Document:

Exhibit
4.6

 

 

ENGINE
MEDIA HOLDINGS, INC.

 

Interim
Condensed Consolidated Financial Statements

 

(Unaudited)

 

For
the three months ended

November
30, 2020 and 2019

 

(Expressed
in United States Dollars)

 

    	 

     

    

 

	Engine
                                         Media Holdings, Inc.

        November
        30, 2020 and 2019

        (Unaudited)
	
	 	 

 

Table
of Contents

 

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

  

    	 
	Page 2 of 41

     

    

 

	Engine
                                         Media Holdings, Inc.

Management’s
Responsibility for Financial Reporting and Notice to Reader

For
the three months ended November 30, 2020 and 2019

(Expressed
in United States Dollars)

(Unaudited)

	
	 	 

 

MANAGEMENT’S
RESPONSIBILITY FOR FINANCIAL REPORTING

 

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

 

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

 

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

 

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

 

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

 

NOTICE
TO READER

 

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

 

    	 
	Page 3 of 41

     

    

 

	Engine
                                         Media Holdings, Inc.

        

Interim
Condensed Consolidated Statements of Financial Position

As
at November 30, 2020 and August 31, 2020

(Expressed
in United States Dollars)

(Unaudited)

        
	
	 	 

 

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

 

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

 

    	 
	Page 4 of 41

     

    

 

	Engine
                                         Media Holdings, Inc.

        

        

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

        As
        at November 30, 2020 and August 31, 2020

        (Expressed
        in United States Dollars)

        (Unaudited)
	
	 	 

 

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

 

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

 

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

 

    	 
	Page 5 of 41

     

    

 

	Engine
                                         Media Holdings, Inc. 

        

Interim
Condensed Consolidated Statements of Loss and Comprehensive Loss

For
the three months ended November 30, 2020 and 2019

(Expressed
in United States Dollars)

(Unaudited)
	
	 	 

 

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

 

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

 

    	 
	Page 6 of 41

     

    

 

	Engine
                                         Media Holdings, Inc.

        

Interim
Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)

For
the three months ended November 30, 2020 and 2019

(Expressed
in United States Dollars)

(Unaudited)

	
	 	 

 

	 	 	Share
                                         capital:

                                                                                Number
	 	 	Share
                                         capital:

                                                                                Amount
	 	 	Shares
                                         to be

                                                                                issued
	 	 	Contributed

                                                                                surplus
	 	 	Foregin
                                         currency

                                                                                translation

                                                                                reserve
	 	 	Deficit	 	 	Total

    equity before
 non-controlling interest	 	 	Non-controlling
    interest	 	 	Total

    equity	 
	 	 	#	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    as at August 31, 2019	 	 	156,440	 	 	 	29,613,406	 	 	 	760,216	 	 	 	2,753,037	 	 	 	(1,333,172	)	 	 	(39,754,120	)	 	 	(7,960,633	)	 	 	293,451	 	 	 	(7,667,182	)
	Share-based
    payments	 	 	-	 	 	 	-	 	 	 	-	 	 	 	11,114	 	 	 	-	 	 	 	-	 	 	 	11,114	 	 	 	-	 	 	 	11,114	 
	Convertible
    debt conversion	 	 	177,067	 	 	 	617,248	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	617,248	 	 	 	-	 	 	 	617,248	 
	Non-controlling
    interest in subsidiary	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(10,887	)	 	 	-	 	 	 	-	 	 	 	(10,887	)	 	 	-	 	 	 	(10,887	)
	Net
    loss for the period	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(8,051,191	)	 	 	(8,051,191	)	 	 	(35,100	)	 	 	(8,086,291	)
	Foreign
    currency translation differences	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(507,853	)	 	 	-	 	 	 	(507,853	)	 	 	-	 	 	 	(507,853	)
	Balance,
    as at November 30, 2019	 	 	333,507	 	 	 	30,230,654	 	 	 	760,216	 	 	 	2,753,264	 	 	 	(1,841,025	)	 	 	(47,805,311	)	 	 	(15,902,202	)	 	 	258,351	 	 	 	(15,643,851	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    as at August 31, 2020	 	 	7,746,136	 	 	 	69,380,807	 	 	 	1,059,214	 	 	 	4,034,323	 	 	 	(2,334,275	)	 	 	(72,094,162	)	 	 	45,907	 	 	 	217,385	 	 	 	263,292	 
	Share-based
    payments	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,088,638	 	 	 	-	 	 	 	-	 	 	 	1,088,638	 	 	 	-	 	 	 	1,088,638	 
	Shares
    issued on vesting of RSUs	 	 	66,666	 	 	 	410,189	 	 	 	-	 	 	 	(230,189	)	 	 	-	 	 	 	-	 	 	 	180,000	 	 	 	-	 	 	 	180,000	 
	Convertible
    debt conversion	 	 	36,666	 	 	 	164,343	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	164,343	 	 	 	-	 	 	 	164,343	 
	Common
    shares issued on exercise of warrants	 	 	7,166	 	 	 	56,079	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	56,079	 	 	 	-	 	 	 	56,079	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(1,059,214	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1,059,214	)	 	 	-	 	 	 	(1,059,214	)
	Non-controlling
    interest in subsidiary	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(7,704	)	 	 	-	 	 	 	-	 	 	 	(7,704	)	 	 	-	 	 	 	(7,704	)
	Net
    loss for the period	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(5,999,433	)	 	 	(5,999,433	)	 	 	(31,030	)	 	 	(6,030,463	)
	Foreign
    currency translation differences	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	133,845	 	 	 	-	 	 	 	133,845	 	 	 	-	 	 	 	133,845	 
	Balance,
    as at November 30, 2020	 	 	7,856,634	 	 	 	70,011,418	 	 	 	-	 	 	 	4,885,068	 	 	 	(2,200,430	)	 	 	(78,093,595	)	 	 	(5,397,539	)	 	 	186,355	 	 	 	(5,211,184	)

 

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

 

    	 
	Page 7 of 41

     

    

 

	Engine
                                         Media Holdings, Inc.

        

Interim
Condensed Consolidated Statements of Cash Flows

For
the three months ended November 30, 2020 and 2019

(Expressed
in United States Dollars)

(Unaudited)

	
	 	 

 

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

 

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

 

    	 
	Page 8 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	1.	Corporate
    information and going concern

 

	(a)	Corporate
    information

 

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

 

The
Company focuses on accelerating new, live, immersive esports and interactive gaming experiences for consumers through its partnerships
with traditional and emerging media companies and providing online interactive technology and monetization services.

 

	(b)
    	Going
    concern

 

These
interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company
will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give
effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required
to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts
different from those in the accompanying consolidated financial statements. Such adjustments could be material. It is not possible
to predict whether the Company will be able to raise adequate financing or to ultimately attain profit levels of operations.

 

The
Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit
of $78,093,595 as at November 30, 2020 (August 31, 2020 – $72,094,162). The recoverability of the carrying value of the
assets and the Company’s continued existence is dependent upon the achievement of profitable operations, or the ability
of the Company to raise alternative financing, if necessary. The Company raised $17.8 million in a private placement of units
in January 2021 (Note 27) and plans to raise additional amounts. While management has been historically successful in raising
the necessary capital, it cannot provide assurance that it will be able to execute on its business strategy or be successful in
future financing activities. As at November 30, 2020, the Company had a working capital deficiency of $25,244,691 (August 31,
2020 – working capital deficiency of $29,663,546) which is comprised of current assets less current liabilities. The Company
also faces uncertain future impacts from COVID-19 (Note 3(b)).

 

These
conditions indicate the existence of material uncertainties that cast significant doubt about the Company’s ability to continue
as a going concern. Changes in future conditions could require material write downs of the carrying values of goodwill and other
long-lived intangibles.

 

	2.	Basis
    of preparation

 

	(a)	Statement
    of compliance

 

These
interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34,
Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements
required by International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards
Board (“IASB”). These unaudited interim condensed consolidated financial statements are prepared on a basis consistent
with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended August 31, 2020;
and should be read in conjunction with those audited consolidated financial statements. Interim results are not necessarily indicative
of the results expected for the fiscal year.

 

    	 
	Page 9 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	2.	Basis
    of preparation (cont’d)

 

	(a)	Statement
    of compliance (cont’d)

 

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

 

	(b)	Basis
    of consolidation

 

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

 

All
transactions and balances between the Company and its subsidiaries are eliminated on consolidation, including unrealized gains
and losses on transactions between companies. Unrealized gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the
same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

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

 

	Name
    of Subsidiary	 	Country
    of Incorporation	 	Ownership
                                         

        Percentage
	 	Functional
                                         

        Currency

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

 

Non-controlling
interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

    	 
	Page 10 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	2.	Basis
    of preparation (cont’d)

 

	(c)	Functional
    and presentation currency

 

The
functional currency of the Company is the US Dollar (“USD). The functional currencies of the Company’s subsidiaries
are disclosed in Note 2(b). The presentation currency of the interim condensed consolidated financial statements is the
US Dollar (“USD”).

 

	(d)
    	Expense
    reclassifications 

 

For
comparability, certain amounts for the three months ended November 30, 2019 have been reclassified to conform with classifications
adopted for the year ended August 31, 2020. With the significant acquisitions of UMG, Media Ltd. (UMG), Frankly Inc. (Frankly)
and WinView, Inc. (WinView) during fiscal 2020, many of the prior expense classifications for the three months ended November
30, 2019 did not best represent the nature of the ongoing business. These reclassifications had no effect on net loss or shareholders’
equity (deficiency).

 

	(e)	Income
    taxes

 

The
Company had no income tax expense for the three months ended November 30, 2020 and 2019. At November 30, 2020, deferred tax assets
have not been recognized because it has not been determined as probable that future taxable profit will be available against which
the Company can utilize the benefits therefrom.

 

	3.	Significant
    judgments, estimates and assumptions

 

The
preparation of these interim condensed consolidated financial statements requires management to make judgments and estimates and
form assumptions that affect the reported amounts of assets and liabilities at the date of the interim condensed consolidated
financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate
to unsettled transactions and events as at the date of the interim condensed consolidated financial statements.

 

On
an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues, and expenses.
Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as
the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions.
Significant estimates and judgments made by management in the preparation of these interim condensed consolidated financial statements
are outlined below.

 

The
assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances. There is a material uncertainty regarding the Company’s
ability to continue as a going concern.

 

    	 
	Page 11 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(a)	Significant
    estimates and critical judgments

 

Information
about significant estimates and critical judgements in applying accounting policies that have the most significant effect on the
amounts recognized in the interim condensed consolidated financial statements is included in the following notes:

 

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

 

	(b)	Uncertainty
    about the effects of COVID-19

 

In
December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has since extensively impacted global health
and the economic environment. To contain the spread of COVID-19, domestic and international governments around the world enacted
various measures, including orders to close all businesses not deemed “essential,” quarantine orders for individuals
to stay in their homes or places of residence, and to practice social distancing when engaging in essential activities. It is
anticipated that these actions and the global health crisis caused by COVID-19 will continue to negatively impact many business
activities and financial markets across the globe.

 

The
fact that our business has increasingly shifted to digital channels, we have increased flexibility as we navigate through the
uncertain environment and near-term implications of the COVID-19 pandemic. The impact of the pandemic on our business has been
mixed thus far. While we have seen some increase in demand for our digital products and services, however, this demand has been
more than offset by reduction in spending by our customers.

 

In
an effort to protect the health and safety of our employees, the majority of our workforce is currently working from home and
we have placed restrictions on non-essential business travel. We have implemented business continuity plans and have increased
support and resources to enable our employees to work remotely and thus far our business has been able to operate with minimal
disruption.

 

The
global COVID-19 pandemic remains a rapidly evolving situation. We will continue to actively monitor the developments of the pandemic
and may take further actions that could alter our business operations as may be required by federal, state, local, or foreign
authorities, or that we determine are in the best interests of our employees, customers, partners and shareholders. It is not
clear what effects any such potential actions may have on our business, including the effects on our employees, players and consumers,
customers, partners, development and content pipelines, our reputation, financial condition, results of operations, revenue, cash
flows, liquidity or stock price.

 

    	 
	Page 12 of 41

     

    

  

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	4.
    	Changes
    in significant accounting policies

 

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

 

	5.	Net
    income (loss) per share

 

Due
to the net loss incurred during the three months ended November 30, 2020 and 2019, all outstanding options, restricted share units
and warrants were excluded from diluted weighted-average common shares outstanding as their effect was anti-dilutive. Weighted
average common shares outstanding for the three months ended November 30, 2020 and 2019 were 7,699,907 and 164,659, respectively.

 

	6.
    	Accounts
    and other receivables

 

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

 

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

 

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

 

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

 

    	 
	Page 13 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	7.
    	Investment
    in associate

 

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

 

On
August 25, 2020, the Company acquired a 20.48% interest in One Up Group, LLC (“One Up”). One Up operates a mobile
app which allows gamers to organize and play one-on-one matches with other gamers and compete for money. The Company believes
there will be synergies with the WinView business.

