Thunderbird Entertainment Group — Interim / Quarterly Report 2020

May 28, 2020

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Unaudited Interim Condensed Consolidated Financial Statements of

Thunderbird Entertainment Group Inc.

For the Three and Nine Months Ended March 31, 2020 and 2019

Notice of No Auditor Review of Interim Financial Statements

In accordance with National Instrument 51–102, Continuous Disclosure Obligations , Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of these interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The Company’s external auditors, PricewaterhouseCoopers LLP, have not performed a review of these interim financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Consolidated Statements of Financial Position

			At March 31,		At June 30,
(in thousands of Canadian dollars)		Notes	2020		2019
ASSETS
Current
	Cash and cash equivalents	$	12,185	$	13,430
	Trade receivables and other	6	65,341		63,261
	Income taxes recoverable		1,189		141
	Assets held for sale	5	1,860		-
	Othercurrent assets		-		55
			80,575		76,887
	Long-term trade receivables and other	6	634		1,259
	Investment in content	7	21,288		25,136
	Deferred tax assets		8,393		6,444
	Property and equipment	3(a)	34,684		7,211
	Goodwillandintangible assets	8	13,685		13,888
Total Assets		$	159,259	$	130,825
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
	Accounts payable and accrued liabilities	$	9,141	$	7,519
	Income taxes payable		1,291		1,085
	Interim production financing	9	48,083		48,371
	Deferred revenue	14	11,218		15,389
	Current portion of long-term debt	10	-		1,433
	Current portion of lease obligations	3(a)	6,020		2,496
	Redeemable preferred shares	11	926		926
	Liabilities associated with assets held for sale	5	1,429		-
			78,108		77,219
Long-term debt		10	-		504
Long-term lease obligations		3(a)	24,947		1,540
Deferred tax liabilities			5,605		3,919
Total Liabilities			108,660		83,182
Shareholders' Equity
	Common shares	12	62,634		62,517
	Preferred shares	11	132		132
	Accumulated other comprehensive income		184		264
	Warrants reserve	12	168		168
	Contributed surplus	12	4,347		3,900
	Deficit		(16,866)		(19,338)
Total Shareholders' Equity			50,599		47,643
Total Liabilities and Shareholders' Equity		$	159,259	$	130,825

Commitments and Contingencies - Note 18 Subsequent Events - Note 22

Approved on behalf of the Board:

“Jennifer Twiner McCarron”

Jennifer Twiner McCarron, Director

“Mark Miller”

Mark Miller, Director

See accompanying notes to the consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Consolidated Statements of Operations and Comprehensive Income (Loss)

			Three months	ended	March 31,		Nine months	ended	March 31,
					2019				2019
(in thousands of Canadian dollars except for share data)	Notes		2020		Restated*		2020		Restated*
Revenue	14	$	29,301	$	20,946	$	59,550	$	44,736
Expenses
Direct operating	21		16,442		10,508		31,356		20,604
Distribution and marketing			454		674		1,305		1,294
General and administrative	21		6,257		5,337		16,829		14,549
Share-based compensation	12		140		304		544		1,236
Amortization of property and equipment and intangible assets	21		2,117		772		5,077		2,303
Finance costs, net	20		(310)		9		96		116
Charge related topublic companylisting	4		-		-		-		5,316
			25,100		17,604		55,207		45,418
Income (loss) before income taxes			4,201		3,342		4,343		(682)
Income tax expense			1,041		1,224		1,098		1,892
Net income(loss) from continuing operations			3,160		2,118		3,245		(2,574)
Loss from discontinued operation	5		(205)		(189)		(773)		(152)
Loss from discontinued operation			(205)		(189)		(773)		(152)
Net income(loss) for theperiod			2,955		1,929		2,472		(2,726)
Net income (loss) attributable to
Owners of the parent			2,955		1,929		2,472		(2,734)
Non-controllinginterest			-		-		-		8
			2,955		1,929		2,472		(2,726)
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income (loss)
Foreign currency translation adjustment			10		(1)		9		1
Loss on translation of discontinued operation	5		(95)		(49)		(89)		(36)
			(85)		(50)		(80)		(35)
Comprehensive income(loss) for theperiod			2,870		1,879		2,392		(2,761)
Total comprehensive income (loss) attributable to
Owners of the parent			2,870		1,879		2,392		(2,769)
Non-controllinginterest			-		-		-		8
		$	2,870	$	1,879	$	2,392	$	(2,761)
Basic income(loss) per share - continuing operations	12	$	0.068	$	0.045	$	0.070	$	(0.083)
Diluted income(loss) per share - continuing operations	12	$	0.063	$	0.043	$	0.066	$	(0.083)
Basic lossper share - discontinued operation	12	$	(0.004)	$	(0.004)	$	(0.017)	$	(0.004)
Diluted lossper share - discontinued operation	12	$	(0.004)	$	(0.004)	$	(0.017)	$	(0.004)

*See note 5 for details regarding the restatement as a result of discontinued operation.

See accompanying notes to the consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

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Accumulated
Non- other
Common Preferred controlling comprehensive Warrants Contributed
(in thousands of Canadian dollars) Notes shares shares interest income reserve surplus Deficit Total
Balance at June 30, 2018 $ 29,799 $ 19,526 $ (8) $ 269 $ - $ 1,777 $ (13,214) $ 38,149
Adoption of IFRS 15 - - - - - - (1,861) (1,861)
Balance at July 1, 2018 29,799 19,526 (8) 269 - 1,777 (15,075) 36,288
Comprehensive income (loss) - - 8 (35) - - (2,734) (2,761)
Dividends - - - - - - (386) (386)
Repurchase of common shares 12 (6,000) - - - - - - (6,000)
Conversion of subscription receipts 12 10,250 - - - - - - 10,250
Share issue costs - cash 12 (737) - - - - - - (737)
Share issue costs - non-cash 12 (396) - - - 171 - - (225)
Conversion of convertible debentures 12 2,250 - - - - - - 2,250
Conversion of redeemable preferred shares 12 1,076 (607) - - - - - 469
Conversion of preferred shares 12 18,787 (18,787) - - - - - -
Shares of Golden Secret upon RTO 12 6,660 - - - - - - 6,660
Revaluation of Golden Secret options and warrants 12 - - - - 201 694 - 895
Shares issued as transaction fee on completion of RTO 4 378 - - - - - - 378
Share based compensation 12 - - - - - 1,236 - 1,236
Exercise of options 12 196 - - - - (92) - 104
Exercise of warrants 12 289 - - - (204) - - 85
Balance at March 31, 2019 $ 62,552 $ 132 $ - $ 234 $ 168 $ 3,615 $ (18,195) $ 48,506
Balance at June 30, 2019 $ 62,517 $ 132 $ - $ 264 $ 168 $ 3,900 $ (19,338) $ 47,643
Comprehensive income (loss) - - - (80) - - 2,472 2,392
Share-based compensation 12 - - - - - 544 - 544
Exercise of options 12 117 - - - - (97) - 20
Balance at March 31, 2020 $ 62,634 $ 132 $ - $ 184 $ 168 $ 4,347 $ (16,866) $ 50,599
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See accompanying notes to the consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Consolidated Statements of Cash Flows

