Thunderbird Entertainment Group — Interim / Quarterly Report 2021

Feb 25, 2021

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Thunderbird Entertainment Group Inc.

Unaudited Interim Condensed Consolidated Financial Statements

For the Three and Six Months Ended December 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. Unaudited Interim Condensed Consolidated Statements of Financial Position

		At December 31,		At June 30,
(in thousands of Canadian dollars)	Notes	2020		2020
ASSETS
Current
Cash and cash equivalents	$	18,003	$	12,820
Trade receivables and other	5	63,657		58,735
Income taxes recoverable		651		1,001
Current portion of lease receivable	11	163		-
Assets held for sale	4	682		1,222
		83,156		73,778
Long-term trade receivables and other	5	4,649		3,103
Investment in content	6	27,039		25,292
Deferred tax assets		8,366		8,290
Property and equipment	7	27,218		31,096
Long-term lease receivable	11	1,426		-
Goodwill and intangible assets	8	13,483		13,618
Total Assets	$	165,337	$	155,177
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities	$	6,935	$	7,708
Income taxes payable		1,661		1,131
Interim production financing	9	37,467		42,420
Deferred revenue	15	25,967		14,999
Current portion of lease obligations	11	5,161		5,419
Redeemable preferred shares	12	926		926
Liabilities associated with assets held for sale	4	561		759
		78,678		73,362
Long-term lease obligations	11	20,983		21,443
Deferred tax liabilities		6,374		6,711
Total Liabilities		106,035		101,516
Shareholders' Equity
Redeemable preferred shares	12	132		132
Common shares	13	65,987		62,634
Accumulated other comprehensive income		175		259
Warrants reserve	13	-		168
Contributed surplus	13	4,014		4,486
Deficit		(11,006)		(14,018)
Total Shareholders' Equity		59,302		53,661
Total Liabilities and Shareholders' Equity	$	165,337	$	155,177

Commitments and Contingencies - Note 19 Subsequent Events - Note 23

See accompanying notes to the interim condensed consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Unaudited Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

		Three	months ended December 31,	months ended December 31,	months ended December 31,	Six	months ended	December 31,	December 31,
(in thousands of Canadian dollars except for share data)	Notes		2020		2019*		2020		2019*
Revenue	15	$	27,950	$	14,093	$	47,740	$	30,635
Expenses
Direct operating	22		18,793		8,402		30,475		18,203
Distribution and marketing			268		459		446		851
General and administrative	22		3,615		3,293		7,196		5,986
Share-based compensation	13		223		166		343		404
Amortization of property and equipment and intangible assets	22		1,977		1,782		4,291		2,960
Finance costs, net	21		(220)		439		(11)		757
Foreign exchange loss			286		23		146		33
			24,942		14,564		42,886		29,194
Income (loss) before other items			3,008		(471)		4,854		1,441
Gain on disposal of right-of-use asset	11		(266)		-		(266)		-
Loss on disposal of property and equipment	11		736		-		736		-
Income tax expense(recovery)			1,010		(165)		1,388		407
Net income(loss) from continuing operations			1,528		(306)		2,996		1,034
Income(loss)from discontinued operation	4		97		(420)		16		(568)
Income(loss) from discontinued operation			97		(420)		16		(568)
Net income(loss) for theperiod			1,625		(726)		3,012		466
Other comprehensive income (loss)
Items that may be subsequently reclassified to net income (loss)
Foreign currency translation adjustment			(19)		(3)		(22)		(1)
Income(loss)on translation of discontinued operation	4		(18)		13		(62)		7
			(37)		10		(84)		6
Comprehensive income(loss) for theperiod		$	1,588	$	(716)	$	2,928	$	472
Basic income (loss) per share - continuing operations	13	$	0.032	$	(0.007)	$	0.064	$	0.022
Basic income(loss) per share - discontinued operation	13	$	0.002	$	(0.009)	$	-	$	(0.012)
Total basic income(loss) per share		$	0.034	$	(0.016)	$	0.064	$	0.010
Diluted income (loss) per share - continuing operations	13	$	0.030	$	(0.007)	$	0.061	$	0.021
Diluted income(loss) per share - discontinued operation	13	$	0.002	$	(0.009)	$	-	$	(0.012)
Total diluted income(loss) per share		$	0.032	$	(0.016)	$	0.061	$	0.009

*See note 3(d) for details of revisions to prior period amounts.

See accompanying notes to the interim condensed 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
other
Preferred Common comprehensive Warrants Contributed
(in thousands of Canadian dollars) Notes shares shares income reserve surplus Deficit Total
Balance at June 30, 2019 $ 132 $ 62,517 $ 264 $ 168 $ 3,900 $ (17,061) $ 49,920
Comprehensive income - - 6 - - 466 472
Share-based compensation 13 - - - - 404 - 404
Exercise of options 13 - 117 - - (97) - 20
Balance at December 31, 2019 $ 132 $ 62,634 $ 270 $ 168 $ 4,207 $ (16,595) $ 50,816
Balance at June 30, 2020 $ 132 $ 62,634 $ 259 $ 168 $ 4,486 $ (14,018) $ 53,661
Comprehensive income (loss) - - (84) - - 3,012 2,928
Share-based compensation 13 - - - - 343 - 343
Shares issued as management compensation 13 - 114 - - - - 114
Exercise of options 13 - 2,397 - - (815) - 1,582
Exercise of warrants 13 - 842 - (168) - - 674
Balance at December 31, 2020 $ 132 $ 65,987 $ 175 $ - $ 4,014 $ (11,006) $ 59,302
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*See note 3(d) for details of revisions to prior period amounts.

