Document:

Exhibit
4.14

 

 

ENGINE
MEDIA HOLDINGS, INC.

(formerly
Torque Esports Corp.)

 

Interim
Condensed Consolidated Financial Statements

 

For
the Three and Six Months Ended

February
28, 2021 and February 29, 2020

 

(Expressed
in United States Dollars)

(Unaudited)

 

    	 

     

    

 

Table
of Contents

 

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

 

    	Page 2 of 47

     

    

  

	Engine
                                            Media Holdings, Inc.

                               (formerly
                               Torque Esports Corp.) 
	

 

 

 

MANAGEMENT’S
RESPONSIBILITY FOR FINANCIAL REPORTING

 

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

 

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

 

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

 

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

 

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

 

 NOTICE TO READER  

   

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

 

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

   

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

   

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

 

 

    	Page 3 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
                                            Condensed Consolidated Statements of Financial Position

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

	   	   	 Note 	   	 February
                                            28, 

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

 

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

 

    	Page 4 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

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

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

 

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

 

    	Page 5 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
Condensed Consolidated Statements of Loss and Comprehensive Loss

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

 

    	Page 6 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

    equity before
 non-controlling interest 	   	   	 Non-controlling
    interest 	   	   	 Total

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

 

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

 

    	Page 7 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Interim
                                            Condensed Consolidated Statements of Cash Flows 

                                                          (Unaudited)

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

 

    	Page 8 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

    	Page 9 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

	Name
    of Subsidiary	 	Country
    of Incorporation	 	Ownership

    Percentage
	 	Functional

    Currency

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

 

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

 

    	Page 10 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

    	Page 11 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

 

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

 

    	Page 12 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

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

 

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

 

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

 

    	Page 13 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	Page 14 of 47

     

    

 

	Engine
        Media Holdings, Inc.

                                                          (formerly
                                            Torque Esports Corp.) 

                                                          Notes
                                            to the Interim Condensed Consolidated Financial Statements

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

                                                          (Expressed
                                            in United States Dollars)
	

 

 

 

	7.
    	Investment
    in associate and investment at FVTPL 

 

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

 

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

 

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

 

    	Page 15 of 47

     

    

 

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	8.	Property
    and equipment (cont’d)

 

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

 

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

 

	9.	Goodwill

 

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

 

    	Page 16 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	10.	Intangible
    assets

 

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

 

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

 

    	Page 17 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	10.	Intangible
    assets (cont’d)

 

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

 

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

 

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

 

	11.	Right-of-use
    assets

 

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

 

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

 

    	Page 18 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	12.	Lease
    liabilities

 

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

 

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

 

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

 

The
Company’s lease obligation is classified  as follows:

 

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

 

	13.	Players
    liability account

 

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

 

    	Page 19 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	14.	Promissory
    notes payable and other borrowings

 

	(a)	Promissory
    notes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	Page 20 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

	(c)	Frankly
    line of credit

 

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

 

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

 

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

 

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

 

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

 

	15.	Convertible
    debt

 

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

 

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

 

    	Page 21 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	15.	Convertible
    debt (cont’d)

 

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

 

	(a)	Conversions during
  the period

 

2019
Series

 

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

 

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

 

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

 

2020
Series

 

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

 

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

 

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

 

    	Page 22 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	15.	Convertible
    debt (cont’d)

 

	(b)	Issuances
    during the period

 

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

 

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

 

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

 

	(c)	2019 Series

 

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

 

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

 

    	Page 23 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	15.	Convertible
    debt (cont’d)

 

	(d)	2020
    Series

 

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

 

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

 

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

 

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

 

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

 

	(e)	2020
    Series - One Up

 

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

 

	(f)	2020
    Series – Standby

 

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

 

    	Page 24 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	15.	Convertible
    debt (cont’d)

 

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

 

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

 

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

 

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

 

	(g)	EB
    CD

 

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

 

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

 

    	Page 25 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	16.	Long-term
    debt

 

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

 

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

 

	17.	Warrant
    liability

 

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

 

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

 

    	Page 26 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

 

	17.	Warrant
    liability (cont’d)

 

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

 

    	Page 27 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

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

 

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

 

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

 

	17.	Warrant
    liability (cont’d)

 

	(a)	Warrants
    exercised during the period

 

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

 

    	Page 28 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	(b)	Warrants
    issued during the period

 

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

 

	(c)	Warrants issued on conversion of convertible
debt

 

2019
Series

 

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

 

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

 

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

 

2020
Series

 

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

 

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

 

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

 

    	Page 29 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	17.	Warrant
    liability (cont’d)

 

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

 

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

 

	(e)	Warrants
    issued on private placement of units

 

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

 

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

 

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

 

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

 

	18.	Share
    capital

 

	(a)	Authorized

 

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

 

	(b)	Issued
    and outstanding, common shares

 

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

 

    	Page 30 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	18.	Share
    capital (cont’d)

 

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

 

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

 

	(c)	Activity
    for the period

 

Private
Placement of units

 

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

 

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

 

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

 

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

 

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

 

    	Page 31 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	18.	Share
    capital (cont’d)

 

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

 

Private
Placement of units (cont’d)

 

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

 

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

 

Other
activity

 

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

 

	19.	Stock options

 

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

 

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

 

    	Page 32 of 47

     

    

  

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

 

 

 

	19.	Stock options (cont’d)

 

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

 

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

 

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

 

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

 

    	Page 33 of 47

     

    

 

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

  

 

 

	19.	Stock options (cont’d)

 

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

 

	20.	Restricted share units

 

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

 

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

 

The
Company’s outstanding RSUs are as follows:

 

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

 

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

 

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

 

    	Page 34 of 47

     

    

 

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

 

 

 

	21.	Capital management

 

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

 

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

 

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

 

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

 

	22. 	Commitments and contingencies

 