THUNDERBIRD ENTERTAINMENT GROUP INC. Consolidated Statements of Cash Flows
		~~Nine months ended March 31,~~
				2019
(in thousands of Canadian dollars)	Notes	2020		Restated*
OPERATING ACTIVITIES
Net income (loss) from operations	$	2,472	$	(2,726)
Net loss from discontinued operation		773		152
Net income (loss) from continuing operations		3,245		(2,574)
Items not involving cash:
Amortization of investment in content	7	10,096		7,240
Amortization of property and equipment		832		1,824
Amortization of right-of-use assets	3(a)	4,042		-
Amortization of intangible assets	8	203		479
Gain on settlement of amount payable		-		(265)
Share-based compensation	12	544		1,236
Deferred income taxes expense (recovery)		(264)		162
Unrealized foreign exchange gain		(185)		(135)
Charge related to public company listing	4	-		5,316
Loss on termination of lease		1		-
Disposal of investment in content costs	7	309		-
Loss on disposal of equipment		11		-
Changes in non-cash working capital	19	(5,475)		(2,840)
Investment in content		(6,283)		(9,728)
Cash flows from continuing operations		7,076		715
Cash flows from discontinued operation		(712)		(9)
		6,364		706
FINANCING ACTIVITIES
Repayment of interim production financing	19	(32,945)		(36,181)
Proceeds from interim production financing	19	32,657		36,461
Repayment of obligations under leases	19	(4,288)		(1,335)
Proceeds from obligations under leases	19	895		27
Repayment of long-term debt	19	(1,433)		(4,040)
Proceeds from long-term debt	19	-		6,000
Repurchase of preferred shares	12	-		(1,110)
Repurchase of common shares	12	-		(6,000)
Proceeds from issuance of shares in private placement	12	-		10,250
Proceeds from issuance of convertible debentures	12	-		2,250
Share issue costs	12	-		(1,009)
Proceeds from exercise of warrants and share options	12	20		188
Dividends		-		(386)
Cash flows provided by (used in) continuing operations		(5,094)		5,115
Cash flows provided by (used in) discontinued operation		(504)		(810)
		(5,598)		4,305
INVESTING ACTIVITIES
Cash acquired in reverse takeover, net of transaction costs	4	-		2,378
Purchase of property and equipment		(2,088)		(2,616)
Cash flows provided by (used in) continuing operations		(2,088)		(238)
Cash flows provided by (used in) discontinued operation		(3)		(10)
		(2,091)		(248)
Effect of exchange rate changes on cash and cash equivalents		80		116
Net increase (decrease) in cash and cash equivalents during the period		(1,245)		4,879
Cash and cash equivalents, beginning of period		13,430		12,886
Cash and cash equivalents, end of period	$	12,185	$	17,765

• See note 5 for details regarding the restatement as a result of discontinued operation.

See accompanying notes to the consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

1. NATURE OF BUSINESS

Thunderbird Entertainment Group Inc. (formerly Golden Secret Ventures Ltd.) (the “Company”), the ultimate parent, and its primary wholly owned subsidiaries: Thunderbird Entertainment Inc., Great Pacific Media Inc., Atomic Cartoons Inc., Thunderbird Releasing Ltd., and Thunderbird International Limited, are an integrated group of companies that develop, produce and distribute film and television programming for the domestic and international markets. As an independent distribution company, the Company also acquires, licenses and merchandises distribution rights. Thunderbird Entertainment Group Inc. is incorporated under the laws of British Columbia, Canada. The Company’s head office is located at 400 – 2233 Columbia Street, Vancouver, BC, V5Y 0M6.

On October 30, 2018, the Company completed the acquisition of the issued and outstanding shares of a private company, Thunderbird Entertainment Inc. (“TEI”), through a reverse takeover transaction (the “RTO Transaction”). The Company is considered to be a continuation of TEI with the net assets of the Company at the date of the RTO Transaction deemed to have been acquired by TEI (note 4). The Company has changed its year end to June 30 to align to TEI’s.

Thunderbird Entertainment Group Inc. is a public company which is listed on the TSX Venture Exchange (“TSX-V”) and commenced trading under the symbol “TBRD” on November 2, 2018.

The interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on May 27, 2020.

2. BASIS OF PRESENTATION

Statement of compliance

These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting , using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). Certain disclosures required by IFRS have been condensed or omitted in the following note disclosures as they are disclosed or have been disclosed on an annual basis only. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the years ended June 30, 2019 and 2018, which have been prepared in accordance with IFRS and can be found on www.sedar.com.

Basis of measurement

These interim condensed consolidated financial statements have been prepared under the historical cost convention.

Functional and presentation currency

The interim condensed consolidated financial statements are presented in Canadian dollars (“CA$”) which is also the Company’s functional currency.

Reclassification of comparatives

Certain prior period amounts in the unaudited interim condensed consolidated statement of operations have been reclassified to conform with the current period presentation. Amortization of property and equipment and intangibles have been aggregated to provide more useful information. This reclassification had no effect on the reported results of operations.

3. SIGNIFICANT ACCOUNTING POLICIES

These interim condensed consolidated financial statements have been prepared using the same accounting policies and methods as the Company’s consolidated financial statements for the year ended June 30, 2019, except for the new and amended accounting standards adopted and described below.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

New and amended standards adopted

(a) IFRS 16, Leases

IFRS 16, Leases (“IFRS 16”) was issued by the IASB in January 2016 and supersedes IAS 17, Leases (“IAS 17”); IFRIC 4, Determining whether an Arrangement contains a Lease ; SIC-15, Operating Leases – Incentives ; and SIC-27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease . The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for leases, with limited exemptions for leases that are 12 months or less in duration or for leases of low-value assets. A lessee is required to recognize a right-of-use asset (“ROU asset”) representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of the expenses related to these leases will change as IFRS 16 replaces the straightline operating lease expense with depreciation expense on the ROU asset and a finance charge on the lease obligation. The standard substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors.

Initial adoption of IFRS 16

Under IAS 17 the Company’s operating leases consisted of property leases for office space, studio space and storage; computer and office equipment leases; and vehicles leases. Property lease terms range from short-term periods of less than one year to nine and a half years with certain leases containing renewal options. Computer and office equipment leases have terms ranging from short-term periods of less than one year to three years. Vehicle leases have terms ranging from approximately two to four years. Finance leases consist of computer equipment and data network infrastructure equipment with terms ranging from short-term periods of less than one year to three years.

Prior to the adoption of IFRS 16, contracts identified as operating leases under IAS 17 were recognized as expenses in general and administration expense in the consolidated statement of operations and comprehensive income (loss) or capitalized to investment in content in the consolidated statement of financial position and subsequently amortized over a period of time.

