Document:

Exhibit 4.2

 

Consolidated Financial Statements

(In Canadian dollars)

 

SCORE MEDIA AND

GAMING INC.

 

And Independent Auditors' Report thereon

 

Years ended August 31, 2020 and 2019

 

    

     

    

 

 

 

kpmg LLP

Vaughan Metropolitan Centre

100 New Park Place, Suite 1400

Vaughan ON
L4K 0J3

Canada

Tel 905-265-5900

Fax 905-265-6390

 

independent
AUDITORS' REPORT

 

To the Shareholders of Score Media
and Gaming Inc.

 

Opinion

 

We have audited the consolidated
financial statements of Score Media and Gaming Inc. (the Entity), which comprise:

 

		·	the consolidated statements of financial
position as at August 31, 2020 and 2019

 

		·	the consolidated statements of comprehensive
loss for the years then ended

 

		·	the consolidated statements of changes
in shareholders' equity for the years then ended

 

		·	the consolidated statements of cash flows
for the years then ended

 

		·	and notes to the consolidated financial
statements, including a summary of significant accounting policies

 

(Hereinafter referred to as the
 "financial statements").

 

In our opinion, the accompanying
financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at August 31,
2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance
with International Financial Reporting Standards (IFRS).

 

Basis for Opinion

 

We conducted our audit in accordance
with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors'
Responsibilities for the Audit of the Financial Statements" section of our auditors' report.

 

We are independent of the Entity
in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled
our other ethical responsibilities in accordance with these requirements.

 

We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

© 2020 KPMG
LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

 

    

     

    

 

 

Page 2

 

Other Information

 

Management is responsible for the
other information. Other information comprises:

 

		·	the information included in Management's
Discussion and Analysis filed with the relevant Canadian Securities Commissions.

 

		·	the Glossy Annual Report.

 

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

 

In connection with our audit of
the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain
alert for indications that the other information appears to be materially misstated.

 

We obtained the information included
in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors'
report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of
this other information, we are required to report that fact in the auditors' report.

 

We have nothing to report in this
regard.

 

The information, other than the
financial statements and auditors' report thereon, included in the Glossy Annual Report is expected to be made available to us
after the date of this auditors' report. If, based on the work we will perform on this other information, we conclude that there
is a material misstatement of this other information, we are required to report that fact to those charged with governance.

 

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

 

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

 

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

 

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

 

    

     

    

 

 

Page 3

 

Auditors' Responsibilities
for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditors' report that includes our opinion.

 

Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists.

 

Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.

 

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

 

We also:

 

		·	Identify and assess the risks of material
misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

 

The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

 

		·	Obtain an understanding of internal control
relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity's internal control.

 

		·	Evaluate the appropriateness of accounting
policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

		·	Conclude on the appropriateness of management's
use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue
as a going concern.

 

		·	Evaluate the overall presentation, structure
and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.

 

    

     

    

 

 

Page 4

 

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

 

		·	Provide those charged with governance
with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards

 

/s/ KPMG LLP

 

Chartered Professional Accountants,
Licensed Public Accountants

 

The engagement partner on the audit
resulting in this auditors' report is Derek Peters.

 

Vaughan, Canada

 

October 28, 2020

 

    

     

    

 

SCORE
MEDIA AND GAMING INC.

Consolidated Statements of Financial
Position

(In thousands of Canadian dollars)

 

August 31, 2020 and 2019

 

	 	 	2020	 	 	2019	 
	Assets	 	 	 	 	 	 	 	 
	Current
    assets:	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents	 	$	40,116	 	 	$	4,035	 
	Restricted
    cash related to customer deposits	 	 	1,859	 	 	 	11	 
	Accounts
    receivable	 	 	5,455	 	 	 	7,956	 
	Tax
    credits recoverable (note 6)	 	 	1,616	 	 	 	–	 
	Prepaid
    expenses, deposits and other assets	 	 	2,048	 	 	 	1,261	 
	 	 	 	51,094	 	 	 	13,263	 
	Non-current
    assets:	 	 	 	 	 	 	 	 
	Restricted
    cash related to customer deposits	 	 	–	 	 	 	668	 
	Property
    and equipment (note 3)	 	 	4,136	 	 	 	1,373	 
	Intangible
    and other assets (note 4)	 	 	23,477	 	 	 	21,760	 
	Tax
    credits recoverable (note 6)	 	 	–	 	 	 	1,616	 
	 	 	 	27,613	 	 	 	25,417	 
	Total
    assets	 	$	78,707	 	 	$	38,680	 
	Liabilities
    and Shareholders' Equity	 	 	 	 	 	 	 	 
	Current
    liabilities:	 	 	 	 	 	 	 	 
	Accounts
    payable and accrued liabilities	 	$	10,353	 	 	$	7,147	 
	Current
    portion of loans and other borrowings (note 8)	 	 	6,645	 	 	 	–	 
	Current
    portion of deferred lease obligation	 	 	–	 	 	 	184	 
	Current
    portion of lease liabilities	 	 	908	 	 	 	–	 
	Other
    current financial liabilities (note 16)	 	 	231	 	 	 	–	 
	 	 	 	18,137	 	 	 	7,331	 
	Non-current
    liabilities:	 	 	 	 	 	 	 	 
	Loans
    and other borrowings (note 8)	 	 	740	 	 	 	–	 
	Deferred
    lease obligation	 	 	–	 	 	 	112	 
	Lease
    liabilities	 	 	1,042	 	 	 	–	 
	Convertible
    debenture (note 13)	 	 	29,584	 	 	 	–	 
	 	 	 	31,366	 	 	 	112	 
	 	 	 	49,503	 	 	 	7,443	 
	Shareholders'
    equity	 	 	29,204	 	 	 	31,237	 
	Commitments
    (note 9)	 	 	 	 	 	 	 	 
	Subsequent
    event (note 19)	 	 	 	 	 	 	 	 
	Total
    liabilities and shareholders' equity	 	$	78,707	 	 	$	38,680	 

 

See accompanying notes to consolidated
financial statements.

 

On behalf of the Board:

 

	John Levy	 	Director
	 	 	 
	Bill Thomson	 	Director

 

    1

     

    

 

SCORE MEDIA AND GAMING INC.

Consolidated Statements of
Comprehensive Loss 

(In thousands of Canadian dollars,
except per share amounts)

 

Years ended August 31,
2020 and 2019

 

	 	 	2020	 	 	2019	 
	Revenue (note 11)	 	$	20,719	 	 	$	31,121	 
	Operating expenses (note 15):	 	 	 	 	 	 	 	 
	Product development and content	 	 	8,149	 	 	 	9,160	 
	Sales and marketing	 	 	13,036	 	 	 	10,331	 
	Technology and operations	 	 	16,241	 	 	 	7,717	 
	General and administration	 	 	13,756	 	 	 	10,407	 
	Depreciation and amortization (notes 3 and 4)	 	 	5,397	 	 	 	3,117	 
	 	 	 	56,579	 	 	 	40,732	 
	Operating loss	 	 	(35,860	)	 	 	(9,611	)
	Finance income (expense) (note 17)	 	 	(5,177	)	 	 	198	 
	Loss before income taxes	 	 	(41,037	)	 	 	(9,413	)
	Deferred income tax recovery (note 18)	 	 	(3,107	)	 	 	–	 
	Net loss	 	 	(37,930	)	 	 	(9,413	)
	Other comprehensive income:	 	 	 	 	 	 	 	 
	Foreign currency translation differences from foreign operations	 	 	 	 	 	 	 	 
	 	 	 	508	 	 	 	4	 
	Comprehensive loss	 	$	(37,422	)	 	$	(9,409	)
	Loss per share - basic and diluted (note 12)	 	$	(0.11	)	 	$	(0.03	)

 

See accompanying notes to consolidated
financial statements.

 

    2

     

    

 

SCORE MEDIA AND GAMING INC.

Consolidated Statements of
Changes in Shareholders' Equity

(In thousands of Canadian dollars,
except per share amounts)

 

Years ended August 31,
2020 and 2019

 

	 	 	 	Special
                                         

                                         voting shares	 	 	 	Class
                                         A subordinate

                                         voting shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	Amount	 	 	 	Number
                                         of 

                                         shares	 	 	 	Amount
                                          	 	 	 	Number
                                         of

                                         shares	 	 	 	Contributed

                                         surplus	 	 	 	Accumulated

                                         other

                                         comprehensive

                                         income	 	 	 	Equity

                                         component

                                         of convertible

                                         debenture	 	 	 	Deficit	 	 	 	Total

                                         shareholders'

                                         equity	 
	Balance, August 31, 2018	 	$	15	 	 	 	5,566	 	 	 $	68,923	 	 		297,055,284	 	 	 $	4,777	 	 	$	–	 	 	$	–	 	 	$	(55,433	)	 	$	18,282	
	Net loss	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(9,413	)	 	 	(9,413	)
	Stock-based compensation
    expense (note 10)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	561	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	561	 
	Shares
    issued on exercise of stock options (note 10)	 	 	–	 	 	 	–	 	 	 	176	 	 	 	595,419	 	 	 	(58	)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	118	 
	Shares issued on completion
    of private placement November 2018	 	 	–	 	 	 	–	 	 	 	8,500	 	 	 	36,956,522	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	8,500	 
	Shares issued on completion
    of private placement August 2019	 	 	–	 	 	 	–	 	 	 	13,185	 	 	 	22,222,223	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	13,185	 
	Foreign
    currency translation differences from foreign operations	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	4	 	 	 	–	 	 	 	–	 	 	 	4	 
	Balance, August 31, 2019	 	 	15	 	 	 	5,566	 	 	 	90,784	 	 	 	356,829,448	 	 	 	5,280	 	 	 	4	 	 	 	–	 	 	 	(64,846	)	 		31,237	 
	Transition
    adjustments upon adoption of IFRS 16 (note 2)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(225	)	 	 	(225	)
	Nel loss	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(37,930	)	 	 	(37,930	)
	Stock-based compensation
    expense (note 10)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	2,305	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	2,305	 
	Shares
    issued on exercise of stock options (note 10)	 	 	–	 	 	 	–	 	 	 	776	 	 	 	1,669,416	 	 	 	(345	)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	431	 
	Restricted stock unit issued (note 10)	 	 	–	 	 	 	–	 	 	 	917	 	 	 	2,320,749	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	917	 
	Convertible debenture, net of tax (note 13)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	8,891	 	 	 	–	 	 	 	8,891	 
	Foreign
    currency translation differences from foreign operations	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	508	 	 	 	–	 	 	 	–	 	 	 	508	 
	Shares issued on completion
    of public offering August 2020 (note 14)	 	 	–	 	 	 	–	 	 	 	23,070	 	 	 	38,500,000	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	–	 	 	 	23,070	 
	Balance, August 31, 2020	 	$	15	 	 	 	5,566	 	 	 $	115,547	 	 		399,319,613	 	 	 $	7,240	 	 	$	512	 	 	$	8,891	 	 	$	(103,001	) 	 	$	29,204	

 

See accompanying notes to consolidated
financial statements.

 

    3

     

    

 

SCORE MEDIA AND GAMING INC. 

Consolidated Statements of
Cash Flows 

(In thousands of Canadian
dollars, except per share amounts)

 

Years ended August 31,
2020 and 2019

  

	 	 	 	2020	 	 	 	2019	 
	Cash flows used in operating
activities:	 	 	 	 	 	 	 	 
	Net loss	 	$	(37,930	)	 	$	(9,413	)
	Adjustments for:	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	5,397	 	 	 	3,117	 
	Stock-based compensation (note 10)	 	 	3,222	 	 	 	561	 
	Interest accretion on lease liabilities	 	 	133	 	 	 	–	 
	Interest accretion on loans and borrowings	 	 	46	 	 	 	–	 
	Interest accretion on convertible debenture (note 13)	 	 	4,613	 	 	 	–	 
	Unrealized foreign exchange loss	 	 	718	 	 	 	–	 
	Deferred income tax recovery (note 18)	 	 	(3,107	)	 	 	–	 
	 	 	 	(26,908	)	 	 	(5,735	)
	Change in non-cash operating assets and liabilities:	 	 	 	 	 	 	 	 
	Accounts receivable	 	 	2,500	 	 	 	(2,117	)
	Restricted cash related to customer deposits	 	 	(1,231	)	 	 	(679	)
	Prepaid expenses, deposits and other assets	 	 	(795	)	 	 	(183	)
	Accounts payable and accrued liabilities	 	 	3,359	 	 	 	3,437	 
	Deferred lease obligation	 	 	–	 	 	 	(119	)
	Other financial liabilities (note 16)	 	 	238	 	 	 	–	 
	 	 	 	(22,837	)	 	 	(5,396	)
	Cash flows from financing activities:	 	 	 	 	 	 	 	 
	Exercise of stock options	 	 	431	 	 	 	118	 
	Payment of lease liabilities (note 2)	 	 	(993	)	 	 	–	 
	Payment of loans and other borrowings	 	 	(119	)	 	 	–	 
	Loans and other borrowings (note 8)	 	 	7,487	 	 	 	–	 
	Issuance
    of convertible debenture, net of transactions costs (note 13)	 	 	37,272	 	 	 	–	 
	Issuance of shares, net of transaction costs (note 14)	 	 	23,070	 	 	 	21,685	 
	 	 	 	67,148	 	 	 	21,803	 
	Cash flows used in investing activities:	 	 	 	 	 	 	 	 
	Additions to property and equipment (note 3)	 	 	(1,858	)	 	 	(316	)
	Additions to intangible and other assets (note 4)	 	 	(6,359	)	 	 	(18,407	)
	 	 	 	(8,217	)	 	 	(18,723	)
	Increase (decrease) in cash and cash equivalents	 	 	36,094	 	 	 	(2,316	)
	Effect of exchange rate fluctuations on cash held	 	 	(13	)	 	 	4	 
	Cash and cash equivalents, beginning of year	 	 	4,035	 	 	 	6,347	 
	Cash and cash equivalents, end of year	 	$	40,116	 	 	$	4,035	 

 

See accompanying notes to consolidated
financial statements.

 

    4

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

		1.	Nature of operations:

 

		(a)	Business:
	 	 	 
	 	 	Score Media and Gaming Inc. ("theScore"
or the "Company") empowers millions of sports fans through its digital media and sports betting products. Its media
app 'theScore' is one of the most popular in North America, delivering fans highly-personalized live scores, news, stats, and
betting information from their favorite teams, leagues, and players. The Company's sports betting app 'theScore Bet' delivers
an immersive and holistic mobile sports betting experience and is currently available to place wagers in New Jersey, Colorado,
and Indiana. Publicly traded on the Toronto Stock Exchange (SCR), theScore also creates and distributes innovative digital content
through its web, social and esports platforms. The Company is organized and operates as one operating segment for the purpose
of making operating decisions and assessing performance.

 

		(b)	Basis of presentation and statement
                                         of compliance:
	 	 	 
	 	 	These consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB").
	 	 	 
	 	 	These consolidated financial
statements are presented in Canadian dollars, which is the Company's functional currency. Note that the functional currency of
certain wholly owned subsidiaries is in U.S. dollars (note 2(e)) and have been translated using principles as defined under IFRS.
	 	 	 