	(a)	Royalty expenses

 

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

 

	(b)	Consulting contracts

 

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

 

	(c)	Litigation and arbitration

 

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

 

    	Page 35 of 47

     

    

 

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

  

 

 

	22.	Commitments and contingencies (cont’d)

 

	(c)	Litigation and arbitration (cont’d)

 

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

 

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

 

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

 

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

 

	23.	Discontinued operations

 

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

 

    	Page 36 of 47

     

    

 

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

  

 

 

	23.	Discontinued operations (cont’d)

 

Consideration
transferred for the Motorsport Group was as follows:

 

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

 

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

 

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

 

    	Page 37 of 47

     

    

 

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

  

 

 

	23.	Discontinued operations (cont’d)

 

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

 

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

 

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

 

	24.	Segmented information

 

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

 

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

 

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

 

    	Page 38 of 47

     

    

 

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

  

 

 

	24.	Segmented information (cont’d)

 

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

 

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

 

    	Page 39 of 47

     

    

 

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

 

 

 

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

 

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

 

    	Page 40 of 47

     

    

  

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

 

 

 

	24.	Segmented
    information (cont’d)

 

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

 

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

 

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

 

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

 

    	Page 41 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

	24.	Segmented
    information

 

	(a)	Geographical
    breakdown

 

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

 

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

 

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

 

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

 

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

 

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

 

    	Page 42 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

 

	(b)	Credit
    risk

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	Page 43 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

 

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

 

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

 

	(d)	Interest
    rate risk

 

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

 

	(e)	Foreign
    exchange rates

 

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

 

	(f)	Fair
    value hierarchy

 

The
following tables combine information about:

 

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

 

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

 

    	Page 44 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

As
of February 28, 2021:

 

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

 

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

 

As
of August 31, 2020:

 

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

 

    	Page 45 of 47

     

    

 

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

 

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

 

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

 

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

 

    	Page 46 of 47

     

    

  

	Engine
                                            Media Holdings, Inc.

    (formerly
    Torque Esports Corp.)

    Notes
    to the Interim Condensed Consolidated Financial Statements

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

    (Expressed
    in United States Dollars)
	

 

 

 

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

 

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

 

	Financial
                                            assets /

    financial
    liabilities
	 	Valuation
    technique	 	Key
    Inputs	 	Relationship
                                            and

    sensitivity
    of

    unobservable
    inputs

    to
    fair value

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

     

    Share
    price CAD$14.15 (USD $11.14)

     

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

     

    Dividend
    yield (0%)

     

    Key
    unobservable inputs

    Credit
    spread (7.33% to 8.46%)

     

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

    The
    share price was higher (lower)

    The
    risk-free interest rate was higher (lower)

    The
    dividend yield was lower (higher)

    The
    credit spread was lower (higher)

    The
    discount for lack of marketability was lower (higher)

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

    Share
    price (USD $8.92)

     

    Risk-free
    interest rate (0.14%)

     

    Dividend
    yield (0%)

     

    Key
    unobservable inputs

     

    Credit
    spread (18.35%)

     

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

    The
    share price was higher (lower)

    The
    risk-free interest rate was higher (lower)

    The
    dividend yield was lower (higher)

    The
    credit spread was lower (higher)

    The
    discount for lack of marketability was lower (higher)

 

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

 

	27.	Subsequent
    events

 

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

 

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

 

    	Page 47 of 47Exhibit
4.15

 

 

 

ENGINE
MEDIA HOLDINGS, INC.

(formerly
Torque Esports Corp.)

 

Management’s
Discussion and Analysis

 

For
the three and six months ended

February
28, 2021 and February 29, 2020

 

(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 and six months ended February 28, 2021 and February 29,
2020 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). This
MD&A has taken into account information available up to and including June 9, 2021.

 

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 45

    	 

    

 

	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 45

    	 

    

 

	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 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

 NOTICE
TO READER 

   

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

 

		 1. 	 Accounting
                                            for finder’s warrants issued in private placements within contributed surplus –
                                            Adjustments resulted in a decrease to warrant liability of $918,476, increase in contributed
                                            surplus of $770,563 and decrease in change in fair value of warrant liability (decrease of
                                            expense) of $147,913. 

		 2. 	 Accounting
                                            for investment in One Up to move from investment in associate to investment at FVTPL –
                                            Adjustments resulted in reclass of investment in One Up out of investment in associate
                                            and into investment at FVTPL along with a $181,120 increase to the carrying value, decrease
                                            in share of net loss of associate of $81,159 and an increase in gain on retained interest
                                            in former associate of $99,961. 

		 3. 	 Accounting
                                            for share issuance costs incurred in the private placements – Adjustments resulted
                                            in increase to share capital of $582,333 and increase to transaction costs of $582,333. 

 

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

   

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

 

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, ESPN, Discovery / Eurosport, 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 45

    	 

    

 

	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, including 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, and intellectual property.

 

Frankly

 

Through
its wholly-owned subsidiary Frankly Media, LLC, Frankly 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 45

    	 

    

 

	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 on the mobile
second screen, its foundational patents, and its 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. 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 most significant 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, 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 the 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 45

    	 

    

 

	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 worldwide 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 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.

 

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. We have seen
an increase in demand for some of our digital products and services, this demand has been more than offset by a reduction in spending
by our customers.