See accompanying notes to the interim condensed consolidated financial statements.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

		Six months	ended	December 31,
(in thousands of Canadian dollars)	Notes	2020		2019
OPERATING ACTIVITIES
Net income for the period	$	3,012	$	466
Net income (loss) from discontinued operation		(16)		568
Net income from continuing operations		2,996		1,034
Items not involving cash:
Amortization of investment in content	6	5,070		2,334
Amortization of property and equipment	7	619		407
Amortization of right-of-use assets	7	3,537		2,418
Amortization of intangible assets	8	135		135
Share-based compensation	13	343		404
Deferred income taxes recovery		(414)		(679)
Unrealized foreign exchange gain		(702)		(32)
Loss on disposal of property and equipment		736		11
Gain on disposal of right-of-use asset		(347)		-
Termination and modifications of leases		112		-
Impairment of development costs	6	306		-
Changes in non-cash working capital	20	4,108		(2,343)
Investment in content		(6,108)		(5,521)
Cash flows provided by (used in) continuing operations		10,391		(1,832)
Cash flows provided by (used in) discontinued operation		359		(309)
		10,750		(2,141)
FINANCING ACTIVITIES
Repayment of interim production financing	20	(32,595)		(20,287)
Proceeds from interim production financing	20	28,468		22,909
Repayment of obligations under leases	20	(3,755)		(2,584)
Proceeds from obligations under leases	20	1,078		322
Repayment of long-term debt	20	-		(1,433)
Proceeds from exercise of warrants and share options	13	2,256		20
Cash flows used in continuing operations		(4,548)		(1,053)
Cash flows used in discontinued operation		-		(266)
		(4,548)		(1,319)
INVESTING ACTIVITIES
Purchase of property and equipment		(615)		(559)
Costs of disposal of property and equipment		(81)		-
Cash flows used in continuing operations		(696)		(559)
Cash flows used in discontinued operation		-		(3)
		(696)		(562)
Effect of exchange rate changes on cash and cash equivalents		(323)		43
Net increase (decrease) in cash and cash equivalents during the period		5,183		(3,979)
Cash and cash equivalents, beginning of period		12,820		13,430
Cash and cash equivalents, end of period	$	18,003	$	9,451

See accompanying notes to the interim condensed consolidated financial statements.

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

1. NATURE OF BUSINESS

Thunderbird Entertainment Group Inc. (the “Company”), the ultimate parent, and its primary wholly owned subsidiaries: Thunderbird Entertainment Inc., Great Pacific Media Inc. and Atomic Cartoons Inc., 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 123 West 7[th] Avenue, Vancouver, BC, V5Y 1L8.

Thunderbird Entertainment Group Inc. is a public company that is listed on the TSX Venture Exchange (“TSX-V”), which commenced trading under the symbol “TBRD” on November 2, 2018, and the OTCQX® Best Market, which commenced trading under the symbol “THBRF” on November 10, 2020.

The interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on February 23, 2021.

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, 2020 and 2019, 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

These 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 these interim condensed consolidated statements of operations and comprehensive income (loss) have been reclassified to conform with the current period presentation, such as foreign exchange loss which has been aggregated. These reclassifications 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, 2020, except for the new accounting policy adopted and described below.

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

(a) New accounting policy adopted

Subleases

When the Company enters into sublease arrangements as an intermediate lessor, it assesses whether the sublease is classified as a finance sublease or an operating sublease by reference to the corresponding right-of-use asset (“ROU asset”) arising from the head lease, rather than by reference to the underlying asset. A sublease is a finance sublease if substantially all the risks and rewards incidental to ownership of the related ROU asset on the head lease have been transferred to the sub-lessee.

(b) Significant accounting estimates and judgments

The preparation of these interim condensed consolidated financial statements requires management to make estimates, judgments and assumptions that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable. Actual results may differ materially from these estimates.

Risks and uncertainties from 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 the Company’s customers that could negatively impact the Company’s operations and financial results in future periods. These conditions continued to exist at December 31, 2020. Given the unprecedented and pervasive impact of changing circumstances surrounding the COVID-19 pandemic, there is inherently more uncertainty associated with the Company’s 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.

(c) Standards issued but not yet effective

There are no new standards issued but not yet effective as at July 1, 2020 that have a material impact to the Company's interim condensed consolidated financial statements.

