Exhibit 99.2





















KPMG LLP

Vaughan Metropolitan Centre
 100 New Park Place

Suite 1400

Vaughan, ON Canada L4K 0J3 
Telephone (905) 265-5900

Fax (905) 265-6390

www.kpmg.ca







Report of Independent Registered
Public Accounting Firm



To the Shareholders and Board of Directors

Enthusiast
Gaming Holdings, Inc.



Opinion on the Consolidated Financial
Statements

We have audited the accompanying
consolidated statements of financial position of Enthusiast Gaming Holdings, Inc. and subsidiaries (collectively “the Company”)
as of December 31, 2021 and 2020, the related consolidated statements of loss and comprehensive loss, shareholders’ equity, and
cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for each of the years in the two-year
period ended December 31, 2021, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).



Basis for Opinion

These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as











KPMG
LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent 
member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG Canada provides services to KPMG LLP.















well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.





KPMG_LLP.png



Chartered Professional Accountants, Licensed Public Accountants



We have served as the Company’s auditor since 2020.



Toronto, Canada 
March 28, 2022















2













Enthusiast
Gaming Holdings Inc.

Consolidated
Statements of Financial Position

As
at December 31, 2021 and 2020

(Expressed
in Canadian Dollars)








|                                                |  |  | Note   |  |  | December 31, 2021 |              |   | December 31, 2020 |  
|----------------------------------------------- |  |  | ------ |  |  | ----------------- | ------------ | - | ----------------- | -
|ASSETS                                          |  |  |        |  |  |                   |              |   |                   |  
|Current                                         |  |  |        |  |  |                   |              |   |                   |  
|Cash                                            |  |  |        |  |  | $                 | 22,654,262   |   |                   | $
|Trade and other receivables                     |  |  | 6      |  |  |                   | 33,801,990   |   |                   |  
|Investments                                     |  |  | 7      |  |  |                   | 131,342      |   |                   |  
|Loans receivable                                |  |  | 24     |  |  |                   | 176,931      |   |                   |  
|Income tax receivable                           |  |  | 23     |  |  |                   | 356,366      |   |                   |  
|Prepaid expenses                                |  |  |        |  |  |                   | 2,145,184    |   |                   |  
|Total current assets                            |  |  |        |  |  |                   | 59,266,075   |   |                   |  
|Non-current                                     |  |  |        |  |  |                   |              |   |                   |  
|Property and equipment                          |  |  | 9      |  |  |                   | 247,988      |   |                   |  
|Right-of-use assets                             |  |  | 12     |  |  |                   | 2,885,662    |   |                   |  
|Long-term investment                            |  |  | 7      |  |  |                   | -            |   |                   |  
|Investment in associates and joint ventures     |  |  | 8      |  |  |                   | 885,269      |   |                   |  
|Long-term portion of prepaid expenses           |  |  |        |  |  |                   | 261,922      |   |                   |  
|Intangible assets                               |  |  | 10     |  |  |                   | 129,138,595  |   |                   |  
|Goodwill                                        |  |  | 11     |  |  |                   | 195,097,659  |   |                   |  
|Total Assets                                    |  |  |        |  |  | $                 | 387,783,170  |   |                   | $
|                                                |  |  |        |  |  |                   |              |   |                   |  
|LIABILITIES AND SHAREHOLDERS’ EQUITY            |  |  |        |  |  |                   |              |   |                   |  
|Current                                         |  |  |        |  |  |                   |              |   |                   |  
|Accounts payable and accrued liabilities        |  |  | 13     |  |  | $                 | 34,391,221   |   |                   | $
|Contract liabilities                            |  |  |        |  |  |                   | 3,890,569    |   |                   |  
|Income tax payable                              |  |  | 23     |  |  |                   | 114,094      |   |                   |  
|Current portion of long-term debt               |  |  | 14     |  |  |                   | 2,000,000    |   |                   |  
|Current portion of deferred payment liability   |  |  | 17     |  |  |                   | 27,244,146   |   |                   |  
|Current portion of convertible debentures       |  |  | 16     |  |  |                   | -            |   |                   |  
|Current portion of lease contract liabilities   |  |  | 12     |  |  |                   | 796,835      |   |                   |  
|Current portion of other long-term debt         |  |  | 15     |  |  |                   | 11,121       |   |                   |  
|Total current liabilities                       |  |  |        |  |  |                   | 68,447,986   |   |                   |  
|Non-current                                     |  |  |        |  |  |                   |              |   |                   |  
|Long-term debt                                  |  |  | 14     |  |  |                   | 7,681,867    |   |                   |  
|Long-term portion of deferred payment liability |  |  | 17     |  |  |                   | 20,794,275   |   |                   |  
|Long-term portion of lease contract liabilities |  |  | 12     |  |  |                   | 2,213,512    |   |                   |  
|Vendor-take-back loan                           |  |  | 18     |  |  |                   | -            |   |                   |  
|Other long-term debt                            |  |  | 15     |  |  |                   | 136,324      |   |                   |  
|Deferred tax liability                          |  |  | 23     |  |  |                   | 25,740,885   |   |                   |  
|Total liabilities                               |  |  |        |  |  | $                 | 125,014,849  |   |                   | $
|                                                |  |  |        |  |  |                   |              |   |                   |  
|Shareholders’ Equity                            |  |  |        |  |  |                   |              |   |                   |  
|Share capital                                   |  |  | 19     |  |  |                   | 387,087,948  |   |                   |  
|Contributed surplus                             |  |  | 21, 22 |  |  |                   | 25,485,361   |   |                   |  
|Accumulated other comprehensive income (loss)   |  |  |        |  |  |                   | 527,166      |   |                   |  
|Deficit                                         |  |  |        |  |  |                   | (150,332,154 | ) |                   |  
|Total shareholders’ equity                      |  |  |        |  |  |                   | 262,768,321  |   |                   |  
|Total liabilities and shareholders’ equity      |  |  |        |  |  | $                 | 387,783,170  |   |                   | $



Commitments(Note 27)

Subsequent
events (Note 29)



Approved
by the Board of Directors of the Company:



|Signed:
    “Adrian Montgomery” | Signed:
    “Ben Colabrese”
|------------------------------- | ---------------------------
|Director                        | Director                   



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





1







Enthusiast Gaming Holdings Inc.

Consolidated Statements of Loss and Comprehensive Loss

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)








|                                                                        |  |  | Note                   |  |  | December 31, 2021 |             |   | December 31, 2020 |  
|----------------------------------------------------------------------- |  |  | ---------------------- |  |  | ----------------- | ----------- | - | ----------------- | -
|Revenue                                                                 |  |  |                        |  |  |                   |             |   |                   |  
|Revenue                                                                 |  |  |                        |  |  | $                 | 167,364,286 |   |                   | $
|Gain on player buyout                                                   |  |  | 10                     |  |  |                   | -           |   |                   |  
|Total Revenue                                                           |  |  | 28                     |  |  |                   | 167,364,286 |   |                   |  
|Cost of Sales                                                           |  |  |                        |  |  |                   | 129,589,540 |   |                   |  
|Gross Margin                                                            |  |  |                        |  |  |                   | 37,774,746  |   |                   |  
|Operating Expenses                                                      |  |  |                        |  |  |                   |             |   |                   |  
|Professional fees                                                       |  |  |                        |  |  |                   | 3,073,330   |   |                   |  
|Consulting fees                                                         |  |  | 24                     |  |  |                   | 4,591,688   |   |                   |  
|Advertising and promotion                                               |  |  | 24                     |  |  |                   | 3,047,149   |   |                   |  
|Office and general                                                      |  |  |                        |  |  |                   | 6,972,055   |   |                   |  
|Salaries and wages                                                      |  |  | 24                     |  |  |                   | 25,140,326  |   |                   |  
|Technology support, web development and content                         |  |  |                        |  |  |                   | 10,640,184  |   |                   |  
|Esports player, team and game expenses                                  |  |  |                        |  |  |                   | 5,497,165   |   |                   |  
|Foreign exchange gain                                                   |  |  |                        |  |  |                   | (2,079,774  | ) |                   |  
|Share-based compensation                                                |  |  | 21, 22                 |  |  |                   | 18,918,489  |   |                   |  
|Amortization and depreciation                                           |  |  | 9, 10, 12              |  |  |                   | 9,518,471   |   |                   |  
|Total operating expenses                                                |  |  |                        |  |  |                   | 85,319,083  |   |                   |  
|                                                                        |  |  |                        |  |  |                   |             |   |                   |  
|Other expenses (income)                                                 |  |  |                        |  |  |                   |             |   |                   |  
|Transaction costs                                                       |  |  | 5                      |  |  |                   | 1,490,463   |   |                   |  
|Share of loss from investment in associates and joint ventures          |  |  | 8                      |  |  |                   | 266,641     |   |                   |  
|Interest and accretion                                                  |  |  | 12, 14, 15, 16, 17, 18 |  |  |                   | 2,844,956   |   |                   |  
|Change in fair value of investment                                      |  |  | 7                      |  |  |                   | 444,764     |   |                   |  
|Loss on modification of long-term debt                                  |  |  | 14                     |  |  |                   | -           |   |                   |  
|Gain on repayment of long-term debt                                     |  |  | 14                     |  |  |                   | (39,502     | ) |                   |  
|Gain on settlement of long-term debt                                    |  |  | 14                     |  |  |                   | (11,991     | ) |                   |  
|Loss on settlement of vendor-take-back loan                             |  |  | 18                     |  |  |                   | 316,241     |   |                   |  
|Loss on revaluation of deferred payment liability                       |  |  | 17                     |  |  |                   | 181,707     |   |                   |  
|Loss on conversion of convertible debentures                            |  |  | 16                     |  |  |                   | -           |   |                   |  
|Interest income                                                         |  |  |                        |  |  |                   | (51,529     | ) |                   |  
|Net loss before income taxes                                            |  |  |                        |  |  |                   | (52,986,087 | ) |                   |  
|                                                                        |  |  |                        |  |  |                   |             |   |                   |  
|Income taxes                                                            |  |  |                        |  |  |                   |             |   |                   |  
|Current tax expense                                                     |  |  | 23                     |  |  |                   | 194,222     |   |                   |  
|Deferred tax recovery                                                   |  |  | 23                     |  |  |                   | (1,133,687  | ) |                   |  
|Net loss for the year                                                   |  |  |                        |  |  |                   | (52,046,622 | ) |                   |  
|                                                                        |  |  |                        |  |  |                   |             |   |                   |  
|Other comprehensive income (loss)                                       |  |  |                        |  |  |                   |             |   |                   |  
|Items that may be reclassified to profit or loss                        |  |  |                        |  |  |                   |             |   |                   |  
|Foreign currency translation adjustment                                 |  |  |                        |  |  |                   | 481,738     |   |                   |  
|Net loss and comprehensive loss for the year                            |  |  |                        |  |  | $                 | (51,564,884 | ) |                   | $
|Net loss per share, basic and diluted                                   |  |  |                        |  |  | $                 | (0.43       | ) |                   | $
|Weighted average number of common shares outstanding, basic and diluted |  |  |                        |  |  |                   | 121,002,659 |   |                   |  



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



2







Enthusiast Gaming Holdings Inc.

Consolidated Statements of Shareholders’ Equity

For the years
ended December 31, 2021 and 2020

(Expressed in Canadian
Dollars)








|                                                             |  |  | Note   |  | Number of Shares |             | Share capital |   | Contributed surplus |   | Warrant reserve |            | Shares to be returned to treasury |   | Accumulated other comprehensive income |   | Deficit |            | Total shareholders’ equity |  
|------------------------------------------------------------ |  |  | ------ |  | ---------------- | ----------- | ------------- | - | ------------------- | - | --------------- | ---------- | --------------------------------- | - | -------------------------------------- | - | ------- | ---------- | -------------------------- | -
|Balance, December 31, 2019                                   |  |  |        |  |                  | 72,091,673  |               | $ | 176,511,857         |   | $               | 9,439,324  |                                   | $ | 15,404,728                             |   | $       | (3,858,756 | )                          | $
|Issuance of shares for the offering, net of transaction cost |  |  | 19     |  |                  | 11,500,000  |               |   | 15,609,256          |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the Omnia acquisition           |  |  | 5, 19  |  |                  | 18,250,000  |               |   | 30,112,500          |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Shares returned to treasury                                  |  |  | 19     |  |                  | (1,071,876  | )             |   | (3,858,756          | ) |                 | -          |                                   |   | -                                      |   |         | 3,858,756  |                            |  
|Shares issued upon exercise of warrants                      |  |  | 19     |  |                  | 3,109,589   |               |   | 10,635,411          |   |                 | -          |                                   |   | (7,907,396                             | ) |         | -          |                            |  
|Shares issued upon exercise of options                       |  |  | 19     |  |                  | 823,937     |               |   | 2,992,079           |   |                 | (2,763,543 | )                                 |   | -                                      |   |         | -          |                            |  
|Shares issued upon conversion of convertible debentures      |  |  | 16, 19 |  |                  | 136,649     |               |   | 414,488             |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Shares issued for services                                   |  |  | 19     |  |                  | 91,009      |               |   | 200,162             |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Share-based compensation                                     |  |  | 21     |  |                  | -           |               |   | -                   |   |                 | 818,383    |                                   |   | -                                      |   |         | -          |                            |  
|Expiry of warrants                                           |  |  | 20     |  |                  | -           |               |   | -                   |   |                 | -          |                                   |   | (7,497,332                             | ) |         | -          |                            |  
|Other comprehensive loss for the year                        |  |  |        |  |                  | -           |               |   | -                   |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Net loss for the year                                        |  |  |        |  |                  | -           |               |   | -                   |   |                 | -          |                                   |   | -                                      |   |         |            |                            |  
|Balance, December 31, 2020                                   |  |  |        |  |                  | 104,930,981 |               | $ | 232,616,997         |   | $               | 7,494,164  |                                   | $ | -                                      |   | $       | -          |                            | $
|Issuance of shares for offerings, net of transaction cost    |  |  | 19     |  |                  | 15,983,000  |               |   | 95,146,338          |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the Vedatis acquisition         |  |  | 5, 19  |  |                  | 226,563     |               |   | 2,374,380           |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the Tabwire acquisition         |  |  | 5, 19  |  |                  | 790,094     |               |   | 5,238,323           |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the GameKnot acquisition        |  |  | 5, 19  |  |                  | 165,425     |               |   | 921,417             |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the Addicting Games acquisition |  |  | 5, 19  |  |                  | 2,661,164   |               |   | 14,636,402          |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Issuance of shares to effect the Outplayed acquisition       |  |  | 5, 19  |  |                  | 5,164,223   |               |   | 26,182,611          |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Shares issued upon exercise of options                       |  |  | 19     |  |                  | 363,176     |               |   | 1,711,723           |   |                 | (927,292   | )                                 |   | -                                      |   |         | -          |                            |  
|Shares issued upon conversion of convertible debentures      |  |  | 16, 19 |  |                  | 2,835,289   |               |   | 7,626,957           |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Shares issued for settlement of deferred payment liability   |  |  | 17, 19 |  |                  | 429,354     |               |   | 632,800             |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Share-based compensation                                     |  |  | 21, 22 |  |                  | -           |               |   | -                   |   |                 | 18,918,489 |                                   |   | -                                      |   |         | -          |                            |  
|Other comprehensive income for the year                      |  |  |        |  |                  | -           |               |   | -                   |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Net loss for the year                                        |  |  |        |  |                  | -           |               |   | -                   |   |                 | -          |                                   |   | -                                      |   |         | -          |                            |  
|Balance, December 31, 2021                                   |  |  |        |  |                  | 133,549,269 |               | $ | 387,087,948         |   | $               | 25,485,361 |                                   | $ | -                                      |   | $       | -          |                            | $



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



3







Enthusiast Gaming Holdings Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)








|                                                                             |  |  | Note                   |  |  | December 31, 2021 |             |   | December 31, 2020 |  
|---------------------------------------------------------------------------- |  |  | ---------------------- |  |  | ----------------- | ----------- | - | ----------------- | -
|Cash flows from operating activities                                         |  |  |                        |  |  |                   |             |   |                   |  
|Net loss for the year                                                        |  |  |                        |  |  | $                 | (52,046,622 | ) |                   | $
|Items not affecting cash:                                                    |  |  |                        |  |  |                   |             |   |                   |  
|Amortization and depreciation                                                |  |  | 9, 10, 12              |  |  |                   | 9,518,471   |   |                   |  
|Share-based compensation                                                     |  |  | 21, 22                 |  |  |                   | 18,918,489  |   |                   |  
|Interest and accretion                                                       |  |  | 12, 14, 15, 16, 17, 18 |  |  |                   | 1,294,774   |   |                   |  
|Deferred tax recovery                                                        |  |  | 23                     |  |  |                   | (1,133,687  | ) |                   |  
|Gain on player buyout                                                        |  |  | 10                     |  |  |                   | -           |   |                   |  
|Foreign exchange (gain) loss                                                 |  |  |                        |  |  |                   | (172,776    | ) |                   |  
|Gain on repayment of long-term debt                                          |  |  | 14                     |  |  |                   | (39,502     | ) |                   |  
|Gain on settlement of long-term debt                                         |  |  | 14                     |  |  |                   | (11,991     | ) |                   |  
|Loss on settlement of vendor-take-back loan                                  |  |  | 18                     |  |  |                   | 316,241     |   |                   |  
|Loss on revaluation of deferred payment liability                            |  |  | 17                     |  |  |                   | 181,707     |   |                   |  
|Loss on conversion of convertible debentures                                 |  |  |                        |  |  |                   | -           |   |                   |  
|Capitalized interest and success fee                                         |  |  |                        |  |  |                   | -           |   |                   |  
|Shares issued for services                                                   |  |  |                        |  |  |                   | 173,567     |   |                   |  
|Loss on modification of long-term debt                                       |  |  | 14                     |  |  |                   | -           |   |                   |  
|Provisions                                                                   |  |  |                        |  |  |                   | -           |   |                   |  
|Change in fair value of investment                                           |  |  | 7                      |  |  |                   | 444,764     |   |                   |  
|Share of loss from investment in associates and joint ventures               |  |  | 8                      |  |  |                   | 266,641     |   |                   |  
|Changes in working capital:                                                  |  |  |                        |  |  |                   |             |   |                   |  
|Changes in trade and other receivables                                       |  |  |                        |  |  |                   | (8,322,247  | ) |                   |  
|Changes in prepaid expenses                                                  |  |  |                        |  |  |                   | (1,599,739  | ) |                   |  
|Changes in loans receivable                                                  |  |  |                        |  |  |                   | 37,500      |   |                   |  
|Changes in accounts payable and accrued liabilities                          |  |  |                        |  |  |                   | 7,687,368   |   |                   |  
|Changes in contract liabilities                                              |  |  |                        |  |  |                   | 1,284,406   |   |                   |  
|Changes in income tax receivable and payable                                 |  |  |                        |  |  |                   | (174,052    | ) |                   |  
|Income tax paid                                                              |  |  |                        |  |  |                   | (301,975    | ) |                   |  
|Net cash used in operating activities                                        |  |  |                        |  |  |                   | (23,678,663 | ) |                   |  
|                                                                             |  |  |                        |  |  |                   |             |   |                   |  
|Cash flows from investing activities                                         |  |  |                        |  |  |                   |             |   |                   |  
|Cash paid for mergers and acquisitions                                       |  |  | 5                      |  |  |                   | (36,222,278 | ) |                   |  
|Cash acquired from mergers and acquisitions                                  |  |  | 5                      |  |  |                   | 2,406,356   |   |                   |  
|Proceeds from disposal of investment                                         |  |  | 7                      |  |  |                   | -           |   |                   |  
|Deferred payment liability                                                   |  |  | 17                     |  |  |                   | -           |   |                   |  
|Proceeds from disposal of intangible assets                                  |  |  | 10                     |  |  |                   | -           |   |                   |  
|Investment in associate and joint ventures                                   |  |  | 8                      |  |  |                   | (125,000    | ) |                   |  
|Acquisition of property and equipment                                        |  |  | 9                      |  |  |                   | (3,398      | ) |                   |  
|Net cash used in investing activities                                        |  |  |                        |  |  |                   | (33,944,320 | ) |                   |  
|                                                                             |  |  |                        |  |  |                   |             |   |                   |  
|Cash flows from financing activities                                         |  |  |                        |  |  |                   |             |   |                   |  
|Proceeds from the issuance of shares for offerings, net of transaction costs |  |  | 19                     |  |  |                   | 95,146,338  |   |                   |  
|Proceeds from long-term debt, net of transaction costs                       |  |  | 14                     |  |  |                   | 10,823,240  |   |                   |  
|Repayment of long-term debt                                                  |  |  | 14                     |  |  |                   | (23,773,470 | ) |                   |  
|Proceeds from exercise of warrants                                           |  |  | 19                     |  |  |                   | -           |   |                   |  
|Proceeds from exercise of options                                            |  |  | 19                     |  |  |                   | 784,431     |   |                   |  
|Repayment of vendor-take-back loan                                           |  |  | 18                     |  |  |                   | (6,158,329  | ) |                   |  
|Repayment of other long-term debt                                            |  |  | 15                     |  |  |                   | (5,561      | ) |                   |  
|Lease payments                                                               |  |  | 12                     |  |  |                   | (802,013    | ) |                   |  
|Net cash provided by financing activities                                    |  |  |                        |  |  |                   | 76,014,636  |   |                   |  
|                                                                             |  |  |                        |  |  |                   |             |   |                   |  
|Foreign exchange effect on cash                                              |  |  |                        |  |  |                   | (61,214     | ) |                   |  
|Net change in cash                                                           |  |  |                        |  |  |                   | 18,330,439  |   |                   |  
|Cash, beginning of year                                                      |  |  |                        |  |  |                   | 4,323,823   |   |                   |  
|Cash, end of year                                                            |  |  |                        |  |  | $                 | 22,654,262  |   |                   | $



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



4







Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)








| | 1. | Nature
                                         of operations
| | -- | -------------------------------------------------------------



Enthusiast
Gaming Holdings Inc. (the “Company” or “Enthusiast”) was incorporated under the Business Corporation
Act (British Columbia) on June 27, 2018. The Company is publicly traded on the Toronto Stock Exchange (“TSX”)
and Nasdaq Global Select Market (“Nasdaq”) under the symbol “EGLX”. On January 27, 2020, the common shares
of the Company commenced trading on the TSX following a graduation from the TSX Venture Exchange. On April 21, 2021 the common
shares of the Company commenced trading on the Nasdaq. The Company maintains its registered office at 510 West Georgia Street,
Suite 1800, Vancouver, British Columbia and its executive office at 90 Eglinton Avenue East, Suite 805, Toronto, Ontario, M4P
2Y3.



The
Company’s principal business activities are comprised of media and content, entertainment and esports. The Company’s
digital media platform includes 100+ gaming related websites, approximately 1,000 YouTube channels and a library of over 1,500
casual games. The Company’s esports division, Luminosity Gaming Inc., is a leading global esports franchise that consists
of 7 professional esports teams under ownership and management, including the Vancouver Titans Overwatch team and the Seattle
Surge Call of Duty team. The Company’s entertainment business owns and operates Canada’s largest gaming expo, Enthusiast
Gaming Live Expo, EGLX, and the largest mobile gaming event in Europe, Pocket Gamer Connects.



On
August 30, 2020, the Company acquired all of the issued and outstanding shares of Omnia Media Inc. (“Omnia”) from
Blue Ant Media Solutions Inc. (“Blue Ant”) pursuant to a share purchase agreement dated August 6, 2020 (the “Omnia
SPA”). The Omnia SPA is accounted for in accordance with IFRS 3, Business Combinations, as the operations of Omnia
constitute a business.