 

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. 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 monitor the developments of the pandemic actively.
We may take further actions that could alter our business operations as 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 an 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 45

    	 

    

 

	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

 

	   	   	 For
    the three months ended 	   	   	 For
    the six months ended 	   
	   	   	 Feb
    28, 2021 	   	   	 Feb
    29, 2020 	   	   	 Feb
    28, 2021 	   	   	 Feb
    29, 2020 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Operating
    results 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Total
    revenues 	   	 $ 	 8,387,880 	   	   	 $ 	 623,995 	   	   	 $ 	 15,854,271 	   	   	 $ 	 1,432,243 	   
	 Total
    expenses 	   	   	 35,757,818 	   	   	   	 2,079,596 	   	   	   	 47,558,840 	   	   	   	 8,947,371 	   
	 Total
    net loss from continuing operations 	   	   	 (27,376,542 	 ) 	   	   	 (1,413,392 	 ) 	   	   	 (31,746,829 	 ) 	   	   	 (7,437,819 	 ) 
	 Total
    net loss from discontinued operations 	   	   	 (2,970 	 ) 	   	   	 (1,093,879 	 ) 	   	   	 (1,632,116 	 ) 	   	   	 (3,120,643 	 ) 
	 Total
    net loss 	   	   	 (27,379,512 	 ) 	   	   	 (2,507,271 	 ) 	   	   	 (33,378,945 	 ) 	   	   	 (10,558,462 	 ) 
	 Comprehensive
    loss 	   	   	 (27,517,956 	 ) 	   	   	 (2,211,357 	 ) 	   	   	 (33,383,544 	 ) 	   	   	 (10,770,401 	 ) 
	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Loss
    per share – Continuing operations 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Basic
    and diluted loss per share 	   	 $ 	 (2.71 	 ) 	   	 $ 	 (1.81 	 ) 	   	 $ 	 (3.57 	 ) 	   	 $ 	 (15.29 	 ) 
	 Loss
    per share – Discontinued operations 	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Basic
    and diluted loss per share 	   	 $ 	 (0.00 	 ) 	   	 $ 	 (1.40 	 ) 	   	 $ 	 (0.18 	 ) 	   	 $ 	 (6.42 	 ) 

 

 

	   	   	 Note 	   	 Feb
    28, 2021 	   	   	 Aug
    31, 2020 	   
	   	   	   	   	   	   	   	   	   
	 Financial
    position 	   	   	   	   	   	   	   	   	   	   
	 Total
    assets 	   	   	   	 $ 	 70,344,899 	   	   	 $ 	 53,415,477 	   
	 Total
    liabilities 	   	   	   	   	 65,078,685 	   	   	   	 53,152,185 	   
	 Working
    capital deficiency 	   	 (i) 	   	   	 (18,485,323 	 ) 	   	   	 (29,663,546 	 ) 
	 Total
    debt 	   	 (ii) 	   	   	 16,243,246 	   	   	   	 20,334,966 	   
	   	   	   	   	   	   	   	   	   	   	   
	 Other
    metrics 	   	   	   	   	   	   	   	   	   	   
	 Debt
    to total assets 	   	 (iii) 	   	   	 23 	 % 	   	   	 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 and six months ended February 28, 2021, and February 29, 2020, is impacted significantly by the acquisitions
of UMG on December 31, 2019, and Frankly and WinView on May 8, 2020. Refer to our analysis as per below.

 

    	Page 9 of 45

    	 

    

 

	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 three months ended	 	Feb
    28,	 	 	Feb
    29,	 	 	Increase	 
		 	2021	 	 	2020	 	 	(decrease)	 
	 	 		$ 	 	 		$ 	 	 		$ 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Games
    development	 	 	688,473	 	 	 	426,835	 	 	 	261,638	 
	Sponsorship,
    tournament and event income	 	 	133,942	 	 	 	26,693	 	 	 	107,249	 
	Platform
    revenue	 	 	1,444,934	 	 	 	120,339	 	 	 	1,324,595	 
	Advertising
    revenue	 	 	6,005,573	 	 	 	-	 	 	 	6,005,573	 
	Professional
    services	 	 	114,958	 	 	 	50,128	 	 	 	64,830	 
	 	 	 	8,387,880	 	 	 	623,995	 	 	 	7,763,885	 

  

For
the three months ended February 28, 2021:

 

	●	Games
    development revenue increase of $261,638 was due to Eden’s new contract engagement.
	 	 
	●	Sponsorship,
    tournament, and event income increase of $107,249 was due to higher UMG revenue and post-acquisition revenue of WinView.
	 	 
	●	Platform
    revenue increase of $1,324,595 was due to higher Stream Hatchet revenue and post-acquisition revenue of Frankly.
	 	 
	●	Advertising
    revenue increase of $6,005,573 was due to the post-acquisition revenue of Frankly.
	 	 
	●	Professional
    services revenue increase of $64,830 was due to post-acquisition revenue of Frankly.

 

	For
    the six months ended	 	Feb
    28,	 	 	Feb
    29,	 	 	Increase	 
		 	2021	 	 	2020	 	 	(decrease)	 
	 	 		$	 	 		$	 	 		$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Games
    development	 	 	1,188,428	 	 	 	959,696	 	 	 	228,732	 
	Sponsorship,
    tournament and event income	 	 	183,774	 	 	 	26,957	 	 	 	156,817	 
	Platform
    revenue	 	 	2,881,931	 	 	 	261,621	 	 	 	2,620,310	 
	Advertising
    revenue	 	 	11,458,043	 	 	 	-	 	 	 	11,458,043	 
	Professional
    services	 	 	142,095	 	 	 	183,969	 	 	 	(41,874	)
	 	 	 	15,854,271	 	 	 	1,432,243	 	 	 	14,422,028	 

 

For
the six months ended February 28, 2021:

 

	●	Games
    development revenue increase of $228,732 was due to Eden new contract engagement.
	 	 
	●	Sponsorship,
    tournament and event income increase of $156,817 was due to higher UMG revenue and post-acquisition revenue of WinView.
	 	 
	●	Platform
    revenue increase of $2,620,310 was due to higher Stream Hatchet revenue and post-acquisition revenue of Frankly.

 

    	Page 10 of 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

Results
from operations (cont’d)

 

Revenue
(cont’d)

 

	●	Advertising
    revenue increase of $11,458,043 was due to post-acquisition revenue of Frankly.
	 	 