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

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

(d) Statement of operations reconciliation

The tables below describe the effect of the changes made to the interim condensed consolidated statement of operations for the three and six months ended December 31, 2019 for the following:

• Reclassification of comparatives as described in note 2;

• Change in accounting policy as described in note 3(w) of the Company’s consolidated financial statements for the year ended June 30, 2020; and

• The discontinued operation as described in note 4.

The effect of the changes for the three months ended December 31, 2019 are as follows:

Consolidated statement of operations (extract) December 31, 2019 - As originally presented Reclassi- fications Change in accounting policy Discontinued operation December 31, 2019 - Revised Revenue $ 14,270 $ 169 $ - $ (346) $ 14,093 Expenses Direct operating 7,173 25 1,510 (306) 8,402 Distribution and marketing 609 - - (150) 459 General and administrative 5,978 (21) (2,382) (282) 3,293 Share-based compensation 166 - - - 166 Amortization of property and equipment and intangible assets 1,795 - -) (13) 1,782 Finance costs, net 312 141 - (14) 439 Foreign exchange loss(gain) - 24 - (1) 23 16,033 169 (872) (766) 14,564 Income (loss) before income taxes (1,763) - 872 420 (471) Income tax expense(recovery) (401) - 236 - (165) Net income (loss) from continuing operations (1,362) - 636 420 (306) Loss from discontinued operation - - - (420) (420) Net income(loss) for theperiod $ (1,362) $ - $ 636 $ - $ (726)

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THUNDERBIRD ENTERTAINMENT GROUP INC.

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

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

The effect of the changes for the six months ended December 31,2019 are as follows: Consolidated statement of operations (extract) December 31, 2019 - As originally presented Reclassi- fications Change in accounting policy Discontinued operation December 31, 2019 - Revised Revenue $ 31,321 $ 385 $ - $ (1,071) $ 30,635 Expenses Direct operating 15,486 88 3,199 (570) 18,203 Distribution and marketing 1,298 - - (447) 851 General and administrative 11,155 (79) (4,498) (592) 5,986 Share-based compensation 404 - - - 404 Amortization of property and equipment and intangible assets 2,975 - -) (15) 2,960 Finance costs, net 459 342 - (44) 757 Foreign exchange loss(gain) - 34 - (1) 33 31,777 385 (1,299) (1,669) 29,194 Income (loss) before income taxes (456) - 1,299 598 1,441 Income tax expense 58 - 349 - 407 Net income (loss) from continuing operations (514) - 950 598 1,034 Gain (loss) from discontinued operation 30 - - (598) (568) Net income(loss) for theperiod $ (484) $ - $ 950 $ - $ 466

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

4. 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:

presented as held for sale and are as follows:
		December 31,		June 30,
		2020		2020
Cash	$	352	$	538
Trade receivables and other		234		586
Investment in content		96		98
Assets held for sale		682		1,222
Accounts payable and accrued liabilities		483		633
Deferred revenue		78		126
Liabilities associated with assets held for sale		561		759
Net assets held for sale	$	121	$	463

The cumulative foreign exchange gains recognized in accumulated other comprehensive income in relation to the discontinued operation as at December 31, 2020 were $27 (June 30, 2020 – foreign exchange losses of $35).

Analysis of the results of discontinued operation is as follows:

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Revenue	$	267	$	346	$	419	$	1,071
Expenses		170		766		403		1,639
Income(loss) from discontinued operation		97		(420)		16		(568)
Income (loss) on translation of discontinued
operation		(18)		13		(62)		7
Other comprehensive income (loss) from
discontinued operation	$	(18)	$	13	$	**(62) **	$	7

In assessing the fair values of the assets and liabilities, the Company determined that all assets and liabilities have a fair value which is equal to net book value. The Company determined the fair value of investment in content based on current negotiations with prospective buyers.

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

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

5. TRADE RECEIVABLES AND OTHER

		December 31,		June 30,
Current		2020		2020
Trade receivables, net of loss allowance	$	10,586	$	9,731
Deposits and prepaids		3,433		3,246
Contract acquisition costs		950		330
Federal andprovincial film and television tax credits		48,688		45,428
	$	63,657	$	58,735
		December 31,		June 30,
Long-term		2020		2020
Trade receivables	$	3,298	$	2,748
Deposits and prepaids		978		304
Contract acquisition costs		373		51
	$	4,649	$	3,103

The Company believes that its loss allowance is sufficient to reflect the related credit risk based on the history of collections and forward-looking information for collectability. 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 audits of these balances.

The aging of current trade receivables is as follows:

	December 31, 2020 June 30, 2020 Less than 60 days $ 9,822 $ 9,016 Over 61 days 764 715 $ 10,586 $ 9,731

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

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

6. 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.

