Exhibit 4.13


 





 


TORQUE
ESPORTS CORP.


(formerly
Millennial Esports Corp.)


 


MANAGEMENT’S
DISCUSSION AND ANALYSIS


 


For
the Years Ended August 31, 2019 and 2018

(Expressed in United States Dollars)


 


Dated:
February 17, 2020


 




    	 	 	 



     


    

 


TORQUE
ESPORTS CORP. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the year ended August 31, 2019 and 2018





 



 


INTRODUCTION


 


Torque
Esports Corp. (formerly Millennial Esports Corp.) (“Torque” or the “Company”)
was incorporated on April 8, 2011 as a private company pursuant to the provisions
of the Business Corporations Act (Ontario). As of August 31, 2019,
and 2018, the Company’s
common shares are listed on the Toronto
Venture Stock Exchange (TSXV) under the
symbol “GAME” and
on the OTCQB in the
United States of America
under the symbol “MLLLF”.
The authorized share capital of the Company consists of an unlimited number
of common shares, without nominal or par value.


 


The
United States Dollar
is the Company’s
functional and reporting currency. Unless
otherwise noted, all dollar amounts
are expressed in United
States Dollars.


 


The
following management’s discussion and analysis (“MD&A”) of the
financial condition and results of operations of Torque constitutes management’s review of the factors that
affected the Company’s financial and operating performance for the year ended August 31, 2019 and 2018. This MD&A
has been prepared in compliance with the requirements of National Instrument 51-102
– Continuous Disclosure Obligations.


 


This
MD&A should be read in conjunction with the audited annual consolidated financial statements of the Company for the years
ended August 31, 2019 and 2018, together with the notes thereto.


 


For
the purposes of preparing this MD&A, management, in conjunction with the Board
of the Company (the “Board”), considers the materiality of information.
Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant
change in the market price or value of Torque’s common shares; or (ii) there
is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii)
if it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board,
evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.


 


Further
information about the Company and its operations can be obtained from the offices of
the Company or from https://torqueesport.com/ or
www.sedar.com.


 


CAUTIONARY
NOTE REGARDING FORWARD LOOKING INFORMATION


 


This
MD&A contains forward-looking information and statements (“forward-looking statements”) which may include, but
are not limited to, statements with respect to the future financial or operating performance of the Company. Forward-looking statements
reflect the current expectations of management regarding the Company’s future growth, results of operations, performance
and business prospects and opportunities. Wherever possible, words such as “may”, “would”, “could”,
“will”, “anticipate”, “believe”, “plan”, “expect”, “intend”,
“estimate” and similar expressions have been used to identify these forward-looking statements. These statements reflect
management’s current beliefs with respect to future events and are based on information currently available to management.
Forward-looking statements involve significant risks, uncertainties and assumptions. Many factors could cause the actual results,
performance or events to be materially different from any future results, performance or events that may be expressed or implied
by such forward-looking statements, including, without limitation, those listed in the “Risk Factors” section of this
MD&A. Although the Company has attempted to identify important factors that could cause actual results, performance or events
to differ materially from those described in the forward-looking statements, there could be other factors unknown to management
or which management believes are immaterial that could cause actual results, performance or events to differ from those anticipated,
estimated or intended. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking
statements prove incorrect, actual results, performance or events may vary materially from those expressed or implied by the forward-looking
statements contained in this MD&A. These factors should be considered carefully, and readers should not place undue reliance
on the forward-looking statements. Forward-looking statements contained herein are made as of the date of this MD&A and the
Company assumes no responsibility to update forward looking statements, whether as a result of new information or otherwise, other
than as may be required by applicable securities laws.


 




    	 	 	Page 1 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


BUSINESS
OVERVIEW


 


Torque
focuses on three areas esports data provision, esports tournament hosting and esports racing. Torque aims to revolutionize esports
racing and the racing gaming genre via its industry-leading gaming studio Eden Games which focuses on mobile racing games and
its unique motorsport intellectual property, including World’s Fastest Gamer (created and managed by wholly-owned subsidiary
IDEAS+CARS, Silverstone UK). Torque offers gamers everything from free- to-play mobile games to the high end simulators. Building
on the leading position of Stream Hatchet, a wholly-owned subsidiary, Torque also provides robust esports data and management
information to brands, sponsors, and industry leaders.


 


During
July 2019, Torque restructured its business and leadership team. As such Torque refocused
on parts of the existing business that could be made profitable in the near term and on investigating mergers and acquisition
opportunities that were both synergistic to the existing business and/or could speed up the timeline to profitability. Torque
also focused on reducing overhead dramatically with a reduction in non-essential resources including offices, personnel
and consultants. Unprofitable projects and business units were either streamlined or wound down.


 


In
addition, Torque’s new management focused attention on building
on the leading position of Stream Hatchet (a Barcelona, Spain-based wholly-owned subsidiary)
who provides robust esports data and management information to brands, sponsors, and
industry leaders. This data allows the esports industry to monetize the huge number
of eyeballs in the gaming and esports space. These efforts allowed Torque to
focus short term on being a vertically integrated mobile gaming publisher leading a revolution to fuse esports racing and
professional motorsport through a global competition model.


 


Torque
has transitioned itself in this period from a high overhead, low revenue business to one that is lean, focused and has used mergers
and acquisitions to short cut its structural maturity and path to revenue and profit.


 


Torque
uses the buzz of esports to tell the story about this new booming industry,but is building its revenue streams in known areas
for investors: video games, data, motorsport and now media.


 


Since
July 2019, Torque has made significant strides in lowering costs and focusing investment
in high growth areas. The ground work for the future was being completed in this period but the financial results will not be
clear until the second half of 2020 – when Torque will show leadership
in this space as a diversified company with its centre
of gravity based around the high growth areas of video gaming and esports.


 


Whilst
this rationalization and overhead cutting was being deployed, Torque also looked at how mergers and acquisitions could be used
to speed up its path to profitability and to speed up bolstering its structure and processes. Torque considered a number of opportunities
to support its push in racing esports and diversify its esports focus. It also looked at a wider diversification into ‘digital
entertainment’.


