Results

Engine Media Holdings Inc.

01/14/2022 | Press release | Distributed by Public on 01/14/2022 16:14

Interim Condensed Consolidated Financial Statements - Form 6-K

Interim Condensed Consolidated Financial Statements

(Unaudited)

For the three months ended

November 30, 2021 and 2020

(Expressed in United States Dollars)

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

Table of Contents

Management's Responsibility for Financial Reporting 3
Unaudited Interim Condensed Consolidated Statements of Financial Position 4
Unaudited Interim Condensed Consolidated Statements of Loss and Comprehensive Loss 6
Unaudited Interim Condensed Consolidated Statements of Shareholders' Equity (Deficiency) 7
Unaudited Interim Condensed Consolidated Statements of Cash Flows 8
Notes to the Unaudited Interim Condensed Consolidated Financial Statements 9
Page 2 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

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

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

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

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

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

Page 3 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

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

(Unaudited)

(Expressed in United States Dollars)

Note November 30,
2021
August 31,
2021
$ $
ASSETS
Current
Cash 9,678,803 15,305,996
Restricted cash 13 360,372 331,528
Accounts and other receivables 6 10,061,734 8,646,807
Government remittances 1,195,102 1,070,216
Publisher advance, current 6 3,055,401 3,197,102
Prepaid expenses and other 2,707,176 3,006,033
27,058,588 31,557,682
Non-Current
Publisher advance, non-current 6 575,651 1,337,116
Investment at FVTPL 7 2,629,851 2,629,851
Property and equipment 8 389,104 403,811
Goodwill 9 18,466,209 18,495,121
Intangible assets 10 11,528,591 12,482,244
Right-of-use assets 11 490,582 557,022
34,079,988 35,905,165
61,138,576 67,462,847

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

Page 4 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

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

(Unaudited)

(Expressed in United States Dollars)

Note November 30,
2021
August 31,
2021
$ $
LIABILITIES
Current
Accounts payable 9,610,276 10,403,665
Accrued liabilities 8,568,864 5,722,470
Players liability account 13 360,372 331,528
Deferred revenue 1,759,166 2,644,948
Lease obligation, current 12 198,663 222,583
Long-term debt, current 69,507 96,664
Promissory notes payable 14 753,652 821,948
Warrant liability 16 1,851,311 4,868,703
Convertible debt, current 15 2,557,504 914,427
Arbitration reserve 21 3,728,278 6,468,330
29,457,593 32,495,266
Convertible debt, non-current 15 5,628,060 9,037,069
Lease obligation, non-current 12 325,631 364,968
5,953,691 9,402,037
35,411,284 41,897,303
SHAREHOLDERS' EQUITY (DEFICIENCY)
Share capital 17 123,422,989 122,741,230
Contributed surplus 18,459,260 17,819,933
Foreign currency translation reserve (2,154,607 ) (2,324,025 )
Deficit (114,168,493 ) (112,814,973 )
25,559,149 25,422,165
Non-controlling interest 168,143 143,379
25,727,292 25,565,544
61,138,576 67,462,847
Going concern 1
Commitments and contingencies 21
Subsequent events 26
Approved on Behalf of Board: "Larry Rutkowski" "Lou Schwartz"
Director Director

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

Page 5 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

Interim Condensed Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)

(Expressed in United States Dollars)