 

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

 

	8.	Property
    and equipment

 

	Cost	 	Leasehold

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

 

    	 
	Page 14 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	8.	Property
    and equipment (cont’d)

 

	Accumulated
    amortization	 	Leasehold

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

 

	Net
    book value	 	Leasehold

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

 

	9.	Goodwill

 

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

 

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

 

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

 

    	 
	Page 15 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	10.	Intangible
    assets

 

	Cost	 	Patents	 	 	Application
    Platforms	 	 	Software	 	 	Brand	 	 	Customer
    
 Lists and 
 Contracts	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2019	 	 	-	 	 	 	760,323	 	 	 	5,055,798	 	 	 	1,662,993	 	 	 	477,592	 	 	 	7,956,706	 
	Foreign
    exchange	 	 	-	 	 	 	(1,076	)	 	 	(32,421	)	 	 	(3,550	)	 	 	(640	)	 	 	(37,687	)
	November
    30, 2019	 	 	-	 	 	 	759,247	 	 	 	5,023,377	 	 	 	1,659,443	 	 	 	476,952	 	 	 	7,919,019	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	9,430,265	 	 	 	1,322,802	 	 	 	10,763,975	 	 	 	2,310,475	 	 	 	3,671,954	 	 	 	27,499,471	 
	Additions	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	11,797	 	 	 	11,797	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(3,598,869	) 	 	 	(201,627	)	 	 	(222,650	)	 	 	(4,023,146	)
	Foreign
    exchange	 	 	-	 	 	 	20,516	 	 	 	322,019	 	 	 	101,056	 	 	 	2,866	 	 	 	446,457	 
	November
    30, 2020	 	 	9,430,265	 	 	 	1,343,318	 	 	 	7,487,125	 	 	 	2,209,904	 	 	 	3,463,967	 	 	 	23,934,579	 

 

	Accumulated
    amortization	 	Patents	 	 	Application
    Platforms	 	 	Software	 	 	Brand	 	 	Customer
    
 Lists and 
 Contracts	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2019	 	 	-	 	 	 	628,277	 	 	 	2,634,338	 	 	 	673,302	 	 	 	296,061	 	 	 	4,231,978	 
	Amortization	 	 	-	 	 	 	22,491	 	 	 	425,403	 	 	 	74,221	 	 	 	13,388	 	 	 	535,503	 
	Foreign
    exchange	 	 	-	 	 	 	(225	)	 	 	(10,436	)	 	 	(1,625	)	 	 	(273	)	 	 	(12,559	)
	November
    30, 2019	 	 	-	 	 	 	650,543	 	 	 	3,049,305	 	 	 	745,898	 	 	 	309,176	 	 	 	4,754,922	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	628,684	 	 	 	793,041	 	 	 	4,909,000	 	 	 	1,077,491	 	 	 	648,933	 	 	 	8,057,149	 
	Amortization	 	 	471,513	 	 	 	51,594	 	 	 	779,385	 	 	 	122,746	 	 	 	145,910	 	 	 	1,571,148	 
	Disposal
    of Motorsports	 	 	-	 	 	 	-	 	 	 	(532,412	)	 	 	(201,627	)	 	 	(222,650	)	 	 	(956,689	)
	Foreign
    exchange	 	 	-	 	 	 	17,427	 	 	 	301,761	 	 	 	49,090	 	 	 	(69,603	)	 	 	298,675	 
	November
    30, 2020	 	 	1,100,197	 	 	 	862,062	 	 	 	5,457,734	 	 	 	1,047,700	 	 	 	502,590	 	 	 	8,970,283	 

 

	Net
    book value	 	Patents	 	 	Application
    Platforms	 	 	Software	 	 	Brand	 	 	Customer
    
 Lists and 
 Contracts	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	August
    31, 2020	 	 	8,801,581	 	 	 	529,761	 	 	 	5,854,975	 	 	 	1,232,984	 	 	 	3,023,021	 	 	 	19,442,322	 
	November
    30, 2020	 	 	8,330,068	 	 	 	481,256	 	 	 	2,029,391	 	 	 	1,162,204	 	 	 	2,961,377	 	 	 	14,964,296	 

 

    	 
	Page 16 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	10.	Intangible
    assets (cont’d)

 

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

 

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

 

	11.	Right-of-use
    assets

 

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

 

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

 

	12.	Lease
    liabilities

 

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

 

	 	 	Equipment	 	 	Office
    lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2019	 	 	-	 	 	 	-	 	 	 	-	 
	Additions
    to right-of-use assets on adoption of IFRS 16, September 1, 2019	 	 	-	 	 	 	234,215	 	 	 	234,215	 
	Interest
    expense	 	 	-	 	 	 	1,821	 	 	 	1,821	 
	Payments	 	 	-	 	 	 	(27,528	)	 	 	(27,528	)
	Balance,
    November 30, 2019	 	 	-	 	 	 	208,508	 	 	 	208,508	 

 

    	 
	Page 17 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	12.	Lease
    liabilities (cont’d)

 

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

 

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

 

	 	 	Equipment	 	 	Office
    lease	 	 	Total	 
	 	 	$	 	 	$	 	 	$	 
	As
    at August 31, 2020:	 	 	 	 	 	 	 	 	 	 	 	 
	Less
    than one year	 	 	11,409	 	 	 	174,262	 	 	 	185,671	 
	Greater
    than one year	 	 	24,048	 	 	 	362,429	 	 	 	386,477	 
	Total
    lease obligation	 	 	35,457	 	 	 	536,691	 	 	 	572,148	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	As
    at November 30, 2020:	 	 	 	 	 	 	 	 	 	 	 	 
	Less
    than one year	 	 	11,595	 	 	 	178,279	 	 	 	189,874	 
	Greater
    than one year	 	 	21,079	 	 	 	316,555	 	 	 	337,634	 
	Total
    lease obligation	 	 	32,674	 	 	 	494,834	 	 	 	527,508	 

 

	13.	Players
    liability account

 

The
Players liability account consists of UMG and Winview cash deposited by players, plus any prize winnings, less any fees for match
game play and withdrawal requests processed to date. As at November 30, 2020, the players liability account balance is the total
amount payable if all players were to request closure of their accounts. As at November 30, 2020, the players account liability
and corresponding restricted cash balances were the same.

 

	14.	Promissory
    notes payable and other borrowings

 

	(a)	Promissory
    notes

 

The
Company has promissory notes with a balance of $200,000 (August 31, 2020 – $200,000) that are unsecured, due on demand,
and bear interest at 18%. As of November 30, 2020, interest of $83,581 has been accrued (August 31, 2020 – $83,435).

 

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

 

The
Company, through its WinView subsidiary, has a secured promissory note outstanding for amounts due for the provision of services
by the noteholder. As of November 30, 2020, $985,671 was due under the note (August 31, 2020 – $1,527,582). The note is
secured by the assets of WinView, bears interest at 8%, and is currently due. As of November 30, 2020, interest of $79,263 has
been accrued on this note (August 31, 2020 – $63,612).

 

    	 
	Page 18 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(a)	Promissory
    notes (cont’d)

 

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

 

As
of November 30, 2020, the Company, through its UMG subsidiary, has a balance of $330,000 (August 31, 2020 – $330,000) due
to a former UMG shareholder. This balance was the remaining cash due for the purchase of UMG Events LLC (subsidiary of UMG Media
Ltd.), is currently due, and was non-interest bearing until the due date. As of November 30, 2020, interest of $15,074 has been
accrued on this note (August 31, 2020 – $nil).

 

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

 

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

 

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

 

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

 

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

 

    	 
	Page 19 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(c)	Frankly
    line of credit

 

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

 

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

 

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

 

	15.	Convertible
    debt

 

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

 

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

 

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

 

    	 
	Page 20 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	15.	Convertible
    debt (cont’d)

 

	(a)	Conversions
    during the period

 

During
the three months ended November 30, 2020, 2019 Series convertible debentures with a principal amount of CAD$275,000 (2019 –
CAD$1,328,000) were converted into 36,666 units (2019 – 177,067), and as a result, the Company issued 36,666 common
shares and 36,666 warrants (2019 – 177,067 common shares and 177,067 warrants). The fair value of the convertible debentures
at the time of conversion was estimated using the binomial lattice model with the below assumptions:

 

Share
price of CAD$11.65 (2019 – CAD$29.85); term of 1.90 years (2019 – 2.68 and 2.77); conversion price and warrant exercise
price of CAD$7.50 (2019 – CAD$7.50); interest rate of 6% (2019 – 6%); expected volatility of 179% (2019 – 150%);
risk-free interest rate of 0.25% (2019 – 1.47%); exchange rate of 0.7651 (2019 – 0.7599); and an expected dividend
yield of 0% (2019 – 0%). The fair value assigned to these convertible debentures was $305,223 (2019 – $1,228,333).

 

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

 

	(b)	Issuances
    during the period

 

During
the three months ended November 30, 2020, 2020 Series convertible debentures with a principal amount of $2,901,393 were issued
for gross proceeds of $2,901,393. In addition, in November 2020, $2,000,000 of convertible debentures from the Company’s
standby convertible debenture facility were issued along with 224,719 warrants for gross proceeds of $2,000,000 (Note 15(f)).
Of the gross proceeds of $2,000,000, $1,381,084 was allocated to the convertible debt and $618,916 was allocated to the 224,719
warrants issued (Note 15(f)). The total fair value recorded to convertible debt for issuances above amounted to $4,282,477.

 

	(c)	2019
    Series

 

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

 

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

 

    	 
	Page 21 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	15.	Convertible
    debt (cont’d)

 

	(d)	2020
    Series

 

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

 

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

 

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

 

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

 

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

 

	(e)	2020
    Series - One Up

 

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

 

	(f)	2020
    Series – Standby

 

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

 

The
proceeds of $2,000,000 from the first draw were allocated between convertible debt and warrant liability with $1,381,084 allocated
to convertible debt and $618,916 allocated to the 224,719 warrants issued.

 

    	 
	Page 22 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	15.	Convertible
    debt (cont’d)

 

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

 

The
remaining $6,000,000 of convertible debentures that are issuable under this facility have substantially similar terms as the 2020
Series debentures, including conversion into units consisting of one share and one-half warrant, provided that the conversion
price of any additional convertible debentures will be based on the market price of the common shares at the time of such subscriptions
and are subject to TSX-V approval.

 

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

 

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

 

	16.	Long-term
    debt 

 

The
Company has an unsecured, non-interest bearing loan that matures on June 30, 2022. The loan bears interest at 0% per annum. As
at August 31, 2020, the present value of the loan was $164,601 (August 31, 2020 – $230,932), accretion having been charged
to interest expense on the Company’s consolidated statements of loss and comprehensive loss for three months ended November
30, 2020 of $14,013 (2019 – $14,724). A discount rate of 10% was used (August 31, 2020 – 10%).

 

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

 

    	 
	Page 23 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	17.	Warrant
    liability

 

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

 

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

 

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

 

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

 

	 	 	Number
    of	 	 	Weighted-average
    exercise price	 
	 	 	warrants	 	 	CAD	 	 	USD	 
	 	 	 	#	 	 	 	$	 	 	 	$
                                         	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Outstanding,
    August 31, 2020	 	 	2,405,369	 	 	 	9.60	 	 	 	7.36	 
	Issued
    on conversion of convertible debt	 	 	36,666	 	 	 	7.50	 	 	 	5.78	 
	Issued
    in private placement of convertible debentures	 	 	224,719	 	 	 	19.45	 	 	 	15.00	 
	Exercised	 	 	(7,166	)	 	 	8.28	 	 	 	6.39	 
	Expired	 	 	(430	)	 	 	153.81	 	 	 	118.63	 
	Oustanding
    as at November 30, 2020	 	 	2,659,158	 	 	 	10.39	 	 	 	8.01	 

 

    	 
	Page 24 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	17.	Warrant
    liability (cont’d)

 

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

 

	 	 	 	 	 	Warrants
    outstanding	 	 	Warrants
    exercisable	 
	 	 	 	 	 	 	 	 	 	 	 	Average 	 	 		 	 	Weighted
    number	 
	 	 	Number	 	 	Average
    

exercise price	 	 	remaining
    contractual	 	 	Weighted
    number	 	 	exercisable
    

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

 

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

 

	(a)	Warrants
    exercised during the period

 

During
the three months ended November 30, 2020, the holders of 7,166 warrants (2019 – nil) exercised their right to convert the
warrants into the Company’s common shares at an exercise price of CAD$7.50 - $9.75. As a result of the underlying exercise
of warrants, the Company received $44,675 in cash proceeds and the intrinsic value of the underlying warrants at the date of exercise
of $11,404 was transferred to share capital, for a total addition to share capital of $56,079.

 

	(b)	Warrants
    issued during the period

 

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

 

	(c)	Warrants
    issued on conversion of convertible debt 

 

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

 

    	 
	Page 25 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	17.	Warrant
    liability (cont’d)

 

	(c)	Warrants
    issued on conversion of convertible debt 

 

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

 

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

 

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

 

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

 

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

 

	18.	Share
    capital

 

	(a)	Authorized

 

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

 

	(b)	Issued
    and outstanding, common shares

 

	 	 	Shares	 	 	Consideration	 
	 	 	#	 	 	$	 
	 	 	 	 	 	 	 	 	 
	Balance,
    August 31, 2019	 	 	156,440	 	 	 	29,613,406	 
	Convertible
    debt conversion	 	 	177,067	 	 	 	617,248	 
	Balance,
    November 30, 2019	 	 	333,507	 	 	 	30,230,654	 

 

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

 

    	 
	Page 26 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	18.	Share
    capital (cont’d)

 

	(c)	Activity
    for the period

 

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

 

	19.	Stock
    options

 

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

 

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

 

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

 

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

    fair value	 	 	Remaining

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

 

    	 
	Page 27 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	19.	Stock
    options (cont’d)

 

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

 

	 	 	Outstanding	 	 	 	 	 	Weighted

                                                                                average

                                                                                exercise
                                         price
	 	 	Weighted

                                                                 average

                                                                 remaining

                                                                 contractual

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

 

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

 

	20.	Restricted
    share units

 

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

 

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

 

    	 
	Page 28 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	20.	Restricted
    share units (cont’d)

 

The
Company’s outstanding RSUs are as follows:

 

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

 

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

 

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

 

	21.	Capital
    management

 

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

 

As
at November 30, 2020, the Company had shareholders’ equity (deficit) before non-controlling interests of $(5,397,539) (August
31, 2019 – equity of 45,907). The Company’s objective when managing its capital is to seek continuous improvement
in the return to its shareholders while maintaining a moderate to high tolerance for risk. The objective is achieved by prudently
managing the capital generated through internal growth and profitability, through the use of lower cost capital, including raising
share capital or debt when required to fund opportunities as they arise.

 

The
Company may also return capital to shareholders through the repurchase of shares, pay dividends or reduce debt where it determines
any of these to be an effective method of achieving the above objective. The Company does not use ratios in the management of
its capital. There have been no changes to management’s approach to managing its capital during the three months ended November
30, 2020 and 2019.