 




    	 	 	Page 2 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


This
consideration resulted in a number of acquisitions that have been publicly announced. These include the following:


 


	 	●	On
    November 6, 2019, the Company signed a definitive agreement to acquire UMG Media Ltd. (“UMG”). The transaction
    closed on December 31, 2019 and was carried out by way of a plan of arrangement under the Business Corporations Act (Alberta).
    UMG shareholders will receive, on an exchange ratio of 0.0643205, common shares of Torque. In total, Torque will issue approximately
    4,329,445 Torque Shares (the “Consideration Shares”) in exchange for the UMG securities to be exchanged pursuant
    to the transaction, including the securities to be issued pursuant to the UMG Private Placement (defined below) (a total of
    812,361 of these Torque Shares will be issued to the UMG Private Placement shareholders and the remainder shall be issued
    to the current UMG Shareholders). In addition, each outstanding option and warrant to purchase a UMG Share will be exchanged
    for an option or warrant, as applicable, to purchase a Torque share, based upon the exchange ratio. This transaction was approved
    at the special meeting of UMG shareholders held on December 17, 2019 and the final order regarding the Arrangement was granted
    by the Court of Queen’s Bench of Alberta on December 18, 2019. Pursuant to the Arrangement, Torque has acquired all
    of the issued and outstanding UMG Shares, by way of a plan of arrangement, based on an exchange ratio of 0.0643205 of a Torque
    common share for each UMG Share held by the former UMG Shareholders. The plan of arrangement was completed on December 31,
    2019.
	 	●	On
    November 22, 2019, Torque, Frankly Inc. (“Frankly”), and WinView Inc. (“WinView”) announced that the
    three companies have agreed to combine to form an integrated news, gaming, sports and esports platform. The parties have until
    February 14, 2020 to close this transaction, which is subject to various closing conditions, including the audit of the Company.
    The three companies have entered into a binding letter agreement (the “Letter Agreement”) that provides for Torque
    to acquire all of the issued and outstanding common shares of Frankly and all of
    the issued and outstanding securities of WinView pursuant to (a) a plan of arrangement under the Business Corporations Act
    (British Columbia) (the “Plan of Arrangement”) or, (b) solely with respect to WinView, a statutory merger under
    the General Corporation Law of the State of Delaware or another acquisition structure mutually agreed among Torque, Frankly
    and WinView in respect of Torque’s acquisition of the securities of WinView (an “Alternative Structure”)
    (collectively, the Plan of Arrangement and an Alternative Structure, if applicable, are referred to as the “Transaction”).
    In addition, should any amount be awarded from WinView’s patent portfolio, 50% of the net license fees, damage awards
    or settlement amounts collected from third parties, with such payments to be calculated after deduction for all associated
    legal costs incurred in connection to such amounts. Upon closing of this transaction, it is expected that Tom Rogers, Chairman
    of Frankly and WinView will assume the role of the Chairman of the Board and Lou Schwartz (CEO of Frankly) and Darren Cox
    (CEO of the Company) will act as Co-CEO’s. The combined company is expected to have the following capital structure.
    The common shares of Frankly will be exchanged for common shares of Torque on a one for one basis. Frankly convertible securities
    will remain outstanding and be exercisable for common shares of Torque on the same terms. Pursuant to the Plan of Arrangement
    or Alternative Structure, if applicable, holders of securities of WinView will receive common shares of Torque having a total
    value of $35,000,000, based on a share price of CAD$1.75 ($1.32) per common share of Torque, and/or contingent rights, in
    exchange for the securities of WinView held by them. The contingent rights will
    entitle holders to proceeds from the enforcement of WinView’s patent portfolio as further specified in the Letter Agreement.
    A certain director of the Company holds 200,000 common shares and 100,000 common share purchase warrants in Frankly. In addition,
    SOL Global Investments Corp (“SOL Global”), a company related due to the fact that a certain director of the Company
    serves as its Chief Financial Officer, has disclosed that it was a holder of greater than 10% on a partially diluted basis
    of shares in the Frankly.


 




    	 	 	Page 3 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


	 	●	On
    October 18, 2019, the Company signed a definitive agreement to acquire a 51 percent interest in motorsport simulator manufacturer,
    All in Sports SRL (“All In Sports”), incorporated in Italy, for $5,632,000 comprised of the following: total cash
    consideration of $1,900,000 to be payable to the shareholders of All In Sports in three tranches on or prior to November 30,
    2019. As at August 31, 2019, $1,470,000 had been paid as advanced to All In Sports and is included in long term prepaid expenses
    and deposits. Of this amount, a total of $1,350,000 has been advanced as part of the consideration for the purchase price
    and $120,000 has been advanced as deposits for the purchase of simulators. No interest in accruing on this advance. (i) $3,732,000
    to be paid in 1,985,424 common shares of Torque; and (ii) Torque shall have the option to purchase the remaining 49% of All
    In Sports beginning 18 months following the closing date and ending 24 months following the closing date for the lesser of:
    (i) ten times EBITDA for fiscal 2020; or (ii) $20,000,000 based on certain milestones. The Company shall be entitled to a
    preferred purchase price for eRacer simulators for a period of two years from the closing date of the transaction. The preferred
    price shall be the lesser of (i) 20% discount on current fair value or (ii) $240,000 per simulator. This transaction is subject
    to regulatory and exchange approval.
	 	●	On
    November 26, 2019, signed a binding letter of intent to acquire all of the issued and outstanding shares of DriverDB AB, a
    Swedish esports racing company, for £400,000 ($488,000) in a combination of cash and common shares of the Company. As
    of February 14, 2020, a definitive agreement had not been signed. On November 7, 2019, the Company entered into a binding
    letter of intent with LetsGoRacing, a U.K. based automotive YouTube Channel. The parties will enter into a definitive purchase
    and sale agreement, which will reflect the following terms: (i) total cash consideration of £315,000 ($384,300) to be
    payable to the shareholders of LetsGoRacing in tranches ending on the 30th day following the signing of the definitive agreement;
    and (ii) £136,000 ($165,920) worth of common shares of the Company to be issued
    at a price per share equal to the greater of the share price on the date of signing the letter of intent or the date
    of signing the definitive agreement, with such shares subject to up to a 12 month hold period. This transaction is subject
    to regulatory and exchange approval. As of February 14, 2020, this transaction has yet to close.