For the three months ended
Note November 30,
2021
November 30,
2020
$ $
CONTINUING OPERATIONS
REVENUE
Games development 2,102,126 499,955
Direct to consumer 32,850 49,832
Software-as-a-service 2,080,710 1,436,997
Advertising 10,042,734 5,122,090
Professional services 91,058 357,517
14,349,478 7,466,391
EXPENSES
Salaries and wages 5,000,546 3,777,476
Consulting 1,318,638 895,952
Professional fees 738,793 685,852
Revenue sharing expense 8,966,736 4,491,427
Sponsorships and tournaments 449,086 364,229
Advertising and promotion 512,365 859,826
Office and general 1,589,803 705,819
Technology expenses 731,071 580,854
Amortization and depreciation 8,10,11 1,042,847 1,416,140
Share-based payments 18, 19 1,321,038 1,088,638
Interest expense 214,608 408,089
Loss on foreign exchange 166,251 (37,249 )
Transaction costs 7,119 -
Non-operational professional fees 974,447 -
Arbitration settlement reserve 21 (2,740,052 ) -
Change in fair value of warrant liability 16 (2,941,546 ) (4,759,776 )
Change in fair value of convertible debt 15 (1,683,172 ) 1,323,745
15,668,578 11,801,022
ASSOCIATES
Share of net loss of associate - 66,686
Net loss for the period before discontinued operations (1,319,100 ) (4,401,317 )
DISCONTINUED OPERATIONS
Loss on disposal of Motorsports 22 - (678,931 )
Loss from discontinued operations 22 (9,656 ) (950,215 )
Net loss for the period (1,328,756 ) (6,030,463 )
Net (income) loss attributable to non-controlling interest (24,764 ) 31,030
Net loss attributable to owners of the Company (1,353,520 ) (5,999,433 )
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences 169,418 133,845
Comprehensive loss for the period (1,184,102 ) (5,865,588 )
LOSS PER SHARE
Basic loss per share - continuing operations 5 (0.09 ) (0.57 )
Basic loss per share - discontinued operations 5 (0.00 ) (0.21 )
Basic and diluted loss per share 5 (0.09 ) (0.78 )
Weighted average number of shares outstanding - Basic 5 15,565,638 7,699,907

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

Page 6 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

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 Foreign currency translation reserve Deficit Total
equity before
non-controlling interest
Non-controlling interest Total
equity
# $ $ $ $ $ $ $ $
Balance, as at August 31, 2020 7,746,136 69,380,807 1,059,214 4,034,323 (2,334,275 ) (72,094,162 ) 45,907 217,385 263,292
Share-based payments - - - 1,088,638 - - 1,088,638 - 1,088,638
Shares issued on vesting of RSUs 66,666 410,189 - (230,189 ) - - 180,000 - 180,000
Convertible debt conversion 36,666 164,343 - - - - 164,343 - 164,343
Common shares issued on exercise of warrants 7,166 56,079 - - - - 56,079 - 56,079
Disposal of Motorsports - - (1,059,214 ) - - - (1,059,214 ) - (1,059,214 )
Non-controlling interest in subsidiary - - - (7,704 ) - - (7,704 ) - (7,704 )
Net loss for the period - - - - - (5,999,433 ) (5,999,433 ) (31,030 ) (6,030,463 )
Foreign currency translation differences - - - - 133,845 - 133,845 - 133,845
Balance, as at November 30, 2020 7,856,634 70,011,418 - 4,885,068 (2,200,430 ) (78,093,595 ) (5,397,539 ) 186,355 (5,211,184 )
Balance, as at August 31, 2021 15,543,309 122,741,230 - 17,819,933 (2,324,025 ) (112,814,973 ) 25,422,165 143,379 25,565,544
Share-based payments - - - 1,321,038 - - 1,321,038 - 1,321,038
Shares issued on vesting of RSUs 91,635 681,759 - (681,759 ) - - - - -
Non-controlling interest in subsidiary - - - 48 - - 48 - 48
Net loss for the period - - - - - (1,353,520 ) (1,353,520 ) 24,764 (1,328,756 )
Foreign currency translation differences - - - - 169,418 - 169,418 - 169,418
Balance, as at November 30, 2021 15,634,944 123,422,989 - 18,459,260 (2,154,607 ) (114,168,493 ) 25,559,149 168,143 25,727,292

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

Page 7 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc.)