	 	 	These consolidated financial
statements were approved by the Board of Directors of the Company on October 28, 2020.

 

    5

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

  

		2.	Significant accounting policies:

 

		(a)	Basis of measurement:
	 	 	 
	 	 	The consolidated financial statements
have been primarily prepared using the historical cost basis, except certain financial instruments as disclosed in note 16, which
are measured at fair value.

 

		(b)	Principles of consolidation:

 

	 		(i)	Subsidiaries:
	 	 	 	 
	 	 	 	Subsidiaries
are entities controlled by the Company. The Company controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity.

	 	 	 	 
	 	 	 	The financial statements of subsidiaries
are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The Company has six wholly-owned subsidiaries through which the Company owns its assets and operates its business, being Score
Media Ventures Inc., ScoreMobile Inc., SDSV Inc., 2733692 Ontario Inc., SDSV (Delaware) Inc., and Score Digital Sports Ventures
Inc.

  

	 		(ii)	Intercompany transactions:
	 	 	 	 
	 	 	 	All intercompany balances and
transactions with subsidiaries, and any unrealized revenue and expenses arising from intercompany transactions are eliminated
in preparing these consolidated financial statements.

 

    6

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

  

		2.	Significant accounting policies
                                         (continued):

 

		(c)	New accounting policies adopted
                                         in the current year:
	 	 	 
	 	 	The Company adopted new amendments
to the following accounting standards commencing September 1, 2019.

 

	 		(i)	IFRS 16, Leases ("IFRS 16"):
	 	 	 	 
	 	 	 	Effective September 1, 2019,
the Company adopted IFRS 16 which specifies the methodology to recognize, measure, present and disclose leases. The standard introduces
a single, on-balance sheet lessee accounting model, requiring lessees to recognize right-of-use assets and lease liabilities representing
its obligation to make lease payments, unless the underlying leased asset has a low value or is considered short term.
	 	 	 	 
	 	 	 	The Company leases office premises
and equipment. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases - i.e. these leases
are on-balance sheet.
	 	 	 	 
	 	 	 	The Company presents right-of-use
assets in "property and equipment", whereas lease liabilities are separately presented in the consolidated statements
of financial position.
	 	 	 	 
	 	 	 	The Company recognizes a right-of-use
asset and a lease liability at lease commencement date. The right-of-use asset is initially measured at cost, and subsequently
at cost less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability.
	 	 	 	 
	 	 	 	The Company adopted IFRS 16 using
a modified retrospective approach. Accordingly, comparative information presented for the year ended August 31, 2019 has
not been restated. On transition to IFRS 16, the Company elected to apply the practical expedient approach to grandfather the
assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as
leases. Contracts that were not identified as leases under IAS 17, Leases ("IAS 17"), and International Financial Reporting
Interpretations Committee 4, Determining whether an Arrangement Contains a Lease, were not reassessed. The Company's leases primarily
consist of leases for office premises with terms ranging from two to four years. The lease term includes periods covered by an
option to extend if the Company is reasonably certain to exercise that option.

 

    7

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

  

		2.	Significant accounting policies
                                         (continued):

 

	 	 	 	At transition on September 1,
2019, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of lease
payments at inception, discounted at the Company's incremental borrowing rate. Right-of-use assets are measured at an amount equal
to the lease liabilities, adjusted for any prepaid or accrued lease payments relating to that lease.
	 	 	 	 
	 	 	 	The Company has elected to use
the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

 

	 	 	l	applied
                                         a single discount rate to a portfolio of leases with reasonably similar characteristics;

 

	 	 	l	excluded
                                         initial direct costs from the measurement of the right-of-use assets at the date of initial
                                         application; and

 

	 	 	l	relied
                                         upon the Company's assessment of whether leases are onerous under the requirements of
                                         IAS 37, Provisions, contingent liabilities and contingent assets as at August 31,
                                         2019 as an alternative to reviewing our right-of-use assets for impairment.
	 	 	 
	 	The Company has elected not to separate non-lease components and will instead account for the lease and non-lease component as a single lease component. In addition, the Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low value assets. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term.
	 	 	 
	 	The impact on transition to IFRS 16 as at September 1, 2019 is summarized below:

 

	Right-of-use assets	 	$	2,288	 
	Current portion of lease liabilities	 	 	860	 
	Lease liabilities	 	 	1,950	 

 

	 	 	When measuring lease liabilities
for leases that were classified as operating leases under IAS 17, the Company discounted lease payments using its incremental
borrowing rate at September 1, 2019. The weighted average rate applied is 5.44%.

 

    8

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

  

		2.	Significant accounting policies
                                         (continued):

 

	Operating
    lease commitment at August 31, 2019, as disclosed in the Company's 2019 consolidated financial statements	 	$	2,999	 
	 	 	 	 	 
	Discounted using the incremental borrowing rate at September 1,
    2019	 	$	2,756	 
	Adjustment for discounted amount of additional lease recorded	 	 	54	 
	Lease liabilities recognized at September 1, 2019	 	$	2,810	 

 

	 	 	 	IFRS 16 replaces the straight-line
operating lease expense recorded under IAS 17 with a depreciation charge for right-of-use assets and interest expense on lease
liabilities, which resulted in a decrease in operating expenses, an increase in depreciation expense and an increase in finance
costs.
	 	 	 	 
	 	 	 	The Company has applied judgment
to determine the lease term for some lease contracts that include renewal options. The assessment of whether the Company is reasonably
certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use
assets recognized.
	 	 	 	 
	 	 	 	As a result of initially applying
IFRS 16, in relation to the leases that were previously classified as operating leases, the Company recognized $2,288 of right-of-use
assets and $2,810 of lease liabilities as at September 1, 2019. During the year ended August 31, 2020, the Company recognized
depreciation of right-of-use assets of $742 (2019 - nil), and finance cost of $133 (2019 - nil).

  

	Operating lease commitment as at September 1, 2019	 	$	2,810	 
	Interest accretion on lease liabilities	 	 	133	 
	Payment of lease liabilities	 	 	(993	)
	Operating lease commitment as at August 31, 2020	 	$	1,950	 
	 	 	 	 	 
	Current portion of lease liabilities	 	$	908	 
	Non-current portion of lease liabilities	 	 	1,042	 
	 	 	$	1,950	 

 

    9

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

  

		2.	Significant accounting policies
                                         (continued):

 

	 	 	 	The Company also made judgements
in determining the incremental borrowing rate used in measuring the lease liabilities, reflecting the rate that the Company would
have to pay for a loan of similar term, with similar security, to obtain asset of similar value.
	 	 	 	 
	 	 	 	Right-of-use assets and lease
liabilities:
	 	 	 	 
	 	 	 	At inception of a contract, the
Company assesses whether a contract is or contains a lease based on whether the contract conveys a right to control the use of
an identified asset for a period of time in exchange for consideration.
	 	 	 	 
	 	 	 	The Company recognizes right-of-use
assets and lease liabilities at the lease commencement date. After the initial adoption date, the right-of-use asset is initially
measured at cost, which comprises:

  

	 	 	l	the
                                         amount of the initial measurement of the lease liability;

 

	 	 	l	any
                                         lease payments made at or before the commencement date, less any lease incentives received;

 

	 	 	l	any
                                         initial direct costs incurred; and

 

		 	l	an
                                         estimate of costs to dismantle or remove the underlying asset, or restore the asset to
                                         the condition required by the terms and conditions of the lease.
	 	 	 	 
	 	 	Subsequent to initial measurement,
right-of-use assets are measured at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements
of the lease liability. The right-of-use assets are depreciated on a straight-line basis over the term of the lease, or the estimated
useful life of the right-of-use assets if the Company expects to obtain the ownership of the leased asset at the end of the lease.
The lease term includes the non-cancellable period of the lease and optional renewable periods that the Company is reasonably
certain to extend.
	 	 	 
	 	 	The lease liability is initially
measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally,
the Company uses its incremental borrowing rate as the discount rate.

 

    10

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

After initial recognition, the
lease liability is measured at amortized cost using the effective interest method. The lease liability is remeasured when there
is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected
to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase
option, extension option or termination option. When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset.

 

The lease liability is also remeasured
when the underlying lease contract is amended. When there is a decrease in contract scope, the lease liability and right-of-use
asset will decrease relative to this change with the difference recorded in net income prior to the remeasurement of lease liability.

 

Short-term leases:

 

The aggregate cost of operating
leases are recognized in profit or loss on a straight-line basis over the term of the lease, if less than 12 months. Lease incentives
received are recognized as an integral part of the total lease expense over the term of the lease.

 

		(ii)	Gaming revenue recognition:

 

As a result of the launch of theScore
Bet, the Company has adopted the following policy for gaming revenue recognition:

 

In sports-betting related transactions
where the Company generates a net gain or loss on a bet which is determined by an uncertain future event, the transaction is within
the scope of IFRS 9 ("Financial Instruments"). Revenue is recorded as the gain or loss on betting transactions settled
during the period less, free bets, promotional costs, bonuses and fair value adjustments on open bets (unsettled bets). The Company
recognizes the gain or loss on a betting transaction as revenue when a bet is settled. The gain or loss is calculated as the total
of sums bet less amounts paid out in respect of such bets when such bets are settled with the customer. Any open bets are accounted
for as a derivative financial instrument carried at fair value through profit and loss ("FVTPL") instrument, with gains
and losses on the open bets recognized in revenue.

 

    	 	11	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(d)	Property and equipment:

 

		(i)	Recognition and measurement:

 

Property and equipment are measured
at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenses that are directly attributable
to the acquisition of the asset. When parts of an item of property and equipment have different useful lives, they are accounted
for as separate components of property and equipment and depreciated accordingly. The carrying amount of any replaced component
or a component no longer in use is derecognized.

 

		(ii)	Subsequent costs:

 

Subsequent costs are included in
the asset's carrying amount or recognized as a separate asset only when it is probable that future economic benefits associated
with the item of property and equipment will flow to the Company and the costs of the item can be reliably measured. All other
expenses are charged to operating expenses as incurred.

 

		(iii)	Depreciation:

 

Depreciation is based on the cost
of an asset less its estimated residual value. Depreciation is charged to income or loss over the estimated useful life of an asset.
Depreciation is provided on a declining-balance basis using the following annual rates:

 

	Computer equipment	 	 	30	%
	Office equipment	 	 	20	%
	Leasehold improvements	 	 	Shorter
                                                                                      of asset's useful life and the term of lease	 
	Right-of-use assets	 	 	Term of the lease	 

 

Depreciation methods, rates and
residual values are reviewed annually and revised if the current method, estimated useful life or residual value is different from
that estimated previously. The effect of such changes is recognized on a prospective basis in the consolidated financial statements.

 

    	 	12	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(e)	Foreign currency translation:

 

		(i)	Foreign currency transactions:

 

Foreign currency transactions are
translated to the Company's functional currency using exchange rates at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated
in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in equity if they
are attributable to part of the net investment in a foreign operation.

 

		(ii)	Foreign balances:

 

The assets and liabilities of foreign
operations are translated to Canadian dollars at exchange rates at the reporting date. The income and expenses of foreign operations
are translated to Canadian dollars using average exchange rates for the month during which the transactions occurred. Foreign currency
differences are recognized in other comprehensive income in the cumulative translation account.

 

		(f)	Intangible assets:

 

Product development costs and
other outlays are only capitalized if the general recognition requirements in IAS 38, Intangible Assets ("IAS 38")
are met, which include whether the item meets the definition of an intangible asset and that it is probable that expected future
economic benefits will flow to the Company and that the cost of the asset can be measured reliably. To meet the definition criteria,
one of the factors the Company assesses is whether the item is capable of being separated or divided from the Company. Expenditures
that are considered to relate to development of the business as a whole are not capitalized as intangible assets and are expensed
when incurred. Costs such as enhancements and routine maintenance are expensed when incurred.

 

    	 	13	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

Product development costs are
also only capitalized if the Company can demonstrate all of the following:

 

		·	the technological feasibility of the project;

 

		·	the intention to complete the project
and use or sell it;

 

		·	the availability of adequate resources
to complete the project;

 

		·	the ability to sell or use the intangible
asset created;

 

		·	the ability to reliably measure the expenditure
attributable to the asset during the development phase; and

 

		·	how the intangible asset will generate
probable future economic benefits.

 

If the projects being reviewed
do not meet the criteria for capitalization, the related costs are expensed when incurred. See note 2(r) for a discussion
of estimates and judgments.

 

Product development costs are
amortized on a 30% declining-balance basis commencing when they are available for use and form part of the revenue-producing activities
of the Company. Research, maintenance, improvements, promotional and advertising expenses associated with the Company's products
are expensed as incurred.

 

Intangible assets with finite
useful lives are amortized over their expected useful lives and are tested for impairment, as described in note 2(g). Useful lives,
residual values and amortization methods for intangible assets with finite useful lives are reviewed at least annually and revised
if the current method, estimated useful life, or residual value is different from that estimated previously. The effects of such
changes are recognized on a prospective basis in the consolidated financial statements.

 

Trademarks are amortized on a
straight-line basis over an expected useful life of 10 years.

 

Computer software is amortized
over the useful life.

 

    	 	14	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

Product development costs primarily
consist of internal labour costs incurred by the Company in developing its products, and also include, from time to time, external
contractor costs incurred. Development costs, which by definition represent costs for the production of new or substantially improved
products, are capitalized from the time the project first meets both the general recognition requirements for an intangible asset
in IAS 38 and the more specific criteria in IAS 38 for the recognition of an internally developed intangible asset arising from
development. Capitalization ceases when the product is available for use, or when the project no longer meets the recognition criteria.

 

Market access licenses which
are included in licenses and other assets are amortized on a straight-line basis over their respective license period which ranges
from five years to 20 years.

 

		(g)	Impairment:

 

Impairment of non-financial assets:

 

The carrying values of non-financial
assets with finite useful lives, such as property and equipment and intangible assets, are assessed for impairment at the end of
each reporting date for indication of impairment or whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. If any such indication exists, the recoverable amount of the asset must be determined. Such assets are
impaired if their recoverable amount is lower than their carrying amount. If it is not possible to estimate the recoverable amount
of an individual asset, the recoverable amount of the cash generating unit ("CGU") to which the asset belongs is tested
for impairment. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. The recoverable amount is the greater of an asset's fair value less costs
to sell or its value in use. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the
carrying amount of the asset or CGU is reduced to its recoverable amount. The resulting impairment loss is recognized in income
or loss.

 

An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount. When an impairment loss is subsequently reversed,
the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount. The increased carrying
amount does not exceed the carrying amount that would have been recorded had no impairment losses been recognized for the asset
or CGU in prior years.

 

    	 	15	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(h)	Short-term employee benefits:

 

Short-term employee benefit obligations
are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount
expected to be paid under employee short-term incentive compensation plans if there is legal or constructive obligation to pay
this amount at the time and the obligation can be estimated reliably.