 


FINANCINGS


 


Convertible
Debt Financings


 


On
July 8, 2019 through August 8, 2019, the Company completed three tranches of a non-brokered private placement of convertible debentures
(the “second series” or “Series Two”) in the principal amount aggregating CAD$15,000,012 ($11,401,984).
Included in the amounts raised were CAD$5,113,112 ($3,844,200) received from companies associated with a corporation with which
a director of the Company is a senior officer. The debentures will mature 36 months from the date of issuance and bear interest
at a rate of 6% per annum, payable on maturity. The debenture holders may convert all or a portion of the convertible loan principal
into units of the Company at a price of CAD$0.50 ($0.38) per unit. Each unit is comprised of one common share of the Company and
one warrant, with each warrant exercisable into a common share of the Company at an exercise price of CAD$0.50 ($0.38) per share
for a period of five years from the issuance. The Company shall be entitled to call for the exercise of any outstanding warrants
following the 6 month anniversary of closing in the event that the closing trading price of the shares is above $3.00 for fifteen
consecutive trading days. The Series Two Convertible debentures includes a call option in which the Company may force exercise
of the warrants if the stock price exceeds CAD$3.00 ($2.26) for fifteen consecutive trading days, starting six months from the
closing date.


 


Commencing
December 18, 2018 through June 27, 2019 the Company
closed seven tranches of a non- brokered private placement of convertible debentures
(“Series One” or “the first series”) with an aggregate principal amount of CAD$3,536,350 ($2,655,090).
The debentures mature 24 months from the date of issuance and bear interest at a rate of 12%
per annum, payable on maturity. The debenture holders may convert at any time, all or a portion of the convertible loan principal
into units of the Company at a price of CAD$6.75 ($5.08) per unit for the first 12
months and thereafter at a price of CAD$7.50 ($5.64) per unit until maturity. Each
unit is comprised of one common share of the Company
and one warrant, with each warrant exercisable into a common share of the Company
at an exercise price of CAD$6.75 ($5.08) per share for the first 12 months and
thereafter at a price of CAD$7.50 ($5.64) per share for a period of five years
from the issuance of the debentures. The Series One convertible debentures included
a call option in which the Company could force exercise of the warrants if the stock
price exceeded CAD$27.00 ($20.30) for five
consecutive trading days.


 




    	 	 	Page 4 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


Equity
Financing


 


On
December 18, 2019, the Company closed the first tranche of a non-brokered private placement of up to 4,000,000 units at a price
of $0.94 (CAD$1.25) per unit (the “Offering”) for gross proceeds of up to $3,761,000 (CAD$5,000,000). A total of 872,000
units were issued for cash proceeds of $414,000 (CAD$550,000) and $406,000 (CAD$540,000) issued to creditors to settle amounts
owing on the closing of this first tranche of the Offering. Each unit consisted of one common share of the Company and one-half
of one common share purchase warrant. Each whole warrant entitles the holder to acquire one additional share of the Company for
a period of 36 months from the date of issuance at a price of $1.35 (CAD$1.80) per share. Of the $819,000 (CAD$1,090,000) raised,
$75,000 (CAD$100,000) were subscribed to by a director of the Company.


 


SELECTED
ANNUAL INFORMATION


 


	 	 	Year Ended August 31, 2019
 $
	 	 	Year Ended August 31, 2018
 $
	 
	Total assets	 	 	10,685,697	 	 	 	14,908,615	 
	Total liabilities	 	 	18,352,879	 	 	 	8,118,943	 
	Working capital	 	 	(693,391	)	 	 	(5,798,474	)
	Expenses (Income)	 	 	18,171,745	 	 	 	14,018,166	 
	Net (loss) income	 	 	(14,737,998	)	 	 	(11,503,463	)
	Net (loss) earnings per share, basic and diluted	 	 	(6.28	)	 	 	(5.28	)



 


COMPARISON
OF INCOME STATEMENT FOR THE YEARS ENDED AUGUST 31, 2019 AND 2018


 


The
Company reported a net loss of $14.7 million
the year ended August 31, 2019 (August 31, 2018: $9.6 million). The Company
continues to sustain a recurring loss as it builds its business. Significant variances comparing
the year ended August 31, 2019 to the year ended August 31, 2018 were as follows:


 


	 	●	The
    Company’s revenue grew by $0.7 million from $3.5 million for the year ended
    August 31, 2018 to $4.2 million for the year end August 31, 2019. This increase was driven primarily by games
    and membership income in Eden Games,
    revenue from its data company, Stream Hatchet,
    and event income.
	 	●	The
    change in the fair value of warrants payable resulted in a gain of $0.6
    million compared to a gain of $4.9 million for the prior period.
    This resulted in an increase of net loss by $4.3 million. The modification
    of the fair value of warrants payable is a result of the revaluation of the Company’s
    warrant obligation, with an increase in the gain in value of the obligation primarily driven by favourable variances
    in the Company’s share price during the valuation period.
	 	●	Impairment
    of goodwill increased by $4.5 million from $1.4 million in the prior period to
    $5.9 million in the current period. This is a result of an adjustment of goodwill
    relating to the Company’s wholly -owned subsidiary, Eden Games.
	 	●	The
    change in fair value of the conversion feature of the convertible debt for the current period was $1.5 million compared to
    $Nil in the prior period. The expense is a result of the valuation of probabilities of the exercise of convertible debt held
    by the debtholders into common shares.
	 	●	Direct
    costs increased by $1.0 million to $3.6 million for the year ended August 31, 2019, reflective of production costs in Eden
    Games, as compared with $2.6 million during the year ended August 31, 2018.
	 	●	Amortization
    and depreciation increased by $0.7 million from $1.7 million during the prior
    period to $2.4 million in the current period. This is a result of the increased amortization of intangibles related to Eden
    Games, Stream Hatchet and Ideas & Cars.


