Exhibit
4.14


 





 


ENGINE
MEDIA HOLDINGS, INC.


(formerly
Torque Esports Corp.)


 


Interim
Condensed Consolidated Financial Statements


 


For
the Three and Six Months Ended


February
28, 2021 and February 29, 2020


 


(Expressed
in United States Dollars)


(Unaudited)


 




    	 



     


    

 


Table
of Contents


 


	Management’s Responsibility for Financial Reporting and Notice to Reader	3
	 	 
	Unaudited Interim Condensed Consolidated Statements of Financial Position	4-5
	 	 
	Unaudited Interim Condensed Consolidated Statements of Loss and Comprehensive Loss	6
	 	 
	Unaudited Interim Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)	7
	 	 
	Unaudited Interim Condensed Consolidated Statements of Cash Flows	8
	 	 
	Notes to the Unaudited Interim Condensed Consolidated Financial Statements	9-47





 




    	Page 2 of 47



     


    

  


	Engine
                                            Media Holdings, Inc.

                               (formerly
                               Torque Esports Corp.) 
	







 


 






 








MANAGEMENT’S
RESPONSIBILITY FOR FINANCIAL REPORTING


 


The
accompanying unaudited interim condensed consolidated financial statements of Engine Media Holdings Inc. (formerly Torque Esports Corp.)
(the “Company”) are the responsibility of management and the Board of Directors.


 


The
unaudited interim condensed consolidated financial statements have been prepared by management, on behalf of the Board of Directors,
in accordance with the accounting policies disclosed in the notes to the unaudited interim condensed consolidated financial statements.
Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement
of financial position date. In the opinion of management, the unaudited interim condensed consolidated financial statements have been
prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34 - Interim Financial
Reporting using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.


 


Management
has established processes, which are in place to provide it with sufficient knowledge to support management representations that it has
exercised reasonable diligence in that (i) the unaudited interim condensed consolidated financial statements do not contain any untrue
statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading
in light of the circumstances under which it is made, as of the date of, and for the periods presented by, the unaudited interim condensed
consolidated financial statements and (ii) the unaudited interim condensed consolidated financial statements fairly present in all material
respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented
by the unaudited interim condensed consolidated financial statements.


 


The
Board of Directors are responsible for reviewing and approving the unaudited interim condensed consolidated financial statements together
with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. The
Company’s Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management
to review the financial reporting process and the unaudited interim condensed consolidated financial statements together with other financial
information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the
unaudited interim condensed consolidated financial statements together with other financial information of the Company for issuance to
the shareholders.


 


Management
recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable
laws and regulations, and for maintaining proper standards of conduct for its activities.


 





 NOTICE TO READER  


   


 The Audit Committee, in consultation with
management of the Company, has determined that the Company’s previously filed unaudited condensed consolidated interim financial
statements and management’s discussion and analysis for the three and six months ended February 28, 2021 and February 29, 2020
required restating to correct content and disclosure deficiencies related to the following items: 




 





	   	 1. 	 Accounting
    for finder’s warrants issued in private placements within contributed surplus – Adjustments resulted in a decrease to
    warrant liability of $918,476, increase in contributed surplus of $770,563 and decrease in change in fair value of warrant liability
    (decrease of expense) of $147,913. 
	   	 2. 	 Accounting
    for investment in One Up to move from investment in associate to investment at FVTPL – Adjustments resulted in reclass
    of investment in One Up out of investment in associate and into investment at FVTPL along with a $181,120 increase to the carrying
    value, decrease in share of net loss of associate of $81,159 and an increase in gain on retained interest in former associate of
    $99,961. 
	   	 3. 	 Accounting
    for share issuance costs incurred in the private placements – Adjustments resulted in increase to share capital of $582,333
    and increase to transaction costs of $582,333. 


   


 The
previously filed financial statements and management’s discussion and analysis for the financial periods were originally filed
by the Company on SEDAR on May 3, 2021. 


   


 Each
of the Restated Unaudited Condensed Consolidated Interim Financial Statements and Restated MD&A for the three and six months ended
February 28, 2021 and February 29, 2020 replaces and supersedes the respective previously filed original financial statements and related
Management’s Discussion and Analysis. There have been no other changes. This notice supersedes the previously filed version. 

 


 




    	Page 3 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
                                            Condensed Consolidated Statements of Financial Position

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 






 





	   	   	 Note 	   	 February
                                            28, 

                                                                                 2021 
	   	   	 August 31, 
2020 	   
	   	   	   	   	 $ 	   	   	 $ 	   
	   	   	   	   	   	   	   	   	   
	 ASSETS 	   	   	   	   	   	   	   	   	   	   
	 Current 	   	   	   	   	   	   	   	   	   	   
	 Cash and cash equivalents 	   	   	   	   	 22,761,881 	   	   	   	 5,243,278 	   
	 Restricted cash 	   	 13 	   	   	 321,129 	   	   	   	 388,587 	   
	 Accounts and other receivables 	   	 6 	   	   	 5,026,111 	   	   	   	 3,845,890 	   
	 Government remittances 	   	   	   	   	 953,844 	   	   	   	 1,125,912 	   
	 Publisher advance, current 	   	 6 	   	   	 1,765,126 	   	   	   	 - 	   
	 Prepaid expenses and other 	   	   	   	   	 1,156,415 	   	   	   	 1,571,806 	   
	   	   	   	   	   	 31,984,506 	   	   	   	 12,175,473 	   
	   	   	   	   	   	   	   	   	   	   	   
	 Publisher advance, non-current 	   	 6 	   	   	 3,093,519 	   	   	   	 - 	   
	 Investment in associate 	   	 7 	   	   	 - 	   	   	   	 2,052,008 	   
	 Investment at FVTPL 	   	 7 	   	   	 2,048,039 	   	   	   	 - 	   
	 Property and equipment 	   	 8 	   	   	 376,095 	   	   	   	 409,389 	   
	 Goodwill 	   	 9 	   	   	 18,816,371 	   	   	   	 18,785,807 	   
	 Intangible assets 	   	 10 	   	   	 13,558,456 	   	   	   	 19,442,322 	   
	 Right-of-use assets 	   	 11 	   	   	 467,913 	   	   	   	 550,478 	   
	   	   	   	   	   	 38,360,393 	   	   	   	 41,240,004 	   
	   	   	   	   	   	 70,344,899 	   	   	   	 53,415,477 	   


 


The
accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.


 




    	Page 4 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
                                            Condensed Consolidated Statements of Financial Position (Cont’d)

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 









 





	   	   	 Note 	   	 February 28, 
2021 	   	   	 August 31, 
2020 	   
	   	   	   	   	 $ 	   	   	 $ 	   
	 LIABILITIES 	   	   	   	   	   	   	   	   
	 Current 	   	   	   	   	   	   	   	   
	 Accounts payable and accrued liabilities 	   	   	   	   	 15,804,476 	   	   	   	 17,144,346 	   
	 Players liability account 	   	 13 	   	   	 321,129 	   	   	   	 388,587 	   
	 Deferred revenue 	   	   	   	   	 1,289,338 	   	   	   	 553,395 	   
	 Lease obligation, current 	   	 12 	   	   	 194,558 	   	   	   	 185,671 	   
	 Line of credit 	   	 14 	   	   	 - 	   	   	   	 4,919,507 	   
	 Long-term debt, current 	   	 16 	   	   	 98,992 	   	   	   	 97,702 	   
	 Promissory notes payable 	   	 14 	   	   	 1,340,840 	   	   	   	 3,818,920 	   
	 Deferred purchase consideration 	   	   	   	   	 - 	   	   	   	 333,503 	   
	 Warrant liability 	   	 17 	   	   	 31,420,496 	   	   	   	 14,135,321 	   
	 Contingent performance share obligation, current 	   	 23 	   	   	 - 	   	   	   	 262,067 	   
	   	   	   	   	   	 50,469,829 	   	   	   	 41,839,019 	   
	   	   	   	   	   	   	   	   	   	   	   
	 Convertible debt 	   	 15 	   	   	 14,276,107 	   	   	   	 10,793,459 	   
	 Lease obligation, non-current 	   	 12 	   	   	 287,753 	   	   	   	 386,477 	   
	 Long-term debt, non-current 	   	 16 	   	   	 44,996 	   	   	   	 133,230 	   
	   	   	   	   	   	 14,608,856 	   	   	   	 11,313,166 	   
	   	   	   	   	   	 65,078,685 	   	   	   	 53,152,185 	   
	   	   	   	   	   	   	   	   	   	   	   
	 SHAREHOLDERS’ EQUITY (DEFICIENCY) 	   	   	   	   	   	   	   	   	   	   
	 Share capital 	   	 18 	   	   	 107,136,725 	   	   	   	 69,380,807 	   
	 Shares to be issued 	   	   	   	   	 - 	   	   	   	 1,059,214 	   
	 Contributed surplus 	   	   	   	   	 5,785,755 	   	   	   	 4,034,323 	   
	 Foregin currency translation reserve 	   	   	   	   	 (2,338,874 	 ) 	   	   	 (2,334,275 	 ) 
	 Deficit 	   	   	   	   	 (105,473,107 	 ) 	   	   	 (72,094,162 	 ) 
	   	   	   	   	   	 5,110,499 	   	   	   	 45,907 	   
	 Non-controlling interest 	   	   	   	   	 155,715 	   	   	   	 217,385 	   
	   	   	   	   	   	 5,266,214 	   	   	   	 263,292 	   
	   	   	   	   	   	 70,344,899 	   	   	   	 53,415,477 	   
	 Going concern 	   	 1 	   	   	   	   	   	   	   	   
	 Commitments and contingencies 	   	 22 	   	   	   	   	   	   	   	   
	 Subsequent events 	   	 27 	   	   	   	   	   	   	   	   


 


	 Approved on Behalf of Board: 	   	 “Larry Rutkowski” 	   	 “Lou Schwartz” 
	   	   	 Director 	   	 Director 



 


The accompanying notes are an integral part of these unaudited
interim condensed consolidated financial statements.


 









    	Page 5 of 47



     


    

 


	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
Condensed Consolidated Statements of Loss and Comprehensive Loss

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	









 


 






 





	   	   	   	   	 For the three months ended 	   	   	 For the six months ended 	   
	   	   	 Note 	   	 Feb. 28, 2021 	   	   	 Feb. 29, 2020 	   	   	 Feb. 28, 2021 	   	   	 Feb. 29, 2020 	   
	 CONTINUING OPERATIONS 	   	   	   	   	 $
                                             	   	   	   	 $
                                             	   	   	   	 $
                                             	   	   	   	 $
                                             	   
	 REVENUE 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Games development 	   	   	   	   	 688,473 	   	   	   	 426,835 	   	   	   	 1,188,428 	   	   	   	 959,696 	   
	 Sponsorship, tournament and event income 	   	   	   	   	 133,942 	   	   	   	 26,693 	   	   	   	 183,774 	   	   	   	 26,957 	   
	 Platform revenue 	   	   	   	   	 1,444,934 	   	   	   	 120,339 	   	   	   	 2,881,931 	   	   	   	 261,621 	   
	 Advertising revenue 	   	   	   	   	 6,005,573 	   	   	   	 - 	   	   	   	 11,458,043 	   	   	   	 - 	   
	 Professional services 	   	   	   	   	 114,958 	   	   	   	 50,128 	   	   	   	 142,095 	   	   	   	 183,969 	   
	   	   	   	   	   	 8,387,880 	   	   	   	 623,995 	   	   	   	 15,854,271 	   	   	   	 1,432,243 	   
	 EXPENSES 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Salaries and wages 	   	   	   	   	 4,769,052 	   	   	   	 1,342,621 	   	   	   	 8,546,528 	   	   	   	 2,469,781 	   
	 Consulting 	   	   	   	   	 800,471 	   	   	   	 1,035,101 	   	   	   	 1,696,423 	   	   	   	 1,535,751 	   
	 Professional fees 	   	   	   	   	 442,055 	   	   	   	 226,023 	   	   	   	 1,127,907 	   	   	   	 562,053 	   
	 Revenue sharing expense 	   	   	   	   	 5,117,302 	   	   	   	 - 	   	   	   	 9,608,729 	   	   	   	 - 	   
	 Sponsorships and tournaments 	   	   	   	   	 87,247 	   	   	   	 35,530 	   	   	   	 451,476 	   	   	   	 35,530 	   
	 Advertising and promotion 	   	   	   	   	 515,704 	   	   	   	 243,097 	   	   	   	 1,375,530 	   	   	   	 1,367,442 	   
	 Office and general 	   	   	   	   	 621,054 	   	   	   	 572,421 	   	   	   	 1,326,873 	   	   	   	 852,705 	   
	 Technology expenses 	   	   	   	   	 645,803 	   	   	   	 88,239 	   	   	   	 1,226,657 	   	   	   	 101,589 	   
	 Amortization and depreciation 	   	 8, 10, 11 	   	   	 1,530,784 	   	   	   	 637,201 	   	   	   	 2,946,924 	   	   	   	 1,228,392 	   
	 Share-based payments 	   	 19, 20 	   	   	 689,995 	   	   	   	 5,800 	   	   	   	 1,778,633 	   	   	   	 16,914 	   
	 Interest expense 	   	   	   	   	 572,478 	   	   	   	 249,061 	   	   	   	 980,567 	   	   	   	 523,538 	   
	 (Gain) loss on foreign exchange 	   	   	   	   	 139,994 	   	   	   	 113,821 	   	   	   	 102,745 	   	   	   	 284,146 	   
	 Change in fair value of contingent consideration 	   	   	   	   	 - 	   	   	   	 82,215 	   	   	   	 - 	   	   	   	 82,215 	   
	 Loss (gain) on extinguishment of debt 	   	   	   	   	 2,428,900 	   	   	   	 (927 	 ) 	   	   	 2,428,900 	   	   	   	 (927 	 ) 
	 Gain on retained interest in former associate 	   	   	   	   	 (99,961 	 ) 	   	   	 - 	   	   	   	 (99,961 	 ) 	   	   	 - 	   
	 Transaction costs 	   	 18 	   	   	 582,333 	   	   	   	 - 	   	   	   	 582,333 	   	   	   	 - 	   
	 Change in fair value of warrant liability 	   	 17 	   	   	 10,374,703 	   	   	   	 (502,438 	 ) 	   	   	 5,614,927 	   	   	   	 1,131,886 	   
	 Change in fair value of convertible debt 	   	 15 	   	   	 6,539,904 	   	   	   	 (2,048,169 	 ) 	   	   	 7,863,649 	   	   	   	 (1,243,644 	 ) 
	   	   	   	   	   	 35,757,818 	   	   	   	 2,079,596 	   	   	   	 47,558,840 	   	   	   	 8,947,371 	   
	 ASSOCIATES 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Share of net loss of associate 	   	   	   	   	 37,244 	   	   	   	 - 	   	   	   	 103,930 	   	   	   	 - 	   
	 Net loss for the period before taxes 	   	   	   	   	 (27,407,182 	 ) 	   	   	 (1,455,601 	 ) 	   	   	 (31,808,499 	 ) 	   	   	 (7,515,128 	 ) 
	 Deferred income taxes 	   	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   
	   	   	   	   	   	 (27,407,182 	 ) 	   	   	 (1,455,601 	 ) 	   	   	 (31,808,499 	 ) 	   	   	 (7,515,128 	 ) 
	 DISCONTINUED OPERATIONS 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Loss on disposal of Motorsports 	   	   	   	   	 - 	   	   	   	 - 	   	   	   	 (678,931 	 ) 	   	   	 - 	   
	 Discontinued operations 	   	 23 	   	   	 (2,970 	 ) 	   	   	 (1,093,879 	 ) 	   	   	 (953,185 	 ) 	   	   	 (3,120,643 	 ) 
	 Net loss for the period 	   	   	   	   	 (27,410,152 	 ) 	   	   	 (2,549,480 	 ) 	   	   	 (33,440,615 	 ) 	   	   	 (10,635,771 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Net loss attributable to non-controlling interest 	   	   	   	   	 30,640 	   	   	   	 42,209 	   	   	   	 61,670 	   	   	   	 77,309 	   
	 Net loss attributable to owners of the Company 	   	   	   	   	 (27,379,512 	 ) 	   	   	 (2,507,271 	 ) 	   	   	 (33,378,945 	 ) 	   	   	 (10,558,462 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 OTHER COMPREHENSIVE LOSS 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Items that may be reclassified subsequently to profit or loss 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Foreign currency translation differences 	   	   	   	   	 (138,444 	 ) 	   	   	 295,914 	   	   	   	 (4,599 	 ) 	   	   	 (211,939 	 ) 
	 Comprehensive loss for the period 	   	   	   	   	 (27,517,956 	 ) 	   	   	 (2,211,357 	 ) 	   	   	 (33,383,544 	 ) 	   	   	 (10,770,401 	 ) 
	 EARNINGS PER SHARE 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Basic and diluted earnings per share - continuing operations 	   	 5 	   	   	 (2.71 	 ) 	   	   	 (1.81 	 ) 	   	   	 (3.57 	 ) 	   	   	 (15.29 	 ) 
	 Basic and diluted earnings per share - discontinued operations 	   	 5 	   	   	 (0.00 	 ) 	   	   	 (1.40 	 ) 	   	   	 (0.18 	 ) 	   	   	 (6.42 	 ) 
	 Basic and diluted earnings per share 	   	 5 	   	   	 (2.71 	 ) 	   	   	 (3.21 	 ) 	   	   	 (3.75 	 ) 	   	   	 (21.71 	 ) 
	 Weighted average number of shares outstanding 	   	 5 	   	   	 10,095,276 	   	   	   	 781,119 	   	   	   	 8,890,974 	   	   	   	 486,430 	   


 





The
accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.