On
May 1, 2021, the Company acquired all of the issued and outstanding shares of Vedatis SAS (“Vedatis”) pursuant to
a share purchase agreement dated May 1, 2021 (the “Vedatis SPA”). The Vedatis SPA is accounted for in accordance with
IFRS 3, as the operations of Vedatis constitute a business.



On
June 21, 2021, the Company, through its wholly-owned subsidiary, Enthusiast Gaming Media (US) Inc. (“Media US”), acquired
all of the issued and outstanding membership interest of Tabwire LLC (“Tabwire”) pursuant to an equity purchase agreement
dated April 22, 2021 (the “Tabwire EPA”). The Tabwire EPA is accounted for in accordance with IFRS 3, as the operations
of Tabwire constitute a business.



On
August 30, 2021, the Company, through its wholly-owned subsidiary, Media US, acquired all of the issued and outstanding membership
interest of GameKnot LLC (“GameKnot”) pursuant to an equity purchase agreement dated August 30, 2021 (the “GameKnot
EPA”). The GameKnot EPA is accounted for in accordance with IFRS 3, as the operations of GameKnot constitute a business.



On
September 3, 2021, the Company, through its wholly-owned subsidiary, Media US, acquired all of the issued and outstanding shares
of Addicting Games, Inc. and TeachMe, Inc. (“TeachMe”, which together with Addicting Games, Inc., is herein referred
to as “Addicting Games”) pursuant to a share purchase agreement dated September 3, 2021 (the “Addicting Games
SPA”). The Addicting Games SPA is accounted for in accordance with IFRS 3, as the operations of Addicting Games constitute
a business.



On
November 22, 2021, the Company, through its wholly-owned subsidiary, Media US, acquired all of the issued and outstanding shares
of Outplayed, Inc. (“Outplayed”) pursuant to a merger agreement dated November 22, 2021 (the “Outplayed MA”).
Pursuant to the Outplayed MA between Enthusiast Acquisition Corp. (“Acquisition Corp”), a subsidiary of Media US incorporated
to facilitate this transaction, and Outplayed, Outplayed merged with and into Acquisition Corp and Acquisition Corp changed its
name to Outplayed, Inc. The Outplayed MA is accounted for in accordance with IFRS 3, as the operations of Outplayed constitute
a business.



The
Omnia SPA, Vedatis SPA, Tabwire EPA, GameKnot EPA, Addicting Games SPA and Outplayed MA are collectively called the “Mergers
and Acquisitions” in these consolidated financial statements. For information relating to the accounting of the Mergers
and Acquisition see Note 5.



Approval
of Financial Statements



These
consolidated financial statements were authorized for issuance by the Board of Directors of the Company on March 28, 2022.





5





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 2. | Statement
                                         of compliance and basis of preparation
| | -- | -----------------------------------------------------------------------------------------



| | (i) | Statement
                                         of compliance
| | --- | ----------------------------------------------------------------



The
Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”)
using the accounting policies described herein as issued by International Accounting Standards Board (“IASB”) and
interpretations by the IFRS Interpretations Committee.



| | (ii) | Basis
                                         of presentation
| | ---- | --------------------------------------------------------------



The
consolidated financial statements are prepared under the historical cost convention except for the revaluation of certain financial
assets and liabilities to fair value. All financial information is presented in Canadian dollars, except as otherwise noted.



| | (iii) | Basis
                                         of consolidation
| | ----- | ---------------------------------------------------------------



Subsidiaries
are entities controlled by the Company where control is defined as the power to govern the financial and operating policies of
an entity so as to obtain benefits from its activities. Subsidiaries are included in the consolidated financial statements from
the date control is obtained until the date control ceases. All intercompany balances, transactions, income and expenses have
been eliminated on consolidation.



These
consolidated financial statements include the accounts of Enthusiast Gaming Holdings Inc. and its wholly-owned subsidiaries. The
accounts of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies.
The table below lists the Company’s wholly-owned subsidiaries:





|Name
    of Subsidiary                        | Jurisdiction          | Functional
    Currency | AccountingMethod
|--------------------------------------------- | --------------------- | ----------------------- | ----------------
|                                              |                       |                         |                 
|Aquilini
    GameCo Inc.                      | Canada                | Canadian
    dollars    | Consolidation   
|GameCo
    eSports USA Inc.                   | USA                   | U.S.
    dollars        | Consolidation   
|Luminosity
    Gaming Inc.                    | Canada                | Canadian
    dollars    | Consolidation   
|Luminosity
    Gaming (USA) LLC               | USA                   | U.S.
    dollars        | Consolidation   
|Enthusiast
    Gaming Properties Inc.         | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming Inc.                    | Canada                | U.S.
    dollars        | Consolidation   
|Enthusiast
    Gaming Live Inc.               | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming Media Inc.              | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming Media (US) Inc.         | USA                   | U.S.
    dollars        | Consolidation   
|Tabwire
        LLC                           | USA                   | U.S.
    dollars        | Consolidation   
|GameKnot
        LLC                          | USA                   | U.S.
    dollars        | Consolidation   
|Addicting
        Games, Inc.                 | USA                   | U.S.
    dollars        | Consolidation   
|TeachMe,
        Inc.                         | USA                   | U.S.
    dollars        | Consolidation   
|Outplayed,
        Inc.                       | USA                   | U.S.
    dollars        | Consolidation   
|Enthusiast
    Gaming Media Holdings Inc.     | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming Media II Holdings Inc.  | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming Media III Holdings Inc. | Canada                | U.S.
    dollars        | Consolidation   
|Enthusiast
    Gaming (TSR) Inc.              | Canada                | U.S.
    dollars        | Consolidation   
|Hexagon
    Games Corp.                       | Canada                | Canadian
    dollars    | Consolidation   
|Enthusiast
    Gaming (PG) Inc.               | Canada                | Canadian
    dollars    | Consolidation   
|Steel
    Media Limited                       | England
    and Wales | UK
    Pound Sterling   | Consolidation   
|Omnia
    Media Inc.                          | USA                   | U.S.
    dollars        | Consolidation   
|Vedatis
        SAS                           | France                | Euro                    | Consolidation   



Refer
to Note 8 for the Company’s investment in associates and joint ventures.





6





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies
| | -- | ------------------------------------------------------------------------



The
accounting policies set out below have been applied consistently to all years presented in these consolidated financial statements.



| | (i) | Foreign
                                         currency
| | --- | ---------------------------------------------------------



The
consolidated financial statements are presented in Canadian dollars. The functional currency of Enthusiast Gaming Holdings Inc.,
Aquilini GameCo Inc., Luminosity Gaming Inc., Enthusiast Gaming Properties Inc., Enthusiast Gaming Gaming Live Inc., Enthusiast
Gaming Media Inc., Enthusiast Gaming Media Holdings Inc., Enthusiast Gaming Media II Holdings Inc., Hexagon Games Corp., Enthusiast
Gaming (PG) Inc., AIG eSports Canada Holdings Ltd. and AFK Media Partnership is Canadian dollars. The functional currency of Enthusiast
Gaming Inc., Omnia Media Inc., Enthusiast Gaming Media (US) Inc., Enthusiast Gaming (TSR) Inc., Enthusiast Gaming Media III Holdings
Inc., Luminosity Gaming (USA) LLC, GameCo eSports USA Inc., Tabwire LLC, GameKnot LLC, Addicting Games, Inc., TeachMe, Inc., Outplayed,
Inc. and AIG eSports USA Intermediate Holdings, LLC is United States dollars. The functional currency of Steel Media Limited is
the UK pound sterling. The functional currency of Vedatis SAS is Euro.



Assets
and liabilities of subsidiaries having a functional currency other than the Canadian dollar are translated at the rate of exchange
at the reporting period date. Revenues and expenses are translated at average rates for the period, unless exchange rates fluctuated
significantly during the period, in which case the exchange rates at the dates of the transaction are used. The resulting foreign
currency translation adjustments are recognized in the accumulated other comprehensive loss included in the consolidated statements
of changes in shareholders’ equity. Foreign currency transactions are translated into the functional currency using exchange
rates prevailing at the date of the transactions. At the end of each reporting period, foreign currency denominated monetary assets
and liabilities are translated to the functional currency using the prevailing rate of exchange at the reporting period date.
Gains and losses on translation of monetary items are recognized in the consolidated statements of loss and comprehensive loss.



Foreign
exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which
is neither planned nor likely to occur in the foreseeable future and which in substance is considered to form part of the net
investment in the foreign operation, are recognized in other comprehensive income (“OCI”) in the translation reserve.



| | (ii) | Revenue
| | ---- | -------



Media
and content revenue



The
Company generates media and content revenues primarily by delivering performance and brand advertising. Performance advertising
creates and delivers relevant advertisements that users will click, leading to direct engagement with advertisers. Brand advertising
enhances users’ awareness of and affinity with advertisers’ products and services, through videos, text, images, and
other advertisements that run across various devices. Revenue from digital advertising is recognized when the user clicks on the
advertisement or when the user views the advertisement for a specified period of time or based on cost-per-impression, which is
based on the number of times an advertisement is displayed.



Brand
advertising revenue is also earned from talent management and representation. Within brand advertising revenue, the Company generates
revenue through programs and promotions directly with advertisers on behalf of the talent it represents, by arranging for product
placement, presentation, or additional advertisement of brands embedded directly within or around the video content that is produced
by the represented talent. This brand advertising revenue is recognized over time, using an output method, upon fulfillment of
contractual campaigns based on the number of advertising units utilized.



Subscription
revenue



The
Company generates recurring subscription revenue from subscriptions to websites and casual games. Revenue is recognized ratably
over the contractual subscription term as control of the goods or services is transferred to the customer, beginning on the date
that the subscription is made available to the customer.





7





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (ii) | Revenue
                                         (continued)
| | ---- | ------------------------------------------------------------



Entertainment
revenue



The
Company generates revenue through ticket sales and sponsorships during its exhibition events. The exhibition events are short
in duration ranging from three to four days. The Company records revenue from ticket sales and sponsorships once the event is
held and the performance obligation is met.



Esports
revenue



The
Company earns prize revenue from its winnings from various esports tournaments and competitions that the Luminosity Gaming teams
enter into. Revenue is recognized once the competition ends.



The
Company earns league fees from the Luminosity Gaming teams being participants in certain various esports leagues. These fees are
recognized over the term of the participation in the league.



The
Company earns buyout revenue from fees charged to competing esports teams for the buyout of contracted players that compete for
the various Luminosity Gaming teams. The revenue is recognized when the transfer of the contracts is completed.



The
Company earns revenue on physical and digital merchandise that it sells through its website and video games. Revenue is recognized
when the products are shipped or digital products have been redeemed.



The
Company earns revenue by providing a series of esports management services, see Note 24. Revenue is recognized as the services
are provided.



Gross
versus net revenue



Third
party arrangements are evaluated to determine whether the Company acts as the principal or agent under the specific terms of each
arrangement. To the extent that the Company acts as the principal in an arrangement, revenues are reported on a gross basis; revenue
and expenses are recognized in their respective financial statement line items. Conversely, if the Company acts as the agent,
revenues are reported on a net basis; revenues are presented net of any expenses.



Determination
of principal or agent classification is based on an evaluation of whether the nature of the Company’s promise is a performance
obligation to provide specific goods or services to the customer (principal), or simply arrange for those goods and services to
be provided to the customer by a third party (agent). The most significant factors to consider include whether the Company controls
the good or service immediately before it is transferred to the customer, is primarily responsible for fulfilling the promise
to provide the specified good or service, has inventory risk before transferring the specified good or service, and has discretion
in establishing prices for the specified good or service.



| | (iii) | Contract
                                         liabilities
| | ----- | -------------------------------------------------------------



Contract
liabilities represents the portion of goods or services to be transferred to the customer for the contractual subscription term
remaining as at the year-end date and amounts received in advance of live entertainment events to be held.



| | (iv) | Investment
                                         in associates and joint ventures
| | ---- | ------------------------------------------------------------------------------------



An
associate is an entity over which the Company has significant influence and is neither a subsidiary nor a joint arrangement. The
Company has significant influence when it has the power to participate in the financial and operating policy decisions of the
associate but does not have control or joint control over those policies. A joint venture is a type of joint arrangement whereby
the parties that have joint control of the contractual arrangement have rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control. The Company accounts for its investments in associates and joint
ventures using the equity method.





8





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (iv) | Investment
                                         in associates and joint ventures (continued)
| | ---- | ------------------------------------------------------------------------------------------------



Under
the equity method, the Company’s investments in associates and joint ventures are initially recognized at cost, including
transaction costs, and subsequently increased or decreased to recognize the Company’s share of net earnings or losses of
the associates and joint ventures after any adjustments necessary to give effect to uniform accounting policies and for impairment
losses after the initial recognition date. The Company’s share of earnings or losses of the associates and joint ventures
are recognized in net loss during the period. Unrealized gains and losses on transactions between the Company and its associates
and joint ventures are eliminated to the extent of the Company’s interest in the associates and joint ventures.



The
Company assesses if there are any indicators of impairment of the carrying amount of the investments in associates and joint ventures
at each reporting period. An impairment test is performed when there is objective evidence of impairment, such as significant
adverse changes in the external environment in which the associates and joint ventures operates or a significant or prolonged
decline in the fair value of the investment in associates and joint ventures below its carrying amount. An impairment loss is
recorded when the recoverable amount becomes lower than the carrying amount.



| | (v) | Share-based
                                         payments
| | --- | -------------------------------------------------------------



The
Company has a stock option plan for directors, officers, employees and consultants. Each tranche in an award is considered a separate
award with its own vesting period and grant date fair value. For employees and those performing employee like services, the fair
value of each tranche is measured at the date of grant using the Black-Scholes option pricing model. For non-employees, the fair
value of each tranche is measured based on the fair value of the goods or services received, unless that fair value cannot be
estimated reliably, in which case, the Company measures their value based on the fair value of the equity instruments granted.
Compensation expense is recognized over the tranche’s vesting period based on the number of awards expected to vest with
the offset credited to contributed surplus. The number of awards expected to vest is reviewed quarterly with any impact being
recognized immediately.



If
and when stock options are exercised, consideration received is credited to share capital and the fair value attributed to these
options is transferred from contributed surplus to share capital.



| | (vi) | Income
                                         taxes and deferred taxes
| | ---- | ------------------------------------------------------------------------



The
income tax provision comprises current and deferred tax. Income tax is recognized in the consolidated statements of loss and comprehensive
loss except to the extent that it relates to items recognized directly in equity, in which case the income tax is also recognized
directly in equity.



Current
tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted, at the
end of the reporting period, and any adjustment to tax payable in respect of previous years.



Deferred
tax is recognized in respect of temporary differences arising between the tax basis of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred tax is determined on a non-discounted basis using tax rates and laws
that have been enacted or substantively enacted at the end of the reporting period and are expected to apply when the asset is
realized or liability is settled. Deferred tax assets are recognized for deductible temporary differences, unused tax losses and
other income tax deductions to the extent that it is probable the Company will have taxable income against which those deductible
temporary differences, unused tax losses and other income tax deductions can be utilized. The extent to which deductible temporary
differences, unused tax losses and other income tax deductions are expected to be realized is reassessed at the end of each reporting
period.



In
a business combination, temporary differences arise as a result of differences in the fair values of identifiable assets and liabilities
acquired and their respective tax basis. Deferred tax assets and liabilities are recognized for the tax effects of these differences.
Deferred tax assets and liabilities are not recognized for temporary differences arising from goodwill or from the initial recognition
of assets and liabilities acquired in a transaction other than a business combination which do not affect either accounting or
taxable income or loss.





9





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (vii) | Property
                                         and equipment
| | ----- | ---------------------------------------------------------------



Property
and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly
attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized
as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Company and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs
and maintenance costs are charged to the consolidated statements of loss and comprehensive loss during the period in which they
are incurred.



Depreciation
is calculated at 20% of the declining balance for furniture and fixtures, 30% of the declining balance for computer equipment,
20% of the declining balance for production equipment and over the term of the lease for leasehold improvements. Residual values,
method of depreciation and useful lives of the assets are reviewed annually and adjusted, if required.



Gains
and losses on disposals of property and equipment are determined by comparing the proceeds with the carrying amount of the asset
and are included as part of other gains and losses in the consolidated statements of loss and comprehensive loss.



| | (viii) | Intangible
                                         assets
| | ------ | ----------------------------------------------------------



Intangible
assets with finite lives that are acquired separately are measured on initial recognition at cost, which comprises its purchase
price plus any directly attributable costs of preparing the asset for its intended use. Following initial recognition, such intangible
assets are carried at cost less any accumulated amortization on a straight-line basis over the following periods:





|Game application and technology development | 0.5 - 1.5 years                                        
|------------------------------------------- | -------------------------------------------------------
|Website content                             | 2 years                                                
|Sponsorship relationships                   | 2 years                                                
|Application and technology development      | 0.25 - 2 years                                         
|Digital content                             | 2 years                                                
|Talent contracts                            | 3 years                                                
|Subscriber relationships                    | 2 - 10 years                                           
|Multi-channel network license               | 10 years                                               
|Player contracts                            | Over the term of the contract including renewal options
|Domain name                                 | Indefinite life                                        
|Brand name                                  | Indefinite life                                        
|Talent management brand                     | Indefinite life                                        
|Owned and operated content brand            | Indefinite life                                        



Amortization
expense is included in the consolidated statements of loss and comprehensive loss.



The
estimated useful life and amortization method are reviewed annually, with the effect of any change in estimate being accounted
for on a prospective basis. These assets are subject to impairment testing as described below in Note 3(x).



| | (ix) | Goodwill
| | ---- | --------



Goodwill
represents the excess of the acquisition cost in a business combination over the fair value of the Company’s share of the
identifiable net assets acquired. Goodwill is carried at cost less accumulated impairment losses.



| | (x) | Impairment
                                         testing of goodwill, other intangible assets and property and equipment
| | --- | ---------------------------------------------------------------------------------------------------------------------------



For
purposes of assessing impairment under IFRS, assets are grouped at the lowest levels for which there are largely independent cash
inflows (cash-generating unit). The Company has seven cash-generating units (CGUs) and goodwill is tested for impairment on an
annual basis at the end of the fourth quarter. Intangible assets that have indefinite useful lives are also tested for impairment
at each reporting period. The Company assesses if there are any indicators of impairment of the carrying amount of goodwill and
indefinite-life intangible assets at each reporting period. All other long-lived assets and finite life intangible assets are
tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.





10





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (x) | Impairment
                                         testing of goodwill, other intangible assets and property and equipment (continued)
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------



An
impairment loss is recognized for the amount by which the asset’s or CGU’s carrying amount exceeds its recoverable
amount, which is the higher of fair value less costs to sell or value-in-use. Fair value less cost to sell is estimated as the
arm’s length sale price between knowledgeable willing parties less costs of disposal. To determine the value-in-use, management
estimates expected future cash flows from the CGU and determines a suitable pre-tax discount rate in order to calculate the present
value of those cash flows. The data used for impairment testing procedures are directly linked to the Company’s latest approved
budget, adjusted as necessary to exclude the effects of future reorganizations and asset enhancements.



Discount
factors have been determined for the CGU and reflect its risk profile as assessed by management.



Impairment
losses for the CGU reduce first the carrying amount of any goodwill allocated to that CGU, with any remaining impairment loss
charged pro rata to the other assets in the CGU. In allocating an impairment loss, the Company does not reduce the carrying amount
of an asset below the highest of its fair value less costs of disposal or its value-in-use and zero.



With
the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized
may no longer exist. An impairment charge is reversed if the assets’ recoverable amount exceeds its carrying amount only
to the extent that the new carrying amount does not exceed the carrying value of the asset had it not originally been impaired.



| | (xi) | Financial
                                         instruments
| | ---- | --------------------------------------------------------------



Financial
assets



Recognition
and initial measurement



The
Company recognizes financial assets when it becomes party to the contractual provisions of the instrument. Financial assets are
measured initially at their fair value plus, in the case of financial assets not subsequently measured at fair value through profit
or loss, transaction costs that are directly attributable to their acquisition. Transaction costs attributable to the acquisition
of financial assets subsequently measured at fair value through profit or loss are expensed in profit or loss when incurred.



Classification
and subsequent measurement



On
initial recognition, financial assets are classified as subsequently measured at amortized cost, fair value through other comprehensive
income or fair value through profit or loss. The Company determines the classification of its financial assets, together with
any embedded derivatives, based on the business model for managing the financial assets and their contractual cash flow characteristics.



Financial
assets are classified as follows:



| | ● | Amortized
                                         cost - Assets that are held for collection of contractual cash flows where those cash
                                         flows are solely payments of principal and interest are measured at amortized cost. Interest
                                         revenue is calculated using the effective interest method and gains or losses arising
                                         from impairment, foreign exchange and derecognition are recognized in profit or loss.
                                         Financial assets measured at amortized cost are comprised of cash, trade and other receivables
                                         and loans receivable.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Fair
                                         value through other comprehensive income - Assets that are held for collection of contractual
                                         cash flows and for selling the financial assets, and for which the contractual cash flows
                                         are solely payments of principal and interest, are measured at fair value through other
                                         comprehensive income. Interest income is calculated using the effective interest method
                                         and gains or losses arising from impairment and foreign exchange are recognized in profit
                                         or loss. All other changes in the carrying amount of the financial assets are recognized
                                         in other comprehensive income. Upon derecognition, the cumulative gain or loss previously
                                         recognized in other comprehensive income is reclassified to profit or loss. The Company
                                         does not hold any financial assets measured at fair value through other comprehensive
                                         income.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Mandatorily
                                         at fair value through profit or loss - Assets that do not meet the criteria to be measured
                                         at amortized cost, or fair value through other comprehensive income, are measured at
                                         fair value through profit or loss. All interest income and changes in the financial assets’
                                         carrying amount are recognized in profit or loss. The Company does not hold any financial
                                         assets mandatorily measured at fair value through profit or loss.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





11





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (xi) | Financial
                                         instruments (continued)
| | ---- | --------------------------------------------------------------------------



Classification
and subsequent measurement (continued)



| | ● | Designated
                                         at fair value through profit or loss – On initial recognition, the Company may
                                         irrevocably designate a financial asset to be measured at fair value through profit or
                                         loss in order to eliminate or significantly reduce an accounting mismatch that would
                                         otherwise arise from measuring assets or liabilities, or recognizing the gains and losses
                                         on them, on different basis. All interest income and changes in the financial assets’
                                         carrying amount are recognized in profit or loss. Financial assets designated at fair
                                         value through profit or loss are comprised of investments.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
Company measures all equity investments at fair value. Changes in fair value are recorded in profit or loss.



Business
model assessment



The
Company assesses the objective of its business model for holding a financial asset at a level of aggregation which best reflects
the way the business is managed and information is provided to management. Information considered in this assessment includes
stated policies and objectives.



Contractual
cash flow assessment



The
cash flows of financial assets are assessed as to whether they are solely payments of principal and interest on the basis of their
contractual terms. For this purpose, ‘principal’ is defined as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value of money, the credit risk associated with the principal
amount outstanding, and other basic lending risks and costs. In performing this assessment, the Company considers factors that
would alter the timing and amount of cash flows such as prepayment and extension features, terms that might limit the Company’s
claim to cash flows, and any features that modify consideration for the time value of money.



Impairment



The
Company recognizes a loss allowance for the expected credit losses associated with its financial assets, other than financial
assets measured at fair value through profit or loss. Expected credit losses are measured to reflect a probability-weighted amount,
the time value of money, and reasonable and supportable information regarding past events, current conditions and forecasts of
future economic conditions. The Company applies the simplified approach for trade receivables. Using the simplified approach,
the Company records a loss allowance equal to the expected credit losses resulting from all possible default events over the assets’
contractual lifetime.