 




    	 	 	Page 5 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


	 	●	Share-based
    payments decreased by $2.3 million to
    $0.0 million from $2.3 million in the prior period. This expense release to the
    Black-Scholes value of stock options issued during the respective reporting periods
    to employees, directors and consultants of the Company.
	 	●	Consulting
    decreased by $1.9 million to $0.8 million from $2.7 million and salaries and wages
    increased by $0.1 million to $1.7 million from $1.6 million. Staffing and consultant levels were reduced between
    periods primarily in PGL Nevada, Ideas & Cars and the corporate head office staff.
	 	●	Impairment
    of intangible assets was $Nil in the current period and $1.7 million in the prior period. Provisions were made for both brands
    and contracts in the prior period.
	 	●	Write-down
    of long-term investment totaled $Nil in the current period and $1.6 million in
    the prior period. The prior period write-down relates to the Company’s
    investment in Alt-Tab Productions.
	 	●	Sponsorship
    and tournament expenses decreased by $0.6 million to $0.6 million from $1.2 million. The change is a result of the Company
    deemphasizing the tournaments and events in PGL Nevada during the current
    period.
	 	●	Foreign
    exchange gain/loss fluctuated by $0.3 million
    between periods to a gain of $0.2 million during the current period compared
    to a loss of $0.1 million during the prior period. The company transacts
    a significant portion of its business in currencies other than United States Dollars,
    namely British Pounds, Canadian Dollars and Euros.


 


SELECTED
QUARTERLY INFORMATION


 


A
summary of selected information for each of the quarters presented below is as follows:


 





		 	Net
    Loss	 	 	 	 
	For
    the Period Ended	 	Total
    

($)	 	 	Basic
                    and diluted loss per share
 ($)
	 	 	Total
    assets 

($)	 
	August 31, 2019	 	 	(10,127,745	)	 	 	(6.28	)	 	 	10,685,697	 
	May 31, 2019	 	 	(2,058,314	)	 	 	(0.95	)	 	 	13,144,665	 
	February 28, 2019	 	 	(1,195,488	)	 	 	(0.75	)	 	 	13,731,836	 
	November 30, 2018	 	 	(1,356,451	)	 	 	(0.75	)	 	 	14,206,010	 
	August 31, 2018	 	 	(9,818,790	)	 	 	(5.25	)	 	 	14,908,615	 
	May 31, 2018	 	 	119,992	 	 	 	(0.00	)	 	 	20,318,954	 
	February 28, 2018	 	 	79,758	 	 	 	(0.00	)	 	 	21,175,895	 
	November 30, 2017	 	 	(1,884,423	)	 	 	(1.50	)	 	 	7,897,520	 





 




    	 	 	Page 6 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


LIQUIDITY
AND CAPITAL RESOURCES


 


The
Company’s approach to managing liquidity
risk is to ensure that it will have sufficient liquidity to meet liabilities when due. The Company’s
liquidity and operating results may be adversely affected if the Company’s access
to the capital market is hindered, whether as a result of a downturn in stock market
conditions generally or as a result of conditions specific to the Company. The
Company regularly evaluates its cash position to ensure preservation and security of
capital as well as maintenance of liquidity. As the Company
does not presently generate sufficient revenue to cover its costs, managing liquidity
risk is dependent upon the ability to secure additional financing. 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, as necessary. While management and the Board have
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 August 31, 2019, the Company had a cash balance of $2.8
million (August 31, 2018: $0.6 million), to settle current liabilities of $5.4 million (August 31, 2018: $7.5 million).
This represents a working capital deficiency of $0.0 million (August 31, 2018: deficiency
of $1.3 million) which is comprised of current assets less current liabilities, excluding long-term debt, contingent performance
share obligation, convertible debt and conversion feature of convertible debt. The Company
has not yet realized profitable operations and has incurred significant losses to date resulting
in a cumulative deficit of $39.8 million as at August 31, 2019 (August 31, 2018:
$25.0 million).


 


SHARE
CAPITAL STRUCTURE


 


As
at the date of this document, the Company had 14,082,385 issued and outstanding common shares, 6,798,595 warrants exercisable
between $0.29 (CAD$0.38) and $50.92 (CAD$67.70), expiring between October 20, 2019 and August 8, 2024, and 27,933 stock options
with a weighted average exercise price of $11.08 (CAD$14.73).


 


SHARE
CONSOLIDATIONS


 


Two
share consolidations occurred during the period from September 1, 2018 to February 13, 2020:


 


	 	●	On
    June 5, 2019, subject to shareholder approval granted May 11, 2018, the Company consolidated
    its common shares on a 15 to 1 basis.
	 	●	On
    October 18, 2019 (post the Company’s August 31, 2019 fiscal year end), the
    Company further consolidated its common shares on a 5 to 1 basis.


 


COMMITMENTS
AND CONTINGENCIES


 


Operating
Leases


 


Eden
Games is obligated under operating leases for use of its office premises for the period ending April 15, 2025. Eden Games can
end the lease at end of every three-year period on six months advance notice. Payment of €25,000 ($27,463) is required every
quarter. Annual future minimum rental payments under operating leases are as follows: 2020 € 100,000 ($109,851); 2021 €
100,000 ($109,851); and 2022 € 31,250 ($34,328).


 


Ideas
+ Cars is obligated under the terms of a facilities use agreement for event and meeting premises amounting to €180,851
($198,997) for an event planned in July 2020.


 


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 ($nil)
and €125,560 ($149,880) for the years ended August 31, 2019 and 2018, respectively.


