39 weeks ended	39 weeks ended
				May 30,	2021
		Key	Other related
	Joint ventures	management	parties	Total
	$	$	$		$
Revenues
Franchises	74	-	-		74
Royalties for the National Advertising Fund	44	-	-		44
Construction contracts	1	-	-		1
Others	78	-	-		78
	197	-	-		197
Operating expenses
Employee benefit expenses	-	797	96		893
Stock-based compensation	-	37	-		37
	-	834	96		930
Other transactions and balances
Accounts receivable	545	-	-		545
				39 weeks ended
				May24,	2020
		Key	Other related
	Joint ventures	management	parties	Total
	$	$	$		$
Revenues
Franchises	513	-	-		513
Royalties for the National Advertising Fund	310	-	-		310
Construction contracts	821	-	-		821
Lease	73	-	-		73
Others	354	-	-		354
	2,071	-	-	2,071
Operating expenses
Employee benefit expenses	-	598	29		627
Stock-based compensation	-	128	-		128
	-	726	29		755
Other transactions and balances
Accounts receivable	468	-	-		468
Notes receivable	925	-	-		925

During the 13-and 39-week periods ended May 30, 2021, the Company incurred negligible expenses with entities related to directors ($23,000 and $309,000 respectively for the 13- and 39-week periods ended May 24, 2020).

18

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

18. Segmented information

Under IFRS 8, Operating Segments , the Company provides information about its segments based on the information disclosed to the primary operational decision maker to evaluate the performance of these segments.

The operating segments are grouped into four distinct segments: restaurant, retail, franchising and other activities. The Company has restated the corresponding segment information for prior periods. Each sector offers different products and services and requires different marketing strategies.

The Restaurant segment consists of corporate and joint venture restaurants operating under the La Cage – Brasserie Sportive and P.F. Chang’s banners. The Retail segment includes sales of branded products in grocery stores, under the banners La Cage and Moishes. The Franchising segment is dedicated to franchise development and services to restaurants, such as construction and technological support. Its revenues also include entry fees and royalties. The Other Activities segment includes event catering, sports complex operation and the sale of broadcasting rights.

The accounting policies followed by each segment are identical to those described in the summary of significant accounting policies. The Company evaluates the performance of each reportable segment based on the consolidated adjusted EBITDA, which corresponds to the income before income tax, excluding the following expenses: financial expenses, amortization, other gains and losses, and the net income / loss of joint ventures, to which is added the (loss) income before financial expenses, amortization and income tax of the joint ventures. Intersegment revenues of the construction activities are made at the cost of the work for corporate restaurants and at current market prices for the other restaurants. Management of the income tax expense is centralized and thus, this expense is not broken down between the reportable segments.

							13	weeks ended	weeks ended
								May 30,	2021
						Other
	Restaurant		Retail	Franchising		Activities		Total
	$		$	$		$			$
Total revenues	4,734		7,998	1,567		455		14,754
Intersegment revenues		-	-	(726)		(206)			(932)
Third-partyrevenues	4,734		7,998	841		249		13,822
(Loss) income before income tax	(30)		859	(1,348)		(31)			(550)
Amortization	406		46	110		108			670
Financial expenses	(12)		32	31		29			80
Government assistance deducted from amortization
and financial expenses (Notes 6 and 8)	1,777		-		-		-	1,777
Net loss of joint ventures	97		22	21			-		140
Other gains	(71)		-		-		-		(71)
(Loss) income before financial expenses,
amortization and income taxes of
joint ventures(Note 12)	(18)		34	(11)			-		5
Consolidated adjusted EBITDA	2,149		993	(1,197)		106		2,051
Acquisitions of property, plant and
equipment	258		21	27			-		306

19

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

18. Segmented information (continued)

									13 weeks ended
									May24, 2020
							Other
	Restaurant		Retail		Franchising		Activities		Total
	$		$		$		$		$
Total revenues	7,232		8,498		1,589		751		18,070
Intersegment revenues		-		-	(1,190)		(208)		(1,398)
Third-partyrevenues	7,232		8,498		399		543		16,672
(Loss) income before income tax	(8,226)		900		(2,621)		217		(9,730)
Amortization	1,982		79		110		221		2,392
Financial expenses	315		32		88		68		503
Net loss of joint ventures	171		33			-		-	204
Other losses (gains)	5,196			-	314		(448)		5,062
Loss before financial expenses,
amortization and income taxes of
joint ventures(Note 12)	(25)		(17)			-		-	(42)
Consolidated adjusted EBITDA	(587)		1,027		(2,109)		58		(1,611)
Impairment of assets	3,550			-		-		-	3,550
Acquisitions of property, plant and
equipment	1,722		8			-	55		1,785
								39 weeks ended
									May 30, 2021
							Other
	Restaurant		Retail		Franchising		Activities		Total
	$		$		$		$		$
Total revenues	14,414		23,588		4,555		1,495		44,052
Intersegment revenues		-		-	(2,206)		(527)		(2,733)
Third-partyrevenues	14,414		23,588		2,349		968		41,319
(Loss) income before income tax	(1,569)		2,218		(2,984)		(9)		(2,344)
Amortization	2,839		133		325		326		3,623
Financial expenses	498		97		93		120		808
Government assistance deducted from amortization
and financial expenses (Notes 6 and 8)	2,764			-		-		-	2,764
Net loss of joint ventures	184		73		23			-	280
Other gains	(483)			-		-		-	(483)
Income (loss) before financial expenses,
amortization and income taxes of
joint ventures(Note 12)	132		57		(13)			-	176
Consolidated adjusted EBITDA	4,365		2,578		(2,556)		437		4,824
Acquisitions of property, plant and
equipment	933		55		51		18		1,057