 




    	Page 6 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 






 





	   	   	 Share
    capital:
 Number 	   	   	 Share
    capital:
 Amount 	   	   	 Shares
    to be issued 	   	   	 Contributed
    surplus 	   	   	 Foregin
    currency translation reserve 	   	   	 Deficit 	   	   	 Total

    equity before
 non-controlling interest 	   	   	 Non-controlling
    interest 	   	   	 Total

    equity 	   
	   	   	   	  #
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   	   	   	  $
                                             	   
	 Balance, as at
    August 31, 2019 	   	   	 156,440 	   	   	   	 29,613,406 	   	   	   	 760,216 	   	   	   	 2,753,037 	   	   	   	 (1,333,172 	 ) 	   	   	 (39,754,120 	 ) 	   	   	 (7,960,633 	 ) 	   	   	 293,451 	   	   	   	 (7,667,182 	 ) 
	 Share-based payments 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 16,914 	   	   	   	 - 	   	   	   	 - 	   	   	   	 16,914 	   	   	   	 - 	   	   	   	 16,914 	   
	 Convertible debt conversion 	   	   	 435,068 	   	   	   	 1,170,060 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 1,170,060 	   	   	   	 - 	   	   	   	 1,170,060 	   
	 Common shares issued on private placement, net of
    costs 	   	   	 58,133 	   	   	   	 592,028 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 592,028 	   	   	   	 - 	   	   	   	 592,028 	   
	 Common shares issued on exercise of warrants 	   	   	 625 	   	   	   	 5,437 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 5,437 	   	   	   	 - 	   	   	   	 5,437 	   
	 Common shares issued on acquisition of UMG 	   	   	 288,561 	   	   	   	 3,965,823 	   	   	   	 - 	   	   	   	 51,027 	   	   	   	 - 	   	   	   	 - 	   	   	   	 4,016,850 	   	   	   	 - 	   	   	   	 4,016,850 	   
	 Non-controlling interest in subsidiary 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 80,834 	   	   	   	 - 	   	   	   	 - 	   	   	   	 80,834 	   	   	   	 - 	   	   	   	 80,834 	   
	 Net loss for the period 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (10,558,462 	 ) 	   	   	 (10,558,462 	 ) 	   	   	 (77,309 	 ) 	   	   	 (10,635,771 	 ) 
	 Foreign currency translation
    differences 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (211,939 	 ) 	   	   	 - 	   	   	   	 (211,939 	 ) 	   	   	 - 	   	   	   	 (211,939 	 ) 
	 Balance, as at February 29,
    2020 	   	   	 938,827 	   	   	   	 35,346,754 	   	   	   	 760,216 	   	   	   	 2,901,812 	   	   	   	 (1,545,111 	 ) 	   	   	 (50,312,582 	 ) 	   	   	 (12,848,911 	 ) 	   	   	 216,142 	   	   	   	 (12,632,769 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Balance, as at August 31,
    2020 	   	   	 7,746,136 	   	   	   	 69,380,807 	   	   	   	 1,059,214 	   	   	   	 4,034,323 	   	   	   	 (2,334,275 	 ) 	   	   	 (72,094,162 	 ) 	   	   	 45,907 	   	   	   	 217,385 	   	   	   	 263,292 	   
	 Share-based payments 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 1,778,633 	   	   	   	 - 	   	   	   	 - 	   	   	   	 1,778,633 	   	   	   	 - 	   	   	   	 1,778,633 	   
	 Shares issued on vesting of RSUs 	   	   	 142,610 	   	   	   	 970,366 	   	   	   	 - 	   	   	   	 (790,366 	 ) 	   	   	 - 	   	   	   	 - 	   	   	   	 180,000 	   	   	   	 - 	   	   	   	 180,000 	   
	 Convertible debt conversion 	   	   	 1,542,184 	   	   	   	 11,911,875 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 11,911,875 	   	   	   	 - 	   	   	   	 11,911,875 	   
	 Common shares issued on private placement, net of
    costs 	   	   	 4,435,433 	   	   	   	 24,225,901 	   	   	   	 - 	   	   	   	 770,563 	   	   	   	 - 	   	   	   	 - 	   	   	   	 24,996,464 	   	   	   	 - 	   	   	   	 24,996,464 	   
	 EB bonus shares 	   	   	 6,666 	   	   	   	 54,061 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 54,061 	   	   	   	 - 	   	   	   	 54,061 	   
	 Shares for debt 	   	   	 40,000 	   	   	   	 226,556 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 226,556 	   	   	   	 - 	   	   	   	 226,556 	   
	 Common shares issued on exercise of warrants 	   	   	 37,991 	   	   	   	 367,159 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 367,159 	   	   	   	 - 	   	   	   	 367,159 	   
	 Disposal of Motorsports 	   	   	 - 	   	   	   	 - 	   	   	   	 (1,059,214 	 ) 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (1,059,214 	 ) 	   	   	 - 	   	   	   	 (1,059,214 	 ) 
	 Non-controlling interest in subsidiary 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (7,398 	 ) 	   	   	 - 	   	   	   	 - 	   	   	   	 (7,398 	 ) 	   	   	 - 	   	   	   	 (7,398 	 ) 
	 Net loss for the period 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (33,378,945 	 ) 	   	   	 (33,378,945 	 ) 	   	   	 (61,670 	 ) 	   	   	 (33,440,615 	 ) 
	 Foreign currency translation
    differences 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 (4,599 	 ) 	   	   	 - 	   	   	   	 (4,599 	 ) 	   	   	 - 	   	   	   	 (4,599 	 ) 
	 Balance, as at February 28,
    2021 	   	   	 13,951,020 	   	   	   	 107,136,725 	   	   	   	 - 	   	   	   	 5,785,755 	   	   	   	 (2,338,874 	 ) 	   	   	 (105,473,107 	 ) 	   	   	 5,110,499 	   	   	   	 155,715 	   	   	   	 5,266,214 	   





 


The
accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.


 




    	Page 7 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
                                            Condensed Consolidated Statements of Cash Flows 

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	


 





 






 





	   	   	 For the six months ended 	   
	   	   	 Feb. 28, 2021 	   	   	 Feb. 29, 2020 	   
	   	   	   	 $
                                             	   	   	   	 $
                                             	   
	 OPERATING ACTIVITIES 	   	   	   	   	   	   	   	   
	 Net loss for the period before non-controlling interest 	   	   	 (33,440,615 	 ) 	   	   	 (10,635,771 	 ) 
	 Items not affecting cash: 	   	   	   	   	   	   	   	   
	 Amortization and depreciation 	   	   	 3,148,259 	   	   	   	 1,232,630 	   
	 Loss on disposal of Motorsports 	   	   	 678,931 	   	   	   	 - 	   
	 Loss on disposal of P&E 	   	   	 9,767 	   	   	   	 - 	   
	 Loss (gain) on extinguishment of debt 	   	   	 2,428,900 	   	   	   	 (927 	 ) 
	 Gain on retained interest in former associate 	   	   	 (99,961 	 ) 	   	   	 - 	   
	 Transaction costs 	   	   	 582,333 	   	   	   	 - 	   
	 Share of net loss of associate 	   	   	 103,930 	   	   	   	 - 	   
	 Change in fair value of warrant liability 	   	   	 5,614,927 	   	   	   	 1,131,886 	   
	 Change in fair value of convertible debt 	   	   	 7,863,649 	   	   	   	 (1,161,429 	 ) 
	 Unrealized foreign exchange gain 	   	   	 - 	   	   	   	 (69,740 	 ) 
	 Accretion of debt 	   	   	 99,231 	   	   	   	 - 	   
	 Share-based payments 	   	   	 1,778,633 	   	   	   	 16,914 	   
	   	   	   	 (11,232,016 	 ) 	   	   	 (9,486,437 	 ) 
	 Changes in non-cash working capital: 	   	   	   	   	   	   	   	   
	 Restricted cash 	   	   	 67,458 	   	   	   	 (13,109 	 ) 
	 Accounts and other receivables 	   	   	 (1,205,489 	 ) 	   	   	 49,486 	   
	 Government remittances 	   	   	 146,973 	   	   	   	 66,584 	   
	 Publisher advance 	   	   	 (4,858,645 	 ) 	   	   	 - 	   
	 Prepaid expenses and other 	   	   	 391,278 	   	   	   	 255,664 	   
	 Accounts payable and accrued liabilities 	   	   	 111,237 	   	   	   	 2,620,500 	   
	 Players liability account 	   	   	 (67,458 	 ) 	   	   	 2,506 	   
	 Deferred revenue 	   	   	 735,943 	   	   	   	 311,515 	   
	   	   	   	 (4,678,703 	 ) 	   	   	 3,293,146 	   
	   	   	   	 (15,910,719 	 ) 	   	   	 (6,193,291 	 ) 
	 INVESTING ACTIVITIES 	   	   	   	   	   	   	   	   
	 Purchase of property and equipment 	   	   	 (90,013 	 ) 	   	   	 (98,786 	 ) 
	 Bank indebtedness acquired on acquisition of UMG 	   	   	 - 	   	   	   	 (71,925 	 ) 
	 Investment in Allinsports 	   	   	 - 	   	   	   	 270,000 	   
	 Acquisition of intangible assets 	   	   	 - 	   	   	   	 (54,680 	 ) 
	 Cash from disposal of Motorsports 	   	   	 24,348 	   	   	   	 - 	   
	   	   	   	 (65,665 	 ) 	   	   	 44,609 	   
	 FINANCING ACTIVITIES 	   	   	   	   	   	   	   	   
	 Net proceeds from issuance of Units 	   	   	 31,017,374 	   	   	   	 592,028 	   
	 Proceeds from issuance of convertible debentures 	   	   	 4,901,393 	   	   	   	 - 	   
	 Net proceeds (payments) from promissory notes payable 	   	   	 (2,478,080 	 ) 	   	   	 3,160,302 	   
	 Proceeds from exercise of warrants 	   	   	 258,156 	   	   	   	 3,542 	   
	 Payments on lease financing 	   	   	 (109,875 	 ) 	   	   	 - 	   
	 Payments on long-term debt 	   	   	 (107,967 	 ) 	   	   	 (45,158 	 ) 
	   	   	   	 33,481,001 	   	   	   	 3,710,714 	   
	 Impact of foreign exchange on cash 	   	   	 13,986 	   	   	   	 - 	   
	 Change in cash and cash equivalents 	   	   	 17,518,603 	   	   	   	 (2,437,968 	 ) 
	   	   	   	   	   	   	   	   	   
	 Cash and cash equivalents, beginning of period 	   	   	 5,243,278 	   	   	   	 2,827,014 	   
	 Cash and cash equivalents, end of period 	   	   	 22,761,881 	   	   	   	 389,046 	   


 


The
accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.


 




    	Page 8 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	


 








 






 


	1.	Corporate
    information and going concern
	 	 
	(a)	Corporate
    information
	 	 
	 	The
    Company focuses on accelerating new, live, immersive esports and interactive gaming experiences for consumers through its partnerships
    with traditional and emerging media companies and providing online interactive technology and monetization services.
	 	 
	 	On
    August 13, 2020, the Company consolidated its shares on the basis of 15 pre-consolidation shares for every 1 post-consolidation share.
    Current and comparative disclosure has been amended to reflect this share consolidation.
	 	 
	 	Pursuant
    to shareholder approval at the July 15, 2020 shareholders’ meeting, effective August 13, 2020, the Company changed its name
    to Engine Media Holdings, Inc. The Company’s common shares trade on the TSX Venture Exchange under the trading symbol GAME.V
    and OTCQB under the trading symbol MLLLF.
	 	 
	(b)	Going
    concern
	 	 
	 	These
    interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company
    will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give
    effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required
    to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different
    from those in the accompanying consolidated financial statements. Such adjustments could be material. It is not possible to predict
    whether the Company will be able to raise adequate financing or to ultimately attain profit levels of operations.
	 	 
	 	The
    Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit
    of $105,473,107 as of February 28, 2021 (August 31, 2020 – $72,094,162). The recoverability of the carrying value of
    the assets and the Company’s continued existence is dependent upon the achievement of profitable operations, or the ability
    of the Company to raise alternative financing, if necessary. While management has been historically successful in raising the necessary
    capital (Note 18), it cannot provide assurance that it will be able to execute on its business strategy or be successful in future
    financing activities.
	 	 
	 	As
    of February 28, 2021, the Company had a working capital deficiency of $18,485,323 (August 31, 2020 – working capital deficiency
    of $29,663,546) which is comprised of current assets less current liabilities. Excluding non-cash warrant liability, the Company
    had a working capital surplus of $12,935,173 (August 31, 2020 – working capital deficiency of $15,528,225). The Company also
    faced uncertain future impacts from COVID-19 (Note 3(b)).
	 	 
	 	These
    conditions indicate the existence of material uncertainties that cast significant doubt about the Company’s ability to continue
    as a going concern. Changes in future conditions could require material write downs of the carrying values of goodwill and other
    long-lived intangibles.


 




    	Page 9 of 47



     


    

 


	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	


 





 






 


	2.	Statement
    of compliance and basis of presentation
	 	 
	(a)	Statement
    of compliance
	 	 
	 	These
    unaudited interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard
    34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements
    required by International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
    Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
	 	 
	 	These
    unaudited interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company
    on June 9, 2021 and should be read in conjunction with the Company’s audited consolidated financial statements for the
    year ended August 31, 2020.
	 	 
	(b)	Basis
    of consolidation
	 	 
	 	The
    unaudited interim condensed consolidated financial statements comprise the accounts of the Company and its controlled subsidiaries.
    The financial statements of subsidiaries are included in the unaudited interim condensed consolidated financial statements from the
    date that control commences until the date that control ceases. Unaudited interim condensed consolidated financial statements are
    prepared using uniform accounting policies for like transactions and other events in similar circumstances.
	 	The
    Company’s subsidiaries are as follows:


 


	Name
    of Subsidiary	 	Country
    of Incorporation	 	Ownership

    Percentage
	 	Functional

    Currency

	PGL
    Consulting Services Inc.	 	Canada	 	100%	 	US
    Dollar
	Pro
    Gaming League Inc.	 	Canada	 	100%	 	US
    Dollar
	Pro
    Gaming League Nevada Inc.	 	USA	 	100%	 	US
    Dollar
	Millennial
    Esports California Corp.	 	USA	 	100%	 	US
    Dollar
	Stream
    Hatchet S.L.	 	Spain	 	100%	 	Euro
	Eden
    Games S.A.	 	France	 	96%	 	Euro
	Frankly
    Media LLC	 	USA	 	100%	 	US
    Dollar
	WinView,
    Inc.	 	USA	 	100%	 	US
    Dollar
	UMG
    Media Ltd.	 	Canada	 	100%	 	Canadian
    Dollar


 


	 	All
    transactions and balances between the Company and its subsidiaries are eliminated on consolidation, including unrealized gains and
    losses on transactions between companies. Unrealized gains arising from transactions with equity accounted investees are eliminated
    against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same
    way as unrealized gains, but only to the extent that there is no evidence of impairment.
	 	 
	 	Non-controlling
    interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
    Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.