The
Company assesses whether a financial asset is credit-impaired at the reporting date. Regular indicators that a financial instrument
is credit-impaired include significant financial difficulties as evidenced through borrowing patterns or observed balances in
other accounts and breaches of borrowing contracts such as default events or breaches of borrowing covenants. For financial assets
assessed as credit-impaired at the reporting date, the Company continues to recognize a loss allowance equal to lifetime expected
credit losses.



For
financial assets measured at amortized cost, loss allowances for expected credit losses are presented in the consolidated statements
of financial position as a deduction from the gross carrying amount of the financial asset.



Financial
assets are written off when the Company has no reasonable expectations of recovering all or any portion thereof.



Derecognition
of financial assets



The
Company derecognizes a financial asset when its contractual rights to the cash flows from the financial asset expire.





12





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (xi) | Financial
                                         instruments (continued)
| | ---- | --------------------------------------------------------------------------



Financial
liabilities



Recognition
and initial measurement



The
Company recognizes a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition,
the Company measures financial liabilities at their fair value plus transaction costs that are directly attributable to their
issuance, with the exception of financial liabilities subsequently measured at fair value through profit or loss for which transaction
costs are immediately recorded in profit or loss.



Where
an instrument contains both a liability and equity component, these components are recognized separately based on the substance
of the instrument, with the liability component measured initially at fair value and the equity component assigned the residual
amount.



Classification
and subsequent measurement



Subsequent
to initial recognition, all financial liabilities are measured at amortized cost using the effective interest rate method. Interest,
gains and losses relating to a financial liability are recognized in profit or loss.



Derecognition
of financial liabilities



The
Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expire.



| | (xii) | Provisions
| | ----- | ----------



Provisions
represent liabilities of the Company for which the amount or timing is uncertain. Provisions are recognized when the Company has
a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required
to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses.
Where material, provisions are measured at the present value of the expected expenditures to settle the obligation using a discount
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase
in the provision due to passage of time is recognized as interest expense.



| | (xiii) | Cash
| | ------ | ----



Cash
comprises of cash held with financial institutions and cash held in trust.



| | (xiv) | Warrants
| | ----- | --------



All
warrants issued under a unit financing arrangement are valued on the date of grant using the Black-Scholes pricing model, net
of related issuance costs.



If
and when warrants are exercised, consideration received is credited to share capital and the fair value attributed to these warrants
is transferred from warrant reserve to share capital. Expired warrants are removed from warrant reserve and credited directly
to retained earnings or deficit.



| | (xv) | Loss
                                         per share
| | ---- | -------------------------------------------------------



Basic
loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares
outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share except that the
weighted average number of shares outstanding is increased to include additional shares for the assumed exercise of stock options
and warrants, if dilutive. The average number of shares is calculated by assuming that outstanding conversions were exercised
and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting
period. For the years ended December 31, 2021 and 2021, potentially dilutive common shares issuable upon the exercise of the conversion
option related to convertible debentures, warrants and options were not included in the computation of loss per share because
their effect was anti-dilutive.





13





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (xvi) | Business
                                         combinations
| | ----- | --------------------------------------------------------------



On
the acquisition of a business, the acquisition method of accounting is used, whereby the purchase consideration is allocated to
the identifiable assets and liabilities on the basis of fair value of the date of acquisition. Provisional fair values allocated
at a reporting date are finalized as soon as the relevant information is available, within a period not to exceed twelve months
from the acquisition date with retroactive restatement of the impact of adjustment to those provisional fair values effective
as at the acquisition date. Incremental costs related to acquisitions are expensed as incurred. When the consideration transferred
by the Company in a business combination includes assets or liabilities resulting from a contingent consideration arrangement,
the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred
in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments
are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments
that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition
date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value
of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration
is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured
at subsequent reporting dates in accordance with IFRS 9, Financial Instruments, or IAS 37, Provisions, Contingent Liabilities
and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss.



| | (xvii) | Restricted
                                         Share Units
| | ------ | ---------------------------------------------------------------



The
Company has a Share Unit Plan for directors, officers, employees and consultants. Each tranche in an award is considered a separate
award with its own vesting period and grant date fair value. Fair value of equity-settled restricted share units is measured at
the grant date based on the market value of the Company’s common shares on that date. Compensation expense is recognized
over the tranche’s vesting period based on the number of awards expected to vest with the offset credited to contributed
surplus. The number of awards expected to vest is reviewed quarterly with any impact being recognized immediately.



When
common shares are issued for restricted share units, the fair value attributed to these restricted share units is transferred
from contributed surplus to share capital.



| | (xviii) | Leases
| | ------- | ------



The
Company assesses, at the inception of contract, whether it contains a lease. A contract is classified as a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.



The
Company recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises of the initial amount of the lease liability adjusted for any lease payments made at or before
the commencement date, plus any indirect costs incurred.



The
right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets
are determined using the same criteria as those for property and equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses and adjusted for certain remeasurements of the lease liability, if any.



The
lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be determined, the Company’s incremental borrowing
rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments
made. It is remeasured when there is a change in future lease payment arising from a change in an index or rate, or changes in
assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably
certain not to be exercised.





14





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 3. | Significant
                                         accounting policies (continued)
| | -- | ------------------------------------------------------------------------------------



| | (xviii) | Leases
                                         (continued)
| | ------- | -----------------------------------------------------------



Short-term
leases and leases of low-value assets



The
Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months
or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on
a straight-line basis over the lease term.



| | 4. | Significant
                                         accounting judgments, estimates and uncertainties
| | -- | ------------------------------------------------------------------------------------------------------



The
preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect
the amounts reported in the consolidated financial statements and notes to the consolidated financial statements. These estimates
are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results
could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting
estimates are recognized in the period in which the estimates are revised. Significant areas requiring the Company to make estimates
include goodwill impairment testing and recoverability of assets, identification and valuation of intangible assets acquired in
business combinations, estimated useful lives of long-lived assets, income taxes, the fair value of share-based payments, provisions
for expected credit losses, fair value measurement of an investment not quoted in an active market and recognition of revenue
on a gross versus net basis. These estimates and judgments are further discussed below.



| | (a) | Goodwill
                                         impairment testing and recoverability of assets
| | --- | -------------------------------------------------------------------------------------------------



In
evaluating impairment, the Company determines the recoverable amount based on an assessment of value-in-use using a discounted
cash flow approach. In determining the estimated recoverable amount, the Company’s significant assumptions include expected
future cash flows, terminal growth rates and discount rates. The approach uses cash flow projections based upon a financial forecast
approved by management, covering a five-year period. Cash flows for the years thereafter are extrapolated using the estimated
terminal growth rate. The risk premiums expected by market participants related to uncertainties about the industry and assumptions
relating to future cash flows may differ or change quickly, depending on economic conditions and other events.



| | (b) | Identification
                                         and valuation of intangible assets acquired in business combinations
| | --- | ----------------------------------------------------------------------------------------------------------------------------



In
a business combination, all identifiable assets, liabilities and contingent liabilities acquired are recorded at their fair values.
One of the most significant estimates relates to the determination of the fair value of intangible assets. For any intangible
asset identified, depending on the type of intangible asset and the complexity of determining its fair value, management with
assistance from an independent valuation expert develops the fair value using appropriate valuation techniques which are based
on a forecast of the total expected future net cash flows. In determining the fair value of the intangible assets at the acquisition
date, the Company’s significant assumptions include the future net cash flows, royalty rates, attrition rates and in the
discount rate applied.



Certain
fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional
values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods. However,
the measurement period will last for one year from the acquisition date.



| | (c) | Estimated
                                         useful lives of long-lived assets
| | --- | ------------------------------------------------------------------------------------



Management
reviews the useful lives of depreciable assets at each reporting date. Management assesses that the useful lives represent the
expected utilization in terms of duration of the assets to the Company. Actual utilization, however, may vary due to technical
obsolescence, particularly relating to website content and application and technology development.



15





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 4. | Significant
                                         accounting judgments, estimates and uncertainties (continued)
| | -- | ------------------------------------------------------------------------------------------------------------------



| | (d) | Income
                                         taxes
| | --- | -----------------------------------------------------



At
the end of each reporting period, the Company assesses whether the realization of deferred tax benefits is sufficiently probable
to recognize deferred tax assets. This assessment requires the exercise of judgment on the part of management with respect to,
among other things, benefits that could be realized from available income tax strategies and future taxable income, as well as
other positive and negative factors. The recorded amount of total deferred tax assets could be reduced if estimates of projected
future taxable income and benefits from available income tax strategies are lowered, or if changes in current income tax regulations
are enacted that impose restrictions on the timing or extent of the Company’s ability to utilize deferred tax benefits.



The
Company’s effective income tax rate can vary significantly quarter-to-quarter for various reasons, including the mix and
volume of business in lower income tax jurisdictions and in jurisdictions for which no deferred income tax assets have been recognized
because management believed it was not probable that future taxable profit would be available against which income tax losses
and deductible temporary differences could be utilized. The Company’s effective income tax rate can also vary due to the
impact of foreign exchange fluctuations.



| | (e) | Share-based
                                         payments
| | --- | -------------------------------------------------------------



The
fair value of all share-based payments granted are determined using the Black-Scholes option pricing model which incorporates
assumptions regarding risk-free interest rates, dividend yield, expected volatility, estimated forfeitures, and the expected life
of options. The Company has a significant number of options outstanding and expects to continue to make option grants.



| | (f) | Provision
                                         for expected credit losses (“ECLs”)
| | --- | --------------------------------------------------------------------------------------



The
Company performs impairment testing annually for trade receivables in accordance with IFRS 9. The ECL model requires considerable
judgment, including consideration of how changes in economic factors affect ECLs, which are determined on a probability-weighted
basis. IFRS 9 outlines a three-stage approach to recognizing ECLs which is intended to reflect the increase in credit risks of
a financial instrument based on i) 12-month expected credit losses, or ii) lifetime expected credit losses. The Company measures
provisions for ECLs at an amount equal to lifetime ECLs.



The
Company applies the simplified approach to determine ECLs on trade receivables by using a provision matrix based on historical
credit loss experiences. The historical results are used to calculate the run rates of default which are then applied over the
expected life of the trade receivables, adjusted for forward looking estimates.



| | (g) | Fair
                                         value measurement of an investment not quoted in an active market
| | --- | ---------------------------------------------------------------------------------------------------------------



The
fair value of an investment that is not quoted in an active market requires the use of judgments and estimates by management.
Management used the valuation techniques and inputs outlined in Note 7 using all available data on the investment and market conditions
at the date of these financial statements. Changes in these assumptions and conditions could result in changes of the reported
fair value of this investment.



| | (h) | Recognition
                                         of revenue on a gross versus net basis
| | --- | -------------------------------------------------------------------------------------------



The
Company follows the guidance provided in IFRS 15,Revenue from
Contracts with Customers, for determining whether the Company is the principal or an agent in
arrangements with customers that involve another party that contributes to providing a specified service to a customer. In these
instances, the Company determines whether it controls the promised specified service itself (as principal) or arranges for the
specified service to be provided by another party (as an agent). This determination depends on the facts and circumstances of
each arrangement and, in some instances, involves significant judgment.





16





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 4. | Significant
                                         accounting judgments, estimates and uncertainties (continued)
| | -- | ------------------------------------------------------------------------------------------------------------------



In
March 2020, the World Health Organization declared the outbreak of the novel strain of the coronavirus, specifically identified
as SARS-CoV-2, to be a pandemic. Responses to the SARS-CoV-2 outbreak have resulted in governments worldwide enacting emergency
measures to combat the spread of the virus, causing disruptions to business operations worldwide and a significant increase in
economic uncertainty, with more volatile commodity prices and currency exchange rates, and a marked decline in long-term interest
rates. These events are resulting in a challenging economic climate in which it is difficult to reliably estimate the length or
severity of these developments and their financial impact. The direct and indirect impact to the Company has been considered in
management’s judgments, estimates and uncertainties at year-end. Although management has determined that no significant
revisions to such estimates, judgments or assumptions were required at year-end, there could be a further prospective material
impact in future periods to the extent that the negative impacts from SARS-CoV-2 continue or worsen. The Company is monitoring
developments of the SARS-CoV-2 outbreak and will adapt its business plans accordingly.



| | 5. | Mergers
                                         and acquisitions
| | -- | -----------------------------------------------------------------



| | (i) | Vedatis
                                         SPA
| | --- | ----------------------------------------------------



As
described in Note 1, on May 1, 2021, the Company completed the acquisition of Vedatis. Based in Lyon, France, Vedatis owns the
web property Icy Veins. Pursuant to the terms of the Vedatis SPA, the Company acquired all of the outstanding common shares of
Vedatis in exchange for i) a cash payment of Euro €3,500,000, subject to a Euro €100,000 target working capital adjustment,
which was paid on April 28, 2021, (ii) the issuance of Euro €1,500,000 of common shares of the Company, for which 226,563
common shares were issued on May 4, 2021, (iii) a cash payment of Euro €1,250,000 on the first anniversary of closing which
was paid to escrow on June 23, 2021, (iv) a payment of Euro €750,000 on the first anniversary of closing which may be paid
in cash or common shares at the option of the Company, and (v) an earn-out payment based on the performance of Vedatis.



The
earn-out payment, subject to certain conditions, is equal to the sum of earnings before interest, taxes, depreciation and amortization
for the best four consecutive quarters of the existing Vedatis business at the time of closing excluding new business generated
or enhanced by the Company. The earn-out period is for four years following May 1, 2021. The Company has, at its option, the ability
to settle the earn-out payment half in cash and half in common shares. The earn-out payment is to be paid no later than 60 days
from the completion of the earn-out period.



Following
the acquisition, the Company controls Vedatis and for accounting purposes the Company is deemed the acquirer. The Vedatis SPA
is accounted for in accordance with IFRS 3 as the operations of Vedatis constitute a business. As a result, the business combination
is accounted for using the acquisition method of accounting and Vedatis’ identifiable net assets acquired are recognized
at their fair value.



The
Vedatis SPA has been accounted for at the fair value of the consideration provided to Vedatis, consisting of cash, common shares,
the deferred payment liability and the settlement of a pre-existing relationship. The Company’s deferred payment liability
to the former shareholders of Vedatis is carried at fair value. Management uses current and historical operational results, estimates
and probabilities of future earnings and discounted cash flows to estimate the earn-out payment, see Note 17.



17





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (continued)
| | -- | -----------------------------------------------------------------------------



| | (i) | Vedatis
                                         SPA (continued)
| | --- | ----------------------------------------------------------------



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:



|                                                                       |  | Fair
    Value |                                                        
|---------------------------------------------------------------------- |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                              |  |                |                                                        
|Cash                                                                   |  | $              | 156,168                                                
|Trade
    and other receivables                                        |  |                | 72,915                                                 
|Property
    and equipment                                             |  |                | 2,097                                                  
|Intangible
    assets                                                  |  |                | 3,511,000                                              
|Goodwill                                                               |  |                | 9,372,025                                              
|Accounts
    payable and accrued liabilities                           |  |                | (599,981                                               
|Contract
    liabilities                                               |  |                | (45,391                                                
|Income
    tax payable                                                 |  |                | (233,829                                               
|Deferred
    tax liability                                             |  |                | (878,284                                               
|                                                                       |  | $              | 11,356,720                                             
|                                                                       |  |                |                                                        
|                                                                       |  |                | Purchase
                                         price
|Consideration                                                          |  |                |                                                        
|Cash
    (a)                                                           |  | $              | 7,006,067                                              
|Fair
    value of 226,563 common shares issued at $10.48 per share (b) |  |                | 2,374,380                                              
|Deferred
    payment liability (c)                                     |  |                | 2,649,930                                              
|Settlement
    of pre-existing relationship (d)                        |  |                | (673,657                                               
|                                                                       |  | $              | 11,356,720                                             



| | a. | Cash
                                         consists of the $7,130,507 (Euro €4,750,000) paid less a working capital recovery
                                         of $124,440.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $10.48 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         fair value of the deferred payment liability is the present value of the payment of $1,109,850
                                         (Euro €750,000) due on the first anniversary of closing and the present value of
                                         estimated earn-out payable to the former shareholders of Vedatis of $1,920,745 (Euro
                                         €1,297,976), see note 17.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | The
                                         settlement of a pre-existing relationship consists of accounts payable due by the Company
                                         to Vedatis with a fair value of $673,657 which was effectively settled on the date of
                                         acquisition.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. Goodwill represents intangible
assets that cannot be measured directly such as brand name, subscriber relationships and website content, and synergies expected
to be achieved from integrating Vedatis into the Company’s existing business. Goodwill is not expected to be deductible
for tax purposes.



| | (ii) | Tabwire
                                         EPA
| | ---- | ----------------------------------------------------



As
described in Note 1, on June 21, 2021, the Company, through its wholly-owned subsidiary, Media US, completed the acquisition of
Tabwire. Based in Chicago, Illinois, Tabwire is a technology company that gives gamers the ability to login directly to view their
game data in real time. Pursuant to the term of the Tabwire EPA, the Company acquired all of the outstanding membership interests
of Tabwire in exchange for i) a cash payment of USD $5,000,000, subject to an accounts receivable adjustment, which was paid on
June 23, 2021, and (ii) the issuance of USD $6,000,000 of common shares of the Company, for which 790,094 common shares were issued
on June 21, 2021.



Following
the acquisition, the Company controls Tabwire and for accounting purposes the Company is deemed the acquirer. The Tabwire EPA
is accounted for in accordance with IFRS 3 as the operations of Tabwire constitute a business. As a result, the business combination
is accounted for using the acquisition method of accounting and Tabwire’s identifiable net assets acquired are recognized
at their fair value.



The
Tabwire EPA has been accounted for at the fair value of the consideration provided to Tabwire, consisting of cash, common shares
and the settlement of a pre-existing relationship.





18





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



| | (ii) | Tabwire
                                         EPA (continued)
| | ---- | ----------------------------------------------------------------



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:



|                                                                      |  | Fair
    Value |                                                        
|--------------------------------------------------------------------- |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                             |  |                |                                                        
|Cash                                                                  |  | $              | 6,506                                                  
|Trade
    and other receivables                                       |  |                | 76,647                                                 
|Intangible
    assets                                                 |  |                | 3,304,000                                              
|Goodwill                                                              |  |                | 9,013,287                                              
|Accounts
    payable and accrued liabilities                          |  |                | (6,097                                                 
|Contract
    liabilities                                              |  |                | (2,388                                                 
|Deferred
    tax liability                                            |  |                | (941,970                                               
|                                                                      |  | $              | 11,449,985                                             
|                                                                      |  |                |                                                        
|                                                                      |  |                | Purchase
                                         price
|Consideration                                                         |  |                |                                                        
|Cash
    (a)                                                          |  | $              | 6,262,616                                              
|Fair
    value of 790,094 common shares issued at $6.63 per share (b) |  |                | 5,238,323                                              
|Settlement
    of pre-existing relationship (c)                       |  |                | (50,954                                                
|                                                                      |  | $              | 11,449,985                                             



| | a. | Cash
                                         consists of the $6,143,500 (USD $5,000,000) paid and the accounts receivable adjustment
                                         payable of $119,116.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $6.63 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         settlement of a pre-existing relationship consists of accounts payable due by the Company
                                         to Tabwire with a fair value of $50,954 which was effectively settled on the date of
                                         acquisition.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. Goodwill represents intangible
assets that cannot be measured directly such as brand name, subscriber relationships and developed technology, and synergies expected
to be achieved from integrating Vedatis into the Company’s existing business. Goodwill is not expected to be deductible
for tax purposes.



| | (iii) | GameKnot
                                         EPA
| | ----- | -----------------------------------------------------



As
described in Note 1, on August 30, 2021, the Company, through its wholly-owned subsidiary, Media US, completed the acquisition
of GameKnot. Based in Sausalito, California, GameKnot owns the web property GameKnot. Pursuant to the terms of the GameKnot EPA,
the Company acquired all of the outstanding membership interest of GameKnot in exchange for i) a cash payment of USD $1,500,000
which was paid on August 30, 2021, (ii) the issuance of USD $750,000 of common shares of the Company, for which 165,425 common
shares were issued on August 30, 2021 (iii) a payment of USD $500,000 on the six-month anniversary of closing which may be paid
in cash or common shares at the option of the Company.



Following
the acquisition, the Company controls GameKnot and for accounting purposes the Company is deemed the acquirer. The GameKnot EPA
is accounted for in accordance with IFRS 3 as the operations of GameKnot constitute a business. As a result, the business combination
is accounted for using the acquisition method of accounting and GameKnot’s identifiable net assets acquired are recognized
at their fair value.



The
GameKnot EPA has been accounted for at the fair value of the consideration provided to GameKnot, consisting of cash, common shares
and the deferred payment liability. The Company’s deferred payment liability to the former owner of GameKnot is carried
at fair value.



19





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



| | (iii) | GameKnot
                                         EPA (continued)
| | ----- | -----------------------------------------------------------------



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:



|                                                                      |  | Fair
    Value |                                                        
|--------------------------------------------------------------------- |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                             |  |                |                                                        
|Cash                                                                  |  | $              | 9,513                                                  
|Trade
    and other receivables                                       |  |                | 19,119                                                 
|Investments                                                           |  |                | 6,317                                                  
|Intangible
    assets                                                 |  |                | 601,000                                                
|Goodwill                                                              |  |                | 3,111,023                                              
|Accounts
    payable and accrued liabilities                          |  |                | (8,077                                                 
|Contract
    liabilities                                              |  |                | (145,739                                               
|Deferred
    tax liability                                            |  |                | (168,160                                               
|                                                                      |  | $              | 3,424,996                                              
|                                                                      |  |                |                                                        
|                                                                      |  |                | Purchase
                                         price
|Consideration                                                         |  |                |                                                        
|Cash
    (a)                                                          |  | $              | 1,890,450                                              
|Fair
    value of 165,425 common shares issued at $5.57 per share (b) |  |                | 921,417                                                
|Deferred
    payment liability (c)                                    |  |                | 613,129                                                
|                                                                      |  | $              | 3,424,996                                              



| | a. | Cash
                                         consists of the $1,890,450 (USD $1,500,000) consideration paid on acquisition.
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $5.57 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         fair value of the deferred payment liability is the present value of the payment of $631,750
                                         (USD $500,000) due on the six-month anniversary of closing, see Note 17.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. Goodwill represents intangible
assets that cannot be measured directly such as brand name and subscriber relationships, and synergies expected to be achieved
from integrating GameKnot into the Company’s existing business. Goodwill is not expected to be deductible for tax purposes.



| | (iv) | Addicting
                                         Games SPA
| | ---- | ------------------------------------------------------------



As
described in Note 1, on September 3, 2021, the Company, through its wholly-owned subsidiary, Media US, completed the acquisition
of Addicting Games. Based in Los Angeles, California, Addicting Games is an innovator in casual gaming with a portfolio of casual
games for desktop and mobile devices. Pursuant to the terms of the Addicting Games SPA, the Company acquired all of the outstanding
common shares of Addicting Games in exchange for i) a cash payment of USD $10,000,000, subject to a working capital adjustment
and other adjustments, of which USD $10,090,533 was paid in September (inclusive of estimated working capital and other adjustments),
(ii) the issuance of USD $12,000,000 of common shares of the Company, for which 2,661,164 common shares were issued on September
3, 2021, (iii) a cash payment of USD $7,000,000 on the first anniversary of closing which may be paid in cash or common shares
at the option of the Company, and (iv) a payment of USD $3,800,000 on the second anniversary of closing which may be paid in cash
or common shares at the option of the Company.



Following
the acquisition, the Company controls Addicting Games and for accounting purposes the Company is deemed the acquirer. The Addicting
Games SPA is accounted for in accordance with IFRS 3 as the operations of Addicting Games constitute a business. As a result,
the business combination is accounted for using the acquisition method of accounting and Addicting Games’ identifiable net
assets acquired are recognized at their fair value.