Under IFRS 16 entities are required to assess contracts to determine if the contract is or contains a lease based on the definition of a lease under IFRS 16: a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. In addition, the standard requires a lessee to separate lease components and non-lease components of a contract and allocate the consideration in the contract to each lease and non-lease component based on the relative stand-alone prices. However, the standard allows entities to elect to apply the practical expedient whereby it is not required to separate a lease component from any associated non-lease components and can instead elect to treat these as a single lease component. The Company has elected to apply this practical expedient to all of its leases.

The Company has adopted the new standard for the fiscal year beginning July 1, 2019, using the modified retrospective transition approach, which does not require restatement of comparative periods. In addition, as the Company has elected to initially measure the ROU asset at the amount equal to the lease liability on July 1, 2019, plus any prepaid lease payments, the adjustment to retained earnings is $nil.

The Company has elected to apply the following options and practical expedients on the date of initial adoption:

• to grandfather the assessment of which contracts are leases and to apply the new standard to those contracts identified as leases under IAS 17 and IFRIC 4;

• for leases previously classified as finance leases, the Company will recognize a ROU asset and lease liability measured initially at the previous carrying amount of the finance lease under IAS 17;

• the ROU asset will be based on the lease liability, plus any prepaid lease payments excluding any initial direct costs incurred;

• apply the short-term lease exemption to leases for which the lease term ends within 12 months of the date of initial adoption on a lease by lease basis;

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

• apply the low-value exemption to leases for which the underlying asset’s value is $6,500 or less;

• rely on previous assessments of whether leases are onerous; and

• use hindsight in determining the lease term if the contract contains options to extend or terminate the lease.

• The following table summarizes the impact on the consolidated statement of financial position as at June 30, 2019, resulting from the adoption of IFRS 16 on July 1, 2019.

				IFRS 16
		June 30, 2019		adoption		July 1, 2019
Trade receivables and other	$	63,261	$	(51)	$	63,210
Property and equipment1		7,211		18,149		25,360
Current obligations under finance leases		2,496		(2,496)		-
Current obligations under leases		-		3,823		3,823
Long-term obligations under finance leases		1,540		(1,540)		-
Long-term obligations under leases		-		18,307		18,307

1ROU assets are included in property and equipment.

The following table reconciles the Company’s operating lease commitments as at June 30, 2019, to the lease obligations recognized on the initial application of IFRS 16 as at July 1, 2019.

Commitments note at June 30, 2019	$	18,937
Add:
Adjustments due to elected lease renewal options		10,537
Finance lease liabilities previously recorded under IAS 17		4,036
Less:
Effect of discounting at the Company’s incremental borrowing rate		(7,041)
Variable lease payments		(3,872)
Short-term leases		(457)
Low-value leases		(10)
Lease liabilities arising from the initial adoption of IFRS 16 as at July 1, 2019	$	22,130

At the date of initial adoption, for leases previously classified as operating leases under IAS 17, except for short-term and low-value leases, the Company has discounted the remaining lease payments using its incremental borrowing rate (“IBR”). The following are the weighted-average discount rates applied: premise leases – 5.61%, equipment leases – 4.34%, and vehicle leases – 2.23%.

Accounting policies under IFRS 16

Right-of-use assets

At the lease commencement date, the Company recognizes a ROU asset at an amount equal to the lease liability and adjusted to include any prepaid lease payments, less any lease incentives, plus initial direct costs incurred, and any costs of dismantling and restoring an asset to a specific condition. The ROU assets are amortized on a straight-line basis over a period which is the earlier of the end of the asset’s estimated useful life or the end of the lease term. Amortization of ROU assets are included in general and administrative expenses in the consolidated statement of operations and comprehensive income (loss) and ROU assets are presented as a part of property and equipment in the consolidated statement of financial position.

Under IFRS 16, ROU assets are tested for impairment in accordance with IAS 36, Impairment of Assets , which replaces the previous requirement to recognize a provision for onerous lease contracts under IAS 37, Provisions, Contingent Liabilities and Contingent Assets .

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

Lease obligations

The lease obligation is initially measured as the present value of the future payments discounted using the rate implicit in the lease. However, if that rate is not readily determinable, the entity’s IBR is to be used. An entity’s IBR is the rate the Company would have to pay for similar assets at similar locations over a similar term. Subsequent to initial measurement, lease obligations are amortized in a similar manner to finance leases under IAS 17. Interest charges are reported as part of finance costs in the consolidated statement of operations and comprehensive income (loss) and lease obligations are reported as a separate line item in the consolidated statement of financial position.

Lease modifications

A lease modification, depending upon the nature of the modification, will be accounted for as a separate lease or as a remeasurement of the lease liability with a corresponding adjustment to the ROU asset or as a gain or loss if the carrying amount of the ROU asset has been reduced to zero.

Significant judgments in determining the lease term of contracts with renewal options

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. In its determination as to whether the Company is reasonably certain to exercise a renewal option, it considers all facts and circumstances that create an economic incentive for it to exercise the option. After the commencement date the Company reassesses the lease term for whether a significant event or change in circumstances affects its ability to exercise the option or not has occurred.

ROU assets and lease obligations as at and for the nine months ended March 31, 2020:

ROU assets		Premises		Equipment		Vehicles		Total
Lease liability on initial adoption of IFRS 16	$	17,717	$	318	$	63	$	18,098
Prepaid lease payments		51		-		-		51
Property and equipment – reclass existing
assets under finance leases		-		3,729		-		3,729
Balance July 1, 2019		17,768		4,047		63		21,878
Additions		7,727		5,450		-		13,177
Lease incentives		(900)		-		-		(900)
Amortization		(1,455)		(2,675)		(15)		(4,145)
Balance March 31, 2020	$	23,140	$	6,822	$	48	$	30,010

In the nine months ended March 31, 2020, $103 of amortization was capitalized to production costs.

Lease obligations		Premises		Equipment		Vehicles		Total
Lease liabilityon initial adoption of IFRS 16	$	17,714	$	4,353	$	63	$	22,130
Balance July 1, 2019		17,714		4,353		63		22,130
Additions1		7,677		5,448		-		13,125
Amortization		(1,160)		(3,113)		(15)		(4,288)
Balance March 31, 2020	$	24,231	$	6,688	$	48	$	30,967

1Additions include lease reassessments.

On the date of initial adoption, the Company applied the practical expedient to designate leases with terms of less than 12 months as short-term. As a result, for the nine months ended March 31, 2020, under the short-term exemption, $689 was expensed to rent, equipment rentals and office expenses and under the low-value exemption, $22 was expensed to office expense.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

The following table presents a reconciliation of the Company’s undiscounted cash flows at March 31, 2020 and June 30, 2019, to their present value for the Company’s lease obligations.

		March 31, 2020		June 30, 20191
Within one year	$	5,662	$	2,614
Between one and five years		16,478		1,573
Beyond fiveyears		17,607		-
Total undiscounted lease obligations		39,747		4,187
Less future interest charges		(8,780)		(151)
Total discounted lease obligations		30,967		4,036
Less currentportion of lease obligations	$	(6,020)	$	(2,496)
Non-currentportion of lease obligations	$	24,947	$	1,540

1As IFRS 16 was applied using the modified retrospective approach, lease obligations as at June 30, 2019, were those that were classified as finance leases under IAS 17.

