Exhibit
4.6


 











 


ENGINE
MEDIA HOLDINGS, INC.


 


Interim
Condensed Consolidated Financial Statements


 


(Unaudited)


 


For
the three months ended


November
30, 2020 and 2019


 


(Expressed
in United States Dollars)


 




    	 



     


    




 


	Engine
                                         Media Holdings, Inc.

        November
        30, 2020 and 2019

        (Unaudited)
	
	 	 


 


Table
of Contents


 


	Management’s Responsibility for Financial Reporting and Notice to Reader	3
	 	 
	Unaudited Interim Condensed Consolidated Statements of Financial Position	4
	 	 
	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


  




    	 
	Page 2 of 41



     


    

 





	Engine
                                         Media Holdings, Inc.





Management’s
Responsibility for Financial Reporting and Notice to Reader


For
the three months ended November 30, 2020 and 2019







(Expressed
in United States Dollars)


(Unaudited)




	
	 	 


 





MANAGEMENT’S
RESPONSIBILITY FOR FINANCIAL REPORTING


 


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


 


The
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 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 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 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 interim
condensed consolidated financial statements and (ii) the 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 interim condensed consolidated financial statements.


 


The
Board of Directors are responsible for reviewing and approving the 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 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 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
accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared by and are the responsibility
of management. The unaudited interim condensed consolidated financial statements have not been reviewed by the Company’s
auditors.


 




    	 
	Page 3 of 41



     


    

 



	Engine
                                         Media Holdings, Inc.

        


Interim
Condensed Consolidated Statements of Financial Position


As
at November 30, 2020 and August 31, 2020


(Expressed
in United States Dollars)


(Unaudited)

        
	
	 	 



 


	 	 	Note	 	 	November
    30,
 2020	 	 	August
    31,
 2020	 
	 	 	 	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 
	Current	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents	 	 	 	 	 	 	2,726,563	 	 	 	5,243,278	 
	Restricted
    cash	 	 	13	 	 	 	340,911	 	 	 	388,587	 
	Accounts
    and other receivables	 	 	6	 	 	 	5,222,659	 	 	 	3,845,890	 
	Government
    remittances	 	 	 	 	 	 	1,021,425	 	 	 	1,125,912	 
	Prepaid
    expenses and other	 	 	 	 	 	 	1,359,005	 	 	 	1,571,806	 
	 	 	 	 	 	 	 	10,670,563	 	 	 	12,175,473	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Investment
    in associate	 	 	7	 	 	 	1,985,322	 	 	 	2,052,008	 
	Property
    and equipment	 	 	8	 	 	 	407,758	 	 	 	409,389	 
	Goodwill	 	 	9	 	 	 	18,812,710	 	 	 	18,785,807	 
	Intangible
    assets	 	 	10	 	 	 	14,964,296	 	 	 	19,442,322	 
	Right-of-use
    assets	 	 	11	 	 	 	521,379	 	 	 	550,478	 
	 	 	 	 	 	 	 	36,691,465	 	 	 	41,240,004	 
	 	 	 	 	 	 	 	47,362,028	 	 	 	53,415,477	 



 


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


 



    	 
	Page 4 of 41



     


    

 





	Engine
                                         Media Holdings, Inc.

        

        


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






        As
        at November 30, 2020 and August 31, 2020

        (Expressed
        in United States Dollars)

        (Unaudited)
	
	 	 



 


	 	 	 	 	 	November
    30,	 	 	August
    31,	 
	 	 	 	Note	 	2020	 	 	2020	 
	 	 	 	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 
	Current	 	 	 	 	 	 	 	 	 	 	 
	Accounts
    payable and accrued liabilities	 	 	 	 	 	17,378,824	 	 	 	17,144,346	 
	Players
    liability account	 	 	13	 	 	340,911	 	 	 	388,587	 
	Deferred
    revenue	 	 	 	 	 	663,651	 	 	 	553,395	 
	Lease
    obligation, current	 	 	12	 	 	189,874	 	 	 	185,671	 
	Line
    of credit	 	 	14(c)	 	 	4,979,877	 	 	 	4,919,507	 
	Long-term
    debt, current	 	 	16	 	 	97,871	 	 	 	97,702	 
	Promissory
    notes payable	 	 	14(a)	 	 	2,018,100	 	 	 	3,818,920	 
	Deferred
    purchase consideration	 	 	22(d)	 	 	-	 	 	 	333,503	 
	Warrant
    liability	 	 	17	 	 	10,246,146	 	 	 	14,135,321	 
	Contingent
    performance share obligation, current	 	 	23	 	 	-	 	 	 	262,067	 
	 	 	 	 	 	 	35,915,254	 	 	 	41,839,019	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible
    debt	 	 	15	 	 	16,253,594	 	 	 	10,793,459	 
	Lease
    obligation, non-current	 	 	12	 	 	337,634	 	 	 	386,477	 
	Long-term
    debt, non-current	 	 	16	 	 	66,730	 	 	 	133,230	 
	 	 	 	 	 	 	16,657,958	 	 	 	11,313,166	 
	 	 	 	 	 	 	52,573,212	 	 	 	53,152,185	 
	 	 	 	 	 	 	 	 	 	 	 	 
	SHAREHOLDERS’
    EQUITY (DEFICIENCY)	 	 	 	 	 	 	 	 	 	 	 
	Share
    capital	 	 	18	 	 	70,011,418	 	 	 	69,380,807	 
	Shares
    to be issued	 	 	23	 	 	-	 	 	 	1,059,214	 
	Contributed
    surplus	 	 	 	 	 	4,885,068	 	 	 	4,034,323	 
	Foregin
    currency translation reserve	 	 	 	 	 	(2,200,430	)	 	 	(2,334,275	)
	Deficit	 	 	 	 	 	(78,093,595	)	 	 	(72,094,162	)
	 	 	 	 	 	 	(5,397,539	)	 	 	45,907	 
	Non-controlling
    interest	 	 	 	 	 	186,355	 	 	 	217,385	 
	 	 	 	 	 	 	(5,211,184	)	 	 	263,292	 
	 	 	 	 	 	 	47,362,028	 	 	 	53,415,477	 
	Going
    concern	 	 	1	 	 	 	 	 	 	 	 
	Commitments
    and contingencies	 	 	22	 	 	 	 	 	 	 	 
	Subsequent
    events	 	 	27	 	 	 	 	 	 	 	 




 


	Approved
    on Behalf of Board:	 	“Steven
    Zenz”	 	“Lou
    Schwartz”
	 	 	Director	 	Director


 



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


 





    	 
	Page 5 of 41



     


    

 





	Engine
                                         Media Holdings, Inc. 

        


Interim
Condensed Consolidated Statements of Loss and Comprehensive Loss


For
the three months ended November 30, 2020 and 2019


(Expressed
in United States Dollars)


(Unaudited)
	
	 	 



 


	 	 	Note	 	 	2020	 	 	2019	 
		 	 	 	 	 	 	$
                                         	 	 	 	$
                                         	 