 

		(i)	Stock-based payment transactions:

 

Certain members of the Company's
personnel participate in stock-based compensation plans (note 10). The stock-based compensation costs are expensed by the
Company under operating expenses in profit or loss. The grant date fair value of stock-based payment awards granted to the Company's
employees is recognized as a compensation cost, with a corresponding increase in contributed surplus within shareholders' equity,
over the period that the employees unconditionally become entitled to the awards. The amount recognized as compensation cost is
adjusted to reflect the number of awards for which the related service vesting conditions are expected to be met, such that the
amount ultimately recognized as compensation cost is based on the number of awards that vest.

 

		(j)	Provisions:

 

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

 

Provisions are measured at the
estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting
date, including the risks and uncertainties associated with the present obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The Company has no material provisions as at August 31, 2020 and 2019.

 

    	 	16	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(k)	Operating leases:

 

The aggregate cost of operating
leases are recognized in profit or loss on a straight-line basis over the term of the lease, if less than 12 months. Lease incentives
received are recognized as an integral part of the total lease expense over the term of the lease.

 

		(l)	Income taxes:

 

Deferred tax assets are recognized
for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and their respective tax bases. A deferred tax asset is recognized for unused tax losses, tax credits, and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related
tax benefit will be realized. Deferred tax assets and liabilities are not recognized for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting
nor taxable income or loss, and differences relating to investments in subsidiaries to the extent that it is probable that they
will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured using enacted or substantively enacted
tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered
or settled.

 

		(m)	Refundable tax credits and government assistance:

 

Refundable tax credits related
to digital media development products are recognized in profit or loss when there is reasonable assurance that they will be received
and the Company has and will comply with the conditions associated with the relevant government program. These investment tax credits
are recorded and presented as either a deduction to the carrying amount of the asset and subsequently recognized over the useful
life of the related asset or recognized directly to profit or loss based on the accounting of the initial costs incurred to which
the tax credits were applied. When collection of the tax credits is not expected within 12 months of the end of the reporting years,
then such amounts are classified as non-current assets.

 

Government assistance related
to expenses are presented as part of comprehensive loss, as a deduction to the related expense in the reporting period.

 

    	 	17	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

  
 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

During the year ended August 31,
2020, the Company determined it was eligible for the Canadian Emergency Wage Subsidy ("CEWS"). The Company recognized
a reduction in salary costs of $4,418 based on the estimated funding available during the eligibility period from March 15,
2020. The amount receivable at year ended August 31, 2020 is $1,519.

 

		(n)	Revenue recognition:

 

		(i)	Revenue from contracts with customers:

 

The Company records revenue in
accordance with the five steps in IFRS 15, Revenue from Contracts with Customers, as follows:

 

		(1)	Identify the contract with a customer;

 

		(2)	Identify the performance obligations in the contract;

 

		(3)	Determine the transaction price, which is the amount the Company expects to be entitled to;

 

		(4)	Allocate the transaction price among the performance obligations in the contract based on their
relative stand-alone selling prices; and

 

		(5)	Recognize revenue when or as the goods or services are transferred to the customer.

 

The Company's principal sources
of revenue are from advertising on its digital media properties. Advertising revenue is recorded at the time advertisements are
displayed on the Company's digital media properties. Funds received from advertising customers before advertisements are displayed
are recorded as deferred revenue.

 

    	 	18	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(ii)	Gaming revenue recognition:

 

In sports-betting related transactions
where the Company generates a net gain or loss on a bet which is determined by an uncertain future event, the transaction is within
the scope of IFRS 9 ("Financial Instruments"). Revenue is recorded as the gain or loss on betting transactions settled
during the period less, free bets, promotional costs, bonuses and fair value adjustments on open bets (unsettled bets). The Company
recognizes the gain or loss on a betting transaction as revenue when a bet is settled. The gain or loss is calculated as the total
of sums bet less amounts paid out in respect of such bets when such bets are settled with the customer. Any open bets are accounted
for as a derivative financial instrument carried at fair value through profit and loss ("FVTPL") instrument, with gains
and losses on the open bets recognized in revenue.

 

		(o)	Finance income:

 

Interest income on funds invested
is recognized as it accrues in profit or loss, using the effective interest method.

 

		(p)	Convertible debenture:

 

Compound financial instruments
issued by the Company comprise convertible debentures that can be converted to share capital at the option of the holder, and the
number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument
is recognized initially at the fair value of a similar liability that does not have an equity conversion option. The equity component
is recognized initially as the difference between the fair value of the compound financial instrument as a whole and the fair value
of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.

 

Subsequent to initial recognition,
the liability component of a compound financial instrument is measured at amortized cost using the effective interest rate method.
The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest, losses and
gains relating to the financial liability are recognized as period costs.

 

    	 	19	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(q)	Segment information:

 

The Company is organized and
operates as one operating segment for purposes of making operating decisions and assessing performance. The chief operating decision
makers, being the Chairman and Chief Executive Officer, the President and Chief Operating Officer and the Chief Financial Officer,
evaluate performance and make decisions about resources to be allocated based on financial data consistent with the presentation
in these consolidated financial statements.

 

Virtually all of the Company's
assets are located in Canada and U.S. and most of the Company's expenses are incurred in Canada and U.S.

 

		(r)	Use of estimates and judgments:

 

The preparation of these consolidated
financial statements requires management to make estimates, judgments and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates.
Key areas of estimation and judgment are as follows:

 

		(i)	Measurement uncertainty:

 

The preparation of the consolidated
financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical
experience and other assumptions that are considered reasonable in the circumstances. The actual amount or values may vary in certain
instances from the assumptions and estimates made. Changes will be recorded, with corresponding effect in profit or loss, when,
and if, better information is obtained.

 

		(ii)	Intangible assets:

 

Management's judgment is applied,
and estimates are used, in determining whether costs qualify for recognition as internally developed intangible assets.

 

    	 	20	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

To be able to recognize an intangible
asset, management must demonstrate the item meets the definition of an intangible asset in IAS 38. Management exercises significant
judgment in determining whether an item meets the identifiability criteria in the definition of an intangible asset which, in part,
requires that the item is capable of being separated or divided from the Company and sold, transferred or licensed either individually
or together with a related contract or asset, whether or not the Company intends to do so. Judgment is required to distinguish
those expenditures that develop the business as a whole, which cannot be capitalized as intangible assets and are expensed in the
years incurred.

 

Also, to recognize an intangible
asset, management, in its judgment, must demonstrate that it is probable that expected future economic benefits will flow to the
Company and that the cost of the asset can be measured reliably. Estimates are used to determine the probability of expected future
economic benefits that will flow to the Company. Future economic benefits include net cash flows from the sports betting app as
well as net cash flows from future advertising sales, which are dependent upon the ability of the Company to attract users to its
products and increase user engagement with its products, and may also include anticipated cost savings, depending upon the nature
of the development project.

 

The Company capitalized internal
product development costs during the years ended August 31, 2020 and 2019 for both new development projects and projects that,
in management's judgment, represent substantial improvements to existing products. In assessing whether costs can be capitalized
for improvements, management exercises significant judgment when considering the extent of the improvement and whether it is substantial,
whether it is sufficiently separable and whether expected future economic benefits are derived from the improvement itself. Factors
considered in assessing the extent of the improvement include, but are not limited to, the degree of change in functionality and
the impact of the project on the ability of the Company to attract users to its products and increase user engagement with its
products. Costs which do not meet these criteria, such as enhancements and routine maintenance, are expensed when incurred.

 

In addition, the Company uses estimation
in determining the measurement of internal labour costs capitalized to intangible assets. The capitalization estimates are based
upon the nature of the activities the developer performs.

 

    	 	21	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

Management's judgment is also used
in determining appropriate amortization methods for intangible assets, and estimates are used in determining the expected useful
lives of amortizable intangible assets.

 

		(iii)	Tax credits:

 

Refundable tax credits related
to expenditures to develop digital media products are recognized when there is reasonable assurance that they will be received
and the Company has and will comply with the conditions associated with the relevant government program. Management's judgment
is required in determining which expenditures and projects are reasonably assured of compliance with the relevant conditions and
criteria and have, accordingly, met the recognition criteria.

 

		(iv)	Impairment of non-financial assets:

 

An impairment test is carried out
whenever events or changes in circumstances indicate that carrying amounts may not be recoverable and is performed by comparing
the carrying amount of an asset or CGU and its recoverable amount. Management's judgment is required in determining whether an
impairment indicator exists. The recoverable amount is the higher of fair value, less costs to sell, and its value in use over
its remaining useful life.

 

This valuation process involves
the use of methods which use assumptions to estimate future cash flows. The recoverable amount depends significantly on the discount
rate used, as well as the expected future cash flows and the terminal growth rate used for extrapolation.

 

		(v)	Programmatic receivables:

 

The Company estimates receivables
pertaining to programmatic advertising revenues, based on the best information available at the recognition date. These estimates
are trued up at the time of payment.

 

Amongst other factors, management
considers the historic experience with the programmatic partner and the age of the outstanding balance.

 

    	 	22	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		2.	Significant accounting policies (continued):

 

		(vi)	Allowance for doubtful accounts:

 

The valuation of accounts receivable
requires valuation estimates to be made by management. These accounts receivable comprise a large and diverse base of advertisers
dispersed across varying industries and locations that purchase advertising on the Company's digital media platforms.

 

The Company determines an allowance
for doubtful accounts based on knowledge of the financial conditions of its customers, the aging of the receivables, customer and
industry concentrations, the current business environment and historical experience. A change in any of the factors impacting the
estimate of the allowance for doubtful accounts will directly impact the amount of bad debt expense recorded in facilities, administrative
and other expenses.

 

The loss allowance for trade receivables
must be calculated using the expected lifetime credit loss and recorded at the time of initial recognition.

 

    	 	23	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		3.	Property and equipment:

 

	 	 	Computer
 equipment	 	 	Office
 equipment	 	 	Leasehold
 improvements	 	 	Right-of-use
 assets	 	 	Total	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2018	 	$	1,840	 	 	$	935	 	 	$	1,982	 	 	$	–	 	 	$	4,757	 
	Additions	 	 	268	 	 	 	34	 	 	 	14	 	 	 	–	 	 	 	316	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019	 	 	2,108	 	 	 	969	 	 	 	1,996	 	 	 	–	 	 	 	5,073	 
	Adjustment pertaining to IFRS 16 adoption	 	 	–	 	 	 	–	 	 	 	–	 	 	 	2,288	 	 	 	2,288	 
	Additions	 	 	1,491	 	 	 	39	 	 	 	328	 	 	 	–	 	 	 	1,858	 
	Revaluations of foreign currency balances	 	 	(2	)	 	 	–	 	 	 	–	 	 	 	–	 	 	 	(2	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020	 	$	3,597	 	 	$	1,008	 	 	$	2,324	 	 	$	2,288	 	 	$	9,217	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accumulated depreciation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2018	 	$	1,431	 	 	$	595	 	 	$	1,278	 	 	$	–	 	 	$	3,304	 
	Depreciation	 	 	145	 	 	 	73	 	 	 	178	 	 	 	–	 	 	 	396	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019	 	 	1,576	 	 	 	668	 	 	 	1,456	 	 	 	–	 	 	 	3,700	 
	Depreciation	 	 	318	 	 	 	65	 	 	 	256	 	 	 	742	 	 	 	1,381	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020	 	$	1,894	 	 	$	733	 	 	$	1,712	 	 	$	742	 	 	$	5,081	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Carrying amounts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2018	 	$	409	 	 	$	340	 	 	$	704	 	 	$	–	 	 	$	1,453	 
	August 31, 2019	 	 	532	 	 	 	301	 	 	 	540	 	 	 	–	 	 	 	1,373	 
	August 31, 2020	 	 	1,703	 	 	 	275	 	 	 	612	 	 	 	1,546	 	 	 	4,136	 

 

    	 	24	 

     

    

 

	SCORE MEDIA AND GAMING INC.
	Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 Years ended August 31, 2020 and 2019

  

 

		4.	Intangible and other assets:

 

	 	 	Product

development

and software	 	 	Trademarks

and domain

names	 	 	Licenses

and other

assets	 	 	Total	 
	Cost	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2018	 	$	23,488	 	 	$	358	 	 	$	–	 	 	$	23,846	 
	Additions	 	 	3,758	 	 	 	–	 	 	 	14,649	 	 	 	18,407	 
	Disposals	 	 	(1,580	)	 	 	–	 	 	 	–	 	 	 	(1,580	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019	 	 	25,666	 	 	 	358	 	 	 	14,649	 	 	 	40,673	 
	Additions	 	 	5,097	 	 	 	–	 	 	 	1,262	 	 	 	6,359	 
	Revaluations of foreign currency balances	 	 	–	 	 	 	–	 	 	 	(353	)	 	 	(353	)
	Disposals and reclassifications	 	 	(3,713	)	 	 	–	 	 	 	(303	)	 	 	(4,016	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020	 	$	27,050	 	 	$	358	 	 	$	15,255	 	 	$	42,663	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accumulated amortization	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2018	 	$	17,584	 	 	$	188	 	 	$	–	 	 	$	17,772	 
	Amortization	 	 	2,674	 	 	 	36	 	 	 	11	 	 	 	2,721	 
	Disposals	 	 	(1,580	)	 	 	–	 	 	 	–	 	 	 	(1,580	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019	 	 	18,678	 	 	 	224	 	 	 	11	 	 	 	18,913	 
	Amortization	 	 	3,102	 	 	 	30	 	 	 	880	 	 	 	4,012	 
	Revaluation of foreign currency balances	 	 	–	 	 	 	–	 	 	 	(26	)	 	 	(26	)
	Disposals	 	 	(3,713	)	 	 	–	 	 	 	–	 	 	 	(3,713	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020	 	$	18,067	 	 	$	254	 	 	$	865	 	 	$	19,186	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Carrying amounts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2018	 	$	5,904	 	 	$	170	 	 	$	–	 	 	$	6,074	 
	August 31, 2019	 	 	6,988	 	 	 	134	 	 	 	14,638	 	 	 	21,760	 
	August 31, 2020	 	 	8,983	 	 	 	104	 	 	 	14,390	 	 	 	23,477	 

 

During the year ended August
31, 2020, within the additions to product development and software, the Company capitalized internal and subcontractor costs of
approximately $4,029 (2019 - $3,758).

 

Licenses and other assets include
payments in respect of sports betting related market access licenses and associated costs, as well as payments related to sports
betting related rights and licenses.

 

    	 	25	 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

	

                                                    4.
	Intangible and other assets (continued):

 

The significant development projects
for the year ended August 31, 2020 consisted of new features in theScore's betting app, including significant enhancements
to live betting and sports data, and significant new enhancements to its core technology infrastructure.

 

The significant development projects
for the year ended August 31, 2019 consisted of new social features in the Company's media app including public and private
chat, Follow Together, as well as new features including a betting data section and a new website widget. The Company has also
continued developing significant new enhancements to its core technology infrastructure as well as development of its sports betting
app and related systems and services.

 

	5.	Related party transactions:

 

		(a)	Lease agreement:

 

In fiscal 2013, the Company entered
into a lease for a property partially owned by the Chairman and Chief Executive Officer of the Company. The aggregate rent paid
during the years ended August 31, 2020 and 2019 amounted to $40 and $40, respectively. The payable balances as at August 31,
2020 and 2019 were $2 and nil, respectively. These transactions are recorded at the exchange amount, being the amount agreed upon
between the parties.