As at March 31, 2020, the total discounted lease obligations related to contracts with Royal Bank of Canada (“RBC”) amounted to $4,220 with $2,652 classified as current and $1,568 as non-current.

(b) IFRIC 23, Uncertainty over Income Tax Treatments

On July 1, 2019, the Company adopted IFRIC 23 which was issued by the IASB in June 2017. The interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments under IAS 12, Income Taxes . There was no impact on the Company upon adoption of this standard.

4. REVERSE TAKEOVER TRANSACTION

On July 27, 2018, Golden Secret Ventures Ltd. (“Golden Secret”) signed a letter of intent with TEI, pursuant to which Golden Secret would acquire 100% of the common shares of TEI via a reverse take-over (the “RTO Transaction”). On October 30, 2018, the RTO Transaction was completed, and Golden Secret changed its name to Thunderbird Entertainment Group Inc. The excess of the fair value of consideration over the net assets acquired resulted in a charge related to public company listing of $5,316. Included in the net assets acquired was cash of $2,378. The Company issued 188,777 common shares as a transaction fee with a deemed value of $378.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

5. NET ASSETS HELD FOR SALE AND DISCONTINUED OPERATION

In March 2020, the Company decided to cease its UK Operation. The related assets and liabilities have been presented as held for sale and are as follows:

as held for sale and are as follows:
		March 31, 2020
Cash	$	432
Trade receivables and other		734
Investment in content		690
Propertyand equipment		4
Assets held for sale		1,860
Accounts payable and accrued liabilities		1,216
Deferred revenue		213
Liabilities associated with assets held for sale		1,429
Net assets held for sale	$	431

The cumulative foreign exchange losses recognized in accumulated other comprehensive income in relation to the discontinued operation as at March 31, 2020 were $45.

Analysis of the result of discontinued operation is as follows:

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Revenue	$	611	$	919	$	1,683	$	3,079
Expenses		816		1,108		2,456		3,231
Loss from discontinued operation		(205)		(189)		(773)		(152)
Loss on translation of discontinued operation		(95)		(49)		(89)		(36)
Other comprehensive loss from discontinued
operation	$	**(95) **	$	(49)	$	(89)	$	(36)

In assessing the fair values of the assets and liabilities, the Company assumed that all assets and liabilities had a fair value which is equal to net book value. The investment in content consists of distribution advances which are paid to obtain the distribution rights. The Company has also determined the fair value based upon current negotiations with prospective buyers that will transfer the assumption of the net liabilities held in this entity.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

6. TRADE RECEIVABLES AND OTHER

		March 31,		June 30,
Current		2020		2019
Trade receivables, net of loss allowance	$	7,951	$	5,781
Deposits and prepaids		3,140		2,415
Contract acquisition costs		415		138
Federal andprovincial film and television tax credits		53,835		54,927
	$	65,341	$	63,261
		March 31,		June 30,
Non-current		2020		2019
Trade receivables, net	$	69	$	735
Deposits and prepaids		461		386
Contract acquisition costs		104		138
	$	634	$	1,259

Federal and provincial film and television tax credits receivable from government agencies are subject to audit by the applicable government agency. Management believes that the net amounts recorded are fully collectible. The Company adjusts amounts receivable from government agencies quarterly and annually for any known differences arising from internal or external audit of these balances. The Company believes that its loss allowance is sufficient to reflect the related credit risk based on the history of collections.

The aging of current trade receivables is as follows:

		March 31,		June 30,
		2020		2019
Less than 60 days	$	7,403	$	5,718
Over 61 days		548		63
	$	7,951	$	5,781

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

7. INVESTMENT IN CONTENT

Investment in content represents the unamortized costs of film and television projects in development, content in production, released content and acquired content.

The components are as follows:

The components are as follows:
	Development			Content in		Released		Acquired
		costs		production		content		content		Total
Cost
At June 30, 2018	$	912	$	4,608	$	109,790	$	9,237	$	124,547
Additions1		482		14,953		-		1,641		17,076
Disposals		(315)		-		-		-		(315)
Transferred		-		(8,298)		8,298		-		-
At June 30, 2019		1,079		11,263		118,088		10,878		141,308
Additions1		390		7,361		-		398		8,149
Disposals2		(384)		-		-		-		(384)
Assets classified as held for sale		(50)		-		-		(4,936)		(4,986)
Transferred		-		(9,965)		9,965		-		-
At March 31, 2020	$	1,035	$	8,659	$	128,053	$	6,340	$	144,087
Amortization
At June 30, 2018	$	-	$	-	$	99,660	$	6,922	$	106,582
Additions		-		-		7,915		1,675		9,590
At June 30, 2019		-		-		107,575		8,597		116,172
Additions3		-		-		9,921		1,002		10,923
Assets classified as held for sale		-		-		-		(4,296)		(4,296)
At March 31, 2020	$	-	$	-	$	117,496	$	5,303	$	122,799
Net book value
June 30, 2019	$	1,079	$	11,263	$	10,513	$	2,281	$	25,136
March 31, 2020	$	1,035	$	8,659	$	10,557	$	1,037	$	21,288

1Net of government assistance (note 13) and third-party participation.

2Included in disposals is $75 in disposals related to discontinued operation.

3 Included in additions is $827 in amortization related to discontinued operation.

Interest charges capitalized to the cost of film and television production for the nine months ended March 31, 2020, amounted to $885 (June 30, 2019 - $1,081).

For the nine months ended March 31, 2020, the Company recorded amortization of investment in content of $1,313 (March 31, 2019 - $24) as a result of a change in the estimated useful life of certain released content for which the Company has no reasonable expectation of recovery through future exploitation.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

8. GOODWILL AND INTANGIBLE ASSETS

The continuity of goodwill and intangible assets is as follows:

				Distribution		Customer
		Goodwill		libraries	**relationships **			Total
Cost
At March 31, 2020, June 30, 2019 and
2018	$	12,402	$	2,700	$	1,470	$	16,572
Amortization
At June 30, 2018		-		944		1,103		2,047
Charge for theyear		-		270		367		637
At June 30, 2019		-		1,214		1,470		2,684
Charge for theperiod		-		203		-		203
At March 31, 2020	$	-	$	1,417	$	1,470	$	2,887
Net book value
June 30, 2019	$	12,402	$	1,486	$	-	$	13,888
March 31, 2020	$	12,402	$	1,283	$	-	$	13,685

9. INTERIM PRODUCTION FINANCING

Interim production credit facilities represent individual loans for the production of film and television programs that the Company produces.