 




    	 	 	Page 7 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


Software
Contract


 


The
Company is committed under the terms of a software license agreement until June 1, 2021 for annual fees of $87,907, or
$154,484 in aggregate.


 


Consulting
Contracts


 


Under
the terms of three consulting agreements, the Company is committed to pay 0.5% of tokens issued to each consultant, should the
Company ever undertake a initial coin offering. Under the terms of a consulting agreement dated July 27, 2017, the Company is
committed to pay six months severance in the event of termination, amounting to £144,500 ($175,911). If revenue from the
Eden Games mobile app exceeds £100,000 ($121,561) in a month, in the first year of this agreement, a bonus equal to 2.5%
of the excess shall be paid up to a maximum of £100,000 ($121,561) on an annual basis. Each successive year, the monthly
target will increase by 20% but the maximum will remain at £100,000 ($121,561). As no triggering events have taken place
related to the contingencies to August 31, 2019, no provision has been made in these consolidated financial statements.


 


The
Company is committed under the terms of a business development services contract for
aggregate payments of CAD$586,500 ($441,143) over a period of 36 months commencing July 1, 2019 to Rockstar Kids Ltd., a corporation
controlled by a company where a senior officer is a director of Torque.


 


The
Company is committed under the terms of a management services agreement commencing September 3, 2019 for six months at $20,000
per month and a 25% success fee, or $150,000 in aggregate.


 


Employment
Contracts


 


Under
the terms of an employment contract undertaken with the Company’s controller, the Company is committed to pay three months
severance in the event of termination, amounting to $42,500. Additionally, the controller’s employment agreement contains
a provision for a discretionary annual bonus for up to 20%.


 


Litigation


 


The
Company is subject to various 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.


 


Contingent
Consideration and Shares to be Issued


 


In
connection with the Company’s acquisition of IDEAS+CARS Ltd. on July 27, 2017, the principal shareholder of IDEAS+CARS,
entered into a three-year agreement with the Company to act as Chief Marketing Officer of the Company and received CAD$357,000
($256,911) of common shares (5,535 shares issued January 17, 2018) and up to 106,667 additional common shares upon meeting certain
performance milestones based on an issuance price of the greater of CAD$43.50 ($32.72) and the common share closing price on the
day prior to the respective milestone date. The agreement stipulates an equivalent share payout of CAD$600,000 ($451,320) in the
first year, and CAD$957,000 ($720,000) on the second, third, and fourth anniversaries of the agreement upon meeting annual revenue
targets of £272,000 ($347,700), £416,047 ($531,900), £535,707 ($684,900) and £655,023 ($837,400) in the
first through fourth years, respectively, with a minimum share equivalent payout of CAD$400,000 ($300,880) annually.


 


As
at August 31, 2019, the estimated fair value of the contingent consideration is $473,363 (2018 - $667,342), which is calculated
based on a combination of probabilities ranging from 5%-10% (2018 – 10%-100%) of meeting milestone targets, and a discount
rate of 19% (2018 – 19%). Based on milestones met to August 31, 2019, $760,216 (2018 -$455,736) was reflected as shares
to be issued as at August 31, 2019.


 




    	 	 	Page 8 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


RELATED
PARTY TRANSACTIONS


 


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 includes
the following:


 


	 	 	2019	 	 	2018	 
	 	 	 	 	 	 	 
	Total compensation paid to key management	 	$	1,401,723	 	 	$	1,112,051	 
	Share based payments	 	$	28,834	 	 	$	1,853,445	 



 


Total
compensation paid to key management is recorded in consulting and salaries and wages in the statement of loss and comprehensive
loss for the years ended August 31, 2019 and 2018.


 


Amounts
due to related parties as at August 31, 2019 with respect to the above fees were $124,717 (2018 - $252,797). These amounts are
unsecured, non-interest bearing and due on demand.


 


Included
in accounts and other receivables is $35,365 (2018 - $nil) in advances due from the Company’s Chief Executive Officer. This
amount is unsecured, bear no interest and are due on demand.


 


Included
in prepaid expenses is $431,608 (2018 - $nil) for future consulting fees paid to a corporation related to a company of which a
director of the Torque is a senior officer.


 


During
the year ended August 31, 2019, the Company expensed $87,281 (2018 - $115,989) to Marrelli Support Services Inc. (“Marrelli
Support”) and DSA Corporate Services Inc. (“DSA”), together known as the “Marrelli Group” for: (i)
Robert D.B. Suttie to act as Chief Financial Officer (“CFO”) of the Company; (ii) Bookkeeping and office support services;
(iii)Corporate filing services; and (iv) Corporate secretarial services. The Marrelli Group is also reimbursed for out of pocket
expenses. Both Marrelli Support and DSA are private companies. Robert Suttie is the President of Marrelli Support.


 


During
the year ended August 31, 2018, 16,667 common shares were issued through the exercise of options, in aggregate, to two directors
of the Company on exercise of stock options to settle debt of $135,118.


 


During
the year ended August 31, 2018, 13,295 units were issued to three directors pursuant to the January 9, 2018 and July 13, 3018
private placement for gross proceeds of $412,954.


 


On
January 12, 2018, the Company granted 14,667 stock options to directors of the Company with an exercise price of CAD$54.00 ($40.62)
per share, expiring on January 12, 2023.


 


On
January 13, 2018, the Company granted 3,333 stock options to a director of the Company with an exercise price of CAD$54.75 ($41,18)
per share, expiring on January 12, 2023.


 


On
January 19, 2018, the Company granted 10,000 stock options to an officer of the Company with an exercise price of CAD$54.00 ($40.62)
per share, expiring on January 12, 2023.


 


On
July 25, 2018, the Company granted 66,667 stock options to an officer of the Company with an exercise price of CAD$10.50 ($7.90)
per share, expiring on July 25, 2025.


 


On
October 30, 2017, the Company granted 40,000 stock options to a director with an exercise price of CAD$58.50 ($44.00) per share,
expiring on October 30, 2027. During the year ended August 31, 2018, these options were cancelled.