 

    	 
	Page 29 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	22.	Commitments
    and contingencies

 

	(a)	Royalty
    expenses

 

Royalty
expenses relate to royalties paid to intellectual property rights holders for use of their trademarks, copyrights, software, technology
or other intellectual property or proprietary rights in the development or sale of the Eden Games’ products. Eden Games
has royalty agreements to utilize trademarks, copyrights, software, technology or other intellectual property or proprietary rights
in the development or sale of its products. Eden Games has committed to pay royalties ranging from 4% to 25% of revenues after
certain thresholds have been met, in connection with the underlying license agreements. Royalty expenses were €nil for the
three months ended November 30, 2020 and 2019.

 

	(b)	Consulting
    contracts

 

Under
the terms of a consulting agreement dated July 27, 2017, the Company is committed to pay to certain employees of Eden Games, nine
months’ severance in the event of termination, amounting to £144,500 ($175,911). If revenue from the Eden Games mobile
app exceeds specified amounts, a bonus shall be paid up to a maximum of £100,000 ($121,561) on an annual basis. As no triggering
events have taken place related to the contingencies to November 30, 2020, no provision has been made in these interim condensed
consolidated financial statements.

 

	(c)	Litigation
    and arbitration

 

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

 

In
response, in November 2020, the shareholders of Allinsports commenced arbitration in Ontario seeking, among other things, to compel
the Company to complete the acquisition of Allinsports without the audited financial statements, and to issue 966,667 common shares
of the Company to those shareholders. As alternative relief, the shareholders of Allinsports are seeking US$20,000,000 in damages.
The Company will defend itself vigorously in this proceeding.

 

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

 

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

 

    	 
	Page 30 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	23.	Discontinued
    operations

 

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

 

Consideration
transferred for the Motorsport Group was as follows:

 

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

 

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

 

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

 

    	 
	Page 31 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	23.	Discontinued
    operations (cont’d)

 

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

 

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

 

	24.	Segmented
    information

 

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

 

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

 

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

 

    	 
	Page 32 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	24.	Segmented
    information (cont’d)

 

The
following is an analysis of the Company’s revenue and results by reportable segment for the three months ended November
30, 2020:

 

	 	 	E-Sports	 	 	Media
    and
 Advertising	 	 	Corporate

    and Other	 	 	2020

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

 

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

 

	 	 	E-Sports	 	 	Media
    and
 Advertising	 	 	Corporate

    and Other	 	 	2019

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

 

    	 
	Page 33 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	24.	Segmented
    information (cont’d)

 

Geographical
breakdown 

 

	 	 	North

    America	 	 	United

    Kingdom	 	 	European

    Union	 	 	Total	 
	 	 	 	 $
                                         	 	 	 	 $
                                         	 	 	 	 $
                                         	 	 	 	 $
                                         	 
	August
    31, 2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	48,230,804	 	 	 	2,896,582	 	 	 	2,288,091	 	 	 	53,415,477	 
	Long-term
    assets	 	 	37,664,748	 	 	 	2,507,761	 	 	 	1,067,495	 	 	 	41,240,004	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	November
    30, 2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Assets	 	 	45,816,386	 	 	 	-	 	 	 	1,545,642	 	 	 	47,362,028	 
	Long-term
    assets	 	 	36,423,177	 	 	 	-	 	 	 	268,288	 	 	 	36,691,465	 

 

	25.	Related
    party transactions and balances

 

	(a)	Key
    management compensation

 

Key
management includes the Company’s directors, officers and any consultants with the authority and responsibility for planning,
directing and controlling the activities of an entity, directly or indirectly. Compensation awarded to key management for the
three months ended November 30 includes the following:

 

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

 

Total
compensation paid to key management is recorded in consulting fees, salaries and wages and share based payments in the consolidated
statement of loss and comprehensive loss for the three months ended November 30, 2020 and 2019. As discussed in Note 20, of the
322,547 RSUs granted in the three months ended November 30, 2020, 75,944 were severance compensation to a former officer. As these
RSUs were issued as severance compensation, the grant date fair value of CAD$713,874 ($550,896) was recognized as share based
payments expense on the grant date.

 

Amounts
due to related parties as at November 30, 2020 with respect to the above fees were $72,000 (August 31, 2020 – $275,502).
The amounts due to related parties are recorded within accounts payable and accrued liabilities on the consolidated statement
of loss and comprehensive loss. These amounts are unsecured, non-interest bearing and due on demand.

 

    	 
	Page 34 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	26.	Financial
    instruments and risk management

 

	(a)	Financial
    risk management objectives and policies

 

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

 

	(b)	Credit
    risk

 

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

 

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

 

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

 

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

 

As
at November 30, 2020 one customer (August 31, 2020 – one) accounted for greater than 10% of the Company’s accounts
receivable balance. In total, this one customer (August 31, 2020 – one) accounted for 19% of the Company’s accounts
and other receivables balance as at November 30, 2020 (August 31, 2020 – 13%). During the three months ended November 30,
2020, one (2019 – three) customers represented 58% (2019 – 50%) of total revenue.

 

The
below table reflects the aging of the Company’s aging by invoice date of gross trade accounts receivable and allowance for
doubtful accounts as at November 30, 2020:

 

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

 

    	 
	Page 35 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(c)	Liquidity
    risk

 

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

 

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

 

	 	 	<
    1 year	 	 	1-2
    years	 	 	3-5
    years	 
	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts
    payable and accrued liabilities	 	 	17,378,824	 	 	 	-	 	 	 	-	 
	Players
    liability account	 	 	340,911	 	 	 	-	 	 	 	-	 
	Lease
    obligation	 	 	189,874	 	 	 	337,634	 	 	 	-	 
	Line
    of credit	 	 	4,979,877	 	 	 	-	 	 	 	-	 
	Long-term
    debt	 	 	97,871	 	 	 	66,730	 	 	 	-	 
	Promissory
    notes payable	 	 	2,018,100	 	 	 	-	 	 	 	-	 
	Convertible
    debt	 	 	-	 	 	 	16,253,594	 	 	 	-	 

 

	(d)	Interest
    rate risk

 

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

 

	(e)	Foreign
    exchange rates

 

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

 

	(f)	Fair
    value hierarchy

 

The
following tables combine information about:

 

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

 

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

 

    	 
	Page 36 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(f)	Fair
    value hierarchy (cont’d)

 

As
at November 30, 2020:

 

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

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

 

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

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

 

As
at August 31, 2020:

 

	Carrying
    value at August 31, 2020	 	FVTPL
    -
 mandatorily
 measured	 	 	FVOCI
    -
 mandatorily
 measured	 	 	FVOCI
    -
 designated	 	 	Amortized

    cost	 
	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial
    assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents	 	 	-	 	 	 	-	 	 	 	-	 	 	 	5,243,278	 
	Restricted
    cash	 	 	-	 	 	 	-	 	 	 	-	 	 	 	388,587	 
	Accounts
    and other receivables	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,845,890	 
	Government
    remittances	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,125,912	 
	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	10,603,667	 

 

    	 
	Page 37 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(f)	Fair
    value hierarchy (cont’d)

 

	Carrying
    value at August 31, 2020	 	FVTPL
    -
 mandatorily
 measured	 	 	FVTPL
    -
 designated	 	 	Amortized

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

 

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

 

	 	 	Level
    1	 	 	Level
    2	 	 	Level
    3	 	 	Fair
    value as
 at November
 30, 2020	 
	 	 	 	$	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible
    debt	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 
	 	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 

 

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

 

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

 

    	 
	Page 38 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

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

 

	(f)	Fair
    value hierarchy (cont’d)

 

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

 

	Financial
                                         assets / 

        financial
        liabilities
	 	Valuation
    technique	 	Key
    Inputs	 	Relationship
                                         and

        sensitivity
        of

        unobservable
        inputs

        to
        fair value

	Convertible
    debt	 	The
    fair value of the convertible debentures as at November 30, 2020 has been calculated using a binomial lattice methodology.	 	Key
                                         observable inputs

         

        Share
        price (USD $6.77)

         

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

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

        Credit
        spread (10.71% to 10.73%)

         

        Discount
        for lack of marketability (35%)
	 	The
                                         estimated fair value would increase (decrease) if:

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

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

        Share
        price (USD $8.92)

         

        Risk-free
        interest rate (0.14%)

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

         

        Credit
        spread (18.35%)

         

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

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

 

There
has been no change to the valuation technique during the year. There were no transfers between Levels 1, 2 and 3 during the year.

 

    	 
	Page 39 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	27.	Subsequent
    events

 

The
Company has evaluated subsequent events from the balance sheet date through February 1, 2021, the date at which the interim condensed
consolidated financial statements were available to be issued, and determined there were no additional items to be disclosed except
for the transactions described below.

 

	(a)	Amendment
    of credit facility

 

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

 

In
January 2021, the Company further amended the EB loan such that in lieu of repayment of the loan due to the Company completing
an equity financing of at least $15 million (see note 27(d), the $5 million principal amount of the EB loan will now be subject
to a secured convertible debenture. The convertible debenture is convertible into units of the Company at a conversion price of
$10.25 per unit, with each unit comprised of one common share and one-half of a warrant, with each whole warrant exercisable into
a common share at an exercise price of $15.00 per share for a period of three years from the issuance of the convertible debenture.

 

	(b)	Shares
    for debt transaction 

 

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

 

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

 

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

 

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

 

In
January 2021, the Company closed on the issuance of 2,371,747 units (the “Units”) for gross proceeds of $17,788,105
of a non-brokered private placement. Each Unit consists of one common share of the Company and one-half of one common share purchase
warrant (a “Warrant”). Each whole Warrant entitles the holder to acquire one additional share of the Company at a
price of US$15.00 per share for a period of 3 years provided that: (i) if the common shares are listed for trading on NASDAQ,
(ii) the Company completes an offering of securities under a short form prospectus for an aggregate amount of at least US$30,000,000,
and (iii) the closing price of the common shares on NASDAQ is US$30.00 or greater for a period of 15 consecutive trading days,
then the Company may accelerate the expiry date of the Warrants to the 30th day after the date written notice is provided to the
holders.

 

    	 
	Page 40 of 41

     

    

 

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

                            For
                            the three months ended November 30, 2020 and 2019

        (Expressed
        in United States Dollars) 

        (Unaudited)
	
	 	 

 

	27.	Subsequent
    events (cont’d)

 

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

 

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

 

The
Company paid cash commissions to eligible finders under the offering totaling $490,641 and also issued the following securities
as partial payment of commissions to finders: 49,700 Units; and, 114,987 finders warrants, with each finder warrant exercisable
into a common share at an exercise price of US$15.00 per share for 3 years subject to the same acceleration terms described above.

 

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

 

    	 
	Page 41 of 41Exhibit
4.7

 

ENGINE
MEDIA HOLDINGS, INC.

(formerly
Torque Esports Corp.)

 

Management’s
Discussion and Analysis

 

For
the three months ended

November
30, 2020 and 2019

 

(Expressed
in United States Dollars)

 

    	 

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Introduction

 

The
following Management’s Discussion and Analysis (“MD&A”) is provided to enable a reader to assess the results
of operations and financial condition of Engine Media Holdings, Inc. for the three months ended November 30, 2020 and 2019 and
should be read in conjunction with the Company’s Interim Condensed Consolidated Financial Statements and accompanying notes.
The words “we”, “our”, “us”, “Company”, and “Engine Media” refer to
Engine Media Holdings, Inc. and its subsidiaries and/or the management and employees of the Company (as the context may require).

 

Cautionary
Note Regarding Forward-Looking Statements

 

This
MD&A contains certain “forward-looking information” and “forward-looking statements” as defined under
applicable Canadian and U.S. securities laws (collectively, “forward-looking statements”)
which are based upon the Company’s current internal expectations, estimates, projections, assumptions and beliefs. Such
statements can be identified by the use of forward-looking terminology such as “expect”, “likely”, “may”,
“will”, “should”, “intend”, or “anticipate”, “potential”, “proposed”,
“estimate” and other similar words, including negative and grammatical variations thereof, or statements that certain
events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements
include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance or other statements that are not statements
of fact. Such forward-looking statements are made as of the date of this MD&A. Forward-looking statements in this MD&A
include, but are not limited to, statements with respect to:

 

	●	financial,
    operational and other projections and outlooks as well as statements or information concerning future operation plans, objectives,
    performance, revenues, growth, acquisition strategy, profits or operating expenses;
	 	 
	●	our
    ability to successfully execute our business plan;
	 	 
	●	any
    expectation of regulatory approval and receipt of certifications with respect to the Company’s current and proposed
    business transactions;
	 	 
	●	expectations
    regarding existing products and plans to develop, implement or adopt new technology or products;
	 	 
	●	expectations
    regarding the successful integration of recent acquisitions of WinView, Inc. (“WinView”) and Frankly Inc. (“Frankly”);
	 	 
	●	the
    expectation of obtaining new customers for the Company’s products and services, as well as expectations regarding expansion
    and acceptance of the Company’s brand and products to new markets;
	 	 
	●	estimates
    and projections regarding the industry in which the Company operates and adoption of technologies, including expectations
    regarding the growth and impact of esports;
	 	 
	●	requirements
    for additional capital and future financing options;
	 	 
	●	the
    risks inherent in international operations;
	 	 
	●	marketing
    plans;
	 	 
	●	our
    ability to compete with our competitors and their technologies;
	 	 
	●	our
    reliance on key executives and the ability to attract and retain qualified personnel;
	 	 
	●	the
    availability of intellectual property protection for the Company’s products, and our ability to expand and exploit our
    intellectual property;

 

    	 
	Page 2 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Cautionary
Note Regarding Forward-Looking Statements (cont’d)

 

	●	statements
    related to the expected or potential impact of the novel coronavirus (“COVID-19”) pandemic;
	 	 
	●	the
    completion of and our use of the proceeds of any offering; and
	 	 
	●	other
    expectations of the Company.

 

The
forward-looking statements are based on a number of key expectations and assumptions made by our management, including, but not
limited to:

 

	●	that
    the projections relating to growth and trends in the industry of the Company and adoption of the technologies underlying the
    Company’s products are accurate;
	 	 
	●	assumptions
    and uncertainties related to the expected size of the esports market and other markets for the Company’s products and
    the acceptance of the Company’s product in existing and new markets;
	 	 
	●	our
    ability to generate new sales and market demand for our products;
	 	 
	●	our
    ability to continue to attract and retain qualified personnel;
	 	 
	●	our
    ability to protect our intellectual property and to expand and exploit our intellectual property;
	 	 
	●	the
    successful execution of our business plan;
	 	 
	●	the
    availability of additional capital; and
	 	 
	●	general
    economic and financial market conditions.