Interim Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Expressed in United States Dollars)

For the three months ended
Note November 30, 2021 November 30, 2020
$ $
OPERATING ACTIVITIES
Net loss for the period before non-controlling interest (1,328,756 ) (6,030,463 )
Items not affecting cash:
Amortization and depreciation 8, 10, 11 1,042,847 1,617,475
Arbitration settlement reserve 21 (2,740,052 ) -
Loss on disposal of Motorsports 22 - 678,931
Share of net loss of associate - 66,686
Change in fair value of warrant liability 16 (2,941,546 ) (4,759,776 )
Change in fair value of convertible debt 15 (1,683,172 ) 1,323,745
Accretion of debt 2,317 74,383
Share-based payments 18, 19 1,321,038 1,088,638
(6,327,324 ) (5,940,381 )
Changes in non-cash working capital:
Restricted cash (28,844 ) 47,676
Accounts and other receivables (1,414,927 ) (1,402,037 )
Government remittances (124,886 ) 79,392
Publisher advance 6 903,166 -
Prepaid expenses and other 298,857 188,688
Accounts payable (853,263 ) (268,393 )
Accrued liabilities 2,846,394 1,765,531
Players liability account 28,844 (47,676 )
Deferred revenue (885,782 ) 110,256
769,559 473,437
(5,557,765 ) (5,466,944 )
INVESTING ACTIVITIES
Purchase of property and equipment (13,829 ) (64,145 )
Acquisition of intangible assets - (11,797 )
Cash from disposal of Motorsports - 24,348
(13,829 ) (51,594 )
FINANCING ACTIVITIES
Proceeds from convertible debentures 15 - 4,901,393
Net (payments) proceeds from promissory notes payable 14 (68,296 ) (1,800,820 )
Proceeds from exercise of warrants 16 - 44,675
Payments on lease financing 12 (70,258 ) (54,260 )
Payments on long-term debt (25,486 ) (80,744 )
(164,040 ) 3,010,244
Impact of foreign exchange on cash 108,441 (8,421 )
Change in cash (5,627,193 ) (2,516,715 )
Cash, beginning of period 15,305,996 5,243,278
Cash, end of quarter 9,678,803 2,726,563

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

Page 8 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

1.Corporate information and going concern

(a)Corporate information

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

Pursuant to shareholder approval at the October 6, 2021, shareholders' meeting, effective October 19, 2021, the Company changed its name to Engine Gaming and Media, Inc. The Company's common shares trade on the TSX Venture Exchange under the trading symbol GAME.V and NASDAQ under the trading symbol GAME.

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

(b) Going concern

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

The Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit of $114,168,493as of November 30, 2021 (August 31, 2021 -$112,814,973). 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, it cannot provide assurance that it will be able to execute on its business strategy or be successful in future financing activities. As of November 30, 2021, the Company had a working capital deficiency of $2,399,004(August 31, 2021 - working capital deficiency of $937,584) which is comprised of current assets minus current liabilities. The Company also faces uncertain future impacts from COVID-19 (Note 3(b)).

These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.

2.Basis of preparation

(a)Statement of compliance

These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). These unaudited interim condensed consolidated financial statements are prepared on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended August 31, 2021; and should be read in conjunction with those audited consolidated financial statements. Interim results are not necessarily indicative of the results expected for the fiscal year.

Page 9 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

These interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company on January 13, 2022.

(b) Basis of consolidation

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

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

The Company's material subsidiaries as of November 30, 2021, are as follows:

Name of Subsidiary Country of Incorporation

Ownership

Percentage

Functional

Currency

Frankly Inc. Canada 100% Canadian Dollar
UMG Media Ltd. Canada 100% Canadian Dollar
Eden Games S.A. France 96% Euro
Stream Hatchet S.L. Spain 100% Euro
SideQik, Inc. USA 100% US Dollar
WinView, Inc. USA 100% US Dollar

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

Page 10 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

2. Basis of preparation (cont'd)
(c) Functional and presentation currency
The functional currency of the Company is the US Dollar ("USD). The functional currencies of the Company's subsidiaries are disclosed in Note 2(b). The presentation currency of the interim condensed consolidated financial statements is the US Dollar ("USD").
(d) Income taxes
The Company had noincome tax expense for the three months ended November 30, 2021, and 2020. As of November 30, 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 at the date of the interim condensed consolidated financial statements.
On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes may differ from these estimates under different assumptions and conditions. Significant estimates and judgments made by management in the preparation of these interim condensed consolidated financial statements are outlined below.
The assessment of the Company's ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There is a material uncertainty regarding the Company's ability to continue as a going concern.
Page 11 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