 




    	 	 	Page 9 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


On
November 3, 2017, the Company granted 6,667 stock options with an exercise price of
CAD$60.00 ($45.13) per share, expiring on November 3, 2022 to a director of the Company. During the year ended August 31, 2018,
these options were cancelled.


 


On
November 22, 2017, the Company granted 13,333 stock options with an exercise price of CAD$57,75 ($43,44) per share, expiring on
October 31, 2018 to an officer of the Company. The options were cancelled subsequent to the year ended August 31, 2018. During
the year ended August 31, 2018, 10,000 and 3,333 options, with exercise prices of CAD$54.00 ($40.62) and CAD$54.75 ($41.18), respectively,
granted to a director of the Company were cancelled.


 


On
September 14, 2018, the Company granted 26,667 stock options with an exercise price of CAD$9.75 ($7.33) per share, expiring on
September 14, 2025 to the Chief Executive Officer of the Company.


 


CRITICAL
ACCOUNTING ESTIMATES


 


Use
of Management Estimates, Judgments and Measurement Uncertainty


 


The
preparation of these 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 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 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 consolidated financial statements are outlined below:


 


Foreign
Currency Translation


 


Under
IFRS, each entity must determine its own functional currency, which becomes the currency that entity measures its results and
financial position in. Judgment is necessary in assessing each entity’s functional currency. In determining the functional
currencies of the Company and its subsidiaries, the Company considered many factors, including the currency that mainly influences
sales prices for goods and services, the currency of the country whose competitive forces and regulations mainly determine the
sales prices, and the currency that mainly influences labour material and other costs for each consolidated entity.


 


Valuation
of Warrant Liability


 


The
Black-Scholes pricing model is used to determine the fair value for the warrants and utilizes subjective assumptions such as expected
price volatility which is based on comparable companies, expected life of the warrant
at the risk free rate. Any changes in these input assumptions can significantly affect the fair value estimate.


 


Income,
Valued Added, Withholding and Other Taxes


 


The
Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s
provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during
the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. The determination of the Company’s income, value added, withholding and other tax liabilities
requires interpretation of complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions
and activities may not coincide with the interpretation of the tax authorities. All tax related filings are subject to government
audit and potential reassessment subsequent to the financial statement reporting period. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the tax related accruals and
deferred income tax provisions in the period in which such determination is made.


 




    	 	 	Page 10 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


Business
Acquisitions


 


The
determination of whether a transaction meets the definition of a business combination under IFRS 3 or constitutes an asset acquisition
is subject to judgment. Applying the acquisition method to business combinations requires each identifiable asset and liability
to be measured at its acquisition date fair value. The excess, if any, of the fair value of consideration over the fair value
of the net identifiable assets acquired is recognized as goodwill. The determination of acquisition date fair values and the value
of contingent consideration often requires management to make assumptions and estimates about future events and discount rates.
The assumptions with respect to the identification and fair value of intangible assets require a high degree of judgment and include
estimates for future operating performance, discount rates, technology migration factors and terminal value rates.


 


The
assumptions with respect to valuation of contingent consideration require a high degree of judgment and include estimates for
future operating performance and discount rates. Under the terms of the acquisition of Eden Games, the Company is obligated to
pay certain additional consideration amounts based on performance milestones being met by Eden Games.


 


As
at August 31, 2019 and 2018 these milestones had been met. The value of the contingent consideration at August 31, 2019 was $nil
(2018 - $1,446,719). The Company was also obligated to pay certain additional amounts based on performance milestones related
to the IDEAS + CARS acquisition.


 


Where
put options are issued on non-controlling interests, judgement is required in determining whether the risks are considered to
be transferred to the parent or whether the risks remain with the non-controlling interest.


 


Goodwill
and Intangible Assets Valuation


 


Goodwill
and intangible assets are reviewed annually for impairment, or more frequently when there are indicators that impairment may have
occurred, by comparing the carrying value to its recoverable amount. Management uses judgment in estimating the recoverable values
of the Company’s cash-generating units (“CGUs”) and uses internally developed valuation models that consider
various factors and assumptions including estimates for future operating performance, discount rates, technology migration factors
and terminal value rates. The use of different assumptions and estimates could influence the determination of the existence of
impairment and the valuation of goodwill and intangible assets.


 


Valuation
of Share-based Payments


 


The
valuation of stock options involves key estimates such as volatility, forfeiture rates, estimated lives, market rates, and likelihood
of performance measures being met.


 


Revenue
Recognition


 


Judgement
is required in identifying performance obligations and the timing of satisfaction of the performance obligations.


 


ACCOUNTING
PRONOUNCEMENTS ADOPTED DURING THE YEAR


 


Accounting
Pronouncements Adopted During the Year


 


The
Company has adopted IFRS 15 – Revenue from Contracts with Customers, on September 1, 2018. IFRS 15 was issued by the IASB
in May 2014 and specifies how and when revenue should be recognized based on a five-step model, which is applied to all contracts
with customers. On April 12, 2016, the IASB published final clarifications to IFRS 15 with respect to identifying performance
obligations, principal versus agent considerations, and licensing.


 


The
Company has applied IFRS 15 retrospectively and determined that there is no change to the comparative periods or transitional
adjustments required as a result of the adoption of this standard.


 


Revenues
reflect the consideration to which the Company expects to be entitled to, in exchange for the transfer of promised goods or services
as described below and categorized by operating segments.


 


The
Company’s accounting policy for revenue recognition under IFRS 15 is as follows:


 




    	 	 	Page 11 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


To
determine the amount and timing of revenue to be recognized, the Company follows a 5-step process: (i) Identifying the contract
with a customer; (ii) identifying the performance obligations; (iii) determining the transaction price; (iv) allocating the transaction
price to the performance obligations; and (v) recognizing revenue when/as performance obligation(s) are satisfied.