Development costs Content in production Released content Acquired content Total Cost Balance June 30, 2019 $ 1,079 $ 12,386 $ 118,356 $ 10,878 $ 142,699 Change in accounting policy1 - 1,107 1,937 - 3,044 Revised June 30, 2019 1,079 13,493 120,293 10,878 145,743 Additions2 493 14,213 - 377 15,083 Impairment3 (394) - - - (394) Assets classified as held for sale (34) - - (4,915) (4,949) Transferred (115) (18,802) 18,917 - - Balance June 30, 2020 1,029 8,904 139,210 6,340 155,483 Additions2 326 6,962 - 14 7,302 Impairment (306) - - - (306) Transferred to service productions (179) - - - (179) Transferred (72) (5,990) 6,062 - - Balance December 31, 2020 $ 798 $ 9,876 $ 145,272 $ 6,354 $ 162,300 Amortization Balance June 30, 2019 $ - $ - $ 107,726 $ 8,597 $ 116,323 Change in accounting policy1 - - 1,165 - 1,165 Revised June 30, 2019 - - 108,891 8,597 117,488 Additions4 - - 15,935 1,619 17,554 Assets classified as held for sale - - - (4,851) (4,851) Balance June 30, 2020 - - 124,826 5,365 130,191 Additions - - 4,814 256 5,070 Balance December 31, 2020 $ - $ - $ 129,640 $ 5,621 $ 135,261 Net book value June 30, 2020 $ 1,029 $ 8,904 $ 14,384 $ 975 $ 25,292 December 31, 2020 $ 798 $ 9,876 $ 15,632 $ 733 $ 27,039

1 See note 3(w) of the financial statements for the year ended June 30, 2020.

2 Net of government assistance (note 14) and third-party participation.

3 Included in impairment is $85 in impairment related to discontinued operation.

4 Included in additions is $1,382 in amortization related to discontinued operation.

Interest charges capitalized to the cost of film and television productions for the six months ended December 31, 2020 amounted to $294 (year ended June 30, 2020 - $1,077).

For the six months ended December 31, 2020, the Company recorded amortization of investment in content of $905 (December 31, 2019 - $250) 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 six months ended December 31, 2020 and 2019

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

7. PROPERTY AND EQUIPMENT

	Computer equipment Furniture and equipment Leasehold improvements Vehicles Right-of-use assets Total
	Cost Balance June 30, 2019 $ 7,380 $ 2,274 $ 1,581 $ 132 $ - $ 11,367 Additions on adoption of IFRS 16 - - - - 16,073 16,073 Reclass existing assets on adoption of IFRS 16 (4,175) - - - 4,175 - Additions1 1,304 452 1,286 129 12,033 15,204 Disposals (33) (58) (244) - - (335)
	Balance June 30, 2020 4,476 2,668 2,623 261 32,281 42,309 Additions 302 85 49 97 2,034 2,567 Reclass of assets3 (1,070) - - - 1,070 - Disposals - (22) (992) - (1,462) (2,476)
	Balance December 31, 2020 $ 3,708 $ 2,731 $ 1,680 $ 358 $ 33,923 $ 42,400
	Amortization Balance June 30, 2019 $ 2,299 $ 1,334 $ 460 $ 63 $ - $ 4,156 Reclass existing amortization on adoption of IFRS 16 (446) - - - 446 - Charge for the year2 961 232 325 50 5,796 7,364 Disposals (16) (47) (244) - - (307)
	Balance June 30, 2020 2,798 1,519 541 113 6,242 11,213 Charge for the period 350 118 122 29 3,718 4,337 Reclass of assets3 (316) - - - 316 - Disposals - (4) (157) - (207) (368)
	Balance December 31, 2020 $ 2,832 $ 1,633 $ 506 $ 142 $ 10,069 $ 15,182
	Net book value June 30, 2020 $ 1,678 $ 1,149 $ 2,082 $ 148 $ 26,039 $ 31,096
	December 31, 2020 $ 876 $ 1,098 $ 1,174 $ 216 $ 23,854 $ 27,218

1 Included in additions is $3 in additions related to discontinued operation.

2 Included in charge for the year is $4 in amortization related to discontinued operation.

3 Reclass of assets consists of existing computer equipment assets that have been converted to right-of-use assets under finance leases.

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

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

8. GOODWILL AND INTANGIBLE ASSETS

The continuity of goodwill and intangible assets is as follows:

Goodwill Distribution libraries Customer relationships Total Cost Balance December 31, 2020 and June 30, 2020 and 2019 $ 12,402 $ 2,700 $ 1,470 $ 16,572 Amortization Balance June 30, 2019 $ - $ 1,214 $ 1,470 $ 2,684 Charge for theyear - 270 - 270 Balance June 30, 2020 - 1,484 1,470 2,954 Charge for theperiod - 135 - 135 Balance December 31, 2020 $ - $ 1,619 $ 1,470 $ 3,089 Net book value June 30, 2020 $ 12,402 $ 1,216 $ - $ 13,618 December 31, 2020 $ 12,402 $ 1,081 $ - $ 13,483