The
Addicting Games SPA has been accounted for at the fair value of the consideration provided to Addicting Games, consisting of cash,
common shares, the deferred payment liabilities and the settlement of a pre-existing relationship, which comprised the investment
Enthusiast Gaming Properties Inc. (“Enthusiast Properties”) held in Addicting Games, see Note 7. The Company’s
deferred payment liabilities to the former shareholders of Addicting Games and investment held in Addicting Games are carried
at fair value.





20





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



| | (iv) | Addicting
                                         Games SPA (continued)
| | ---- | ------------------------------------------------------------------------



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:





|                                                                        |  | Fair
    Value |                                                        
|----------------------------------------------------------------------- |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                               |  |                |                                                        
|Cash                                                                    |  | $              | 316,920                                                
|Trade
    and other receivables                                         |  |                | 674,067                                                
|Prepaid
    expenses                                                    |  |                | 41,935                                                 
|Property
    and equipment                                              |  |                | 6,476                                                  
|Right-of-use
    assets                                                 |  |                | 410,208                                                
|Intangible
    assets                                                   |  |                | 16,539,000                                             
|Goodwill                                                                |  |                | 28,947,665                                             
|Accounts
    payable and accrued liabilities                            |  |                | (411,057                                               
|Contract
    liabilities                                                |  |                | (755,019                                               
|Income
    tax payable                                                  |  |                | (290,003                                               
|Current
    portion of lease contract liabilities                       |  |                | (133,533                                               
|Long-term
    lease contract liabilities                                |  |                | (284,773                                               
|Other
    long-term debt                                                |  |                | (144,948                                               
|Deferred
    tax liability                                              |  |                | (3,268,434                                             
|                                                                        |  | $              | 41,648,504                                             
|                                                                        |  |                |                                                        
|                                                                        |  |                | Purchase
                                         price
|Consideration                                                           |  |                |                                                        
|Cash
    (a)                                                            |  | $              | 12,477,901                                             
|Fair
    value of 2,661,164 common shares issued at $5.50 per share (b) |  |                | 14,636,402                                             
|Deferred
    payment liability (c)                                      |  |                | 12,328,753                                             
|Settlement
    of pre-existing relationship (d)                         |  |                | 2,205,448                                              
|                                                                        |  | $              | 41,648,504                                             



| | a. | Cash
                                         consists of the $12,631,330 (USD $10,090,533) paid less the estimated working capital
                                         and other adjustment recoveries of $153,429.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $5.50 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         fair value of the deferred payment liability is the present value of the payment of $8,762,600
                                         (USD $7,000,000) due on the first anniversary of closing and the present value of the
                                         payment of $4,756,840 (USD $3,800,000) due on the second anniversary of closing, see
                                         Note 17.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | The
                                         settlement of a pre-existing relationship consists of the investment Enthusiast Properties
                                         held in Addicting Games with a fair value of $2,115,525 plus interest receivable of $89,923
                                         which is effectively settled on the date of acquisition, see Note 7.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. The other long-term debt has
been reflected at fair value which represents the fair value of future cash outflows. Goodwill represents intangible assets that
cannot be measured directly such as domain names, subscriber relationships and game application and technology development, and
synergies expected to be achieved from integrating Addicting Games into the Company’s existing business. Goodwill is not
expected to be deductible for tax purposes.





21





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



| | (v) | Outplayed
                                         MA
| | --- | -----------------------------------------------------



As
described in Note 1, on November 22, 2021, the Company, through its wholly-owned subsidiary, Media US, completed the acquisition
of Outplayed. Based in Austin, Texas, Outplayed owns the web property U.GG, one of the largest League of Legends fan communities
in the world. By combining a rigorous data science approach with a proprietary user centric experience, Outplayed provides actionable,
data-driven insights supporting, educating, connecting, and engaging a monthly active user base. Pursuant to the terms of the
Outplayed MA, the Company acquired all of the outstanding common shares of Outplayed in exchange for i) a cash payment of USD
$7,500,000, subject to working capital and other adjustments, of which USD $7,216,958 was paid on November 23, 2021 (inclusive
of estimated working capital and other adjustments), (ii) the issuance of 5,200,000 of common shares of the Company, for which
5,164,223 common shares were issued on December 31, 2021 and 35,770 common shares were issued on February 14, 2022 (Note 29),
(iii) a payment of USD $8,500,000 on the first anniversary of closing which may be paid in cash or common shares at the option
of the Company, (iv) a payment of USD $8,500,000 on the second anniversary of closing which may be paid in cash or common shares
at the option of the Company, (v) a first anniversary earn-out payment of USD $6,000,000 based on the performance of Outplayed,
and (vi) a second anniversary earn-out payment of USD $6,000,000 based on the performance of Outplayed.



The
earn-out payments, subject to certain conditions, will be paid if certain site traffic based targets are met in the first and
second years of operations. The first anniversary earn-out period is for one year from the closing date and the second anniversary
earn-out period is for one year from the end of the first anniversary earn-out period. The Company has, at its option, the ability
to settle the earn-out payments in common shares. The first anniversary earn-out payment is to be paid no later than 30 days from
the completion of the first anniversary earn-out period and the second anniversary earn-out payment is to be paid no later than
30 days from the completion of the second anniversary earn-out period.



Following
the acquisition, the Company controls Outplayed and for accounting purposes the Company is deemed the acquirer. The Outplayed
MA is accounted for in accordance with IFRS 3 as the operations of Outplayed constitute a business. As a result, the business
combination is accounted for using the acquisition method of accounting and Outplayed’s identifiable net assets acquired
are recognized at their fair value.



The
Outplayed MA has been accounted for at the fair value of the consideration provided to Outplayed, consisting of cash, common shares
and the deferred payment liabilities. The Company’s deferred payment liability to the former shareholders of Outplayed are
carried at fair value. Management used current and historical operating results, estimates and probabilities of future site traffic
to estimate the earn-out payments, see Note 17.





22





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
and acquisitions (Continued)
| | -- | ------------------------------------



| | (v) | Outplayed
                                         MA (continued)
| | --- | -----------------------------------------------------------------



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:





|                                                                        |  | Fair
    Value |                                                        
|----------------------------------------------------------------------- |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                               |  |                |                                                        
|Cash                                                                    |  | $              | 1,917,249                                              
|Trade
    and other receivables                                         |  |                | 2,024,454                                              
|Prepaid
    expenses                                                    |  |                | 31,339                                                 
|Right-of-use
    assets                                                 |  |                | 365,184                                                
|Intangible
    assets                                                   |  |                | 32,494,000                                             
|Goodwill                                                                |  |                | 37,844,194                                             
|Accounts
    payable and accrued liabilities                            |  |                | (225,978                                               
|Contract
    liabilities                                                |  |                | (32,032                                                
|Current
    portion of lease contract liabilities                       |  |                | (185,495                                               
|Long-term
    lease contract liabilities                                |  |                | (204,294                                               
|Deferred
    tax liability                                              |  |                | (6,395,405                                             
|                                                                        |  | $              | 67,633,216                                             
|                                                                        |  |                |                                                        
|                                                                        |  |                | Purchase
                                         price
|Consideration                                                           |  |                |                                                        
|Cash (a)                                                                |  | $              | 10,429,399                                             
|Fair value of
    5,200,000 common shares issued at $5.07 per share (b) |  |                | 26,364,000                                             
|Deferred
    payment liability (c)                                      |  |                | 30,839,817                                             
|                                                                        |  | $              | 67,633,216                                             





| | a. | Cash
                                         consists of the $9,510,000 (USD $7,500,000) cash consideration plus the estimated working
                                         capital and other adjustments of $919,399.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $5.07 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition. Pursuant to the round down clause in the
                                         Outplayed MA, the total common shares issued were 7 common shares less than 5,200,000
                                         common shares to be issued per the Outplayed MA. As at December 31, 2021, 35,770 consideration
                                         common shares in the amount of $181,389 remain to be issued which is included in accounts
                                         payable and accrued liabilities. These common shares were issued subsequent to December
                                         31, 2021, see Note 29.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         fair value of the deferred payment liability is the present value of the payment of $10,778,000
                                         (USD $8,500,000) due on the first anniversary of closing, the present value of the payment
                                         of $10,778,000 (USD $8,500,000) due on the second anniversary of closing, the present
                                         value of the first earn-out payment of $7,608,000 (USD $6,000,000) and the present value
                                         of the second earn-out payment of $7,608,000 (USD $6,000,000), see Note 17.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. Goodwill represents intangible
assets that cannot be measured directly such as brand name, developed technology and subscriber relationships, and synergies expected
to be achieved from integrating Outplayed into the Company’s existing business. Goodwill is not expected to be deductible
for tax purposes.



| | (vi) | Omnia
                                         SPA
| | ---- | --------------------------------------------------



As
described in Note 1, on August 30, 2020, the Company completed the acquisition of Omnia from Blue Ant. Based in Los Angeles, California,
Omnia is a leading global gaming YouTube platform which creates, manages and operates a multi-channel YouTube network that distributes
premium, original content. Pursuant to the terms of the Omnia SPA, the Company acquired all of the outstanding common shares of
Omnia from Blue Ant in exchange for (i) a cash payment of $11,000,000, subject to a $500,000 working capital adjustment and holdbacks
of which $10,500,000 was paid on the acquisition date, (ii) the issuance of 18,250,000 common shares (the “Share Consideration”)
of the Company, which are subject to resale restrictions of: 50% after 180 days; 25% after 270 days; and 25% after 360 days, and
(iii) a vendor-take-back loan (“VTB loan”) with a face value of $5,750,000, which bears interest at 9% per annum,
compounded annually, and matures 36 months after the acquisition date.





23





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



| | (vi) | Omnia
                                         SPA (continued)
| | ---- | --------------------------------------------------------------



The
Company appointed Robb Chase, chief financial officer of Blue Ant, to serve on its Board of Directors pursuant to a nomination
rights agreement entered into in connection with the acquisition. The nomination rights agreement entitles Blue Ant to nominate
a director to the Board of Directors of the Company until Blue Ant ceases to hold either (i) at least 75% of the Share Consideration
or (ii) 10% of the issued and outstanding common shares.



The
Omnia SPA has been accounted for at the fair value of the consideration provided to Blue Ant, consisting of cash, common shares
and the VTB loan.



The
following table summarizes the recognized amounts of assets acquired, liabilities assumed and consideration paid, at the date
of acquisition:



|                                                                         |  | Fair
    Value |                                                        
|------------------------------------------------------------------------ |  | -------------- | -------------------------------------------------------
|Fair
    Value of identifiable net assets                                |  |                |                                                        
|Cash                                                                     |  | $              | 281,125                                                
|Trade
    and other receivables                                          |  |                | 8,738,169                                              
|Prepaid
    expenses                                                     |  |                | 305,435                                                
|Property
    and equipment                                               |  |                | 183,086                                                
|Right-of-use
    assets                                                  |  |                | 2,392,984                                              
|Intangible
    assets                                                    |  |                | 25,619,000                                             
|Goodwill                                                                 |  |                | 22,921,670                                             
|Accounts
    payable and accrued liabilities                             |  |                | (9,278,674                                             
|Current
    portion of lease contract liabilities                        |  |                | (298,434                                               
|Long-term
    portion of lease contract liabilities                      |  |                | (2,099,651                                             
|Deferred
    tax liability                                               |  |                | (2,763,914                                             
|                                                                         |  | $              | 46,000,796                                             
|                                                                         |  |                |                                                        
|                                                                         |  |                | Purchase
                                         price
|Consideration                                                            |  |                |                                                        
|Cash
    (a)                                                             |  | $              | 10,530,888                                             
|Fair
    value of 18,250,000 common shares issued at $1.65 per share (b) |  |                | 30,112,500                                             
|Vendor-take-back
    loan (c)                                            |  |                | 5,357,408                                              
|                                                                         |  | $              | 46,000,796                                             



| | a. | Cash
                                         consists of the $10,500,000 paid and the estimated working capital payment of $30,888.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------



| | b. | The
                                         fair value per share was measured to be $1.65 based on the closing price of the Company’s
                                         shares on the TSX on the date of acquisition.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | The
                                         VTB loan has a principal balance of $5,750,000 and accrues interest at 9% per annum,
                                         compounded annually and payable at maturity, the VTB loan matures August 30, 2023. The
                                         VTB loan was included in the total purchase price consideration at an initial fair value
                                         of $5,357,408 based on the present value of cash flows using an 11.60% discount rate
                                         and a maturity date of 36 months.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Trade
receivables have been reflected at fair value which represent gross contractual amounts receivable. Goodwill represents intangible
assets that cannot be measured directly such as talent management brand, owned and operated content brand, talent contracts, digital
content and multi-channel network license, and synergies expected to be achieved from integrating Omnia into the Company’s
existing business. Goodwill is not expected to be deductible for tax purposes.





24





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 5. | Mergers
                                         and acquisitions (Continued)
| | -- | -----------------------------------------------------------------------------



For
a pre-existing relationship between the Company and the Mergers and Acquisitions that is not extinguished on the business combination,
such a relationship is considered effectively settled as part of the business combination even if it is not legally cancelled.
At the acquisition date, it becomes an intercompany relationship and is eliminated upon consolidation.



The
Mergers and Acquisitions are consistent with the Company’s targeted acquisition strategy of identifying value-enhancing
independent gaming web and video properties that can enhance viewership base, data and analytics platform and pricing optimization
strategy.



The
Company incurred transaction costs of $1,490,463 (December 31, 2020 - $1,882,081) relating to the Mergers and Acquisitions which
is included in the consolidated statement of loss and comprehensive loss.



Since
the date of acquisition of Vedatis, revenue of $129,270 and a net loss of $1,293,335 have been included in the consolidated statement
of loss and comprehensive loss during the year ended December 31, 2021. Since the date of acquisition of Tabwire, revenue of $176,534
and a net loss of $170,391 have been included in the consolidated statement of loss and comprehensive loss during the year ended
December 31, 2021. Since the date of acquisition of GameKnot, revenue of $168,866 and net income of $146,625 have been included
in the consolidated statement of loss and comprehensive loss during the year ended December 31, 2021. Since the date of acquisition
of Addicting Games, revenue of $2,765,343 and net income of $681,426 have been included in the consolidated statement of loss
and comprehensive loss during the year ended December 31, 2021. Since the date of acquisition of Outplayed, revenue of $1,411,255
and net income of $960,160 have been included in the consolidated statement of loss and comprehensive loss during the year ended
December 31, 2021. If the Vedatis, Tabwire, GameKnot, Addicting Games, and Outplayed acquisitions had occurred on January 1, 2021,
pro-forma revenue and net loss would have been $177,223,858 and $50,708,448 respectively for the year ended December 31, 2021.



Since
the date of acquisition of Omnia, revenue of $40,966,601 and net income of $528,664 have been included in the consolidated statement
of loss and comprehensive loss during the year ended December 31, 2020. If the Omnia acquisition had occurred on January 1, 2020
pro-forma revenue and net loss would have been $127,805,084 and $27,367,853 respectively for the year ended December 31, 2020.



| | 6. | Trade
                                         and other receivables
| | -- | --------------------------------------------------------------------



Trade
and other receivables consist of the following:



|                                             |  | December
    31, 2021 |            | December
    31, 2020 |  
|-------------------------------------------- |  | --------------------- | ---------- | --------------------- | -
|                                             |  |                       |            |                       |  
|Trade
    receivables (Note 24, 26)          |  | $                     | 30,034,661 |                       | $
|HST
    and VAT receivables                  |  |                       | 142,699    |                       |  
|Other
    receivables (Note 26)              |  |                       | 3,683,102  |                       |  
|Expected
    credit loss provision (Note 26) |  |                       | (58,472    | )                     |  
|                                             |  | $                     | 33,801,990 |                       | $



| | 7. | Investments
| | -- | -----------



| | (i) | Addicting
                                         Games, Inc.
| | --- | --------------------------------------------------------------



In
April 2019, Enthusiast Properties entered into a Senior Convertible Debenture Purchase Agreement to invest in Addicting Games,
an innovator in casual gaming. Under the Senior Convertible Debenture Purchase Agreement, Enthusiast Properties invested USD $1,500,000
by way of a 3-year secured convertible debenture with interest accruing at 2% per annum. The convertible debenture and accrued
interest can be converted into common shares of Addicting Games at the option of the Company based on a conversion price which
is the lesser of the price of the common shares as valued in Addicting Games’ next equity raise or a liquidation event or
by dividing USD $30,000,000 by the aggregate number of outstanding common shares, warrants and options.



The
convertible debenture has been accounted for in accordance with IFRS 9, as a financial asset at fair value, with changes in fair
value recognized in profit and loss as they arise at each subsequent reporting period.





25





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 7. | Investments
                                         (continued)
| | -- | ----------------------------------------------------------------



| | (i) | Addicting
                                         Games, Inc (continued)
| | --- | -------------------------------------------------------------------------



The
fair value of the convertible debenture was valued using a binomial model using a ‘with derivatives’ and ‘without
derivatives’ approach. The ‘with derivatives’ approach fair values the convertible debenture with the conversion
option. The ‘without derivatives’ approach fair values the convertible debenture by treating the debt component of
the loan as a plain vanilla bond. The fair value of the debt portion was determined using the discounted cash flow method by discounting
the expected cash flows using a risk-adjusted discount rate. The difference in fair values from the ‘with’ and ‘without’
approaches represents the fair value of the embedded derivative component (the conversion option). The ‘with’ and
‘without’ scenarios assumed the occurrence of i) a liquidity event, as well as, ii) a non-liquidity event, and considered
the fair value of the conversion option to be the weighted average of these two values.



The
Company acquired Addicting Games on September 3, 2021. The convertible debenture plus interest receivable is effectively settled
on the date of acquisition, see Note 5. Historically, the fair value of the convertible debentures is determined assuming the
occurrence of i) a liquidity event, as well as, ii) a non-liquidity event. As this is a step-acquisition under IFRS 3, the revaluation
of the convertible debenture is performed as of September 3, 2021. As the Company has full knowledge of the upcoming acquisition
of Addicting Games, the fair value under the no-liquidity event scenario is not required as the probability of a liquidity event
was 100% as at the September 3, 2021 revaluation date.



The
valuation of the investment included the following inputs for a liquidity event:





|                                            | September 3, 2021 | December 31, 2020
|------------------------------------------- | ----------------- | -----------------
|                                            |                   |                  
|Liquidity event probability                 | 100.00%           | 50.00%           
|Exercise price for conversion               | USD $15           | USD $15          
|Time to maturity                            | 0.01 years        | 0.51 years       
|Initial stock price                         | USD $15           | USD $15          
|Volatility                                  | 95.00%            | 131.10%          
|Risk free interest rate                     | 0.05%             | 0.09%            
|Credit spread                               | 262 bps           | 317 bps          
|Risk adjusted rate                          | 2.66%             | 3.26%            
|Discount for lack of marketability (“DLOM”) | 14.00%            | 21.00%           
|Synthetic credit rating                     | B                 | B+               





The
valuation of the investment included the following inputs for a ‘no’ liquidity event:





|                                 | September 3, 2021 | December 31, 2020
|-------------------------------- | ----------------- | -----------------
|                                 |                   |                  
|‘No’ liquidity event probability | 0.00%             | 50.00%           
|Exercise price for conversion    | USD $15           | USD $15          
|Time to maturity                 | 0.60 years        | 1.27 years       
|Initial stock price              | USD $15           | USD $15          
|Volatility                       | 130.00%           | 144.70%          
|Risk free interest rate          | 0.06%             | 0.11%            
|Credit spread                    | 285 bps           | 346 bps          
|Risk adjusted rate               | 2.89%             | 3.57%            
|DLOM                             | 14.00%            | 21.00%           
|Synthetic credit rating          | B                 | B+               



As
at September 3, 2021, the expected liquidity event date is estimated to be September 3, 2021. As at December 31, 2020, the expected
liquidity event date was estimated to be July 5, 2021.





26





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 7. | Investments
                                         (continued)
| | -- | ----------------------------------------------------------------



| | (i) | Addicting
                                         Games, Inc (continued)
| | --- | -------------------------------------------------------------------------



As
at September 3, 2021, the debt portion has been valued at $1,967,790 (December 31, 2020 - $1,948,950) and the derivative portion
has been valued at $147,735 (December 31, 2020 - $657,150). The fair value of the long-term investment is $2,115,525 (December
31, 2020 - $2,606,100). The loss from the change in the fair value of the long-term investment during the year ended December
31, 2021 of $444,764 (December 31, 2020 – gain of $183,951) is included in the consolidated statement of loss and comprehensive
loss. The loss from the change in foreign exchange movements during the year ended December 31, 2021 of $45,811 (December 31,
2020 – $58,256) is included in the foreign currency translation adjustment in the consolidated statement of loss and comprehensive
loss.



| | (ii) | Waveform
                                         Entertainment Inc.
| | ---- | --------------------------------------------------------------------



In
April 2019, Enthusiast Properties, through a wholly-owned subsidiary, signed a definitive agreement to purchase 20% of the issued
and outstanding shares (“Purchased Shares”) in Waveform Entertainment Inc. (“Waveform”) for an aggregate
consideration of $1,680,000 (the “Subscription Price”). Waveform is a leading esports broadcast and production company
specializing in the organization of premium esports tournaments world-wide.



The
Purchased Shares were to be purchased pursuant to the terms of a share subscription agreement, among Waveform and a wholly owned
subsidiary of Enthusiast Properties created for the purpose of the transaction. Pursuant to the share subscription agreement,
Enthusiast Properties agreed to purchase the Purchased Shares in three tranches: (i) on April 4, 2019, Enthusiast Properties purchased
8.1% of the Purchased Shares for a portion of the Subscription Price, being $680,000; (ii) on or before (as decided by Enthusiast
Properties) October 4, 2019, 5.95% of the Purchased Shares for a portion of the Subscription Price, being $500,000; and (iii)
on or before (as decided by Enthusiast Properties) June 3, 2020, 5.95% of the Purchased Shares for a portion of the Subscription
Price, being $500,000.



The
Company has recognized the investment in accordance with IFRS 9, as a financial asset at fair value, with changes in fair value
recognized in profit and loss as they arise at each subsequent reporting period.



In
April 2019, $680,000 had been paid to Waveform. On December 31, 2019, the Company and Waveform entered into a Share Repurchase
Agreement in which Waveform agreed to repurchase the shares acquired by the Company for $680,000. On February 14, 2020, the Company
received proceeds of $680,000 pursuant to the Waveform Share Repurchase Agreement and no longer holds an investment in Waveform.



A
summary of the Company’s investments at December 31, 2021 and December 31, 2020 is as follows:



|                                   |  | December 31, 2021 |         |  | December 31, 2020 |  
|---------------------------------- |  | ----------------- | ------- |  | ----------------- | -
|Addicting Games Inc.               |  | $                 | -       |  |                   | $
|Guaranteed investment certificates |  |                   | 131,342 |  |                   |  
|Total investments                  |  |                   | 131,342 |  |                   |  
|Current portion of investments     |  |                   | 131,342 |  |                   |  
|Long-term portions of investments  |  | $                 | -       |  |                   | $



27





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 8. | Investment
                                         in associates and joint ventures
| | -- | ------------------------------------------------------------------------------------



| | (i) | Investment
                                         in associates
| | --- | -----------------------------------------------------------------



On
August 30, 2019, pursuant to an investment agreement between Aquilini GameCo Inc. (“GameCo”) and Aquilini Properties
LP (a related party by nature of it being under the control or direction of the Chairman of the Company), GameCo acquired 100
class B common shares of AIG eSports Canada Holdings Ltd. (“AIG Canada”) for $1,246,125 (USD $937,500), and GameCo
eSports USA Inc. acquired a 25% non-voting participating interest in AIG eSports USA Intermediate Holdings, LLC, (“AIG USA”)
for $414,594 (USD $312,500). Collectively, AIG Canada and AIG USA own and manage professional esports teams in Canada and the
United States. Aquilini Properties LP controls AIG Canada and AIG USA.