 


The
Company’s revenue from the sale of game development services are considered to be revenue from contracts with customers.
These contracts relate to the development of gaming applications, which are assessed as a single performance obligation and satisfied
over time. Revenue is recognized over time by measuring progress towards completion of the performance obligation. Each customer
contract contains deliverables based on a milestone schedule. The customer assumes control of each deliverable upon acceptance
and as such, this is the best estimate in measuring satisfaction of the performance obligation.


 


Membership
income is recognized when there is persuasive evidence that a contract or other arrangement exists, collection is reasonably assured
and the entity has satisfied all its performance obligations and therefore, has provided service or delivered the product to the
customer. The fee billed to customers is recognized as revenue at the end of each month. Revenue from non-recurring transactions
are recognized when services are provided in accordance with the contract.


 


Esports
event revenue is recognised upon completion of the event. In some cases, judgement is required in determining whether the customer
is a business or the end consumer. This evaluation was made on the basis of whether the business obtains control of the product
before transferring to the end consumer.


 


Control
of the product transfers at a point in time either upon access to completed code to or receipt by the customer, depending on the
contractual terms. The Company recognizes revenue in an amount that reflects the consideration that the Company expects to receive
taking into account any variation that may result from rights of return.


 


As
the Company does not enter into contracts with its customers where, once performance has occurred, the Company’s right to
consideration is dependent on anything other than the passage of time, the Company does not presently have any contract assets.
The related accounts receivable balances are recorded in the balance sheet as trade receivables and generally have terms of 30
days.


 


IFRS
9 – Financial instruments (“IFRS 9”) addresses the classification, measurement and recognition of financial
assets and financial liabilities. IFRS 9 was issued in November 2009, October 2010, November 2013 and finalized in July 2014.
It replaces the parts of IAS 39 Financial Instruments: Recognition and Measurement that relate to the classification and measurement
of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at
fair value through profit or loss and those measured at amortized cost, with the determination made at initial recognition. The
classification depends on an entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change
is that in cases where the fair value option is selected for financial liabilities, the part of a fair value change due to an
entity’s own credit risk is recorded in other comprehensive income rather than the statements of operations, unless this
creates an accounting mismatch. IFRS 9 has also been updated to amend the requirements around hedge accounting. However, there
is no impact to the Company from these amendments as it does not apply hedge accounting. On September 1, 2018, the Company adopted
these amendments.


 


The
new hedge accounting guidance had no impact on the Company’s consolidated financial statements.


 


Under
IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics
of their contractual cash flows. IFRS 9 contains the primary measurement categories for financial assets: measured at amortized
cost, fair value through other comprehensive income (“FVTOCI”) and fair value through profit and loss (“FVTPL”).


 




    	 	 	Page 12 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


Below
is a summary showing the classification and measurement bases of the financial instruments as at September 1, 2018 as a result
of adopting IFRS 9 (along with comparison to lAS 39).


 


	Classification	 	IAS
    39	 	IFRS
    9
	 	 	 	 	 
	Cash	 	Loans
    and receivables	 	Amortized
    cost
	Accounts
    and other receivables	 	Loans
    and receivables	 	Amortized
    cost
	Deposits	 	Loans
    and receivables	 	Amortized
    cost
	Accounts
    payable and accrued liabilities	 	Other
    financial liabilities	 	Amortized
    cost
	Convertible
    debentures	 	n/a	 	FVTPL
	Contingent
    consideration	 	Other
    financial liabilities	 	Amortized
    cost
	Put
    option redemption liability	 	Other
    financial liabilities	 	Amortized
    cost
	Warrant
    liability	 	FVTPL	 	FVTPL
	Customer
    points liability	 	Other
    financial liabilities	 	Amortized
    cost
	Promissory
    notes payable	 	Other
    financial liabilities	 	Amortized
    cost
	McLaren
    loan	 	Other
    financial liabilities	 	Amortized
    cost
	Long-term
    debt	 	Other
    financial liabilities	 	Amortized
    cost


 


There
was no impact on the Company’s consolidated financial statements as result of adopting IFRS 9.


 


MANAGEMENT
CHANGES


 


On
April 8, 2019, the Company announced that Darren Cox was appointed as president and
director. Mr. Cox was the founder of Nissan and Sony’s GT Academy, Mr. Cox previously served as Nissan’s Head of Global
Motorsport. Further, on July 17, 2019, the Company announced it had appointed Mr. Cox
as its Chief Executive Officer, replacing Mr. Steve Shoemaker.


 


On
April 8, 2019, the Company announced that both Mr. Ron Spoehel and Mr. Alex Igelman resigned from the Board of the Company.


 


As
of the date of this report the Board the following are the members of the Board: Darren Cox, Peter Liabotis and Bryan Reyhani.


 


The
Company’s business and operations are dependent on retaining the services of
a small number of key employees. The success of the Company
is, and will continue to be, to a significant extent, dependent on the expertise
and experience of these employees. The loss of one or more of these employees could
have a materially adverse effect on the Company. The Company
does not maintain insurance on any of its key employees.


 


FINANCIAL
RISK MANAGEMENT


 


Risk
Management


 


In
the normal course of business, the Company is exposed to a number of risks that can affect its operating performance. These risks,
and the actions taken to manage them, are as follows:


 


Fair
Values


 


The
Company has designated its cash and short term and long term investments as FVTPL which are measured at fair value. Fair value
of cash is determined based on transaction value and is categorized as a Level 1 measurement. Short term investments are categorized
as Level 2 measurement, long-term investment is classified as Level 3 measurement, and warrant liability is categorized as Level
2 measurement.


 


	 	●	Level
    1 - includes quoted prices (unadjusted) in active markets for identical assets or liabilities.
	 	●	Level
    2 - includes inputs that are observable other than quoted prices included in Level 1.
	 	●	Level
    3 - includes inputs that are not based on observable market data.


 




    	 	 	Page 13 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


As
at August 31, 2019 and 2018, both the carrying and fair value amounts of the Company’s cash, accounts and other receivables,
government remittances receivable, accounts payable, promissory notes payable and accrued liabilities, McLaren loan, put option
redemption liability, customer points liability, and contingent consideration are approximately equivalent due to their short
term nature.