	●	Professional
    services revenue decrease of $41,874 was due to slightly lower Stream Hatchet professional services revenue for the period.

 

Expenses

 

		   	 Feb
    28, 	   	   	 Feb
    29, 	   	   	 Increase 	   
	 For
    the three months ended 	   	 2021 	   	   	 2020 	   	   	 (decrease) 	   
	   	   		 $ 	   	   		 $ 	   	   		 $ 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Salaries
    and wages 	   	   	 4,769,052 	   	   	   	 1,342,621 	   	   	   	 3,426,431 	   
	 Consulting 	   	   	 800,471 	   	   	   	 1,035,101 	   	   	   	 (234,630 	 ) 
	 Professional
    fees 	   	   	 442,055 	   	   	   	 226,023 	   	   	   	 216,032 	   
	 Revenue
    sharing expense 	   	   	 5,117,302 	   	   	   	 - 	   	   	   	 5,117,302 	   
	 Sponsorships
    and tournaments 	   	   	 87,247 	   	   	   	 35,530 	   	   	   	 51,717 	   
	 Advertising
    and promotion 	   	   	 515,704 	   	   	   	 243,097 	   	   	   	 272,607 	   
	 Office
    and general 	   	   	 621,054 	   	   	   	 572,421 	   	   	   	 48,633 	   
	 Technology
    expenses 	   	   	 645,803 	   	   	   	 88,239 	   	   	   	 557,564 	   
	 Amortization
    and depreciation 	   	   	 1,530,784 	   	   	   	 637,201 	   	   	   	 893,583 	   
	 Share-based
    payments 	   	   	 689,995 	   	   	   	 5,800 	   	   	   	 684,195 	   
	 Interest
    expense 	   	   	 572,478 	   	   	   	 249,061 	   	   	   	 323,417 	   
	 (Gain)
    loss on foreign exchange 	   	   	 139,994 	   	   	   	 113,821 	   	   	   	 26,173 	   
	 Change
    in fair value of contingent consideration 	   	   	 - 	   	   	   	 82,215 	   	   	   	 (82,215 	 ) 
	 Loss
    (Gain) on extinguishment of debt 	   	   	 2,428,900 	   	   	   	 (927 	 ) 	   	   	 2,429,827 	   
	 Gain
    on retained interest in former associate 	   	   	 (99,961 	 ) 	   	   	 - 	   	   	   	 (99,961 	 ) 
	 Transaction
    costs 	   	   	 582,333 	   	   	   	 - 	   	   	   	 582,333 	   
	 Change
    in fair value of warrant liability 	   	   	 10,374,703 	   	   	   	 (502,438 	 ) 	   	   	 10,877,141 	   
	 Change
    in fair value of convertible debt 	   	   	 6,539,904 	   	   	   	 (2,048,169 	 ) 	   	   	 8,588,073 	   
	   	   	   	 35,757,818 	   	   	   	 2,079,596 	   	   	   	 33,678,222 	   

 

For
the three months period ended February 28, 2021:

 

	●	Salaries
    and wages increase of $3,426,430 was due to post-acquisition salary and wages of Frankly, WinView, and UMG.
	 	 
	●	Consulting
    decrease of $234,630 was due to the lack of costs relating to the group’s pre-acquisition activities, which were necessary
    for the same period last year.
	 	 
	●	Professional
    fees increase of $216,032 was due to post-acquisition professional fees of Frankly, WinView, and UMG.
	 	 
	●	Revenue
    sharing increase of $5,117,302 was due to post-acquisition revenue sharing of Frankly related to advertising revenue.

 

    	Page 11 of 45

    	 

    

 

	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)

 

	●	Sponsorships
    and tournaments increase of $51,717 was due to post-acquisition costs of UMG, which accounted for only two months of operations in
    the same period last year.
	 	 
	●	Advertising
    and promotion increase of $272,607 was due to more focused third-party PR activity for the quarter for the group.
	 	 
	●	Office
    and general expense increase of $48,633 were due to post-acquisition costs of Frankly, WinView, and UMG.
	 	 
	●	Technology
    expenses increase of $557,564 was due to post-acquisition costs of Frankly, WinView, and UMG.
	 	 
	●	Amortization
    and depreciation increase of $893,583 was mainly due to amortization of intangibles from the acquisition of Frankly, WinView, and
    UMG.
	 	 
	●	Share-based
    payments expense increase of $684,195 was due to the issuance of grants to key management and directors, and officers.
	 	 
	●	Interest
    expense increase of $323,417 was due to the issuance of convertible debentures in the fourth quarter of 2020 and first quarter of
    2021 and assumption of debt with the acquisitions of Frankly, WinView, and UMG.
	 	 
	●	Loss
    on foreign exchange increase of $26,173 was due to fluctuations in currency exchange rates.
	 	 
	●	Change
    in fair value of contingent consideration decrease of $82,215 was due to the company longer maintaining contingent consideration.
    This was connected with and released upon exit of the Motorsport group.
	 	 
	●	Loss
    (gain) on extinguishment of debt increase of $2,429,827 was due to modification of Frankly line of credit which occurred on December
    1, 2020 and subsequent exchange of convertible debt instruments with the same holder which occurred on February 24, 2021.
	 	 
	●	Gain
    on retained interest in former associate increase of $99,961. Increase is due to movement away from equity method accounting in the
    second quarter of 2021 resulting from our ownership percentage dropping below 20%.
	 	 
	 ● 	 Transaction
    costs increase of 582,333 due to costs associated with the private placemnts that closed in the second quarter of 2021. The amount
    recorded to transaction costs represents the share issuance costs allocated to the warrants issued. As the warrants issued are accounted
    for within warrant liability at FVTPL, the share issuance costs allocated to the warrants issued are expensed. 
	 	 