On
April 22, 2020 and September 23, 2020, the Company made capital contributions of $500,000 and $1,252,312 respectively to AIG Canada.
On September 23, 2020, the Company made a capital contribution of $417,438 to AIG USA.



A
summary of the Company’s investment in associates is as follows:



|                                               |  | AIG Canada |            |   | AIG USA |   |          | Total | 
|---------------------------------------------- |  | ---------- | ---------- | - | ------- | - | -------- | ----- | 
|Balance, December 31, 2019                     |  | $          | 503,965    |   |         | $ | 410,330  |       | 
|Contributions – cash                           |  |            | 1,752,312  |   |         |   | 417,438  |       | 
|Share of net loss from investment in associate |  |            | (1,590,286 | ) |         |   | (466,849 | )     | 
|Balance, December 31, 2020                     |  | $          | 665,991    |   |         | $ | 360,919  |       | 
|Share of net loss from investment in associate |  |            | (3,138     | ) |         |   | (197,412 | )     | 
|Balance, December 31, 2021                     |  | $          | 662,853    |   |         | $ | 163,507  |       | 



| | (ii) | Investment
                                         in joint ventures
| | ---- | ---------------------------------------------------------------------



On
July 7, 2021, the Company, through its wholly-owned subsidiary, Enthusiast Gaming Inc., entered into a joint venture with Toronto
Star Newspapers Limited (“Torstar”) to create an original online news platform and community for gamers named AFK
Media Partnership (“AFK”). The Company and Torstar each hold a 50% interest in this joint venture. The Company and
Torstar have each invested $125,000 into AFK as startup capital.



A
summary of the Company’s investment in AFK is as follows:



|                                                   |  | Amount |        
|-------------------------------------------------- |  | ------ | -------
|Balance, December 31, 2020                         |  | $      | -      
|Contributions - cash                               |  |        | 125,000
|Share of net loss from investment in joint venture |  |        | (66,091
|Balance, December 31, 2021                         |  | $      | 58,909 



A
summary of the Company’s investment in associates and joint venture at December 31, 2021 and December 31, 2020 is as follows:



|                                                  |  | December 31, 2021 |         |  | December 31, 2020 |  
|------------------------------------------------- |  | ----------------- | ------- |  | ----------------- | -
|AIG Canada                                        |  | $                 | 662,853 |  |                   | $
|AIG USA                                           |  |                   | 163,507 |  |                   |  
|AFK                                               |  |                   | 58,909  |  |                   |  
|Total investment in associates and joint ventures |  | $                 | 885,269 |  |                   | $



28





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 9. | Property
                                         and equipment
| | -- | ---------------------------------------------------------------



|                                         |  | Furniture
    and fixtures |         | Computer
    equipment |   | Leasehold
    improvements |   | Production
    equipment |        | Total |  
|---------------------------------------- |  | -------------------------- | ------- | ---------------------- | - | -------------------------- | - | ------------------------ | ------ | ----- | -
|Cost                                     |  |                            |         |                        |   |                            |   |                          |        |       |  
|Balance,
    December 31, 2019           |  | $                          | 119,730 |                        | $ | 115,140                    |   | $                        | 84,385 |       | $
|Mergers
    and Acquisitions (Note 5)    |  |                            | 61,585  |                        |   | 70,026                     |   |                          | 4,224  |       |  
|Additions                                |  |                            | 4,871   |                        |   | 2,388                      |   |                          | -      |       |  
|Effect
    of movement in exchange rates |  |                            | (3,092  | )                      |   | (3,677                     | ) |                          | (1,402 | )     |  
|Balance,
    December 31, 2020           |  | $                          | 183,094 |                        | $ | 183,877                    |   | $                        | 87,207 |       | $
|Mergers
    and Acquisitions (Note 5)    |  |                            | 3,717   |                        |   | 4,856                      |   |                          | -      |       |  
|Additions                                |  |                            | -       |                        |   | 3,398                      |   |                          | -      |       |  
|Effect
    of movement in exchange rates |  |                            | (566    | )                      |   | (1,038                     | ) |                          | (288   | )     |  
|Balance,
    December 31, 2021           |  | $                          | 186,245 |                        | $ | 191,093                    |   | $                        | 86,919 |       | $
|                                         |  |                            |         |                        |   |                            |   |                          |        |       |  
|Accumulated
    depreciation             |  |                            |         |                        |   |                            |   |                          |        |       |  
|Balance, December
    31, 2019           |  | $                          | 5,484   |                        | $ | 12,231                     |   | $                        | 3,228  |       | $
|Depreciation                             |  |                            | 29,442  |                        |   | 69,126                     |   |                          | 22,237 |       |  
|Effect
    of movement in exchange rates |  |                            | (841    | )                      |   | (2,509                     | ) |                          | (907   | )     |  
|Balance,
    December 31, 2020           |  | $                          | 34,085  |                        | $ | 78,848                     |   | $                        | 24,558 |       | $
|Depreciation                             |  |                            | 33,712  |                        |   | 52,812                     |   |                          | 17,053 |       |  
|Effect
    of movement in exchange rates |  |                            | 148     |                        |   | 32                         |   |                          | 68     |       |  
|Balance,
    December 31, 2021           |  | $                          | 67,945  |                        | $ | 131,692                    |   | $                        | 41,679 |       | $
|                                         |  |                            |         |                        |   |                            |   |                          |        |       |  
|Net
    book value                       |  |                            |         |                        |   |                            |   |                          |        |       |  
|Balance, December
    31, 2020           |  | $                          | 149,009 |                        | $ | 105,029                    |   | $                        | 62,649 |       | $
|Balance,
    December 31, 2021           |  | $                          | 118,300 |                        | $ | 59,401                     |   | $                        | 45,240 |       | $



29





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 10. | Intangibles
| | --- | -----------



|                                             |  | Domain name |            | Application & technology development & website content |   | Brand name |   | Subscriber & sponsorship relationships |            | Player contracts |   | Multi channel network license |  | Talent management & owned & operated content brand |            | Talent contracts & digital content |   | Game application & technology development |  | Total |          
|-------------------------------------------- |  | ----------- | ---------- | ------------------------------------------------------ | - | ---------- | - | -------------------------------------- | ---------- | ---------------- | - | ----------------------------- |  | -------------------------------------------------- | ---------- | ---------------------------------- | - | ----------------------------------------- |  | ----- | ---------
|                                            
|Cost                                        
|Balance, December 31, 2019                   |  | $           | 40,930,000 |                                                        | $ | 3,252,104  |   | $                                      | 8,602,563  |                  | $ | 6,832,646                     |  | $                                                  | 2,901,900  |                                    | $ | -                                         |  | $     | -        
|Mergers and Acquisitions (Note 5)            |  |             | -          |                                                        |   | -          |   |                                        | -          |                  |   | -                             |  |                                                    | -          |                                    |   | 10,749,000                                |  |       | 9,363,000
|Disposals                                    |  |             | -          |                                                        |   | -          |   |                                        | -          |                  |   | -                             |  |                                                    | (2,590,700 | )                                  |   | -                                         |  |       | -        
|Effect of movement in foreign exchange rates |  |             | -          |                                                        |   | (1,182     | ) |                                        | -          |                  |   | -                             |  |                                                    | -          |                                    |   | -                                         |  |       | -        
|Balance, December 31, 2020                   |  | $           | 40,930,000 |                                                        | $ | 3,250,922  |   | $                                      | 8,602,563  |                  | $ | 6,832,646                     |  | $                                                  | 311,200    |                                    | $ | 10,749,000                                |  | $     | 9,363,000
|Mergers and Acquisitions (Note 5)            |  |             | 9,779,000  |                                                        |   | 13,684,000 |   |                                        | 25,928,000 |                  |   | 1,070,000                     |  |                                                    | -          |                                    |   | -                                         |  |       | -        
|Effect of movement in foreign exchange rates |  |             | 125,054    |                                                        |   | 20,256     |   |                                        | 43,569     |                  |   | 11,759                        |  |                                                    | -          |                                    |   | -                                         |  |       | -        
|Balance, December 31, 2021                   |  | $           | 50,834,054 |                                                        | $ | 16,955,178 |   | $                                      | 34,574,132 |                  | $ | 7,914,405                     |  | $                                                  | 311,200    |                                    | $ | 10,749,000                                |  | $     | 9,363,000
|                                             |  |             |            |                                                        |   |            |   |                                        |            |                  |   |                               |  |                                                    |            |                                    |   |                                           |  |       |          
|Accumulated amortization                     |  |             |            |                                                        |   |            |   |                                        |            |                  |   |                               |  |                                                    |            |                                    |   |                                           |  |       |          
|Balance, December 31, 2019                   |  | $           | -          |                                                        | $ | 395,893    |   | $                                      | -          |                  | $ | 239,200                       |  | $                                                  | 1,866,800  |                                    | $ | -                                         |  | $     | -        
|Amortization                                 |  |             | -          |                                                        |   | 1,627,117  |   |                                        | -          |                  |   | 716,300                       |  |                                                    | 1,035,100  |                                    |   | 365,200                                   |  |       | -        
|Disposals                                    |  |             | -          |                                                        |   | -          |   |                                        | -          |                  |   | -                             |  |                                                    | (2,590,700 | )                                  |   | -                                         |  |       | -        
|Effect of movement in foreign exchange rates |  |             | -          |                                                        |   | (1,686     | ) |                                        | -          |                  |   | -                             |  |                                                    | -          |                                    |   | -                                         |  |       | -        
|Balance, December 31, 2020                   |  | $           | -          |                                                        | $ | 2,021,324  |   | $                                      | -          |                  | $ | 955,500                       |  | $                                                  | 311,200    |                                    | $ | 365,200                                   |  | $     | -        
|Amortization                                 |  |             | -          |                                                        |   | 2,366,160  |   |                                        | -          |                  |   | 899,727                       |  |                                                    | -          |                                    |   | 1,074,920                                 |  |       | -        
|Effect of movement in foreign exchange rates |  |             | -          |                                                        |   | 7,282      |   |                                        | -          |                  |   | 1,008                         |  |                                                    | -          |                                    |   | -                                         |  |       | -        
|Balance, December 31, 2021                   |  | $           | -          |                                                        | $ | 4,394,766  |   | $                                      | -          |                  | $ | 1,856,235                     |  | $                                                  | 311,200    |                                    | $ | 1,440,120                                 |  | $     | -        
|                                            
|                                             |  |             |            |                                                        |   |            |   |                                        |            |                  |   |                               |  |                                                    |            |                                    |   |                                           |  |       |          
|Net book value                               |  |             |            |                                                        |   |            |   |                                        |            |                  |   |                               |  |                                                    |            |                                    |   |                                           |  |       |          
|Balance, December 31, 2020                   |  | $           | 40,930,000 |                                                        | $ | 1,229,598  |   | $                                      | 8,602,563  |                  | $ | 5,877,146                     |  | $                                                  | -          |                                    | $ | 10,383,800                                |  | $     | 9,363,000
|Balance, December 31, 2021                   |  | $           | 50,834,054 |                                                        | $ | 12,560,412 |   | $                                      | 34,574,132 |                  | $ | 6,058,170                     |  | $                                                  | -          |                                    | $ | 9,308,880                                 |  | $     | 9,363,000



During
the year ended December 31, 2020, the Company entered into a buyout agreement relating to a player contract for gross proceeds
of $204,764. The net book value on the date of termination of the player contract was $Nil resulting in a gain on disposal of
intangible assets of $204,764. The gain on disposal is included in revenue in the consolidated statement of loss and comprehensive
loss. During the year ended December 31, 2020, the Company recorded disposals of $2,389,000 for player contract cost and accumulated
amortization for players no longer on the Company’s active roster. There were no disposals during the year ended December
31, 2021.



30





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 11. | Goodwill
| | --- | --------



The
following comprises the balance of goodwill by cash-generating unit (“CGU”). Goodwill arose through the acquisitions
of (i) Luminosity Gaming Inc. (“Luminosity”) on August 27, 2019; (ii) Enthusiast Properties on August 30, 2019; (iii)
Steel Media Limited (“Steel Media”) on October 3, 2019; (iv) Omnia on August 30, 2020; (v) Vedatis on May 1, 2021;
and (vi) Tabwire on June 21, 2021 (vii) GameKnot on August 30, 2021 (viii) Addicting Games on September 2, 2021, and (ix) Outplayed
on November 22, 2021. In April 2019, Enthusiast Properties acquired 100% of the assets of The Sims Resource (“TSR”)
from Generatorhallen AB and IBIBI HB. TSR is identified as a separate CGU from Enthusiast Properties based on the nature of the
business and the assessment that TSR generates cash flows that are largely independent of the cash flows from other assets deployed
in Enthusiast Properties. The Company has included Vedatis, Tabwire and GameKnot within the Enthusiast Properties CGU based on
the nature of these businesses and the assessment that they generate cash flows that are not largely independent of the cash flows
from other assets deployed in Enthusiast Properties.



|                                             |  | Enthusiast Properties |            |  | TSR |   |            | Luminosity |  |   | Steel Media |  |  | Omnia |           |  | Addicting Games |   |            | Outplayed |  |   | Total      | 
|-------------------------------------------- |  | --------------------- | ---------- |  | --- | - | ---------- | ---------- |  | - | ----------- |  |  | ----- | --------- |  | --------------- | - | ---------- | --------- |  | - | ---------- | 
|                                             |  |                       |            |  |     |   |            |            |  |   |             |  |  |       |           |  |                 |   |            |           |  |   |            | 
|Balance, December 31, 2019                   |  | $                     | 54,467,041 |  |     | $ | 20,898,598 |            |  | $ | 6,003,150   |  |  | $     | 1,890,627 |  |                 | $ | -          |           |  | $ | -          | 
|Mergers and Acquisitions (Note 5)            |  |                       | -          |  |     |   | -          |            |  |   | -           |  |  |       | -         |  |                 |   | 22,921,670 |           |  |   | -          | 
|Balance, December 31, 2020                   |  | $                     | 54,467,041 |  |     | $ | 20,898,598 |            |  | $ | 6,003,150   |  |  | $     | 1,890,627 |  |                 | $ | 22,921,670 |           |  | $ | -          | 
|Mergers and Acquisitions (Note 5)            |  |                       | 21,496,335 |  |     |   | -          |            |  |   | -           |  |  |       | -         |  |                 |   | -          |           |  |   | 28,947,665 | 
|Effect of movement in foreign exchange rates |  |                       | 299,900    |  |     |   | -          |            |  |   | -           |  |  |       | -         |  |                 |   | -          |           |  |   | 334,749    | 
|Balance, December 31, 2021                   |  | $                     | 76,263,276 |  |     | $ | 20,898,598 |            |  | $ | 6,003,150   |  |  | $     | 1,890,627 |  |                 | $ | 22,921,670 |           |  | $ | 29,282,414 | 



The
Company performed its annual impairment tests at December 31, 2021 and determined that no impairment charge was necessary. The
Company determined the recoverable amount based on the value-in-use approach to assess the value of Enthusiast Properties, TSR,
Luminosity, Steel Media, Omnia, Addicting Games and Outplayed CGUs. The recoverable amount of the Company’s CGUs was estimated
based on an assessment of their value-in-use using a discounted cash flow approach. The approach uses cash flow projections based
upon a financial forecast approved by management and the Board of Directors, covering a five-year period. Cash flows for the years
thereafter are extrapolated using the estimated terminal growth rate. The risk premiums expected by market participants related
to uncertainties about the industry and assumptions relating to future cash flows may differ or change quickly, depending on economic
conditions and other events.



The
Company has made certain assumptions in determining the expected future cash flows based on budgets approved by management and
include management’s best estimate of expected market conditions. Accordingly, it is possible that future changes in assumptions
may negatively impact future valuations of goodwill and the Company would be required to recognize an impairment loss.



At
December 31, 2021, the following are key assumptions on which management based its determinations of the recoverable amount for
goodwill based on each CGU’s value-in-use:



|                              |  | Enthusiast Properties |      |   | TSR |  |      | Luminosity |  |  | Steel Media |   |  | Omnia |      |   | Addicting Games |  |      | Outplayed | 
|----------------------------- |  | --------------------- | ---- | - | --- |  | ---- | ---------- |  |  | ----------- | - |  | ----- | ---- | - | --------------- |  | ---- | --------- | 
|                              |  |                       |      |   |     |  |      |            |  |  |             |   |  |       |      |   |                 |  |      |           | 
|Average revenue growth rates  |  |                       | 32.9 | % |     |  | 7.7  | %          |  |  | 62.3        | % |  |       | 21.5 | % |                 |  | 14.7 | %         | 
|Terminal revenue growth rates |  |                       | 3.0  | % |     |  | 3.0  | %          |  |  | 3.0         | % |  |       | 3.0  | % |                 |  | 3.0  | %         | 
|Pre-tax discount rate         |  |                       | 17.6 | % |     |  | 25.2 | %          |  |  | 17.4        | % |  |       | 20.4 | % |                 |  | 25.9 | %         | 



At
December 31, 2020, the following are key assumptions on which management based its determinations of the recoverable amount for
goodwill based on each CGU’s value-in-use:



|                              |  | Enthusiast Properties |      |   | TSR |  |      | Luminosity |  |  | Steel Media |   |  | Omnia |      |   |  | Addicting Games |      |   |  | Outplayed |    
|----------------------------- |  | --------------------- | ---- | - | --- |  | ---- | ---------- |  |  | ----------- | - |  | ----- | ---- | - |  | --------------- | ---- | - |  | --------- | ---
|                              |  |                       |      |   |     |  |      |            |  |  |             |   |  |       |      |   |  |                 |      |   |  |           |    
|Average revenue growth rates  |  |                       | 38.6 | % |     |  | 24.2 | %          |  |  | 71.4        | % |  |       | 40.8 | % |  |                 | 20.0 | % |  |           | N/A
|Terminal revenue growth rates |  |                       | 3.0  | % |     |  | 3.0  | %          |  |  | 3.0         | % |  |       | 3.0  | % |  |                 | 3.0  | % |  |           | N/A
|Pre-tax discount rate         |  |                       | 15.6 | % |     |  | 19.0 | %          |  |  | 12.0        | % |  |       | 18.0 | % |  |                 | 22.5 | % |  |           | N/A



The
Company determined the revenue growth rate, the terminal revenue growth rate based on past performance and its expectations for
market development. The pre-tax discount rates used reflect specific risks in relation to the CGU.





31





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 12. | Right-of-use
                                         assets and lease contract liabilities
| | --- | -------------------------------------------------------------------------------------------



The
Company’s leased assets consist of office premises. When measuring lease liabilities for leases that were classified as
operating leases, the Company discounted lease payments using incremental borrowing rates of 4.20% to 5.00%.



|Right-of-use assets                                              |  | Amount |          
|---------------------------------------------------------------- |  | ------ | ---------
|Balance, December 31, 2019                                       |  | $      | 733,413  
|Office lease additions - cost                                    |  |        | 162,226  
|Office lease additions - cost, mergers and acquisitions (Note 5) |  |        | 2,392,984
|Depreciation                                                     |  |        | (377,145 
|Effect of movement in exchange rates                             |  |        | (63,078  
|                                                                 |  |        |          
|Balance, December 31, 2020                                       |  | $      | 2,848,400
|Office lease additions – cost, mergers and acquisitions (Note 5) |  |        | 775,392  
|Depreciation                                                     |  |        | (729,573 
|Effect of movement in exchange rates                             |  |        | (8,557   
|Balance, December 31, 2021                                       |  | $      | 2,885,662



|Lease liabilities                                                          |  | Amount |          
|-------------------------------------------------------------------------- |  | ------ | ---------
|Balance, December 31, 2019                                                 |  | $      | 742,212  
|Office lease additions - finance cost                                      |  |        | 162,226  
|Office lease additions - finance cost, mergers and acquisitions (Note 5)   |  |        | 2,398,085
|Payments                                                                   |  |        | (404,958 
|Interest cost                                                              |  |        | 56,720   
|Effect of movement in exchange rates                                       |  |        | (67,619  
|Balance, December 31, 2020                                                 |  | $      | 2,886,666
|Building lease additions – finance cost, mergers and acquisitions (Note 5) |  |        | 808,095  
|Payments                                                                   |  |        | (802,013 
|Interest cost                                                              |  |        | 119,470  
|Effect of movement in exchange rates                                       |  |        | (1,871   
|Balance, December 31, 2021                                                 |  |        | 3,010,347
|Current portion of contract lease liabilities                              |  |        | 796,835  
|Long-term portion of contract lease liabilities                            |  | $      | 2,213,512



Note
26 provides a summary of undiscounted lease payments to be made as at the statement of financial position date. Variable lease
payments during the year ended December 31, 2021, which are not included in lease liabilities are $253,206 (December 31, 2020
- $169,587). The total cash outflow for leases during the year ended December 31, 2021 is $1,055,219 (December 31, 2020 - $574,545).



| | 13. | Accounts
                                         payable and accrued liabilities
| | --- | ---------------------------------------------------------------------------------



|                    |  | December 31, 2021 |            |  | December 31, 2020 |  
|------------------- |  | ----------------- | ---------- |  | ----------------- | -
|                   
|Accounts payable    |  | $                 | 25,247,351 |  |                   | $
|Accrued liabilities |  |                   | 9,143,870  |  |                   |  
|                    |  | $                 | 34,391,221 |  |                   | $



The
Company, in the course of its normal operations, is subject to claims, lawsuits, and contingencies. Accruals are made in instances
where it is probable that liabilities may be incurred and where such liabilities can be reasonably estimated. Although it is possible
that liabilities may be incurred in instances for which no accruals have been made, the Company has no reason to believe that
the ultimate outcome of these matters would have a material impact on its consolidated financial position.





32





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 14. | Long-term
                                         debt
| | --- | -------------------------------------------------------



| | (i) | The
                                         Facility
| | --- | -----------------------------------------------------



Under
the terms of a loan facility agreement dated August 2, 2019, an arm’s length lender (the “Lender”) agreed to
provide the Company with a loan of up to $20,000,000 (the “Facility”) comprising two advances: (i) an initial advance
in an amount of up to $3,000,000 (the “Initial Advance”) at the request of the Company following satisfaction or waiver
by the Lender of certain conditions precedent, and (ii) a further advance in an amount equal to the remaining difference between
$20,000,000 and the amount of the Initial Advance (the “Further Advance”) at the request of the Company following
satisfaction or waiver by the Lender of certain additional conditions precedent, including the completion of the acquisition of
Enthusiast Properties. The Company received the Initial Advance and Further Advance, aggregating $20,000,000, during the year
ended December 31, 2019. The Facility is secured by the Company’s assets.



The
loan had a term (the “Term”) which expired on August 2, 2021, the date that was 24 months from the date of the Initial
Advance (the “Maturity Date”). Interest (or standby fees at an equivalent rate in lieu thereof) accrued at a rate
per annum that was equal to the prime rate plus 5.05% calculated on the aggregate amount of the Facility, compounded monthly,
whether or not the conditions precedent were satisfied or the Facility was advanced. The Company had further agreed to pay the
Lender a success fee at an amount that was equal to 4.1% per annum, payable monthly, calculated on the full amount of the Facility
from the date of the Initial Advance.



Interest
(and any such equivalent amount by way of standby fee) and the success fee were capitalized during the first 12 months of the
Term and, commencing in August 2020, interest and the success fee were payable in cash on the last business day of each and every
month until the Maturity Date.



The
Company was entitled to prepay all or a part of the Facility at any time, from time to time, without bonus or penalty after the
date that was twelve (12) months following the date of completion of the acquisition of Enthusiast Properties.