	CONTINUING
    OPERATIONS	 	 	 	 	 	 	 	 	 	 	 	 
	REVENUE	 	 	 	 	 	 	 	 	 	 	 	 
	Games
    development	 	 	 	 	 	 	499,955	 	 	 	532,861	 
	Sponsorship,
    tournament and event income	 	 	 	 	 	 	49,832	 	 	 	264	 
	Platform
    revenue	 	 	 	 	 	 	1,436,997	 	 	 	141,282	 
	Advertising
    revenue	 	 	 	 	 	 	5,122,090	 	 	 	-	 
	Professional
    services	 	 	 	 	 	 	357,517	 	 	 	133,841	 
	 	 	 	 	 	 	 	7,466,391	 	 	 	808,248	 
	EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 
	Salaries
    and wages	 	 	 	 	 	 	3,777,476	 	 	 	1,127,160	 
	Consulting	 	 	 	 	 	 	895,952	 	 	 	500,650	 
	Professional
    fees	 	 	 	 	 	 	685,852	 	 	 	336,030	 
	Revenue
    sharing expense	 	 	 	 	 	 	4,491,427	 	 	 	-	 
	Sponsorships
    and tournaments	 	 	 	 	 	 	364,229	 	 	 	-	 
	Advertising
    and promotion	 	 	 	 	 	 	859,826	 	 	 	1,124,345	 
	Office
    and general	 	 	 	 	 	 	705,819	 	 	 	280,284	 
	Technology
    expenses	 	 	 	 	 	 	580,854	 	 	 	13,350	 
	Accretion
    expense	 	 	 	 	 	 	-	 	 	 	-	 
	Amortization
    and depreciation	 	 	8,
                                         10, 11	 	 	 	1,416,140	 	 	 	591,191	 
	Share-based
    payments	 	 	19,
                                         20	 	 	 	1,088,638	 	 	 	11,114	 
	Interest
    expense	 	 	 	 	 	 	408,089	 	 	 	274,477	 
	(Gain)
    loss on foreign exchange	 	 	 	 	 	 	(37,249	)	 	 	170,325	 
	Change
    in fair value of warrant liability	 	 	17	 	 	 	(4,759,776	)	 	 	1,634,324	 
	Change
    in fair value of convertible debt	 	 	15	 	 	 	1,323,745	 	 	 	804,525	 
	 	 	 	 	 	 	 	11,801,022	 	 	 	6,867,775	 
	ASSOCIATES	 	 	 	 	 	 	 	 	 	 	 	 
	Share
    of net loss of associate	 	 	 	 	 	 	66,686	 	 	 	-	 
	Net
    loss for the period before taxes	 	 	 	 	 	 	(4,401,317	)	 	 	(6,059,527	)
	Deferred
    income taxes	 	 	 	 	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	(4,401,317	)	 	 	(6,059,527	)
	DISCONTINUED
    OPERATIONS	 	 	 	 	 	 	 	 	 	 	 	 
	Loss
    on disposal of Motorsports	 	 	 	 	 	 	(678,931	)	 	 	-	 
	Motorsports
    Group	 	 	23	 	 	 	(950,215	)	 	 	(2,026,764	)
	Net
    loss for the period	 	 	 	 	 	 	(6,030,463	)	 	 	(8,086,291	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net
    loss attributable to non-controlling interest	 	 	 	 	 	 	31,030	 	 	 	35,100	 
	Net
    loss attributable to owners of the Company	 	 	 	 	 	 	(5,999,433	)	 	 	(8,051,191	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	OTHER
    COMPREHENSIVE LOSS	 	 	 	 	 	 	 	 	 	 	 	 
	Items
    that may be reclassified subsequently to profit or loss	 	 	 	 	 	 	 	 	 	 	 	 
	Foreign
    currency translation differences	 	 	 	 	 	 	133,845	 	 	 	(507,853	)
	Comprehensive
    loss for the period	 	 	 	 	 	 	(5,865,588	)	 	 	(8,559,044	)
	EARNINGS
    PER SHARE	 	 	 	 	 	 	 	 	 	 	 	 
	Basic
    and diluted earnings per share - continuing operations	 	 	5	 	 	 	(0.57	)	 	 	(36.59	)
	Basic
    and diluted earnings per share - discontinued operations	 	 	5	 	 	 	(0.21	)	 	 	(12.31	)
	Basic
    and diluted earnings per share	 	 	5	 	 	 	(0.78	)	 	 	(48.90	)
	Weighted
    average number of shares outstanding	 	 	5	 	 	 	7,699,907	 	 	 	164,659	 



 


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


 





    	 
	Page 6 of 41



     


    

 





	Engine
                                         Media Holdings, Inc.

        


Interim
Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)


For
the three months ended November 30, 2020 and 2019


(Expressed
in United States Dollars)


(Unaudited)





	
	 	 



 


	 	 	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	 	 	-	 	 	 	-	 	 	 	-	 	 	 	11,114	 	 	 	-	 	 	 	-	 	 	 	11,114	 	 	 	-	 	 	 	11,114	 
	Convertible
    debt conversion	 	 	177,067	 	 	 	617,248	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	617,248	 	 	 	-	 	 	 	617,248	 
	Non-controlling
    interest in subsidiary	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(10,887	)	 	 	-	 	 	 	-	 	 	 	(10,887	)	 	 	-	 	 	 	(10,887	)
	Net
    loss for the period	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(8,051,191	)	 	 	(8,051,191	)	 	 	(35,100	)	 	 	(8,086,291	)
	Foreign
    currency translation differences	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(507,853	)	 	 	-	 	 	 	(507,853	)	 	 	-	 	 	 	(507,853	)
	Balance,
    as at November 30, 2019	 	 	333,507	 	 	 	30,230,654	 	 	 	760,216	 	 	 	2,753,264	 	 	 	(1,841,025	)	 	 	(47,805,311	)	 	 	(15,902,202	)	 	 	258,351	 	 	 	(15,643,851	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	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	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,088,638	 	 	 	-	 	 	 	-	 	 	 	1,088,638	 	 	 	-	 	 	 	1,088,638	 
	Shares
    issued on vesting of RSUs	 	 	66,666	 	 	 	410,189	 	 	 	-	 	 	 	(230,189	)	 	 	-	 	 	 	-	 	 	 	180,000	 	 	 	-	 	 	 	180,000	 
	Convertible
    debt conversion	 	 	36,666	 	 	 	164,343	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	164,343	 	 	 	-	 	 	 	164,343	 
	Common
    shares issued on exercise of warrants	 	 	7,166	 	 	 	56,079	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	56,079	 	 	 	-	 	 	 	56,079	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(1,059,214	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1,059,214	)	 	 	-	 	 	 	(1,059,214	)
	Non-controlling
    interest in subsidiary	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(7,704	)	 	 	-	 	 	 	-	 	 	 	(7,704	)	 	 	-	 	 	 	(7,704	)
	Net
    loss for the period	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,999,433	)	 	 	(5,999,433	)	 	 	(31,030	)	 	 	(6,030,463	)
	Foreign
    currency translation differences	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	133,845	 	 	 	-	 	 	 	133,845	 	 	 	-	 	 	 	133,845	 
	Balance,
    as at November 30, 2020	 	 	7,856,634	 	 	 	70,011,418	 	 	 	-	 	 	 	4,885,068	 	 	 	(2,200,430	)	 	 	(78,093,595	)	 	 	(5,397,539	)	 	 	186,355	 	 	 	(5,211,184	)



 


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


 




    	 
	Page 7 of 41



     


    

 





	Engine
                                         Media Holdings, Inc.

        


Interim
Condensed Consolidated Statements of Cash Flows


For
the three months ended November 30, 2020 and 2019


(Expressed
in United States Dollars)


(Unaudited)





	
	 	 



 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	OPERATING
    ACTIVITIES	 	 	 	 	 	 	 	 
	Net
    loss for the period before non-controlling interest	 	 	(6,030,463	)	 	 	(8,086,291	)
	Items
    not affecting cash:	 	 	 	 	 	 	 	 
	Amortization
    and depreciation	 	 	1,617,475	 	 	 	592,806	 
	Loss
    on disposal of Motorsports	 	 	678,931	 	 	 	-	 
	Share
    of net loss of associate	 	 	66,686	 	 	 	-	 
	Change
    in fair value of warrant liability	 	 	(4,759,776	)	 	 	1,634,324	 
	Change
    in fair value of convertible debt	 	 	1,323,745	 	 	 	804,525	 
	Unrealized
    foreign exchange (gain)	 	 	-	 	 	 	(362,944	)
	Accretion
    of debt	 	 	74,383	 	 	 	14,724	 
	Share-based
    payments	 	 	1,088,638	 	 	 	11,114	 
	 	 	 	(5,940,381	)	 	 	(5,391,742	)
	Changes
    in non-cash working capital:	 	 	 	 	 	 	 	 
	Restricted
    cash	 	 	47,676	 	 	 	-	 
	Accounts
    and other receivables	 	 	(1,402,037	)	 	 	(101,272	)
	Government
    remittances	 	 	79,392	 	 	 	(150,005	)
	Prepaid
    expenses and other	 	 	188,688	 	 	 	103,689	 
	Accounts
    payable and accrued liabilities	 	 	1,497,138	 	 	 	1,866,057	 
	Players
    liability account	 	 	(47,676	)	 	 	-	 
	Deferred
    revenue	 	 	110,256	 	 	 	110,033	 
	 	 	 	473,437	 	 	 	1,828,502	 
	 	 	 	(5,466,944	)	 	 	(3,563,240	)
	INVESTING
    ACTIVITIES	 	 	 	 	 	 	 	 
	Purchase
    of property and equipment	 	 	(64,145	)	 	 	(59,472	)
	Purchase
    of intangible assets	 	 	(11,797	)	 	 	-	 
	Cash
    from disposal of Motorsports	 	 	24,348	 	 	 	(400,000	)
	 	 	 	(51,594	)	 	 	(459,472	)
	FINANCING
    ACTIVITIES	 	 	 	 	 	 	 	 
	Proceeds
    from convertible debentures	 	 	4,901,393	 	 	 	-	 
	Net
    proceeds (payments) from promissory notes payable	 	 	(1,800,820	)	 	 	1,687,631	 
	Proceeds
    from exercise of warrants	 	 	44,675	 	 	 	-	 
	Payments
    on lease financing	 	 	(54,260	)	 	 	-	 
	Payments
    on long-term debt	 	 	(80,744	)	 	 	(27,528	)
	 	 	 	3,010,244	 	 	 	1,660,103	 
	Impact
    of foreign exchange on cash	 	 	(8,421	)	 	 	-	 
	Change
    in cash and cash equivalents	 	 	(2,516,715	)	 	 	(2,362,609	)
	 	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents, beginning of period	 	 	5,243,278	 	 	 	2,827,014	 
	Cash
    and cash equivalents, end of period	 	 	2,726,563	 	 	 	464,405	 