 




    	Page 10 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 






 


	2.	Statement
    of compliance and basis of presentation (cont’d)
	 	 
	(c)	Basis
    of presentation
	 	 
	 	These
    unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis, except for financial
    instruments which are measured at fair value. In addition, these interim condensed consolidated financial statements have been prepared
    using the accrual basis of accounting except for cash flow information.
	 	 
	 	In
    the preparation of these interim condensed consolidated financial statements, management is required to make estimates and assumptions
    that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
    financial statements and the reported amounts of expenses during the period. Actual results could differ from these estimates.
	 	 
	(d)	Foreign
    currency translation
	 	 
	 	The
    functional currency of the Company is the US Dollar (“USD). The functional currencies of the Company’s subsidiaries are
    disclosed in Note 2(b). The presentation currency of the interim condensed consolidated financial statements is the US Dollar (“USD”).
	 	 
	(e)	Expense
    reclassifications
	 	 
	 	For
    comparability, certain amounts for the three and six months ended February 29, 2020 have been reclassified to conform with classifications
    adopted for the year ended August 31, 2020. With the significant acquisitions of UMG, Media Ltd. (UMG), Frankly Inc. (Frankly) and
    WinView, Inc. (WinView) during fiscal 2020, many of the prior expense classifications for the three and six months ended February
    29, 2020 did not best represent the nature of the ongoing business. These reclassifications had no effect on net loss or shareholders’
    equity (deficiency).
	 	 
	(f)	Income
    taxes
	 	 
	 	The
    Company had no income tax expense for the three and six months ended February 28, 2021 and February 29. 2020. As of February 28,
    2021, deferred tax assets have not been recognized because it has not been determined as probable that future taxable profit will
    be available against which the Company can utilize the benefits therefrom.
	 	 	 
	3.	Significant
    judgments, estimates and assumptions
	 	 
	 	The
    preparation of these interim condensed consolidated financial statements requires management to make judgments and estimates and
    form assumptions that affect the reported amounts of assets and liabilities at the date of the interim condensed consolidated financial
    statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to unsettled
    transactions and events as of the date of the interim condensed consolidated financial statements.
	 	 
	 	On
    an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues, and expenses. Management
    uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for
    its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. Significant
    estimates and judgments made by management in the preparation of these interim condensed consolidated financial statements are outlined
    below.


 




    	Page 11 of 47



     


    

 


	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 






 


	3.	Significant
    judgments, estimates and assumptions (cont’d)
	 	 
	 	The
    assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment.
    Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations
    of future events that are believed to be reasonable under the circumstances. There is a material uncertainty regarding the Company’s
    ability to continue as a going concern.
	 	 
	(a)	Significant
    estimates and critical judgments
	 	 
	 	Information
    about significant estimates and critical judgements in applying accounting policies that have the most significant effect on the
    amounts recognized in the interim condensed consolidated financial statements is included in the following notes:


 


	 	Note
    1	Going
    concern;
	 	Note
    26	Expected
    credit losses;
	 	Note
    17	Valuation
    of warrant liability;
	 	Notes
    9 and 10	Goodwill
    and intangible assets;
	 	Notes
    19 and 20	Valuation
    of share-based payments;
	 	Note
    15	Valuation
    of convertible debt; and
	 	Note
    22	Contingencies.


 


	(b)	Uncertainty
    about the effects of COVID-19
	 	 
	 	In
    December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has since extensively impacted global health and
    the economic environment. To contain the spread of COVID-19, domestic and international governments around the world enacted various
    measures, including orders to close all businesses not deemed “essential,” quarantine orders for individuals to stay
    in their homes or places of residence, and to practice social distancing when engaging in essential activities. It is anticipated
    that these actions and the global health crisis caused by COVID-19 will continue to negatively impact many business activities and
    financial markets across the globe.
	 	 
	 	The
    fact that our business has increasingly shifted to digital channels, we have increased flexibility as we navigate through the uncertain
    environment and near-term implications of the COVID-19 pandemic. The impact of the pandemic on our business has been mixed thus far.
    While we have seen some increase in demand for our digital products and services, however, this demand has been more than offset
    by reduction in spending by our customers.
	 	 
	 	In
    an effort to protect the health and safety of our employees, the majority of our workforce is currently working from home and we
    have placed restrictions on non-essential business travel. We have implemented business continuity plans and have increased support
    and resources to enable our employees to work remotely and thus far our business has been able to operate with minimal disruption.
	 	 
	 	The
    global COVID-19 pandemic remains a rapidly evolving situation. We will continue to actively monitor the developments of the pandemic
    and may take further actions that could alter our business operations as may be required by federal, state, local, or foreign authorities,
    or that we determine are in the best interests of our employees, customers, partners and shareholders. It is not clear what effects
    any such potential actions may have on our business, including the effects on our employees, players and consumers, customers, partners,
    development and content pipelines, our reputation, financial condition, results of operations, revenue, cash flows, liquidity or
    stock price.


 




    	Page 12 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	








 





 






 


	4.
    	Significant
    accounting policies
	 	 
	(a)	Future
    accounting pronouncements
	 	 
	 	The
    following standards have not yet been adopted and are being evaluated to determine their impact on the Company:


 


IFRS
10 – Consolidated Financial Statements (“IFRS 10”) and


IAS
28 – Investments in Associates and Joint Ventures (“IAS 28”)


 


IFRS
10 and IAS 28 were amended in September 2014 to address a conflict between the requirements of IAS 28 and IFRS 10 and clarify that in
a transaction involving an associate or joint venture, the extent of gain or loss recognition depends on whether the assets sold or contributed
constitute a business. The effective date of these amendments is yet to be determined; however early adoption is permitted. The Company
has not assessed the effect of these pronouncements on its consolidated financial statements.


 


	 	Other
    accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either
    not applicable or the Company is still assessing what the impact will be to the Company’s financial statements.
	 	 
	5.	Net
    income (loss) per share
	 	 
	 	Basic
    net income (loss) per share is calculated using the weighted-average number of common shares outstanding during each period. Diluted
    net income (loss) per share assumes the conversion, exercise or issuance of all potential common share equivalents unless the effect
    is to reduce the loss or increase the income per share. For purposes of this calculation, stock options, warrants and RSU’s
    are considered to be potential common shares and are only included in the calculation of diluted net income (loss) per share when
    their effect is dilutive.
	 	 
	 	Due
    to the net loss incurred during the three and six months ended February 28, 2021 and February 29, 2020, all outstanding options,
    restricted share units and warrants were excluded from diluted weighted-average common shares outstanding as their effect was anti-dilutive.
	 	 
	 	Weighted
    average common shares outstanding for the three and six months ended February 28, 2021 were 10,095,276 and 8,890,974, respectively
    (February 29, 2020 – 781,119 and 486,430, respectively).


 




    	Page 13 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	








 


 






 


	6.
    	Accounts,
    other receivables, and customer advance
	 	 
	(a)	Accounts
    and other receivables
	 	 
	 	The
    Company’s accounts and other receivables are comprised of the following:


 


	 	 	February 28,
 2021	 	 	August 31,
 2020	 
	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Trade accounts receivable	 	 	5,919,455	 	 	 	4,690,922	 
	Other receivables	 	 	51,480	 	 	 	29,406	 
	Allowance for doubtful accounts	 	 	(944,824	)	 	 	(874,438	)
	 	 	 	5,026,111	 	 	 	3,845,890	 



 


A
continuity of the Company’s allowance for doubtful accounts is as follows:


 


	 	 	February 28,
 2021	 	 	February 29,
 2020	 
	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Alowance for doubtful accounts, beginning of period 	 	 	(874,438	)	 	 	-	 
	Provision, bad debt expense	 	 	(72,636	)	 	 	-	 
	Writeoffs	 	 	2,250	 	 	 	-	 
	Alowance for doubtful accounts, end of period 	 	 	(944,824	)	 	 	-	 



 


	(b)	 Publisher
     advance
	 	 
	 	On
    February 7, 2021, the Company’s subsidiary Frankly Media LLC, amended its commercial agreement with its largest publisher,
    which secured a long-term extension. One of the key terms of the amended agreement required the Company to advance $6 million
    of revenue sharing payments to the publisher under the following schedule:


 


	 	(i)
    	$4
    million within one day of execution of the amendment;
	 	(ii)
    	$1
    million on or before February 28, 2021; and
	 	(iii)
    	$1
    million on or before March 31, 2021.


 


	 	The
    advance is to be recouped through additional withholding on future advertising revenue share payments made to the publisher,
    beyond Frankly’s share, and is effective for amounts billed for periods February 1, 2021 forward.
	 	 
	 	As
    of February 28, 2021, $5 million had been advanced to the publisher and $141,355 had been recouped through the process explained
    above. As of February 28, 2021, a net amount of $4,858,645 was outstanding on the advance.
	 	 
	 	The
    breakout of the publisher advance into current and non-current portions is based on an estimate of advertising billings over
    the next twelve months and the resulting additional withholding on the related advertising revenue share payments.


 




    	Page 14 of 47



     


    

 





	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

                                                          For
                                            the three and six months ended February 28, 2021 (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	





 





 



 


	7.
    	Investment
    in associate and investment at FVTPL 


 





	   	   	 Investment in associate 	   	   	 Investment in affiliate 	   
	   	   	 $ 	   	   	   	   
	   	   	   	   	   	   	   
	 Balance, August 31, 2020 	   	   	 2,052,008 	   	   	   	 - 	   
	 Share of loss in One Up 	   	   	 (103,930 	 ) 	   	   	 - 	   
	 Discontinue use of equity method on retained interest
    in former associate 	   	   	 (1,948,078 	 ) 	   	   	 2,048,039 	   
	 Balance, February 28, 2021 	   	   	 - 	   	   	   	 2,048,039 	   


 


	 	On
    August 25, 2020, the Company acquired a 20.48% interest in One Up Group, LLC (“One Up”). One Up operates a mobile app
    which allows gamers to organize and play one-on-one matches with other gamers and compete for money. The Company believes there will
    be synergies with the WinView business.
	 	 
	 	The
    Company accounted for this investment as an investment in associate under the equity method from acquisition through January 5, 2021.
    The Company’s equity in the loss of One Up for the period from September 1, 2020 to January 5, 2021 amounted to $103,930.
	 	 
	 	On
    January 5, 2021, the Company’s interest in One Up was reduced to 18.62% as a result of One Up closing a financing round.
    In accordance with IAS 28, the Company discontinued the use of the equity method on January 5, 2021, the date at which its investment
    ceased being an associate. The difference between the fair value of the Company’s retained interest in One Up and it’s
    carrying value on January 5, 2021 amounted to $99,961, which is recognized as a gain on retained interest in former associate on
    the Company’s statement of loss and comprehensive loss.
	 	 
	8.	Property
    and equipment


 


	Cost	 	Leasehold
 improvements	 	 	Computer equipment	 	 	Furniture 
 and fixtures	 	 	Total	 
	 	 	 	 $ 	 	 	 	 $ 	 	 	 	 $ 	 	 	 	 $ 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2019  	 	 	54,465	 	 	 	209,126	 	 	 	123,298	 	 	 	386,889	 
	Acquisition of UMG	 	 	166,193	 	 	 	116,668	 	 	 	30,761	 	 	 	313,622	 
	Additions	 	 	-	 	 	 	-	 	 	 	98,786	 	 	 	98,786	 
	Foreign exchange	 	 	-	 	 	 	(17,566	)	 	 	(13,626	)	 	 	(31,192	)
	February 29, 2020  	 	 	220,658	 	 	 	308,228	 	 	 	239,219	 	 	 	768,105	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020 	 	 	221,653	 	 	 	486,340	 	 	 	173,091	 	 	 	881,084	 
	Additions	 	 	-	 	 	 	74,598	 	 	 	15,415	 	 	 	90,013	 
	Disposals	 	 	-	 	 	 	(9,767	)	 	 	-	 	 	 	(9,767	)
	Disposal of Motorsports	 	 	(2,631	)	 	 	(47,645	)	 	 	(18,118	)	 	 	(68,394	)
	Foreign exchange	 	 	-	 	 	 	2,660	 	 	 	(162	)	 	 	2,498	 
	February 28, 2021 	 	 	219,022	 	 	 	506,186	 	 	 	170,226	 	 	 	895,434	 



 




    	Page 15 of 47



     


    

 


 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 





	8.	Property
    and equipment (cont’d)


 


	Accumulated depreciation	 	Leasehold
 improvements	 	 	Computer equipment	 	 	Furniture 
 and fixtures	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2019	 	 	51,847	 	 	 	181,089	 	 	 	68,700	 	 	 	301,636	 
	Depreciation	 	 	4,247	 	 	 	4,510	 	 	 	63,538	 	 	 	72,295	 
	Foreign exchange	 	 	-	 	 	 	(11,110	)	 	 	(7,911	)	 	 	(19,021	)
	February 29, 2020	 	 	56,094	 	 	 	174,489	 	 	 	124,327	 	 	 	354,910	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020	 	 	57,517	 	 	 	307,508	 	 	 	106,670	 	 	 	471,695	 
	Depreciation	 	 	2,214	 	 	 	50,531	 	 	 	13,142	 	 	 	65,887	 
	Disposal of Motorsports	 	 	-	 	 	 	(11,068	)	 	 	(9,910	)	 	 	(20,978	)
	Foreign exchange	 	 	59	 	 	 	2,639	 	 	 	37	 	 	 	2,735	 
	February 28, 2021	 	 	59,790	 	 	 	349,610	 	 	 	109,939	 	 	 	519,339	 



 


	Net book value	 	Leasehold
 improvements	 	 	Computer equipment	 	 	Furniture 
 and fixtures	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020	 	 	164,136	 	 	 	178,832	 	 	 	66,421	 	 	 	409,389	 
	February 28, 2021	 	 	159,232	 	 	 	156,576	 	 	 	60,287	 	 	 	376,095	 



 





	9.	Goodwill


 


	 	 	February 28,
 2021	 	 	February 29,
 2020	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 
	Balance, beginning of period	 	 	18,785,807	 	 	 	651,354	 
	Acquisition of UMG	 	 	-	 	 	 	3,441,021	 
	Impairment	 	 	-	 	 	 	-	 
	Effect of foreign exchange	 	 	30,564	 	 	 	(459	)
	Balance, end of period	 	 	18,816,371	 	 	 	4,091,916	 



 




    	Page 16 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	





 





 



 


	10.	Intangible
    assets


 


	Cost	 	Patents	 	 	Application Platforms	 	 	Software	 	 	Brand	 	 	Customer 
 Lists and 
 Contracts	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2019	 	 	-	 	 	 	760,323	 	 	 	5,055,798	 	 	 	1,662,993	 	 	 	477,592	 	 	 	7,956,706	 
	Acquisition of UMG	 	 	-	 	 	 	846,000	 	 	 	-	 	 	 	288,946	 	 	 	333,704	 	 	 	1,468,650	 
	Additions	 	 	-	 	 	 	-	 	 	 	54,680	 	 	 	-	 	 	 	-	 	 	 	54,680	 
	Foreign exchange	 	 	-	 	 	 	3,890	 	 	 	40,665	 	 	 	3,055	 	 	 	822	 	 	 	48,432	 
	February 29, 2020	 	 	-	 	 	 	1,610,213	 	 	 	5,151,143	 	 	 	1,954,994	 	 	 	812,118	 	 	 	9,528,468	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020	 	 	9,430,265	 	 	 	1,322,802	 	 	 	10,763,975	 	 	 	2,310,475	 	 	 	3,671,954	 	 	 	27,499,471	 
	Disposal of Motorsports	 	 	-	 	 	 	-	 	 	 	(3,598,869	)	 	 	(201,627	)	 	 	(222,650	)	 	 	(4,023,146	)
	Foreign exchange	 	 	-	 	 	 	22,001	 	 	 	349,861	 	 	 	109,143	 	 	 	4,149	 	 	 	485,154	 
	February 28, 2021	 	 	9,430,265	 	 	 	1,344,803	 	 	 	7,514,967	 	 	 	2,217,991	 	 	 	3,453,453	 	 	 	23,961,479	 



 