3. Significant judgments, estimates and assumptions (cont'd)
(a) Significant estimates and critical judgments

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

Note 1 Going concern;
Note 25 Expected credit losses;
Note 16 Valuation of warrant liability;
Notes 9 and 10 Goodwill and intangible assets;
Notes 18 and 19 Valuation of share-based payments;
Note 15 Valuation of convertible debt; and
Note 21 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. The Company anticipates 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.
In an effort to protect the health and safety of our employees, much of the Company's workforce is currently working from home. The Company has implemented business continuity plans and has increased support and resources to enable employees to work remotely and thus far has been able to operate with minimal disruption.
The global COVID-19 pandemic remains an evolving situation. The Company will continue to actively monitor the developments of the pandemic and may take further actions that could alter business operations as may be required by federal, state, local, or foreign authorities, or that management determines 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 the Company's business, including the effects on our employees, players and consumers, customers, partners, development and content pipelines, the Company's reputation, financial condition, results of operations, revenue, cash flows, liquidity, or stock price.

4. Changes in significant accounting policies

Future accounting pronouncements
The following standards have not yet been adopted and are being evaluated to determine their impact on the Company:

Amendments to IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract;

Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

Amendments to IFRS 3 - Reference to the Conceptual Framework

Page 12 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

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 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 months ended November 30, 2021, and 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 months ended November 30, 2021, and 2020 were 15,565,638and 7,699,907, respectively.

6. Accounts, other receivables, and customer advance

(a) Accounts and other receivables

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

November 30,
2021
August 31,
2021
$ $
Trade accounts receivable 11,096,122 9,677,725
Other receivables 49,917 53,387
Allowance for doubtful accounts (1,084,305 ) (1,084,305 )
10,061,734 8,646,807

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

November 30,
2021
August 31,
2021
$ $
Allowance for doubtful accounts, August 31 (1,084,305 ) (874,438 )
Acquisition of SideQik -

(140,896

)
Provision, bad debt expense -

(72,636

)
Writeoffs - 3,665
Allowance for doubtful accounts, November 30 (1,084,305 ) (1,084,305 )
Page 13 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

(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. The contract is expected to go through early calendar year 2023. One of the key terms of the amended agreement required the Company to advance $6million of revenue sharing payments to the publisher under the following schedule:
(i) $4million within one day of execution of the amendment;
(ii) $1million on or before February 28, 2021; and
(iii) $1million 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 November 30, 2021, $6million had been advanced to the publisher and $2,368,948had been recouped through the process explained above. As of November 30, 2021, a net amount of $3,631,052was 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.

7. Investment at FVTPL

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 accounted for this investment as an investment in associate under the equity method from acquisition through January 5, 2021. The Company's share 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.

The fair value of the Company's investment in One Up is estimated at each reporting period, with reference to valuations underlying privately placed financing transactions closed by One Up and is classified with a level 3 in the fair value hierarchy (Note 25). The fair value of this investment was $2,629,851on November 30, 2021, and August 31, 2021.

Page 14 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

8.Property and equipment

Cost Leasehold
improvements
Computer equipment Furniture
and fixtures
Total
$ $ $ $
August 31, 2020 221,653 486,340 173,091 881,084
Additions - 64,145 - 64,145
Disposal of Motorsports (2,631 ) (47,645 ) (18,118 ) (68,394 )
Effect of foreign exchange (49 ) (432 ) (382 ) (863 )
November 30, 2020 218,973 502,408 154,591 875,972
August 31, 2021 218,851 603,607 173,044 995,502
Additions - 13,829 - 13,829
Foreign exchange (398 ) 776 (2,467 ) (2,089 )
November 30, 2021 218,453 618,212 170,577 1,007,242
Accumulated depreciation Leasehold
improvements
Computer equipment Furniture
and fixtures
Total
$ $ $ $
August 31, 2020 57,517 307,508 106,670 471,695
Depreciation (120 ) 15,634 1,772 17,286
Disposal of Motorsports - (11,068 ) (9,910 ) (20,978 )
Foreign exchange 10 425 (224 ) 211
November 30, 2020 57,407 312,499 98,308 468,214
August 31, 2021 63,367 406,231 122,093 591,691
Depreciation 1,743 22,953 4,222 28,918
Foreign exchange (258 ) (2,160 ) (53 ) (2,471 )
November 30, 2021 64,852 427,024 126,262 618,138
Net book value Leasehold
improvements
Computer equipment Furniture
and fixtures
Total
$ $ $ $
August 31, 2021 155,484 197,376 50,951 403,811
November 30, 2021 153,601 191,188 44,315 389,104