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

9. INTERIM PRODUCTION FINANCING

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

December 31, 2020 June 30, 2020 Interim production credit facilities with Royal Bank of Canada (“RBC”), bearing interest at RBC’s prime rate plus 0.50% to 1.25% (June 30, 2020 - 0.50% to 1.25%). Secured by assignment and direction of trade receivables and tax credits of approximately $39,817 at December 31, 2020 (June 30, 2020 - $38,168). The Company also enters into General Security Agreements. All facilities are repayable on demand. $ 33,214 $ 39,305 Revolving production operating line of credit with RBC, bearing interest at RBC’s prime rate plus 0.50%. Maximum funds available of $40,000 and secured by a General Security Agreement and assignment of federal and provincial tax credits of approximately $5,684 at December 31, 2020. Interest only is payable monthly in arrears with the principal repayment to be made upon the receipt of the tax credits for each single purpose production company (“SPPC”). 4,253 - Revolving term loan with RBC, bearing interest at RBC’s prime rate plus 1.25% (June 30, 2020 - 1.25%). Maximum funds available of $5,000 and secured by a General Security Agreement. Repayable on the earlier of 15 days after the closing of the applicable SPPC production facility or 180 days after the first draw has been made. - 2,325 Revolving unmargined line of credit with RBC, bearing interest at RBC’s prime rate plus 1.25% (June 30, 2020 - 1.25%). Maximum funds available of $3,000 and secured bya General SecurityAgreement. Repayable on demand. - 790 $ 37,467 $ 42,420

At December 31, 2020, included in interim production credit facilities are loans repayable in US$ in the amount of US$8,682 (CA$11,054) (June 30, 2020 - US$9,748 (CA$13,284)).

10. LONG-TERM DEBT

As at December 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% and secured by a General Security Agreement. Under the terms of the loan, an annual cash flow sweep of 5% of the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) will be due within 120 days of the fiscal year-end of the Company and will be applied to repayment of the loan.

• A $4,200 revolving lease facility. This facility may be used to finance equipment purchases.

• Two non-revolving reducing single lease facilities totaling $2,793. These facilities may be used to finance equipment purchases and leasehold improvements.

• A $721 foreign exchange line of credit to hedge against fluctuating exchange rates.

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

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

11. LEASES

ROU assets

The continuity of ROU assets is as follows:

ROU assets The continuityof ROU assets is as follows:
		Premises		Equipment		Vehicles		Total
Lease liability on initial adoption of IFRS
16	$	15,670	$	318	$	63	$	16,051
Prepaid lease payments		22		-		-		22
Property and equipment – reclass
existingassets under finance leases		-		3,729		-		3,729
Balance July 1, 2019		15,692		4,047		63		19,802
Additions		6,823		6,250		44		13,117
Lease incentives		(879)		-		-		(879)
Lease modifications		(205)		-		-		(205)
Amortization		(1,686)		(4,087)		(23)		(5,796)
Balance June 30, 2020	$	19,745	$	6,210	$	84	$	26,039
Additions		105		2,990		-		3,095
Lease modifications		145		(136)		-		9
Disposal		(1,255)		-		-		(1,255)
Amortization		(1,173)		(2,846)		(15)		(4,034)
Balance December 31, 2020	$	17,567	$	6,218	$	69	$	23,854

Amortization capitalized to investment in content for the six months ended December 31, 2020 amounted to $181 (year ended June 30, 2020 - $109).

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

Lease obligations

Lease obligations as at and for the six months ended December 31, 2020 are as follows:

		Premises		Equipment		Vehicles		Total
Lease liabilityon initial adoption of IFRS 16	$	15,670	$	4,353	$	63	$	20,086
Balance July 1, 2019		15,670		4,353		63		20,086
Additions		6,755		6,263		44		13,062
Lease modifications		(116)		-		-		(116)
Amortization		(1,357)		(4,791)		(22)		(6,170)
Balance June 30, 2020	$	20,952	$	5,825	$	85	$	26,862
Additions		172		2,991		-		3,163
Lease modifications		24		(137)		-		(113)
Amortization		(941)		(2,812)		(15)		(3,768)
Balance December 31, 2020	$	20,207	$	5,867	$	70	$	26,144

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 six months ended December 31, 2020, under the short-term exemption, $1,012 was expensed to office and administrative and under the low-value exemption, $33 was expensed to office and administrative (year ended June 30, 2020 - $709 and $69, respectively).

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

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

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

and June 30,2020,to theirpresent value for the Company’s	lease obligations:
		December 31,		June 30,
		2020		2020
Within one year	$	5,330	$	6,684
Between one and five years		13,950		12,535
Beyond fiveyears		13,700		15,183
Total undiscounted lease obligations		32,980		34,402
Less future interest charges		(6,836)		(7,540)
Total discounted lease obligations		26,144		26,862
Less currentportion of lease obligations	$	(5,161)	$	(5,419)
Non-currentportion of lease obligations	$	20,983	$	21,443

As at December 31, 2020, the total discounted lease obligations related to contracts with RBC amounted to $3,125, with $2,044 classified as current and $1,081 as non-current (year ended June 30, 2020 - $3,446, with $2,275 classified as current and $1,171 as non-current).

Lease receivable

In October 2020, the Company entered into an Assignment Agreement for one of its leases for office space. As the Company has not been fully discharged from the original lease, the assignment is accounted for as a sublease. The assignment is effective from November 1, 2020 to the end of lease term on December 31, 2028.