	Accumulated amortization	 	Patents	 	 	Application Platforms	 	 	Software	 	 	Brand	 	 	Customer 
 Lists and 
 Contracts	 	 	Total	 
	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2019	 	 	-	 	 	 	628,277	 	 	 	2,634,338	 	 	 	673,302	 	 	 	296,061	 	 	 	4,231,978	 
	Amortization	 	 	-	 	 	 	72,953	 	 	 	839,418	 	 	 	154,307	 	 	 	35,447	 	 	 	1,102,125	 
	Foreign exchange	 	 	-	 	 	 	3,214	 	 	 	13,826	 	 	 	1,237	 	 	 	510	 	 	 	18,787	 
	February 29, 2020	 	 	-	 	 	 	704,444	 	 	 	3,487,582	 	 	 	828,846	 	 	 	332,018	 	 	 	5,352,890	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020	 	 	628,684	 	 	 	793,041	 	 	 	4,909,000	 	 	 	1,077,491	 	 	 	648,933	 	 	 	8,057,149	 
	Amortization	 	 	943,026	 	 	 	104,273	 	 	 	1,377,922	 	 	 	249,007	 	 	 	324,170	 	 	 	2,998,398	 
	Disposal of Motorsports	 	 	-	 	 	 	-	 	 	 	(532,412	)	 	 	(201,627	)	 	 	(222,650	)	 	 	(956,689	)
	Foreign exchange	 	 	-	 	 	 	18,157	 	 	 	316,406	 	 	 	51,573	 	 	 	(81,971	)	 	 	304,165	 
	February 28, 2021	 	 	1,571,710	 	 	 	915,471	 	 	 	6,070,916	 	 	 	1,176,444	 	 	 	668,482	 	 	 	10,403,023	 



 







    	Page 17 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	10.	Intangible
    assets (cont’d)


 


	Net book value	 	Patents	 	 	Application Platforms	 	 	Software	 	 	Brand	 	 	Customer 
 Lists and 
 Contracts	 	 	Total	 
	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August 31, 2020	 	 	8,801,581	 	 	 	529,761	 	 	 	5,854,975	 	 	 	1,232,984	 	 	 	3,023,021	 	 	 	19,442,322	 
	February 28, 2021	 	 	7,858,555	 	 	 	429,332	 	 	 	1,444,051	 	 	 	1,041,547	 	 	 	2,784,971	 	 	 	13,558,456	 



 


A
continuity of the Company’s accumulated impairment losses for intangibles is as follows:


 


	 	 	February 28, 2021	 	 	February 29, 2020	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 
	Accumulated impairment losses, beginning of period 	 	 	1,739,776	 	 	 	1,585,474	 
	Disposal of Motorsports	 	 	(1,697,107	)	 	 	-	 
	Effect of foreign exchange	 	 	(42,669	)	 	 	81,659	 
	Accumulated impairment losses, end of period 	 	 	-	 	 	 	1,667,133	 






 


	11.	Right-of-use
    assets


 


	 	 	February 28, 2021	 	 	February 29, 2020	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 
	Balance, beginning of period	 	 	550,478	 	 	 	-	 
	Additions to right-of-use assets on adoption of IFRS 16, September 1, 2019	 	 	-	 	 	 	234,215	 
	Acquisition of UMG	 	 	-	 	 	 	388,996	 
	Depreciation	 	 	(83,974	)	 	 	(64,566	)
	Effect of foreign exchange	 	 	1,409	 	 	 	-	 
	Balance, end of period	 	 	467,913	 	 	 	558,645	 



 


Right
of use assets consist primarily of leases for corporate office facilities and are amortized on a monthly basis over the term of the lease,
or useful life, if shorter.


 




    	Page 18 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	12.	Lease
    liabilities


 


Lease
liabilities are measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted
using an average interest rate of 7.75%, which is the Company’s estimated incremental borrowing rate. The continuity of the lease
liabilities is presented in the table below:


 


	 	 	Equipment	 	 	Office lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019 	 	 	-	 	 	 	-	 	 	 	-	 
	Additions to right-of-use assets on adoption of IFRS 16, September 1, 2019	 	 	-	 	 	 	234,215	 	 	 	234,215	 
	Acquisition of UMG	 	 	19,770	 	 	 	388,996	 	 	 	408,766	 
	Interest expense	 	 	146	 	 	 	7,060	 	 	 	7,206	 
	Payments	 	 	(1,799	)	 	 	(69,197	)	 	 	(70,996	)
	Balance, February 29, 2020 	 	 	18,117	 	 	 	561,074	 	 	 	579,191	 



 


	 	 	Equipment	 	 	Office lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020 	 	 	35,457	 	 	 	536,691	 	 	 	572,148	 
	Acquired	 	 	-	 	 	 	-	 	 	 	-	 
	Interest expense	 	 	1,078	 	 	 	17,507	 	 	 	18,585	 
	Payments	 	 	(6,690	)	 	 	(103,185	)	 	 	(109,875	)
	Effect of foreign exchange	 	 	-	 	 	 	1,453	 	 	 	1,453	 
	Balance, February 28, 2021 	 	 	29,845	 	 	 	452,466	 	 	 	482,311	 



 


The
Company’s lease obligation is classified  as follows:


 


	 	 	Equipment	 	 	Office lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	As of August 31, 2020:	 	 	 	 	 	 	 	 	 
	Less than one year	 	 	11,409	 	 	 	174,262	 	 	 	185,671	 
	Greater than one year	 	 	24,048	 	 	 	362,429	 	 	 	386,477	 
	Total lease obligation 	 	 	35,457	 	 	 	536,691	 	 	 	572,148	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	As of February 28, 2021:	 	 	 	 	 	 	 	 	 	 	 	 
	Less than one year	 	 	11,785	 	 	 	182,773	 	 	 	194,558	 
	Greater than one year	 	 	18,060	 	 	 	269,693	 	 	 	287,753	 
	Total lease obligation 	 	 	29,845	 	 	 	452,466	 	 	 	482,311	 






 


	13.	Players
    liability account


 


The
Players liability account consists of UMG and WinView cash deposited by players, plus any prize winnings, less any fees for match game
play and withdrawal requests processed to date. As of February 28, 2021, the players liability account balance is the total amount payable
if all players were to request closure of their accounts. As of February 28, 2021, the players account liability and corresponding restricted
cash balances were the same.


 




    	Page 19 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	14.	Promissory
    notes payable and other borrowings


 


	(a)	Promissory
    notes


 


The
Company has promissory notes with a balance of $200,000 (August 31, 2020 – $200,000) that are unsecured, due on demand, and bear
interest at 18%. As of February 28, 2021, interest of $110,245 has been accrued (August 31, 2020 – $83,435).


 


The
Company, through its WinView subsidiary, has a secured promissory note outstanding for amounts due for the provision of services by the
noteholder. As of February 28, 2021, $669,710 was due under the note (August 31, 2020 – $1,527,582). The note is secured by the
assets of WinView, bears interest at 8%, and is currently due. As of February 28, 2021, interest of $12,881 has been accrued on this
note (August 31, 2020 – $63,612).


 


As
of February 28, 2021, the Company, through its UMG subsidiary, has a balance of $330,000 (August 31, 2020 – $330,000) due to a
former UMG shareholder. This balance was the remaining cash due for the purchase of UMG Events LLC (subsidiary of UMG Media Ltd.), is
currently due, and was non-interest bearing until the due date. As of February 28, 2021, interest of $30,885 has been accrued on this
note (August 31, 2020 – $nil).


 


	(b)	Paycheck
    Protection Program (the “PPP”) loans


 


In
April and May 2020, the Company entered into promissory notes (the “Notes”) with three banks. The Notes evidence loans to
the Company of $1,589,559 pursuant to the PPP of the CARES Act administered by the U.S. Small Business Administration (the “SBA”).
In accordance with the requirements of the CARES Act, the Company used the proceeds from the loans exclusively for qualified expenses
under the PPP, including payroll costs, rent and utility costs, as further detailed in the CARES Act and applicable guidance issued by
the SBA.


 


Interest
will accrue on the outstanding balance of the Notes at a rate of 1.00% per annum. However, the Company has applied for and expects to
receive forgiveness of all amounts due under the Notes.


 


Subject
to any forgiveness granted under the PPP, the Notes are scheduled to mature in April 2022 and require 18 equal monthly payments of principal
and interest beginning November 2020. However, no principal payments are due until the SBA determines whether to forgive the amounts
The Notes may be prepaid at any time prior to maturity with no prepayment penalties. The Notes provide for customary events of default,
including, among others, those relating to failure to make payments, bankruptcy, breaches of representations, significant changes in
ownership, and material adverse effects. The Company’s obligations under the Notes are not secured by any collateral.


 


Upon
the receipt of the proceeds of $1,589,559 from the Notes, the Company accounted for the Notes as a grant in the form of forgivable loan
and recorded the amount as a deferred income liability. The liability was reduced as the Company recognized expenses which qualified
for forgiveness of the loan. As of August 31, 2020, the Company had incurred greater than $1,589,559 of qualifying expenses and therefore
had a remaining deferred income liability of $nil. The Company recognized the impact of the loan forgiveness as an offset against related
salaries and wages expense, in the consolidated statement of loss and comprehensive loss for the year ended August 31, 2020. As of the
date of this filing, two of the three PPP loans in the amount of $1,379,684 were formally forgiven.


 




    	Page 20 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	14.	Promissory
    notes payable and other borrowings (cont’d)


 


	(c)	Frankly
    line of credit


 


On
January 7, 2020, the Company’s Frankly Media LLC subsidiary (“Frankly Media”) entered an agreement with an arm’s
length lender, EB Acquisition Company, LLC (the “Lender”), whereby the Lender agreed, subject to the terms and conditions
thereof, to provide Frankly Media with a revolving term line of credit in the principal amount of up to $5 million (the “EB Loan”).


 


The
EB Loan had a one-year term, extendable for a second year upon the mutual agreement of Lender and Frankly Media; and was secured by a
security interest in Frankly Media’s assets, as well as a guarantee by the Company, secured against the Company’s assets.


 


On
December 1, 2020, the EB Loan was amended (the “Amended EB Loan”). The amendment extended the maturity date by one year and
added a conversion feature to $1 million of the $5 million principal outstanding. The conversion feature allowed the holder to convert
$1 million into common shares of the Company at a conversion price of $11.25 per common share. On February 24, 2021, the Company extinguished
the Amended EB Loan and issued the Lender a convertible debenture in the principal amount of $5 million (the “EB CD”). The
EB CD is convertible into units of the Company at a conversion price of $10.25 per unit, with each unit comprised of one common share
and one-half of a warrant, with each whole warrant exercisable into a common share at an exercise price of $15.00 per share for a period
of three years from the issuance of the EB CD. The EB CD has a term of three years.


 


As
of the date of Amended EB Loan, December 1, 2020, the Company has accounted for the loan as convertible debt at FVTPL. As such, the Amended
EB Loan was recognized within convertible debt (Note 15).


 


The
carrying value of the line of credit as of February 28, 2021 was $nil (August 31, 2020 – $4,919,507).


 


	15.	Convertible
    debt


 


The
continuity of convertible debt for the six months ended February 28, 2021 and February 29, 2020, is as follows:


 


	 	 	2019 
 Series	 	 	2020 
 Series	 	 	Amended EB Loan	 	 	EB CD	 	 	Total	 
	 	 	$	 	 	$	 	 	 	 	 	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019 	 	 	12,532,723	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	12,532,723	 
	Conversion - common shares issued	 	 	(1,170,060	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1,170,060	)
	Conversion - warrants issued	 	 	(1,609,232	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1,609,232	)
	Interest expense	 	 	264,430	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	264,430	 
	Effect of foreign exchange	 	 	67,424	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	67,424	 
	Change in fair value	 	 	(1,243,644	)	 	 	     -	 	 	 	      -	 	 	 	-	 	 	 	(1,243,644	)
	Balance, February 29, 2020    	 	 	8,841,641	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	8,841,641	 



 







    	Page 21 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	





 





 






 


	15.	Convertible
    debt (cont’d)


 





	 	 	2019 
 Series	 	 	2020 
 Series	 	 	Amended EB Loan	 	 	EB CD	 	 	Total	 
	 	 	$	 	 	$	 	 	 	 	 	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020 	 	 	2,121,869	 	 	 	8,671,590	 	 	 	-	 	 	 	-	 	 	 	10,793,459	 
	Issuances	 	 	-	 	 	 	4,282,477	 	 	 	-	 	 	 	-	 	 	 	4,282,477	 
	Exchange of EB Loan for Amended EB Loan	 	 	-	 	 	 	-	 	 	 	5,043,103	 	 	 	-	 	 	 	5,043,103	 
	Exchange of Amended EB Loan for EB CD	 	 	-	 	 	 	-	 	 	 	(4,931,813	)	 	 	7,394,022	 	 	 	2,462,209	 
	Conversion - common shares issued	 	 	(183,879	)	 	 	(11,727,996	)	 	 	-	 	 	 	-	 	 	 	(11,911,875	)
	Conversion - warrants issued	 	 	(154,265	)	 	 	(4,121,208	)	 	 	-	 	 	 	-	 	 	 	(4,275,473	)
	Interest expense	 	 	37,584	 	 	 	295,896	 	 	 	138,710	 	 	 	-	 	 	 	472,190	 
	Accrued interest on conversion / interest payments	 	 	(15,849	)	 	 	(241,868	)	 	 	(250,000	)	 	 	-	 	 	 	(507,717	)
	Effect of foreign exchange	 	 	54,085	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	54,085	 
	Change in fair value	 	 	1,656,768	 	 	 	5,827,548	 	 	 	-	 	 	 	379,333	 	 	 	7,863,649	 
	Balance, February 28, 2021 	 	 	3,516,313	 	 	 	2,986,439	 	 	 	-	 	 	 	7,773,355	 	 	 	14,276,107	 



 


	(a)	Conversions during
  the period




 


2019
Series


 


During
the six months ended February 28, 2021, 2019 Series convertible debentures with a principal amount of CAD$290,000 (2020 – CAD$3,263,010)
were converted into 38,666 units (2020 – 435,068), and as a result, the Company issued 38,666 common shares and 38,666 warrants
(2020 – 435,068 common shares and 435,068 warrants). The fair value of the convertible debentures at the time of conversion was
estimated using the binomial lattice model with the below assumptions:


 


Share
price of CAD$11.65 – $14.15 (2020 – CAD$10.95); term of 1.44 – 1.90 years (2020 – 2.43 and 2.52); conversion
price and warrant exercise price of CAD$7.50 (2020 – CAD$7.50); interest rate of 6% (2020 – 6%); expected volatility of 98.5%
– 179% (2020 – 171.62%); risk-free interest rate of 0.25% - 0.27% (2020 – 1.14%); exchange rate of 0.7651 – 0.7883
(2020 – 0.7456); and an expected dividend yield of 0% (2020 – 0%). The fair value assigned to these convertible debentures
was $338,114 (2020 – $2,779,292).


 


This
value was split between common shares and warrants as $183,879 (2020 – $1,170,060) and $154,265 (2020 – $1,609,232), respectively.


 


2020
Series


 


During
the six months ended February 28, 2021, 2020 Series convertible debentures with a principal amount of $11,276,393 (2020 – nil)
were converted or settled into 1,503,519 units, and as a result, the Company issued 1,503,519 common shares and 1,109,306 warrants. The
fair value of the convertible debentures at the time of conversion or settlement was estimated using the binomial lattice model with
the below assumptions:


 


Share
price of $7.79; term of 1.61 – 1.77 years; conversion price of $7.50; warrant exercise price of $15.00, interest rate of 10%; expected
volatility of 98.5%; risk-free interest rate of 0.12% - 0.13%; and an expected dividend yield of 0%. The fair value assigned to these
convertible debentures was $15,849,204.


 


This
value was split between common shares and warrants as $11,727,996 and $4,121,208, respectively.


 




    	Page 22 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	15.	Convertible
    debt (cont’d)


 


	(b)	Issuances
    during the period


 


During
the six months ended February 28, 2021, 2020 Series convertible debentures with a principal amount of $2,901,393 were issued for gross
proceeds of $2,901,393. In addition, in November 2020, $2,000,000 of convertible debentures from the Company’s standby convertible
debenture facility were issued along with 224,719 warrants for gross proceeds of $2,000,000 (Note 15(f)). Of the gross proceeds of $2,000,000,
$1,381,084 was allocated to the convertible debt and $618,916 was allocated to the 224,719 warrants issued (Note 15(f)). The total fair
value recorded to convertible debt for issuances above amounted to $4,282,477.