	●	Change
    in fair value of warrant liability increase of $ 10,877,141 was due primarily to a much larger population of warrants outstanding
    on February 28, 2021 as well as the significant increase in common share price at February 28, 2021 of CAD$14.15 as compared to November
    30, 2020, of CAD$8.80.
	 	 
	●	Change
    in fair value of convertible debt increase of $8,588,073 was due primarily to the large increase in common share price at February
    28, 2021, of CAD$14.15 compared to November 30, 2020, of CAD$8.80.

 

    	Page 12 of 45

    	 

    

 

	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)

 

		   	 Feb
    28, 	   	   	 Feb
    29, 	   	   	 Increase 	   
	 For
    the six months ended 	   	 2021 	   	   	 2020 	   	   	 (decrease) 	   
	   	   		 $ 	   	   		 $ 	   	   		 $ 	   
	   	   	   	   	   	   	   	   	   	   	   	   	   
	 Salaries
    and wages 	   	   	 8,546,528 	   	   	   	 2,469,781 	   	   	   	 6,076,747 	   
	 Consulting 	   	   	 1,696,423 	   	   	   	 1,535,751 	   	   	   	 160,672 	   
	 Professional
    fees 	   	   	 1,127,907 	   	   	   	 562,053 	   	   	   	 565,854 	   
	 Revenue
    sharing expense 	   	   	 9,608,729 	   	   	   	 - 	   	   	   	 9,608,729 	   
	 Sponsorships
    and tournaments 	   	   	 451,476 	   	   	   	 35,530 	   	   	   	 415,946 	   
	 Advertising
    and promotion 	   	   	 1,375,530 	   	   	   	 1,367,442 	   	   	   	 8,088 	   
	 Office
    and general 	   	   	 1,326,873 	   	   	   	 852,705 	   	   	   	 474,168 	   
	 Technology
    expenses 	   	   	 1,226,657 	   	   	   	 101,589 	   	   	   	 1,125,068 	   
	 Amortization
    and depreciation 	   	   	 2,946,924 	   	   	   	 1,228,392 	   	   	   	 1,718,532 	   
	 Share-based
    payments 	   	   	 1,778,633 	   	   	   	 16,914 	   	   	   	 1,761,719 	   
	 Interest
    expense 	   	   	 980,567 	   	   	   	 523,538 	   	   	   	 457,029 	   
	 (Gain)
    loss on foreign exchange 	   	   	 102,745 	   	   	   	 284,146 	   	   	   	 (181,401 	 ) 
	 Change
    in fair value of contingent consideration 	   	   	 - 	   	   	   	 82,215 	   	   	   	 (82,215 	 ) 
	 Loss
    (Gain) on extinguishment of debt 	   	   	 2,428,900 	   	   	   	 (927 	 ) 	   	   	 2,429,827 	   
	 Gain
    on retained interest in former associate 	   	   	 (99,961 	 ) 	   	   	 - 	   	   	   	 (99,961 	 ) 
	 Transaction
    costs 	   	   	 582,333 	   	   	   	 - 	   	   	   	 582,333 	   
	 Change
    in fair value of warrant liability 	   	   	 5,614,927 	   	   	   	 1,131,886 	   	   	   	 4,483,041 	   
	 Change
    in fair value of convertible debt 	   	   	 7,863,649 	   	   	   	 (1,243,644 	 ) 	   	   	 9,107,293 	   
	   	   	   	 47,558,840 	   	   	   	 8,947,371 	   	   	   	 38,611,469 	   

 

For
the six months ended February 28, 2021:

 

	●	Salaries
    and wages increase of $6,076,746 was due to post-acquisition salary and wages of Frankly, WinView, and UMG.
	 	 
	●	Consulting
    increase of $160,672 was due to the post-acquisition costs of Frankly, WinView, and UMG.
	 	 
	●	Professional
    fees increase of $565,854 was due to post-acquisition professional fees of Frankly, WinView, and UMG.
	 	 
	●	Revenue
    sharing increase of $9,608,729 was due to post-acquisition revenue sharing of Frankly related to advertising revenue.
	 	 
	●	Sponsorships
    and tournaments increase of $415,946 was due to post-acquisition costs of UMG.
	 	 
	●	Advertising
    and promotion increase of $8,088 was not significant.
	 	 
	●	Office
    and general expense increase of $474,168 were due to post-acquisition costs of Frankly, WinView, and UMG.
	 	 
	●	Technology
    expenses increase of $1,125,068 was due to post-acquisition costs of Frankly, WinView, and UMG.
	 	 
	●	Amortization
    and depreciation increase of $1,718,532 was mainly due to amortization of intangibles from the acquisition of Frankly, WinView, and
    UMG.

 

    	Page 13 of 45

    	 

    

 

	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)

 

	●	Share-based
    payments expense increase of $1,761,719 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 $457,029 was due to the issuance of convertible debentures over the last two quarters as well as an assumption
    of debt with the acquisitions of Frankly, WinView, and UMG.
	 	 
	●	Loss
    on foreign exchange decrease of $181,401 was due to fluctuations in currency exchange rates.
	 	 
	●	Change
    in fair value of contingent consideration decrease of $82,215 was due to the company longer maintaining contingent consideration.
    This was connected with and released upon exit of the Motorsport group.
	 	 
	●	Loss
    (gain) on extinguishment of debt increase of $2,429,827 was due to modification of Frankly line of credit which occurred on December
    1, 2020 and subsequent exchange of convertible debt instruments with the same holder which occurred on February 24, 2021.
	 	 
	 ● 	Gain
    on retained interest in former associate increase of $99,961. Increase is due to movement away from equity method accounting in the
    second quarter of 2021 resulting from our ownership percentage dropping below 20%.
	 	 