On
August 30, 2020 the Company entered into an amending facility agreement (the “Amended Facility”). The Amended Facility
extended the Facility expiry Term to September 6, 2022 and commencing in August 2021 principal repayments of $250,000 per month
were payable every month until maturity, the remaining outstanding principal amount was to be repaid on September 6, 2022. The
Company was entitled to prepay all or a part of the Facility at any time, from time to time, without bonus or penalty. The Company
incurred an amendment fee in the amount of $200,000 in connection with the Amended Facility which was netted against the Facility
long-term debt balance.



On
November 27, 2020 the Company entered into an amending and restated facility agreement (the “Amended and Restated Facility”).
The Amended and Restated Facility increased the total size of the loan and allowed for three loans, Facility A, B and C. Facility
A and B were revolving loans up to $10,000,000 each. Facility C was a term loan in the amount of $10,000,000. Facility A and B
were limited to an aggregate principal amount of $14,000,000.



The
maximum amount of Facility A was based on the aggregate of 85% eligible accounts receivable less the amount of Facility A then
outstanding and less amounts payable and reserves for material subsidiaries. The Company incurred transaction cost of $17,500
in connection with the Amended and Restated Facility which was netted against the Facility long-term debt balance.



As
terms of the amended facilities were not substantially different from the terms of the Facility, the amendments were determined
to be a modification of debt in accordance with IFRS 9. A loss on modification of long-term debt in the amount of $814,899 and
$325,421 was recognized in the consolidated statement of loss and comprehensive loss the during the year ended December 31, 2020
related to the August 30, 2020 and November 27, 2020 amendments, respectively.



The
Amended and Restated Facility was amortized at an effective interest rate of 7.29% following the transaction costs and loss on
modification of debt recognized pursuant to the amendments.



The
Amended and Restated Facility was used for purposes of (i) working capital and (ii) to finance future acquisitions.



On
December 31, 2020 the Company was advanced $75,333 and $150,667 on Facility A and B respectively for a total advance of $226,000.
As at December 31, 2020 the total principal balances of Facility A, B and C were $9,972,104, $2,856,579 and $10,000,000 respectively
for a total principal balance of $22,828,682.





33





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 14. | Long-term
                                         debt
| | --- | -------------------------------------------------------



| | (i) | The
                                         Facility (continued)
| | --- | -----------------------------------------------------------------



On
January 18, 2021 and February 3, 2021, the Company was further advanced $441,921 and $502,866 respectively on Facility A and B.
On February 12, 2021, the Company repaid Facility A and B principal balances of $13,773,470.



The
Amended and Restated Facility was amortized at an effective interest rate of 7.28% following the repayment on February 12, 2021.



On
December 17, 2021, in conjunction with obtaining the Term Credit and Operating Credit, see Note 14(ii), the Company repaid the
remaining principal balance then outstanding on Facility C of $9,250,000 and extinguished the Amended and Restated Facility. The
Company incurred a prepayment fee of $166,438 relating to the extinguishment which is included in interest and accretion in the
consolidated statement of loss and comprehensive loss.



During
the year ended December 31, 2021, the Company recognized $847,322 (December 31, 2020 - $1,725,684) of interest expense, $450,475
(December 31, 2020 - $830,470) of success fee expense and $21,780 (December 31, 2020 – expense of $567,006) of accretion
income which are included in interest and accretion in the consolidated statement of loss and comprehensive loss.



The
following tables shows the movement of the Facility balance during the year:



|                                       |  | Amount |            
|-------------------------------------- |  | ------ | -----------
|Balance, December 31, 2019             |  | $      | 19,691,220 
|Capitalized interest                   |  |        | 1,016,577  
|Capitalized success fee                |  |        | 478,333    
|Advance                                |  |        | 226,000    
|Loss on modification of long-term debt |  |        | 1,140,320  
|Transaction cost                       |  |        | (217,500   
|Accretion                              |  |        | 567,006    
|Balance, December 31, 2020             |  | $      | 22,901,956 
|Advances                               |  |        | 944,787    
|Repayments                             |  |        | (13,773,470
|Principal repayments                   |  |        | (10,000,000
|Gain on repayment of long-term debt    |  |        | (39,502    
|Gain on settlement of long-term debt   |  |        | (11,991    
|Accretion                              |  |        | (21,780    
|Balance, December 31, 2021             |  |        | -          
|Current portion of long-term debt      |  |        | -          
|Long-term debt                         |  | $      | -          



The
Amended and Restated Facility agreement contained certain covenants that the Company must comply with including maintaining a
total consolidated equity of at least $20,000,000 and maintaining a minimum cash balance of $2,000,000. The Company was in compliance
with these covenants during the year ended December 31, 2021.



| | (ii) | The
                                         Term Credit and Operating Credit
| | ---- | -----------------------------------------------------------------------------



Under
the terms of a commitment letter dated December 3, 2021, an arm’s length lender (the “Bank”) agreed to provide
the Company, as borrower, and certain Canadian and U.S. subsidiaries of the Company, as guarantors, with a non-revolving term
facility (the “Term Credit”) and an operating line (the “Operating Credit”).



The
Term Credit consists of an authorized credit limit amount of $10,000,000, bearing interest at the Banker’s Acceptance fee
equal to CDOR rate plus 7.5% per annum, with interest payable monthly. The Term Credit is repayable in up to 24 equal monthly
instalments of principal based on an amortization period of 60 months, with final payment of the remaining principal then outstanding
due 24 months from the initial drawdown date of advance. On December 17, 2021 the Company was advanced $10,000,000 which was used
to extinguish the Facility, see Note 14(i).





34





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 14. | Long-term
                                         debt (continued)
| | --- | -------------------------------------------------------------------



| | (ii) | The
                                         Term Credit and Operating Credit (continued)
| | ---- | -----------------------------------------------------------------------------------------



The
Operating Credit consists of an authorized amount of $5,000,000, subject to a borrowing base, bearing interest at the greater
of (i) the Bank’s prime lending rate plus 1.25%, and (ii) 2.45% per annum, with interest payable monthly. The Operating
Credit is repayable no later than 24 months from the date of the satisfaction or waiver of conditions precedent. The Operating
Credit will be used for purposes of (i) general operating requirement, and (ii) to finance future acquisitions. As at December
31, 2021, no amounts were drawn upon relating to the Operating Credit.



The
aggregate of all advances under the Operating Credit and Bank credit cards are not to exceed the lesser of (i) the Operating Credit,
and (ii) the borrowing base. The borrowing base is based on a percentage of eligible accounts receivable less certain accounts
payable for material subsidiaries of the Company.



Subject
to the Bank’s approval, the Company can exercise an option to extend the maturity date of both Term Credit and Operating
Credit for an additional 12-month period. The Term Credit and Operating Credit are secured by substantially all of the assets
of the Company and the guarantor subsidiaries. The Company will be entitled to prepay all or part of the Term Credit and Operating
Credit at any time with penalty.



During
the year ended December 31, 2021, the Company received Term Credit advances of $10,000,000 and incurred transaction cost of $325,183
relating to the commitment letter. During the year ended December 31, 2021, the Company recognized $30,467 (December 31, 2020
- $Nil) of interest expense and $7,050 (December 31, 2020 – $Nil) of accretion expense which are included in interest and
accretion in the consolidated statement of loss and comprehensive loss.



The
following tables shows the movement of the Term Credit balance during the year:



|                                  |  | Amount |           
|--------------------------------- |  | ------ | ----------
|Balance, December 31, 2020        |  | $      | -         
|Advances                          |  |        | 10,000,000
|Transaction costs                 |  |        | (325,183  
|Accretion                         |  |        | 7,050     
|Balance, December 31, 2021        |  |        | 9,681,868 
|Current portion of long-term debt |  |        | 2,000,000 
|Long-term debt                    |  | $      | 7,681,867 



The
commitment letter contains certain covenants that the Company must comply with, including maintaining a minimum funded debt to
gross profit ratio, which varies by quarter, unless the Company has at least $10,000,000 of unencumbered cash on hand less the
amount then outstanding on the Operating Credit. The Company was in compliance with these covenants during the year ended December
31, 2021.



| | 15. | Other
                                         long-term debt
| | --- | -------------------------------------------------------------



Upon
the acquisition of Addicting Games (Note 5), the Company obtained a USD $150,000 United States of America Small Business Administration
loan (“SBA Loan”). The SBA Loan has a term which is thirty years from the date of the initial advance, expiring July
2, 2050. The SBA loan bears interest at 3.75% per annum, is repayable in monthly installment payments until maturity of USD $731,
which includes principal and interest, the remaining outstanding principal amount will be repaid on July 2, 2050. The SBA Loan
is secured by Addicting Games’ assets.



The
SBA Loan was included in Addicting Games’ identifiable net assets acquired at an initial fair value of $144,948 based on
a discounted valuation using a 7.10% discount rate. The SBA Loan is amortized at an effective interest rate of 7.10%.





35





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 15. | Other
                                         long-term debt (continued)
| | --- | -------------------------------------------------------------------------



The
following table shows the movement of the SBA Loan during the year:



|                                        |  | Amount |        
|--------------------------------------- |  | ------ | -------
|Balance, December 31, 2020              |  | $      | -      
|Mergers and Acquisitions (Note 5)       |  |        | 144,948
|Accretion                               |  |        | 3,424  
|Payments                                |  |        | (5,561 
|Effect of movement in exchange rates    |  |        | 4,634  
|Balance, December 31, 2021              |  |        | 147,445
|Current portion of other long-term debt |  |        | 11,121 
|Other long-term debt                    |  | $      | 136,324



| | 16. | Convertible
                                         debentures
| | --- | ---------------------------------------------------------------



On
November 8, 2018, Enthusiast Properties issued convertible debenture units (the “Debenture Units”) for total gross
proceeds of $9,000,000.



Each
Debenture Unit, issued at a price of $1,000, is comprised of one unsecured convertible debenture (each a “Debenture”
and collectively, the “Debentures”), having a principal amount of $1,000 and accruing interest at 9% per annum, payable
semi-annually until maturity, and 166 common share purchase warrants of the Company (each, a “Debenture Warrant”).
Each Debenture is convertible into shares of the Company at a conversion price of $3.03 per common share (the “Conversion
Price”), subject to acceleration in certain events. The Debentures mature on December 31, 2021. Each Debenture Warrant entitles
the holder to acquire one share at a price of $3.79 per share for a period of two years, subject to acceleration in certain events.
The Debentures and the Debenture Warrants contain customary anti-dilution provisions. The Company also issued 540 Debenture Units
to the brokers as part of the transaction. If the brokers subscribe for the Debenture Units, 89,640 warrants will be issued. The
brokers did not subscribe for the Debenture Units and they expired unexercised on November 8, 2020.



Beginning
on March 9, 2019, the Company may, at its option, require the conversion of the then outstanding principal amount of the Debentures
(plus accrued and unpaid interest thereon) at the Conversion Price on not less than 30 days’ notice, should the daily volume-weighted
average trading price of the shares of the Company be greater than $4.55 for each of seven consecutive trading days, ending five
trading days prior to the applicable date.



The
Company may accelerate the expiry date of the then outstanding Debenture Warrants on not less than 30 days’ notice, should
the volume-weighted average trading price of the shares be greater than $5.68 for the twenty consecutive trading days, ending
five trading days prior to the applicable date.



The
fair value of the convertible debentures on the date of the acquisition of Enthusiast Properties was determined to be $6,761,663
measured using a market rate of 13.0% for a similar unsecured debt without the conversion feature. The 1,495,442 warrants issued
previously were valued on the date of the acquisition of Enthusiast Properties as consideration in the amount of $2,056,130. The
convertible debentures are amortized at an effective interest rate of 22.82%.



In
December 2020, debenture holders converted $400,000 of convertible debentures into 136,649 common shares of the Company. Between
January 5, 2021 and January 21, 2021 debenture holders converted $2,600,000 of convertible debentures into 857,180 common shares
of the Company. On January 21, 2021, the Company issued notice to the holders of the convertible debentures to exercise the Company’s
option to convert the outstanding convertible debentures into common shares of the Company. Through the notice, $6,000,000 of
convertible debentures were converted into 1,978,109 common shares of the Company on January 27, 2021.



During
the year ended December 31, 2021, the Company recognized $53,051 (December 31, 2020 - $808,675) of interest expense and $80,504
(December 31, 2020 - $881,631) of accretion expense which is included in interest and accretion in the consolidated statement
of loss and comprehensive loss.





36





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 16. | Convertible
                                         debentures (continued)
| | --- | ---------------------------------------------------------------------------



The
following tables shows the movement of the convertible debenture balance during the year:



|                                             |  | Amount |           
|-------------------------------------------- |  | ------ | ----------
|Balance, December 31, 2019                   |  | $      | 7,015,820 
|Conversion to equity                         |  |        | (400,000  
|Loss on conversion of convertible debentures |  |        | 49,002    
|Accretion                                    |  |        | 881,631   
|Balance, December 31, 2020                   |  | $      | 7,546,453 
|Conversion to equity                         |  |        | (7,626,957
|Accretion                                    |  |        | 80,504    
|Balance, December 31, 2021                   |  | $      | -         



| | 17. | Deferred
                                         payment liability
| | --- | -------------------------------------------------------------------



The
deferred payment liability relates to the acquisitions of (i) Steel Media on October 3, 2019, (ii) Vedatis on May 1, 2021, (iii)
GameKnot on August 30, 2021, (iv) Addicting Games on September 3, 2021, and (v) Outplayed on November 22, 2021.



| | (i) | Steel
                                         Media Deferred Payment Liability
| | --- | -------------------------------------------------------------------------------



The
Steel Media deferred payment liability consists of the present value of a USD $1,000,000 payment (the “Steel Media Deferred
Payment”) to be paid on October 3, 2020 and the present value of the earn-out payment (the “Steel Media Earn-Out Payment”)
of USD $500,000 expected to be paid based on the performance of Steel Media by April 15, 2022.



The
Company has, at its option, the ability to settle USD $500,000 of the remaining Steel Media Deferred Payment either in cash or
by the allotment and issuance of such number of common shares determined by the volume weighted average price for the five trading
days immediately prior to October 3, 2020. The Company also has, at its option, the ability to settle USD $500,000 of the Steel
Media Earn-Out Payment either in cash or by the allotment and issuance of such number of common shares determined by the volume
weighted average price for the five trading days immediately prior to the date that the amount of any Steel Media Earn-Out Payment
is conclusively determined.



The
expected Steel Media Earn-Out Payment is calculated on a dollar-for-dollar basis to the extent the average annualized normalized
gross revenue of Steel Media for the period from January 1, 2020 to December 31, 2021 exceeds USD $2,500,000. The maximum Steel
Media Earn-Out Payment will not exceed USD $500,000. The Steel Media Earn-Out Payment criteria were satisfied during the year
ended December 31, 2021. At December 31, 2021, the deferred payment liability is $600,508.



The
Steel Media Deferred Payment was included in Steel Media’s total purchase price consideration at an initial fair value of
$1,211,818 based on a discounted valuation using a 10.00% discount rate. The Steel Media Earn-Out Payment was included in Steel
Media’s total purchase price consideration at an initial fair value of $470,625 based on a discounted valuation using a
13.97% discount rate and an expectation that payment of the full earn-out of USD $500,000 is probable.



The
Steel Media Deferred Payment and Steel Media Earn-Out Payment are amortized at an effective interest rate of 9.54% and 13.15%
respectively.



Between
October 16 and November 2, 2020, $659,832 (USD $500,000) of the Steel Media Deferred Payment liability was paid by the Company.
On January 20, 2021, the remaining Steel Media Deferred Payment liability of $632,800 (USD $500,000) was settled by the Company
through the issuance of 429,354 common shares through the exercise of the Company’s option.



| | (ii) | Vedatis
                                         Deferred Payment Liability
| | ---- | ---------------------------------------------------------------------------



The
Vedatis deferred payment liability consists of the present value of a Euro €750,000 payment (the “Vedatis Deferred
Payment”) to be paid on May 1, 2022 and the present value of the estimated earn-out payment (the “Vedatis Earn-Out
Payment”) expected to be paid based on the performance of Vedatis by August 29, 2025, see Note 5.





37





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 17. | Deferred
                                         payment liability (continued)
| | --- | -------------------------------------------------------------------------------



| | (ii) | Vedatis
                                         Deferred Payment Liability (continued)
| | ---- | ---------------------------------------------------------------------------------------



The
Vedatis Earn-Out Payment, subject to certain conditions, is equal to the sum of earnings before interest, taxes, depreciation
and amortization for the best four consecutive quarters of the existing Vedatis business at the time of closing excluding new
business generated or enhanced by the Company. The earn-out period is for four years following May 1, 2021.



The
Company has, at its option, the ability to settle the Vedatis Deferred Payment of Euro €750,000 either in cash or by the
allotment and issuance of such number of common shares determined by the volume weighted average price for the two trading days
immediately prior to May 1, 2022. The Company has, at its option, the ability to settle the Vedatis Earn-Out Payment half in cash
and half in common shares, the share payment portion will be settled by the allotment and issuance of such number of common shares
determined by the volume weighted average price for the two trading days immediately prior to May 1, 2025.



The
Company uses Monte-Carlo simulation valuation techniques to estimate the net present value of the Vedatis Earn-Out Payment. The
cash portion and equity portion are present valued separately based on the outcomes of the Monte-Carlo simulation. The Vedatis
Earn-Out Payment is revalued each reporting period with changes in fair value of the Vedatis Earn-Out Payment recorded in the
consolidated statement of loss and comprehensive loss.



The
Vedatis Deferred Payment was included in Vedatis’ total purchase price consideration at an initial fair value of $1,047,028
based on a discounted valuation using a 6% discount rate. The Vedatis Earn-Out Payment was included in Vedatis’ total purchase
price consideration at an initial fair value of $1,602,902 based on a discounted valuation using an 8.16% and 0.78% discount rate
for the cash settled and equity settled portion, respectively, and an expectation that a Vedatis Earn-Out Payment of $1,920,745
is probable. The Vedatis Deferred Payment is amortized at an effective interest rate of 5.86% and the cash portion of the Vedatis
Earn-Out Payment is amortized at an effective interest rate of 8.19%.



On
December 31, 2021, the Vedatis Earn-Out Payment was revalued at $1,774,337 based on a discounted valuation using a 9.79% and 1.16%
discount rate for the cash settled and equity settled portion, respectively, and an expectation that a Vedatis Earn-Out Payment
of $2,141,645 is probable. Following the December 31, 2021 revaluation, the cash portion of the Vedatis Earn-Out Payment is amortized
at an effective interest rate of 9.83%.



The
fair value of the Vedatis Earn-Out Payment on the acquisition date and at December 31, 2021was calculated using the following
inputs:



|                                                                                 | December
    31, 2021                                    | May
    1, 2021                                         
|-------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------------
|Payment
                                         date                            | August
                                         29, 2025 | August
                                         29, 2025
|Time to maturity                                                                 | 3.66
    years                                           | 4.33 years                                              
|Required metric
    risk premium                                                 | 21.75%                                                   | 21.75%                                                  
|EBITDA volatility                                                                | 17.00%                                                   | 19.00%                                                  
|Senior credit rating                                                             | B-                                                       | B-                                                      
|Earn-out payment
    credit rating                                               | CCC+                                                     | CCC+                                                    
|Drift rate                                                                       | 1.15%                                                    | 0.75%                                                   
|Discount rate (risk
    free rate) for equity-based payment                      | 1.16%                                                    | 0.78%                                                   
|Discount rate (risk
    adjusted rate) for cash payment                          | 9.79%                                                    | 8.16%                                                   
|Discount
                                         rate for lack of marketability | Nil%                                                     | Nil%                                                    



| | (iii) | GameKnot
                                         Deferred Payment Liability
| | ----- | ----------------------------------------------------------------------------



The
GameKnot deferred payment liability consists of the present value of a USD $500,000 six-month anniversary payment (the “GameKnot
Deferred Payment”) to be paid on February 28, 2022, see Notes 5 and 29(iii).



The
Company has, at its option, the ability to settle the GameKnot Deferred Payment either in cash or by the allotment and issuance
of such number of common shares determined by the volume weighted average price for the ten trading days prior to February 28,
2022.



The
GameKnot Deferred Payment was included in GameKnot’s total purchase price consideration at an initial fair value of $613,129
based on a discounted valuation using a 6.00% discount rate.



The
GameKnot Deferred Payment is amortized at an effective interest rate of 6.01%.





38





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 17. | Deferred
                                         payment liability (continued)
| | --- | -------------------------------------------------------------------------------



| | (iv) | Addicting
                                         Games Deferred Payment Liability
| | ---- | -----------------------------------------------------------------------------------



The
Addicting Games deferred payment liability consists of the present value of a USD $7,000,000 first anniversary payment (the “Addicting
Games First Anniversary Deferred Payment”) to be paid on September 3, 2022 and the present value of a USD $3,800,000 second
anniversary payment (the “Addicting Games Second Anniversary Deferred Payment”) to be paid on September 3, 2023 (the
Addicting Games First Anniversary Deferred Payment and the Addicting Games Second Anniversary Deferred Payment are collectively
the “Addicting Games Deferred Payment”), see Note 5.



The
Company has, at its option, the ability to settle the Addicting Games Deferred Payment either in cash or by the allotment and
issuance of such number of common shares determined by the volume weighted average price for the ten trading days prior to the
payment due dates.



The
Addicting Games First Anniversary Deferred Payment was included in Addicting Games’ total purchase price consideration at
an initial fair value of $8,181,699 based on a discounted valuation using a 7.10% discount rate. The Addicting Games Second Anniversary
Deferred Payment was included in Addicting Games’ total purchase price consideration at an initial fair value of $4,147,054
based on a discounted valuation using a 7.10% discount rate.



The
Addicting Games First Anniversary Deferred Payment and Addicting Games Second Anniversary Deferred Payment are amortized at an
effective interest rate of 6.88% and 6.88% respectively.



| | (v) | Outplayed
                                         Deferred Payment Liability
| | --- | -----------------------------------------------------------------------------



The
Outplayed deferred payment liability consists of the present value of a USD $8,500,000 first anniversary payment (the “Outplayed
First Anniversary Deferred Payment”) to be paid on November 22, 2022, the present value of a USD $8,500,000 second anniversary
payment (the “Outplayed Second Anniversary Deferred Payment”) to be paid on November 22, 2023 (collectively, the “Outplayed
Deferred Payment”), the present value of the first anniversary earn-out payment USD $6,000,000 (the “Outplayed First
Anniversary Earn-Out Payment”) expected to be paid based on the performance of Outplayed by December 22, 2022, and the present
value of the second anniversary earn-out payment USD $6,000,000 (the “Outplayed Second Anniversary Earn-Out Payment”)
expected to be paid based on the performance of Outplayed by December 22, 2023 (collectively, the “Outplayed Earn-Out Payment”),
see Note 5.



The
Outplayed Earn-Out Payment, subject to certain conditions, will be paid if certain site traffic based targets are met in the first
and second years of operations. The first anniversary earn-out period is for one year from the closing date and the second anniversary
earn-out period is for one year from the end of the first anniversary earn-out period.



The
Company has, at its option, the ability to settle the Outplayed Deferred Payment either in cash or by the allotment and issuance
of such number of common shares determined by the volume weighted average price for the ten trading days two business days prior
to the anniversary payment due dates. The Company has, at its option, the ability to settle the Outplayed Earn-Out Payment either
in cash or by the allotment and issuance of such number of common shares determined by the volume weighted average price for the
ten trading days prior to the date the applicable earn-out is achieved.