 

Forward-looking
statements contained in this MD&A are based on the assumptions described in this MD&A. Although management believes the
expectations reflected in such forward-looking statements are reasonable, forward-looking statements are based on the opinions,
assumptions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties
and other factors, both known and unknown, that could cause actual events or results to differ materially from those projected
in the forward-looking statements. These factors include, but are not limited to:

 

	●	liquidity
    concerns and future financings;
	 	 
	●	execution
    of business plan;
	 	 
	●	the
    integration of recent acquisitions such as WinView, Frankly, and UMG Media Ltd. (“UMG”);
	 	 
	●	the
    management of growth;
	 	 
	●	reduced
    cash reserves from future operating losses;
	 	 
	●	failure
    to compete successfully in various markets;
	 	 
	●	the
    development of high-quality products;

 

    	 
	Page 3 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Cautionary
Note Regarding Forward-Looking Statements (cont’d)

 

	●	rapid
    technological changes;
	 	 
	●	proprietary
    protection and intellectual property disputes;
	 	 
	●	transmission
    of user data;
	 	 
	●	data
    collection risk;
	 	 
	●	mobile
    gaming and the free-to-play business model;
	 	 
	●	the
    condition of the global economy;
	 	 
	●	risks
    inherent in foreign/international operations;
	 	 
	●	changing
    governmental regulations;
	 	 
	●	COVID-19
    related risks; and
	 	 
	●	those
    risks discussed in this MD&A under the heading “Risks and Uncertainties”.

 

Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may
vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made. Although the Company has attempted to identify important
factors that could cause actual results to differ materially from forward-looking statements, there may be other factors that
cause results not to be as anticipated, estimated, described or intended.

 

A
number of factors could cause actual events, performance or results to differ materially from what is projected in forward-looking
statements. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations,
and such forward-looking statements may not be appropriate for any other purpose. You should not place undue reliance on forward-looking
statements contained in this MD&A.

 

Although
the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to have been correct. We undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by applicable law.

 

We
qualify all the forward-looking statements contained in this MD&A by reference herein and therein by the foregoing cautionary
statements.

 

    	 
	Page 4 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Corporate
Profile

 

Engine
Media is addressing massive market opportunities in esports, gaming, data, and streaming content distribution. The three-way merger
of Torque Esports, Frankly Media and WinView Games which closed on May 8, 2020 brings together a unique combination of technology
assets that include (i) a market leading video gaming competition platform – UMG; (ii) a skills-based mobile engagement
platform for traditional sports and esports – WinView; (iii) a data intelligence platform – Stream Hatchet S.L. (“Stream
Hatchet”); (iv) a content management and streaming video platform that supports over 1,200 news sites and engages over 100
million monthly active users across some of the top media companies in world - Frankly; and (v) a development studio that’s
dedicated to making the best racing games for mobile – Eden Games. The Company is a publicly traded company listed on the
TSX Venture Exchange (“TSXV”) under the symbol “GAME”. It is also dual listed in the United States on
the OTCQB market under the symbol “MLLLF”. The registered head office of the Company is 77 King Street, West, Suite
3000, P.O. Box 95, TD Centre North Tower, Toronto, Ontario, Canada M5K 1G8.

 

Businesses
of Engine

 

Engine
is a multi-platform media group leading the charge in esports, news streaming and gaming. Following the completion of the transformational
acquisition of each of Frankly and WinView, the Company now offers a unique combination of esports content, streaming technology,
gaming platforms, data analytics and intellectual property.

 

Engine
is focused on accelerating new, live, immersive esports and interactive gaming experiences for consumers through its partnerships
with traditional and emerging media companies. Following the Frankly and WinView acquisitions, Engine clients include more than
1,200 television, print and radio brands including CNN, Fox, Vice, Newsweek, and Cumulus; dozens of gaming and technology companies
including EA, Activision, Blizzard, Take2Interactive, Microsoft, Google, Twitch, and Ubisoft; and has connectivity into hundreds
of millions of homes around the world through content, distribution, and technology.

 

Eden
Games

 

Eden
Games S.A. (“Eden Games”) is a game developer with market-leading competency in building mobile racing games. They
are well-known in the industry for the multiple racing franchises they have created and are considered experts in the fields of
licensing and racing technology. Founded in 1998 in Lyon, France, by two experienced Atari developers, Eden Games is a household
name in development circles and has both a storied history of success and a strong pipeline of future engagements. Its current
development deals are for the official F1 mobile game and porting its Gear.Club franchise onto the hugely successful Nintendo
Switch. These two contracts provide regular revenue contracted from 3rd parties and a share of the revenue from game sales or
in-app purchases.

 

Eden
has produced the following video game titles: V-Rally (1998); V-Rally 2 (1999); Need for Speed: Porsche (2000); V-Rally 3 (2002);
KYA: Dark Lineage (2003); TITEUF: Mega Compet (2004); Test Drive Unlimited (2006); Alone in the Dark (2008); Test Drive Unlimited
2 (2011); TDU2 Casino Online (2011); Gear.Club Mobile (2016 – 2020); Gear.Club Unlimited (2017); F1 Mobile (2018 –
2020); and Gear.Club Unlimited 2 (2018 – 2020).

 

Stream
Hatchet

 

Stream
Hatchet is a data analytics company based in Terrassa, Spain, providing intelligence for persons and entities involved in video
game streaming. Stream Hatchet provides real-time data analytics and viewership information that assists in the development and
marketing decisions of the Company’s initiatives. This is a service that no other publisher or esports operator owns in-house.
These unique data analytic capabilities provide the Company an edge in accessing sponsorships and promotions from major brands
focused on esports, as the Company has proprietary data on esports viewership, brand exposure and sponsorship valuation to quantify
the value of our brand exposure on multiple streaming platforms around the globe.

    	 
	Page 5 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Businesses
of Engine (cont’d)

 

Stream
Hatchet (cont’d)

 

Stream
Hatchet, through a SaaS offering, also generates significant independent revenue for the Company as a standalone unit without
infringing upon its strategic value to the Company. Stream Hatchet provides holistic data to its users, which include streamers,
esports organizations, video game producers, and advertising agencies. Stream Hatchet provides a clearly-delineated product offering
with a high degree of automation, and a strong pipeline of clients and brands looking for intelligence in the esports & gaming
landscape. Stream Hatchet’s innovative reporting and data analytics are unique in the industry, with services and reporting
having been sold to major brands in the technology space.

 

UMG

 

The
Company acquired UMG on December 31, 2019. UMG is a premier esports company in North America, offering live gaming entertainment
events and online play. UMG provides online and live tournaments as well as the creation and distribution of original esports
content.

 

UMG,
through its wholly-owned subsidiary UMG Events LLC, which was founded in 2012, is actively involved in many aspects of the esports
industry. UMG is deeply ingrained in the gaming community and very well established within the competitive gaming sector with
approximately 2.1 million registered users and over 18 million matches played live and online through its platform.

 

UMG
is a diversified esports company that has operations involved in:

 

	 	●	Live
    tournaments
	 	●	Online
    contests
	 	●	Casino
    esports operations
	 	●	Creation
    and distribution of original content
	 	●	Esports
    tournament operations through its proprietary tournament management app

 

Frankly
and WinView Acquisition

 

On
May 8, 2020, the Company completed a business combination with Frankly and WinView. It is expected that the transaction will place
Engine at the forefront of esports, news streaming and sports gaming across multiple media platforms. The completion of the Frankly
and WinView acquisition has resulted in a company with a unique combination of assets, ranging from esports content, streaming
technology, sports gaming, data and analytics as well as intellectual property.

 

Frankly

 

Frankly,
through its wholly-owned subsidiary Frankly Media, LLC, provides a complete suite of solutions that give publishers a unified
workflow for the creation, management, publishing and monetization of digital content to any device, while maximizing audience
value and revenue.

 

Frankly’s
products include a ground-breaking online video platform for Live, Video-on-Demand (“VOD”) and Live-to-VOD workflows,
a full-featured content management system with rich storytelling capabilities, as well as native apps for iOS, Android, Apple
TV, Fire TV and Roku.

 

Frankly
also provides comprehensive advertising products and services, including direct sales and programmatic ad support. With the release
of its server-side ad insertion (SSAI) platform, Frankly has been positioned to help video producers take full advantage of the
growing market in addressable advertising.

 

    	 
	Page 6 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Businesses
of Engine (cont’d)

 

WinView

 

WinView
is a Silicon Valley-based company, pioneering second-screen interactive TV. WinView is a leading skill-based sports prediction
mobile games platform. WinView plans to leverage its extensive experience in pioneering real-time interactive television games
played on the mobile second screen, its foundational patents and unique business model. The WinView app is an end-to-end two-screen
TV synchronization platform for both television programming and commercials. The paid entry, skill-based WinView Games app uniquely
enhances TV viewing enjoyment and rewards sports fans with prizes as they answer in-game questions while competing in real-time
during live televised sports. WinView also holds the foundational patents on the synchronized second screen experience.

 

Disposition
of Motorsport Group 

 

In
November 2020, the Company sold IDEAS+CARS, The Race Media, WTF1 and Driver DataBase (collectively the “Motorsport Group”)
to Ideas + Cars Holdings Limited, a third-party investment group based in the UK. As a result, Engine is eliminating its funding
obligations related to the cost of maintaining and growing these auto media businesses and certain accrued liabilities. While
reducing its cost base, Engine will maintain the ability to work with the Motorsports Group. Engine will continue to support racing
as a category through its competitive gaming platform, UMG, as it expands relationships across the entire esports sector as the
leading destination for tournament play. For the three-month period ended November 30, 2020, the Motorsport Group had revenue
of approximately $90,934 and a net loss of $950,215. As part of the disposition of the Motorsport Group, Engine Media reorganized
its leadership team by moving to a single CEO role under Lou Schwartz, with Tom Rogers remaining Executive Chairman.

 

Market
Opportunity

 

Video
gaming is one of the largest and fastest growing markets in the entertainment sector, with an estimated 2.6 billion gamers globally
with esports being the major source of growth. Esports is a term that comprises a diverse offering of competitive electronic games
that gamers play against each other. One of the biggest differences between esports and video games of old is the community and
spectator nature of esports, whereby competitive play against another person, either one-on-one or in teams, this is a central
feature of esports. Since players play against each other online, a global network of players and viewers has developed as these
players compete against each other worldwide. Additionally, game developers have greatly increased the entertainment value of
games, which has made the spectator aspect of gaming much more prevalent and further drives expansion of the gaming market.

 

The
expanded reach of broadband service and the computer technology advances in the last decade have also greatly accelerated the
growth of esports. Esports has become so popular that many high schools and colleges now offer programs to support students’
interest in esports, as well as tournaments and scholarships. The best-known esports teams are receiving marquee sponsorships
and are being purchased or invested in by a range of financial and strategic partners. The highest profile esports gamers have
significant online audiences as they stream themselves playing against other players online and potentially can generate millions
of dollars in sponsorship money and affiliate fees from their online streaming channels. It is projected that by 2023, approximately
650 million people will be watching esports globally. Most major professional esports events and a wide range of amateur esports
events are broadcast live via streaming services, including Twitch.tv, Youtube.com and Facebook Gaming.

 

    	 
	Page 7 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Strategy
for Growth

 

Engine
Media generates revenue through a combination of (i) direct-to-consumer fees (subscription, rake, advertising and sponsorship,
and merchandise sales); (ii) business-to-business software-as-a-service (“SaaS”) subscription and professional service
fees; and (iii) programmatic advertising sales and brand sponsorships. The Company is uniquely positioned with a base of predictable
business-to-business revenues and an extensive network of media and gaming publisher relationships. These media and gaming publishers
engage over one hundred (100) million monthly active users. Leveraging these relationships to efficiently create awareness for
our gaming competition platform, where players and fans can play, watch and engage with other members of the esports community,
is key to our long-term growth strategy.

 

Impact
of the Global COVID-19 Pandemic

 

In
December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has since extensively impacted global health
and the economic environment. To contain the spread of COVID-19, domestic and international governments around the world enacted
various measures, including orders to close all businesses not deemed “essential,” quarantine orders for individuals
to stay in their homes or places of residence, and to practice social distancing when engaging in essential activities. We anticipate
that these actions and the global health crisis caused by COVID-19 will continue to negatively impact many business activities
and financial markets across the globe.

 

The
fact that our business has increasingly shifted to digital channels, we have increased flexibility as we navigate through the
uncertain environment and near-term implications of the COVID-19 pandemic. The impact of the pandemic on our business has been
mixed thus far. While we have seen some increase in demand for our digital products and services, this demand has been more than
offset by reduction in spending by our customers.

 

In
an effort to protect the health and safety of our employees, the majority of our workforce is currently working from home and
we have placed restrictions on non-essential business travel. We have implemented business continuity plans and have increased
support and resources to enable our employees to work remotely and thus far our business has been able to operate with minimal
disruption.

 

The
global COVID-19 pandemic remains a rapidly evolving situation. We will continue to actively monitor the developments of the pandemic
and may take further actions that could alter our business operations as may be required by federal, state, local, or foreign
authorities, or that we determine are in the best interests of our employees, customers, partners and shareholders. It is not
clear what effects any such potential actions may have on our business, including the effects on our employees, players and consumers,
customers, partners, development and content pipelines, our reputation, financial condition, results of operations, revenue, cash
flows, liquidity or stock price.

 

We
continue to monitor economic conditions, including the impact of COVID-19 pandemic, that may unfavorably affect our businesses,
such as deteriorating consumer demand, delays in development, pricing pressure on our products, credit quality of our receivables,
and foreign currency exchange rates.

 

Senior
Management Team

 

Engine
Media has a deep and cohesive executive management team with diverse skillsets and unparalleled understanding of the gaming industry.
This experience provides a powerful competitive edge against our competitors, as it enables our team to anticipate patterns before
they become trends, to identify influential shifts as they develop and to adjust strategy accordingly.