		March 31,		June 30,
		2020		2019
Interim production credit facilities with various institutions, bearing interest at
bank’s prime rate plus 0.50% to 1.25% (June 30, 2019 - 0.50% to 1.25%). Secured
by assignment and direction of trade receivables and tax credits of
approximately $46,379 at March 31, 2020 (June 30, 2019 - $41,409). The
Company also enters into General Security Agreements. All facilities are
repayable on demand.	$	47,758	$	41,724
Revolving term loan with RBC, bearing interest at bank’s prime plus 1.25% (June
30, 2019 – 0.75% to 1.25%). Maximum funds available of $5.0 million and
secured by a General Security Agreement. Repayable on the earlier of 15 days
after the closing of the applicable single purpose production company (“SPPC”)
production facility or 180 days after the first draw has been made.		325		925
Non-interest bearing production loans with various service clients, secured by
Canadian tax credits and repayable upon receipt of Canadian tax credits.		-		5,722
	$	48,083	$	48,371

At March 31, 2020, included in interim production credit facilities are loans repayable in US$ in the amount of US$8,414 (CA$11,937) (June 30, 2019 - US$4,029 (CA$5,273)).

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

10. LONG-TERM DEBT

As at March 31, 2020, the Company has $nil (GBP£nil) (June 30, 2019 – $504 (GBP£303)) outstanding of a GBP£2,000 non-revolving credit line classified as long-term as it has no fixed schedule of repayment and a maturity date of March 31, 2021 and $nil (June 30, 2019 – $1,433) outstanding of a $2,640 non-revolving term loan classified as current portion of long-term debt.

The maximum funds available under the above credit facilities consist of the following:

		March 31,		June 30,
		2020		2019
Non-revolving credit line bearing interest at a margin of 3.00% plus the
applicable LIBOR (March 31, 2020 – 3.76% to 3.94% (June 30, 2019 - 3.80% to
3.96%)). Secured byassignment and direction of trade receivables.	£	2,000	£	2,000
Non-revolving term loan with RBC bearing interest at prime plus 0.50% (March
31,2020 - 4.45%(June 30,2019 – 4.20% to 4.45%))1	$	2,640	$	2,640

1 Under the terms of this loan, payment will include all excess tax credits remaining once RBC has been fully repaid for each SPPC which has obtained interim financing of the tax credits from RBC due within 15 days of the receipt of the tax credit. The original maximum funds available under this credit facility was $6,000. In August 2018, the Company drew down the full amount to repurchase common shares (see note 11). In January 2019 the loan limit was decreased to $2,640 due to the principal repayments made in the prior months. The credit facility is secured by a General Security Agreement.

As at March 31, 2020, the Company also has the following credit facilities with RBC which have not been drawn on:

• A five-year $10,000 non-revolving term loan at an interest rate of prime plus 0.50%. Under the terms of the loan, an annual cash flow sweep of 5% of the Company’s EBITDA will be due within 120 days of the fiscal yearend of the Company and will be applied to repayment of the loan.

• A $1,500 non-revolving reducing lease facility. This facility may be used to finance equipment purchases and leasehold improvements

Under the terms of the RBC credit facilities disclosed above, the Company is required to meet certain covenants. As at March 31, 2020, the Company was in compliance with all of the covenants.

11. REDEEMABLE PREFERRED SHARES

Issued and outstanding:

_Issued and outstanding: _
			Amount
	Number of		Liability		Equity
	shares		component		component
Class A (formerly Class B Series 2)
Balance June 30,2019 and 2018	1,054,000	$	926	$	132
Balance March 31, 2020	1,054,000	$	926	$	132

Prior to the RTO Transaction (note 4), the Company had the following preferred shares: Class A Series 2 – 244,444 and Class B Series 1 – 1,378,750. In October 2018, 166,666 Class A Series 2 and 943,076 Class B Series 1 preferred shares were redeemed at the option of the shareholder at a value of $1.00 per share. At the same time, 77,778 Class A Series 2 and 435,674 Class B Series 1 preferred shares were converted into common shares on the basis of 0.67 common share for each one preferred share.

Concurrent with the RTO Transaction described in note 4, the Class B Series 2 preferred shares were converted to Class A preferred shares of the Company. The Class A preferred shares hold the same terms as the former Class B Series 2 preferred shares.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

The Class A preferred shares were issued in fiscal 2016 under the provisions of the Small Business Venture Capital Act (British Columbia), and therefore the Company is not permitted to acquire, cancel, or redeem shares held by eligible investors for a period of five years from the date of issue. The Company has the option to retract the shares at a value of $1.00, $1.025, and $1.05 per share after the fifth, sixth and seventh anniversary dates of the share issuance, respectively. In addition, the shareholders may convert their preferred shares into common shares at a ratio of three preferred shares to one common share at any time after the fifth anniversary, or may redeem their shares at a price of $1.00, $1.025, and $1.05 per share after the fifth, sixth and seventh anniversary dates of the share issuance, respectively.

During the three and nine months ended March 31, 2020, the Company paid a dividend of $0.07 per Class A preferred share which amounted to $18 and $55, respectively (three and nine months ended March 31, 2019 - $0.07 per preferred share; $18 and $55, respectively).

12. SHARE CAPITAL

Authorized

Unlimited number of common shares without par value Unlimited number of preferred shares without par value

Common shares

Issued:

Number of shares1 Amount1 Balance June 30, 2018 29,753,344) $ 29,799) Repurchase of common shares (4,800,000) (6,000) Share issue costs – cash, net of tax effect - (737) Share issue costs – non-cash - (431) Conversion of Class A Series 2 redeemable preferred shares (note 10) 52,109 53) Conversion of Class B Series 1 redeemable preferred shares (note 10) 291,900 1,023) Conversion ofpreferred shares 11,363,208 18,787) Balance October 30, 2018 36,660,561 42,494) RTO Transaction (note 4) Exchanged for Thunderbird Entertainment Group Inc. shares (36,660,561) -) Issued pursuant to acquisition 36,660,561) -) Shares of Golden Secret upon RTO Transaction2 3,329,929) 6,660) Shares issued as transaction fee on completion of RTO Transaction 188,777) 378) Conversion of subscription receipts 5,125,000) 10,250) Conversion of convertible debentures 1,125,000) 2,250) Exercise of options 95,000) 196) Exercise of warrants 107,208) 289) Balance June 30, 2019 46,631,475 $ 62,517 Exercise of options 40,000 117) Balance March 31, 2020 46,671,475 $ 62,634

1Under reverse takeover accounting, the number of shares issued and outstanding is that of Thunderbird Entertainment Group Inc. (formerly Golden Secret Ventures Ltd.). However, the share capital amount is that of its legal subsidiary Thunderbird Entertainment Inc. plus the share of capital transactions of the Company from the acquisition date of October 30, 2018 onwards. 2As at October 30, 2018, Golden Secret had 3,329,929 common shares issued and outstanding.

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Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

THUNDERBIRD ENTERTAINMENT GROUP INC.

In August 2018, the Company repurchased 4,800,000 common shares at a price of $1.25 per share.

Prior to completion of the RTO Transaction described in note 4, TEI completed a brokered private placement financing of 5,125,000 subscription receipts at a price of $2.00 per subscription receipt for aggregate gross proceeds of $10,250. On closing of the RTO Transaction, each subscription receipt was exchanged for one common share of the Company. For their services in connection with the financing, the agent received a cash commission equal to 7% of the gross proceeds raised, a corporate finance fee of $195 and 344,500 agent’s warrants entitling it to purchase that number of common shares. The cash commission and agent’s warrants were reduced to 2% each for subscribers on the President’s List.