9.Goodwill

2021 2020
$ $
Balance, August 31, 18,495,121 18,785,807
Effect of foreign exchange (28,912 ) 26,903
Balance, November 30, 18,466,209 18,812,710
Page 15 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

10.Intangible assets

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

Cost Patents Application Platforms Software Brand Customer
Lists and
Contracts
Total
$ $ $ $ $ $
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 and other - 20,516 322,019 101,056 14,663 458,254
November 30, 2020 9,430,265 1,343,318 7,487,125 2,209,904 3,463,967 23,934,579
August 31, 2021 9,430,265 1,073,045 8,330,683 2,137,449 3,624,300 24,595,742
Foreign exchange and other - (11,723 ) (219,879 ) (63,862 ) (11,917 ) (307,381 )
November 30, 2021 9,430,265 1,061,322 8,110,804 2,073,587 3,612,383 24,288,361
Accumulated amortization Patents Application Platforms Software Brand Customer
Lists and
Contracts
Total
$ $ $ $ $ $
August 31, 2020 628,684 793,041 4,909,000 1,077,491 648,933 8,057,149
Amortization 471,513 51,594 779,385 122,746 145,910 1,571,148
Disposal of Motorsports - - (532,412 ) (201,627 ) (222,650 ) (956,689 )
Foreign exchange - 17,427 301,761 49,090 (69,603 ) 298,675
November 30, 2020 1,100,197 862,062 5,457,734 1,047,700 502,590 8,970,283
August 31, 2021 2,514,737 966,444 6,340,302 1,375,647 916,368 12,113,498
Amortization 471,513 28,000 212,167 101,666 135,615 948,961
Foreign exchange - (11,723 ) (219,879 ) (46,975 ) (24,112 ) (302,689 )
November 30, 2021 2,986,250 982,721 6,332,590 1,430,338 1,027,871 12,759,770
Net book value Patents Application Platforms Software Brand Customer
Lists and
Contracts
Total
$ $ $ $ $ $
August 31, 2021 6,915,528 106,601 1,990,381 761,802 2,707,932 12,482,244
November 30, 2021 6,444,015 78,601 1,778,214 643,249 2,584,512 11,528,591
Page 16 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

11.Right-of-use assets

2021 2020
$ $
Balance, August 31, 557,022 550,478
Acquired - -
Depreciation (64,968 ) (29,041 )
Effect of foreign exchange (1,472 ) (58 )
Balance, November 30, 490,582 521,379

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

12.Lease liabilities

Lease liabilities are measured at the present value of the lease payments that were not paid at that date. The lease payments are discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. The continuity of the lease liabilities is presented in the table below:

Equipment Office lease Total
$ $ $
Balance, August 31, 2020 35,457 536,691 572,148
Interest expense 562 9,094 9,656
Payments (3,345 ) (50,915 ) (54,260 )
Effect of foreign exchange - (36 ) (36 )
Balance, November 30, 2020 32,674 494,834 527,508
Balance, August 31, 2021 24,048 563,503 587,551
Interest expense 375 8,266 8,641
Payments (3,345 ) (66,913 ) (70,258 )
Effect of foreign exchange - (1,640 ) (1,640 )
Balance, November 30, 2021 21,078 503,216 524,294
Page 17 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