 



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


 




    	 
	Page 8 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	1.	Corporate
    information and going concern


 


	(a)	Corporate
    information


 


Engine
Media Holdings, Inc. (formerly Torque Esports Corp.) (“Engine Media” or the “Company”) was incorporated
under the Business Corporations Act (Ontario) on April 8, 2011. The registered head office of the Company is 77 King St. West,
Suite 3000, PO Box 95, TD Centre – North Tower, Toronto, Ontario, M5K 1G8, Canada.


 


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.


 


	(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 $78,093,595 as at November 30, 2020 (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. The Company raised $17.8 million in a private placement of units
in January 2021 (Note 27) and plans to raise additional amounts. While management has been historically successful in raising
the necessary capital, it cannot provide assurance that it will be able to execute on its business strategy or be successful in
future financing activities. As at November 30, 2020, the Company had a working capital deficiency of $25,244,691 (August 31,
2020 – working capital deficiency of $29,663,546) which is comprised of current assets less current liabilities. The Company
also faces 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.


 


	2.	Basis
    of preparation


 


	(a)	Statement
    of compliance


 


These
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”). These unaudited interim condensed consolidated financial statements are prepared on a basis consistent
with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended August 31, 2020;
and should be read in conjunction with those audited consolidated financial statements. Interim results are not necessarily indicative
of the results expected for the fiscal year.


 




    	 
	Page 9 of 41



     


    

 











	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	2.	Basis
    of preparation (cont’d)


 


	(a)	Statement
    of compliance (cont’d)


 


These
interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company on January
28, 2021.


 


	(b)	Basis
    of consolidation


 


The
interim condensed consolidated financial statements comprise the accounts of the Company and its controlled subsidiaries. The
financial statements of subsidiaries are included in the interim condensed consolidated financial statements from the date that
control commences until the date that control ceases. Consolidated financial statements are prepared using uniform accounting
policies for like transactions and other events in similar circumstances.


 


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.


 


The
Company’s material subsidiaries as at November 30, 2020 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


 


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 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	2.	Basis
    of preparation (cont’d)


 


	(c)	Functional
    and presentation currency


 


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”).


 


	(d)
    	Expense
    reclassifications 


 


For
comparability, certain amounts for the three months ended November 30, 2019 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 months ended November
30, 2019 did not best represent the nature of the ongoing business. These reclassifications had no effect on net loss or shareholders’
equity (deficiency).


 


	(e)	Income
    taxes


 


The
Company had no income tax expense for the three months ended November 30, 2020 and 2019. At November 30, 2020, 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 at 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.


 


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.


 




    	 
	Page 11 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	3.	Significant
    judgments, estimates and assumptions (cont’d)


 


	(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 41



     


    

  








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	4.
    	Changes
    in significant accounting policies


 


Certain
pronouncements have been issued by the IASB that are not yet effective. There are currently no such pronouncements that are expected
to have a significant impact on the Company’s interim condensed consolidated financial statements upon adoption.


 


	5.	Net
    income (loss) per share


 


Due
to the net loss incurred during the three months ended November 30, 2020 and 2019, 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 months ended November 30, 2020 and 2019 were 7,699,907 and 164,659, respectively.


 


	6.
    	Accounts
    and other receivables


 


The
Company’s accounts and other receivables are comprised of the following:


 


	 	 	November
    30,
 2020	 	 	August
    31,
 2020	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Trade
    accounts receivable	 	 	6,039,173	 	 	 	4,690,922	 
	Other
    receivables	 	 	56,524	 	 	 	29,406	 
	Allowance
    for doubtful accounts	 	 	(873,038	)	 	 	(874,438	)
	 	 	 	5,222,659	 	 	 	3,845,890	 



 


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


 


	 	 	2020	 	 	2019	 
	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Alowance
    for doubtful accounts, August 31	 	 	(874,438	)	 	 	-	 
	Provision,
    bad debt expense	 	 	-	 	 	 	-	 
	Writeoffs	 	 	1,400	 	 	 	-	 
	Alowance
    for doubtful accounts, November 30	 	 	(873,038	)	 	 	-	 



 




    	 
	Page 13 of 41



     


    




 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	7.
    	Investment
    in associate


 


	 	 	2020	 
	 	 	$	 
	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	2,052,008	 
	Equity
    in loss of One Up	 	 	(66,686	)
	Balance,
    November 30, 2020	 	 	1,985,322	 



 


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 accounts for this investment as an investment in associate under the equity method. The Company’s equity in the
earnings (loss) of One Up for the three months ended November 30, 2020 was $66,686. One Up, as an entity, had total equity on
its balance sheet as at November 30, 2020 of $2,447,218.


 


	8.	Property
    and equipment


 


	Cost	 	Leasehold

    improvements	 	 	Computer
    equipment	 	 	Furniture
    
 and fixtures	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2019	 	 	54,465	 	 	 	209,126	 	 	 	123,298	 	 	 	386,889	 
	Additions	 	 	-	 	 	 	26,364	 	 	 	5,719	 	 	 	32,083	 
	Foreign
    exchange	 	 	-	 	 	 	14,943	 	 	 	8,187	 	 	 	23,130	 
	November
    30, 2019	 	 	54,465	 	 	 	250,433	 	 	 	137,204	 	 	 	442,102	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	221,653	 	 	 	486,340	 	 	 	173,091	 	 	 	881,084	 
	Additions	 	 	-	 	 	 	64,145	 	 	 	-	 	 	 	64,145	 
	Disposal
    of Motorsports	 	 	(2,631	)	 	 	(47,645	)	 	 	(18,118	)	 	 	(68,394	)
	Foreign
    exchange	 	 	(49	)	 	 	(432	)	 	 	(382	)	 	 	(863	)
	November
    30, 2020	 	 	218,973	 	 	 	502,408	 	 	 	154,591	 	 	 	875,972	 




 




    	 
	Page 14 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	8.	Property
    and equipment (cont’d)



 


	Accumulated
    amortization	 	Leasehold

    improvements	 	 	Computer
    equipment	 	 	Furniture
    
 and fixtures	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2019	 	 	51,847	 	 	 	181,089	 	 	 	68,700	 	 	 	301,636	 
	Depreciation	 	 	174	 	 	 	1,089	 	 	 	351	 	 	 	1,614	 
	Foreign
    exchange	 	 	-	 	 	 	11,560	 	 	 	4,382	 	 	 	15,942	 
	November
    30, 2019	 	 	52,021	 	 	 	193,738	 	 	 	73,433	 	 	 	319,192	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	57,517	 	 	 	307,508	 	 	 	106,670	 	 	 	471,695	 
	Depreciation	 	 	(120	)	 	 	15,634	 	 	 	1,772	 	 	 	17,286	 
	Disposal
    of Motorsports	 	 	-	 	 	 	(11,068	)	 	 	(9,910	)	 	 	(20,978	)
	Foreign
    exchange	 	 	10	 	 	 	425	 	 	 	(224	)	 	 	211	 
	November
    30, 2020	 	 	57,407	 	 	 	312,499	 	 	 	98,308	 	 	 	468,214	 



 


	Net
    book value	 	Leasehold

    improvements	 	 	Computer
    equipment	 	 	Furniture
    
 and fixtures	 	 	Total	 
	 	 	 	$ 	 	 	 	$ 	 	 	 	$ 	 	 	 	$ 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	164,136	 	 	 	178,832	 	 	 	66,421	 	 	 	409,389	 
	November
    30, 2020	 	 	161,566	 	 	 	189,909	 	 	 	56,283	 	 	 	407,758	 