 

    	 
	Page 8 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Presentation
of financial information

 

Unless
otherwise specified within, financial results, including historical comparatives, contained in this MD&A are based on Engine
Media’s audited consolidated financial statements which have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Unless otherwise
specified, amounts are in U.S. dollars and percentage changes are calculated using whole numbers.

 

Results
from operations

 

Selected
quarterly information

 

	Period
ended November 30, 	 	Note	 	 	2020	 	 	2019	 
	 	 	 	 	 	 	 	 	 	 
	Operating results	 	 	 	 	 	 	 	 	 	 	 	 
	Total revenues	 	 	 	 	 	$	7,466,391	 	 	$	808,248	 
	Total expenses	 	 	 	 	 	 	11,801,022	 	 	 	6,867,775	 
	Total net loss from continuing operations	 	 	 	 	 	 	(4,370,287	)	 	 	(6,024,427	)
	Total net loss from discontinued operations	 	 	 	 	 	 	(1,629,146	)	 	 	(2,026,764	)
	Total net loss	 	 	 	 	 	 	(5,999,433	)	 	 	(8,051,191	)
	Comprehensive loss	 	 	 	 	 	 	(5,865,588	)	 	 	(8,559,044	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss per share – Continuing operations	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted loss per share	 	 	 	 	 	$	(0.57	)	 	$	(36.59	)
	Loss per share – Discontinued operations	 	 	 	 	 	 	 	 	 	 	 	 
	Basic and diluted loss per share	 	 	 	 	 	$	(0.21	)	 	$	(12.31	)

 

	As at period November 30,	 	Note	 	 	2020	 	 	2019	 
	 	 	 	 	 	 	 	 	 	 
	Financial position	 	 	 	 	 	 	 	 	 	 	 	 
	Total assets	 	 	 	 	 	$	47,362,028	 	 	$	53,415,477	 
	Total liabilities	 	 	 	 	 	 	52,573,212	 	 	 	53,152,185	 
	Working capital deficiency	 	 	(i)	 	 	 	(25,244,691	)	 	 	(29,663,546	)
	Total debt	 	 	(ii)	 	 	 	23,943,680	 	 	 	20,334,966	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other metrics	 	 	 	 	 	 	 	 	 	 	 	 
	Debt to total assets	 	 	(iii)	 	 	 	51	%	 	 	38	%

 

	(i)	Working
    capital deficiency is defined as total current assets less total current liabilities.
	(ii)	Total
    debt is defined as the aggregate total of convertible debt, line of credit, promissory notes, long-term debt and lease obligations.
	(iii)	Debt
    to total assets is calculated as total debt divided by total assets.

 

The
comparison between the three months ended November 30, 2020 and 2019 is impacted significantly by the acquisitions of UMG on December
31, 2019 and Frankly and WinView on May 8, 2020. See discussion below.

 

    	 
	Page 9 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Results
from operations (cont’d)

 

Revenue

 

	For the period November 30,	 	2020	 	 	2019	 	 	Increase
 (decrease)	 
	 	 	 	$	 	 	 	$	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Games development	 	 	499,955	 	 	 	532,861	 	 	 	(32,906	)
	Sponsorship, tournament and event income	 	 	49,832	 	 	 	264	 	 	 	49,568	 
	Platform revenue	 	 	1,436,997	 	 	 	141,282	 	 	 	1,295,715	 
	Advertising revenue	 	 	5,122,090	 	 	 	-	 	 	 	5,122,090	 
	Professional services	 	 	357,517	 	 	 	133,841	 	 	 	223,676	 
	 	 	 	7,466,391	 	 	 	808,248	 	 	 	6,658,143	 

 

	●	Games
    development revenue decrease of $32,908 was due a short delay in new contract activations. 
	 	 
	●	Sponsorship,
    tournament and event income increase of $49,568 was due to the inclusion of UMG and WinView during the period.
	 	 
	●	Platform
    revenue increase of $1,295,715 was due to the inclusion of post-acquisition revenue from Frankly.
	 	 
	●	Advertising
    revenue increase of $5,122,090 was due to post-acquisition revenue from Frankly.
	 	 
	●	Professional
    services revenue increase of $223,676 was due to post-acquisition revenue from Frankly. 

 

Expenses

 

	For the period November 30,	 	2020	 	 	2019	 	 	Increase
 (decrease)	 
	 	 	 	$ 	 	 	 	$ 	 	 	 	$ 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Salaries and wages	 	 	3,777,476	 	 	 	1,127,160	 	 	 	2,650,316	 
	Consulting	 	 	895,952	 	 	 	500,650	 	 	 	395,302	 
	Professional fees	 	 	685,852	 	 	 	336,030	 	 	 	349,822	 
	Revenue sharing expense	 	 	4,491,427	 	 	 	-	 	 	 	4,491,427	 
	Sponsorships and tournaments	 	 	364,229	 	 	 	-	 	 	 	364,229	 
	Advertising and promotion	 	 	859,826	 	 	 	1,124,345	 	 	 	(264,519	)
	Office and general	 	 	705,819	 	 	 	280,284	 	 	 	425,535	 
	Technology expenses	 	 	580,854	 	 	 	13,350	 	 	 	567,504	 
	Amortization and depreciation	 	 	1,416,140	 	 	 	591,191	 	 	 	824,949	 
	Share-based payments	 	 	1,088,638	 	 	 	11,114	 	 	 	1,077,524	 
	Interest expense	 	 	408,089	 	 	 	274,477	 	 	 	133,612	 
	(Gain) loss on foreign exchange	 	 	(37,249	)	 	 	170,325	 	 	 	(207,574	)
	Change in fair value of warrant liability	 	 	(4,759,776	)	 	 	1,634,324	 	 	 	(6,394,100	)
	Change in fair value of convertible debt	 	 	1,323,745	 	 	 	804,525	 	 	 	519,220	 
	 	 	 	11,801,022	 	 	 	6,867,775	 	 	 	4,933,247	 

 

	●	Salaries
    and wages increase of $2,650,316 was due to post acquisition salary and wages of Frankly, WinView and UMG. 

 

    	 
	Page 10 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Results
from operations (cont’d)

 

Expenses
(cont’d)

 

	●	Consulting
    increase of $395,302 was due to costs relating to the acquisition activities of the group and taking up the post-acquisition
    costs of Frankly, WinView and UMG.
	 	 
	●	Professional
    fees increase of $349,822 was due to post acquisition professional fees of Frankly, WinView and UMG.
	 	 
	●	Revenue
    sharing increase of $4,491,427 was due to post acquisition revenue sharing of Frankly related to advertising revenue.
	 	 
	●	Sponsorships
    and tournaments increase of $364,229 was due to post acquisition costs of UMG.
	 	 
	●	Advertising
    and promotion decrease of $264,519 was due to more focused PR activity for the quarter.
	 	 
	●	Office
    and general expense increase of $425,535 was due to post acquisition costs of Frankly, WinView and UMG.
	 	 
	●	Technology
    expenses increase of $567,504 was due to post acquisition costs of Frankly, WinView and UMG.
	 	 
	●	Amortization
    and depreciation increase of $824,949 was mainly due to amortization of intangibles from the acquisition of Frankly, WinView
    and UMG.
	 	 
	●	Share-based
    payments expense increase of $1,077,524 was due to the amount of $550,896 issued to the former Co-CEO’s as part of severance
    connected to the sale of the Motorsport Group and also due to the issuance of grants to key management and directors and officers.
    
	 	 
	●	Interest
    expense increase of $133,612 was due to the issuance of convertible debentures over the last two quarters as well as assumption
    of debt with the acquisitions of Frankly, WinView and UMG.
	 	 
	●	Loss
    on foreign exchange decrease of $207,574 was due to fluctuations in currency exchange rates.
	 	 
	●	Change
    in fair value of warrant liability decrease of $6,394,100 was due primarily to the decrease in the share price of the Company
    during the quarter ended November 30, 2020.
	 	 
	●	Change
    in fair value of convertible debt increase of $519,220 was due to a increase in the fair value of our convertible debt.

 

    	 
	Page 11 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Results
from operations (cont’d)

 

Other
items

 

	For the period November 30,	 	2020	 	 	2019	 	 	Increase
 (decrease)	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Share of net loss of associate	 	 	66,686	 	 	 	-	 	 	 	66,686	 
	Discontinued Operations - Loss on disposal of Motorsports	 	 	(678,931	)	 	 	-	 	 	 	(678,931	)
	Discontinued Operations - Motorsports Group	 	 	(950,215	)	 	 	(2,026,764	)	 	 	1,076,549	 
	Net loss attributable to non-controlling interest	 	 	31,030	 	 	 	35,100	 	 	 	(4,070	)
	Foreign currency translation differences 	 	 	133,845	 	 	 	(507,853	)	 	 	641,698	 

 

	●	The
    net loss of associate relates to a 20.48% interest in One Up that was acquired in August 2020. One Up is an early-stage company
    which expects losses to continue as it seeks to grow its revenues.
	 	 
	●	The
    discontinued operations of the Motorsports Group relate to assets sold in November 2020.
	 	 
	●	The
    minority interest in net loss decrease of $4,070 was not significant.
	 	 
	●	Foreign
    currency translation differences increase of $641,698 was due to fluctuations in trading foreign currencies against the US
    dollar.

 

Segmented
analysis

 

For
the three-month period ended November 30, 2020:

 

	 	 	E-Sports	 	 	Media and
 Advertising	 	 	Corporate
 and Other	 	 	2020
 Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External sales 	 	 	762,941	 	 	 	6,703,450	 	 	 	-	 	 	 	7,466,391	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment loss 	 	 	(2,697,438	)	 	 	(1,392,595	)	 	 	-	 	 	 	(4,090,033	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central administration costs	 	 	-	 	 	 	-	 	 	 	3,309,789	 	 	 	3,309,789	 
	Other gains and losses	 	 	(2,352	)	 	 	(3,693	)	 	 	(3,467,236	)	 	 	(3,473,281	)
	Finance costs	 	 	59,571	 	 	 	186,990	 	 	 	161,529	 	 	 	408,090	 
	Loss before tax 	 	 	(2,754,657	)	 	 	(1,575,892	)	 	 	(4,082	)	 	 	(4,334,631	)
	Income tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share of net loss of associate	 	 	-	 	 	 	-	 	 	 	(66,686	)	 	 	(66,686	)
	Discontinued operations	 	 	(950,215	)	 	 	-	 	 	 	(678,931	)	 	 	(1,629,146	)
	Non-controlling interest in net loss	 	 	-	 	 	 	-	 	 	 	31,030	 	 	 	31,030	 
	Net loss 	 	 	(3,704,872	)	 	 	(1,575,892	)	 	 	(718,669	)	 	 	(5,999,433	)

 

    	 
	Page 12 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Results
from operations (cont’d)

 

Segmented
analysis (cont’d)

 

For
the three-month period ended November 30, 2019:

 

	 	 	E-Sports	 	 	Media and
 Advertising	 	 	Corporate
 and Other	 	 	2019
 Total	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	External sales	 	 	807,983	 	 	 	-	 	 	 	265	 	 	 	808,248	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Segment loss	 	 	(889,819	)	 	 	-	 	 	 	265	 	 	 	(889,554	)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Central administration costs	 	 	-	 	 	 	-	 	 	 	2,286,322	 	 	 	2,286,322	 
	Other gains and losses	 	 	1,371	 	 	 	-	 	 	 	2,607,803	 	 	 	2,609,174	 
	Finance costs	 	 	1,880	 	 	 	-	 	 	 	272,597	 	 	 	274,477	 
	Loss before tax	 	 	(893,070	)	 	 	-	 	 	 	(5,166,457	)	 	 	(6,059,527	)
	Income tax	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Gain (Loss) for the year from:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Discontinued operations	 	 	(2,026,764	)	 	 	-	 	 	 	-	 	 	 	(2,026,764	)
	Non-controlling interest in net loss	 	 	-	 	 	 	-	 	 	 	35,100	 	 	 	35,100	 
	Net loss	 	 	(2,919,834	)	 	 	-	 	 	 	(5,131,357	)	 	 	(8,051,191	)

 

	●	E-Sports
    net loss for the period ended November 30, 2020 was $3,704,872 in comparison to $2,919,834 for the period ended November 30,
    2019. The increase of $785,038 was primarily due to post acquisition activities of UMG and WinView.
	 	 
	●	Media
    and Advertising net loss for the period ended November 30, 2020 was $1,575,892 in comparison to $nil for the period ended
    November 30, 2019. This was due to addition on May 8, 2020 of Frankly, Inc. to the group resulting in the creation of a new
    segment.
	 	 
	●	Corporate
    and Other net loss for the period ended November 30, 2020 was $718,669 in comparison to $5,131,357 for the year period ended
    November 30, 2019. The decrease of $4,412,688 was primarily due to Other gains and losses which includes change in value of
    warrant liability and convertible debt. 

 

    	 
	Page 13 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Results
from operations (cont’d)

 

Other
selected quarterly information

 

	 	 	 	 	 	From continuing operations	 	 	 	 
	Three-month period ended	 	Total revenue	 	 	Total loss	 	 	Basic and
 diluted loss per share	 	 	Total assets	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	November 30, 2020	 	 	7,466,391	 	 	 	(4,370,287	)	 	 	(0.57	)	 	 	47,362,028	 
	August 31, 2020	 	 	7,024,238	 	 	 	(8,661,786	)	 	 	(1.15	)	 	 	53,415,477	 
	May 31, 2020	 	 	2,089,323	 	 	 	(10,380,228	)	 	 	(3.22	)	 	 	42,747,189	 
	February 29, 2020	 	 	623,994	 	 	 	(1,413,392	)	 	 	(2.91	)	 	 	12,664,332	 
	November 30, 2019	 	 	808,248	 	 	 	(6,024,427	)	 	 	(36.59	)	 	 	8,555,893	 
	August 31, 2019	 	 	206,129	 	 	 	(8,839,957	)	 	 	(59.95	)	 	 	10,685,697	 
	May 31, 2019	 	 	800,121	 	 	 	(1,760,375	)	 	 	(11.99	)	 	 	13,144,665	 
	February 28, 2019	 	 	1,544,789	 	 	 	(1,320,041	)	 	 	(8.99	)	 	 	13,731,836	 

 

Quarterly
revenues declined from the quarter ended February 28, 2019 compared to the quarter ended May 31, 2019 primarily due to a decline
in revenue for Eden Games. Quarterly revenues increased from the quarter ended February 29, 2020 compared to the quarter ended
May 31, 2020 and increased further in the quarters ended August 31, 2020 and November 30, 2020 primarily due to inclusion of the
revenues of Frankly for 18 days after the May 8, 2020 acquisition and for the full quarter for the quarters ended August 31 and
November 30, 2020.