The
Outplayed First Anniversary Deferred Payment was included in Outplayed’s total purchase price consideration at an initial
fair value of $10,013,937 based on a discounted valuation using a 7.63% discount rate. The Outplayed Second Anniversary Deferred
Payment was included in Outplayed’s total purchase price consideration at an initial fair value of $9,304,038 based on a
discounted valuation using a 7.63% discount rate. The Outplayed First Anniversary Earn-Out Payment was included in Outplayed’s
total purchase price consideration at an initial fair value of $6,272,711 based on a discounted valuation using a 19.50% discount
rate with an expectation that payment of the full earn-out of USD $6,000,000 is probable. The Outplayed Second Anniversary Earn-Out
Payment was included in Outplayed’s total purchase price consideration at an initial fair value of $5,249,130 based on a
discounted valuation using a 19.50% discount rate with an expectation that payment of the full earn-out of USD $6,000,000 is probable.



The
Outplayed First Anniversary Earn-Out Payment, the Outplayed Second Anniversary Earn-Out Payment, Outplayed First Anniversary Earn-Out
Payment and the Outplayed Second Anniversary Earn-Out Payment are amortized are amortized at an effective interest rate of 7.38%,
7.38%, 17.97% and 17.96% respectively.



39





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 17. | Deferred
                                         payment liability (continued)
| | --- | -------------------------------------------------------------------------------



The
following table shows the movement of the Steel Media Deferred Payment, the Steel Media Earn-Out Payment, the Vedatis Deferred
Payment deferred, the Vedatis Earn-Out Payment, the GameKnot Deferred Payment, the Addicting Games Deferred Payment, the Outplayed
Deferred Payment and the Outplayed Earn-Out Payment balances during the year:



|                                                  |  | Steel Media Deferred Payment |           | Steel Media Earn-Out Payment |   | Vedatis Deferred Payment |   | Vedatis  Earn-Out Payment |           | GameKnot Deferred Payment |   | Addicting Games Deferred Payment |   | Outplayed Deferred Payment |         | Outplayed Earn-Out Payment |   | Total      | 
|------------------------------------------------- |  | ---------------------------- | --------- | ---------------------------- | - | ------------------------ | - | ------------------------- | --------- | ------------------------- | - | -------------------------------- | - | -------------------------- | ------- | -------------------------- | - | ---------- | 
|                                                  |  |                              |           |                              |   |                          |   |                           |           |                           |   |                                  |   |                            |         |                            |   |            | 
|Balance, December 31, 2019                        |  | $                            | 1,208,413 |                              | $ | 473,413                  |   | $                         | -         |                           | $ | -                                |   | $                          | -       |                            | $ | -          | 
|Accretion                                         |  |                              | 92,767    |                              |   | 68,097                   |   |                           | -         |                           |   | -                                |   |                            | -       |                            |   | -          | 
|Payment                                           |  |                              | (659,832  | )                            |   | -                        |   |                           | -         |                           |   | -                                |   |                            | -       |                            |   | -          | 
|Effect of movement in exchange rates              |  |                              | (4,748    | )                            |   | (12,386                  | ) |                           | -         |                           |   | -                                |   |                            | -       |                            |   | -          | 
|Balance, December 31, 2020                        |  | $                            | 636,600   |                              | $ | 529,124                  |   | $                         | -         |                           | $ | -                                |   | $                          | -       |                            | $ | -          | 
|Initial fair value of deferred payment liability  |  |                              | -         |                              |   | -                        |   |                           | 1,047,028 |                           |   | 1,602,902                        |   |                            | 613,129 |                            |   | 12,328,753 | 
|Accretion                                         |  |                              | -         |                              |   | 77,415                   |   |                           | 41,705    |                           |   | 39,830                           |   |                            | 12,490  |                            |   | 280,700    | 
|Payment                                           |  |                              | (632,800  | )                            |   | -                        |   |                           | -         |                           |   | -                                |   |                            | -       |                            |   | -          | 
|Loss on revaluation of deferred payment liability |  |                              | -         |                              |   | -                        |   |                           | -         |                           |   | 181,707                          |   |                            | -       |                            |   | -          | 
|Effect of movement in exchange rates              |  |                              | (3,800    | )                            |   | (6,031                   | ) |                           | (29,944   | )                         |   | (50,103                          | ) |                            | 2,162   |                            |   | 159,266    | 
|Balance, December 31, 2021                        |  |                              | -         |                              |   | 600,508                  |   |                           | 1,058,789 |                           |   | 1,774,336                        |   |                            | 627,781 |                            |   | 12,768,719 | 
|Current portion of deferred payment liability     |  |                              | -         |                              |   | 600,508                  |   |                           | 1,058,789 |                           |   | -                                |   |                            | 627,781 |                            |   | 8,473,672  | 
|Long-term portion of deferred payment liability   |  | $                            | -         |                              | $ | -                        |   | $                         | -         |                           | $ | 1,774,336                        |   | $                          | -       |                            | $ | 4,295,047  | 



40





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 18. | Vendor-take-back
                                         loan
| | --- | --------------------------------------------------------------



The
vendor-take-back loan (“VTB”) arose on the acquisition of Omnia on August 30, 2020 (Note 5). The VTB has a principal
balance of $5,750,000 and accrues interest at 9% per annum, compounded annually and payable at maturity, and matures on August
30, 2023.



The
VTB was included in Omnia’s total purchase price consideration at an initial fair value of $5,357,408 based on the present
value of the cash flows using a 11.60% discount rate and a maturity date of 36 months. The VTB is amortized at an effective interest
rate of 11.03%.



On
June 17, 2021, the Company settled the VTB by paying the principal balance of $5,750,000 and accrued interest of $408,329. The
Company recognized a loss on settlement of the VTB of $316,241 in the consolidated statement of loss and comprehensive loss during
the year ended December 31, 2021.



During
the year ended December 31, 2021, the Company recognized $255,792 (December 31, 2020 - $190,381) of interest expense and $27,046
(December 31, 2020 - $11,461) of accretion expense in relation to the VTB which is included in interest and accretion expense
in the consolidated statement of loss and comprehensive loss.



The
following tables shows the movement of the VTB during the year:



|                                            |  | Amount |           
|------------------------------------------- |  | ------ | ----------
|                                            |  |        |           
|Balance, December 31, 2019                  |  | $      | -         
|Initial fair value of vendor-take-back loan |  |        | 5,357,408 
|Interest                                    |  |        | 190,381   
|Accretion                                   |  |        | 11,461    
|Balance, December 31, 2020                  |  | $      | 5,559,250 
|Interest                                    |  |        | 255,792   
|Accretion                                   |  |        | 27,046    
|Repayments                                  |  |        | (6,158,329
|Loss on settlement of vendor-take-back loan |  |        | 316,241   
|Balance, December 31, 2021                  |  | $      | -         



| | 19. | Share
                                         capital
| | --- | ------------------------------------------------------



Authorized:

Unlimited
number of common shares

Unlimited
number of preferred shares



During
the year ended December 31, 2021:



| | (i) | The
                                         Company received proceeds of $784,431 from the exercise of 363,176 stock options. The
                                         fair value assigned to these stock options of $927,292 was reclassified from contributed
                                         surplus to share capital.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The
                                         Company issued 2,835,289 common shares from the conversion of convertible debentures
                                         (Note 16).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | On
                                         January 20, 2021, the Company issued 429,354 common shares to settle the remaining Steel
                                         Media Deferred Payment liability (Note 17).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | On
                                         February 10, 2021, the Company offered and sold a total of 7,383,000 common shares resulting
                                         in gross proceeds of $42,452,250 (the “February Offering”). The Company incurred
                                         cash share issuance cost of $2,704,571 relating to the February Offering.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | On
                                         May 4, 2021, the Company issued 226,563 common shares in connection with the closing
                                         of the Vedatis SPA (Note 5).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | In
                                         June 2021, the Company offered and sold a total of 8,600,000 common shares resulting
                                         in gross proceeds of $60,137,755 (USD $49,450,000) (the “June Offering”).
                                         The Company incurred cash share issuance cost of $4,739,096 relating to the June Offering.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | On
                                         June 21, 2021, the Company issued 790,094 common shares in connection with the closing
                                         of the Tabwire EPA (Note 5).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





41





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 19. | Share
                                         capital (continued)
| | --- | ------------------------------------------------------------------



During
the year ended December 31, 2021 (continued):



| | (viii) | On
                                         August 30, 2021, the Company issued 165,425 common shares in connection with the closing
                                         of the GameKnot EPA (Note 5).
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | On
                                         September 3, 2021, the Company issued 2,661,164 common shares in connection with the
                                         closing of the Addicting Games SPA (Note 5).
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | On
                                         December 31, 2021, the Company issued 5,164,223 common shares in connection with the
                                         closing of Outplayed MA (Note 5).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During
the year ended December 30, 2020:



| | (i) | The
                                         Company received proceeds of $2,728,015 from the exercise of 3,109,589 common share purchase
                                         warrants. The fair value assigned to these warrants of $7,907,396 was reclassified from
                                         warrant reserve to share capital.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The
                                         Company received proceeds of $228,536 from the exercise of 823,937 stock options. The
                                         fair value assigned to these options of $2,763,543 was reclassified from contributed
                                         surplus to share capital.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | On
                                         August 6, 2020, the Company completed an offering of 11,500,000 common shares at a price
                                         of $1.50 per common share for gross proceeds of $17,250,000. The Company incurred a 6%
                                         commission on the gross proceeds received from the offering and incurred cash share issuance
                                         of $1,640,744 relating to the offering.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | On
                                         August 31, 2020, the Company issued 18,250,000 common shares in connection with the closing
                                         of the Omnia SPA (Note 5).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | On
                                         July 21, 2020, 1,071,876 common shares were returned to treasury. The shares to be returned
                                         to treasury related to GameCo’s acquisition of Luminosity in 2019. The consideration
                                         was reduced by the value of the shares to be returned to treasury which was determined
                                         to be $3,858,756 as at the acquisition date.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | In
                                         December 2020, the Company issued 136,649 common shares for the conversion of convertible
                                         debentures (Note 16).
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | On
                                         December 29, 2020, the Company issued 91,009 common shares for services performed by
                                         a consultant. The common shares issued were valued based on the fair value of services
                                         provided. The value assigned to the shares issued of $200,162 was recorded as consulting
                                         fee expense.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 20. | Warrants
| | --- | --------



Each
common share warrant entitles the holder to purchase one common share of the Company. The Company has no warrants outstanding
as at December 31, 2021 and December 31, 2020.



The
following table reflects the continuity of warrants as at December 31, 2021 and December 31, 2020:



|                      |  | December
    31, 2021  |   | December
    31, 2020               |  
|--------------------- |  | ---------------------- | - | ----------------------------------- | -
|                      |  | Number
    of warrants |   | Weighted
    average exercise price |  
|Beginning
    balance |  |                        | - |                                     | $
|Granted               |  |                        | - |                                     |  
|Exercised             |  |                        | - |                                     |  
|Expired               |  |                        | - |                                     |  
|Ending
    balance    |  |                        | - |                                     | $



The
weighted average share price on the date of exercise is $Nil (December 31, 2020 - $2.32).



During
the year ended December 30, 2020, the fair value assigned to expired warrants of $7,497,332 was reclassified from warrant reserve
to deficit.



42





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 21. | Stock
                                         options
| | --- | ------------------------------------------------------



On
January 20, 2021, the shareholders of the Company approved and ratified the adoption of the stock option plan (the “Stock
Option Plan”) which allows the Board of Directors to grant stock options to directors, officers, employees and consultants
of the Company as performance incentives. The maximum number of common shares issuable under the Stock Option Plan is limited
to 10% of the issued and outstanding common shares of the Company. There are also limitations on the number of common shares issuable
to insiders. At the time of granting a stock option, the Board of Directors must approve: (i) the exercise price, being not less
than the market value of the common shares; (ii) the vesting provisions; and (iii) the expiry date, generally being no more than
ten years after the grant date.



The
following table reflects the continuity of stock options as at December 31, 2021 and December 31, 2020:



|                      |  | December
    31, 2021 |           | December
    31, 2020               |  
|--------------------- |  | --------------------- | --------- | ----------------------------------- | -
|                      |  | Number
    of options |           | Weighted
    average exercise price |  
|                      |  |                       |           |                                     |  
|Beginning
    balance |  |                       | 2,734,073 |                                     | $
|Granted               |  |                       | 1,598,905 |                                     |  
|Exercised             |  |                       | (363,176  | )                                   |  
|Expired               |  |                       | (46,311   | )                                   |  
|Ending
    balance    |  |                       | 3,923,491 |                                     | $
|Exercisable           |  |                       | 2,668,573 |                                     | $



The
weighted average share price on the date of exercise is $7.25 (December 31, 2020 - $2.25).



On
January 20, 2021, following shareholder approval of the Stock Option Plan, the Company issued 743,671 stock options to directors,
officers and employees, of which 679,582 were issued to directors and officers. These stock options are exercisable at $3.20,
expire December 9, 2025 and vest as follows: (i) 304,709 on January 20, 2021; (ii) 247,890 on January 20, 2022; and (iii) 191,072
on January 20, 2023. These stock options were approved for issuance by the Board of Directors on December 9, 2020, and were granted
upon shareholder approval of the Stock Option Plan on January 20, 2021. The fair value of the stock options issued was $4.73 per
stock option, which was estimated using the Black-Scholes option pricing model using the following inputs and assumptions: stock
price - $6.10; exercise price - $3.20; expected life in years – 4.89 years; expected volatility – 86.59% (based on
comparable companies); expected dividend yield – Nil%; expected forfeiture rate – 2.90%; and, risk-free interest rate
– 0.43%.



On
April 13, 2021, the Company issued 855,234 stock options to directors, officers, employees and consultants, of which 493,969 were
issued to directors and officers. These stock options are exercisable at $8.75, expire January 1, 2026 and vest one-third on January
1, 2022, January 1, 2023 and January 1, 2024 respectively. The fair value of these stock options issued was $6.06 per stock option,
which was estimated using the Black-Scholes option pricing model using the following inputs and assumptions: stock price - $8.73;
exercise price - $8.75; expected life in years – 4.72 years; expected volatility – 92.89% (based on comparable companies);
expected dividend yield – Nil%; expected forfeiture rate – 2.90%; and, risk-free interest rate – 0.94%.



The
Company recorded share-based compensation expense of $5,823,302 (December 31, 2020 - $818,383) for stock options vesting during
the year ended December 31, 2021.





43





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 21. | Stock
                                         options (continued)
| | --- | ------------------------------------------------------------------



The
Company has the following stock options outstanding as at December 31, 2021:



|Expiry
    date       |  | Number
    of stock options outstanding |           | Exercise
    price |   | Number
    of stock options exercisable |  | Weighted
    average remaining life (years) |          
|--------------------- |  | --------------------------------------- | --------- | ------------------ | - | --------------------------------------- |  | ------------------------------------------- | ---------
|                      |  |                                         |           |                    |   |                                         |  |                                             |          
|October
    17, 2022  |  |                                         | 17,959    |                    | $ | 0.80                                    |  |                                             | 17,959   
|November 18, 2022     |  |                                         | 874,558   |                    |   | 0.37                                    |  |                                             | 874,558  
|November 14, 2023     |  |                                         | 13,187    |                    |   | 2.37                                    |  |                                             | 13,187   
|March 29, 2024        |  |                                         | 324,410   |                    |   | 2.37                                    |  |                                             | 324,410  
|August 27, 2024       |  |                                         | 943,750   |                    |   | 2.40                                    |  |                                             | 943,750  
|December 9, 2025      |  |                                         | 739,475   |                    |   | 3.20                                    |  |                                             | 304,709  
|January 1, 2026       |  |                                         | 820,152   |                    |   | 8.75                                    |  |                                             | -        
|December
    12, 2028 |  |                                         | 190,000   |                    |   | 1.00                                    |  |                                             | 190,000  
|                      |  |                                         | 3,923,491 |                    | $ | 3.35                                    |  |                                             | 2,668,573



| | 22. | Share
                                         units
| | --- | ----------------------------------------------------



On
January 20, 2021, the shareholders of the Company approved and ratified the adoption of the Share Unit Plan (“SU Plan”)
which allows for the issuance of restricted share units and performance share units (collectively “Share Units”) to
directors, officers, employees and consultants. The Board of Directors, or a committee appointed by the Board of Directors, will
establish vesting conditions of Share Units at the time of grant. The maximum number of common shares that are issuable to settle
Share Units cannot exceed 4% of the aggregate number of common shares issued and outstanding and the maximum number of common
shares issuable in aggregate under the SU Plan and other share-based compensation arrangements adopted by the Company cannot exceed
10% of the common shares issued and outstanding. Share Units can be settled in cash or common shares at the option of the Company.



On
January 20, 2021, following shareholder approval of the SU Plan, the Company issued 1,251,162 restricted share units to directors,
officers and employees, of which 1,158,772 were issued to directors and officers. These restricted share units are expected to
be settled through the issuance of 1,251,162 common shares of the Company. These restricted share units vest as follows: (i) 530,692
on January 20, 2021; (ii) 417,054 on January 20, 2022; and (iii) 303,416 on January 20, 2023. These restricted share units were
approved for issuance by the Board of Directors on December 9, 2020, and were granted upon shareholder approval of the SU Plan
on January 20, 2021. These restricted share units have been fair valued based on the quoted market price on the date of issuance
of $6.10 per common share.



On
April 13, 2021, the Company issued 1,242,577 restricted share units to directors, officers, employees and consultants, of which
636,887 were issued to directors and officers. These restricted share units are expected to be settled through the issuance of
1,242,577 common shares of the Company. These restricted share units vest one-third on January 1, 2022, January 1, 2023 and January
1, 2024 respectively. These restricted share units have been fair valued based on the quoted market price on the date of issuance
of $8.73 per common share.



On
July 19, 2021, the Company modified the vesting dates of 178,293 restricted share units issued to consultants on April 13, 2021.
These 178,293 restricted share units were modified to vest 100% on October 31, 2021. Share-based compensation expense is recognized
based on the modified vesting term.



The
Company recorded share-based compensation expense of $13,095,187 (December 31, 2020 - $Nil) for restricted share units vesting
during the year ended December 31, 2021.



The
Company has the following restricted share units outstanding as at December 31, 2021 and December 31, 2020:



|Number of restricted share units |  | December 31, 2021 |           |   | December 31, 2020 | 
|-------------------------------- |  | ----------------- | --------- | - | ----------------- | 
|Beginning balance                |  |                   | -         |   |                   | 
|Granted                          |  |                   | 2,493,739 |   |                   | 
|Forfeited                        |  |                   | (38,042   | ) |                   | 
|Ending balance                   |  |                   | 2,455,697 |   |                   | 
|Vested                           |  |                   | 711,452   |   |                   | 





44





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 23. | Income
                                         Tax
| | --- | ---------------------------------------------------



The
reconciliation of the combined Canadian federal and provincial statutory income tax rate of 26.60% (2020 - 26.60%) to the effective
tax rate for the year ended December 31, 2021 and December 31, 2020 is as follows:



|                                                       |  | December 31, 2021 |             |   | December 31, 2020 |  
|------------------------------------------------------ |  | ----------------- | ----------- | - | ----------------- | -
|Statutory income tax rate                              |  |                   | 26.60       | % |                   |  
|                                                       |  |                   |             |   |                   |  
|Net loss before income taxes                           |  | $                 | (52,986,087 | ) |                   | $
|Computed income tax recovery                           |  |                   | (14,094,299 | ) |                   |  
|Increase (decrease) resulting from:                    |  |                   |             |   |                   |  
|Non-deductible expenses and other                      |  |                   | 5,314,788   |   |                   |  
|Differences in foreign tax rates                       |  |                   | (247,875    | ) |                   |  
|Utilization of previously unrecognized tax losses      |  |                   | 199,180     |   |                   |  
|Origination and reversal of temporary differences      |  |                   | 413,197     |   |                   |  
|Current period loss for which no benefit is recognized |  |                   | 7,475,544   |   |                   |  
|Income tax recovery                                    |  | $                 | (939,465    | ) |                   | $



The
components of income tax expense (recovery) are as follows:



|                      |  | December 31, 2021 |            |   | December 31, 2020 |  
|--------------------- |  | ----------------- | ---------- | - | ----------------- | -
|Current tax expense   |  | $                 | 194,222    |   |                   | $
|Deferred tax recovery |  |                   | (1,133,687 | ) |                   |  
|Income tax recovery   |  | $                 | (939,465   | ) |                   | $



The
table below summarizes the movement of net deferred tax assets and liabilities:



|                                   |  | January
1, 2021 |             |   | Recognized in net loss |   |            | Recognized in OCI |  |   | Acquisitions |   |  | December 31, 2021 |            
|---------------------------------- |  | --------------- | ----------- | - | ---------------------- | - | ---------- | ----------------- |  | - | ------------ | - |  | ----------------- | -----------
|Deferred tax asset                 |  |                 |             |   |                        |   |            |                   |  |   |              |   |  |                   |            
|Tax losses carried forward         |  | $               | 5,385,629   |   |                        | $ | (2,065,439 | )                 |  | $ | -            |   |  | $                 | 620,551    
|Financing and share issuance cost  |  |                 | 14,551      |   |                        |   | (14,551    | )                 |  |   | -            |   |  |                   | -          
|Intangible assets and other        |  |                 | 702,666     |   |                        |   | (673,525   | )                 |  |   | (60,616      | ) |  |                   | 1,167,246  
|                                   |  |                 | 6,102,846   |   |                        |   | (2,753,515 | )                 |  |   | (60,616      | ) |  |                   | 1,787,797  
|Deferred tax liability             |  |                 |             |   |                        |   |            |                   |  |   |              |   |  |                   |            
|Intangible assets and other        |  | $               | (21,090,932 | ) |                        | $ | 3,728,197  |                   |  | $ | -            |   |  | $                 | (13,439,766
|Investments                        |  |                 | (173,901    | ) |                        |   | 159,005    |                   |  |   | -            |   |  |                   | -          
|                                   |  |                 | (21,264,833 | ) |                        |   | 3,887,202  |                   |  |   | -            |   |  |                   | (13,439,766
|                                   |  |                 |             |   |                        |   |            |                   |  |   |              |   |  |                   |            
|Net deferred tax asset (liability) |  | $               | (15,161,987 | ) |                        | $ | 1,133,687  |                   |  | $ | (60,616      | ) |  | $                 | (11,651,969



|                                   |  | January 1, 2020 |             |   | Recognized in net loss |   |          | Recognized in OCI |  |   | Acquisitions |  |  | December 31, 2020 |           
|---------------------------------- |  | --------------- | ----------- | - | ---------------------- | - | -------- | ----------------- |  | - | ------------ |  |  | ----------------- | ----------
|Deferred tax asset                 |  |                 |             |   |                        |   |          |                   |  |   |              |  |  |                   |           
|Tax losses carried forward         |  | $               | 1,398,277   |   |                        | $ | (412,552 | )                 |  | $ | -            |  |  | $                 | 4,399,904 
|Financing and share issuance cost  |  |                 | 14,551      |   |                        |   | -        |                   |  |   | -            |  |  |                   | -         
|Intangible assets and other        |  |                 | -           |   |                        |   | 702,666  |                   |  |   | -            |  |  |                   | -         
|                                   |  |                 | 1,412,828   |   |                        |   | 290,114  |                   |  |   | -            |  |  |                   | 4,399,904 
|Deferred tax liability             |  |                 |             |   |                        |   |          |                   |  |   |              |  |  |                   |           
|Intangible assets and other        |  | $               | (13,735,411 | ) |                        | $ | (192,449 | )                 |  | $ | -            |  |  | $                 | (7,163,072
|Investments                        |  |                 | (160,022    | ) |                        |   | (13,879  | )                 |  |   | -            |  |  |                   | -         
|                                   |  |                 | (13,895,433 | ) |                        |   | (206,328 | )                 |  |   | -            |  |  |                   | (7,163,072
|                                   |  |                 |             |   |                        |   |          |                   |  |   |              |  |  |                   |           
|Net deferred tax asset (liability) |  | $               | (12,482,605 | ) |                        | $ | 83,786   |                   |  | $ | -            |  |  | $                 | (2,763,168



45





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 23. | Income
                                         Tax (continued)
| | --- | ---------------------------------------------------------------



Deferred
tax assets have not been recognized in respect of the following deductible temporary differences:



|                                   |  | December 31, 2021 |             |  | December 31, 2020 |  
|---------------------------------- |  | ----------------- | ----------- |  | ----------------- | -
|                                   |  |                   |             |  |                   |  
|Tax losses carried forward         |  | $                 | 84,156,050  |  |                   | $
|Intangible assets and goodwill     |  |                   | 32,732,062  |  |                   |  
|Investments                        |  |                   | 5,112,068   |  |                   |  
|Financing and share issuance costs |  |                   | 9,694,771   |  |                   |  
|Long-term debt                     |  |                   | -           |  |                   |  
|Other temporary differences        |  |                   | 390,249     |  |                   |  
|                                   |  | $                 | 132,085,200 |  |                   | $



The
Company has Canadian net operating losses of $66,740,187 available to reduce taxable income in future years. If not utilized,
these net operating losses will expire between 2031 to 2041.