 


	9.	Goodwill


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Balance,
    August 31	 	 	18,785,807	 	 	 	651,354	 
	Impairment	 	 	-	 	 	 	-	 
	Effect
    of foreign exchange	 	 	26,903	 	 	 	482	 
	Balance,
    November 30	 	 	18,812,710	 	 	 	651,836	 



 


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


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Accumulated
    impairment losses, August 31	 	 	7,375,241	 	 	 	7,192,821	 
	Disposal
    of Motorsports	 	 	(1,398,556	)	 	 	-	 
	Effect
    of foreign exchange	 	 	422,115	 	 	 	84,017	 
	Accumulated
    impairment losses, November 30	 	 	6,398,800	 	 	 	7,276,838	 



 




    	 
	Page 15 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	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	 
	Foreign
    exchange	 	 	-	 	 	 	(1,076	)	 	 	(32,421	)	 	 	(3,550	)	 	 	(640	)	 	 	(37,687	)
	November
    30, 2019	 	 	-	 	 	 	759,247	 	 	 	5,023,377	 	 	 	1,659,443	 	 	 	476,952	 	 	 	7,919,019	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	9,430,265	 	 	 	1,322,802	 	 	 	10,763,975	 	 	 	2,310,475	 	 	 	3,671,954	 	 	 	27,499,471	 
	Additions	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	11,797	 	 	 	11,797	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(3,598,869	) 	 	 	(201,627	)	 	 	(222,650	)	 	 	(4,023,146	)
	Foreign
    exchange	 	 	-	 	 	 	20,516	 	 	 	322,019	 	 	 	101,056	 	 	 	2,866	 	 	 	446,457	 
	November
    30, 2020	 	 	9,430,265	 	 	 	1,343,318	 	 	 	7,487,125	 	 	 	2,209,904	 	 	 	3,463,967	 	 	 	23,934,579	 




 


	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	 	 	-	 	 	 	22,491	 	 	 	425,403	 	 	 	74,221	 	 	 	13,388	 	 	 	535,503	 
	Foreign
    exchange	 	 	-	 	 	 	(225	)	 	 	(10,436	)	 	 	(1,625	)	 	 	(273	)	 	 	(12,559	)
	November
    30, 2019	 	 	-	 	 	 	650,543	 	 	 	3,049,305	 	 	 	745,898	 	 	 	309,176	 	 	 	4,754,922	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	628,684	 	 	 	793,041	 	 	 	4,909,000	 	 	 	1,077,491	 	 	 	648,933	 	 	 	8,057,149	 
	Amortization	 	 	471,513	 	 	 	51,594	 	 	 	779,385	 	 	 	122,746	 	 	 	145,910	 	 	 	1,571,148	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(532,412	)	 	 	(201,627	)	 	 	(222,650	)	 	 	(956,689	)
	Foreign
    exchange	 	 	-	 	 	 	17,427	 	 	 	301,761	 	 	 	49,090	 	 	 	(69,603	)	 	 	298,675	 
	November
    30, 2020	 	 	1,100,197	 	 	 	862,062	 	 	 	5,457,734	 	 	 	1,047,700	 	 	 	502,590	 	 	 	8,970,283	 




 


	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	 
	November
    30, 2020	 	 	8,330,068	 	 	 	481,256	 	 	 	2,029,391	 	 	 	1,162,204	 	 	 	2,961,377	 	 	 	14,964,296	 



 




    	 
	Page 16 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	10.	Intangible
    assets (cont’d)


 


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


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Accumulated
    impairment losses, August 31	 	 	1,739,776	 	 	 	1,585,474	 
	Disposal
    of Motorsports	 	 	(1,697,107	)	 	 	-	 
	Effect
    of foreign exchange	 	 	(42,669	)	 	 	97,366	 
	Accumulated
    impairment losses, November 30	 	 	-	 	 	 	1,682,840	 



 


	11.	Right-of-use
    assets


 


	 	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Balance,
    August 31	 	 	550,478	 	 	 	-	 
	Additions
    to right-of-use assets on adoption of IFRS 16, September 1, 2019	 	 	-	 	 	 	234,215	 
	Acquired	 	 	-	 	 	 	-	 
	Depreciation	 	 	(29,041	)	 	 	(26,024	)
	Effect
    of foreign exchange	 	 	(58	)	 	 	-	 
	Balance,
    November 30	 	 	521,379	 	 	 	208,191	 



 


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.


 


	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	 
	Interest
    expense	 	 	-	 	 	 	1,821	 	 	 	1,821	 
	Payments	 	 	-	 	 	 	(27,528	)	 	 	(27,528	)
	Balance,
    November 30, 2019	 	 	-	 	 	 	208,508	 	 	 	208,508	 




 






    	 
	Page 17 of 41



     


    



 



	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 






	12.	Lease
    liabilities (cont’d)


 


	 	 	Equipment	 	 	Office
    lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	35,457	 	 	 	536,691	 	 	 	572,148	 
	Acquired	 	 	-	 	 	 	-	 	 	 	-	 
	Interest
    expense	 	 	562	 	 	 	9,094	 	 	 	9,656	 
	Payments	 	 	(3,345	)	 	 	(50,915	)	 	 	(54,260	)
	Effect
    of foreign exchange	 	 	-	 	 	 	(36	)	 	 	(36	)
	Balance,
    November 30, 2020	 	 	32,674	 	 	 	494,834	 	 	 	527,508	 




 


The
Company’s lease obligation is classified between current and non-current liabilities as follows:


 


	 	 	Equipment	 	 	Office
    lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	As
    at 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
    at November 30, 2020:	 	 	 	 	 	 	 	 	 	 	 	 
	Less
    than one year	 	 	11,595	 	 	 	178,279	 	 	 	189,874	 
	Greater
    than one year	 	 	21,079	 	 	 	316,555	 	 	 	337,634	 
	Total
    lease obligation	 	 	32,674	 	 	 	494,834	 	 	 	527,508	 




 


	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 at November 30, 2020, the players liability account balance is the total
amount payable if all players were to request closure of their accounts. As at November 30, 2020, the players account liability
and corresponding restricted cash balances were the same.


 


	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 November 30, 2020, interest of $83,581 has been accrued (August 31, 2020 – $83,435).


 


The
Company, through its Frankly subsidiary, has promissory notes with one party for $200,000 (August 31, 2020 – two parties
for $400,000). The notes are unsecured, bear interest at 12%, and are currently due. As of November 30, 2020, interest of $7,161
has been accrued (August 31, 2020 – $14,423).


 


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 November 30, 2020, $985,671 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 November 30, 2020, interest of $79,263 has
been accrued on this note (August 31, 2020 – $63,612).


 




    	 
	Page 18 of 41



     


    

 











	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



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


 


	(a)	Promissory
    notes (cont’d)


 


The
Company, through its UMG subsidiary, has two promissory notes outstanding as at November 30, 2020 in the amount of $117,350 (August
31, 2020 – $112,168), representing principal and accrued interest. The larger note has an outstanding balance of principal
and accrued interest at November 30, 2020 of $78,177 (August 31, 2020 – $75,492), has an interest rate of 12% and is currently
due.


 


As
of November 30, 2020, 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 November 30, 2020, interest of $15,074 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 at 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.


 




    	 
	Page 19 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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 is secured
by a security interest in Frankly Media’s assets, as well as a guarantee by the Company, secured against the Company’s
assets. The EB loan was amended in December 2020 and January 2021 (Note 27). Interest on outstanding balances of the EB
Loan accrues at a rate of 10% per annum. The proceeds of the EB Loan were used to supplement Frankly Media’s general working
capital.


 


The
carrying value of the line of credit as at November 30, 2020 is $4,979,877 (August 31, 2020 – $4,919,507).