	 ● 	 Transaction
    costs increase of 582,333 due to costs associated with the private placemnts that closed in the second quarter of 2021. The amount
    recorded to transaction costs represents the share issuance costs allocated to the warrants issued. As the warrants issued are accounted
    for within warrant liability at FVTPL, the share issuance costs allocated to the warrants issued are expensed. 
	 	 
	●	Change
    in fair value of warrant liability increase of $4,483,041 was due primarily to a much larger population of warrants outstanding at
    February 28, 2021 as well as the large increase in common share price at February 28, 2021 of CAD$14.15 as compared to August 31,
    2020 of CAD$11.65.
	 	 
	●	Change
    in fair value of convertible debt increase of $9,107,293 was due primarily to the large increase in common share price at February
    28, 2021 of CAD$14.15 as compared to August 31, 2020 of CAD$11.65.

 

Other
items

 

	For
    the three months ended	 	Feb
    28,	 	 	Feb
    29,	 	 	Increase	 
	 	 	2021	 	 	2020	 	 	(decrease)	 
	 	 	 	$	 	 	 	$	 	 		$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share
    of net loss of associate	 	 	37,244	 	 	 	-	 	 	 	37,244	 
	Discontinued
    Operations - Loss on disposal of Motorsports	 	 	-	 	 	 	-	 	 	 	-	 
	Discontinued
    Operations	 	 	(2,970	)	 	 	(1,093,879	)	 	 	1,090,909	 
	Net
    loss attributable to non-controlling interest	 	 	30,640	 	 	 	42,209	 	 	 	(11,569	)
	Foreign
    currency translation differences	 	 	(138,444	)	 	 	295,914	 	 	 	(434,358	)

 

For
the three months ended February 28:

 

	●	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 that
    expects losses to continue as it seeks to grow its revenues. Effective January 5, 2021, we no longer account for this investment
    under the equity method as our ownershiop % dropped to 18.62%.
	 	 
	●	The
    discontinued operations – loss on disposal of Motorsports Group, relate to entities sold in November 2020.
	 	 
	●	The
    minority interest in net loss decrease of $11,569 was not significant.
	 	 
	●	The
    differences decrease by $434,358 due to fluctuations in trading foreign currencies against the US dollar.

 

    	Page 14 of 45

    	 

    

 

	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 (cont’d)

 

	For
    the six months ended	 	Feb
    28,	 	 	Feb
    29,	 	 	Increase	 
	 	 	2021	 	 	2020	 	 	(decrease)	 
	 	 	 	$	 	 		$	 	 		$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share
    of net loss of associate	 	 	103,930	 	 	 	-	 	 	 	103,930	 
	Discontinued
    Operations - Loss on disposal of Motorsports	 	 	(678,931	)	 	 	-	 	 	 	(678,931	)
	Discontinued
    Operations	 	 	(953,185	)	 	 	(3,120,643	)	 	 	2,167,458	 
	Net
    loss attributable to non-controlling interest	 	 	61,670	 	 	 	77,309	 	 	 	(15,639	)
	Foreign
    currency translation differences	 	 	(4,599	)	 	 	(211,939	)	 	 	207,340	 

 

For
the six months ended February 28:

 

	●	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. Effective January 5, 2021, we no longer account for this investment
    under the equity method as our ownershiop % dropped to 18.62%.
	 	 
	●	The
    discontinued operations – loss on disposal of Motorsports Group relate to entities sold in November 2020.
	 	 
	●	The
    minority interest in net loss decrease of $15,639 was not significant.
	 	 
	●	Foreign
    currency translation differences increase of $207,340 was due to fluctuations in trading foreign currencies against the US dollar.

 

    	Page 15 of 45

    	 

    

 

	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

 

For
the three-month period ended February 28, 2021:

 

	 Three
    months ended 	   	 E-Sports 	   	   	 Media
    and
 Advertising 	   	   	 Corporate

    and Other 	   	   	 28-Feb-21

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

 

    	Page 16 of 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

For
the three-month period ended February 29, 2020:

 

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

 

    	Page 17 of 45

    	 

    

 

	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 six-month period ended February 28, 2021:

 

	 Six
    months ended 	   	 E-Sports 	   	   	 Media
    and
 Advertising 	   	   	 Corporate

    and Other 	   	   	 28-Feb-21

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

 

    	Page 18 of 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

For
the six-month period ended February 29, 2020:

 

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

 

    	Page 19 of 45

    	 

    

 

	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)

 

	●	E-Sports
    net loss for the 3 months ended February 28, 2021 was $2,130,629 in comparison to $2,614,549 for the 3 months ended February 29,
    2020. The decrease of $483,920 was primarily due to the increase in e-sports revenue for the quarter. E-Sports net loss for the 6
    months ended February 28, 2021, was $5,835,501 in comparison to $5,534,383 for the 6 months ended February 29, 2020. The increase
    of $301,118 was primarily due to post-acquisition activities of UMG and WinView.
	 	 
	●	Media
    and Advertising net loss for the 3 months ended February 28, 2021, was $5,365,443 in comparison to $nil for the 3 months ended February
    29, 2020. Media and Advertising net loss for the 6 months ended February 28, 2021 was $6,941,335 in comparison to $nil for the 6
    months ended February 29, 2020. 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 3 months ended February 28, 2021, was $19,883,439 in comparison to $(107,278) for the year 3 months
    ended February 29, 2020. The increase of $19,990,717 was primarily due to other gains and losses which includes change in
    fair value of warrant liability and convertible debt. Corporate and other net loss for the 6 months ended February 28, 2021 was $20,602,108
    compared to $5,024,079 for the year 6 months ended February 29, 2020. The increase of $15,578,029 was primarily due to
    other gains and losses, including a change in fair value of warrant liability and convertible debt.