 


Fair
Value of Financial Instruments


 


The
following table presents the changes in fair value measurements of the investment in Alt Tab classified as Level 3 during the
years ended August 31, 2019 and 2018. These financial instruments are measured at fair value utilizing non-observable market inputs.
The net realized losses and net unrealized gains are recognized in the statements of loss.


 


	 	 	2019	 	 	2018	 
	Balance, beginning of year	 	$	-	 	 	$	1,328,077	 
	Purchase at cost	 	 	-	 	 	 	242,700	 
	Unrealized (loss)	 	 	-	 	 	 	(1,570,777	)
	 	 	 	 	 	 	 	 	 
	Balance, end of year	 	 	-	 	 	 	-	 



 


A
sensitivity analysis was performed on key inputs of the convertible debenture valuation; volatility, share price and conversion
price.


 


	●	A
    10% increase or decrease in volatility would result in a $7,000 change in the fair value of the convertible debt outstanding
    as of August 31, 2019.
	●	A
    10% increase or decrease in share price would result in a $200,000 change in the fair value of the convertible debt outstanding
    as of August 31, 2019.
	●	A
    10% increase or decrease conversion price would result in a $13,000 change in the fair value of the convertible debt outstanding
    as of August 31, 2019.


 


Credit
Risk


 


Credit
risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s
credit risk is primarily attributable to accounts and other receivables. Management believes credit risk with respect to financial
instruments included in accounts and other receivable is minimal. As at August 31, 2019 and 2018, all of the Company’s accounts
receivable are current and the allowance for doubtful accounts is $nil. The Company’s maximum exposure to credit risk as
at August 31, 2019 and 2018 is the carrying value of accounts and other receivables.


 


Liquidity
Risk


 


Liquidity
risk is the risk that the Company will encounter difficulty in satisfying its financial obligations. The Company manages its liquidity
risk by forecasting it operations and anticipating its operating and investing activities. All amounts comprising of accounts
payable and accrued liabilities. Liquidity risk is the risk that the Company will encounter difficulty in satisfying its financial
obligations. The Company manages its liquidity risk by forecasting it operations and anticipating its operating and investing
activities. All amounts comprising of accounts payable and accrued liabilities, customer points liability, McLaren Loan, put option
redemption liability, contingent consideration, current portion of long-term debt and promissory notes payable of $4,862,086 (2018
- $6,635,775) are due within one year.


 


Market
Risk


 


Market
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market risk
factors. The market risk factor that affects the Company is foreign currency risk.


 




    	 	 	Page 14 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 


Foreign
Currency Risk


 


The
Company is exposed to foreign currency risk due to the timing of their accounts payable balances, valuation of its warrant liability
and contingent share obligation due to the use of prevailing exchange rates in the valuation process. The risk associated with
accounts payable mitigated by timely payment of creditors and monitoring of foreign exchange fluctuations by management. Warrant
liability and contingent share liability are noncash items with foreign exchange variances presented as gains or losses on the
Company’s consolidated statements of loss and comprehensive loss. Aside from these items, the Company is not exposed to
significant foreign currency risk based on its current operations.


 


Concentration
of Risk


 


During
the year ended August 31, 2019, two (2018 - three) customers represented 75% (2018 - 87%) of revenue and as at August 31, 2019,
54% (2018 - 75%) of accounts and other receivables.


 


Sensitivity
Analysis


 


Based
on management’s knowledge and experience of the financial markets, the Company believes the following movements are reasonably
possible over the next twelve months:


 


The
Company is exposed to foreign currency risk on fluctuations of financial instruments related to cash, accounts and other
receivables, and accounts payable denominated in Euros, GBP and Canadian dollars. Sensitivity to a plus or minus one
percentage point change in exchange rates would impact the reported net loss by approximately $37,836 for the year
ended August 31, 2019 (2018 - $125,000). The Company is also exposed to foreign currency risk on fluctuations of financial
instruments related to short-term debt, long-term debt, promissory notes payable and convertible debt. Sensitivity to a plus
or minus one percentage point change in exchange rates would impact the reported net loss by approximately $134,011 for the
year ended August 31, 2019 (2018 - $3,041).


 


CAPITAL
MANAGEMENT


 


The
Company considers its capital to be its shareholders’ equity. As at August 31, 2019, the Company had shareholders’
deficiency of $ 7,960,633 (2018 - shareholders’ equity of $6,789,672. 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 years ended August 31, 2019 and 2018.
The Company is subject to Policy 2.5 of the TSXV Venture Exchange (“TSXV”) which requires adequate working capital
or financial resources of the greater of (i) $50,000 and (ii) an amount required in order to maintain operations and cover general
and administrative expenses for a period of 6 months. As of August 31, 2019, the Company was not compliant with Policy 2.5.


 




    	 	 	Page 15 of 16



     


    

 


Torque
Esports Corp. (formerly Millennial Esports Corp.) 


Management’s
discussion and analysis for the years ended August 31, 2019 and 2018 





 



 





OFF-BALANCE
SHEET ARRANGEMENTS


 


As
of the date of this filing, the Company does not have any off-balance sheet arrangements that have, or are reasonably likely to
have, a current or future effect on the results of operations or financial condition of the Company including, without limitation,
such considerations as liquidity and capital resources that have not previously been discussed.


 


CURRENT
GLOBAL FINANCIAL CONDITIONS AND TRENDS


 


Securities
of gaming and technology companies have experienced substantial volatility in the past, often based on factors unrelated to the
financial performance or prospects of the companies involved. These
factors incl ude macroeconomic developments globally and market perceptions
of the attractiveness of particular industries. The price of the securities of companies is also significantly affected by short-term
currency exchange fluctuation and the political environment in the countries
in which the Company does business. As of August 31, 2019, the global economy
continues to be in a period of significant economic volatility, in large part due to US, European, and Middle East economic
and political concerns which have impacted global economic growth.


 




    	 	 	Page 16 of 16