 


	15.	Convertible
    debt


 


The
continuity of convertible debt for the three months ended November 30, 2020 and 2019, is as follows:


 


	 	 	2019
    
 Series	 	 	2020
    
 Series	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2019	 	 	12,532,723	 	 	 	-	 	 	 	12,532,723	 
	Conversion
    - common shares issued	 	 	(617,248	)	 	 	-	 	 	 	(617,248	)
	Conversion
    - warrants issued	 	 	(611,085	)	 	 	-	 	 	 	(611,085	)
	Interest
    expense	 	 	155,553	 	 	 	-	 	 	 	155,553	 
	Effect
    of foreign exchange	 	 	6,393	 	 	 	-	 	 	 	6,393	 
	Change
    in fair value	 	 	804,525	 	 	 	-	 	 	 	804,525	 
	Balance,
    November 30, 2019	 	 	12,270,861	 	 	 	-	 	 	 	12,270,861	 



 


	 	 	2019
    
 Series	 	 	2020
    
 Series	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	2,121,869	 	 	 	8,671,590	 	 	 	10,793,459	 
	Issuances	 	 	-	 	 	 	4,282,477	 	 	 	4,282,477	 
	Conversion
    - common shares issued	 	 	(164,343	)	 	 	-	 	 	 	(164,343	)
	Conversion
    - warrants issued	 	 	(140,880	)	 	 	-	 	 	 	(140,880	)
	Interest
    expense	 	 	19,001	 	 	 	137,775	 	 	 	156,776	 
	Accrued
    interest on conversion	 	 	(14,792	)	 	 	-	 	 	 	(14,792	)
	Effect
    of foreign exchange	 	 	17,152	 	 	 	-	 	 	 	17,152	 
	Change
    in fair value	 	 	370,969	 	 	 	952,776	 	 	 	1,323,745	 
	Balance,
    November 30, 2020	 	 	2,208,976	 	 	 	14,044,618	 	 	 	16,253,594	 



 




    	 
	Page 20 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	15.	Convertible
    debt (cont’d)


 


	(a)	Conversions
    during the period


 


During
the three months ended November 30, 2020, 2019 Series convertible debentures with a principal amount of CAD$275,000 (2019 –
CAD$1,328,000) were converted into 36,666 units (2019 – 177,067), and as a result, the Company issued 36,666 common
shares and 36,666 warrants (2019 – 177,067 common shares and 177,067 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 (2019 – CAD$29.85); term of 1.90 years (2019 – 2.68 and 2.77); conversion price and warrant exercise
price of CAD$7.50 (2019 – CAD$7.50); interest rate of 6% (2019 – 6%); expected volatility of 179% (2019 – 150%);
risk-free interest rate of 0.25% (2019 – 1.47%); exchange rate of 0.7651 (2019 – 0.7599); and an expected dividend
yield of 0% (2019 – 0%). The fair value assigned to these convertible debentures was $305,223 (2019 – $1,228,333).


 


This
value was split between common shares and warrants as $164,343 (2019 – $617,248) and $140,880 (2019 – $611,085), respectively.


 


	(b)	Issuances
    during the period


 


During
the three months ended November 30, 2020, 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.


 


	(c)	2019
    Series


 


As
at November 30, 2020, the fair value of the 2019 Series convertible debentures was estimated using the binomial lattice model
with the below assumptions:


 


	2019
    Series	 	November
    30, 
 2020
 (CA$)	 	 	August
    31, 
 2020
 (CA$)	 
	 	 	 	 	 	 	 
	Share
    price	 	 	8.80	 	 	 	11.65	 
	Conversion
    price	 	 	7.50	 	 	 	7.50	 
	Warrant
    exercise price	 	 	7.50	 	 	 	7.50	 
	 	 	 	 	 	 	 	 	 
	Term,
    in years	 	 	 1.60
                                         - 1.69 	 	 	 	1.85
                                         - 1.94	 
	Interest
    rate	 	 	6	%	 	 	6	%
	Expected
    volatility	 	 	200.00	%	 	 	179.00	%
	Risk-free
    interest rate	 	 	0.23	%	 	 	0.25	%
	Exchange
    rate	 	 	0.7717	 	 	 	0.7651	 
	Expected
    dividend yield	 	 	0	%	 	 	0	%



 




    	 
	Page 21 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 



 


	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.


 


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.


 


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.


 




    	 
	Page 22 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	15.	Convertible
    debt (cont’d)


 


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


 


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
at November 30, 2020, the fair value of the 2020 Series convertible debentures was estimated using the binomial lattice model
with the below assumptions:


 


	 	 	2020
    Series
 30-Nov-20
 (US$)	 	 	2020
    Series
 31-Aug-20
 (US$)	 
	 	 	 	 	 	 	 
	Share
    price	 	 	6.77	 	 	 	8.92	 
	Conversion
    price	 	 	 7.50
                                         - 9.50 	 	 	 	 7.50
                                         - 9.50 	 
	Warrant
    exercise price	 	 	15.00	 	 	 	15.00	 
	 	 	 	 	 	 	 	 	 
	Term,
    in years	 	 	1.72
                                         - 1.97	 	 	 	1.97
                                         - 1.98	 
	Interest
    rate	 	 	5%
                                         and 10	%	 	 	5%
                                         and 10%	 
	Expected
    volatility	 	 	200.00	%	 	 	200.00	%
	Risk-free
    interest rate	 	 	0.15%
                                         - 0.16	%	 	 	0.14	%
	Expected
    dividend yield	 	 	0	%	 	 	0	%



 


	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
at August 31, 2020, the present value of the loan was $164,601 (August 31, 2020 – $230,932), accretion having been charged
to interest expense on the Company’s consolidated statements of loss and comprehensive loss for three months ended November
30, 2020 of $14,013 (2019 – $14,724). A discount rate of 10% was used (August 31, 2020 – 10%).


 


Scheduled
repayments are: € 90,000 ($107,658) and € 67,500 ($80,744) between 0 – 12 months and 12 – 24 months, respectively,
from November 30, 2020.


 




    	 
	Page 23 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 





	17.	Warrant
    liability


 


The
following table reflects the continuity of the Company’s warrant liability for the three months ended November 30, 2020
and 2019:


 


	 	 	Amount	 
	 	 	 	 $
                                         	 
	 	 	 	 	 
	Balance
    at August 31, 2019	 	 	296,795	 
	Issued	 	 	611,085	 
	Change
    in fair value	 	 	1,634,324	 
	Foreign
    exchange	 	 	1,395	 
	Balance
    at November 30, 2019	 	 	2,543,599	 
	 	 	 	 	 
	Balance
    at August 31, 2020	 	 	14,135,321	 
	Issued
    on conversion of convertible debt	 	 	140,880	 
	Issued
    in private placement of convertible debentures	 	 	618,916	 
	Exercised	 	 	(11,404	)
	Change
    in fair value	 	 	(4,759,776	)
	Foreign
    exchange	 	 	122,209	 
	Balance
    at November 30, 2020	 	 	10,246,146	 



 


The
following table reflects the continuity of the Company’s outstanding warrants for the three months ended November 30, 2020
and 2019:


 


	 	 	Number
    of	 	 	Weighted-average
    exercise price	 
	 	 	warrants	 	 	CAD	 	 	USD	 
	 	 	#	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Outstanding,
    August 31, 2019	 	 	29,317	 	 	 	458.40	 	 	 	344.85	 
	Issued	 	 	177,067	 	 	 	7.50	 	 	 	5.70	 
	Expired	 	 	(2,788	)	 	 	(56.25	)	 	 	(42.30	)
	Oustanding
    as at November 30, 2019	 	 	203,596	 	 	 	70.35	 	 	 	52.95	 



 


	 	 	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	 	 	36,666	 	 	 	7.50	 	 	 	5.78	 
	Issued
    in private placement of convertible debentures	 	 	224,719	 	 	 	19.45	 	 	 	15.00	 
	Exercised	 	 	(7,166	)	 	 	8.28	 	 	 	6.39	 
	Expired	 	 	(430	)	 	 	153.81	 	 	 	118.63	 
	Oustanding
    as at November 30, 2020	 	 	2,659,158	 	 	 	10.39	 	 	 	8.01	 




 




    	 
	Page 24 of 41



     


    

 



	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	17.	Warrant
    liability (cont’d)


 


The
following table reflects the warrants issued and outstanding as of November 30, 2020:


 