In September 2018, the Company issued $2,250 in convertible debentures. The convertible debentures bore interest at 8% per annum payable monthly and were repayable on demand after October 31, 2018. Concurrent with the RTO Transaction as described in note 4, the convertible debentures automatically converted into 1,125,000 common shares of the Company at a price of $2.00 per share.

Earnings (loss) per share

The following table calculates basic and diluted net earnings (loss) per share:

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Net income (loss) from continuing operations	$	3,160	$	2,118	$	3,245	$	(2,574)
Non-controlling interest		-		-		-		(8)
Preferred share dividends issued		-		-		-		(386)
Net income (loss) from continuing operations –
attributable to the owners of the parent		3,160		2,118		3,245		(2,968)
Dividends expense		18		18		55		55
Diluted net income(loss)from continuingoperations	$	3,178	$	2,136	$	3,300	$	(2,913)
Basic weighted average number of common shares		46,671,475		46,579,675		46,648,735		35,597,239
Diluted weighted average number of common shares		50,095,567		49,337,267		50,072,827		38,354,831
Basic income(loss) per share – continuing operations	$	0.068	$	0.045	$	0.070	$	(0.083)
Diluted income (loss) per share – continuing
operations	$	0.063	$	0.043	$	0.066	$	(0.083)
Loss from discontinued operation	$	(205)	$	(189)	$	(773)	$	(152)
Basic lossper share – discontinued operation	$	(0.004)	$	(0.004)	$	(0.017)	$	(0.004)
Diluted lossper share – discontinued operation	$	(0.004)	$	(0.004)	$	(0.017)	$	(0.004)

Preferred shares Issued:

Preferred shares Issued:
	Number of shares		Amount
Balance June 30, 2018	9,658,750	$	18,787
Conversion ofpreferred shares	(9,658,750)		(18,787)
Balance June 30, 2019 and March 31, 2020	-	$	-

Immediately prior to closing of the RTO Transaction described in note 4, the preferred shares automatically converted into common shares of the Company on the basis of 1.176 common share for each one preferred share.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

Warrants

The following table summarizes the share purchase warrants outstanding:

	Number of	Weighted average	Weighted average
	warrants		exerciseprice
Balance, June 30, 2018	-	$	-
Issued	344,550		2.00
Warrants of Golden Secret upon RTO Transaction (note 4)	100,000		0.70
Exercised	(107,208)		0.80
Balance June 30, 2019 and March 31, 2020	337,342	$	2.00

In connection with the brokered private placement, the Company issued 344,500 agent warrants to acquire 344,500 common shares. The warrants have an exercise price of $2.00 per share, a two-year term and vest immediately.

In connection with the RTO Transaction, Golden Secret’s warrants were re-valued on October 30, 2018. The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following inputs: share price of $2.70, interest rate of 2.30%, expected life of 0.3 years, volatility of 75% and an exercise price of $0.70.

During the nine months ended March 31, 2020, no warrants were exercised. During the nine months ended March 31, 2019, 107,208 warrants were exercised for proceeds of $84. An amount of $204 was transferred from the warrant reserve to common shares.

No warrants were issued during the nine months ended March 31, 2020. For the nine months ended March 31, 2019, the fair value of each warrant granted was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

model with the followingweighted average assumptions:
	March 31,	March 31,
	2020	2019
Share price on date of grant	N/A	$2.00
Interest rate	N/A	2.28%
Expected life	N/A	2 years
Volatility	N/A	41.53%
Exerciseprice	**N/A **	$2.00

The following table summarizes the warrants outstanding at March 31, 2020:

			Weighted average
			remaining	Weighted average
	Number of		contractual life	exercise price
Exerciseprice	warrants	Expiry date	(years)	($ per share)
$2.00	337,342	October 30,2020	0.58	2.00
	337,342		0.58	2.00

Share-based compensation

The Company has established a Share Option Plan (the “option plan”) which provides for options to purchase common shares to be granted by the Company to directors, officers, employees and consultants of the Company. Options will generally vest over a period of 36 months. The fair value of the options issued is recognized in share-based compensation over the vesting period, with a corresponding charge to contributed surplus. The maximum number of common shares issuable under the option plan is 10% of the total number of issued and outstanding shares at the grant date of an option.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

The following table summarizes the changes in stock options outstanding

		Weighted average	Weighted average
	Number of options		exerciseprice
Balance, June 30, 2018	1,570,000	$	1.44
Issued	2,801,000		2.00
Stock options of Golden Secret upon RTO transaction (note 4)	310,000		1.85
Exercised	(95,000)		1.09
Forfeited	(30,000)		2.00
Balance June 30, 2019	4,556,000		1.82
Issued	250,000		1.32
Exercised	(40,000)		0.50
Forfeited	(90,000)		2.00
Expired	(60,000)		3.20
Balance March 31, 2020	4,616,000	$	1.78

During the nine months ended March 31, 2020, the Company granted options to acquire 250,000 shares of its common stock to a director. The options have an exercise price of $1.32 per share, a seven-year term and vest 25% immediately with the remaining 75% vesting one-third over each anniversary date.

During the nine months ended March 31, 2019, the Company granted options to acquire 2,711,000 shares of its common stock to employees, officers and directors. The options have an exercise price of $2.00 per share, a seven-year term and vest 25% immediately with the remaining 75% vesting one-third over each anniversary date.

During the nine months ended March 31, 2019, the Company granted options to acquire 90,000 shares of its common stock to consultants. The options have an exercise price of $2.00 per share, a five-year term and vest 25% quarterly over one year.

In connection with the RTO Transaction, Golden Secret’s options were re-valued on October 30, 2018. The fair value of the options was estimated using the Black-Scholes option pricing model with the following inputs: share price of $2.70, interest rate of 2.40%, expected life of 7.4 to 9.4 years, volatility of 75% and an exercise price of $0.50 to $3.20.

The fair value of each option granted during the nine months ended March 31, 2020 and 2019, is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

	March 31,	March 31,
	2020	2019
Share price on date of grant	$1.32	$ 2.00
Interest rate	1.60%	1.68% to 2.41%
Expected life	7 years	5 to 7 years
Volatility	46.16%	36.75% to 38.93%
Exerciseprice	$1.32	$ 2.00

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

The following table summarizes the stock options outstanding at March 31, 2020:

			Weighted
			average		Weighted			Weighted
	Number		remaining		average	Number of		average
Exercise	of		contractual	exercise price		options	exercise price
price	options	Expiry date	life(years)	($ per share)		exercisable	($ per share)
$ 0.50	95,000	Mar 2026	5.94	$	0.50	95,000	$	0.50
$ 1.25	1,100,000	Nov 2020 to Jan 2021	0.63		1.25	1,100,000		1.25
$ 1.32	250,000	December 2026	6.70		1.32	62,500		1.32
$ 2.00	3,076,000	Jun 2021 to Mar 2026	5.09		2.00	1,734,250		2.00
$3.20	95,000	Mar 2028	7.96		3.20	95,000		3.20
	4,616,000		4.16	$	1.78	3,086,750	$	1.70

During the three and nine months ended March 31, 2020, the Company recorded share-based compensation expense of $140 and $544, respectively (three and nine months ended March 31, 2019 - $304 and $1,236, respectively).