 


On
December 1, 2020, the EB Loan was amended (Note 14(c)). The amendment extended the maturity date by one year and added a conversion feature
to $1 million of the $5 million principal outstanding. The conversion feature allowed the holder to convert $1 million into common shares
of the Company at a conversion price of $11.25 per common share. On February 24, 2021, the Company extinguished the Amended EB Loan and
issued the Lender a convertible debenture in the principal amount of $5 million. The EB CD is convertible into units of the Company at
a conversion price of $10.25 per unit, with each unit comprised of one common share and one-half of a warrant, with each whole warrant
exercisable into a common share at an exercise price of $15.00 per share for a period of three years from the issuance of the EB CD.
The EB CD has a term of three years.


 


The
fair value of the Amended EB Loan on December 1, 2020 was $5,043,103. The carrying value of the former EB Loan on December 1, 2020, consisted
of $5 million in principal and 76,412 in accrued interest, for total carrying value on the amendment date of 5,076,412. As a result,
a gain on extinguishment of debt of $33,309 was recognized. The fair value of the EB CD on the date of issuance of February 24, 2021
was $7,394,022. The fair value of the Amended EB Loan on February 24, 2021 was $4,931,813. As a result, a loss on extinguishment of debt
of $2,462,209 was recognized. The above two transactions resulted in a loss on extinguishment of debt in the second quarter of $2,428,900.


 


	(c)	2019 Series




 


As
of February 28, 2021, the fair value of the 2019 Series convertible debentures was estimated using the binomial lattice model with the
below assumptions:


 


	2019 Series	 	February 28, 2021
 (CA$)	 	 	August 31, 2020
 (CA$)	 
	 	 	 	 	 	 	 
	Share price	 	 	14.15	 	 	 	11.65	 
	Conversion price	 	 	7.50	 	 	 	7.50	 
	Warrant exercise price	 	 	7.50	 	 	 	7.50	 
	 	 	 	 	 	 	 	 	 
	Term, in years	 	 	1.36 - 1.44 	 	 	 	1.85 - 1.94	 
	Interest rate	 	 	6	%	 	 	6	%
	Expected volatility	 	 	98.50	%	 	 	179.00	%
	Risk-free interest rate	 	 	0.26% - 0.27	%	 	 	0.25	%
	Exchange rate	 	 	0.7883	 	 	 	0.7651	 
	Expected
dividend yield	 	 	0	%	 	 	0	%






 




    	Page 23 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	15.	Convertible
    debt (cont’d)


 


	(d)	2020
    Series


 


The
2020 Series debentures will mature twenty-four (24) months from the date of issuance and bear interest at a rate of 5% per annum (subject
to adjustment as described below), payable on maturity. At the Company’s option, interest under the 2020 Series debentures is payable
in kind in common shares at an issue price which would be based on the trading price of the common shares at the time of such interest
payment. The interest rate under the 2020 Series debentures will increase from 5% to 10% per annum on a prospective basis on December
19, 2020, if a public offering has not occurred by that date.


 


The
2020 Series debenture holders may convert all or a portion of the principal amount of the debentures into units (“Units”)
of the Company at a price (the “Conversion Price”) equal to the lesser of (a) $11.25 per Unit, and (b) if such conversion
occurs after a public offering of securities by the Company (the “Public Offering”), a fifteen percent (15%) discount to
the public offering price, provided that such conversion price shall not be less than $7.50 per Unit.


 


Notwithstanding
the foregoing, if by December 19, 2020, the Company has not obtained registration rights in the United States to allow sale in
the United States of the common shares (“Common Shares”) of the Company and the exercise of warrants (the “Warrants”)
of the Company to be issued pursuant to the conversion of the 2020 Series debentures, holders of 2020 Series debentures may convert
such debentures into Units at $7.50 per Unit. As of February 28, 2021, the Company had not obtained registration rights in
the United States. As such, the conversion price is $7.50 per Unit and the interest rate increased to 10% on December 19, 2020. 


 


Each
Unit is comprised of one common share and one-half of one Warrant, with each Warrant exercisable into one common share of the Company
at an exercise price of $15.00 per share for a period of three years from the issuance of the 2020 Series debentures. Under certain circumstances,
the Company shall be entitled to call for the exercise of any outstanding Warrants in the event that the closing trading price of the
Company common shares on the NASDAQ is above $30.00 per share for fifteen (15) consecutive trading days.


 


In
the event that the Company’s common shares are listed for trading on the NASDAQ Capital Market and the Company completes a Public
Offering for an aggregate amount of at least US$30,000,000, the Company may cause the 2020 Series debentures to be converted at the Conversion
Price by the Company delivering a notice to the holder not less than a minimum of 30 days and a maximum 60 days prior to the forced conversion
date.


 


	(e)	2020
    Series - One Up


 


These
convertible debentures (the “2020 Series One Up” debentures) have identical terms as the 2020 Series debentures except that
the minimum conversion price of $7.50 per Unit (as described above) will be US$9.50 per Unit. The 2020 Series One Up convertible debentures
had a fair value at issuance of $3,078,550.


 


	(f)	2020
    Series – Standby


 


In
September 2020, the Company entered into an $8,000,000 stand-by convertible debenture facility (the “2020 Series Standby”
debentures). The 2020 Series Standby Debenture has substantially similar terms as the 2020 Series debentures, except the following: (i)
the references to a minimum $7.50 conversion price (as described above) have been changed to $8.90; and (ii) the 2020 Series Standby
debentures are only convertible into common shares of the Company, not units. In November 2020, the Company issued 224,719 warrants in
connection with this first draw of $2,000,000 of the Standby Debentures, with each warrant exercisable into one common share the Company
at an exercise price of $15.00 per share for a period of two years, subject to the same acceleration clause as the warrants underlying
the 2020 Series debentures.


 




    	Page 24 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 






 





	15.	Convertible
    debt (cont’d)


 


	(f)	2020
    Series – Standby (cont’d)


 


The
proceeds of $2,000,000 from the first draw were allocated between convertible debt and warrant liability with $1,381,084 allocated to
convertible debt and $618,916 allocated to the 224,719 warrants issued. The remaining $6,000,000 of convertible debentures that are issuable
under this facility have substantially similar terms as the 2020 Series debentures, including conversion into units consisting of one
share and one-half warrant, provided that the conversion price of any additional convertible debentures will be based on the market price
of the common shares at the time of such subscriptions and are subject to TSX-V approval.


 


As
of February 28, 2021, the fair value of the 2020 Series convertible debentures was estimated using the binomial lattice model with the
below assumptions:


 


	2020 Series	 	February 28, 2021
 (US$)	 	 	 August 31, 2020 
 (US$)	 
	 	 	 	 	 	 	 
	Share price	 	 	11.14	 	 	 	8.92	 
	Conversion price	 	 	7.50 - 8.90 	 	 	 	7.50 - 9.50 	 
	Warrant exercise price	 	 	15.00	 	 	 	15.00	 
	 	 	 	 	 	 	 	 	 
	Term, in years	 	 	1.47 - 1.73	 	 	 	1.97 - 1.98	 
	Interest rate	 	 	10	%	 	 	5% and 10%	 
	Expected volatility	 	 	98.50	%	 	 	200.00	%
	Risk-free interest rate	 	 	0.11% - 0.12%	 	 	 	0.14	%
	Expected dividend yield	 	 	0	%	 	 	0	%



 


	(g)	EB
    CD





 


On
February 24, 2021, the Company extinguished the Amended EB Loan and issued the Lender a convertible debenture in the principal amount
of $5 million (the “EB CD”). The EB CD is convertible into units of the Company at a conversion price of $10.25 per unit,
with each unit comprised of one common share and one-half of a warrant, with each whole warrant exercisable into a common share at an
exercise price of $15.00 per share for a period of three years from the issuance of the EB CD. The EB CD has a term of three years. As
of February 28, 2021, the fair value of the EB CD convertible debenture was estimated using the binomial lattice model with the below
assumptions:


 





	EB CD	 	February 28, 2021
 (US$)	 	 	 August 31, 2020 
 (US$)	 
	 	 	 	 	 	 	 
	Share price	 	 	11.14	 	 	 	-	 
	Conversion price	 	 	10.25	 	 	 	-	 
	Warrant
exercise price 	 	 	15.00	 	 	 	        -	 
	 	 	 	 	 	 	 	 	 
	Term, in years	 	 	2.99	 	 	 	-	 
	Interest rate	 	 	10	%	 	 	-	 
	Expected volatility	 	 	98.50	%	 	 	-	 
	Risk-free interest rate	 	 	0.30	%	 	 	-	 
	Expected
dividend yield	 	 	0	%	 	 	-	 



 




    	Page 25 of 47



     


    

 








	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	16.	Long-term
    debt


 


The
Company has an unsecured, non-interest bearing loan that matures on June 30, 2022. The loan bears interest at 0% per annum. As of February
28, 2021, the present value of the loan was $143,988 (August 31, 2020 – $230,932), accretion having been charged to interest expense
on the Company’s consolidated statements of loss and comprehensive loss for six months ended February 28, 2021 of $18,738 (February
29, 2020 – $4,091). A discount rate of 10% was used (August 31, 2020 – 10%).


 


Scheduled
repayments are: € 90,000 ($108,891) and € 45,000 ($54,446) between 0 – 12 months and 12 – 24 months, respectively,
from February 28, 2021.


 


	17.	Warrant
    liability


 


The
following table reflects the continuity of the Company’s warrant liability for the six months ended February 28, 2021 and February
29, 2020:


 


	 	 	Amount	 
	 	 	$	 
	 	 	 	 
	Balance at August 31, 2019	 	 	296,795	 
	Issued on conversion of convertible debt	 	 	1,609,232	 
	Issued in private placement of units	 	 	218,163	 
	Exercised	 	 	(1,895	)
	Change in fair value	 	 	1,131,886	 
	Foreign exchange	 	 	136,969	 
	Balance at February 29, 2020 	 	 	3,391,150	 
	 	 	 	 	 
	Balance at August 31, 2020	 	 	14,135,321	 
	Issued on conversion of convertible debt	 	 	4,275,473	 
	Issued in private placement of convertible debentures	 	 	618,916	 
	Issued in private placement of units	 	 	6,603,243	 
	Exercised	 	 	(109,003	)
	Change in fair value	 	 	5,614,927	 
	Foreign exchange	 	 	281,619	 
	Balance at February 28, 2021 	 	 	31,420,496	 



 




    	Page 26 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








The
following table reflects the continuity of the Company’s outstanding warrants for the six months ended February 28, 2021 and February
29, 2020:


 


	 	 	Number of	 	 	 	 	 	Weighted-average exercise price	 
	 	 	warrants	 	 	CAD	 	 	USD	 
	 	 	#	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Outstanding, August 31, 2019 	 	 	29,317	 	 	 	458.40	 	 	 	344.85	 
	Issued	 	 	464,135	 	 	 	8.70	 	 	 	6.45	 
	Issued on acquisition of UMG	 	 	9,944	 	 	 	214.05	 	 	 	159.45	 
	Exercised	 	 	(625	)	 	 	7.50	 	 	 	5.55	 
	Expired	 	 	(11,145	)	 	 	1,026.45	 	 	 	764.40	 
	Oustanding as at February 29, 2020 	 	 	491,626	 	 	 	16.05	 	 	 	12.00	 



 


	17.	Warrant
    liability (cont’d)


 


	 	 	Number of	 	 	 	 	 	Weighted-average exercise price	 
	 	 	warrants	 	 	CAD	 	 	USD	 
	 	 	 	#	 	 	 	$	 	 	 	 $ 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Outstanding, August 31, 2020 	 	 	2,405,369	 	 	 	9.60	 	 	 	7.36	 
	Issued on conversion of convertible debt	 	 	1,147,972	 	 	 	18.72	 	 	 	14.69	 
	Issued in private placement of convertible debentures	 	 	224,719	 	 	 	19.12	 	 	 	15.00	 
	Issued in private placement of units	 	 	2,185,885	 	 	 	19.12	 	 	 	15.00	 
	Exercised	 	 	(37,991	)	 	 	8.72	 	 	 	6.85	 
	Expired	 	 	(430	)	 	 	153.81	 	 	 	120.69	 
	Oustanding as at February 28, 2021 	 	 	5,925,524	 	 	 	15.23	 	 	 	11.95	 



 




    	Page 27 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








The
following table reflects the warrants issued and outstanding as of February 28, 2021:


 





	 	 	 	 	 	Warrants outstanding	 	 	 	 	 	Warrants exercisable	 
	 	 	Number	 	 	Average exercise price	 	 	Average remaining contractual	 	 	Weighted number	 	 	Weighted number

 exercisable price	 
	Expiry date	 	 outstanding	 	 	CAD	 	 	USD	 	 	life (years)
	 	 	 exercisable	 	 	CAD	 	 	USD	 
	10-May-21	 	 	249,589	 	 	$	9.75	 	 	$	7.65	 	 	 	0.19	 	 	 	249,589	 	 	$	9.75	 	 	$	7.65	 
	15-May-21	 	 	266,957	 	 	 	9.75	 	 	 	7.65	 	 	 	0.21	 	 	 	266,957	 	 	 	9.75	 	 	 	7.65	 
	22-May-21	 	 	394,671	 	 	 	9.75	 	 	 	7.65	 	 	 	0.23	 	 	 	394,671	 	 	 	9.75	 	 	 	7.65	 
	11-Jul-21	 	 	3,955	 	 	 	205.20	 	 	 	161.02	 	 	 	0.36	 	 	 	3,955	 	 	 	205.20	 	 	 	161.02	 
	13-Mar-22	 	 	123,159	 	 	 	10.50	 	 	 	8.24	 	 	 	1.04	 	 	 	123,159	 	 	 	10.50	 	 	 	8.24	 
	20-Nov-22	 	 	224,719	 	 	 	19.12	 	 	 	15.00	 	 	 	1.73	 	 	 	224,719	 	 	 	19.12	 	 	 	15.00	 
	20-Dec-22	 	 	29,066	 	 	 	27.00	 	 	 	21.19	 	 	 	1.81	 	 	 	29,066	 	 	 	27.00	 	 	 	21.19	 
	20-Mar-23	 	 	27,777	 	 	 	13.50	 	 	 	10.59	 	 	 	2.05	 	 	 	27,777	 	 	 	13.50	 	 	 	10.59	 
	30-Mar-23	 	 	46,909	 	 	 	13.50	 	 	 	10.59	 	 	 	2.08	 	 	 	46,909	 	 	 	13.50	 	 	 	10.59	 
	31-Mar-23	 	 	17,222	 	 	 	13.50	 	 	 	10.59	 	 	 	2.08	 	 	 	17,222	 	 	 	13.50	 	 	 	10.59	 
	27-May-23	 	 	130,304	 	 	 	13.50	 	 	 	10.59	 	 	 	2.24	 	 	 	130,304	 	 	 	13.50	 	 	 	10.59	 
	8-Jan-24	 	 	1,775,366	 	 	 	19.12	 	 	 	15.00	 	 	 	2.86	 	 	 	1,775,366	 	 	 	19.12	 	 	 	15.00	 
	22-Jan-24	 	 	476,482	 	 	 	19.12	 	 	 	15.00	 	 	 	2.90	 	 	 	476,482	 	 	 	19.12	 	 	 	15.00	 
	24-Feb-24	 	 	1,006,677	 	 	 	19.12	 	 	 	15.00	 	 	 	2.99	 	 	 	1,006,677	 	 	 	19.12	 	 	 	15.00	 
	8-Jul-24	 	 	445,982	 	 	 	7.50	 	 	 	5.89	 	 	 	3.36	 	 	 	445,982	 	 	 	7.50	 	 	 	5.89	 
	25-Jul-24	 	 	386,890	 	 	 	7.50	 	 	 	5.89	 	 	 	3.41	 	 	 	386,890	 	 	 	7.50	 	 	 	5.89	 
	8-Aug-24	 	 	283,133	 	 	 	7.50	 	 	 	5.89	 	 	 	3.44	 	 	 	283,133	 	 	 	7.50	 	 	 	5.89	 
	19-Aug-24	 	 	36,666	 	 	 	19.12	 	 	 	15.00	 	 	 	3.47	 	 	 	36,666	 	 	 	19.12	 	 	 	15.00	 
	 	 	 	5,925,524	 	 	$	15.23	 	 	$	11.95	 	 	 	2.47	 	 	 	5,925,524	 	 	$	15.23	 	 	$	11.95	 



 





As
of February 28, 2021, the fair value of the 5,925,524 warrants outstanding (August 31, 2020 – 2,405,369) was determined to be $31,420,496
(August 31, 2020 – $14,135,321) as calculated using the Black Scholes option pricing model with the following range of assumptions:
0.19 – 3.47 years (August 31, 2020 – 0.23 – 3.94) as expected average life; share price of CAD$14.15 (August 31, 2020
– CAD$11.65); exercise price of CAD$7.50 – CAD$205.20 (August 31, 2020 – CAD$7.50 – CAD$205.20); 70% - 136% expected
volatility (August 31, 2020 – 115% - 136%); risk free interest rate of 0.13% - 0.53% (August 31, 2020 – 0.23% - 0.32%); and
an expected dividend yield of 0%.