 

The
total loss was larger in the quarters ended August 31, 2019, November 30, 2019 and May 31, 2020 primarily due to one-time charges
for impairments. In the quarter ended August 31, 2019, the Company recorded a goodwill charge of $5.9 million related to the Eden
Games business, and the Company also had change in fair value of convertible debt of $1.5 million. In the quarter ended November
30, 2019, the change in value of the warrant and convertible debt added $2.4 million to the loss and promotion for the World’s
Fastest Gamer and other advertising was a $2.8 million increase. For the quarter ended May 31, 2020, the change in warrant liability
added $7.0 million to the loss. For the quarter ended August 31, 2020, an impairment on investments and advances of $2.6 million
and changes in the fair value of warrant liability and convertible debt of $1.3 million added to the quarterly loss. For the quarter
ended November 30, 2020, the change in fair value of the warrant liability and convertible debt reduced the quarterly loss by
$3.4 million

 

Liquidity
and capital resources

 

Liquidity
and cash management

 

The
Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when
due. The Company’s liquidity and operating results may be adversely affected if the Company’s access to the capital
market is hindered, whether as a result of a downturn in stock market conditions generally or as a result of conditions specific
to the Company.

 

The
Company regularly evaluates its cash position to ensure preservation and security of capital as well as maintenance of liquidity.
As the Company does not presently generate sufficient revenue to cover its costs, managing liquidity risk is dependent upon the
ability to reduce its monthly operating cash outflow and secure additional financing. The recoverability of the carrying value
of the assets and the Company’s continued existence is dependent upon the ability of the Company to continue to raise financing,
and ultimately the achievement of profitable operations.

 

    	 
	Page 14 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Liquidity
and capital resources (cont’d)

 

Liquidity
and cash management (cont’d)

 

As
at November 30, 2020, the Company had a cash balance of $2,726,563 (August 31, 2020: $5,243,278) and current liabilities of
$35,915,254 (August 31, 2020: $41,839,019). This represents a working capital deficiency of $25,244,691 (August
31, 2019: deficiency of $29,663,546) which is comprised of current assets less current liabilities. The working capital
deficiency at November 30, 2020 includes a warrant liability of $10,246,146 which will not be settled in cash. The Company
has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit of
$78,093,595 as at November 30, 2020 (August 31, 2020: cumulative deficit of $72,094,162).

 

Following
the acquisitions of Frankly and WinView on May 8, 2020, the Company undertook a strategic review of the business. As a result
of this review, on November 3, 2020, the Company divested its Motorsports Group. This divestiture reduced accounts payable and
accrued liabilities by $0.9 million and will substantially reduce the Company’s monthly cash outflow, The Company also made
targeted spending cuts to further reduce the monthly cash outflow. In January 2021, the Company completed convertible debenture
settlements of an aggregate principal amount of $10,726,393 of its convertible debentures in exchange for the issuance of 1,430,186
units at a deemed price of $7.50 per unit, with each such unit consisting of a common share and three-quarters (3/4) of a warrant,
with each whole warrant exercisable into a common share at an exercise price of $15 per share for a period of three years.

 

In
January 2021, the Company closed on the issuance of 2,371,747 units (the “Units”) for gross proceeds of $17,788,105
of a non-brokered private placement. Each Unit consists of one common share of the Company and one-half of one common share purchase
warrant (a “Warrant”). Each whole Warrant entitles the holder to acquire one additional share of the Company at a
price of US$15.00 per share for a period of 3 years (see Subsequent events). The proceeds of the offering will be allocated to
marketing and advertising of the Company’s product offerings, product development initiatives for UMG, WinView and Stream
Hatchet, and general working capital purposes.

 

The
Company believes that, based upon current business conditions and plans, the private placement gross proceeds of $17.8 million
will provide sufficient liquidity for the Company to operate through at least its fiscal year end of August 31, 2021. The Company
has plans to raise additional funds. While management has been historically successful in raising the necessary capital, it cannot
provide assurance that it will be able to execute on its business strategy or be successful in future financing activities.

 

Our
ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but not limited to, our
ability to raise additional funds through financing, those related to consumer demand and acceptance of our products and services,
our ability to collect payments as they become due, achieving our internal forecasts and objectives, the economic conditions of
the United States and abroad. These risk factors are described in Risks and uncertainties section of this MD&A.

 

Capital
management framework

 

The
Company considers its capital to be its shareholders’ equity. As at November 30, 2020, the Company had shareholders’
equity (deficiency) of $(5,397,539) (August 31, 2020: shareholders’ equity of $45,907).

 

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

 

The
Company may also return capital to shareholders through the repurchase of shares, pay dividends or reduce debt where it determines
any of these to be an effective method of achieving the above objective. The Company does not use ratios in the management of
its capital.

 

    	 
	Page 15 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Financing

 

Capital
management framework (cont’d)

 

There
have been no changes to management’s approach to managing its capital for the period ended November 30, 2020.

 

The
proceeds of the financings disclosed below were intended to be used primarily for working capital and future operating needs.
The proceeds received have been used primarily for those purposes.

 

Equity

 

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

 

Debt

 

Promissory
notes

 

The
Company has promissory notes with a balance of $200,000 (August 31, 2020 – $200,000) that are unsecured, due on demand,
and bear interest at 18%. As of November 30, 2020, interest of $83,581 has been accrued (August 31, 2020 – $83,435).

 

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

 

The
Company, through its WinView subsidiary, has a secured promissory note outstanding for amounts due for the provision of services
by the noteholder. As of November 30, 2020, $985,671 was due under the note (August 31, 2020 – $1,527,582). The note is
secured by the assets of WinView, bears interest at 8%, and is currently due. As of November 30, 2020, interest of $79,263 has
been accrued on this note (August 31, 2020 – $63,612).

 

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

 

As
of November 30, 2020, the Company, through its UMG subsidiary, has a balance of $330,000 (August 31, 2020 – $330,000) due
to a former UMG shareholder. This balance was the remaining cash due for the purchase of UMG Events LLC (subsidiary of UMG Media
Ltd.), is currently due, and was non-interest bearing until the due date. As of November 30, 2020, interest of $15,074 has been
accrued on this note (August 31, 2020 – $nil).

 

Paycheck
Protection Program (“PPP”) loans

 

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

 

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

 

    	 
	Page 16 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Debt
(cont’d)

 

Paycheck
Protection Program (“PPP”) loans (cont’d)

 

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

 

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

 

Frankly
line of credit

 

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

 

The
EB Loan had a one-year term, extendable for a second year upon the mutual agreement of Lender and Frankly Media; and is secured
by a security interest in Frankly Media’s assets, as well as a guarantee by the Company, secured against the Company’s
assets. The EB loan was amended in December 2020 and January 2021. Interest on outstanding balances of the EB Loan accrues at
a rate of 10% per annum. The proceeds of the EB Loan were used to supplement Frankly Media’s general working capital.

 

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

 

Convertible
debentures

 

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

 

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

 

    	 
	Page 17 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Debt
(cont’d)

 

Convertible
debentures (cont’d)

 

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

 

During
the three months ended November 30, 2020, convertible debentures with a principal amount of CAD$275,000 (2019 – CAD$1,328,000)
were converted into 36,666 units (2019 – 177,067), and as a result, the Company issued 36,666 common shares and 36,666 warrants
(2019 – 177,067 common shares and 177,067 warrants). The fair value of the convertible debentures at the time of conversion
was estimated using the binomial lattice model with the below assumptions:

 

Share
price of CAD$11.65 (2019 – CAD$29.85); term of 1.90 years (2019 – 2.68 and 2.77); conversion price and warrant exercise
price of CAD$7.50 (2019 – CAD$7.50); interest rate of 6% (2019 – 6%); expected volatility of 179% (2019 – 150%);
risk-free interest rate of 0.25% (2019 – 1.47%); exchange rate of 0.7651 (2019 – 0.7599); and an expected dividend
yield of 0% (2019 – 0%). The fair value assigned to these convertible debentures was $305,223 (2019 – $1,228,333).

 

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

 

During
the three months ended November 30, 2020, 2020 Series convertible debentures with a principal amount of $2,901,393 were issued
for gross proceeds of $2,901,393. In addition, in November 2020, $2,000,000 of convertible debentures from the Company’s
standby convertible debenture facility were issued along with 224,719 warrants for gross proceeds of $2,000,000. Of the gross
proceeds of $2,000,000, $1,381,084 was allocated to the convertible debt and $618,916 was allocated to the 224,719 warrants issued.
The total fair value recorded to convertible debt for issuances above amounted to $4,282,477.

 

    	 
	Page 18 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Debt
(cont’d)

 

Convertible
debentures (cont’d)

 

2019
Series

 

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

 

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

 

2020
Series

 

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

 

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

 

Notwithstanding
the foregoing, if by December 19, 2020, the Company has not obtained registration rights in the United States to allow sale in
the United States of the common shares (“Common Shares”) of the Company and the exercise of warrants (the “Warrants”)
of the Company to be issued pursuant to the conversion of the 2020 Series debentures, holders of 2020 Series debentures may convert
such debentures into Units at US$7.50 per Unit.

 

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

 

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

 

    	 
	Page 19 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Debt
(cont’d)

 

Convertible
debentures (cont’d)

 

Series
One Up

 

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

 

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

 

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

 

$8,000,000
Standby Debenture Facility

 

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

 

The
proceeds of $2,000,000 from the first draw were allocated between convertible debt and warrant liability with $1,381,084 allocated
to convertible debt and $618,916 allocated to the 224,719 warrants issued.

 

The
remaining $6,000,000 of convertible debentures that are issuable under this facility have substantially similar terms as the 2020
Series debentures, including conversion into units consisting of one share and one-half warrant, provided that the conversion
price of any additional convertible debentures will be based on the market price of the common shares at the time of such subscriptions
and are subject to TSX-V approval.

 

    	 
	Page 20 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Commitments
and contingencies

 

Royalty
expenses

 

Royalty
expenses relate to royalties paid to intellectual property rights holders for use of their trademarks, copyrights, software, technology
or other intellectual property or proprietary rights in the development or sale of the Eden Games’ products. Eden Games
has royalty agreements to utilize trademarks, copyrights, software, technology or other intellectual property or proprietary rights
in the development or sale of its products. Eden Games has committed to pay royalties ranging from 4% to 25% of revenues after
certain thresholds have been met, in connection with the underlying license agreements. Royalty expenses were €nil for the
three months ended November 30, 2020 and 2019.

 

Consulting
contracts

 

Under
the terms of a consulting agreement dated July 27, 2017, the Company is committed to pay to certain employees of Eden Games, nine
months’ severance in the event of termination, amounting to £144,500 ($175,911). If revenue from the Eden Games mobile
app exceeds specified amounts, a bonus shall be paid up to a maximum of £100,000 ($121,561) on an annual basis.

 

Litigation
and arbitration

 

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

 

In
response, in November 2020, the shareholders of Allinsports commenced arbitration in Ontario seeking, among other things, to compel
the Company to complete the acquisition of Allinsports without the audited financial statements, and to issue 966,667 common shares
of the Company to those shareholders. As alternative relief, the shareholders of Allinsports are seeking US$20,000,000 in damages.
The Company will defend itself vigorously in this proceeding.

 

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

 

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

 

Discontinued
operations

 

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

 

    	 
	Page 21 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Discontinued
operations (cont’d)

 

Consideration
transferred for the Motorsport Group was as follows:

 

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

 

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

 

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

 

	Three-month period ended November 30,	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	Revenues	 	 	 	 	 	 	 	 
	Advertising revenue	 	 	90,934	 	 	 	-	 
	 	 	 	 	 	 	 	 	 
	Operating expenses	 	 	 	 	 	 	 	 
	Salaries and wages	 	 	212,546	 	 	 	73,593	 
	Consulting	 	 	267,933	 	 	 	27,036	 
	Professional fees	 	 	22,681	 	 	 	38,309	 
	Sponsorships and tournaments	 	 	203,637	 	 	 	1,828,587	 
	Advertising and promotion	 	 	1,740	 	 	 	9,583	 
	Office and general	 	 	7,374	 	 	 	55,503	 
	Technology expenses	 	 	86,590	 	 	 	32	 
	Amortization and depreciation	 	 	201,335	 	 	 	1,615	 
	Share-based payments	 	 	-	 	 	 	-	 
	Interest expense	 	 	572	 	 	 	(56	)
	(Gain) loss on foreign exchange	 	 	36,741	 	 	 	(7,438	)
	Net loss from discontinued operations	 	 	(950,215	)	 	 	(2,026,764	)

 

    	 
	Page 22 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Discontinued
operations (cont’d)

 

	Three-month period ended November 30,	 	2020	 	 	2019	 
	 	 	$	 	 	$	 
	 	 	 	 	 	 	 
	Net cash provided by (used in) operating activities	 	 	(92,527	)	 	 	(107,399	)
	Disposal of Motorsports	 	 	24,348	 	 	 	-	 
	Change in cash	 	 	(68,179	)	 	 	(107,399	)
	Cash, beginning of period	 	 	68,304	 	 	 	79,553	 
	Cash, end of period	 	 	125	 	 	 	(27,846	)

 

Financial
instruments and financial risk management

 

Financial
risk management objectives and policies

 

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

 

Credit
risk

 

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

 

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

 

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

 

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

 

As
at November 30, 2020 one customer (August 31, 2020 – one) accounted for greater than 10% of the Company’s accounts
receivable balance. In total, this one customer (August 31, 2020 – one) accounted for 19% of the Company’s accounts
and other receivables balance as at November 30, 2020 (August 31, 2020 – 13%). During the three months ended November 30,
2020, one (2019 – three) customers represented 58% (2019 – 50%) of total revenue.