 

		(b)	Transactions with key management personnel:

 

Key management personnel of the
Company include directors and named executive officers. Total compensation costs for these key management personnel are as follows:

 

	 	 	2020	 	 	2019
	Salaries and non-equity incentive compensation	 	$	2,037	 	 	$	1,614
	Stock-based and other compensation	 	 	2,918	 	 	 	320
	Total	 	$	4,955	 	 	$	1,934

 

		(c)	Entities controlled and directed by the Company's Chairman and Chief Executive Officer and a director
of the Company participated in financing transactions during the fiscal year. Refer to note 14 for details.

 

    26 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial Statements
(continued)

(In thousands of Canadian dollars,
unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	6.	Tax credits:

 

As at August 31, 2020, tax
credits recoverable of $1,616 are included in tax credits recoverable, current, in the consolidated statements of financial position
(2019 - non-current, $1,616). Tax credits recoverable reflect management's best estimate of credits for which realization is reasonably
assured based on consideration of both certificates of eligibility received from the Ontario Media Development Corporation ("OMDC")
for specific claims and the OMDC's historical acceptance of expenditures of a similar nature for refundable credit, and the classification
is based on the expected completion of the assessment by the relevant authorities.  No tax credits were accrued during the
years ended August 31, 2020 and 2019.

 

	7.	Capital risk management:

 

The Company's objectives in managing
capital are to maintain its liquidity to fund future development and growth of the business. The capital structure consists of
shareholders' equity, debt and cash.

 

The Company manages and adjusts
its capital structure in consideration of changes in economic conditions and the risk characteristics of the underlying assets.

 

	8.	Financial risk management:

 

The Company's loans and borrowings
include:

 

	 	 	2020	 	 	2019
	Current:	 	 	 	 	 
	Revolving term credit facility	 	$	6,250	 	 	$	–
	Computer equipment financing	 	 	395	 	 	 	–
	 	 	 	6,645	 	 	 	–
	Non-current:	 	 	 	 	 	 	 
	Computer equipment financing	 	 	740	 	 	 	–

 

At August 31, 2020, the
Company has fully drawn on a 364-day revolving facility the terms of which are described in note 8(b).

 

The computer equipment financing
relates to the financing arrangement for servers and other equipment and has been calculated using discounted cash flows for future
payments over the three-year term of the borrowing using the effective interest rate of 5.62%.

 

    27 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	8.	Financial risk management (continued):

 

The Company has exposure to credit
risk, liquidity risk and market risk from its use of financial instruments. This note presents information about the Company's
exposure to each of these risks and the Company's objectives, policies and processes for measuring and managing these risks.

 

		(a)	Credit risk:

 

Credit risk is the risk of financial
loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises
principally from the Company's receivables from customers. The carrying amount of financial assets represents the maximum credit
exposure. The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer.

 

As at August 31, 2020 and
2019, the Company had a loss allowance for trade receivables of $10 and $54, respectively.

 

At August 31, 2020 and 2019,
$655 and $1,093, respectively, of accounts receivable were considered past due, which is defined as amounts outstanding beyond
normal credit terms and conditions for respective customers that can extend up to 150 days from the date of initial date of invoicing.
The Company believes that its allowance for doubtful accounts sufficiently reflected the related credit risk based on the nature
of the Company's customers and consideration of past performance.

 

The Company has customer concentration
risk as one customer, a programmatic network, represented 14% of revenue, for the year ended August 31, 2020 (2019 - one customer,
a programmatic network, represented 10% of revenue, respectively). As at August 31, 2020, two customers, a media agency and
programmatic network, represented 13% and 13%, respectively, of the trade accounts receivable balance of $3,909, not including
CEWS receivable (2019 - one customer, a media agency, represented 19%, respectively).

 

    28 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	8.	Financial risk management (continued):

 

		(b)	Liquidity risk:

 

Liquidity risk is the risk that
the Company will not be able to meet its financial obligations as they fall due. As at August 31, 2020, the Company had cash
and cash equivalents of $40,116 (2019 - $4,035), restricted cash related to customer deposits on the betting platform of $1,859
(2019 - $679), accounts receivable of $5,455 (2019 - $7,956), tax credits recoverable of $1,616 (2019 - $1,616), accounts payable
and accrued liabilities to third parties of $10,353 (2019 - $7,147), and current portion of loans and other borrowings of
$6,645 (2019 - nil). Accounts payable and accrued liabilities have contracted maturities of less than 12 months.

 

Management prepares budgets and
cash flow forecasts to assist in managing liquidity risk. The Company has a history of operating losses, and can be expected to
generate continued operating losses and negative cash flows in the future while it carries out its current business plan to further
develop and expand its digital media and gaming business.

 

The Company also has access to
a $5,000 revolving demand credit facility with a Canadian chartered bank. The credit facility is available for working capital
purposes and the amount available is based on a percentage of the Company's accounts receivable and those of certain of its subsidiaries.
The facility is secured by substantially all of the assets of the Company and certain of its subsidiaries. At August 31, 2020,
the Company could draw $2,289 on this facility.

 

The credit facility bears an
interest rate at the lenders prime rate plus 1.00% per annum. The credit facility is repayable on demand and is subject to certain
financial covenants.

 

In July 2020, the Company
entered into a $6,250 revolving term credit facility with the same Canadian chartered bank that maintains the Company's $5,000
revolving demand operating credit facility, supported by Export Development Corporation's Business Credit Availability Program
("EDC BCAP"). The term credit facility is available to provide additional liquidity to the Company and to mitigate the
impact of COVID-19 on the Company's operations. The term credit facility is secured by substantially all of the assets of the Company
and certain of its subsidiaries. The term credit facility bears interest rate at the lender's prime rate plus 2.00% per annum and
is subject to a facility fee in respect of the EDC BCAP program of 1.80%. The term credit facility is repayable by July 15,
2021, is extendable for a further period of 364 days in certain circumstances and is subject to certain financial covenants. On
July 24, 2020, the Company completed a drawdown of the revolving credit facility in the amount of $6,250.

 

    29 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	8.	Financial risk management (continued):

 

While the Company can utilize
its cash, cash equivalents, revolving demand credit facility and revolving term credit facility to fund its operating and development
expenditures, it does not have access to other committed sources of funding, and depending upon the level of expenditures and whether
profitable operations can be achieved, may be required to seek additional funding in the future.

 

		(c)	Market risk:

 

Market risk is the risk that
changes in market prices, such as interest rates, foreign exchange rates and equity prices, will affect the Company's income or
the value of its holdings of financial instruments. As at August 31, 2020, the Company does not have any financial instruments
exposing it to market or interest rate risk, other than as disclosed in note 16.

 

The Company does not engage in
risk management practices, such as hedging or use of derivative instruments.

 

The Company's head office is
located in Canada. Some of the Company's customers and suppliers are based in Canada and, therefore, transact in Canadian dollars.
Certain customers and suppliers are based outside of Canada and the associated financial assets and liabilities originate in U.S. dollars,
Euros or Pounds Sterling, thereby exposing the Company to foreign exchange risk. Total U.S. dollar-denominated cash held with banks
as at August 31, 2020 and 2019 were $2,553 and $2,700, respectively. Total U.S. dollar-denominated receivables as at August 31,
2020 and 2019 were $844 and $3,219, respectively. The Company's foreign exchange gain (loss) is included in finance income (expense)
in the consolidated statements of comprehensive loss, and for the year ended August 31, 2020 was ($551) (2019 - $163).

 

    30 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	8.	Financial risk management (continued):

 

		(d)	Fair values:

 

The Company has determined the
estimated fair values of its financial instruments based on appropriate valuation methodologies, as disclosed below. However, considerable
judgment is required to develop certain of these estimates. Accordingly, these estimated values are not necessarily indicative
of the amounts the Company could realize in a current market exchange. The estimated fair value amounts can be materially affected
by the use of different assumptions or methodologies. The methods and assumptions used to estimate the fair value of each class
of financial instruments are discussed below.

 

The different levels have been
defined 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 (i.e. as prices) or indirectly (i.e. derived
from prices); and

 

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

 

Quoted market prices for an identical
asset or liability represent a Level 1 valuation. When quoted market prices are not available, the Company maximizes the use of
observable inputs within valuation models. When all significant inputs are observable, the valuation is classified as Level 2.
Valuations that require the use of significant unobservable inputs are considered Level 3.

 

There were no material financial
instruments categorized in Level 1 or Level 3 as at August 31, 2020 and 2019 and there were no transfers of fair value measurement
between Levels 1, 2 and 3 of the fair value hierarchy in the respective years.

 

    31 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	9.	Commitments:

 

The Company has no off-balance
sheet arrangements or long-term obligations other than the agreements noted below.

 

The Company has the following
firm commitments under agreements:

 

	 	 	 	 	 	Later than	 	 	 
	 	 	 	 	 	one year and	 	 	 
	 	 	Not later than	 	 	not later than	 	 	Later than
	 	 	one year	 	 	five years	 	 	five years
	Contractual commitments	 	$	9,154	 	 	$	18,989	 	 	$	83,958

 

The Company has entered into
several new agreements relating to its sports betting business which has increased future contractual commitments.

 

Office lease:

 

The Company's current lease agreement
is for a 30,881 square foot space at its head office in Toronto, Ontario, and runs until September 30, 2022.

 

    32 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	10.	Stock-based compensation:

 

		(a)	Stock option plan:

 

The Company has a stock option
and restricted stock unit plan (the "Plan") under which the Board of Directors, or a committee appointed for such purpose,
may, from time to time, grant to directors, officers and full-time employees of, or consultants to, theScore options to acquire
Class A subordinate voting shares and restricted stock units ("RSUs"). Under the Plan, the exercise price of an
option is based on the closing trading price on the day prior to the grant. An option's maximum term is 10 years and options generally
vest in six month tranches over a period of three to five years. RSUs entitle a holder, subject to the holder's satisfaction of
any conditions, restrictions, performance objectives, vesting period or limitations imposed under the Plan or set out in a grant
letter, and subject to the Company's clawback policy, to receive a payment in Class A subordinate voting shares issued from
treasury on the date when the RSU is vested. The maximum term of an RSU is 10 years. Certain of theScore's employees and consultants
participate in the Plan in exchange for services provided to theScore.

 

The following table summarizes
the status of options granted to employees of the Company under the Plan:

 

	 	 	 	 	 	 	 	 	Weighted
	 	 	 	 	 	 	 	 	average
	 	 	 	 	 	Exercise	 	 	exercise
	 	 	Number	 	 	price	 	 	price
	Outstanding options, August 31, 2018	 	 	25,916,250	 	 	$	0.13 - 0.385	 	 	$	0.21
	Granted	 	 	5,930,000	 	 	 	0.30 - 0.345	 	 	 	0.30
	Cancelled	 	 	(2,949,582	)	 	 	0.145 - 0.31	 	 	 	0.17
	Exercised	 	 	(595,419	)	 	 	0.145 - 0.31	 	 	 	0.19
	 	 	 	 	 	 	 	 	 	 	 	 
	Outstanding options, August 31, 2019	 	 	28,301,249	 	 	 	0.130 - 0.385	 	 	 	0.23
	Granted	 	 	10,412,500	 	 	 	0.60 - 0.85	 	 	 	0.80
	Cancelled	 	 	(1,305,750	)	 	 	0.145 - 0.85	 	 	 	0.53
	Exercised	 	 	(1,669,416	)	 	 	0.13 - 0.385	 	 	 	0.26
	Outstanding options, August 31, 2020	 	 	35,738,583	 	 	$	0.13 - 0.85	 	 	 	0.38
	 	 	 	 	 	 	 	 	 	 	 	 
	Options exercisable, August 31, 2020	 	 	21,923,612	 	 	$	0.13
    - 0.85	 	 	$	0.26

 

    33 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian
dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

	10.	Stock-based compensation (continued):

 

The following table summarizes
the range of exercise prices and the weighted average prices of outstanding and exercisable options as at August 31, 2020.

           

	 	 	 	 	 	 	 	 	 	Weighted	 
	 	 	 	 	 	 	 	 	 	average	 
	 	 	 	Options	 	 	Options	 	 	exercise	 
	Exercise price	 	 	outstanding	 	 	exercisable	 	 	price	 
	$	0.13	 	 	 	2,550,000	 	 	 	2,550,000	 	 	$	0.13	 
	 	0.145	 	 	 	6,249,000	 	 	 	3,804,436	 	 	 	0.145	 
	 	0.18	 	 	 	2,555,000	 	 	 	2,555,000	 	 	 	0.18	 
	 	0.21	 	 	 	2,424,583	 	 	 	2,424,583	 	 	 	0.21	 
	 	0.29	 	 	 	2,930,000	 	 	 	2,930,000	 	 	 	0.29	 
	 	0.30	 	 	 	4,922,917	 	 	 	2,214,174	 	 	 	0.30	 
	 	0.31	 	 	 	4,025,833	 	 	 	4,025,833	 	 	 	0.31	 
	 	0.345	 	 	 	400,000	 	 	 	80,000	 	 	 	0.345	 
	 	0.60	 	 	 	1,625,000	 	 	 	225,000	 	 	 	0.60	 
	 	0.85	 	 	 	8,056,250	 	 	 	1,114,586	 	 	 	0.85	 
	 	 	 	 	 	35,738,583	 	 	 	21,923,612	 	 	 	0.26	 

 

As at August 31, 2020, the
weighted average remaining contractual life of the options exercisable and outstanding is estimated to be 5.51 and 6.78 years,
respectively. The estimated fair value of options granted during the years ended August 31, 2020 and 2019 was determined on
the date of grant using the Black-Scholes option pricing model with the following assumptions:

 

	 	 	2020	 	 	2019	 
	Fair value of options	 	 	$0.28 - $0.70	 	 	 	$0.10 - $0.25	 
	Exercise price	 	 	$0.60 - $0.85	 	 	 	$0.30 - $0.345	 
	Risk-free interest rate	 	 	1% - 2%	 	 	 	1% - 2%	 
	Dividend yield	 	 	–	 	 	 	–	 
	    Volatility factor of the future expected market
    price of shares	 	 	83%		 	 	81%	
	Weighted average expected life of the options	 	 	3 - 10 years	 	 	 	3 - 10 years	 

 

During the year ended August 31,
2020, stock-based compensation recorded in connection with stock options issued by the Company was $2,305 (2019 - $561).

 

    34 

     

    

 

SCORE MEDIA AND GAMING INC. 

Notes to Consolidated Financial
Statements (continued)

(In thousands of Canadian dollars, unless otherwise stated)

 

Years ended August 31,
2020 and 2019

 

 

		10.	Stock-based compensation (continued):

 

		(b)	Restricted stock units:

 

In April 2020, every member
of theScore's senior management team agreed to forego 25% of their salary from May 1 to August 31, 2020 in exchange for
an equivalent grant of RSUs, with a variation of this program also made available on an optional basis to all full-time staff.
An aggregate of 2,320,749 RSUs were granted on April 22, 2020 and fully vested on May 5, 2020, and the resulting number
of shares were allotted to the participants. During the year ended August 31, 2020, share-based compensation recorded in connection
with RSUs issued by theScore was $917 (2019 - nil).