 


If
all warrants outstanding and exercisable as of February 28, 2021 were exercised, the Company would receive cash from exercise of approximately
$73.7 million.


 


	17.	Warrant
    liability (cont’d)


 


	(a)	Warrants
    exercised during the period


 


During
the six months ended February 28, 2021, the holders of 37,991 warrants exercised their right to convert the warrants into the Company’s
common shares at an exercise price of CAD$7.50 - $9.75. As a result of the underlying exercise of warrants, the Company received $258,156
in cash proceeds and the intrinsic value of the underlying warrants at the date of exercise of $109,003 was transferred to share capital,
for a total addition to share capital of $367,159.


 




    	Page 28 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	(b)	Warrants
    issued during the period


 


During
the six months ended February 28, 2021, the Company issued 1,147,972 warrants (February 29, 2020 – 435,068) in connection with
conversion of convertible debt (Note 15(a)), 224,719 warrants (February 29, 2020 – nil) in connection with the private placement
of convertible debentures (Note 15(f)) and 2,377,272 warrants (February 29, 2020 – 29,067) in connection with the private placement
of units (Note 18(c)), for a total number of 3,749,963 warrants issued (February 29, 2020 – 464,135).


 


	(c)	Warrants issued on conversion of convertible
debt




 


2019
Series


 


During
the six months ended February 28, 2021 the Company issued 38,666 warrants (February 29, 2020 – 435,068) in conjunction with the
conversion of convertible debt. The fair value of the 38,666 warrants (February 29, 2020 – 435,068) issued was determined to be
$154,265 (February 29, 2020 – $1,609,232) as calculated using the Black Scholes option pricing model with the following assumptions:


 


A
3.49 – 3.90 years as expected average life (February 29, 2020 – 4.56 to 4.91); share price of CAD$9.50 – $11.51 (February
29, 2020 – CAD$19.35 – 25.65); exercise price of CAD$7.50 (February 29, 2020 – CAD$7.50); 98.5% - 136% expected volatility
(February 29, 2020 – 136%); risk free interest rate of 0.25% - 0.30% (February 29, 2020 – 1.64% and 1.71%); and an expected
dividend yield of 0% (February 29, 2020 – 0%).


 


Volatility
is calculated using a weighted approach based on the changes in the Company’s historical stock price. The final fair value allocated
to the warrants on conversion of convertible debt is based on a relative fair value allocation between the common shares issued and warrants
issued on conversion.


 


2020
Series


 


During
the six months ended February 28, 2021 the Company issued 1,109,306 warrants (February 29, 2020 – nil) in conjunction with the
conversion of convertible debt. The fair value of the 1,109,306 warrants issued was determined to be $4,121,208 as calculated using the
Black Scholes option pricing model with the following assumptions:


 


A
3.00 – 3.48 years as expected average life; share price of $7.79 – $11.17; exercise price of $15.00; 98.5% expected volatility;
risk free interest rate of 0.29% - 0.57%; and an expected dividend yield of 0%.


 


Volatility
is calculated using a weighted approach based on the changes in the Company’s historical stock price. The final fair value allocated
to the warrants on conversion of convertible debt is based on a relative fair value allocation between the common shares issued and warrants
issued on conversion.


 




    	Page 29 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 








	17.	Warrant
    liability (cont’d)


 


	(d)	Warrants
    issued on private placement of standby convertible debentures


 


During
the six months ended February 28, 2021 the Company issued 224,719 warrants in connection with the private placement of convertible debentures
under its standby convertible debenture facility (Note 15(f)).


 


	(e)	Warrants
    issued on private placement of units


 


During
the six months ended February 28, 2021 the Company issued 2,377,272 warrants (February 29, 2020 – 29,067) in conjunction with the
private placement of units. Of the 2,377,272 warrants issued, 191,387 were issued to finders as fees for services. The fair value of
warrants issued to finders are recorded within contributed surplus at fair value on the date of issuance. The remaining 2,185,885 warrants
issued for proceeds are reflected within warrant liability. The fair value of the 2,377,272 warrants issued (February 29, 2020 –
29,067) was determined to be $7,373,806 (February 29, 2020 – $218,163) as calculated using the Black Scholes option pricing model
with the following assumptions:


 


A
3.00 years as expected average life (February 29, 2020 – 3.00); share price of $7.79 – $10.00 (February 29, 2020 –
CAD$18.45); exercise price of $15.00 (February 29, 2020 – CAD$27.00); 98.5% expected volatility (February 29, 2020 – 136%);
risk free interest rate of 0.29% - 0.43% (February 29, 2020 – 1.72%); and an expected dividend yield of 0% (February 29, 2020 –
0%).


 


Of
the $7,373,806 total fair value, $6,603,243 was the fair value of the 2,185,885 warrants issued for proceeds, and recorded within warrant
liability, with $770,563 being the fair value of the 191,387 warrants issued to finders and recorded within contributed surplus.


 


Volatility
is calculated using a weighted approach based on the changes in the Company’s historical stock price. The final fair value allocated
to the warrants on the issuance of the units is based on a relative fair value allocation between the common shares issued and warrants
issued.


 


	18.	Share
    capital


 


	(a)	Authorized


 


The
Company is authorized to issue an unlimited number of common shares and an unlimited number of preference shares.


 


	(b)	Issued
    and outstanding, common shares


 


	 	 	Shares	 	 	Consideration	 
	 	 	#	 	 	$	 
	 	 	 	 	 	 	 
	Balance, August 31, 2019 	 	 	156,440	 	 	 	29,613,406	 
	Convertible debt conversion	 	 	435,068	 	 	 	1,170,060	 
	Common shares issued on private placement, net of costs	 	 	58,133	 	 	 	592,028	 
	Common shares issued on exercise of warrants	 	 	625	 	 	 	5,437	 
	Common shares issued on acquisition of UMG	 	 	288,561	 	 	 	3,965,823	 
	Balance, February 29, 2020 	 	 	938,827	 	 	 	35,346,754	 



 




    	Page 30 of 47



     


    

 





	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 






 





	18.	Share
    capital (cont’d)


 


	(b)	Issued
    and outstanding, common shares (cont’d)


 





	   	   	 Shares 	   	   	 Consideration 	   
	   	   	 # 	   	   	 $ 	   
	   	   	   	   	   	   	   
	 Balance, August 31, 2020 	   	   	 7,746,136 	   	   	   	 69,380,807 	   
	 Shares issued on vesting of RSUs 	   	   	 142,610 	   	   	   	 970,366 	   
	 Convertible debt conversion 	   	   	 1,542,184 	   	   	   	 11,911,875 	   
	 Common shares issued on private placement, net of costs 	   	   	 4,435,433 	   	   	   	 24,225,901 	   
	 EB bonus shares 	   	   	 6,666 	   	   	   	 54,061 	   
	 Shares for debt 	   	   	 40,000 	   	   	   	 226,556 	   
	 Common shares issued on exercise of warrants 	   	   	 37,991 	   	   	   	 367,159 	   
	 Balance, February 28, 2021 	   	   	 13,951,020 	   	   	   	 107,136,725 	   


 





	(c)	Activity
    for the period


 


Private
Placement of units


 


In
January and February 2021, the Company closed on the issuance of 4,371,767 units (the “Units”) for gross proceeds of $32,788,253
of non-brokered private placements. Each Unit consists of one common share of the Company and one-half of one common share purchase warrant
(a “Warrant”). Each whole Warrant entitles the holder to acquire one additional share of the Company at a price of $15.00
per share for a period of 3 years provided that: (i) if the common shares are listed for trading on NASDAQ, (ii) the Company completes
an offering of securities under a short form prospectus for an aggregate amount of at least $30,000,000, and (iii) the closing price
of the common shares on NASDAQ is $30.00 or greater for a period of 15 consecutive trading days, then the Company may accelerate the
expiry date of the Warrants to the 30th day after the date written notice is provided to the holders.


 


The
Company paid cash commissions to eligible finders under the offering of $1,681,477 and regulatory and legal fees of $89,402. Net cash
proceeds from the offering amounted to $31,017,374.


 


In
addition to the cash finder’s fees discussed above, the Company issued the following securities as partial payment of commissions
to finders: 63,666 Units; and, 159,554 finders warrants, with each finder warrant exercisable into a common share at an exercise price
of US$15.00 per share for 3 years subject to the same acceleration terms described above.


 


The
total number of common shares issued as a result of the private placements totaled 4,435,433, which was comprised of 4,371,767 Units
issued for proceeds and 63,666 Units issued as partial payment to finders. The total number of warrants issued totaled 2,377,272, which
was comprised of warrants issued as part of the Units issued of 2,217,718 (50% of Units issued) and 159,554 finders warrants issued.


 


The
total amount recorded to shareholder’s equity (deficit) resulting from the private placements of Units amounted to $24,225,901.
This amount is comprised of the following: (i) $26,185,009 allocated to the common shares issued of total gross proceeds of $32,788,253,
with $6,603,244 being allocated to the warrants; plus (ii) $383,720 allocated to the common shares issued of total fair value of finder’s
Units of $477,495, with $93,775 being allocated to the warrants; less share issue costs totaling $2,925,161 comprised of the following;
(i) total fair value of finder’s Units of $477,495; plus (ii) total fair value of finder’s warrants of $676,787; plus (iii)
cash finder’s fees of $1,681,477; plus (iv) regulatory and legal fees of $89,402; less (v) portion of total share issuance
costs allocated to the warrants issued of $582,333. As the warrants issued are accounted for at FVTPL, these share issuance costs were
recorded within transaction costs on the Statements of Loss and Comprehensive Loss. 


 




    	Page 31 of 47



     


    




 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	


 





 



 





	18.	Share
    capital (cont’d)


 


	(c)	Activity
    for the period (cont’d)


 


Private
Placement of units (cont’d)


 


The
total amount recorded to warrant liability resulting from the private placements of Units amounted to $7,373,806. This is comprised of
the allocation of gross proceeds of $6,603,244, finder’s Units issued of $93,775 and fair value of finder’s warrants of $676,787.


 


The
fair value allocated between the common shares and warrants on the issuance of the Units is based on a relative fair value allocation
between the common shares issued and warrants issued. Refer to warrant liability note for discussion of the key assumptions used in valuation
of the warrants as part of the relative fair value allocation.


 


Other
activity


 


During
the six months ended February 28, 2021, the Company had the following additional activity to share capital: (i) issued 142,610 common
shares upon vesting of an equal number of RSUs (Note 20); (ii) issued 1,542,184 common shares in connection with conversion of convertible
debt (Note 15(a)), (iii) issued 37,991 common shares in connection with the exercise of warrants (Note 17(a)); (iv) issued 40,000 common
shares for cancelation of $226,556 of debt (shares for debt); and (v) issued 6,666 common shares valued at $54,061 as an amendment fee
to the lender in connection with the Amended EB Loan (the “EB Bonus Shares”). In addition to the EB Bonus Shares, the Company
paid the lender a cash fee of $100,000. The amendment fees were recorded within interest expense as the Amended EB Loan and subsequent
EB CD is being accounted for at FVTPL.


 


	19.	Stock options




 


On
July 15, 2020, the Company adopted an amended and restated equity incentive plan (“Omnibus Plan”), which amends and restates
the equity incentive plan which was previously established as of October 9, 2019. Under the amendments, there were no changes in the
terms of previously issued awards. Under the Omnibus Plan, the total number of common shares reserved and available for grant and issuance
pursuant to awards shall not exceed 1,501,084 common shares.


 


Options
may be exercisable over periods of up to 10 years as determined by the Board of Directors of the Company and the exercise price shall
not be less than the closing price of the shares on the day preceding the award date, subject to regulatory approval.


 




    	Page 32 of 47



     


    

  


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



 





 



 


	19.	Stock options (cont’d)




 


The
following table reflects the continuity of stock options for the six months ended February 28, 2021 and February 29, 2020:


 


	 	 	 	 	 	Weighted-average	 	 	 	 
	 	 	Number of
 stock options	 	 	Exercise 
 price	 	 	Grant-date
 fair value	 	 	Remaining
 contractual 
 term	 
	 	 	#	 	 	$	 	 	$	 	 	(yrs.)	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2019	 	 	6,971	 	 	 	169.30	 	 	 	50.79	 	 	 	5.84	 
	Expired/Cancelled	 	 	(5,110	)	 	 	185.97	 	 	 	55.79	 	 	 	 	 
	Issued on acquisition of UMG	 	 	16,606	 	 	 	63.30	 	 	 	2.32	 	 	 	 	 
	Balance, February 29, 2020	 	 	18,467	 	 	 	69.37	 	 	 	5.83	 	 	 	2.04	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance, August 31, 2020	 	 	253,121	 	 	 	12.73	 	 	 	4.39	 	 	 	4.31	 
	Expired/Cancelled	 	 	(16,694	)	 	 	20.90	 	 	 	8.56	 	 	 	 	 
	Balance, February 28, 2021	 	 	236,427	 	 	 	12.15	 	 	 	4.39	 	 	 	3.51	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Vested and expected to vest, February 28, 2021	 	 	233,171	 	 	 	12.25	 	 	 	4.38	 	 	 	3.44	 
	Exerciseable as at February 28, 2021	 	 	203,899	 	 	 	13.22	 	 	 	4.27	 	 	 	2.68	 



 


The
following table reflects the stock options issued and outstanding as of February 28, 2021:


 


	Expiry date	 	Outstanding options	 	 	CAD	 	 	Weighted average exercise price USD	 	 	Weighted average remaining contractual term (Years)	 
	11-Jul-21	 	 	632	 	 	 	164.40	 	 	 	126.58	 	 	 	0.36	 
	15-Jul-21	 	 	9,490	 	 	 	41.10	 	 	 	31.64	 	 	 	0.38	 
	10-Dec-21	 	 	1,564	 	 	 	93.30	 	 	 	71.84	 	 	 	0.78	 
	30-Jun-22	 	 	4,428	 	 	 	153.45	 	 	 	118.15	 	 	 	1.33	 
	1-Apr-23	 	 	104,998	 	 	 	11.25	 	 	 	7.91	 	 	 	2.09	 
	31-Oct-23	 	 	64,997	 	 	 	11.25	 	 	 	7.91	 	 	 	2.67	 
	29-Jan-25	 	 	46	 	 	 	106.50	 	 	 	76.43	 	 	 	3.92	 
	25-Aug-25	 	 	340	 	 	 	106.50	 	 	 	76.43	 	 	 	4.49	 
	23-Sep-25	 	 	11	 	 	 	106.50	 	 	 	76.43	 	 	 	4.57	 
	10-Feb-26	 	 	1,443	 	 	 	106.50	 	 	 	76.43	 	 	 	4.95	 
	19-May-26	 	 	4	 	 	 	106.50	 	 	 	76.43	 	 	 	5.22	 
	23-May-26	 	 	9	 	 	 	106.50	 	 	 	76.43	 	 	 	5.23	 
	3-Mar-27	 	 	1,256	 	 	 	106.50	 	 	 	76.43	 	 	 	6.01	 
	31-Jul-27	 	 	159	 	 	 	106.50	 	 	 	76.43	 	 	 	6.42	 
	3-Nov-27	 	 	133	 	 	 	106.50	 	 	 	76.43	 	 	 	6.68	 
	7-Nov-29	 	 	46,251	 	 	 	7.50	 	 	 	5.38	 	 	 	8.70	 
	20-Apr-30	 	 	666	 	 	 	7.05	 	 	 	5.06	 	 	 	9.15	 
	 	 	 	236,427	 	 	 	16.69	 	 	 	12.15	 	 	 	3.51	 



 




    	Page 33 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



  





 



 



	19.	Stock options (cont’d)




 


Of
the 236,427 options outstanding as of February 28, 2021 (August 31, 2020 – 253,121), 203,899 are exercisable as of February 28,
2021 (August 31, 2020 – 191,730). During the six months ended February 28, 2021, share-based compensation expense for the Company’s
stock options was $70,118 (February 29, 2020 – $16,914).