As the sublease has been assessed as a finance sublease, the ROU asset previously recognized has been derecognized and the Company has recognized a lease receivable. The lease receivable was measured at the present value of the future lease payments to be made by the assignee using an incremental borrowing rate of 5.4%. In relation to the above, the Company recognized a gain on disposal of ROU asset of $266.

In addition, the Company has fully impaired the leasehold improvements associated with this lease and has recognized a loss on disposal of property and equipment of $736.

The continuity of the lease receivable is as follows:

The continuityof the lease receivable is as follows:
		December 31,
		2020
Opening balance	$	-
Additions		1,602
Interest accrual (note 21)		7
Lease recoveries(non-cash)		(20)
Ending balance	$	1,589

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

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

As at December 31, 2020, the minimum lease recoveries are as follows:

		December 31,
		2020
Within one year	$	238
Between one and five years		980
Beyond fiveyears		735
Total undiscounted lease receivable		1,953
Less future interest income		(364)
Total discounted lease receivable		1,589
Less currentportion of lease receivable	$	(163)
Non-currentportion of lease receivable	$	1,426

12. REDEEMABLE PREFERRED SHARES

Issued and outstanding:

_Issued and outstanding: _
			Amount
	Number of		Liability		Equity
	shares		component		component
Class A
Balance June 30,2020 and 2019	1,054,000	$	926	$	132
Balance December 31, 2020	1,054,000	$	926	$	132

During the three and six months ended December 31, 2020, the Company paid a dividend of $0.07 per Class A preferred share which amounted to $18 and $36, respectively (three and six months ended December 31, 2019 - $0.07 per preferred share; $18 and $36, respectively).

13. SHARE CAPITAL

Authorized

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

Common shares

Issued:

Common shares Issued:
	Number of shares		Amount
Balance June 30, 2019	46,631,475	$	62,517
Exercise of options	40,000		117
Balance June 30, 2020	46,671,475	$	62,634
Shares issued as management compensation	55,698		114
Exercise of options	1,233,750		2,397
Exercise of warrants	337,342		842
Balance December 31, 2020	48,298,265	$	65,987

During the six months ended December 31, 2020, the Company issued 55,698 common shares to the Chief Executive Officer (“CEO”) at a deemed price of $2.045 per share. The issuance reflects partial consideration for a performance bonus earned during the fiscal year ended June 30, 2020, in accordance with the terms of the CEO’s employment agreement.

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THUNDERBIRD ENTERTAINMENT GROUP INC.

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

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

Earnings (loss) per share

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

		Three	months ended	months ended			Six months ended	Six months ended
			December 31,					December 31,
		2020		2019		2020		2019
Net income (loss) from continuing operations	$	1,528	$	(306)	$	2,996	$	1,034
Dividends expense		18		18		36		36
Diluted net income(loss)from continuingoperations	$	1,546	$	(288)	$	3,032	$	1,070
Basic weighted average number of common shares		48,061,471		46,660,338		47,007,025		46,638,763
Diluted weighted average number of common shares		50,741,596		50,075,730		49,687,150		50,054,105
Basic income (loss) per share – continuing
operations	$	0.032	$	(0.007)	$	0.064	$	0.022
Diluted income (loss) per share – continuing
operations	$	0.030	$	(0.007)	$	0.061	$	0.021
Income(loss)from discontinued operation	$	97	$	(420)	$	16	$	(568)
Basic income (loss) per share – discontinued
operation	$	0.002	$	(0.009)	$	0.000	$	(0.012)
Diluted income (loss) per share – discontinued
operation	$	0.002	$	(0.009)	$	0.000	$	(0.012)

Warrants

The following table summarizes the changes in share purchase warrants outstanding:

	Number of	Weighted average	Weighted average
	warrants		exerciseprice
Balance, June 30, 2019 and 2020	337,342	$	2.00
Exercised	(337,342)		(2.00)
Balance December 31, 2020	-	$	-

During the six months ended December 31, 2020, 337,342 warrants were exercised for proceeds of $674. An amount of $168 was transferred from the warrant reserve to common shares.

During the six months ended December 31, 2019, no warrants were issued or exercised.

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

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 sharebased 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.

The following table summarizes the changes in stock options outstanding

		Weighted average	Weighted average
	Number of options		exerciseprice
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 June 30, 2020	4,616,000		1.78
Issued	360,000		3.00
Exercised	(1,233,750)		1.28
Forfeited	(18,750)		2.00
Balance December 31, 2020	3,723,500	$	2.06

During the six months ended December 31, 2020, the Company granted options to acquire 360,000 shares of its common stock to employees. The options have an exercise price of $3.00 per share, a seven-year term and vest 25% immediately with the remaining 75% vesting one-third over each anniversary date.

During the six months ended December 31, 2019, 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 six months ended December 31, 2020, 1,233,750 stock options were exercised for proceeds of $1,582. An amount of $815 was transferred from contributed surplus to common shares.

During the six months ended December 31, 2019, 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.