 

Other
selected quarterly information

 

	   	   	   	   	   	 From
    continuing operations 	   	   	   
	 Three-month
    period ended 	   	 Total
    revenue 	   	   	 Total
    loss 	   	   	 Basic
    and
 diluted loss per share 	   	   	 Total
    assets 	   
	   	   	 $ 	   	   	 $ 	   	   	 $ 	   	   	 $ 	   
	 February
    28, 2021 	   	   	 8,387,880 	   	   	   	 (27,376,542 	 ) 	   	   	 (2.71 	 ) 	   	   	 70,344,899 	   
	 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 	   

 

 

 

Quarterly
revenues increased from the quarter ended February 29, 2020 compared to the quarter ended May 31, 2020 and increased further in the quarter
ended August 31, 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, 2020, November 30, 2020 and February 28, 2021.

 

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 fair value of 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 February 28, 2021, the loss
much was larger due to the change in fair value of the warrant liability and convertible debt which increased the quarter loss by $19,465,214
as compared to the quarter ended February 29, 2020.

 

    	Page 20 of 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

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 depends on the ability of the Company to continue to raise financing, and ultimately the
achievement of profitable operations.

 

As
of February 28, 2021, the Company had a cash balance of $22,761,8881 (August 31, 2020: $5,243,278) and current liabilities of $50,469,829
(August 31, 2020: $41,839,019). The Company had a working capital deficiency of $18,485,323 (August 31, 2020: deficiency of $29,663,546)
which is comprised of current assets less current liabilities. Excluding non-cash warrant liability, the Company had a working capital
surplus of $12,935,173 (August 31, 2020 – working capital deficiency of $15,528,225). In addition, if all warrants outstanding
and exercisable as of February 28, 2021 were exercised, the Company would receive cash from exercise of approximately $73.7 million.
The Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit
of $105,473,107 as of February 28, 2021 (August 31, 2020: 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 and February 2021, the Company closed on the issuance of 4,371,767 units (the “Units”) for gross proceeds of $32,788,253
of non-brokered private placements. Each Unit consists of one common share of the Company and one-half of one common share purchase warrant
(a “Warrant”). Each whole Warrant entitles the holder to acquire one additional share of the Company at a price of $15.00
per share for a period of 3 years. 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 $32.8 million will provide
sufficient liquidity for the Company in the near term. 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.

 

    	Page 21 of 45

    	 

    

 

	Engine
  Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

Financing

 

Capital
management framework

 

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

 

The
Company’s objective when managing its capital is to seek continuous improvement in the return to its shareholders while maintaining
a moderate to high tolerance for risk. The objective is achieved by prudently managing the capital generated through internal growth
and profitability, 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.

 

There
have been no changes to management’s approach to managing its capital for the period ended February 28, 2021.

 

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

 

Private
Placement of Units

 

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

 

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

 

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

 

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

 

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

 

    	Page 22 of 45

    	 

    

 

	Engine
                                            Media Holdings, Inc.(formerly
                                 Torque Esports Corp.)

                                  Management’s
                                  Discussion and Analysis

                                  (Expressed
                                  in United States Dollars)
	

 

 

Financing
(cont’d)

 

Equity
(cont’d)

 

Private
Placement of Units (cont’d)

 

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

 

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

 

Other
activity

 

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

 

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 February 28, 2021, interest of $110,245 has been accrued (August 31, 2020 – $83,435).

 

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

 

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

 

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 23 of 45

    	 

    

 

	 

                           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 before maturity with no prepayment penalties. The Notes provide for customary events of default,
including, among others, those relating to failure to make payments, bankruptcy, breaches of representations, significant changes in
ownership, and material adverse effects. The Company’s obligations under the Notes are not secured by any collateral.

 

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

 

Frankly
line of credit

 

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

 

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

 

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

 

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

 

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

 

    	Page 24 of 45

    	 

    

 

	 

                           Engine
                           Media Holdings, Inc.

                           (formerly
                           Torque Esports Corp.)

                           Management’s
                           Discussion and Analysis

                           (Expressed
                           in United States Dollars)
	 	

 

 

Debt
(cont’d)

 

Convertible
debentures

 

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

 

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

 

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

 

Conversions
during the period

 

2019
Series

 

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

 

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

 

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

 

    	Page 25 of 45

    	 

    

 

	 

                           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)

 

Conversions
during the period (cont’d)

 

2020
Series

 

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

 

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

 

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

 

Issuances
during the period

 

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

 

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

 

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

 

2019
Series

 

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

 

    	Page 26 of 45

    	 

    

 

	 

                           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

 

	2019
    Series	 	February
                                            28,

                                                                                2021

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

 

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.

 

    	Page 27 of 45

    	 

    

 

	 

                           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)

 

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.

 

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 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.

 

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

 

	2020
    Series	 	February
                                            28,

                                                                                2021

                                            (US$)
	 	 	31-Aug-20

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

 

    	Page 28 of 45

    	 

    

 

	 

                           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)

 

EB
CD

 

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

 

As
of February 28, 2021, the fair value of the EB CD convertible debenture was estimated using the binomial lattice model with the below
assumptions:

 

	EB
    CD	 	February
                                            28,

                                                                                2021

                                            (US$)
	 	 	31-Aug-20

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

 

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 to develop or
sell its products. Eden Games has committed to pay royalties ranging from 4% to 25% of revenues after certain thresholds have been met,
in connection with the underlying license agreements. Royalty expenses were €nil for the three and six months ended February 28,
2021 and February 29, 2020.

 

Consulting
contracts

 

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

 

    	Page 29 of 45

    	 

    

 

	 

                           Engine
                           Media Holdings, Inc.

                           (formerly
                           Torque Esports Corp.)