20

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

18. Segmented information (continued)

								39 weeks ended
								May24, 2020
						Other
	Restaurant		Retail	Franchising		Activities		Total
	$		$	$		$		$
Total revenues	59,021		18,921	13,924		6,312		98,178
Intersegment revenues		-	-	(7,745)		(710)		(8,455)
Third-partyrevenues	59,021		18,921	6,179		5,602		89,723
(Loss) income before income tax	(5,571)		1,106	(2,705)		699		(6,471)
Amortization	6,176		87	308		666		7,237
Financial expenses	1,073		91	162		225		1,551
Net (income) loss of joint ventures	(221)		21	(6)			-	(206)
Other losses (gains)	4,846		-	314		(408)		4,752
Income before financial expenses,
amortization and income taxes of
joint ventures(Note 12)	520		36	8			-	564
Consolidated adjusted EBITDA	6,823		1,341	(1,919)		1,182		7,427
Change in goodwill	1,620		107		-		-	1,727
Impairment of assets	4,050		-		-		-	4,050
Acquisitions of property, plant and
equipment	4,949		188	142		107		5,386

19. Financial instrument disclosures

Fair value

As at May 30, 2021 and August 30, 2020, the fair value of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximates their carrying amounts because of their short-term maturities.

The fair value of notes receivable could not be determined because the reimbursement terms have not been set.

The fair value of long-term debt approximates its carrying amount since the interest rates are renegotiated on an annual basis for a portion of these loans, may fluctuate in accordance with market rates or these loans bear interest at rates comparable to market rates.

The Company’s only financial instrument that is measured at fair value on a recurring basis subsequent to its initial recognition is the contingent consideration payable related to a business combination. The valuation model for contingent considerations considers the present value of expected payments, discounted using a risk-adjusted discount rate. The expected payment is determined by considering the achievement of various scenarios of pre-established financial performance thresholds, the amount to be paid under each scenario and the probability of each scenario.

The Company presents a fair value hierarchy with three levels that reflects the significance of inputs used in determining the fair value assessments. The fair value of financial assets and liabilities classified in these three levels is evaluated as follows:

• Level 1 - Unadjusted prices on active markets for identical assets or liabilities

• Level 2 - Inputs other than the prices included within Level 1, that are observable for the asset or liability, directly (prices) or indirectly (derived from prices)

• Level 3 - Inputs for the asset or liability that are not based on observable market data

21

GROUPE SPORTSCENE INC. Notes to Interim Condensed Consolidated Financial Statements

(tabular figures in thousands of Canadian dollars, unless otherwise indicated)

(unaudited)

19. Financial instrument disclosures (continued)

Fair value (continued)

As at May 30, 2021, all else being equal, a 10% increase (or decrease) in the expected financial performance thresholds of the acquired business would have resulted in a decrease (or increase) in net income of $45,000.

Liquidity risk

Liquidity risk is the risk that the Company will be unable to fulfil its financial obligations when they are due. The Company manages its liquidity risk through the management of its capital structure and financial leverage. The Company also manages this risk by monitoring cash flows generated from operating activities and by using its available line of credit to ensure that it has sufficient funds to fulfill its obligations. Assessments of cash inflows and outflows take into account seasonal needs, planned investments and debt maturities.

The Company has a revolving credit facility for a maximum amount of $25,000,000 to finance the acquisition of property, plant and equipment and business combinations. As of May 30, 2021, an amount of $7,314,000 of its revolving credit facility was available in addition to the cash and cash equivalents of $8,446,000.

Arising from the context of the COVID-19 pandemic, the Company renegotiated its financing agreement with the lender in order to obtain a six-month capital payment holiday, a deferral of application or relief of its financial and restrictive covenants. In addition, as of the date hereof, the duration of the new financing agreement has been extended until June 2024. In light of the amended agreement and its budget forecasts, management believes that it will likely meet the new restrictive covenants and that the Company will continue to make the scheduled repayments of its long-term debts according to the repayment conditions provided for in the agreement.

This determination could however be affected by future economic, financial and competitive factors, as well as other future events which are beyond the control of the Company, such as the implementation of new health directives decreed by the authorities.

The revolving credit facility and mortgage loan become due, in full, on the date of default if the Company is unable to meet debt covenants, including maintaining certain financial ratios. While management believes that future cash flows generated from operations and available cash under existing or renegotiated banking agreements will be sufficient to meet the Company's financial liabilities, the Company's assessment of liquidity, including future expectations regarding compliance with restrictive covenants requires a significant amount of judgment. On August 18, 2020, the Company amended and updated its financing agreement to facilitate compliance with restrictive covenants based on quarterly projections planned for fiscal year 2021. Beyond this period, the debt covenants in effect prior to this easing should in principle apply. The Company continues its discussions with its lenders and a renegotiation of the agreements with the financial institutions is expected to occur in the coming months in order to update the budgetary forecasts and to obtain, if required, additional debt covenant reliefs depending on the most recent information concerning the evolution of the pandemic, mandatory sanitary measures and available government programs.

If one of these factors or events results in a lower operational performance that what is currently expected, or if the Company’s lenders require a return to the covenants in effect prior to the August 18, 2020 easing for the fiscal year starting on August 30, 2021, there could be uncertainty with regards to the Company’s ability to continue as a going concern approach, and its ability to realize the carrying value of its assets and to repay its current and future obligations as they fall due without having obtained additional financing which may not be available. These financial statements do not reflect the adjustments that would be necessary if the going concern assumption were not appropriate.

As at May 30, 2021 and August 30, 2020, all accounts payable and accrued liabilities were due in the next fiscal year.

22