 

		(c)	Share purchase plan:

 

The Company has a share purchase
plan (the "SPP") in order to facilitate the acquisition and the retention of Class A subordinate voting shares
by eligible participants which as of May 1, 2020 has been paused as part of an initiative to reduce costs due to the impact
of COVID-19. The SPP allows eligible participants to voluntarily join in a share purchase program. Under the terms of the SPP,
eligible participants can have up to 5% of their compensation deducted from their pay to contribute towards the purchase of Class A
subordinate voting shares of the Company. The Company makes a contribution equal to the amount of the compensation contributed
by each participant. The Class A subordinate voting shares were purchased by an independent broker through the facilities
of the TSX-V and are held by a custodian on behalf of the SPP participants. During the year ended August 31, 2020, the Company
recorded an expense of $555, as part of personnel expenses, relating to its participating employees in the SPP (2019 - $549).

 

    35 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		

                                                   11.
	Revenue:

 

Revenue from media activities
for the year ended August 31, 2020 was $22,156 (2019 - $31,123).

 

The Company generated $253 (2019
- nil) of gross gaming revenue1 for the year ended August 31, 2020. After taking into account promotional costs
and fair value adjustments of unsettled bets, the Company generated negative net gaming revenue2 of $1,437 (2019 - $2)
for the year ended August 31, 2020.

 

Revenue from Canadian sources
for the year ended August 31, 2020 was $9,252 (2019 - $13,075), while revenue from non-Canadian sources (predominantly USA)
for the same year was $11,467 (2019 - $18,046). Revenue from non-Canadian sources includes both media and gaming related amounts.

 

		12.	Basic and diluted loss per share:

 

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

 

	 	 	2020	 	 	2019	 
		 	 	 	 	 	 	 	 
	Net
    loss available to shareholders - basic and diluted	 	$	(37,930	)	 	$	(9,413	)
	 	 	 	 	 	 	 	 	 
		 	 	 	 	 	 	 	 
	Weighted
    average shares outstanding - basic and diluted	 	 	331,054,928	 	 	 	328,990,434	 
	 	 	 	 	 	 	 	 	 
	Loss per share - basic and diluted	 	$	(0.11	)	 	$	(0.03	)

 

During the year ended August 31,
2020, there were no outstanding stock options, convertible debentures or warrants included in the computation of diluted loss per
share as the impact would have been anti-dilutive.

 

 

		1	Gross gaming revenue is calculated as dollar amounts
bet by customers, less the dollar amounts paid out to customers in respect of such bets which have settled in the applicable period.

		2	Net gaming revenue is measured as gross gaming revenue,
less free bets, promotional costs, bonuses and fair value adjustments on unsettled bets. Refer to note 16 for more details on
unsettled bets.

 

    36 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		13.	Convertible debenture:

 

On September 5, 2019, the
Company completed a non-brokered financing of $40,000 by way of issuance of convertible debentures ("convertible debenture").
The convertible debentures carry an interest rate of 8.0%, payable in arrears, in equal semi-annual payments on the last day of
February and August in each year commencing on February 29, 2020, with a maturity date of August 31, 2024,
or the earlier date of redemption, repayment or conversion.

 

At the holder's option, the convertible
debenture may be converted into Class A subordinate voting shares of the Company ("Class A Shares") at any
time prior to the close of business on the earlier of the business day immediately preceding the maturity date and the business
day immediately preceding the date fixed for redemption of the convertible debenture. The conversion price will be $0.75 for each
Class A Share, being a conversion rate of 1,333.3333 Class A Shares issuable for each one thousand dollars principal
amount of the convertible debenture, subject to adjustment in certain circumstances.

 

Subject to specified conditions,
the convertible debenture may be redeemed at the Company's option at par plus accrued and unpaid interest at any time after August 31,
2023 if the volume weighted average trading price of the Class A Shares during the 20 trading days ending on the fifth trading
day preceding the date on which notice of the redemption is given is not less than 125% of the conversion price, or if the principal
sum of the convertible debenture outstanding is $4,000 or less.

 

Upon the occurrence of a change
of control of the Company or the sale by the Company of its core assets, the Company will be required to make an offer to purchase
the convertible debenture at a price equal to 105% of the principal amount plus accrued and unpaid interest.

 

Transaction costs of $3,031,
were incurred and have been recorded pro rata against the liability and equity components.

 

    37 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		13.	Convertible debenture (continued):

 

On inception, the Company recorded
the following amounts related to the convertible debenture:

 

	Liability component	 	$	27,018	 
	Transaction costs	 	 	(2,047	)
	 	 	$	24,971	 
	 	 	 	 	 
	Equity component - conversion feature	 	$	12,982	 
	Transaction costs	 	 	(984	)
	Income tax impact of convertible debenture	 	 	(3,107	)
	 	 	$	8,891	 

 

For accounting purposes, the
convertible debentures are separated into their liability and equity components by first valuing the liability component. The fair
value of the liability component at the time of issue was calculated as the discounted cash flows for the convertible debentures
assuming a 19% discount rate, which was the estimated rate for a similar convertible debenture without a conversion feature. The
fair value of the equity component (conversion feature) was determined at the time of issue as the difference between the face
value of the convertible debentures and the fair value of the liability component, less a deferred income tax adjustment to reflect
the book to tax difference in value of the convertible debentures at the time of issuance.

 

Interest and accretion expense
for the year ended August 31, 2020 was $4,613. During the fiscal year, the Company elected to accrue unpaid interest of $3,228,
to the principal sum outstanding of the convertible debenture. This election results in a modification to the cash flows of the
convertible debenture, as such, the Company has recalculated the gross carrying amount of the financial liability which resulted
in a $424 gain recorded through profit and loss.

 

		14.	Share capital:

 

The Company is authorized to
issue the following capital stock:

 

 

5,566 special voting shares

Unlimited Class A subordinate
voting shares

Unlimited preference shares

 

    38 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		14.	Share capital (continued):

 

The special voting shares, each
convertible into one Class A subordinate voting share, entitle the holders to vote separately as a class and to one vote for
each share held. In addition, these shares shall have the right to elect that number of members of the Board of Directors of the
Company that would constitute a majority of the authorized number of directors of the Company plus two, subject to the right of
the holders of Class A subordinate voting shares to elect at least two members of the Board of Directors.

 

The holders of Class A subordinate
voting shares are entitled to one vote for each share held at all meetings of the shareholders, other than meetings at which only
the holders of another class or series of shares are entitled to vote separately.

 

The preference shares are non-voting,
except in certain circumstances and shall, with respect to the payment of dividends and the dissolution of assets in the event
of liquidation or any other distribution of assets, rank on a parity with the preference shares of other series and be entitled
to preference in liquidation over the special voting shares and the Class A subordinate voting shares. As at August 31,
2020 and 2019, no preference shares have been issued.

 

Public offering:

 

On August 25, 2020, the
Company closed a short-form bought deal prospectus offering whereby it sold 38,500,000 Class A subordinate voting shares at
a price per share of $0.65 for gross proceeds of $25,025. Proceeds net of commissions, and other direct costs of the offering,
were $23,070. In addition, theScore has granted the underwriters an option, exercisable at any time, in whole or in part, until
the date that is 30 days following the closing of the financing, to purchase up to an additional 5,775,000 Class A subordinate
voting shares of the Company solely to cover over-allotments, if any, and for market stabilization purposes. Refer to subsequent
event note 19 for further details on the overallotment.

 

On November 6, 2018, the
Company closed a non-brokered private placement offering of 36,956,522 Class A subordinate voting shares at a price per share
of $0.23 for net proceeds of $8,500. Entities controlled and directed by the Company's Chairman and Chief Executive Officer and
a director of the Company participated in the private placement, purchasing 13,043,481 and 13,043,478 shares, respectively.

 

    39 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		14.	Share capital (continued):

 

On August 9, 2019, the Company
closed a non-brokered private placement offering of 22,222,223 Class A subordinate voting shares at a price of $0.59 per share
for net proceeds of $13,185. An entity controlled and directed by the Company's Chairman and Chief Executive Officer participated
in the private placement, purchasing 2,222,222 shares.

 

		15.	Reclassification of expense groupings:

 

Effective September 1, 2019,
the Company has updated expense groupings to reflect a modified internal structure and areas of expenditure. The prior year comparatives
have been reclassified to conform to the current year presentation and total expenses have not changed.

 

The following are expense groupings
for the years ended August 31, 2020 and 2019 shown both with prior and updated expense groupings:

 

	Previous groupings	 	2020	 	 	2019	 
	Operating expenses:	 	 	 	 	 	 	 	 
	Personnel	 	$	17,698	 	 	$	18,818	 
	Content	 	 	2,622	 	 	 	2,109	 
	Technology	 	 	4,490	 	 	 	3,014	 
	Facilities, administrative and other	 	 	17,672	 	 	 	10,641	 
	Marketing	 	 	5,478	 	 	 	2,472	 
	Depreciation of property and equipment	 	 	1,382	 	 	 	396	 
	Amortization of intangible assets	 	 	4,015	 	 	 	2,721	 
	Stock-based compensation	 	 	3,222	 	 	 	561	 
	 	 	$	56,579	 	 	$	40,732	 

 

	Updated groupings	 	2020	 	 	2019	 
	Operating expenses:	 	 	 	 	 	 	 	 
	Product development and content	 	$	8,149	 	 	$	9,160	 
	Sales and marketing	 	 	13,036	 	 	 	10,331	 
	Technology and administration	 	 	16,241	 	 	 	7,717	 
	General and administration	 	 	13,756	 	 	 	10,407	 
	Depreciation and amortization	 	 	5,397	 	 	 	3,117	 
	 	 	$	56,579	 	 	$	40,732	 

 

    40 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		16.	Other financial liabilities:

 

	 	 	2020	 	 	2019	 
	Unsettled bets - at fair value	 	$	231	 	 	$	–	 

 

Other financial liabilities consist
of open betting positions (unsettled bets) at year end. Unsettled bets are accounted for as derivative financial instruments and
are carried at fair value. Gains and losses from these unsettled positions are recognized in revenue. User deposits are grouped
in accounts payable.

 

		17.	Finance income (expense):

 

	 	 	2020	 	 	2019	 
	Interest expense	 	$	(4,791	)	 	$	–	 
	Interest income	 	 	165	 	 	 	38	 
	Revaluation of foreign currency balances	 	 	(551	)	 	 	160	 
	Finance income (expense)	 	$	(5,177	)	 	$	198	 

 

		18.	Income taxes:

 

Recognized deferred tax assets
and liabilities are attributable to the following:

 

	Deferred income tax	 	 	Non-capital	 	 	 	 	 	Financing	 	 	Convertible	 	 	 	 
	asset (liability)	 	 	losses	 	 	Tax credits	 	 	fees	 	 	debt	 	 	Net	 
	2020	 	 	$	2,583	 	 	$	(428	)	 	$	63	 	 	$	(2,218	)	 	$	–	 
	2019	 	 	 	446	 	 	 	(428	)	 	 	(18	)	 	 	–	 	 	 	–	 

 

    41 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		18.	Income taxes (continued):

 

Unrecognized deferred tax assets:

 

Deferred tax assets have not
been recognized for the following items as management estimated that it would not be probable that future years' taxable income
will be available against which the Company could utilize the benefits therefrom:

 

	 	 	2020	 	 	2019	 
	Non-capital income tax loss carryforwards	 	$	25,605	 	 	$	19,838	 
	Capital losses carryforwards	 	 	127	 	 	 	127	 
	Equipment and other deductible differences	 	 	5,588	 	 	 	4,591	 
	Total	 	$	31,320	 	 	$	24,556	 

 

As at August 31, 2020, the
Company has the following unrecognized non-capital losses available to reduce future years' taxable income for income tax purposes:

 

Income tax losses expiring
in the year ending August 31:

 

	2035 and earlier	 	 	$	44,837	 
	2036	 	 	 	9,202	 
	2037	 	 	 	2,220	 
	2038	 	 	 	2,540	 
	2039	 	 	 	6,656	 
	2040	 	 	 	30,203	 
	 	 	 	$	95,658	 

 

The property and equipment and
other deductible temporary differences of $21,085 (2019 - $17,324) do not expire under current legislation.

 

    42 

     

    

 

SCORE MEDIA AND GAMING INC.

Notes to Consolidated Financial
Statements (continued)

(In
thousands of Canadian dollars, unless otherwise stated)

 

Years
ended August 31, 2020 and 2019

 

 

		18.	Income taxes (continued):

 

During the years ended August 31,
2020 and 2019, the Company recorded income tax recovery of $3,107 and nil, respectively. A reconciliation of the income tax expense
(recovery) based on the statutory income tax rate to that recorded is as follows:

 

	 	 	2020	 	 	2019	 
	Income tax recovery based on the combined statutory income tax rate of 26.5% (2019 - 26.5%)	 	$	(10,875	)	 	$	(2,494	)
	Tax effect of non-deductible and non-taxable items	 	 	992	 	 	 	307	 
	Current year tax losses and
    deductible temporary differences for which no deferred tax is recognized	 	 	9,767	 	 	 	2,303	 
	Recognition of previously unrecognized deferred tax assets	 	 	(3,107	)	 	 	(138	)
	Tax rate difference on foreign profit or loss	 	 	116	 	 	 	22	 
	Income tax expense (recovery)	 	$	(3,107	)	 	$	–	 

 

As a result of the income tax
impact related to the convertible debenture and the recording of the deferred tax liability of $3,107 during the year ended August 31,
2020, the Company recorded a deferred tax recovery of $3,107 related to operating loss carryforwards through the consolidated statements
of comprehensive loss, resulting in a net deferred tax asset/liability of nil at August 31, 2020.

 

		19.	Subsequent event:

 

On September 18, 2020, the
Company announced that the underwriters of the public offering partially exercised their over-allotment option, resulting in the
issuance of an additional 960,600 Class A Shares of the Company at a price of $0.65 per Class A Share in exchange for
$624 of gross proceeds. Proceeds net of commissions, and other direct costs of the offering, were $587.

 

    43Exhibit
4.3

Score Media and Gaming, Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the Year ended August 31, 2020
and August 31, 2019

 

The following is Management's Discussion
and Analysis ("MD&A") of the financial condition of Score Media and Gaming Inc. (“theScore” or the “Company”)
and our financial performance for the year ended August 31, 2020. The MD&A should be read in conjunction with theScore’s
consolidated Financial Statements for the years ended August 31, 2020 and 2019 and notes thereto. The financial information
presented herein has been prepared in accordance International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”). All amounts are in Canadian dollars unless otherwise stated.
As a result of the rounding of dollar differences, certain total dollar amounts in this MD&A may not add exactly to their constituent
amounts. Throughout this MD&A, percentage changes are calculated using numbers rounded as they appear. This MD&A reflects
information as of October 28, 2020.