 

    	 
	Page 23 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Financial
instruments and financial risk management (cont’d)

 

Credit
risk (cont’d)

 

The
below table reflects the aging of the Company’s aging by invoice date of gross trade accounts receivable and allowance for
doubtful accounts as at November 30, 2020:

 

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

 

Liquidity
risk

 

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

 

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

 

	 	 	< 1 year	 	 	1-2 years	 	 	3-5 years	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	17,378,824	 	 	 	-	 	 	 	-	 
	Players liability account	 	 	340,911	 	 	 	-	 	 	 	-	 
	Lease obligation	 	 	189,874	 	 	 	337,634	 	 	 	-	 
	Line of credit	 	 	4,979,877	 	 	 	-	 	 	 	-	 
	Long-term debt	 	 	97,871	 	 	 	66,730	 	 	 	-	 
	Promissory notes payable	 	 	2,018,100	 	 	 	-	 	 	 	-	 
	Convertible debt	 	 	-	 	 	 	16,253,594	 	 	 	-	 

 

Interest
rate risk

 

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

 

Foreign
exchange rates

 

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

 

Fair
value hierarchy

 

The
following tables combine information about:

 

	●	classes
    of financial instruments based on their nature and characteristics;
	●	the
    carrying amounts of financial instruments;

 

    	 
	Page 24 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Financial
instruments and financial risk management (cont’d)

 

Fair
value hierarchy (cont’d)

 

	●	fair
    values of financial instruments (except financial instruments when carrying amount approximates their fair value); and
	●	fair
    value hierarchy levels of financial assets and financial liabilities for which fair value was disclosed.

 

The
Company categorizes its financial assets and liabilities measured at fair value into one of three different levels depending on
the observability of the inputs used in the measurement.

 

	Carrying value at November 30, 2020	 	FVTPL – 
mandatorily 
measured	 	 	FVOCI – 
mandatorily 
measured	 	 	FVOCI – 
designated	 	 	Amortized 
cost	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	     	 	 	 	      	 	 	 	     	 	 	 	 	 
	Financial assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,726,563	 
	Restricted cash	 	 	-	 	 	 	-	 	 	 	-	 	 	 	340,911	 
	Accounts and other receivables	 	 	-	 	 	 	-	 	 	 	-	 	 	 	5,222,659	 
	Government remittances	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,021,425	 
	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	9,311,558	 

 

	Carrying value at November 30, 2020	 	FVTPL – 
mandatorily 
measured	 	 	FVTPL – 
designated	 	 	Amortized 
cost	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	        	 	 	 	            	 	 	 	 	 
	Financial liabilities:	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities	 	 	-	 	 	 	-	 	 	 	17,378,824	 
	Players liability account	 	 	-	 	 	 	-	 	 	 	340,911	 
	Line of credit	 	 	-	 	 	 	-	 	 	 	4,979,877	 
	Long-term debt	 	 	-	 	 	 	-	 	 	 	164,601	 
	Promissory notes payable	 	 	-	 	 	 	-	 	 	 	2,018,100	 
	Deferred purchase consideration	 	 	-	 	 	 	-	 	 	 	-	 
	Convertible debt	 	 	-	 	 	 	16,253,594	 	 	 	-	 
	 	 	 	-	 	 	 	16,253,594	 	 	 	24,882,313	 

 

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

 

    	 
	Page 25 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Financial
instruments and financial risk management (cont’d)

 

Fair
value hierarchy (cont’d)

 

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

 

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

 

	 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Fair value as 
at November 
30, 2020	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible debt	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 
	 	 	 	-	 	 	 	-	 	 	 	16,253,594	 	 	 	16,253,594	 

 

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

 

    	 
	Page 26 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Financial
instruments and financial risk management (cont’d)

 

Fair
value hierarchy (cont’d)

 

Some
of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
The following table gives information about how the fair values of these financial assets and financial liabilities are determined
(in particular, the valuation technique and inputs used).

 

	Financial
        assets / 

        financial
        liabilities
	 	Valuation
    technique	 	Key
    Inputs	 	Relationship
and sensitivity of unobservable inputs to fair value

	Convertible
    debt	 	The
    fair value of the convertible debentures as at November 30, 2020 has been calculated using a binomial lattice methodology.	 	Key
        observable inputs

         

        Share
        price (USD $6.77)

         

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

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

        Credit
        spread (10.71% to 10.73%)

         

        Discount
        for lack of marketability (35%)
	 	The
        estimated fair value would increase (decrease) if:

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

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

        Share
        price (USD $8.92)

         

        Risk-free
        interest rate (0.14%)

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

         

        Credit
        spread (18.35%)

         

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

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

 

There
has been no change to the valuation technique during the year. There were no transfers between Levels 1, 2 and 3 during the year.

 

Off-balance
sheet arrangements

 

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

 

    	 
	Page 27 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Related
party transactions and balances

 

Related
party transactions policy

 

Our
Board of Directors has adopted a policy that describes the procedures used to process, evaluate, and if necessary, disclose transactions
between the Company and its directors, officers, or greater than 5% beneficial owners. We review any transaction or series of
transactions in which any related parson has a direct or indirect interest. Once a transaction has been identified, senior management
and the audit committee will review the transaction and ensure appropriate disclosure in the Company’s interim financial
statements and interim management’s discussion and analysis.

 

Key
management transactions

 

Key
management includes the Company’s directors, officers and any consultants with the authority and responsibility for planning,
directing and controlling the activities of an entity, directly or indirectly. Compensation awarded to key management for the
three months ended November 30 includes the following:

 

	Three-month period ended November 30,	 	2020	 	 	2019	 
	 	 	 	$
	 	 	 	$
	 
	 	 	 	 	 	 	 	 	 
	Total compensation paid to key management	 	 	534,738	 	 	 	106,670	 
	Share based payments 	 	 	895,814	 	 	 	7,209	 

 

Total
compensation paid to key management is recorded in consulting fees, salaries and wages and share based payments in the consolidated
statement of loss and comprehensive loss for the three months ended November 30, 2020 and 2019. Of the 322,547 RSUs granted in
the three months ended November 30, 2020, 75,944 were severance compensation to a former officer. As these RSUs were issued as
severance compensation, the grant date fair value of CAD$713,874 ($550,896) was recognized as share based payments expense on
the grant date.

 

Amounts
due to related parties as at November 30, 2020 with respect to the above fees were $72,000 (August 31, 2020 – $275,502).
The amounts due to related parties are recorded within accounts payable and accrued liabilities on the consolidated statement
of loss and comprehensive loss. These amounts are unsecured, non-interest bearing and due on demand.

 

Changes
in accounting policies

 

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

 

Risks
and uncertainties

 

Liquidity
concerns and future financings 

 

Although
we have been successful in the past in financing our activities, there can be no assurance that we will be able to obtain additional
financing as and when needed in the future to execute our business plan and future operations. Our ability to arrange such financing
in the future will depend in part upon the prevailing capital market conditions as well as our business performance. It may be
difficult or impossible for us to obtain financing on commercially acceptable terms. This may be further complicated by the limited
market liquidity for shares of smaller companies such as us, restricting access to some institutional investors. There is a risk
that interest rates will increase given the current historical low level of interest rates. An increase in interest rates could
result in a significant increase in the amount that we pay to service future debt incurred by us and affect our ability to fund
ongoing operations.

 

    	 
	Page 28 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Liquidity
concerns and future financings (cont’d)

 

Failure
to obtain additional financing on a timely basis could also result in delay or indefinite postponement of further development
of its products. Such delay would have a material and adverse effect on our business, financial condition and results of operations.

 

We
may not be able to successfully execute our business plan 

 

The
execution of our business plan poses many challenges and is based on a number of assumptions. We may not be able to successfully
execute our business plan. If our business plan is more costly than we anticipate or we have significant cost overruns, certain
products and development activities may be delayed or eliminated or we may be compelled to secure additional funding (which may
or may not be available) to execute our business plan. We cannot predict with certainty our future revenues or results from our
operations. If the assumptions on which our revenue or expenditure forecasts are based change, the benefits of our business plan
may change as well. In addition, we may consider expanding our business beyond what is currently contemplated in our business
plan. Depending on the financing requirements of a potential acquisition or new product opportunity, we may be required to raise
additional capital through the issuance of equity or debt. If we are unable to raise additional capital on acceptable terms, we
may be unable to pursue a potential acquisition or new product opportunity.

 

Difficulties
integrating acquisitions and strategic investments 

 

We
have acquired businesses, personnel and technologies in the past and we expect to continue to pursue acquisitions, such as the
completed acquisitions of Frankly, WinView, UMG, Eden Games, Stream Hatchet and other investments that are complementary to our
existing business and expanding our employee base and the breadth of our offerings. Our ability to grow through future acquisitions
will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, the ability to compete
effectively to attract these candidates and the availability of financing to complete larger acquisitions. Since we expect the
esports industry to consolidate in the future, we may face significant competition in executing our growth strategy. Future acquisitions
or investments could result in potential dilutive issuances of equity securities, use of significant cash balances or incurrence
of debt, and contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of which could
adversely affect our financial condition and results of operations. The benefits of an acquisition or investment may also take
considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended
benefits.

 

The
above risks and difficulties, if they materialize, could disrupt our ongoing business, distract management, result in the loss
of key personnel, increase expenses and otherwise have a material adverse effect on our business, results of operations and financial
performance.

 

Management
of growth 

 

We
have grown rapidly since our inception and we plan to continue to grow at a rapid pace. This growth has put significant demands
on our processes, systems and personnel. We may be subject to growth-related risks including capacity constraints and pressure
on our internal systems and controls. Our ability to manage growth effectively will require us to continue to implement and improve
our operational and financial systems and to expand, train and manage our employee base. Managing our growth will require significant
expenditures and allocation of valuable management resources. Our inability to deal with this growth may have a material adverse
effect on our business, financial condition, results of operations and prospects.

 

    	 
	Page 29 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

We
may continue to have reduced cash reserves 

 

We
expect our cash reserves will be reduced due to future operating losses, working capital requirements, capital expenditures, and
potential acquisitions and other investments by our business, and we cannot provide certainty as to how long our cash reserves
will last or that we will be able to access additional capital when necessary.

 

We
expect to incur continued losses and generate negative cash flow until we can produce sufficient revenues to cover our costs.
We may never become profitable. Even if we do achieve profitability, we may be unable to sustain or increase our profitability
in the future. For the reasons discussed in more detail below, there are substantial uncertainties associated with our achieving
and sustaining profitability. We expect our cash reserves will be reduced due to future operating losses, and working capital
requirements, and we cannot provide certainty as to how long our cash reserves will last or that we will be able to access additional
capital if and when necessary.

 

Competition

 

Our
potential failure to compete successfully in the various markets we participate in could have a material adverse effect on our
business, financial condition and results of operations. The market for the various types of product and service offerings we
provide is very competitive and rapidly changing. We face competition from other esports businesses, many of which are larger
and better funded than us. There can be no guarantee that our current and future competitors will not develop similar or superior
services to our products and services which may render us uncompetitive. Increasing competition could result in fewer future customers,
reduced revenue, reduced sales margins and loss of market share, any one of which could harm our business.

 

Players
in the current market face a vast array of entertainment choices. Other forms of entertainment, such as offline, traditional online,
personal computer and console games, television, movies, sports and the internet are much larger and more well- established markets
and may be perceived by our customers to offer greater variety, affordability, interactivity and enjoyment. These other forms
of entertainment compete for the discretionary time and income of our customers. If we are unable to sustain sufficient interest
in our games in comparison to other forms of entertainment, including new forms, our business model may no longer be viable.

 

The
development of high-quality products requires substantial up-front expenditures 

 

Consumer
preferences for games are usually cyclical and difficult to predict, and even the most successful titles remain popular for only
limited periods of time, unless refreshed with new content or otherwise enhanced. In order to remain competitive, we must continuously
develop new products or enhancements to existing products. The amount of lead time and cost involved in the development of high-quality
products is increasing, and the longer the lead time involved in developing a product and the greater the allocation of financial
resources to such product, the more critical it is that we accurately predict consumer demand for such product. If its future
products do not achieve expected consumer acceptance or generate sufficient revenues upon introduction, we may not be able to
recover the substantial development and marketing costs associated with those products.

 

Rapid
technological changes 

 

Rapid
technological changes may increase competition and render our technologies, products or services obsolete or cause us to lose
market share. The online gaming software industry is subject to rapid and significant changes in technology, frequent new service
introductions and evolving industry standards. Such changes may adversely affect our revenue. There can be no assurance that we
can improve the features, functionality, reliability and responsiveness of infrastructure. Similarly, the technologies that we
employ may become obsolete or subject to intense competition from new technologies in the future. If we fail to develop, or obtain
timely access to, new technologies, or if we fail to obtain the necessary licenses for the provision of services using these new
technologies, we may lose market share, and our results of operations would be adversely affected.

 

    	 
	Page 30 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Proprietary
protection and intellectual property disputes 

 

Protection
of our trade secrets, copyrights, trademarks, domain names and other product rights are important to our success. We protect our
intellectual property rights by relying on trademark protection, common law rights as well as contractual restrictions. However,
many of our proprietary technologies are currently unpatented nor have we made any applications for such intellectual property
registrations and we have no present intention to do so in the near future. As such, the current steps that it takes to protect
our intellectual property, including contractual arrangements, may not be sufficient to prevent the misappropriation of our proprietary
information or deter independent development of similar technologies by others.

 

Should
we decide to register our intellectual property in one or more jurisdictions, it will be an expensive and time consuming process
and there is no assurance that we will be successful in any or all of such jurisdictions. The absence of registered intellectual
property rights, or the failure to obtain such registrations in the future, may result in us being unable to successfully prevent
our competitors from imitating our solutions or using some or all of our processes. Even if patents and other registered intellectual
property rights were to be issued to us, our intellectual property rights may not be sufficiently comprehensive to prevent our
competitors from developing similar competitive products and technologies.