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

Equipment Office lease Total
$ $ $
As of November 30, 2020:
Less than one year 11,595 178,279 189,874
Greater than one year 21,079 316,555 337,634
Total lease obligation 32,674 494,834 527,508
Equipment Office lease Total
$ $ $
As of November 30, 2021:
Less than one year 12,373 186,290 198,663
Greater than one year 8,705 316,926 325,631
Total lease obligation 21,078 503,216 524,294

The future minimum undiscounted lease payments as of November 30, 2021, are presented below:

Total
$
Current 221,334
2 years 177,301
3 years 141,342
4 years 29,797
Total undiscounted lease obligation 569,774

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 November 30, 2021, the players liability account balance is the total amount payable if all players were to request closure of their accounts. As of November 30, 2021, the players account liability and corresponding restricted cash balances were the same.

14. Promissory notes payable and other borrowings

(a) Promissory notes
The Company has promissory notes with a balance of $200,000(August 31, 2021 - $200,000) that are unsecured, due on demand, and bear interest at 18%. As of November 30, 2021, interest of $154,721has been accrued (August 31, 2021 - $139,644).
The Company, through its WinView subsidiary, has a secured promissory note outstanding for amounts due for the provision of services by the noteholder. As of November 30, 2021, $398,931was due under the note (August 31, 2021 - $4,823,042). The note is secured by the assets of WinView, bears interest at 8%, and is currently due.
(b) Paycheck Protection Program (the "PPP") loans
During April and May 2020, the Company entered into promissory notes (the "Notes") with three banks. The Notes evidence loans to the Company of $1,589,559pursuant 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.
Page 18 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

Interest will accrue on the outstanding balance of the Notes at a rate of 1.00%per annum. However, the Company expects to apply for and receive forgiveness of up to all amounts due under the Notes, in an amount equal to the sum of qualified expenses under the PPP during the twenty-four weeks following disbursement.

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.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 $1,589,559from 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 $1,589,559of 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 November 30, 2021, $209,875has not been formally forgiven.

15. Convertible debt

The continuity of convertible debt for the three months ended November 30, 2021, and 2020, is as follows:

2019
Series
2020
Series
Total
$ $ $
Balance, August 31, 2020 2,121,869 8,671,590 10,793,459
Issuances - 4,282,477 4,282,477
Conversion - common shares issued (164,343 ) - (164,343 )
Conversion - warrants issued (140,880 ) - (140,880 )
Interest expense 19,001 137,775 156,776
Accrued interest on conversion (14,792 ) - (14,792 )
Effect of foreign exchange 17,152 - 17,152
Change in fair value 370,969 952,776 1,323,745
Balance, November 30, 2020 2,208,976 14,044,618 16,253,594
2019
Series
2020
Series
EB CD Total
$ $ $ $
Balance, August 31, 2021 914,428 2,097,127 6,939,941 9,951,496
Interest expense 6,622 49,863 125,000 181,485
Accrued interest on conversion / interest payments - - (250,000 ) (250,000 )
Effect of foreign exchange (14,245 ) - - (14,245 )
Change in fair value (292,982 ) (203,308 ) (1,186,882 ) (1,683,172 )
Balance, November 30, 2021 613,823 1,943,682 5,628,059 8,185,564
2019
Series
2020
Series
EB CD Total
$ $ $ $
As of November 30, 2021:
Less than one year 613,823 1,943,682 - 2,557,505
Greater than one year - - 5,628,059 5,628,059
Total convertible debt obligation 613,823 1,943,682 5,628,059 8,185,564
(a) 2019 Series

As of November 30, 2021, the fair value of the 2019 Series convertible debentures was estimated using the binomial lattice model with the below assumptions:

2019 Series November 30,
2021
(CA$)
August 31,
2021
(CA$)
Share price 4.93 8.42
Conversion price 7.50 7.50
Warrant exercise price 7.50 7.50
Term, in years .60- .69 .85- .94
Interest rate 6 % 6 %
Expected volatility 85.00 % 90.00 %
Risk-free interest rate 0.43% - 0.50 % 0.25% - 0.26 %
Exchange rate 0.7817 0.7947
Expected dividend yield 0 % 0 %
Page 19 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

(b) 2020 Series

The 2020 Series debentures will mature twenty-four (24) monthsfrom 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) $11.25per 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 $7.50per 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 $7.50per 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 $15.00per 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 $30.00per 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.