	 	 	 	 	 	Warrants
    outstanding	 	 	Warrants
    exercisable	 
	 	 	 	 	 	 	 	 	 	 	 	Average 	 	 		 	 	Weighted
    number	 
	 	 	Number	 	 	Average
    

exercise price	 	 	remaining
    contractual	 	 	Weighted
    number	 	 	exercisable
    

price	 
	Expiry
    date	 	outstanding	 	 	CAD	 	 	USD	 	 	life
    (years)	 	 	exercisable	 	 	CAD	 	 	USD	 
	10-May-21	 	 	249,589	 	 	$	9.75	 	 	$	7.52	 	 	 	0.44	 	 	 	249,589	 	 	$	9.75	 	 	$	7.52	 
	15-May-21	 	 	268,123	 	 	 	9.75	 	 	 	7.52	 	 	 	0.45	 	 	 	268,123	 	 	 	9.75	 	 	 	7.52	 
	22-May-21	 	 	411,664	 	 	 	9.75	 	 	 	7.52	 	 	 	0.47	 	 	 	411,664	 	 	 	9.75	 	 	 	7.52	 
	11-Jul-21	 	 	3,955	 	 	 	205.20	 	 	 	158.27	 	 	 	0.61	 	 	 	3,955	 	 	 	205.20	 	 	 	158.27	 
	13-Mar-22	 	 	123,159	 	 	 	10.50	 	 	 	8.10	 	 	 	1.28	 	 	 	123,159	 	 	 	10.50	 	 	 	8.10	 
	20-Nov-22	 	 	224,719	 	 	 	19.45	 	 	 	15.00	 	 	 	1.97	 	 	 	224,719	 	 	 	19.45	 	 	 	15.00	 
	20-Dec-22	 	 	29,066	 	 	 	27.00	 	 	 	20.83	 	 	 	2.05	 	 	 	29,066	 	 	 	27.00	 	 	 	20.83	 
	20-Mar-23	 	 	27,777	 	 	 	13.50	 	 	 	10.41	 	 	 	2.30	 	 	 	27,777	 	 	 	13.50	 	 	 	10.41	 
	30-Mar-23	 	 	46,909	 	 	 	13.50	 	 	 	10.41	 	 	 	2.33	 	 	 	46,909	 	 	 	13.50	 	 	 	10.41	 
	31-Mar-23	 	 	17,222	 	 	 	13.50	 	 	 	10.41	 	 	 	2.33	 	 	 	17,222	 	 	 	13.50	 	 	 	10.41	 
	27-May-23	 	 	130,304	 	 	 	13.50	 	 	 	10.41	 	 	 	2.49	 	 	 	130,304	 	 	 	13.50	 	 	 	10.41	 
	8-Jul-24	 	 	451,982	 	 	 	7.50	 	 	 	5.78	 	 	 	3.61	 	 	 	451,982	 	 	 	7.50	 	 	 	5.78	 
	25-Jul-24	 	 	393,556	 	 	 	7.50	 	 	 	5.78	 	 	 	3.65	 	 	 	393,556	 	 	 	7.50	 	 	 	5.78	 
	8-Aug-24	 	 	281,133	 	 	 	7.50	 	 	 	5.78	 	 	 	3.69	 	 	 	281,133	 	 	 	7.50	 	 	 	5.78	 
	 	 	 	2,659,158	 	 	$	10.39	 	 	$	8.01	 	 	 	2.16	 	 	 	2,659,158	 	 	$	10.39	 	 	$	8.01	 





 





As
at November 30, 2020, the fair value of the 2,659,158 warrants outstanding (August 31, 2020 – 2,405,369) was determined
to be $10,246,146 (August 31, 2020 – $14,135,321) as calculated using the Black Scholes option pricing model with the following
range of assumptions: 0.44 – 3.69 years (August 31, 2020 – 0.23 – 3.94) as expected average life; share price
of CAD$8.80 (August 31, 2020 – CAD$11.65); exercise price of CAD$7.50 – CAD$205.20 (August 31, 2020 – CAD$7.50
– CAD$205.20); 115% - 136% expected volatility (August 31, 2020 – 115% - 136%); risk free interest rate of 0.21% -
0.37% (August 31, 2020 – 0.23% - 0.32%); and an expected dividend yield of 0%. 


 


	(a)	Warrants
    exercised during the period


 


During
the three months ended November 30, 2020, the holders of 7,166 warrants (2019 – nil) 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 $44,675 in cash proceeds and the intrinsic value of the underlying warrants at the date of exercise
of $11,404 was transferred to share capital, for a total addition to share capital of $56,079.


 


	(b)	Warrants
    issued during the period


 


The
Company issued 36,666 warrants (2019 – 177,067) in connection with conversion of convertible debt (Note 15(a)) and 224,719
warrants (2019 – nil) in connection with the private placement of convertible debentures (Note 15(f)), for a total number
of 261,385 warrants issued (2019 – 177,066).


 


	(c)	Warrants
    issued on conversion of convertible debt 


 


During
the three months ended November 30, 2020 the Company issued 36,666 CAD$7.50 warrants (2019 – 177,067 CAD$7.50) in conjunction
with the conversion of 36,666 units of convertible debt (2019 – 177,067). Each resulting unit was comprised of one common
share of the Company and one common share purchase warrant of 


 




    	 
	Page 25 of 41



     


    

 



	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	17.	Warrant
    liability (cont’d)


 


	(c)	Warrants
    issued on conversion of convertible debt 


 


the
Company. Each whole warrant entitles the holder to acquire one common share of the Company for a period of five years from the
date of issuance of the convertible debt at an exercise price of CAD$7.50 (2019 – CAD$7.50) per warrant. The fair value
of the 36,666 warrants (2019 – 177,067) issued was determined to be $140,880 (2019 – $611,085) as calculated using
the Black Scholes option pricing model with the following assumptions: 


 


A
3.9 years as expected average life (2019 – 4.61 to 4.91); share price of CAD$11.51 (2019 – CAD$3.75); exercise price
of CAD$7.50 (2019 – CAD$7.50); 136% expected volatility (2019 – 136%); risk free interest rate of 0.30% (2019 –
1.36% and 1.55%); and an expected dividend yield of 0% (2019 – 0%). 


 


Volatility
is calculated using a weighted approach based on the changes in the Company’s historical stock price and volatility for
comparable public companies. 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.


 


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


 


During
the three months ended November 30, 2020 the Company issued 224,719 warrants in connection with the private placement of convertible
debentures under its standby convertible debenture facility (Note 15(f)). 


 


	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	 	 	177,067	 	 	 	617,248	 
	Balance,
    November 30, 2019	 	 	333,507	 	 	 	30,230,654	 



 


	 	 	Shares	 	 	Consideration	 
	 	 	 	#
                                         	 	 	 	$
                                         	 
	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	7,746,136	 	 	 	69,380,807	 
	Shares
    issued on vesting of RSUs	 	 	66,666	 	 	 	410,189	 
	Convertible
    debt conversion	 	 	36,666	 	 	 	164,343	 
	Common
    shares issued on exercise of warrants	 	 	7,166	 	 	 	56,079	 
	Balance,
    November 30, 2020	 	 	7,856,634	 	 	 	70,011,418	 



 




    	 
	Page 26 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	18.	Share
    capital (cont’d)


 


	(c)	Activity
    for the period


 


During
the three months ended November 30, 2020, the Company issued 66,666 common shares upon vesting of an equal number of RSUs (Note
20), issued 36,666 common shares in connection with conversion of convertible debt (Note 15(a)), and issued 7,166 common shares
in connection with the exercise of warrants (Note 17(a)).


 


	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. 


 


The
following table reflects the continuity of stock options for the three months ended November 30, 2020 and 2019:


 


	 	 	 	 	 	Weighted-average	 	 	 	 
	 	 	Number
    of
 stock options	 	 	Exercise
    
 price	 	 	Grant-date

    fair value	 	 	Remaining

    contractual 
 term	 
	 	 	#	 	 	$	 	 	$	 	 	(yrs.)	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2019	 	 	6,971	 	 	 	166.20	 	 	 	49.86	 	 	 	5.84	 
	Expired/Cancelled	 	 	(5,110	)	 	 	185.97	 	 	 	55.79	 	 	 	 	 
	Balance,
    November 30, 2019	 	 	1,861	 	 	 	123.54	 	 	 	37.06	 	 	 	5.76	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	253,121	 	 	 	12.73	 	 	 	4.39	 	 	 	4.31	 
	Expired/Cancelled	 	 	(2,353	)	 	 	112.73	 	 	 	29.40	 	 	 	 	 
	Balance,
    November 30, 2020	 	 	250,768	 	 	 	11.79	 	 	 	4.43	 	 	 	4.06	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Vested
    and expected to vest, November 30, 2020	 	 	246,054	 	 	 	11.91	 	 	 	4.42	 	 	 	3.97	 
	Exerciseable
    as at November 30, 2020	 	 	203,581	 	 	 	13.23	 	 	 	4.27	 	 	 	2.92	 



 