The
Company has USA net operating losses of $17,415,864 available to reduce taxable income in future years. If not utilized, $2,582,368
of these net operating losses will expire between 2033 and 2036 and $14,833,496 of these net operating losses will carryforward
indefinitely.



Other
deductible temporary differences have an unlimited carryforward period pursuant to current tax laws.



Deferred
tax liabilities related to undistributed earnings from investments in subsidiaries have not been recognized as the Company controls
whether the liabilities will be incurred and the Company is satisfied that the liabilities will not be incurred in the foreseeable
future.



| | 24. | Related
                                         party transactions and balances
| | --- | --------------------------------------------------------------------------------



The
Company’s key management personnel have authority and responsibility for overseeing, planning, directing and controlling
the activities of the Company. Key management personnel include members of the Board of Directors, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer, Chief Corporate Officer, President and former esports President. Compensation of key
management personnel may include short-term and long-term benefits. Short-term benefits include salaries and bonuses. Share-based
compensation includes the fair value of stock options and restricted share units vested during the period.



Compensation
provided to key management during the year ended December 31, 2021 and December 31, 2020 is as follows:



|                         |  | December 31, 2021 |            |  | December 31, 2020 |  
|------------------------ |  | ----------------- | ---------- |  | ----------------- | -
|Short-term benefits      |  | $                 | 2,777,723  |  |                   | $
|Share-based compensation |  |                   | 13,810,779 |  |                   |  
|                         |  | $                 | 16,588,502 |  |                   | $



A
summary of other related party transactions during the year ended December 31, 2021 and December 31, 2020 is as follows:



|                                                               |  | December 31, 2021 |         |  | December 31, 2020 |  
|-------------------------------------------------------------- |  | ----------------- | ------- |  | ----------------- | -
|Total transactions during the year:                            |  |                   |         |  |                   |  
|Revenue                                                        |  | $                 | 839,933 |  |                   | $
|Cost of sales                                                  |  |                   | 41,109  |  |                   |  
|Expenses                                                       |  |                   |         |  |                   |  
|Consulting fees                                                |  |                   | 938,940 |  |                   |  
|Advertising and promotion                                      |  |                   | -       |  |                   |  
|Interest and accretion                                         |  |                   | 282,838 |  |                   |  
|Loss on settlement of vendor-take-back loan                    |  |                   | 316,241 |  |                   |  
|Share of loss from investment in associates and joint ventures |  |                   | 266,641 |  |                   |  





46





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 24. | Related
                                         party transactions and balances (continued)
| | --- | --------------------------------------------------------------------------------------------



A
summary of related party balances at as December 31, 2021 and December 31, 2020 is as follows:



|                                            |  | December 31, 2021 |           |   | December 31, 2020 |  
|------------------------------------------- |  | ----------------- | --------- | - | ----------------- | -
|Balances receivable (payable):              |  |                   |           |   |                   |  
|Investment in associates and joint ventures |  | $                 | 885,269   |   |                   | $
|Trade and other receivables                 |  |                   | 3,734,410 |   |                   |  
|Loans receivable                            |  |                   | 125,995   |   |                   |  
|Accounts payable and accrued liabilities    |  |                   | (382,794  | ) |                   |  
|Contract liabilities                        |  |                   | (55,434   | ) |                   |  
|Vendor-take-back loan                       |  |                   | -         |   |                   |  



On
August 27, 2019, the Company entered into a Management Services Agreement (the “Management SA”) with AIG eSports LP,
a related party by nature of it being under the control or direction of the Chairman of the Company, as well as a Master Services
Agreement (the “Master SA”) with Vancouver Arena Limited Partnership, a related party by nature of it being under
the control or direction of the Chairman of Company (collectively, the “MSAs”). Pursuant to the Management SA, the
Company is to provide a series of esports management services for a base compensation of $100,000 per month, plus an annual amount
of USD $250,000, as well as other additional amounts receivable upon certain milestones relating to the performance of the esports
teams under management. Pursuant to the Master SA, the Company receives a range of marketing and consulting services at a cost
of $100,000 per month, as well as certain other costs payable upon certain milestones relating to third-party revenues generated
by the Company relating to the Master SA services. The MSAs had a retroactive effective date of September 7, 2018, and contain
payment-in-kind provisions whereas either party may, at its discretion, satisfy its amounts payable through the provision of its
respective services. On April 1, 2021, the Management SA with AIG eSports LP and Master SA with Vancouver Arena Limited Partnership
was terminated. During the year ended December 31, 2021, the Company recognized management revenue of $379,125 (December 31, 2020
- $1,535,331) relating to the Management SA, and recognized consulting expenses of $379,125 (December 31, 2020 - $2,080,216) relating
to the Master SA. As at December 31, 2021, a balance of $452,730 (December 31, 2020 - $422,642) is included in trade and other
receivables.



On
April 6, 2020, the Company entered into an Exchange of Marketing Rights and Benefits Agreement with AIG eSports LP and Surge eSports
LLC, related parties by nature of them being under the control or direction of the Chairman of the Company. Pursuant to the Exchange
of Marketing Rights and Benefits Agreement the Company is to provide media advertising for AIG eSports LP and Surge eSports LLC
sponsors and AIG eSports LP and Surge eSports LLC is to provide advertising for the Company. During the year ended December 31,
2021, the Company recognized media advertising revenue of $16,578 (December 31, 2020 - $206,940) and recognized advertising and
promotional expense of $Nil (December 31, 2020 - $277,338) relating to the Exchange of Marketing Rights and Benefits Agreement.
As at December 31, 2021, a balance of $55,434 (December 31, 2020 - $72,343) is included in contract liabilities for media advertising
services to be provided by the Company to AIG eSports and Surge eSports LLC.



During
the year ended December 31, 2021, the Company recognized cost of sales of $Nil (December 31, 2020 - $30,136) from AIG eSport LP
and $Nil (December 31, 2020 - $25,792) from Surge eSports LLC respectively relating to team sponsorship fees. As at December 31,
2021, a balance of $29,952 (December 31, 2020 - $30,079) and $24,427 (December 31, 2020 - $24,531) is due to AIG eSports LP and
Surge eSports LLC, respectively, which is included in accounts payable and accrued liabilities.



As
at December 31, 2021, trade and other receivables include $3,225,177 (December 31, 2020 - $3,238,915) of amounts advanced to Surge
eSports LLC, a related party by nature of it being under the control or direction of the Chairman of the Company. The Company
intends to apply these advances against future share subscriptions in Surge eSports LLC. The advances are non-interest bearing
and are receivable if the Company does not obtain share subscriptions in Surge eSports LLC.





47





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 24. | Related
                                         party transactions and balances (continued)
| | --- | --------------------------------------------------------------------------------------------



On
August 30, 2020, the Company completed the acquisition of Omnia (Note 5), following the acquisition Blue Ant and its affiliated
companies are related parties to the Company. As of July 19, 2021, Blue Ant holds less than 10% of the issued outstanding common
shares of the Company and is no longer a related party of the Company. On July 19, 2021, Robb Chase, chief financial officer of
Blue Ant, resigned from the Board of Directors of the Company. During the period from January 1, 2021 to July 19, 2021, the Company
earned media revenue of $394,373 (August 31, 2020 to December 31, 2020 - $644,658) from Blue Ant and its affiliated companies
and incurred cost of sales of $41,109 (August 31, 2020 to December 31, 2020 - $Nil). As at December 31, 2020, the Company had
trade and other receivables of $741,403 due from Blue Ant and its affiliated companies. As at December 31, 2020, the Company had
accounts payable and accrued liabilities of $380,152 due to Blue Ant and its affiliated companies. See Note 18 for information
relating to the VTB loan payable to Blue Ant.



During
the year ended December 31, 2021, the Company recognized consulting expenses of $75,012 (December 31, 2020 - $73,916) to Rivonia
Capital Inc., a company in which a director of the Company is a principal. As at December 31, 2021, a balance of $7,063 (December
31, 2020 - $14,012) is included in account payable and accrued liabilities.



During
the year ended December 31, 2021, the Company recognized consulting expenses of $74,253 (December 31, 2020 - $Nil) to Franchise
Agency LLC, an agency which represents a director of the Company. As at December 31, 2021, a balance of $55,654 (December 31,
2020 - $Nil) is included in account payable and accrued liabilities.



During
the year ended December 31, 2021 the Company recognized $410,550 (December 31, 2020 - $272,858) in consulting fees relating to
Board of Director and committee fees to certain directors. As at December 31, 2021, a balance of $265,698 (December 31, 2020 -
$237,706) is included in account payable and accrued liabilities.



During
the year ended December 31, 2021 the Company earned media revenue of $49,857 (December 31, 2020 - $Nil) from AFK Media, a related
party by nature of it having common management as the Company. As at December 31, 2021, a balance of $56,503 (December 31, 2020
- $Nil) is included in trade and other receivables.



During
the years ended December 31, 2021, the Company recognized advertising and promotion expense of $Nil (December 31, 2020 - $61,500)
to MKTG Canada Inc., a company in which a director of the Company was the chief executive officer.



As
at December 31, 2021, the Company has other receivables due from the Chief Corporate Officer of $Nil (December 31, 2020 - $248,099)
relating to proceeds receivable for warrant exercises and withholding taxes receivable for stock option exercises.



As
at December 31, 2021, the Company has loans receivable due from the President and Chief Corporate Officer of $80,297 (December
31, 2020 - $96,004) and $45,698 (December 31, 2020 - $52,656) respectively. The loans receivable are non-interest bearing and
due on demand.



See
Note 8 for information relating to an investment in associates controlled by a related party.



See
Note 8 for information relating to an investment in joint under common management as the Company.



See
Note 21 for information relating to stock options issued to officers and directors of the Company.



See
Note 22 for information relating to restricted share units issued to officers and directors of the Company.



| | 25. | Capital
                                         management
| | --- | -----------------------------------------------------------



The
Company considers its capital structure to consist of shareholders’ equity, long-term debt and deferred payment liability.
The Company manages its capital structure and makes adjustments to it, in order to have the funds available to support the acquisition
and development of its business. The Board of Directors does not establish quantitative return on capital criteria for management,
but rather relies on the expertise of the Company’s management to sustain future development of the business.



The
Company is dependent on external equity financing to fund its activities. In order to carry out the planned operations and pay
for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed. Management
reviews its capital management approach on an ongoing basis and believes that this approach, given the size of the Company, is
reasonable. There were no changes in the Company’s approach to capital management during the year ended December 31, 2021.
Neither the Company nor its subsidiaries are subject to externally imposed capital requirements aside from the covenants described
in Note 14.





48





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 25. | Capital
                                         management (continued)
| | --- | -----------------------------------------------------------------------



The
Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern. The
Company’s ability to raise future capital is subject to uncertainty and the inability to raise such capital may have an
adverse impact over the Company’s ability to continue as a going concern.



| | 26. | Financial
                                         instruments
| | --- | --------------------------------------------------------------



Fair
values



The
fair values of cash, investments, trade and other receivables, loans receivable, accounts payable and accrued liabilities and
contract liabilities approximate their carrying values due to the relatively short-term nature of these financial instruments.
The fair value of long-term debt, lease contract liabilities, deferred payment liability, other long-term debt, convertible debentures
and VTB loan is based on observable market data and the calculation of discounted cash flows. Discount rates were determined based
on current terms and conditions observed in the credit market.



The
Company follows a three-tier categorization for its financial instruments as a framework for disclosing fair value based upon
inputs used to value the Company’s investments. The hierarchy is summarized as:

| | ● | Level
                                         1 – quoted prices (unadjusted) in active markets for identical assets and liabilities
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | ● | Level
                                         2 – inputs that are observable for the asset or liability, either directly (prices)
                                         or indirectly (derived from prices) from observable market data
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Level
                                         3 – inputs for assets and liabilities not based upon observable market data
| | - | --------------------------------------------------------------------------------------------------------------------------



As
at September 3, 2021, the investment in Addicting Games is classified as a Level 3 financial instrument, see Note 7, and as at
December 31, 2021 the Vedatis Earn-Out Payment liability is classified as a Level 3 financial instrument, see Note 17.



Total
interest income and interest expense for the years ended December 31, 2021 and December 31, 2020 for financial assets or financial
liabilities that are not at fair value through profit or loss can be summarized as follows:



|                               |  | December 31, 2021 |           |   | December 31, 2020 |  
|------------------------------ |  | ----------------- | --------- | - | ----------------- | -
|Interest income                |  | $                 | (51,529   | ) |                   | $
|Interest and accretion expense |  |                   | 2,844,956 |   |                   |  
|Net interest expense           |  | $                 | 2,793,427 |   |                   | $



The
Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those
risks. These risks may include credit risk, liquidity risk, foreign currency risk and interest rate risk.



Credit
risk



Credit
risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its obligations.



The
Company’s maximum exposure to credit risk for its trade receivables is summarized as follows:



|                               |  | December 31, 2021 |            |   | December 31, 2020 |  
|------------------------------ |  | ----------------- | ---------- | - | ----------------- | -
|Trade receivables aging:       |  |                   |            |   |                   |  
|0-30 days                      |  | $                 | 26,263,555 |   |                   | $
|31-60 days                     |  |                   | 685,112    |   |                   |  
|61-90 days                     |  |                   | 868,473    |   |                   |  
|Greater than 90 days           |  |                   | 2,217,521  |   |                   |  
|                               |  |                   | 30,034,661 |   |                   |  
|Expected credit loss provision |  |                   | (58,472    | ) |                   |  
|Net trade receivables          |  | $                 | 29,976,189 |   |                   | $





49





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 26. | Financial
                                         instruments (continued)
| | --- | --------------------------------------------------------------------------



Credit
risk (continued)



The
movement in the expected credit loss provision can be reconciled as follows:



|                                                  |  | December 31, 2021 |         |   | December 31, 2020 |  
|------------------------------------------------- |  | ----------------- | ------- | - | ----------------- | -
|Expected credit loss provision:                   |  |                   |         |   |                   |  
|Expected credit loss provision, beginning balance |  | $                 | (67,466 | ) |                   | $
|Increase in provision for expected credit loss    |  |                   | -       |   |                   |  
|Write-offs                                        |  |                   | -       |   |                   |  
|Recoveries                                        |  |                   | 8,504   |   |                   |  
|Effect of movement in exchange rates              |  |                   | 490     |   |                   |  
|Expected credit loss provision, ending balance    |  | $                 | (58,472 | ) |                   | $



The
following default rates, determined based on historical default rates based on the aging of trade receivables, are used to calculate
the expected credit loss provision on trade receivables as at December 31, 2021:



|                               |  | Total |            |  | Not past due |   |            | Over 30 days past due |  |   | Over 60 days past due |   |  | Over 90 days past due |        
|------------------------------ |  | ----- | ---------- |  | ------------ | - | ---------- | --------------------- |  | - | --------------------- | - |  | --------------------- | -------
|                               |  |       |            |  |              |   |            |                       |  |   |                       |   |  |                       |        
|Default rates                  |  |       |            |  |              |   | 0.13       | %                     |  |   | 0.20                  | % |  |                       | 0.33   
|Trade receivables              |  | $     | 30,034,661 |  |              | $ | 26,263,555 |                       |  | $ | 685,112               |   |  | $                     | 868,473
|Expected credit loss provision |  | $     | 58,472     |  |              | $ | 34,539     |                       |  | $ | 1,339                 |   |  | $                     | 2,905  



All
of the Company’s cash is held with major financial institutions and thus the exposure to credit risk is considered insignificant.
Management actively monitors the Company’s exposure to credit risk under its financial instruments.



Concentration
risk



The
Company has one customer which makes up more than 10% of revenue, this customer accounts for approximately 46.58% (December 31,
2020 – 67.02%) of trade receivables as at December 31, 2021 and 69.36% (December 31, 2020 – 64.09%) of revenues for
the year ended December 31, 2021.



Liquidity
risk



Liquidity
risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company
has a planning and budgeting process in place by which it anticipates and determines the funds required to support its normal
operating requirements.



The
Company holds sufficient cash and working capital which is maintained through stringent cash flow management to ensure sufficient
liquidity is maintained. The table below summarizes the Company’s contractual obligations into relevant maturity groups
at the statement of financial position date based on the expected contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted payments.



|                                         |  | Less than one year |            |  | One to two years |   |            | Two to three years |  |   | More than three years |  |  | Total |          
|---------------------------------------- |  | ------------------ | ---------- |  | ---------------- | - | ---------- | ------------------ |  | - | --------------------- |  |  | ----- | ---------
|                                         |  |                    |            |  |                  |   |            |                    |  |   |                       |  |  |       |          
|Accounts payable and accrued liabilities |  | $                  | 34,391,221 |  |                  | $ | -          |                    |  | $ | -                     |  |  | $     | -        
|Contract liabilities                     |  |                    | 3,890,569  |  |                  |   | -          |                    |  |   | -                     |  |  |       | -        
|Income tax payable                       |  |                    | 114,094    |  |                  |   | -          |                    |  |   | -                     |  |  |       | -        
|Deferred payment liability               |  |                    | 29,604,825 |  |                  |   | 23,200,740 |                    |  |   | -                     |  |  |       | 2,141,645
|Lease contract liabilities               |  |                    | 858,387    |  |                  |   | 943,882    |                    |  |   | 670,543               |  |  |       | 778,607  
|Long-term debt                           |  |                    | 2,000,000  |  |                  |   | 8,000,000  |                    |  |   | -                     |  |  |       | -        
|Other long-term debt                     |  |                    | 11,121     |  |                  |   | 11,121     |                    |  |   | 11,121                |  |  |       | 365,187  
|                                         |  | $                  | 70,870,217 |  |                  | $ | 32,155,743 |                    |  | $ | 681,664               |  |  | $     | 3,285,439





50





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 26. | Financial
                                         instruments (continued)
| | --- | --------------------------------------------------------------------------



Foreign
currency risk



A
large portion of the Company’s transactions occur in foreign currencies (including US dollars, UK pound sterling and Euro)
and, therefore, the Company is exposed to foreign currency risk at the end of the reporting period through its US dollars, UK
pound sterling and Euro denominated trade and other receivables, accounts payable and accrued liabilities, deferred payment liability
and cash. As at December 31, 2021, a 10% depreciation or appreciation of the US dollar, UK pound sterling and Euro against the
Canadian dollar would have resulted in an approximate $2,598,000, $75,000 and $330,000 decrease or increase, respectively, in
total net loss and comprehensive loss.



Interest
rate risk



The
Company’s long-term debt bears interest at Banker’s Acceptance fee equal to CDOR rate plus 7.5%. Fluctuations in the
Banker’s Acceptance fee equal to CDOR rate will result in changes to the months interest expense. A change in the annual
interest rate of 0.50% would result in a $45,000 change in the annual interest expense.



| | 27. | Commitments
| | --- | -----------



The
Company has the following payment commitments with respect to consulting and other contractual obligations:



|Not later than one year                           |  | $ | 875,000   | 
|------------------------------------------------- |  | - | --------- | 
|Later than one year and not later than five years |  |   | 1,267,000 | 
|                                                  |  | $ | 2,142,000 | 



Further,
the Company is subject to capital commitments pursuant to its investments in AIG Canada and AIG USA, see Note 8, as well as Surge
eSports LLC which is being established under a similar structure. If the Company fails to make any capital contributions, as required,
it may be subject to certain actions including the loss of rights or a reduction in equity ownership in order to satisfy the capital
contribution requirements.



| | 28. | Segment
                                         disclosure
| | --- | -----------------------------------------------------------



The
Company operates in one industry segment of digital media and entertainment. The majority of the Company’s assets are located
in Canada and the United States of America (“USA”). The Company sells into three major geographic centers: USA, Canada
and other foreign countries. The Company has determined that it has a single reportable segment as the Company’s decision
makers reviews information on a consolidated basis.



Revenues
by pillar for the years ended December 31, 2021 and 2020 is as follows:



|                          |  | December 31, 2021 |             |  | December 31, 2020 |  
|------------------------- |  | ----------------- | ----------- |  | ----------------- | -
|Media and content         |  | $                 | 152,444,727 |  |                   | $
|Esports and entertainment |  |                   | 5,483,444   |  |                   |  
|Subscription              |  |                   | 9,436,115   |  |                   |  
|                          |  | $                 | 167,364,286 |  |                   | $



Revenues,
in Canadian dollars, in each of these geographic location for years ended December 31, 2021 and 2020 is as follows:



|                    |  | December 31, 2021 |             |  | December 31, 2020 |  
|------------------- |  | ----------------- | ----------- |  | ----------------- | -
|Canada              |  | $                 | 2,501,988   |  |                   | $
|USA                 |  |                   | 147,761,804 |  |                   |  
|All other countries |  |                   | 17,100,494  |  |                   |  
|                    |  | $                 | 167,364,286 |  |                   | $





51





Enthusiast Gaming Holdings Inc.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021
and 2020

(Expressed in Canadian Dollars)






| | 28. | Segment
                                         disclosure (continued)
| | --- | -----------------------------------------------------------------------



The
non-current assets, in Canadian dollars, in each of the geographic locations as at December 31, 2021 and December 31, 2020 is
as follows:



|                  |  | December 31, 2021 |             |  | December 31, 2020 |  
|----------------- |  | ----------------- | ----------- |  | ----------------- | -
|Canada            |  | $                 | 169,761,447 |  |                   | $
|USA               |  |                   | 153,549,460 |  |                   |  
|France            |  |                   | 3,453,744   |  |                   |  
|England and Wales |  |                   | 1,752,444   |  |                   |  
|                  |  | $                 | 328,517,095 |  |                   | $



| | 29. | Subsequent
                                         events
| | --- | ----------------------------------------------------------



| | (i) | On
                                         January 1, 2022, Enthusiast Gaming Media Inc. and Enthusiast Gaming Media III Holdings
                                         Inc. amalgamated with Enthusiast Gaming Inc. and Enthusiast Gaming Media II Holdings
                                         Inc. amalgamated with Enthusiast Gaming Live Inc.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | On
                                         February 14, 2022, the Company issued the remaining 35,770 common shares to be issued
                                         relating to the Outplayed MA were issued (Note 5).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | On
                                         February 25, 2022, the loan receivable from the Chief Corporate Officer of $45,698 was
                                         repaid to the Company (Note 24).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | On
                                         February 28, 2022, the USD $500,000 GameKnot Deferred Payment liability was settled by
                                         the Company issuing 111,267 common shares (Note 17(iii)).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | On
                                         March 15, 2022, the loan receivable from the President of $80,297 was repaid to the Company
                                         (Note 24).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





52