                           Management’s
                           Discussion and Analysis

                           (Expressed
                           in United States Dollars)
	 	

 

 

Commitments
and contingencies (cont’d)

 

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

 

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

 

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

 

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

 

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 30 of 45

    	 

    

 

	 

                           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:

 

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

 

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

 

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

 

    	Page 31 of 45

    	 

    

 

	 

                           Engine
                           Media Holdings, Inc.

                           (formerly
                           Torque Esports Corp.)

                           Management’s
                           Discussion and Analysis

                           (Expressed
                           in United States Dollars)
	 	

 

 

Discontinued
operations (cont’d)

 

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

 

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

 

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

 

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. The Company actively manages these financial instrument risks under the policies approved by the Board of Directors.
The Company’s finance department manages the principal financial risks, within Board-approved policies and guidelines. On an ongoing
basis, the finance department actively manages market conditions intending to minimize the exposure of the Company to changing market
factors while at the same time limiting the funding costs to the Company.

 

    	Page 32 of 45

    	 

    

 

	 

                           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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

    	Page 33 of 45

    	 

    

 

	 

                           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)

 

Liquidity
risk (cont’d)

 

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

 

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, 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;
	 	 
	●	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 34 of 45

    	 

    

 

	 

                           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)

 

As
of February 28, 2021:

 

	Carrying
    value at February 28, 2021	 	FVTPL
    -
 mandatorily
 measured	 	 	FVOCI
    -
 mandatorily
 measured	 	 	FVOCI
    -
 designated	 	 	Amortized

    cost	 
	 	 	$	             	 	 	$	            	 	 	$	           	 	 	$	 	 
	Financial
    assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash
    and cash equivalents	 	 	-	 	 	 	-	 	 	 	-	 	 	 	22,761,881	 
	Restricted
    cash	 	 	-	 	 	 	-	 	 	 	-	 	 	 	321,129	 
	Accounts
    and other receivables	 	 	-	 	 	 	-	 	 	 	-	 	 	 	5,026,111	 
	Government
    remittances	 	 	-	 	 	 	-	 	 	 	-	 	 	 	953,844	 
	Publisher
    advance	 	 	-	 	 	 	-	 	 	 	-	 	 	 	4,858,645	 
	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	33,921,610	 

 

	Carrying
    value at February 28, 2021	 	FVTPL
    -
 mandatorily
 measured	 	 	FVTPL
    -
 designated	 	 	Amortized

    cost	 
	 	 	$	 	 	$	 	 	$	 
	 	 	 	 	 	 	 	 	 	 
	Financial
    liabilities:	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts
    payable and accrued liabilities	 	 	   -	 	 	 	-	 	 	 	15,804,476	 
	Players
    liability account	 	 	-	 	 	 	-	 	 	 	321,129	 
	Line
    of credit	 	 	-	 	 	 	-	 	 	 	-	 
	Long-term
    debt	 	 	-	 	 	 	-	 	 	 	143,988	 
	Promissory
    notes payable	 	 	-	 	 	 	-	 	 	 	1,340,840	 
	Deferred
    purchase consideration	 	 	-	 	 	 	-	 	 	 	-	 
	Convertible
    debt	 	 	-	 	 	 	14,276,107	 	 	 	-	 
	 	 	 	-	 	 	 	14,276,107	 	 	 	17,610,433	 

 

As
of August 31, 2020:

 

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

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

 

    	Page 35 of 45

    	 

    

 

	 

                           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
                                            February 28, 2021
	 
	 	 		$	 	 		$	 	 		$	 	 		$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Convertible
    debt	 	 	  -	 	 	 	 -	 	 	 	14,276,107	 	 	 	14,276,107	 
	 	 	 	-	 	 	 	-	 	 	 	14,276,107	 	 	 	14,276,107	 

 

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

 

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).

 

    	Page 36 of 45

    	 

    

 

	 

                           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)

 

	Financial
                                            assets /

        financial
        liabilities
	Valuation
    technique	Key
    Inputs	Relationship
                                            and

        sensitivity
        of

        unobservable
        inputs

        to
        fair value

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

         

        Share
        price CAD$14.15 (USD $11.14)

         

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

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

        Credit
        spread (7.33% to 8.46%)

         

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

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

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

        Share
        price (USD $8.92)

         

        Risk-free
        interest rate (0.14%)

         

        Dividend
        yield (0%)

         

        Key
        unobservable inputs

         

        Credit
        spread (18.35%)

         

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

        The
        share price was higher (lower)

        The
        risk-free interest rate was higher (lower)

        The
        dividend yield was lower (higher)

        The
        credit spread was lower (higher)

        The
        discount for lack of marketability was lower (higher)

 

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

 

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 37 of 45

    	 

    

 

	 

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

 

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

 

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

 

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

 

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 38 of 45

    	 

    

 

	 

                           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 39 of 45

    	 

    

 

	 

                           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

 

    	Page 40 of 45

    	 

    

 

	 

                           Engine
                           Media Holdings, Inc.

                           (formerly
                           Torque Esports Corp.)

                           Management’s
                           Discussion and Analysis

                           (Expressed
                           in United States Dollars)
	 	

 

 

Risks
and uncertainties (cont’d)

 

Rapid
technological changes (cont’d)

 

for
the provision of services using these new technologies, we may lose market share, and our results of operations would be adversely affected.

 

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. 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. 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 41 of 45

    	 

    

 

	 

                           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.

 

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:

    	Page 42 of 45

    	 

    

 

	 

                           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 (cont’d)

 

	●	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.

 

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

 

    	Page 43 of 45

    	 

    

 

	 

                           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)

 

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.

 

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 assess its continued magnitude, outcome and duration
accurately, but it could:

 

	●	worsen
    economic conditions, which could negatively impact access to capital;
	●	reduce
    consumer spending;

 

    	Page 44 of 45

    	 

    

 

	 

                           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 (cont’d)

 

	●	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.

 

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

 

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

 

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 45 of 45

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