    	 
	Page 27 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	19.	Stock
    options (cont’d)


 


The
following tables reflect the stock options issued and outstanding as of August 31, 2020:


 



	 	 	Outstanding	 	 	 	 	 	Weighted

                                                                                average

                                                                                exercise
                                         price
	 	 	Weighted

                                                                 average

                                                                 remaining

                                                                 contractual

                                                                 term
	 
	Expiry
    date	 	 	options	 	 	 	CAD	 	 	 	USD	 	 	 	(Years)	 
	11-Jul-21	 	 	632	 	 	 	164.40	 	 	 	126.58	 	 	 	0.61	 
	15-Jul-21	 	 	9,490	 	 	 	41.10	 	 	 	31.64	 	 	 	0.62	 
	10-Dec-21	 	 	1,564	 	 	 	93.30	 	 	 	71.84	 	 	 	1.03	 
	30-Jun-22	 	 	4,428	 	 	 	153.45	 	 	 	118.15	 	 	 	1.58	 
	1-Apr-23	 	 	104,998	 	 	 	11.25	 	 	 	7.91	 	 	 	2.33	 
	31-Oct-23	 	 	64,997	 	 	 	11.25	 	 	 	7.91	 	 	 	2.92	 
	29-Jan-25	 	 	46	 	 	 	106.50	 	 	 	76.43	 	 	 	4.17	 
	25-Aug-25	 	 	340	 	 	 	106.50	 	 	 	76.43	 	 	 	4.74	 
	23-Sep-25	 	 	11	 	 	 	106.50	 	 	 	76.43	 	 	 	4.82	 
	10-Feb-26	 	 	1,553	 	 	 	106.50	 	 	 	76.43	 	 	 	5.20	 
	19-May-26	 	 	4	 	 	 	106.50	 	 	 	76.43	 	 	 	5.47	 
	23-May-26	 	 	9	 	 	 	106.50	 	 	 	76.43	 	 	 	5.48	 
	3-Mar-27	 	 	1,256	 	 	 	106.50	 	 	 	76.43	 	 	 	6.26	 
	31-Jul-27	 	 	159	 	 	 	106.50	 	 	 	76.43	 	 	 	6.67	 
	3-Nov-27	 	 	133	 	 	 	106.50	 	 	 	76.43	 	 	 	6.93	 
	7-Nov-29	 	 	56,483	 	 	 	7.50	 	 	 	5.38	 	 	 	8.94	 
	20-Apr-30	 	 	4,665	 	 	 	7.05	 	 	 	5.06	 	 	 	9.39	 
	 	 	 	250,768	 	 	 	16.20	 	 	 	11.79	 	 	 	4.06	 





 


Of
the 250,768 options outstanding as at November 30, 2020 (August 31, 2020 – 253,121), 203,581 are exercisable as at November
30, 2020 (August 31, 2020 – 191,730). During the three months ended November 30, 2020, share-based compensation expense
for the Company’s stock options was $49,054 (2019 – $9,573).


 


	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.


 




    	 
	Page 28 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	20.	Restricted
    share units (cont’d)


 


The
Company’s outstanding RSUs are as follows:


 


	 	 	Number	 
	 	 	#	 
	 	 	 	 	 
	Balance,
    August 31, 2019 and November 30, 2019	 	 	-	 
	 	 	 	 	 
	Balance,
    August 31, 2020	 	 	402,372	 
	Granted	 	 	322,547	 
	Vested	 	 	(66,666	)
	Cancelled	 	 	-	 
	Balance,
    November 30, 2020	 	 	658,253	 



 


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 three months ended November 30, 2020, share-based compensation expense for the Company’s RSUs was $1,039,584 (2019 –
$nil).


 


	21.	Capital
    management


 


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


 


As
at November 30, 2020, the Company had shareholders’ equity (deficit) before non-controlling interests of $(5,397,539) (August
31, 2019 – equity of 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 months ended November
30, 2020 and 2019.


 




    	 
	Page 29 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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 months ended November 30, 2020 and 2019.


 


	(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 November 30, 2020, no provision has been made in these 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.


 


In
response, in November 2020, the shareholders of Allinsports commenced arbitration in Ontario 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.
The Company will defend itself vigorously in this proceeding.


 


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.


 




    	 
	Page 30 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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.


 


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 at 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 31 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	23.	Discontinued
    operations (cont’d)


 


The
operating results and net cash flows of the Motorsports Group for the three months ended November 30, 2020 and 2019 are presented
as discontinued operations as follows:


 


	 	 	2020	 	 	2019	 
	 	 	 	$
                                         	 	 	 	$
                                         	 
	Revenues	 	 	 	 	 	 	 	 
	Advertising
    revenue	 	 	90,934	 	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Operating
    expenses	 	 	 	 	 	 	 	 
	Salaries
    and wages	 	 	212,546	 	 	 	73,593	 
	Consulting	 	 	267,933	 	 	 	27,036	 
	Professional
    fees	 	 	22,681	 	 	 	38,309	 
	Sponsorships
    and tournaments	 	 	203,637	 	 	 	1,828,587	 
	Advertising
    and promotion	 	 	1,740	 	 	 	9,583	 
	Office
    and general	 	 	7,374	 	 	 	55,503	 
	Technology
    expenses	 	 	86,590	 	 	 	32	 
	Amortization
    and depreciation	 	 	201,335	 	 	 	1,615	 
	Share-based
    payments	 	 	-	 	 	 	-	 
	Interest
    expense	 	 	572	 	 	 	(56	)
	(Gain)
    loss on foreign exchange	 	 	36,741	 	 	 	(7,438	)
	Net
    loss from discontinued operations	 	 	(950,215	)	 	 	(2,026,764	)



 


	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 32 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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 November
30, 2020:


 


	 	 	E-Sports	 	 	Media
    and
 Advertising	 	 	Corporate

    and Other	 	 	2020

    Total	 
	 	 	 	$
                                         	 	 	 	$
                                         	 	 	 	$
                                         	 	 	 	$
                                         	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External
    sales	 	 	762,941	 	 	 	6,703,450	 	 	 	-	 	 	 	7,466,391	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment
    loss	 	 	(2,697,438	)	 	 	(1,392,595	)	 	 	-	 	 	 	(4,090,033	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central
    administration costs	 	 	-	 	 	 	-	 	 	 	3,309,789	 	 	 	3,309,789	 
	Other
    gains and losses	 	 	(2,352	)	 	 	(3,693	)	 	 	(3,467,236	)	 	 	(3,473,281	)
	Finance
    costs	 	 	59,571	 	 	 	186,990	 	 	 	161,529	 	 	 	408,090	 
	Loss
    before tax	 	 	(2,754,657	)	 	 	(1,575,892	)	 	 	(4,082	)	 	 	(4,334,631	)
	Income
    tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain
    (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share
    of net loss of associate	 	 	-	 	 	 	-	 	 	 	(66,686	)	 	 	(66,686	)
	Discontinued
    operations	 	 	(950,215	)	 	 	-	 	 	 	(678,931	)	 	 	(1,629,146	)
	Non-controlling
    interest in net loss	 	 	-	 	 	 	-	 	 	 	31,030	 	 	 	31,030	 
	Net
    loss	 	 	(3,704,872	)	 	 	(1,575,892	)	 	 	(718,669	)	 	 	(5,999,433	)



 


The
following is an analysis of the Company’s revenue and results by reportable segment for the three months ended November
30, 2019:


 


	 	 	E-Sports	 	 	Media
    and
 Advertising	 	 	Corporate

    and Other	 	 	2019

    Total	 
	 	 	 	 $
                                         	 	 	 	 $
                                         	 	 	 	 $
                                         	 	 	 	 $
                                         	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External
    sales	 	 	807,983	 	 	 	-	 	 	 	265	 	 	 	808,248	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment
    loss	 	 	(889,819	)	 	 	-	 	 	 	265	 	 	 	(889,554	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central
    administration costs	 	 	-	 	 	 	-	 	 	 	2,286,322	 	 	 	2,286,322	 
	Other
    gains and losses	 	 	1,371	 	 	 	-	 	 	 	2,607,803	 	 	 	2,609,174	 
	Finance
    costs	 	 	1,880	 	 	 	-	 	 	 	272,597	 	 	 	274,477	 
	Loss
    before tax	 	 	(893,070	)	 	 	-	 	 	 	(5,166,457	)	 	 	(6,059,527	)
	Income
    tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain
    (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discontinued
    operations	 	 	(2,026,764	)	 	 	-	 	 	 	-	 	 	 	(2,026,764	)
	Non-controlling
    interest in net loss	 	 	-	 	 	 	-	 	 	 	35,100	 	 	 	35,100	 
	Net
    loss	 	 	(2,919,834	)	 	 	-	 	 	 	(5,131,357	)	 	 	(8,051,191	)



 




    	 
	Page 33 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	24.	Segmented
    information (cont’d)


 


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	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	November
    30, 2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	45,816,386	 	 	 	-	 	 	 	1,545,642	 	 	 	47,362,028	 
	Long-term
    assets	 	 	36,423,177	 	 	 	-	 	 	 	268,288	 	 	 	36,691,465	 



 


	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 months ended November 30 includes the following:


 


	 	 	2020	 	 	2019	 
	 	 	 	 $
                                         	 	 	 	 $
                                         	 
	 	 	 	 	 	 	 	 	 
	Total
    compensation paid to key management	 	 	534,738	 	 	 	106,670	 
	Share
    based payments	 	 	895,814	 	 	 	7,209	 



 


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 for the three months ended November 30, 2020 and 2019. As discussed in Note 20, of the
322,547 RSUs granted in the three months ended November 30, 2020, 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 as share based
payments expense on the grant date.