 


	20.	Restricted share units




 


The
Omnibus Plan allows the Company to award restricted share units to officers, employees, directors and consultants of the Company and
its subsidiaries upon such conditions as the board may establish, including the attainment of performance goals recommended by the Company’s
compensation committee. The purchase price for common shares of the Company issuable under each Restricted Share Unit (“RSU”)
award, if any, shall be established by the board at its discretion. Common shares issued pursuant to any RSU award may be made subject
to vesting conditions based upon the satisfaction of service requirements, conditions, restrictions, time periods or performance goals
established by the board.


 


The
TSXV requires the Company to fix the number of common shares to be issued in settlement of awards that are not options. The maximum number
of common shares available for issuance pursuant to the settlement of RSUs shall be an aggregate of 750,542 common shares.


 


The
Company’s outstanding RSUs are as follows:


 


	 	 	Number	 
	 	 	#	 
	 	 	 	 
	Balance, August 31, 2019 and February 29, 2020	 	 	-	 
	 	 	 	 	 
	Balance, August 31, 2020	 	 	402,372	 
	Granted	 	 	322,547	 
	Vested	 	 	(142,610	)
	Cancelled	 	 	-	 
	Balance, February 28, 2021	 	 	582,309	 



 


In
November 2020, the Company granted 322,547 RSUs pursuant to the Company’s incentive plan to a former officer and key management
employees. The fair value of these RSUs was estimated based on the closing price of CAD$8.85 – CAD$9.82 for a total fair value
on date of grant of CAD$3,130,180. Of the 322,547 RSUs granted, 75,944 were severance compensation to a former officer. As these RSUs
were issued as severance compensation, the grant date fair value of CAD$713,874 ($550,896) was recognized on the grant date. The fair
value of the remaining RSUs will be recognized as stocked-based compensation expense over the vesting period, which is generally three
years.


 


During
the six months ended February 28, 2021, share-based compensation expense for the Company’s RSUs was $1,708,515 (February 29, 2020
– $nil).


 




    	Page 34 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



 





 



 



	21.	Capital management




 


The
Company considers its capital to be its shareholders’ equity.


 


As
of February 28, 2021, the Company had shareholders’ equity before non-controlling interests of $5,110,499 (August 31, 2020 –
$45,907).


 


The
Company’s objective when managing its capital is to seek continuous improvement in the return to its shareholders while maintaining
a moderate to high tolerance for risk. The objective is achieved by prudently managing the capital generated through internal growth
and profitability, through the use of lower cost capital, including raising share capital or debt when required to fund opportunities
as they arise.


 


The
Company may also return capital to shareholders through the repurchase of shares, pay dividends or reduce debt where it determines any
of these to be an effective method of achieving the above objective. The Company does not use ratios in the management of its capital.
There have been no changes to management’s approach to managing its capital during the three and six months ended February 28,
2021 and February 29, 2020.


 


	22. 	Commitments and contingencies




 


	(a)	Royalty expenses




 


Royalty
expenses relate to royalties paid to intellectual property rights holders for use of their trademarks, copyrights, software, technology
or other intellectual property or proprietary rights in the development or sale of the Eden Games’ products. Eden Games has royalty
agreements to utilize trademarks, copyrights, software, technology or other intellectual property or proprietary rights in the development
or sale of its products. Eden Games has committed to pay royalties ranging from 4% to 25% of revenues after certain thresholds have been
met, in connection with the underlying license agreements. Royalty expenses were €nil for the three and six months ended February
28, 2021 and February 29, 2020.


 


	(b)	Consulting contracts




 


Under
the terms of a consulting agreement dated July 27, 2017, the Company is committed to pay to certain employees of Eden Games, nine months’
severance in the event of termination, amounting to £144,500 ($175,911). If revenue from the Eden Games mobile app exceeds specified
amounts, a bonus shall be paid up to a maximum of £100,000 ($121,561) on an annual basis. As no triggering events have taken place
related to the contingencies to February 28, 2021, no provision has been made in these unaudited interim condensed consolidated financial
statements.


 


	(c)	Litigation and arbitration




 


In
April 2020, the Company announced its renegotiation of the acquisition of Allinsports. The revised purchase agreement provides for the
acquisition of 100% of Allinsports in exchange for the issuance of 966,667 common shares of the Company. The purchase agreement included
the requirement of $1.2 million to be advanced against the purchase price. In September 2020, the Company advised the shareholders of
Allinsports that closing conditions of the transaction, including the failure to provide audited financial statements, had not been satisfied.


 




    	Page 35 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



  





 



 



	22.	Commitments and contingencies (cont’d)




 


	(c)	Litigation and arbitration (cont’d)




 


In
response, in November 2020, the shareholders of Allinsports commenced arbitration in Alberta, Canada seeking, among other things, to
compel the Company to complete the acquisition of Allinsports without the audited financial statements, and to issue 966,667 common shares
of the Company to those shareholders. As alternative relief, the shareholders of Allinsports are seeking US$20,000,000 in damages. A
hearing in this matter was held in May of 2021, with related briefing and oral argument to occur in June and July of 2021.


 


Separately,
in April of 2021, the Company received a copy of a complaint filed by 3CI Holdings, LLP in the Circuit Court for the 11th
Judicial Circuit for Miami-Dade naming Allinsports, A1 Simulation LLC (an entity purported to be a subsidiary of Allinsports), and the
Company, seeking to hold the parties, including Company, responsible for unpaid rent under a lease agreement between 3CI’s predecessors
in interest and A1 Simulation, and seeking damages of at least $2.89 million. The Company does not believe that this action has merit.


 


On
January 21, 2021, eight former shareholders of Winview filed a Complaint in Delaware Chancery Court against four Winview directors (David
Lockton, et al. v. Thomas S. Rogers, et al.) alleging that the defendants breached their fiduciary duties in connection with the sale
of Winview to Engine. The relief sought includes rescission of the sale of Winview to Engine and compensatory damages. The Company does
not believe that the action has merit and neither the Company nor Winview have been named as parties to this action. Under the March
9, 2020 Business Combination Agreement pursuant to which the Company acquired Winview, the Company agreed to indemnify Winview’s
directors for any claims arising out of their service as directors for Winview.


 


The
Company is subject to various other claims, lawsuits and other complaints arising in the ordinary course of business. The Company records
provisions for losses when claims become probable and the amounts are estimable. Although the outcome of such matters cannot be determined,
it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s
financial condition, operations or liquidity.


 


	23.	Discontinued operations




 


On
November 3, 2020, the Company, following a detailed strategic review in connection with the merger of Torque Esports, Frankly and WinView,
announced that it has completed the sale of IDEAS+CARS, The Race Media, WTF1, Driver DataDB and Lets Go Racing (collectively the “Motorsport
Group”) to Ideas + Cars Holdings Limited, a third party investment group based in the UK. As a result, the Company is eliminating
its funding obligations related to the cost of maintaining and growing these auto media businesses and certain accrued liabilities. Accordingly,
the operational results for this group have been presented as a discontinued operation.


 




    	Page 36 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



  





 



 



	23.	Discontinued operations (cont’d)




 


Consideration
transferred for the Motorsport Group was as follows:


 


	 	 	Amount	 
	 	 	$	 
	Consideration received or receivable:	 	 	 	 
	Accounts payable assumed	 	 	101,322	 
	Deferred purchase consideration of LGR	 	 	333,503	 
	Fair value of contingent consideration	 	 	1,321,281	 
	Total disposal consideration	 	 	1,756,106	 
	Carrying amount of net assets sold	 	 	(2,334,303	)
	Loss on disposal before income tax and reclassification of foreign currency translation reserve	 	 	(578,197	)
	 	 	 	 	 
	Reclassification of foreign currency translation reserve	 	 	(100,734	)
	Loss on disposal of Motorsports	 	 	(678,931	)



 


The
net assets of the Motorsport Group as of the date of sale were as follows:


 


	 	 	Amount	 
	 	 	$	 
	Carrying amounts of assets as at the date of sale:	 	 	 	 
	Cash and cash equivalents	 	 	(24,348	)
	Restricted cash	 	 	-	 
	Accounts and other receivables	 	 	126,590	 
	Government remittances	 	 	25,095	 
	Prepaid expenses and other	 	 	24,113	 
	Property and equipment	 	 	47,416	 
	Intangible assets	 	 	3,066,457	 
	Total assets of disposal group	 	 	3,265,323	 
	 	 	 	 	 
	Carrying amount of liabilities directly associated with assets as at the date of sale:	 	 	 	 
	Accounts payable and accrued liabilities	 	 	931,020	 
	Total liabilities of disposal group	 	 	931,020	 
	 	 	 	 	 
	Net assets of disposal group	 	 	2,334,303	 



 




    	Page 37 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



  





 



 



	23.	Discontinued operations (cont’d)




 


The
operating results and net cash flows of the Motorsports Group and PGL Nevada, (together, the “discontinued operations”) for
the three and six months ended February 28, 2021 and February 29, 2020 are presented as discontinued operations as follows:


 


	 	 	For the three months ended	 	 	For the six months ended	 
	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Advertising revenue	 	 	-	 	 	 	38,522	 	 	 	90,934	 	 	 	38,522	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Salaries and wages	 	 	-	 	 	 	199,082	 	 	 	212,546	 	 	 	272,675	 
	Consulting	 	 	-	 	 	 	171,778	 	 	 	267,933	 	 	 	198,814	 
	Professional fees	 	 	-	 	 	 	66,358	 	 	 	22,681	 	 	 	104,667	 
	Sponsorships and tournaments	 	 	-	 	 	 	612,612	 	 	 	203,637	 	 	 	2,441,199	 
	Advertising and promotion	 	 	-	 	 	 	2,531	 	 	 	1,740	 	 	 	12,114	 
	Office and general	 	 	-	 	 	 	66,523	 	 	 	7,374	 	 	 	122,026	 
	Technology expenses	 	 	-	 	 	 	7,588	 	 	 	86,590	 	 	 	7,620	 
	Amortization and depreciation	 	 	-	 	 	 	2,623	 	 	 	201,335	 	 	 	4,238	 
	Share-based payments	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Interest expense	 	 	-	 	 	 	314	 	 	 	572	 	 	 	258	 
	(Gain) loss on foreign exchange	 	 	2,970	 	 	 	2,992	 	 	 	39,711	 	 	 	(4,446	)
	Net loss from discontinued operations	 	 	(2,970	)	 	 	(1,093,879	)	 	 	(953,185	)	 	 	(3,120,643	)



 


	 	 	For the three months ended	 	 	For the six months ended	 
	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net cash provided by (used in) operating activities	 	 	(125	)	 	 	28,331	 	 	 	(92,652	)	 	 	(79,068	)
	Disposal of Motorsports	 	 	-	 	 	 	-	 	 	 	24,348	 	 	 	-	 
	Change in cash	 	 	(125	)	 	 	28,331	 	 	 	(68,304	)	 	 	(79,068	)
	Cash, beginning of period	 	 	125	 	 	 	(27,846	)	 	 	68,304	 	 	 	79,553	 
	Cash, end of period	 	 	-	 	 	 	485	 	 	 	-	 	 	 	485	 



 


	24.	Segmented information




 


Information
reported to the Company’s Chief Executive Officer, the Chief Operating Decision Maker (“CODM”), for the purposes of
resource allocation and assessment of segment performance is focused on the category of services for each type of activity. The principal
categories of services are E-Sports, Media and Advertising, and Corporate and Other. The Group’s reportable segments under IFRS
8 are therefore as follows:


 


	 	E-Sports	-	Services
    related to competitive organized video gaming or sporting events;
	 	Media
    and Advertising	-	Platform
    and advertising services provided to other broadcasters, primarily 
	 	 	 	local
    TV and radio broadcasters;
	 	Corporate
    and Other	-	Services
    provided to other businesses and other revenues;


 


The
Corporate and Other segment primarily consists of support costs not allocated to the two other segments.


 




    	Page 38 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



  





 



 



	24.	Segmented information (cont’d)




 


The
following is an analysis of the Company’s revenue and results by reportable segment for the three months ended February 28, 2021:


 





	 Three months ended 	   	 E-Sports 	   	   	 Media and
 Advertising 	   	   	 Corporate
 and Other 	   	   	 28-Feb-21
 Total 	   
	   	   	 $ 	   	   	 $ 	   	   	 $ 	   	   	 $ 	   
	 Revenue 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 External sales 	   	   	 1,192,474 	   	   	   	 7,195,406 	   	   	   	 - 	   	   	   	 8,387,880 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Results 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Segment loss 	   	   	 (2,093,966 	 ) 	   	   	 (2,232,357 	 ) 	   	   	 - 	   	   	   	 (4,326,323 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Central administration costs 	   	   	 - 	   	   	   	 - 	   	   	   	 2,505,264 	   	   	   	 2,505,264 	   
	 Other gains and losses 	   	   	 (11,537 	 ) 	   	   	 2,808,032 	   	   	   	 17,169,379 	   	   	   	 19,965,874 	   
	 Finance costs 	   	   	 45,231 	   	   	   	 325,054 	   	   	   	 202,192 	   	   	   	 572,477 	   
	 Loss before tax 	   	   	 (2,127,660 	 ) 	   	   	 (5,365,443 	 ) 	   	   	 (19,876,835 	 ) 	   	   	 (27,369,938 	 ) 
	 Income tax 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   
	 Gain (Loss) for the year from: 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Share of net loss of associate 	   	   	 - 	   	   	   	 - 	   	   	   	 (37,244 	 ) 	   	   	 (37,244 	 ) 
	 Discontinued operations 	   	   	 (2,970 	 ) 	   	   	 - 	   	   	   	 - 	   	   	   	 (2,970 	 ) 
	 Non-controlling interest in net loss 	   	   	 - 	   	   	   	 - 	   	   	   	 30,640 	   	   	   	 30,640 	   
	 Net loss 	   	   	 (2,130,630 	 ) 	   	   	 (5,365,443 	 ) 	   	   	 (19,883,439 	 ) 	   	   	 (27,379,512 	 ) 


 




    	Page 39 of 47



     


    

 


	Engine
    Media Holdings, Inc.	 
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)



 





 



 



The
following is an analysis of the Company’s revenue and results by reportable segment for the six months ended February 28, 2021:


 





	 Six months ended 	   	 E-Sports 	   	   	 Media and
 Advertising 	   	   	 Corporate
 and Other 	   	   	 28-Feb-21
 Total 	   
	   	   	 $ 	   	   	 $ 	   	   	 $ 	   	   	 $ 	   
	 Revenue 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 External sales 	   	   	 1,955,415 	   	   	   	 13,898,856 	   	   	   	 - 	   	   	   	 15,854,271 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Results 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Segment loss 	   	   	 (4,791,404 	 ) 	   	   	 (3,624,952 	 ) 	   	   	 - 	   	   	   	 (8,416,356 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Central administration costs 	   	   	 - 	   	   	   	 - 	   	   	   	 5,815,053 	   	   	   	 5,815,053 	   
	 Other gains and losses 	   	   	 (13,889 	 ) 	   	   	 2,804,339 	   	   	   	 13,702,143 	   	   	   	 16,492,593 	   
	 Finance costs 	   	   	 104,802 	   	   	   	 512,044 	   	   	   	 363,721 	   	   	   	 980,567 	   
	 Loss before tax 	   	   	 (4,882,317 	 ) 	   	   	 (6,941,335 	 ) 	   	   	 (19,880,917 	 ) 	   	   	 (31,704,569 	 ) 
	 Income tax 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   
	 Gain (Loss) for the year from: 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Share of net loss of associate 	   	   	 - 	   	   	   	 - 	   	   	   	 (103,930 	 ) 	   	   	 (103,930 	 ) 
	 Discontinued operations 	   	   	 (953,185 	 ) 	   	   	 - 	   	   	   	 (678,931 	 ) 	   	   	 (1,632,116 	 ) 
	 Non-controlling interest in net loss 	   	   	 - 	   	   	   	 - 	   	   	   	 61,670 	   	   	   	 61,670 	   
	 Net loss 	   	   	 (5,835,502 	 ) 	   	   	 (6,941,335 	 ) 	   	   	 (20,602,108 	 ) 	   	   	 (33,378,945 	 ) 


 




    	Page 40 of 47



     


    

  