 

With
our acquisition of WinView, we acquired WinView’s intellectual property portfolio. WinView’s patent portfolio is an
important asset to us and we intend to further develop and protect it and our technologies. Litigation may be necessary to enforce
our intellectual property rights. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs,
adverse publicity or diversion of management and technical resources, any of which could adversely affect our business and operating
results. Moreover, due to the differences in foreign patent, trademark, copyright and other laws concerning proprietary rights,
our intellectual property may not receive the same degree of protection in foreign countries as it would in Canada or the United
States. Our failure to possess, obtain or maintain adequate protection of our intellectual property rights for any reason could
have a material adverse effect on our business, results of operations and financial condition. We are taking further steps to
enforce the intellectual property rights of patents in the WinView portfolio. In connection with that process, we are reviewing
and restructuring, as appropriate, the terms of agreements with third parties we have retained in connection with such enforcement
and may retain other additional parties to assist us in the enforcement process. Among the goals of such review and restructuring
is to increase the upside participation in potential future patent revenues.

 

We
may also face allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of
third parties, including from our competitors and former employers of our personnel. Whether a product infringes a patent or other
intellectual property right involves complex legal and factual issues, the determination of which is often uncertain. As the result
of any court judgment or settlement, we may be obligated to cancel the launch of a new game or product offering, cease offering
a game or certain features of a game, pay royalties or significant settlement costs, purchase licenses or modify our software
and features, or develop substitutes. We have already had communication from trademark trolls in this respect. Currently management
believes these are not a quantifiable business risk.

 

In
addition, we use open source software in our games and we expect to continue to use open source software in the future. From time
to time, we may face claims from companies that incorporate open source software into their products, claiming ownership of, or
demanding release of, the source code, the open source software and/or derivative works that were developed using such software,
or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation,
require us to purchase a costly license or require us to devote additional research and development resources to change our games,
any of which would have a negative effect on our business and operating results.

 

    	 
	Page 31 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Transmission
of user data 

 

In
connection with our operations, we transmit and store data. We are subject to legislation and regulations on the collection, storage,
retention, transmission and use of user-data that we collect. Our efforts to protect the personal information of our users, partners
and clients may be unsuccessful due to the actions of third parties, software bugs or technical malfunctions, employee error or
malfeasance, or other factors.

 

In
addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access
to our data, our users’ data, our partners’ data or our clients’ data. If any of these events occur,
users’, partners’ or clients’ information could be accessed or disclosed improperly. Any incidents
involving the unauthorized access to or improper use of the information of users or incidents involving violation of our
terms of service or policies could damage our reputation and brands and diminish our competitive position.

 

Moreover,
affected users, clients or governmental authorities could initiate legal or regulatory action against us in connection with such
incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to
modify our business practices and remediate the effects of any such incidents of unauthorized access or use. Any of these events
could have a material adverse effect on our prospects, businesses, financial condition or results of operations.

 

Data
collection risks 

 

We
partially rely on data captured by Stream Hatchet for our revenues and for assessing the performance of some of our brands. Capturing
accurate data is subject to various limitations. For example, Stream Hatchet may need to collect certain data from mobile carriers
or other third parties such as various viewing platforms, which limits its ability to verify the reliability of such data. Further,
Stream Hatchet may not be able to collect any data from third parties at all. Failure to capture accurate data or an incorrect
assessment of this data may materially harm business and operating results.

 

Mobile
gaming and the free-to-play business model 

 

Eden
Games is partially reliant on the free-to-play business model where monetization is through in-app purchases. The risks of that
business model include the dependence on a relatively small number of consumers for a significant portion of revenues and profits
from any given game, including the current title, Gear.Club. If we increase our reliance on the free-to-play model, we may be
exposed to increased risk. For example, we may invest in the development of new free-to-play interactive entertainment products
that do not achieve significant commercial success, in which case our revenues from those products likely will be lower than anticipated
and we may not recover our development costs. Further, if: (1) we fail to offer monetization features that appeal to our consumers;
(2) these consumers do not continue to play our free-to-play games or purchase virtual items at the same rate; (3) our platform
providers make it more difficult or expensive for players to purchase our virtual currency; or (4) we cannot encourage significant
additional consumers to purchase virtual items in our free-to-play games, our business may be negatively impacted.

 

    	 
	Page 32 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Retention
and acquisition of new CMS platform customers

 

Our
financial performance and operations are dependent in part on retaining our current CMS platform customers and acquiring new CMS
platform customers. We currently serve a large number of customers with our CMS platform and a typical customer contract runs
for multiple years. However, we compete with the other technology providers in the market and increasing competition may affect
our ability to retain current and acquire new customers. Any number of factors could potentially negatively affect our customer
retention or acquisition. For example, a current customer may request products or services that we currently do not provide and
may be unwilling to wait until we can develop or source such additional features. Other factors that affect our ability to retain
or acquire new CMS platform customers include:

 

	●	customers
    increasingly use competing products or services;
	●	we
    fail to introduce new and improved products or if we introduce new products or services that are not favorably received;
	●	we
    are unable to continue to develop new products and services that work with a variety of mobile operating systems and networks
    and/or that have a high level of market acceptance;
	●	there
    are changes in customer preference;
	●	there
    is consolidation or vertical integration of our customers;
	●	there
    are changes in customer sentiment about the quality or usefulness of our products and services;
	●	there
    are adverse changes in our products that are mandated by legislation, regulatory authorities, or litigation, including settlements
    or consent decrees;
	●	technical
    or other problems prevent us from delivering our products in a rapid and reliable manner;
	●	we
    fail to provide adequate customer service to our customers; or
	●	we,
    our software developers, or other companies in our industry are the subject of adverse media reports or other negative publicity.

 

Exposure
to advertising marketplace 

 

A
significant portion of our projected revenue is generated from the sale of national and local online advertising inventory, which
is dependent on available advertising inventory and market demand and prices for such inventory. A decline in available supply
of advertising inventory, general demand for advertising inventory and general economic conditions may materially and adversely
affect our advertising revenue.

 

A
significant portion of our projected revenue is generated from the sale of national and local online advertising inventory, the
majority of which we sell on an automated basis through real-time bidding. We also sell a small portion of our inventory to premium
direct advertising customers to whom we provide guaranteed advertisement inventory. Our advertising revenue is dependent on the
amount of advertising inventory that is available to us to sell and market demand and prices for such inventory.

 

The
amount of advertising inventory available for us to sell is affected by many variables including but not limited to:

 

	●	the
    negotiated amount of inventory we receive from our current CMS customers;
	●	the
    amount of additional inventory our current CMS customers permit us to sell on their behalf;
	●	our
    ability to acquire inventory to sell on behalf of parties that are not customers of our CMS;
	●	the
    amount of inventory available on our owned and operated properties;
	●	the
    amount of end-user traffic to our customers’ and our online properties; and
	●	the
    specific type of advertising to be sold, such as display, video or mobile advertising.

 

    	 
	Page 33 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Exposure
to advertising marketplace (cont’d)

 

While
we endeavor to maximize the amount of inventory we are able to sell, some of the foregoing variables, and by extension the amount
of inventory we may sell, are affected by market forces and other contingencies that we do not control.

 

The
other principal component of gross advertising revenue is the price at which advertising inventory may be sold. To a large extent,
the prices we can achieve for our advertising inventory are a product of the market supply and demand, which may vary based on
several factors including ad size, ad type, geographic region and time of year. At a macro level, advertising spending is also
sensitive to overall economic conditions, and our advertising revenues will be adversely affected if advertisers respond to weak
and uncertain economic conditions, for example as a result of disruptions from COVID-19, by reducing their budgets or changing
their spending patterns. There are limitations on the amount that we can compensate for fluctuations in the prevailing market
prices for advertising inventory. Any reduction in spending by existing or potential advertisers and a decline in available advertising
inventory or demand for such inventory would negatively affect our advertising revenue and could affect our ability to grow our
advertising customer base.

 

Global
economy 

 

Our
business is subject to general economic conditions. Adverse changes in general economic and market conditions could adversely
impact demand for our products, prices, revenue, operating costs, results of financing efforts, and the timing and extent of capital
expenditures.

 

Foreign
operational risks 

 

A
significant portion of our business and operations is conducted in foreign jurisdictions, including the United States, Spain and
France. As such, our business and operations may be adversely affected by changes in foreign government policies and legislation
or social instability and other factors which are not within our control, including, but not limited to, renegotiation or nullification
of existing contracts or licenses, changes in policies, regulatory requirements or the personnel administering them, economic
sanctions, risk of terrorist activities, revolution, border disputes, implementation of tariffs and other trade barriers and protectionist
practices, volatility of financial markets, labour disputes and other risks arising out of foreign governmental sovereignty over
the areas in which our business is conducted. Our operations may also be adversely affected by laws and policies of such foreign
jurisdictions affecting foreign trade, taxation and investment.

 

If
our operations are disrupted and/or the economic integrity of our contracts is threatened for unexpected reasons, our business
may be harmed. In the event of a dispute arising in connection with our operations in a foreign jurisdiction where we conduct
or will conduct our business, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. We may
also be hindered or prevented from enforcing our rights with respect to a governmental instrumentality because of the doctrine
of sovereign immunity. Accordingly, our activities in foreign jurisdictions could be substantially affected by factors beyond
our control, any of which could have a material adverse effect on our business. We believe that our management is sufficiently
experienced to manage these risks.

 

Regulation

 

We
are subject to general business regulations and laws as well as regulations and laws specifically governing the internet, gaming,
e-commerce and electronic devices. Existing and future laws and regulations may impede our growth or strategy. These regulations
and laws cover taxation, privacy, data protection, pricing, content, copyrights, distribution, mobile communications, consumer
protection, web services, wagering, the provision of online payment services, websites and the characteristics and quality or
products and services. Unfavorable changes in regulations and laws could decrease demand for our events, online offering and merchandise,
increase our cost of doing business or otherwise have a material adverse effect on our reputation, popularity, results of operations
and financial condition.

 

    	 
	Page 34 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Risks
and uncertainties (cont’d)

 

Emerging
diseases, like COVID-19, may adversely affect our operations, our suppliers, or our customers 

 

Emerging
diseases, like COVID-19, and government actions to address them, may adversely affect our operations, our suppliers, or our customers.
The COVID-19 pandemic continues to evolve rapidly and, as a result, it is difficult to accurately assess its continued magnitude,
outcome and duration, but it could:

 

	●	worsen
    economic conditions, which could negatively impact access to capital; 
	●	reduce
    consumer spending; 
	●	limit
    our employees from travelling which could affect the execution of our business plan given the Company is multi- jurisdictional;
    or 
	●	result
    in governmental regulation adversely impacting our business 

 

all
of which could have a material adverse effect on our business, financial condition and results of operations, which could be rapid
and unexpected.

 

Cyber
security threats

 

A
cyber incident is an intentional or unintentional event that could threatens the integrity, confidentiality or availability of
the Company’s information resources. These events include, but are not limited to, unauthorized access to information systems,
a disruption to our information systems, or loss of confidential information. Real’s primary risks that could result directly
from the occurrence of a cyber incident include operational interruption, damage to our public image and reputation, and/or potentially
impact the relationships with our customers.

 

We
have implemented processes, procedures and controls to mitigate these risks, including, but not limited to, firewalls and antivirus
programs and training and awareness programs on the risks of cyber incidents. These procedures and controls do not guarantee that
the financial results may not be negatively impacted by such an incident.

 

Subsequent
events

 

The
Company has evaluated subsequent events from the statement of financial position date through February 1, 2021, the date at which
the interim condensed consolidated financial statements were available to be issued and determined there were no additional items
to be disclosed except for the transactions described below.

 

Amendment
of credit facility

 

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

 

In
January 2021, the Company further amended the EB loan such that in lieu of repayment of the loan due to the Company completing
an equity financing of at least $15 million (see note 27(d), the $5 million principal amount of the EB loan will now be subject
to a secured convertible debenture. The convertible debenture is convertible into units of the Company at a conversion price of
$10.25 per unit, with each unit comprised of one common share and one-half of a warrant, with each whole warrant exercisable into
a common share at an exercise price of $15.00 per share for a period of three years from the issuance of the convertible debenture.

 

    	 
	Page 35 of 36

    	Engine Media Holdings, Inc.
(formerly Torque Esports Corp.)
Management’s Discussion and Analysis
(Expressed in United States Dollars)
	

    

 

Subsequent
events (cont’d)

 

Shares
for debt transaction 

 

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

 

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

 

In
January 2021, the Company completed convertible debenture settlements of an aggregate principal amount of $10,726,393 of its convertible
debentures in exchange for the issuance of 1,430,186 units at a deemed price of $7.50 per unit, with each such unit consisting
of a common share and three-quarters (3/4) of a warrant, with each whole warrant exercisable into a common share at an exercise
price of $15 per share for a period of three years.

 

Included
in the debt settlements was the $3,000,000 convertible debenture that was issued in connection with the Company’s acquisition
of a 20% equity interest in One Up LLC.

 

Issuance
of Units for $17.8 million of gross proceeds

 

In
January 2021, the Company closed on the issuance of 2,371,747 units (the “Units”) for gross proceeds of $17,788,105
of a non-brokered private placement. Each Unit consists of one common share of the Company and one-half of one common share purchase
warrant (a “Warrant”). Each whole Warrant entitles the holder to acquire one additional share of the Company at a
price of US$15.00 per share for a period of 3 years provided that: (i) if the common shares are listed for trading on NASDAQ,
(ii) the Company completes an offering of securities under a short form prospectus for an aggregate amount of at least US$30,000,000,
and (iii) the closing price of the common shares on NASDAQ is US$30.00 or greater for a period of 15 consecutive trading days,
then the Company may accelerate the expiry date of the Warrants to the 30th day after the date written notice is provided to the
holders.

 

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

 

The
Company paid cash commissions to eligible finders under the offering totaling $490,641 and also issued the following securities
as partial payment of commissions to finders: 49,700 Units; and 114,987 finders warrants, with each finder warrant exercisable
into a common share at an exercise price of US$15.00 per share for 3 years subject to the same acceleration terms described above.

 

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

 

Additional
information

 

This
MD&A, as well as additional information regarding Engine Media, has been filed electronically with the Canadian securities
regulators through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and may be accessed through
SEDAR’s website at www.sedar.com.

 

    	 
	Page 36 of 36

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