During the nine months ended March 31, 2020, 40,000 stock options were exercised at a price of $0.50 per option for gross proceeds of $20; an amount of $97 was transferred from contributed surplus to common shares. During the nine months ended March 31, 2019, 95,000 stock options were exercised at prices of $0.50 and $1.25 for gross proceeds of $104; an amount of $92 was transferred from contributed surplus to common shares.

13. GOVERNMENT FINANCING AND ASSISTANCE

Investment in content and direct operating expenses have been reduced by the following:

		Nine months ended	Nine months ended	Nine months ended
		March 31,
		2020		2019
Equity investment from third parties	$	-	$	136
Non-repayable contributions from the Canada Media Fund license fee program		8,129		6,496
Tax credits relatingtoproduction activities		28,650		26,795
	$	36,779	$	33,427

During the nine months ended March 31, 2020, investment in content was reduced by $23,119 and direct operating expenses were reduced by $13,660 (nine months ended March 31, 2019 - $22,365 and $11,062, respectively).

The Company is subject to routine inquiries and review by regulatory authorities of its various incentive claims which have been received or are receivable. Adjustments of claims, if any, as a result of such inquiries or reviews will be recorded at the time of such determination. There have been no material adjustments to date.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

14. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table presents components of revenue:

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Revenue from contracts with customers:
Production services	$	12,495	$	7,813	$	34,346	$	21,165
Licensing and distribution		16,806		13,117		25,166		23,538
Revenue from other sources:
Other		-		16		38		33
	$	29,301	$	20,946	$	59,550	$	44,736

Revenues are derived from the following geographical sources, by location of customer:

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Canada	$	20,784	$	12,774	$	33,194	$	20,978
United States		6,300		3,967		17,018		12,014
United Kingdom		147		1,022		1,808		3,067
Denmark		1,604		1,864		4,471		5,466
Republic of Ireland		299		440		1,527		2,154
China		73		874		1,414		886
Other countries		94		5		118		171
	$	29,301	$	20,946	$	59,550	$	44,736

As at March 31, 2020, the Company’s UK operation was classified as held for sale and as such there were no non-current assets attributable to the Company’s entities based in the U.K (June 30, 2019 - $116 of long-term trade receivables, $1,350 of investment in content and $18 of property and equipment). The following non-current assets were attributable to the Company’s entities based in the USA: $140 of long-term trade receivables, $nil of investment in content, and $1,193 of property and equipment (June 30, 2019 - $nil, $nil, and $25, respectively). All other non-current assets were attributable to the Company’s entities based in Canada.

The Company’s only contract related liability is deferred revenue, which reflects the timing difference between the receipt of cash and the recognition of revenue. The following table reflects the movement in deferred revenue:

		March 31,		June 30,
		2020		2019
Opening balance	$	15,389	$	9,367
Revenue recognized that was included in the deferred revenue balance at the
beginning of the period		(14,403)		(7,983)
Increases due to cash received, excluding amounts recognized as revenue during
the period		10,445		14,005
Deferred revenue classified as held for sale		(213)		-
Ending balance	$	11,218	$	15,389

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019 (Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

15. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

Financial instruments measured at fair value are classified into one of three levels that reflect the inputs to valuation techniques used to measure fair value as follows:

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

Level 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 : inputs for the asset or liability based on unobservable market data.

The Company’s cash and cash equivalents are transacted in active markets and have a hierarchy of Level 1. The carrying amounts reported on the consolidated financial statements for cash and cash equivalents, trade receivables, accounts payable and accrued liabilities approximate their fair values due to their immediate or short-term nature and are classified as Level 2. The carrying value of interim production financing and long-term debt approximates their fair value as the interim production financing and debt bear interest at rates that fluctuate with market rates and are classified as Level 2.

The Company’s Class A (formerly Class B Series 2) redeemable preferred shares are classified as Level 3. The redeemable preferred shares have a liability and equity component. The fair value of liability component was determined by discounted cash flows from expected future dividend payments using a rate of 8%.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy.

The Company is exposed to credit risk, liquidity risk and market risk in the normal course of operations. The Company does not use derivative instruments to reduce its exposure.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s financial risk management framework and monitors risk management activities. The Company identifies and analyzes the risks faced by the Company and may utilize financial instruments to mitigate these risks.

Credit risk

The Company is subject to credit risk with respect to cash and cash equivalents and trade receivables and production financing. Production financing receivable is mainly with Canadian broadcasters and large international distribution companies. For certain arrangements with licensees, the Company is considered the agent, and only reports the revenue net of the licensor’s share. When the Company bills a third party in full where it is an agent for the licensor, the Company records an offsetting amount in accounts payable to the licensee when the amount is collected from a third party. This reduces credit risk, as the Company is only exposed to the amounts receivable related to the revenue it records.

At March 31, 2020, two broadcasters/distributors individually accounted for more than 10% of trade and production financing receivables. Receivables from these broadcasters/distributors accounted for 33% of the total trade and financing receivables.

For our trade receivables, we apply the simplified approach for determining expected credit losses, which requires us to determine the lifetime expected losses for all our trade receivables. The expected lifetime credit loss provision for our trade receivables is based on historical counterparty default rates and adjusted for relevant forward-looking information, as required. Since most of our customers are considered to have low default risk and our historical default rate and frequency of loss are low, the lifetime expected credit loss allowance for trade receivables is nominal as at March 31, 2020.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

All cash and cash equivalents balances are held at major Canadian banking institutions.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they are due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking harm to the Company’s reputation.

The Company expects to satisfy obligations through cash on hand, cash flows from operations, refundable tax credit loans and new financing.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and government assistance risk, will affect the Company’s net income (loss) and the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

i. Interest rate risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate risk on its interim production financing which bears a floating interest rate. Based on the average carrying value of these facilities, a fluctuation in interest rates of 1% would represent approximately a $348 change to net loss for the nine months ended March 31, 2020 (March 31, 2019 - $307). The Company has no interest rate hedges or swaps outstanding at March 31, 2020.

ii. Foreign currency exchange risk

Foreign currency exchange risk is the risk that future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s activities which expose it to currency risk involve the holding of foreign currencies as well as earning revenues and incurring expenses that are denominated in foreign currencies. The Company has not engaged in any foreign exchange hedging activities to date; however, the Company mitigates its currency exchange risk by entering into natural hedges whereby foreign currency liabilities are offset by assets pledged in the same foreign currency. For the nine months ended March 31, 2020, revenue denominated in US dollars accounted for 33% (March 31, 2019 - 34%) of total revenue and revenue denominated in GBP accounted for 3% (2019 – 7%) of total revenue. As at March 31, 2020, a 5% fluctuation in the US dollar exchange rate would have an impact of approximately $538 (March 31, 2019 - $646) on net loss and a 5% fluctuation in the GBP exchange rate would have an impact of approximately $49 (March 31, 2019 - $151) on net loss.