The weighted average grant date value of stock options and assumptions using the Black-Scholes option pricing model for the six months ended December 31, 2020 and 2019 are as follows:

	December 31,	December 31,
	2020	2019
Share price on date of grant	$3.00	$1.32
Weighted average grant date value	$1.53	$0.65
Interest rate	0.53%	1.60%
Expected life	7 years	7 years
Volatility	50.93%	46.16%
Exerciseprice	$3.00	$1.32

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

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

The following table summarizes the stock options outstanding at December 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	55,000	Mar 2026	5.19	$	0.50	55,000	$	0.50
$ 1.32	250,000	Dec 2026	5.95		1.32	125,000		1.32
$ 2.00	2,963,500	Jun 2021 to Mar 2026	4.29		2.00	2,315,125		2.00
$ 3.00	360,000	Dec 2027	6.94		3.00	90,000		3.00
$3.20	95,000	Mar 2028	7.21		3.20	95,000		3.20
	3,723,500		4.78	$	2.06	2,680,125	$	2.03

During the three and six months ended December 31, 2020, the Company recorded share-based compensation expense of $223 and $343, respectively (three and six months ended December 31, 2019 - $166 and $404, respectively).

Refer to note 23 for stock options issued and exercised subsequent to December 31, 2020.

14. GOVERNMENT FINANCING AND ASSISTANCE

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

	Six	months ended	months ended	December 31,
		2020		2019
Non-repayable contributions from the Canada Media Fund license fee
program	$	6,784	$	5,462
Tax credits relatingtoproduction activities		22,602		18,919
	$	29,386	$	24,381

During the six months ended December 31, 2020, investment in content was reduced by $18,808 and direct operating expenses were reduced by $10,578 (six months ended December 31, 2019 - $15,672 and $8,709, respectively).

During the six months ended December 31, 2020, the Company received $11 in COVID-19 related government assistance required to be used towards eligible expenditures (year ended June 30, 2020 - $800). At December 31, 2020, $811 of this amount has been transferred to certain content in production to be applied against eligible expenditures and nil has been classified as an accrued liability (year ended June 30, 2020 - nil and $800, 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 six months ended December 31, 2020 and 2019

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

15. REVENUE

The following table presents components of revenue:

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Revenue from contracts with customers:
Production services	$	19,137	$	11,714	$	33,838	$	22,118
Licensing and distribution		8,754		2,355		13,807		8,479
Revenue from other sources:
Other		59		24		95		38
	$	27,950	$	14,093	$	47,740	$	30,635

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

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Canada	$	9,756	$	6,218	$	17,389	$	12,410
United States		17,244		4,865		26,094		11,029
United Kingdom		1		593		3		1,588
Denmark		593		1,484		1,707		3,014
Republic of Ireland		354		571		2,545		1,229
China		-		362		-		1,342
Other countries		2		-		2		23
	$	27,950	$	14,093	$	47,740	$	30,635

At December 31, 2020, the following non-current assets were attributable to the Company’s entities based in the USA: $132 of long-term trade receivables and other, $185 of deferred tax assets and $5,941 of property and equipment (June 30, 2020 - nil, nil, and $5,902, 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:

		December 31,		June 30,
		2020		2020
Opening balance	$	14,999	$	15,389
Revenue recognized that was included in the deferred revenue balance at
the beginning of the period		(5,367)		(15,339)
Increases due to cash received, excluding amounts recognized as revenue
during the period		16,335		15,075
Deferred revenue classified as held for sale		-		(126)
Ending balance	$	25,967	$	14,999

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

16. 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 interim condensed 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 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 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, trade receivables and production financing. Trade receivables and production financing receivable are 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.

The Company’s customers are considered to have low default risk and the historical default rate and frequency of loss are low, therefore the lifetime expected credit loss allowance for trade receivables is nominal as at December 31, 2020.

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.

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

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

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s net income 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 because 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. The Company has no interest rate hedges or swaps outstanding at December 31, 2020.

ii. Foreign currency exchange risk

Foreign currency exchange risk is the risk that future cash flows will fluctuate because 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 engaged in certain foreign exchange hedging activities (foreign contracts on foreign currency client payments) and also mitigates its currency exchange risk by entering into natural hedges whereby foreign currency liabilities are offset by assets pledged in the same foreign currency.

17. 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.

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, 2020.

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

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

18. RELATED PARTY TRANSACTIONS

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Dividends1	$	2	$	2	$	4	$	4
Consulting fees2		101		154		202		255
Composer fees3		16		-		88		-
Revenue4		-		(205)		-		(342)
Other		16		-		29		-
	$	135	$	(49)	$	323	$	(83)

1 Paid to the President.

2 Paid to companies owned by directors.

3 Paid to a company owned by the President.

4 Received from a company owned by the President.

At December 31, 2020, $456 (December 31, 2019 - $475) was due from companies owned by the President and $32 (December 31, 2019 – $120) was payable to companies owned by directors.

The related party transactions are made on terms equivalent to those that prevail in arm’s length transactions. At December 31, 2020, $456 of amounts due from companies owned by the 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 or payables.