 

Certain statements in this MD&A constitute
 “forward-looking” statements that involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance, objectives or achievements of theScore, or industry results, to be materially different from any
future results, performance, objectives or achievements expressed or implied by such forward-looking statements. Forward looking
information typically contains statements with words such as ‘‘anticipate’’, ‘‘believe’’,
 ‘‘expect’’, ‘‘plan’’, ‘‘estimate’’, “intend’’,
 ‘‘will’’, ‘‘may’’, ‘‘should”, “would”, “could”
or similar words suggesting future outcomes. These statements reflect current assumptions and expectations regarding future events
and operating performance as of the date of this MD&A. These statements reflect theScore’s current views regarding future
events and operating performance, are based on information currently available to theScore, and speak only as of the date of this
MD&A. These forward-looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees
of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results
will be achieved. Many factors could cause the actual results, performance, objectives or achievements of theScore to be materially
different from any future results, performance, objectives or achievements that may be expressed or implied by such forward-looking
statements.

 

    	 		

     

    

 

The principal factors, assumptions and
risks that theScore made or took into account in the preparation of these forward-looking statements include: risks associated
with regulation of gaming industry, continued support of banks and payment processors, losses with respect to individual events
or betting outcomes, competition in the online and mobile sports betting and media industry, digital sports media industry reliant
on mobile advertising, recent expansion of sports betting operations, historical losses and negative operating cash flows, liquidity
risk, COVID-19 (impact on business affairs, operations, financial conditions), cancellation, postponement or curtailing of sporting
and other events, reductions in discretionary consumer spending, dependence on key suppliers, mobile device users may limit data
tracking and targeting, new and evolving industry, limited long-term agreements with advertisers, substantial capital requirements,
protection of intellectual property, infringement on intellectual property, brand development, corporate social responsibility,
responsible gaming and ethical conduct, dependence on key personnel and employees, defects in products, real or perceived inaccuracies
in key performance metrics, user data, reliance on collaborative partners, new business areas and geographic markets, operational
and financial infrastructure, information technology defects, reliance on third-party owned communication networks, uncertain economic
health of the wider economy (including as a result of the recent COVID-19 pandemic as discussed below), governmental regulation
of the internet, currency fluctuations, changes in taxation, exposure to taxable presences, risk of litigation, internal controls,
free and open source software utilization, risk relating to ownership of theScore shares, major shareholder with 100% of the special
voting shares, market price and trading volume of Class A shares, debt obligations will have priority over Class A shares
in the event of a liquidation, dissolution or winding up, dividend policy, future sales of Class A shares by existing shareholders,
potential dilution.

 

The current COVID-19 pandemic crisis continues
to evolve rapidly and could have a material adverse impact on the Company’s business, affairs, operations, results of operations,
financial condition, liquidity, availability of credit and foreign exchange exposure. COVID-19 is altering business and consumer
activity in affected areas and beyond. The global response to the COVID-19 outbreak has resulted in, among other things, border
closures, severe travel restrictions, the temporary shut-down of non-essential services and extreme fluctuations in financial and
commodity markets. Additional measures may be implemented by one or more governments in jurisdictions where the Company operates.
Labour shortages due to illness, Company or government-imposed isolation programs, or restrictions on the movement of personnel
could result in a reduction or cessation of all or a portion of the Company’s operations.

 

The extent to which the COVID-19 pandemic
may impact the Company’s business and activities will depend on future developments which remain highly uncertain and cannot
be predicted with confidence, such as the spread of the disease, the duration of the outbreak, severity of the coronavirus and
actions taken by the Canadian and US authorities, the postponement, suspension, cancellation, rescheduling and resumption of sporting
events, the impact of the pandemic on consumer and advertiser spending,
and the ability or willingness of suppliers and vendors to provide products and services. If the coronavirus continues to spread
at the current pace, disruption to consumer spending and trade could trigger a global recession.

 

The actual and threatened spread of COVID-19
globally could also have a material adverse effect on the regional economies in which the Company operates, could continue to negatively
impact stock markets, including the trading price of the Company’s Class A shares, could cause continued interest rate
volatility and movements and could adversely impact the Company’s ability to raise capital.

 

    	 		1

     

    

 

Any of these developments, and others,
could have a material adverse effect on the Company’s business, affairs, operations, results of operations, financial condition,
liquidity, availability of credit and foreign exchange exposure. In addition, because of the severity and global nature of the
COVID-19 pandemic, it is possible that estimates in the Company’s financial statements could change in the near term and
the effect of any such changes could be material, which could result in, among other things, an impairment of non-current assets
and a change in the expected credit losses on accounts receivable. The Company is constantly evaluating the situation and monitoring
any impacts or potential impacts on its business.

 

Additional factors are discussed under
the heading "Risk Factors" in theScore’s Annual Information Form as filed with securities regulatory authorities
in Canada and available on SEDAR at www.sedar.com and elsewhere in documents that theScore files from time to time with securities
regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking
statements prove incorrect, actual results could differ materially from the expectations expressed in these forward-looking statements.
theScore does not intend, and does not assume any obligation, to update these forward-looking statements except as required by
applicable law or regulatory requirements.

 

The Company

 

Score Media and Gaming Inc. empowers
millions of sports fans through its digital media and sports betting products. Its media app ‘theScore’ is one of the
most popular in North America, delivering fans highly-personalized live scores, news, stats, and betting information from their
favorite teams, leagues, and players. The Company’s sports betting app ‘theScore Bet’ delivers an immersive and
holistic mobile sports betting experience and is currently available to place wagers in New Jersey, Colorado and Indiana. Publicly
traded on the Toronto Stock Exchange (SCR), theScore also creates and distributes innovative digital content through its web, social
and esports platforms. The Company is organized and operates as one operating segment for the purpose of making operating decisions
and assessing performance. At August 31, 2020 theScore had 5,566 special voting shares, 399,319,613 Class A shares and
35,738,583 options outstanding.

 

Selected Annual Financial Data

 

The following is selected financial
data of theScore for each of the years in the three year period ended August 31, 2020. theScore utilizes the non-IFRS
measure of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to measure operating
performance (see “EBITDA loss” below).

 

    	 		2

     

    

 

	 	 	Year ended August 31,	 
	 	 	2020	 	 	2019	 	 	2018	 
	Statements of comprehensive loss data	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue	 	$	20,719	 	 	$	31,121	 	 	$	27,743	 
	EBITDA loss	 	 	(30,463	)	 	 	(6,494	)	 	 	(2,382	)
	Net loss	 	 	(37,930	)	 	 	(9,413	)	 	 	(5,914	)
	Loss per share - basic and diluted	 	$	(0.11	)	 	$	(0.03	)	 	$	(0.02	)
	Statements of financial position data	 	 	 	 	 	 	 	 	 	 	 	 
	Total assets	 	$	78,707	 	 	$	38,680	 	 	$	22,407	 
	Dividends Paid	 	 	nil	 	 	 	nil	 	 	 	nil	 

 

Revenue

 

Revenues for the three months ended August 31,
2020 and 2019 were $2.5 million and $6.4 million, respectively. Revenues for the year ended August 31, 2020 and 2019 were
$20.7 million and $31.1 million, respectively. This decline in revenue for the period reflects the direct impact of the disruption
to the sports calendar caused by the COVID-19 pandemic.

 

Revenues from media activities for the
three months ended August 31, 2020 and 2019 were $3.7 million and $6.4 million, respectively. Revenues from media activities
for the year ended August 31, 2020 and 2019 were $22.2 million and $31.1 million, respectively.

 

The Company generated $14.8 million and
$41.5 million of handle1 and $(0.5) million and $0.3 million (2019 – nil and nil) of gross gaming revenue2
for the three months and year ended August 31, 2020. After taking into account promotional costs and fair value adjustments
of unsettled bets, the Company generated negative net gaming revenue3 of $1.2 million and $1.4 million (2019 –
$2,000 and $2,000) for the three months and year ended August 31, 2020.

 

For the three months ended August 31,
2020 and 2019, revenue from Canadian sources were $1.9 million and $2.7 million, respectively, while revenue from non-Canadian
sources (predominately the U.S.) for the same period was $0.6 million and $3.7 million, respectively. For the year ended August 31,
2020 and 2019, revenue from Canadian sources was $9.2 million and $13.1 million, respectively, while revenue from non-Canadian
sources (predominantly the U.S) for the same period was $11.5 million and $18.0 million, respectively.

 

 

1
Handle is calculated as the total amount of money bet by customers in respect of bets
that have settled in the applicable period. Handle does not include free bets or other promotional incentives, nor money bet by
customers in respect of bets that are open at period end.

2 Gross
gaming revenue is calculated as dollar amounts bet by customers, less the dollar amounts paid out to customers in respect of such
bets which have settled in the applicable period.

3
Net gaming revenue is measured as gross gaming revenue, less free bets, promotional costs, bonuses and fair value adjustments
on open bets.

 

    	 		3

     

    

 

With major sports leagues beginning to
return to play in the latter half of Q4 after the unprecedented disruption to the sports calendar caused by the COVID-19 pandemic,
the Company achieved 3.5 million average monthly active users4 of theScore app on iOS and Android in August 2020,
representing 96% of its average monthly active users achieved in the same period in the previous year.

 

August 2020 monthly user sessions
of theScore sports app on iOS and Android was 434 million which was 55% higher than the same period in the previous year, sessions-per-user
per-month for August 2020 was 124 which was 62% higher than the same period in the previous year.

 

Operating Expenses

(in thousands of Canadian dollars)

 

	 	 	Three months ended	 	 	Year ended	 
	 	 	August 31, 2020	 	 	August 31, 2019	 	 	August 31, 2020	 	 	August 31, 2019	 
	Product development and content	 	 	1,260	 	 	 	2,448	 	 	 	8,149	 	 	 	9,160	 
	Sales and marketing	 	 	1,609	 	 	 	2,679	 	 	 	13,036	 	 	 	10,331	 
	Technology and operations	 	 	4,794	 	 	 	2,785	 	 	 	16,241	 	 	 	7,717	 
	General and administration	 	 	3,073	 	 	 	2,644	 	 	 	13,756	 	 	 	10,407	 
	Depreciation and amortization	 	 	1,370	 	 	 	725	 	 	 	5,397	 	 	 	3,117	 
	 	 	$	12,106	 	 	$	11,281	 	 	$	56,579	 	 	$	40,732	 

 

Total operating expenses for the three
month period ended August 31, 2020 were $12.1 million compared to $11.3 million in the same period of the prior year, an increase
of $0.8 million. Operating expenses for the year ended August 31, 2020 were $56.6 million compared to $40.7 million in the
same period of the prior year, an increase of $15.9 million.

 

During the year ended August 31,
2020, the Company took significant measures to manage costs, including the reduction of discretionary expenses and availing itself
of applicable government programs, including the Canadian Emergency Wage Subsidy (“CEWS”). For the year ended August 31,
2020, the Company recognized $4.4 million of applicable government subsidies. Additionally, in April 2020, every member of
the Company’s senior management team agreed to forego 25% of their salary from May 1 to August 31, 2020 in exchange
for an equivalent grant of restricted stock units in the Company, with a variation of this program also made available on an optional
basis to all full-time staff.

 

Product Development and Content expenses
for the three month period ended August 31, 2020 were $1.3 million compared to $2.4 million in the same period of the prior
year, a decrease of $1.1 million. Product Development and Content expenses for the year August 31, 2020 were $8.1 million
compared to $9.2 million in the same period of the prior year, a decrease of $1.1 million. The decrease was due to government funding
received through the CEWS program.

 

 

4 User
metrics refer to audience and engagement numbers for theScore app on iOS and Android.

 

    	 		4

     

    

 

Sales and Marketing expenses for the three
month period ended August 31, 2020 were $1.6 million compared to $2.7 million in the same period of the prior year, a decrease
of $1.1 million. Sales and Marketing expenses for the year ended August 31, 2020 were $13.0 million compared to $10.3 million
in the same period of the prior year, an increase of $2.7 million. The decrease for the three month period ended August 31,
2020, was due to reduced discretionary marketing spend along with government funding received through the CEWS program. The increase
for year ended August 31, 2020 was due to increased discretionary marketing related to the launch of theScore Bet in the
first and second quarters of the fiscal year.

 

Technology and Operations expenses for
the three month period ended August 31, 2020 were $4.8 million compared to $2.8 million in the same period of the prior year,
an increase of $2.0 million. Technology and Operations expenses for the year ended August 31, 2020 were $16.2 million compared
to $7.7 million in the same period of the prior year, an increase of $8.5 million. The increase was a result of new operational
expenses incurred in connection with the launch of the theScore Bet.

 

General and Administration expenses for
the three month period ended August 31, 2020 were $3.1 million compared to $2.6 million in the same period of the prior year,
an increase of $0.5 million. General and Administration expenses for the year ended August 31, 2020 were $13.8 million compared
to $10.4 million in the same period of the prior year, an increase of $3.4 million. The increase was due to higher professional
fees, personnel expenses and share based compensation expense related restricted stock units vested during the year, offset by
lower facility expenses related to the adoption of IFRS 16.

 

Depreciation and amortization for the three
month period ended August 31, 2020 was $1.4 million compared to $0.7 million in the same period of the prior year, an increase
of $0.7 million. Depreciation and amortization for the year ended August 31, 2020 were $5.4 million compared to $3.1 million
in the same period of the prior year, an increase of $2.3 million. The increase was due to the adoption of IFRS 16 and the recognition
and depreciation of the right of use asset, as well as accelerated amortization of certain intangibles in the period.

 

Impact of Ontario Interactive Digital Media Tax Credits
(“OIDMTC”)

 

As at August 31, 2020, tax credits
recoverable of $1.6 million are included in current tax credits recoverable, in the consolidated statements of financial position
(August 31, 2019 - $1.6 million non-current). Tax credits recoverable reflect management's best estimate of credits that are
reasonably assured of realization considering both certificates of eligibility received from the Ontario Media Development Corporation
(“OMDC”) for specific claims and the OMDC's historical acceptance of expenditures of a similar nature for refundable
credit, and the classification is based on the expected completion of the assessment by the relevant authorities.

 

No tax credits were accrued during the
three months ended August 31, 2020 and 2019.

 

    	 		5

     

    

 

EBITDA and Net and Comprehensive losses

 

theScore utilizes earnings before interest,
taxes, depreciation and amortization (“EBITDA”) to measure operating performance. theScore’s definition of EBITDA
excludes depreciation and amortization, finance (income) expense and income taxes which in theScore's view do not adequately reflect
its core operating results. EBITDA is used in the determination of short-term incentive compensation for all senior management
personnel.

 

EBITDA is not a measure of performance
under IFRS and should not be considered in isolation or as a substitute for net and comprehensive income or loss prepared in accordance
with IFRS or as a measure of operating performance or profitability. EBITDA does not have a standardized meaning prescribed by
IFRS and is not necessarily comparable to similar measures presented by other companies.