The Company is also exposed to foreign exchange risk on its cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities, and interim production financing that are denominated in US dollars. A 5% fluctuation in the US dollar closing rate would result in a change to net loss for the nine months ended March 31, 2020, of approximately $509 (March 31, 2019 - $84).

16. CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to maintain financial flexibility in order to pursue its strategy of organic growth combined with strategic acquisitions, and to maximize the return to shareholders through the optimization of a reasonable debt and equity balance commensurate with current operating requirements. The Company defines capital as the aggregate of its shareholders’ equity and long-term debt less cash and cash equivalents.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

To facilitate the management of its capital structure, the Company prepares annual expenditure budgets that are updated as necessary depending on the various factors, including industry conditions and operating cash flows. The annual and updated budgets are reviewed by the Board of Directors.

The Company expects that its current capital resources will be sufficient to carry out operations beyond its current reporting period. The overall strategy with respect to capital risk management remains unchanged from the year ended June 30, 2019.

17. RELATED PARTY TRANSACTIONS

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Dividends1	$	2	$	2	$	6	$	182
Producer and consulting fees2		90		124		345		144
Revenue3		(309)		-		(651)		-
Transaction fee4		-		-		-		378
Other		-		-		-		17
	$	(217)	$	126	$	(300)	$	721

1Paid to directors and key management personnel and companies owned by directors and key management personnel.

2Paid to companies owned by directors and a president.

3Received from a company owned by a director and president.

4In connection with the RTO Transaction (note 4) 188,777 common shares with a deemed value of $378 were issued to a company owned by a director.

At March 31, 2020, $752 (March 31, 2019 - $105) was due from a company owned by a director and president and $62 (March 31, 2019 - $58) was payable to a director and companies owned by directors.

The related party transactions are made on terms equivalent to those that prevail in arm’s length transactions. At March 31, 2020, $752 of amounts due from a company owned by a director and president carried interest at prime plus 1%. All other outstanding balances at the period-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables/payables.

Key Management Personnel Compensation

Key management includes all directors, as well as the Executive Chair, Vice Chair, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and President. The remuneration of directors and officers is as follows:

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Short-term benefits	$	572	$	855	$	1,973	$	2,315
Share-basedpayments(note 12)		80		142		288		652
	$	652	$	997	$	2,261	$	2,967

18. COMMITMENTS AND CONTINGENCIES

Litigation

The Company and its subsidiaries may from time to time be a party to certain legal disputes and claims arising from commercial issues in the normal course of business. There are currently no legal disputes or claims that will have a material adverse effect on the financial position or results of operations of the Company.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

19. SUPPLEMENTAL CASH FLOW INFORMATION

The following table reconciles the changes in non-cash working capital as disclosed in the consolidated statement of cash flows:

cash flows:
		Nine months ended March 31,
		2020		2019
Operating activities
Changes in non-cash working capital
Accounts receivable	$	(1,959)	$	581
Income taxes recoverable		(1,049)		269
Accounts payable and accrued liabilities		1,462		(2,293)
Income taxes payable		206		(1,014)
Deferred revenue		(4,135)		(383)
	$	(5,475)	$	(2,840)
		Nine months ended March 31,
		2020		2019
Interest and debt service costs paid	$	909	$	1,564
Income taxes paid	$	2,110	$	2,349
Propertyand equipmentpurchased through lease	$	12,277	$	1,430

The change in liabilities arising from financing activities is as follows:

Balance June 30, 2019	Cash flows from(used in) Non-cash changes Proceeds Repayments Disposal Foreign exchange movements Balance March 31, 2020
Interim production financing $ 48,371 Current portion of long-term debt $ 1,433 Long-term debt1 $ 504 Lease obligations – current2 $ 3,823 Lease obligations – long- term2 $ 18,307	$ 32,657 $ (33,784) $ - $ 839 $ 48,083 $ - $ (1,433) $ - $ - $ - $ 13 $ (517) $ - $ - $ - $ 3,734 $ (1,537) $ - $ - $ 6,020 $ 9,438 $ (2,751) $ (47) $ - $ 24,947

1Included in cash flows of long-term debt is $13 in proceeds and $517 in repayments related to discontinued operation.

2Adjusted for the adoption of IFRS 16 (note 3(a))

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

20. FINANCE COSTS, NET

		Three months ended	Three months ended	Three months ended		Nine months ended	Nine months ended	Nine months ended
		March 31,				March 31,
		2020		2019		2020		2019
Dividends	$	18	$	18	$	55	$	55
Interest on loans		117		131		456		749
Interest on lease obligations1		322		35		804		114
Interest income		(391)		(50)		(492)		(322)
Realized foreign exchange gain		(193)		(295)		(476)		(465)
Unrealized foreign exchange(gain)loss		(183)		170		(251)		(15)
	$	(310)	$	9	$	96	$	116

1Included in interest on lease obligations for the three and nine months ended March 31, 2020 is interest related to non-finance leases of $276 and $665, respectively (three and nine months ended March 31, 2019 - $nil and $nil, respectively).

21. EXPENSES BY NATURE

The following table sets out the expenses by nature:

Three months ended Nine months ended March 31, March 31, 2020 2019 2020 2019 Direct operating1 Direct costs $ 8,023 $ 4,873 $ 21,152 $ 13,298 Amortization of content 8,371 5,885 10,096 7,240 Development expenses and other 48 (250) 108 66 16,442 10,508 31,356 20,604 General and administrative Contractors, salaries and employee benefits 4,080 3,446 11,147 9,080 Office and administrative 1,806 1,636 4,900 4,382 Legal and professional 171 255 582 1,087 COVID-19provision 200 - 200 - 6,257 5,337 16,829 14,549 Amortization of property and equipment and intangible assets Amortization of property and equipment and intangible assets 493 772 1,035 2,303 Amortization of right-of-use assets 1,624 - 4,042 - 2,117 772 5,077 2,303 Distribution and marketing 454 674 1,305 1,294 Share-based compensation 140 304 544 1,236 Finance costs, net (310) 9 96 116 Charge relatingtopublic companylisting - - - 5,316 $ 25,100 $ 17,604 $ 55,207 $ 45,418

1Costs related to investment in content.

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THUNDERBIRD ENTERTAINMENT GROUP INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended March 31, 2020 and 2019

(Unaudited – in thousands of Canadian dollars, except for amounts per share and as noted)

22. SUBSEQUENT EVENTS

COVID-19

On March 11, 2020, the World Health Organization (“WHO”) declared COVID-19 a pandemic. In response to the WHO declaration and the continuing spread of COVID-19, there have been several social distancing measures taken by the Company and third parties including governments, regulatory authorities, businesses and our customers that could negatively impact the Company’s operations and financial results in future periods. Given the unprecedented and pervasive impact of changing circumstances surrounding the COVID-19 pandemic, there is inherently more uncertainty associated with our future operating assumptions and expectations as compared to prior periods. As such, it is not possible to estimate the impacts COVID-19 will have on the Company’s financial position or results of operations in future periods.

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