Key Management Personnel Compensation

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

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Short-term benefits	$	494	$	732	$	968	$	1,349
Share-basedpayments(note 13)		41		103		105		208
	$	535	$	835	$	1,073	$	1,557

19. COMMITMENTS AND CONTINGENCIES

Commitments

The Company has commitments related to lease obligations which are disclosed in note 11.

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 six months ended December 31, 2020 and 2019 (in thousands of Canadian dollars, except for amounts per share and as noted) - Unaudited

20. 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:
	Six	months ended December 31,
		2020		2019
Operating activities
Changes in non-cash working capital
Accounts receivable	$	(6,333)	$	(4,933)
Income taxes recoverable		351		(141)
Accounts payable and accrued liabilities		(1,407)		(1,162)
Income taxes payable		530		(457)
Deferred revenue		10,967		4,350
	$	4,108	$	(2,343)

The following table reconciles the changes in liabilities arising from financing activities as disclosed in the consolidated statement of cash flows:

	Cash flows from(used in) Non-cash changes Proceeds Repayments Disposal Foreign exchange movements Balance December 31, 2020 $ 28,468 $ (32,595) $ - $ (826) $ 37,467 $ 1,819 $ (1,967) $ (80) $ (30) $ 5,161 $ 1,700 $ (1,801) $ (39) $ (320) $ 20,983	Cash flows from(used in) Non-cash changes Proceeds Repayments Disposal Foreign exchange movements Balance December 31, 2020 $ 28,468 $ (32,595) $ - $ (826) $ 37,467 $ 1,819 $ (1,967) $ (80) $ (30) $ 5,161 $ 1,700 $ (1,801) $ (39) $ (320) $ 20,983
Balance June 30, 2020	Proceeds Repayments Disposal Foreign exchange movements
Interim production financing $ 42,420 Lease obligations – current1 $ 5,419 Lease obligations – long- term1 $ 21,443

1 Included within proceeds of obligations under leases is $2,441 of non-cash property and equipment additions related to leases. Included within repayments of obligations under leases is $13 in non-cash payments related to a sublease. Total lease payments relating to non-finance leases was $2,915.

Additional supplemental cash flow information:

Additional supplemental cash flow information:
	Six	months ended		December 31,
		2020		2019
Interest and debt service costs paid	$	669	$	184
Income taxespaid	$	595	$	74

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

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

21. FINANCE COSTS, NET

		Three	months	ended		Six	months	ended
			December 31,				December 31,
		2020		2019		2020		2019
Dividends on redeemable preferred shares	$	18	$	18	$	36	$	36
Interest on loans		24		159		74		339
Interest on lease obligations1		343		291		837		482
Interest income		(46)		(29)		(113)		(100)
Interest income on lease receivable		(7)		-		(7)		-
Realized foreign exchange gain on loans		(1)		-		(1)		-
Unrealized foreign exchangegain on loans		(551)		-		(837)		-
	$	(220)	$	439	$	(11)	$	757

1 Included in interest on lease obligations for the three and six months ended December 31, 2020 is interest related to non-finance leases of $314 and $778, respectively (three and six months ended December 31, 2019 - $239 and $388, respectively).

22. EXPENSES BY NATURE

The following sets out the expenses by nature:

Three months ended Six months ended December 31, December 31, 2020 2019 2020 2019 Direct operating Direct costs $ 14,212 $ 7,989 $ 25,051 $ 15,809 Amortization of investment in content 4,272 404 5,070 2,334 Development expenses and other 309 9 354 60 18,793 8,402 30,475 18,203 General and administrative Salaries, employee benefits and contractors 2,622 2,315 5,165 4,229 Office and administrative 780 764 1,445 1,350 Legal andprofessional 213 214 586 407 3,615 3,293 7,196 5,986 Amortization of property and equipment and intangible assets Amortization of property and equipment and intangible assets1 363 346 754 542 Amortization of right-of-use assets 1,614 1,436 3,537 2,418 1,977 1,782 4,291 2,960 Distribution and marketing 268 459 446 851 Share-based compensation 223 166 343 404 Finance costs, net (220) 439 (11) 757 Foreign exchange loss 286 23 146 33 $ 24,942 $ 14,564 $ 42,886 $ 29,194

1 Amortization of right-of-use assets relating to non-finance leases for the three and six months ended December 31, 2020 was

$1,106 and $2,489, respectively (three and six months ended December 31, 2019 – $813 and $1,234, respectively).

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

23. SUBSEQUENT EVENTS

Subsequent to December 31, 2020, the following stock options were exercised:

• 40,000 stock options were exercised at a price of $2.00 for gross proceeds of $80.

• 10,000 stock options were exercised at a price of $2.00 for gross proceeds of $20.

Subsequent to December 31, 2020, the Company granted options to acquire 525,000 shares of its common stock to employees at the management level. The options have an exercise price of $3.07 per share, a seven-year term and vest 25% immediately with the remaining 75% vesting one-third over each anniversary date.

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