 


Amounts
due to related parties as at November 30, 2020 with respect to the above fees were $72,000 (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 34 of 41



     


    

 



	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 



 


	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
at November 30, 2020 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 at November 30, 2020 (August 31, 2020 – 13%). During the three months ended November 30,
2020, one (2019 – three) customers represented 58% (2019 – 50%) 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 at November 30, 2020:


 


	 	 	0
    - 30	 	 	31
    - 60	 	 	61
    - 90	 	 	91+	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Trade
    accounts receivable	 	 	2,580,912	 	 	 	1,140,837	 	 	 	659,502	 	 	 	1,657,922	 	 	 	6,039,173	 
	Allowance
    for doubtful accounts	 	 	1,500	 	 	 	1,500	 	 	 	-	 	 	 	870,038	 	 	 	873,038	 
	%
    Allowance	 	 	0	%	 	 	0	%	 	 	0	%	 	 	52	%	 	 	14	%



 




    	 
	Page 35 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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	 	 	17,378,824	 	 	 	-	 	 	 	-	 
	Players
    liability account	 	 	340,911	 	 	 	-	 	 	 	-	 
	Lease
    obligation	 	 	189,874	 	 	 	337,634	 	 	 	-	 
	Line
    of credit	 	 	4,979,877	 	 	 	-	 	 	 	-	 
	Long-term
    debt	 	 	97,871	 	 	 	66,730	 	 	 	-	 
	Promissory
    notes payable	 	 	2,018,100	 	 	 	-	 	 	 	-	 
	Convertible
    debt	 	 	-	 	 	 	16,253,594	 	 	 	-	 



 


	(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 and GBP, 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 36 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



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


 


	(f)	Fair
    value hierarchy (cont’d)


 


As
at November 30, 2020:


 


	Carrying
    value at November 30, 2020	 	FVTPL
    -
 mandatorily
 measured	 	 	FVOCI
    -
 mandatorily
 measured	 	 	FVOCI
    -
 designated	 	 	Amortized

    cost	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial
    assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,726,563	 
	Restricted
    cash	 	 	-	 	 	 	-	 	 	 	-	 	 	 	340,911	 
	Accounts
    and other receivables	 	 	-	 	 	 	-	 	 	 	-	 	 	 	5,222,659	 
	Government
    remittances	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,021,425	 
	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	9,311,558	 



 


	Carrying
    value at November 30, 2020	 	FVTPL
    -
 mandatorily
 measured	 	 	FVTPL
    -
 designated	 	 	Amortized

    cost	 
	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial
    liabilities:	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts
    payable and accrued liabilities	 	 	-	 	 	 	-	 	 	 	17,378,824	 
	Players
    liability account	 	 	-	 	 	 	-	 	 	 	340,911	 
	Line
    of credit	 	 	-	 	 	 	-	 	 	 	4,979,877	 
	Long-term
    debt	 	 	-	 	 	 	-	 	 	 	164,601	 
	Promissory
    notes payable	 	 	-	 	 	 	-	 	 	 	2,018,100	 
	Deferred
    purchase consideration	 	 	-	 	 	 	-	 	 	 	-	 
	Convertible
    debt	 	 	-	 	 	 	16,253,594	 	 	 	-	 
	 	 	 	-	 	 	 	16,253,594	 	 	 	24,882,313	 



 


As
at 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	 
	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	10,603,667	 



 




    	 
	Page 37 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 



	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 November
 30, 2020	 
	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible
    debt	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 
	 	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 



 


	 	 	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	 



 


Some
of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.


 




    	 
	Page 38 of 41



     


    

 








	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 



 


	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 at November 30, 2020 has been calculated using a binomial lattice methodology.	 	Key
                                         observable inputs

         

        Share
        price (USD $6.77)

         

        Risk-free
        interest rate (0.15% to 0.16%)

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

        Credit
        spread (10.71% to 10.73%)

         

        Discount
        for lack of marketability (35%)
	 	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 at 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 year.


 




    	 
	Page 39 of 41



     


    

 


	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 






	27.	Subsequent
    events


 


The
Company has evaluated subsequent events from the balance sheet date through February 1, 2021, the date at which the 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.


 


	(a)	Amendment
    of credit facility


 


In
December 2020, the Company amended the $5,000,000 revolving term line of credit (“EB Loan”). In connection with the
amendment, the maturity date of the EB Loan was extended from January 5, 2021 until January 5, 2022. Additionally, the Company
guaranteed the obligations under the EB Loan and has granted a security interest in favour of the Lender over the assets of the
Company. In consideration of the extension of the maturity date, the Company has agreed to issue to the Lender an aggregate of
6,666 common shares in the capital of the Company at a deemed price per share equal to $5.77 and an amendment fee of $100,000
which forms part of the outstanding principal under the EB Loan. The Bonus Shares issuable will be subject to a hold period expiring
four months and a day following the date of issuance.


 


In
January 2021, the Company further amended the EB loan such that in lieu of repayment of the loan due to the Company completing
an equity financing of at least $15 million (see note 27(d), the $5 million principal amount of the EB loan will now be subject
to a secured convertible debenture. The convertible debenture 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 convertible debenture.


 


	(b)	Shares
    for debt transaction 


 


In
December 2020, the Company settled outstanding debt of CAD$294,000 with two arm’s length creditors by issuing 40,000 common
shares of the Company at a deemed price of CAD$7.35 per share. The amount of indebtedness represents an outstanding balance of
consulting fees and expense reimbursement owed to former consultants to the Company.


 


	(c)	Retirement
    of convertible debentures in exchange for issuance of common shares and warrants


 


In
January 2021, the Company completed convertible debenture settlements of an aggregate principal amount of $10,726,393 of its convertible
debentures in exchange for the issuance of 1,430,186 units at a deemed price of $7.50 per unit, with each such unit consisting
of a common share and three-quarters (3/4) of a warrant, with each whole warrant exercisable into a common share at an exercise
price of $15 per share for a period of three years. Included in the debt settlements was the $3,000,000 convertible debenture
that was issued in connection with the Company’s acquisition of a 20% equity interest in One Up LLC.


 


	(d)	Issuance
    of Units for $17.8 million of gross proceeds


 


In
January 2021, the Company closed on the issuance of 2,371,747 units (the “Units”) for gross proceeds of $17,788,105
of a non-brokered private placement. 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 US$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 US$30,000,000,
and (iii) the closing price of the common shares on NASDAQ is US$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.


 




    	 
	Page 40 of 41



     


    

 











	Engine
    Media Holdings, Inc.Notes
                                   to the Interim Condensed Consolidated Financial Statements

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 


 


	27.	Subsequent
    events (cont’d)


 


	(d)	Issuance
    of Units for $17.8 million of gross proceeds (cont’d)


 


The
proceeds of the offering will be allocated to marketing and advertising of the Company’s product offerings, product development
initiatives for UMG, WinView and Stream Hatchet, and general working capital purposes.


 


The
Company paid cash commissions to eligible finders under the offering totaling $490,641 and also issued the following securities
as partial payment of commissions to finders: 49,700 Units; and, 114,987 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.


 


All
securities issued under the Offering are subject to a hold period of four months and one day from the closing.


 




    	 
	Page 41 of 41