 

The following table reconciles net and
comprehensive loss to EBITDA: 

(in thousands of Canadian dollars)

 

	 	 	Three Months Ended	 	 	Year Ended	 
	 	 	August 31, 2020	 	 	August 31, 2019	 	 	August 31, 2020	 	 	August 31, 2019	 
	Net loss for the period	 	$	(12,691	)	 	$	(4,845	)	 	$	(37,930	)	 	$	(9,413	)
	Adjustments:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation and amortization	 	 	1,370	 	 	 	725	 	 	 	5,397	 	 	 	3,117	 
	Finance (income) expense, net	 	 	3,051	 	 	 	(29	)	 	 	5,177	 	 	 	(198	)
	Deferred income tax (recovery)	 	 	-	 	 	 	-	 	 	 	(3,107	)	 	 	-	 
	EBITDA	 	$	(8,270	)	 	$	(4,149	)	 	$	(30,463	)	 	$	(6,494	)

 

EBITDA loss for the three month period
ended August 31, 2020 was $8.3 million compared to an EBITDA loss of $4.1 million in the same period in the prior year, an
increase of $4.2 million. EBITDA loss for the year ended August 31, 2020 was $30.5 million compared to EBITDA loss of $6.5
million in the same period in the prior year, an increase of $24.0 million, largely attributable to the revenue decline caused
by the COVID-19 pandemic.

 

Net loss for the three month period ended
August 31, 2020 was $12.7 million compared to a loss of $4.8 million in the same period in the prior year, an increase of
$7.9 million. Net loss for the year ended August 31, 2020 was $37.9 million compared to a loss of $9.4 million in the same
period in the prior year, an increase of $28.5 million.

 

Loss per share for the three month period
ended August 31, 2020 was $(0.04) compared to loss per share of $(0.01) in the same period in the prior year. Loss per share
for the year ended August 31, 2020 was $(0.11) compared to loss per share of $(0.03) in the same period in the prior year.

 

    	 		6

     

    

 

Additions to Intangible Assets

 

During the year ended August 31, 2020,
the Company capitalized internal and subcontractor product development costs of $4.0 million, respectively (August 31, 2019
- $3.8 million), as well as additional capitalized software costs. The significant development projects for the year ended August 31,
2020 consisted of new features in theScore’s betting app, including significant enhancements to live betting and sports data,
and significant new enhancements to its core technology infrastructure.

 

The Company capitalized internal product
development costs during the year ended August 31, 2020 and August 31, 2019 for both new development projects and projects
that, in management’s judgement, represent substantial improvements to existing products. In assessing whether costs can
be capitalized for improvements, management exercises significant judgement when considering the extent of the improvement and
whether it is substantial, whether it is sufficiently separable and whether expected future economic benefits are derived from
the improvement itself. Factors considered in assessing the extent of the improvement include, but are not limited to, the degree
of change in functionality and the impact of the project on the ability of the Company to attract users to its products and increase
user engagement with its products. Costs, which do not meet these criteria, such as enhancements and routine maintenance, are expensed
when incurred. Future economic benefits from these capitalized projects include net cash flows from future sports betting revenue
and future advertising sales, which are dependent upon the ability of the Company to attract users to its products and increase
user engagement with its products, and may also include anticipated cost savings, depending upon the nature of the development
project.

 

Consolidated Quarterly Results

 

The following selected consolidated quarterly
financial data of the Company relates to the preceding eight quarters, inclusive of the quarter ended August 31, 2020.

 

	 	 	 	 	 	 	 	 	 	 	 	Income (loss) per	 
	 	 	 	 	 	 	 	 	Net income	 	 	share – basic and	 
		 	Revenue	 	 	EBITDA	 	 	(loss)	 	 	diluted	 
	Quarterly Results	 	($000’s)	 	 	($000’s)	 	 	($000’s)	 	 	($)	 
	August 31, 2020	 	 	2,466	 	 	 	(8,270	)	 	 	(12,691	)	 	 	(0.04	)
	May 31, 2020	 	 	2,381	 	 	 	(8,736	)	 	 	(10,677	)	 	 	(0.03	)
	February 29, 2020	 	 	6,653	 	 	 	(8,625	)	 	 	(10,454	)	 	 	(0.03	)
	November 30, 2019	 	 	9,219	 	 	 	(4,832	)	 	 	(4,110	)	 	 	(0.01	)
	August 31, 2019	 	 	6,407	 	 	 	(4,149	)	 	 	(4,845	)	 	 	(0.01	)
	May 31, 2019	 	 	8,463	 	 	 	(1,120	)	 	 	(1,727	)	 	 	(0.01	)
	February 28, 2019	 	 	6,776	 	 	 	(2,189	)	 	 	(3,004	)	 	 	(0.01	)
	November 30, 2018	 	 	9,475	 	 	 	964	 	 	 	163	 	 	 	0.00	 

 

Use of the Company’s applications
has historically reflected the general trends for sports schedules of the major North American sports leagues. As a result, the
Company’s first fiscal quarter ending November 30 is typically the strongest from a revenue perspective.

 

    	 		7

     

    

 

Quarterly revenue fluctuations are a combination
of the seasonality trend of usage described above and the market for digital media advertising in Canada and the United States.

 

EBITDA income (loss) and net income (loss)
fluctuations are due to revenue fluctuations (as above) as well as changes in discretionary marketing costs, infrastructure costs,
personnel costs, and in recent quarters, costs related to the Company’s sports betting operations and infrastructure costs,
and seasonal revenue fluctuations.

 

For the quarters ended May 31 and
August 31, 2020, revenue and EBITDA are also affected by the unprecedented impact of COVID-19 on the sports calendar.

 

Liquidity Risk and Capital Resources

 

Cash and cash equivalents as of August 31,
2020 were $40.1 million compared to $4.0 million as of fiscal year ended August 31, 2019. The company also holds restricted
cash related to customer deposits on the betting platform of $1.9 million compared to $0.7 million in the prior year.

 

Liquidity

 

Liquidity risk is the risk that theScore
will not be able to meet its financial obligations as they fall due. As at August 31, 2020 theScore had cash and cash equivalents
of $40.1 million (August 31, 2019 - $4.0 million), restricted cash related to customer deposits on the betting platform
of $1.9 million (August 31, 2019 - $0.7 million), accounts receivable of $5.5 million (August 31, 2019 - $7.9 million),
tax credits recoverable of $1.6 million (August 31, 2019 - $1.6 million), accounts payable and accrued liabilities to
third parties of $10.4 million (August 31, 2019 - $7.1 million) and current portion of loans and other borrowings of
$6.6 million (August 31, 2020 – nil). Accounts payable and accrued liabilities have contracted maturities of less than
twelve months.

 

Management prepares budgets and cash flow
forecasts to assist in managing liquidity risk. theScore has a history of operating losses and can be expected to generate continued
operating losses and negative cash flows in the future while it carries out its current business plan to further develop and expand
its business. theScore can utilize its cash and cash equivalents to fund its operating and development expenditures.

 

The Company has a $5.0 million revolving
demand operating credit facility with a Canadian chartered bank. The credit facility is available for working capital purposes.
The amount available on the operating facility is based on a percentage of the Company’s accounts receivable and those of
certain of its subsidiaries. The operating facility is secured by substantially all of the assets of the Company and certain of
its subsidiaries. At August 31, 2020, the Company could draw up to $2.9 million on this facility. The operating facility bears
interest at the lenders prime rate plus 1.00% per annum. The operating facility is repayable on demand and is subject to certain
financial covenants. As of August 31, 2020 the amount drawn on the facility is nil (August 31, 2019 – nil).

 

    	 		8

     

    

 

In July 2020, the Company entered
into a $6.25 million revolving term credit facility with the same Canadian chartered bank that maintains the Company’s $5.0
million revolving demand operating credit facility, supported by Export Development Corporation’s Business Credit Availability
Program. The term credit facility is available to provide additional liquidity to the Company and to mitigate the impact of COVID-19
on the Company’s operations. The term credit facility is secured by substantially all of the assets of the Company and certain
of its subsidiaries. The term credit facility bears interest rate at the lenders prime rate plus 2.00% per annum and is subject
to a facility fee in respect of the EDC BCAP program of 1.80%. The term credit facility is repayable by July 15, 2021, is
extendable for a further period of 364 days in certain circumstances and is subject to certain financial covenants. On July 24,
2020, the Company completed a drawdown of the revolving credit facility in the amount of $6.25 million.

 

While theScore can utilize its cash, cash
equivalents and demand credit facility to fund its operating and development expenditures, it does not have access to other committed
sources of funding, and depending upon the level of expenditures and whether profitable operations can be achieved, may be required
to seek additional funding in the future.

 

Operations

 

Cash flows used in operating activities
for the year ended August 31, 2020 were $22.8 million compared to $5.4 million in the same period of the prior year. The increase
in cash flows used in operations was a result of increases in costs related to the Company’s sports betting operations, as
well as the impact of COVID-19.

 

Financing

 

Cash flows provided by financing activities
for the year ended August 31, 2020 was $67.1 million compared to $21.8 million in the same period in the prior year. On September 2,
2019 theScore closed a convertible debenture financing for gross proceeds of $40 million. On August 25, 2020, the Company
closed a short-form bought deal prospectus offering of 38,500,000 Class A shares at a price per share of $0.65 for gross proceeds
of $25.0 million.

 

Investing

 

Cash used in investing activities for the
year ended August 31, 2020 was $8.2 million compared to $18.7 million in the same period in the prior year. The decrease in
cash used in investing activities was due to investments in property and equipment, as well as intangible and other assets.

 

    	 		9

     

    

 

Commitments

 

The Company has no debt guarantees, off-balance
sheet arrangements or long-term obligations other than the agreements noted below.

 

theScore has the following firm commitments under agreements:

 

(in thousands of Canadian dollars)

	 	 	Not later than	 	Later than one year and	 	Later than five	 
	 	 	one year	 	not later than five years	 	years	 
	Contractual commitments	 	9,154	 	18,989	 	 	83,958	 

 

The Company has entered into several new
agreements relating to its sports betting operations which has increased future contractual commitments.

 

Convertible Debenture

 

On September 5, 2019, the Company
completed a non-brokered financing of $40.0 million by way of issuance of convertible debentures (“convertible debenture”).
The debentures carry an interest rate of 8.0%, payable in arrears, in equal semi-annual payments on the last day of February and
August in each year commencing on February 29, 2020, with a maturity date of August 31, 2024, or the earlier date
of redemption, repayment or conversion.

 

At the holder’s option, the debenture
may be converted into Class A shares at any time prior to the close of business on the earlier of the business day immediately
preceding the maturity date and the business day immediately preceding the date fixed for redemption of the debenture. The conversion
price will be $0.75 for each Class A Share, being a conversion rate of 1,333.3333 Class A Shares issuable for each one
thousand dollars principal amount of the debenture, subject to adjustment in certain circumstances.

 

Subject to specified conditions, the debenture
may be redeemed at the Company’s option at par plus accrued and unpaid interest at any time after August 31, 2023 if
the volume weighted average trading price of the Class A Shares during the 20 trading days ending on the fifth trading day
preceding the date on which notice of the redemption is given is not less than 125% of the conversion price, or if the principal
sum of the debenture outstanding is $4.0 million or less.

 

Upon the occurrence of a change of control
of the Company or the sale by the Company of its core assets, the Company will be required to make an offer to purchase the debenture
at a price equal to 105% of the principal amount plus accrued and unpaid interest.

 

As a result of the income tax impact related
to the convertible debenture and the recording of the deferred tax liability of $3,107, during the year ended August 31, 2020,
the Company recorded a deferred tax recovery of nil and $3,107, respectively, related to operating loss carryforwards through the
statement of operations, resulting in a net deferred tax asset/liability of nil at August 31, 2020.

 

    10 

     

    

 

Interest and accretion expense for the
year ended August 31, 2020 was $4.6 million. As of August 31, 2020 the Company has elected to accrue unpaid interest
of $3.2 million, to the principal sum outstanding of the debenture. This election results in a modification to the cash flows of
the debenture, as such, the Company has recalculated the gross carrying amount of the financial liability which resulted in a $424
gain recorded through profit and loss.

 

Related Party Transactions

 

In Fiscal 2013, theScore entered into a
lease for a property partially owned by John Levy, the Chairman and Chief Executive Officer of the Company. The aggregate rent
paid during the year ended August 31, 2020 amounted to $40,000 (2019 - $40,000). The corresponding payable balances as at
August 31, 2020 and August 31, 2019 was $2,000 and nil, respectively. These transactions are recorded at the exchange
amount, being the amount agreed upon between the parties.

 

Financial Instruments and other instruments:

 

theScore has the following financial instruments:
cash and cash-equivalents, accounts receivable, accounts payable and a convertible debenture. The Company’s financial instruments
were comprised of the following as at August 31, 2020; cash and cash equivalents of $40.1 million; accounts receivable of
$5.5 million; restricted cash related to customer deposits of $1.9 million; and accounts payable and accrued liabilities $10.4
million and convertible debenture of $29.6 million. Accounts receivable are carried at amortized cost. Accounts payable and accrued
liabilities are carried at amortized cost and are primarily comprised of short-term obligations owing to suppliers related to the
Company’s operations.

 

Fair Value

 

Fair value is the estimated amount that
the Company would pay or receive to dispose of financial instruments in an arm’s length transaction between knowledgeable,
willing parties who are under no compulsion to act. The fair value of financial instruments that are traded in active markets at
each reporting date is determined by reference to quoted market prices, without any deduction for transaction costs. For financial
instruments not traded in an active market, the fair value is determined using appropriate valuation techniques that are recognized
by market participants. Such techniques may include using recent arm’s length market transactions, reference to the current
fair value of another instrument that is substantially the same, discounted cash flow analysis or other valuation models.

 

The fair values of theScore's financial
assets and liabilities, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued
liabilities were deemed to approximate their carrying amounts due to the relative short-term nature of these financial instruments.
The fair value of the convertible debenture was deemed to approximate the carrying amount due to the short passage of time between
issuance date and the date of these interim financial statements and the risk factors for the Company remaining consistent
within this period.

 

    11 

     

    

 

Customer concentration

 

As at August 31, 2020, two customers,
a media agency and programmatic network, each had an accounts receivable balance exceeding 10% of the total accounts receivable
balance (August 31, 2019 – one media agency). Concentration of these two customers, a media agency and a programmatic
network, represented 13% and 13% of the accounts receivable balance, respectively (August 31, 2019 –19%).

 

For the year ended
August 31, 2020, sales to one customer, a programmatic network, exceeded 10% of total revenue (year ended August 31,
2019 – a programmatic network). For the year ended August 31, 2020, concentration of this customer comprised 14% of
total revenue (year ended August 31, 2019 –10%).

 

    12 

     

    

 

Use of Proceeds – 2019 Convertible
Debenture Financing

 

On August 31, 2019, the Company entered
into an investment agreement (the “Investment Agreement”) with a fund managed and controlled by Fengate Asset Management
(“Fengate”), pursuant to which the Company issued a convertible debenture to Fengate on September 5, 2019 for
gross proceeds of $40.0 million and net proceeds of $37.0 million (the “2019 Convertible Debenture Financing”). The
following is a tabular comparison of the use of proceeds disclosed in the Company’s MD&A for the fiscal year ended August 31,
2019 (the “2019 Annual MD&A”) and the actual use of the net proceeds by the Company subsequent to the 2019 Convertible
Debenture Financing.