	Engine
    Media Holdings, Inc.	
	(formerly
    Torque Esports Corp.)
	Notes
    to the Interim Condensed Consolidated Financial Statements
	For
    the three and six months ended February 28, 2021 (Unaudited)
	(Expressed
    in United States Dollars)







 


 






 


	24.	Segmented
    information (cont’d)


 


The
following is an analysis of the Company’s revenue and results by reportable segment for the three months ended February 29, 2020:


 


	Three months ended	 	E-Sports	 	 	Media and
 Advertising	 	 	Corporate
 and Other	 	 	29-Feb-20
 Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External sales 	 	 	623,888	 	 	 	-	 	 	 	107	 	 	 	623,995	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment loss 	 	 	(1,431,329	)	 	 	-	 	 	 	107	 	 	 	(1,431,222	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central administration costs	 	 	-	 	 	 	-	 	 	 	2,130,816	 	 	 	2,130,816	 
	Other gains and losses	 	 	80,510	 	 	 	-	 	 	 	(2,436,008	)	 	 	(2,355,498	)
	Finance costs	 	 	8,831	 	 	 	-	 	 	 	240,230	 	 	 	249,061	 
	Loss before tax 	 	 	(1,520,670	)	 	 	-	 	 	 	65,069	 	 	 	(1,455,601	)
	Income tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discontinued operations	 	 	(1,093,879	)	 	 	-	 	 	 	-	 	 	 	(1,093,879	)
	Non-controlling interest in net loss	 	 	-	 	 	 	-	 	 	 	42,209	 	 	 	42,209	 
	Net loss 	 	 	(2,614,549	)	 	 	-	 	 	 	107,278	 	 	 	(2,507,271	)



 


The
following is an analysis of the Company’s revenue and results by reportable segment for the six months ended February 29, 2020:


 


	Six months ended	 	E-Sports	 	 	Media and
 Advertising	 	 	Corporate
 and Other	 	 	29-Feb-20
 Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External sales 	 	 	1,431,871	 	 	 	-	 	 	 	372	 	 	 	1,432,243	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment loss 	 	 	(2,321,148	)	 	 	-	 	 	 	372	 	 	 	(2,320,776	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central administration costs	 	 	-	 	 	 	-	 	 	 	4,417,138	 	 	 	4,417,138	 
	Other gains and losses	 	 	81,881	 	 	 	-	 	 	 	171,795	 	 	 	253,676	 
	Finance costs	 	 	10,711	 	 	 	-	 	 	 	512,827	 	 	 	523,538	 
	Loss before tax 	 	 	(2,413,740	)	 	 	-	 	 	 	(5,101,388	)	 	 	(7,515,128	)
	Income tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discontinued operations	 	 	(3,120,643	)	 	 	-	 	 	 	-	 	 	 	(3,120,643	)
	Non-controlling interest in net loss	 	 	-	 	 	 	-	 	 	 	77,309	 	 	 	77,309	 
	Net loss 	 	 	(5,534,383	)	 	 	-	 	 	 	(5,024,079	)	 	 	(10,558,462	)



 




    	Page 41 of 47



     


    

 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 


	24.	Segmented
    information


 


	(a)	Geographical
    breakdown


 


	 	 	North
 America	 	 	United
 Kingdom	 	 	European
 Union	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	August 31, 2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	48,230,804	 	 	 	2,896,582	 	 	 	2,288,091	 	 	 	53,415,477	 
	Long-term assets 	 	 	37,664,748	 	 	 	2,507,761	 	 	 	1,067,495	 	 	 	41,240,004	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	February 28, 2021	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	68,337,495	 	 	 	-	 	 	 	2,007,404	 	 	 	70,344,899	 
	Long-term assets 	 	 	38,188,398	 	 	 	-	 	 	 	171,995	 	 	 	38,360,393	 



 


	25.	Related
    party transactions and balances
	 	 
	(a)	Key
    management compensation


 


Key
management includes the Company’s directors, officers and any consultants with the authority and responsibility for planning, directing
and controlling the activities of an entity, directly or indirectly. Compensation awarded to key management for the three and six months
ended February 28, 2021 and February 29, 2020 includes the following:


 


	 	 	For the three months ended	 	 	For the six months ended	 
	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 	 	Feb. 28, 2021	 	 	Feb. 29, 2020	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total compensation paid to key management	 	 	909,355	 	 	 	101,148	 	 	 	1,444,093	 	 	 	207,818	 
	Share based payments 	 	 	361,990	 	 	 	9,705	 	 	 	1,257,804	 	 	$	16,914	 



 


Total
compensation paid to key management is recorded in consulting fees, salaries and wages and share based payments in the consolidated statement
of loss and comprehensive loss.


 


Amounts
due to related parties as of February 28, 2021 with respect to the above fees were $578,778 (August 31, 2020 – $275,502). The amounts
due to related parties are recorded within accounts payable and accrued liabilities on the consolidated statement of loss and comprehensive
loss. These amounts are unsecured, non-interest bearing and due on demand.


 




    	Page 42 of 47



     


    

 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 


	26.	Financial
    instruments and risk management
	 	 
	(a)	Financial
    risk management objectives and policies


 


The
Company’s activities expose it to a variety of financial risks including foreign currency risk, interest rate risk, credit risk,
and liquidity risk. These financial instrument risks are actively managed by the Company under the policies approved by the Board of
Directors. The principal financial risks are managed by the Company’s finance department, within Board approved policies and guidelines.
On an ongoing basis, the finance department actively manages market conditions with a view to minimizing the exposure of the Company
to changing market factors, while at the same time limiting the funding costs to the Company.


 


	(b)	Credit
    risk


 


Credit
risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The
Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate,
as a means of mitigating the risk of financial loss from defaults. The Company uses information supplied by independent rating agencies
where available, and if not available, the Company uses other publicly available financial information and its own records to rate its
customers.


 


Credit
risk arises from cash and deposits with banks as well as credit exposure to outstanding receivables, the carrying amounts represent the
Company’s maximum exposure to credit risk.


 


The
Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company establishes
an allowance for doubtful accounts that represents its estimate of expected losses in respect of accounts receivable. The main components
of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established
for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined
based on historical data of payment statistics for similar financial assets.


 


The
Company’s accounts receivable are concentrated among customers in the media and broadcasting industry, which may be affected by
adverse economic factors impacting that industry. The Company performs ongoing credit evaluations of its major customers, maintains reserves
for expected credit losses, and does not require any collateral deposits.


 


As
of February 28, 2021 one customer (August 31, 2020 – one) accounted for greater than 10% of the Company’s accounts receivable
balance. In total, this one customer (August 31, 2020 – one) accounted for 19% of the Company’s accounts and other receivables
balance as of February 28, 2021 (August 31, 2020 – 13%). During the six months ended February 28, 2021, one customer represented
59% of total revenue.


 


The
below table reflects the aging of the Company’s aging by invoice date of gross trade accounts receivable and allowance for doubtful
accounts as of February 28, 2021:


 


	 	 	0 - 30	 	 	31 - 60	 	 	61 - 90	 	 	91+	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Trade accounts receivable	 	 	3,674,227	 	 	 	784,098	 	 	 	34,691	 	 	 	1,426,439	 	 	 	5,919,455	 
	Allowance for doubtful accounts	 	 	9,750	 	 	 	6,803	 	 	 	6,750	 	 	 	921,521	 	 	 	944,824	 
	% Allowance 	 	 	0	%	 	 	1	%	 	 	19	%	 	 	65	%	 	 	16	%



 




    	Page 43 of 47



     


    

 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 





	26.	Financial
    instruments and risk management (cont’d)
	 	 
	(c)	Liquidity
    risk


 


Liquidity
risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company
is exposed to liquidity risk with respect to its contractual obligations and financial liabilities. The Company manages liquidity risk
by continuously monitoring forecasted and actual cash flows and matching maturity profiles of financial assets and liabilities. The Company
seeks to ensure that it has sufficient capital to meet short term financial obligations after taking into account its operating obligations
and cash on hand.


 


The
Company’s policy is to seek to ensure adequate funding is available from operations and other sources, including debt and equity
capital markets, as required.


 


	 	 	< 1 year	 	 	1-2 years	 	 	3-5 years	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	15,804,476	 	 	 	-	 	 	 	-	 
	Players liability account	 	 	321,129	 	 	 	-	 	 	 	-	 
	Lease obligation	 	 	194,558	 	 	 	287,753	 	 	 	-	 
	Long-term debt	 	 	98,992	 	 	 	44,996	 	 	 	-	 
	Promissory notes payable	 	 	1,340,840	 	 	 	-	 	 	 	-	 
	Convertible debt 	 	 	-	 	 	 	14,276,107	 	 	 	-	 



 


	(d)	Interest
    rate risk


 


Interest
rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is exposed to fair value risk with respect to debt which bear interest at fixed rates.


 


	(e)	Foreign
    exchange rates


 


The
Company’s exposure to the risk of changes in foreign exchange rates relates primarily to fluctuations of financial instruments
related to cash, accounts and other receivables, and accounts payable denominated in Euros, as well as debt denominated in Canadian dollars.


 


	(f)	Fair
    value hierarchy


 


The
following tables combine information about:


 


	 	●	classes
    of financial instruments based on their nature and characteristics;
	 	●	the
    carrying amounts of financial instruments;
	 	●	fair
    values of financial instruments (except financial instruments when carrying amount approximates their fair value); and
	 	●	fair
    value hierarchy levels of financial assets and financial liabilities for which fair value was disclosed.


 


Fair
value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable.


 




    	Page 44 of 47



     


    

 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 


	26.	Financial
    instruments and risk management (cont’d)
	 	 
	(f)	Fair
    value hierarchy (cont’d)


 


As
of February 28, 2021:


 





	 Carrying value at February 28, 2021 	   	 FVTPL -
 mandatorily
 measured 	   	   	 FVOCI -
 mandatorily
 measured 	   	   	 FVOCI -
 designated 	   	   	 Amortized
 cost 	   
	   	   	 $ 	   	   	 $ 	   	   	 $ 	   	   	 $ 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Financial assets: 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Cash and cash equivalents 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 22,761,881 	   
	 Restricted cash 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 321,129 	   
	 Accounts and other receivables 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 5,026,111 	   
	 Government remittances 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 953,844 	   
	 Publisher advance 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 4,858,645 	   
	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 33,921,610 	   


 


	Carrying value at February 28, 2021	 	FVTPL -
 mandatorily
 measured	 	 	FVTPL -
 designated	 	 	Amortized
 cost	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	-	 	 	 	-	 	 	 	15,804,476	 
	Players liability account	 	 	-	 	 	 	-	 	 	 	321,129	 
	Line of credit	 	 	-	 	 	 	-	 	 	 	-	 
	Long-term debt	 	 	-	 	 	 	-	 	 	 	143,988	 
	Promissory notes payable	 	 	-	 	 	 	-	 	 	 	1,340,840	 
	Deferred purchase consideration	 	 	-	 	 	 	-	 	 	 	-	 
	Convertible debt	 	 	-	 	 	 	14,276,107	 	 	 	-	 
	 	 	 	-	 	 	 	14,276,107	 	 	 	17,610,433	 



 


As
of August 31, 2020:


 





	 Carrying value at August 31, 2020 	   	 FVTPL -
 mandatorily
 measured 	   	   	 FVOCI -
 mandatorily
 measured 	   	   	 FVOCI -
 designated 	   	   	 Amortized
 cost 	   
	   	   	 $ 	   	   	 $ 	   	   	 $ 	   	   	 $ 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Financial assets: 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Cash and cash equivalents 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 5,243,278 	   
	 Restricted cash 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 388,587 	   
	 Accounts and other receivables 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 3,845,890 	   
	 Government remittances 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 1,125,912 	   
	 Publisher advance 	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   
	   	   	   	 - 	   	   	   	 - 	   	   	   	 - 	   	   	   	 10,603,667 	   


 




    	Page 45 of 47



     


    

 


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 


	26.	Financial
    instruments and risk management (cont’d)
	 	 
	(f)	Fair
    value hierarchy (cont’d)


 


	Carrying value at August 31, 2020	 	FVTPL -
 mandatorily
 measured	 	 	FVTPL -
 designated	 	 	Amortized
 cost	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	-	 	 	 	-	 	 	 	17,144,346	 
	Players liability account	 	 	-	 	 	 	-	 	 	 	388,587	 
	Line of credit	 	 	-	 	 	 	-	 	 	 	4,919,507	 
	Long-term debt	 	 	-	 	 	 	-	 	 	 	230,932	 
	Promissory notes payable	 	 	-	 	 	 	-	 	 	 	3,818,920	 
	Deferred purchase consideration	 	 	-	 	 	 	-	 	 	 	333,503	 
	Convertible debt	 	 	-	 	 	 	10,793,459	 	 	 	-	 
	 	 	 	-	 	 	 	10,793,459	 	 	 	26,835,795	 



 


A
summary of instruments, with their classification in the fair value hierarchy is as follows:


 


	 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Fair value as
 at February 28, 2021	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible debt	 	 	-	 	 	 	-	 	 	 	14,276,107	 	 	 	14,276,107	 
	 	 	 	-	 	 	 	-	 	 	 	14,276,107	 	 	 	14,276,107	 



 


	 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Fair value
 as at August
 31, 2020	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible debt	 	 	-	 	 	 	-	 	 	 	10,793,459	 	 	 	10,793,459	 
	 	 	 	-	 	 	 	-	 	 	 	10,793,459	 	 	 	10,793,459	 



 




    	Page 46 of 47



     


    

  


	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

    For
    the three and six months ended February 28, 2021 (Unaudited)

    (Expressed
    in United States Dollars)
	







 


 






 


	26.	Financial
    instruments and risk management (cont’d)
	 	 
	(f)	Fair
    value hierarchy (cont’d)


 


The
following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular,
the valuation technique and key inputs used).


 


	Financial
                                            assets /

    financial
    liabilities
	 	Valuation
    technique	 	Key
    Inputs	 	Relationship
                                            and

    sensitivity
    of

    unobservable
    inputs

    to
    fair value

	Convertible
    debt	 	The
    fair value of the convertible debentures as of February 28, 2021 has been calculated using a binomial lattice methodology.	 	Key
                                            observable inputs

     

    Share
    price CAD$14.15 (USD $11.14)

     

    Risk-free
    interest rate (0.11% to 0.30%)

     

    Dividend
    yield (0%)

     

    Key
    unobservable inputs

    Credit
    spread (7.33% to 8.46%)

     

    Discount
    for lack of marketability (0% to 10%)
	 	The
                                            estimated fair value would increase (decrease) if:

    The
    share price was higher (lower)

    The
    risk-free interest rate was higher (lower)

    The
    dividend yield was lower (higher)

    The
    credit spread was lower (higher)

    The
    discount for lack of marketability was lower (higher)

	 	 	 	 	 	 	 
	Convertible
    debt	 	The
    fair value of the convertible debentures as of August 31, 2020 has been calculated using a binomial lattice methodology.	 	Key
                                            observable inputs

    Share
    price (USD $8.92)

     

    Risk-free
    interest rate (0.14%)

     

    Dividend
    yield (0%)

     

    Key
    unobservable inputs

     

    Credit
    spread (18.35%)

     

    Discount
    for lack of marketability (47%)
	 	The
                                            estimated fair value would increase (decrease) if:

    The
    share price was higher (lower)

    The
    risk-free interest rate was higher (lower)

    The
    dividend yield was lower (higher)

    The
    credit spread was lower (higher)

    The
    discount for lack of marketability was lower (higher)



 


There
has been no change to the valuation technique during the year. There were no transfers between Levels 1, 2 and 3 during the three and
six months ended February 28, 2021 and February 29, 2020.


 


	27.	Subsequent
    events


 


The
Company has evaluated subsequent events from the balance sheet date through June 9, 2021, the date at which the unaudited interim
condensed consolidated financial statements were available to be issued, and determined there were no additional items to be disclosed
except for the transactions described below.


 


On
March 25, 2021, the Company filed a final short form base shelf prospectus and a corresponding shelf registration statement on Form F-10
with the U.S. Securities and Exchange Commission. The prospectus and registration statement allows the Company to offer up to $150 million
of common shares, preference shares, warrants, subscription receipts, debt securities, units, or any combination thereof during the 25-month
period that the shelf prospectus is effective. The specific terms of any offering of securities, including the use of proceeds from any
offering, will be set forth in a shelf prospectus supplement.


 




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