 

	Use of Proceeds	 	Disclosed in

 the 

2019 Annual

 MD&A	 	 	Net 

Proceeds and

 estimated use of

 2019 Convertible

 Debenture

 Financing	 	 	Variance	 
		 	 	(Cdn$)  	 	 	 	 	 	 	 	 	 
	Sources:	 	 	 	 	 	 	 	 	 	 	 	 
	Net proceeds of the 2019 Convertible Debenture Financing	 	$	40,000,000	 	 	$	36,969,204	 	 	$	3,030,796	 
	Total:	 	$	40,000,000	 	 	$	36,969,204	 	 	$	3,030,796	 
	Uses: 	 	 	 	 	 	 	 	 	 	 	 	 
	Use of cash for the growth and development of the Company’s media and sports betting businesses	 	$	40,000,000	 	 	$	25,878,443	 	 	$	14,121,557	 
	Balance for working capital and general corporate purposes(1)	 	 	N/A	 	 	$	11,090,761	 	 	 	N/A	 
	Total:	 	$	40,000,000	 	 	$	36,969,204	 	 	$	3,030,796	 

 

 

1
Funds used for working capital and general corporate purposes indirectly support the growth and development of the Company’s
media and sports betting businesses. In addition, the variability of various aspects of the growth and expansion of the Company’s
sports betting business (including the enactment of enabling gaming legislation and regulations, negotiation of market access,
applications for direct licensure and the receipt of required licenses and other regulatory approvals), and the impact this variability
has on the Company’s ability to accurately predict the specific timing and need for funds, funds may be reallocated from
time to time as permitted.

 

    13 

     

    

 

Use of Proceeds – 2020 Bought
Deal Offering

 

The following is a tabular comparison of
the use of proceeds disclosed in the Company’s short form prospectus dated August 19, 2020 (the “2020 Bought Deal
Offering Prospectus”) qualifying the distribution of 38.5 million Class A shares (the “2020 Bought Deal Offering”)
and the estimated use of the net proceeds by the Company subsequent to the 2020 Offering. The $23.6 million of actual net proceeds
shown below includes the net proceeds from the partial exercise of the over-allotment option by the underwriters of the 2020 Offering.

 

	Use of Proceeds	 	Disclosed in

 the 2020 Bought 

Deal Offering

 Prospectus	 	 	Net 

Proceeds and

 estimated use

 of 2020 

Bought Deal 

Offering	 	 	Variance	 
		 	 	(Cdn$)	 	 	 	 	 	 	 	 	 
	Sources:	 	 	 	 	 	 	 	 	 	 	 	 
	Net proceeds of the 2020 Bought Deal Offering	 	$	23,023,500	 	 	$	23,610,426	 	 	$	586,926	 
	Total:	 	$	23,023,500	 	 	$	23,610,426	 	 	$	586,926	 
	Uses:	 	 	 	 	 	 	 	 	 	 	 	 
	Working capital and general corporate purposes(1)	 	$	23,023,500	 	 	$	23,610,426	 	 	$	586,926	 
	Total:	 	$	23,023,500	 	 	$	23,610,426	 	 	$	586,926	 

 

Consistent with the disclosures made in
the 2020 Offering Prospectus, the increase in net proceeds resulting from the exercise of the over-allotment option, as a subsequent
event on September 18, 2020, that was allocated to working capital and general corporate purposes.

 

Other than the increased funds for working
capital and general corporate purposes disclosed above, to date, there have been no material variances in the estimated use of
proceeds from the disclosures made in the 2020 Offering Prospectus.

 

 

1
General corporate purposes includes the continued growth and expansion of theScore Bet’s operations in the United States
and Canada by supporting the multi-jurisdiction deployment and operation of the Score Bet and user acquisition and retention in
jurisdictions where the Company is or will be operating.

 

    14 

     

    

 

Recent standards and amendments effective
September 1, 2019:

 

(a) IFRS 16, Leases ("IFRS 16"):

 

Effective September 1, 2019, the Company
adopted IFRS 16 which specifies the methodology to recognize, measure, present and disclose leases. The standard introduces a single,
on-balance sheet lessee accounting model, requiring lessees to recognize right-of-use assets and lease liabilities representing
its obligation to make lease payments, unless the underlying leased asset has a low value or is considered short term.

 

The Company leases office premises and
equipment. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases
are on-balance sheet.

 

The Company presents right-of-use assets
in “property and equipment,” whereas lease liabilities are separately presented in the statement of financial position.

 

The Company recognizes a right-of-use asset
and a lease liability at lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost
less any accumulated depreciation and impairment losses, and adjusted for certain re-measurements of the lease liability.

 

The Company adopted IFRS 16 using a modified
retrospective approach. Accordingly, comparative information presented for the year ended August 31, 2019 has not been restated.
On transition to IFRS 16, the Company elected to apply the practical expedient approach to grandfather the assessment of which
transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that
were not identified as leases under IAS 17, Leases and IFRIC 4, Determining whether an Arrangement contains a Lease were not reassessed.
The Company’s leases primarily consist of leases for office premises with terms ranging from 2 to 4 years. The lease term
includes periods covered by an option to extend if the Company is reasonably certain to exercise that option.

 

At transition on September 1, 2019,
for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of lease payments
at inception, discounted at the Company’s incremental borrowing rate. Right-of-use assets are measured at an amount equal
to the lease liabilities, adjusted for any prepaid or accrued lease payments relating to that lease.

 

The Company has elected to use the following
practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

 

		·	applied a single discount rate to a portfolio of leases with reasonably similar characteristics;

 

		·	excluded initial direct costs from the measurement of the right-of-use assets at the date of initial
application; and

 

		·	relied upon the Company’s assessment of whether leases are onerous under the requirements
of IAS 37, Provisions, contingent liabilities and contingent assets as at August 31, 2019 as an alternative to reviewing our
right-of-use assets for impairment.

 

    15 

     

    

 

The Company has elected not to separate
non-lease components and will instead account for the lease and non-lease component as a single lease component. In addition, the
Company has elected not to recognize right-of-use assets and lease liabilities for some leases of low value assets. The lease payments
associated with these leases are recognized as an expense on a straight-line basis over the lease term.

 

The impact on transition to IFRS 16 is
summarized below (in thousands of Canadian dollars):

 

	 	 	September 1, 2019	 
	Right-of-use assets	 	$	2,288	 
	Current portion of lease liabilities	 	$	860	 
	Lease liabilities	 	$	1,950	 

 

When measuring lease liabilities for leases
that were classified as operating leases under IAS 17, the Company discounted lease payments using its incremental borrowing rate
at September 1, 2019. The weighted average rate applied is 5.44%.

 

	(in thousands of Canadian dollars)	 	September 1, 2019	 
	Operating lease commitment at August 31, 2019 as disclosed in the Company’s 2019 consolidated financial statements	 	$	2,999	 
	Discounted using the incremental borrowing rate at September 1, 2019	 	$	2,756	 
	Adjustment for discounted amount of additional lease recorded	 	 	54	 
	Lease liabilities recognized at September 1, 2019	 	$	2,810	 

 

IFRS 16 replaces the straight-line operating
lease expense recorded under IAS 17 with a depreciation charge for right-of-use assets and interest expense on lease liabilities,
which resulted in a decrease in operating expenses, an increase in depreciation expense and an increase in finance costs.

 

The Company has applied judgment to determine
the lease term for some lease contracts that include renewal options. The assessment of whether the Company is reasonably certain
to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets
recognized.

 

As a result of initially applying IFRS
16, in relation to the leases that were previously classified as operating leases, the Company recognized $2.3 million of right-of-use
assets and $2.8 million of lease liabilities as at September 1, 2019. During the year ended August 31, 2020, the Company
recognized depreciation of right-of-use assets of $0.7 million (2019 – nil), and finance cost of $0.1 million (2019 –
nil).

 

    16 

     

    

 

The Company also made judgements in determining
the incremental borrowing rate used in measuring the lease liabilities, reflecting the rate that the Company would have to pay
for a loan of similar term, with similar security, to obtain asset of similar value.

 

Right-of-use assets and Lease liabilities

 

At inception of a contract, the Company
assesses whether a contract is or contains a lease based on whether the contract conveys a right to control the use of an identified
asset for a period of time in exchange for consideration.

 

The Company recognizes right-of-use assets
and lease liabilities at the lease commencement date. After the initial adoption date, the right-of-use asset is initially measured
at cost, which comprises:

 

		·	The amount of the initial measurement of the lease liability;

 

		·	Any lease payments made at or before the commencement date, less any lease incentives received;

 

		·	Any initial direct costs incurred; and

 

		·	An estimate of costs to dismantle or remove the underlying asset or restore the asset to the condition
required by the terms and conditions of the lease.

 

Subsequent to initial measurement, right-of-use
assets are measured at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of
the lease liability. The right-of-use assets are depreciated on a straight-line basis over the term of the lease, or the estimated
useful life of the right-of-use assets if the Company expects to obtain the ownership of the leased asset at the end of the lease.
The lease term includes the non-cancellable period of the lease and optional renewable periods that the Company is reasonably certain
to extend.

 

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

 

After initial recognition, the lease liability
is measured at amortized cost using the effective interest method. The lease liability is remeasured when there is a change in
future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable
under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase option, extension
option or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset.

 

The lease liability is also remeasured
when the underlying lease contract is amended. When there is a decrease in contract scope, the lease liability and right-of-use
asset will decrease relative to this change with the difference recorded in net income prior to the remeasurement of lease liability.

 

    17 

     

    

 

As a result of the launch of theScore Bet,
the Company has adopted the following policy for gaming revenue recognition:

 

(b) Gaming Revenue Recognition

 

In sports-betting related transactions
where the Company generates a net gain or loss on a bet which is determined by an uncertain future event, the transaction is within
the scope of IFRS 9 (“Financial Instruments”). Revenue is recorded as the gain or loss on betting transactions settled
during the period less, free bets, promotional costs, bonuses and fair value adjustments on open bets. The Company recognizes the
gain or loss on a betting transaction as revenue when a bet is settled. The gain or loss is calculated as the total of sums bet
less amounts paid out in respect of such bets when such bets are settled with the customer. Any open bets are accounted for as
a derivative financial instrument carried at fair value through profit & loss (“FVTPL” instrument, with gains
and losses on the open bets recognized in revenue.

 

Critical accounting estimates and
judgements:

 

The preparation of these consolidated financial
statements requires management to make estimates, judgments and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. Key areas
of estimation and judgment are as follows:

 

(i)            Measurement
Uncertainty

 

The preparation of the consolidated financial
statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application
of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical experience and other assumptions
that are considered reasonable in the circumstances. The actual amount or values may vary in certain instances from the assumptions
and estimates made. Changes will be recorded, with corresponding effect in profit or loss, when, and if, better information is
obtained.

 

(ii)            Intangible
assets:

 

Management's judgment is applied, and estimates
are used, in determining whether costs qualify for recognition as internally developed intangible assets.

 

To be able to recognize an intangible asset,
management must demonstrate the item meets the definition of an intangible asset in IAS 38. Management exercises significant judgment
in determining whether an item meets the identifiability criteria in the definition of an intangible asset which, in part, requires
that the item is capable of being separated or divided from the Company and sold, transferred or licensed either individually or
together with a related contract or asset, whether or not the Company intends to do so. Judgment is required to distinguish those
expenditures that develop the business as a whole, which cannot be capitalized as intangible assets and are expensed in the years
incurred.

 

    18 

     

    

 

Also, to recognize an intangible asset,
management, in its judgment, must demonstrate that it is probable that expected future economic benefits will flow to the Company
and that the cost of the asset can be measured reliably. Estimates are used to determine the probability of expected future economic
benefits that will flow to the Company. Future economic benefits include net cash flows from the sports betting app as well as
net cash flows from future advertising sales, which are dependent upon the ability of the Company to attract users to its products
and increase user engagement with its products, and may also include anticipated cost savings, depending upon the nature of the
development project.

 

The Company capitalized internal product
development costs during the years ended August 31, 2020 and 2019 for both new development projects and projects that, in
management's judgment, represent substantial improvements to existing products. In assessing whether costs can be capitalized for
improvements, management exercises significant judgment when considering the extent of the improvement and whether it is substantial,
whether it is sufficiently separable and whether expected future economic benefits are derived from the improvement itself. Factors
considered in assessing the extent of the improvement include, but are not limited to, the degree of change in functionality and
the impact of the project on the ability of the Company to attract users to its products and increase user engagement with its
products. Costs which do not meet these criteria, such as enhancements and routine maintenance, are expensed when incurred.

 

In addition, the Company uses estimation
in determining the measurement of internal labour costs capitalized to intangible assets. The capitalization estimates are based
upon the nature of the activities the developer performs.

 

Management's judgment is also used in determining
appropriate amortization methods for intangible assets, and estimates are used in determining the expected useful lives of amortizable
intangible assets.

 

(iii)            Tax
credits:

 

Refundable tax credits related to expenditures
to develop digital media products are recognized when there is reasonable assurance that they will be received and the Company
has and will comply with the conditions associated with the relevant government program. Management's judgment is required in determining
which expenditures and projects are reasonably assured of compliance with the relevant conditions and criteria and have, accordingly,
met the recognition criteria.

 

(iv)            Impairment
of non-financial assets:

 

An impairment test is carried out whenever
events or changes in circumstances indicate that carrying amounts may not be recoverable and is performed by comparing the carrying
amount of an asset or CGU and its recoverable amount. Management's judgment is required in determining whether an impairment indicator
exists. The recoverable amount is the higher of fair value, less costs to sell, and its value in use over its remaining useful
life.

 

    19 

     

    

 

This valuation process involves the use
of methods which use assumptions to estimate future cash flows. The recoverable amount depends significantly on the discount rate
used, as well as the expected future cash flows and the terminal growth rate used for extrapolation.

 

(v)            Programmatic
Receivables

 

The Company estimates receivables pertaining
to programmatic advertising revenues, based on the best information available at the recognition date. These estimates are trued
up at the time of payment.

 

Amongst other factors, management considers
the historic experience with the programmatic partner and the age of the outstanding balance.

 

(vi)            Allowance
for doubtful accounts:

 

The valuation of accounts receivable requires
valuation estimates to be made by management. These accounts receivable comprise a large and diverse base of advertisers dispersed
across varying industries and locations that purchase advertising on the Company's digital media platforms.

 

The Company determines an allowance for
doubtful accounts based on knowledge of the financial conditions of its customers, the aging of the receivables, customer and industry
concentrations, the current business environment and historical experience. A change in any of the factors impacting the estimate
of the allowance for doubtful accounts will directly impact the amount of bad debt expense recorded in facilities, administrative
and other expenses.

 

The loss allowance for trade receivables
must be calculated using the expected lifetime credit loss and recorded at the time of initial recognition.

 

Subsequent Event

 

On September 18, 2020, the Company
announced that the underwriters of the public offering partially exercised their over-allotment option, resulting in the issue
of an additional 960,600 Class A shares of the Company at a price of $0.65 per Class A Share in exchange for $0.6 million
of gross proceeds. Proceeds net of commissions, and other direct costs of the offering, were $0.6 million.

 

    20

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