(c) 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 $7.50per Unit (as described above) will be US$9.50per Unit. The 2020 Series One Up convertible debentures had a fair value at issuance of $3,078,550.

(d) 2020 Series - Standby

In September 2020, the Company entered into an $8,000,000stand-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 $7.50conversion 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 224,719warrants in connection with this first draw of $2,000,000of the Standby Debentures, with each warrant exercisable into one common share the Company at an exercise price of $15.00per share for a period of two years, subject to the same acceleration clause as the warrants underlying the 2020 Series debentures.

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

Page 20 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The remaining $6,000,000of 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 November 30, 2021, the fair value of the 2020 Series convertible debentures was estimated using the binomial lattice model with the below assumptions:

2020 Series November 30,
2021
(US$)
August 31,
2021
(US$)
Share price 3.85 6.66
Conversion price 8.90 8.90
Warrant exercise price - -
Term, in years 1.26 1.26
Interest rate 10 % 10 %
Expected volatility 85.00 % 90.00 %
Risk-free interest rate 0.23 % 0.10 %
Expected dividend yield 0 % 0 %
(e) EB CD

On February 24, 2021, the Company extinguished the Amended EB Loan and issued the Lender a secured convertible debenture in the principal amount of $5million (the "EB CD"). The EB CD is convertible into units of the Company at a conversion price of $10.25per 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 $15.00per share for a period of three years from the issuance of the EB CD. The EB CD has a term of three years. The convertible debenture is secured by the Company's real and personal property, fixtures, leasehold improvements, trade fixtures, equipment, and other personal property as well as all general intangibles relating to or arising from the personal property.

Page 21 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

As of November 30, 2021, the fair value of the EB CD convertible debenture was estimated using the binomial lattice model with the below assumptions:

EB CD November 30,
2021
(US$)
August 31,
2021
(US$)
Share price 3.85 6.66
Conversion price 10.25 10.25
Warrant exercise price 15.00 15.00
Term, in years 2.24 1.26
Interest rate 10 % 10 %
Expected volatility 85.00 % 90.00 %
Risk-free interest rate 0.59 % 0.30 %
Expected dividend yield 0 % 0 %
Page 22 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

(f) Fair value

The following table gives information about how the fair values of these 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 to fair value
Convertible debt The fair value of the convertible debentures as of November 30, 2021 has been calculated using a binomial lattice methodology. Key observable inputs The estimated fair value would increase (decrease) if:
Share price CAD $4.93(USD $3.85) The share price was higher (lower)
Risk-free interest rate (0.23%to 0.59%) The risk-free interest rate was higher (lower)
Dividend yield (0%) The dividend yield was lower (higher)
Key unobservable inputs
Credit spread (7.69%to 9.88%) The credit spread was lower (higher)
Discount for lack of marketability (0%) The discount for lack of marketability was lower (higher)
Convertible debt The fair value of the convertible debentures as of August 31, 2021 has been calculated using a binomial lattice methodology. Key observable inputs The estimated fair value would increase (decrease) if:
Share price CAD$8.42(USD $6.66) The share price was higher (lower)
Risk-free interest rate (0.10%to 0.30%) The risk-free interest rate was higher (lower)
Dividend yield (0%) The dividend yield was lower (higher)
Key unobservable inputs
Credit spread (1.14%to 8.45%) The credit spread was lower (higher)
Discount for lack of marketability (0%) The discount for lack of marketability was lower (higher)
Page 23 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

16. Warrant liability

Liability measured warrants having CAD exercise price

The following tables reflect the continuity of the Company's liability measured warrants for the three months ended November 30, 2021, and 2020:

Amount
$
Balance at August 31, 2020 14,135,321
Issued on conversion of convertible debt 140,880
Issued in private convertible debt 618,916
Exercised (11,404 )
Change in fair value (4,759,776 )
Foreign exchange 122,209
Balance, November 30, 2020 10,246,146
Amount
$
Balance at August 31, 2021 4,868,703
Change in fair value (2,941,546 )
Foreign exchange (75,846 )
Balance, November 30, 2021 1,851,311
Number of warrants Weighted-average exercise price
CAD
# $
Outstanding, August 31, 2020 2,405,369 9.60
Issued on conversion of convertible debt 36,666 7.50
Issued in private placement of convertible debentures 224,719 19.45
Exercised (7,166 ) 8.28
Expired (430 ) 153.81
Outstanding as at November 30, 2020 2,659,158 10.39
Weighted-average
Number of exercise price
warrants CAD
# $
Outstanding, August 31, 2021 1,452,843 8.96
Outstanding as at November 30, 2021 1,452,843 8.96
Page 24 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The following table reflects the liability measured warrants issued and outstanding as of November 30, 2021:

Warrants outstanding
Expiry date Number
outstanding
Average
exercise
price
CAD
Average remaining contractual
life (years)
March 13, 2022 123,159 10.50 0.28
December 20, 2022 29,066 27.00 1.05
March 20, 2023 27,777 13.50 1.30
March 30, 2023 46,909 13.50 1.33
March 31, 2023 17,222 13.50 1.33
May 27, 2023 130,304 13.50 1.49
July 8, 2024 445,982 7.50 2.61
July 25, 2024 401,624 7.50 2.65
August 8, 2024 230,800 7.50 2.69
1,452,843 $ 8.96 2.22

As at November 30, 2021, the fair value of the 1,452,843warrants outstanding (August 31, 2021 - 1,452,843) was determined to be $1,851,311(August 31, 2021 - $4,868,703) as calculated using the Black Scholes option pricing model with the following range of assumptions: 0.28- 2.69years (August 31, 2021 - 0.53- 2.94) as expected average life; share price of CAD$4.93(August 31, 2021 - CAD$8.42); exercise price of CAD$7.50- CAD$27.00(August 31, 2021 - CAD$7.50- CAD$27.00); 70%- 85%expected volatility (August 31, 2021 - 70%- 90%); risk free interest rate of 0.76%- 1.22%(August 31, 2021 - 0.28%- 0.63%); and an expected dividend yield of 0%.

Equity measured warrants having USD exercise price

The Company's 3,736,396equity measured warrants as of November 30, 2021, and August 31, 2021, had an average weighted-average exercise price of $15.

The following table reflects the equity measured warrants issued and outstanding as of November 30, 2021:

Warrants outstanding
Expiry date Number outstanding Average
exercise
price
USD
Average remaining contractual
life (years)
November 20, 2022 224,719 15.00 0.97
January 8, 2024 1,868,787 15.00 2.11
January 22, 2024 522,898 15.00 2.15
February 24, 2024 1,058,227 15.00 2.24
August 19, 2024 49,999 15.00 2.72
September 15, 2024 11,666 15.00 2.79
3,736,296 $ 15.00 2.09

If all equity measured warrants outstanding and exercisable as of November 30, 2021, were exercised, the Company would receive cash from exercise of approximately $56.0million.

Page 25 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

17.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, 2020 7,746,136 69,380,807
Shares issued on vesting of RSUs 66,666 410,189
Convertible debt conversion 36,666 164,343
Common shares issued on exercise of warrants 7,166 56,079
Balance, November 30, 2020 7,856,634 70,011,418
Shares Consideration
# $
Balance, August 31, 2021 15,543,309 122,741,230
Shares issued on vesting of RSUs 91,635 681,759
Balance, November 30, 2021 15,634,944 123,422,989
(c) Activity for the period

During the three months ended November 30, 2021, the Company issued 91,635common shares upon vesting of an equal number of RSUs (Note 19).

18.Stock options

On October 6, 2021, 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 July 15, 2020. 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 stock options shall not exceed 10% of the then issued and outstanding shares.

Options may be exercisable over periods of up to 10years 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 26 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The following table reflects the continuity of stock options for the three months ended November 30, 2021, and 2020:

Weighted-average
Number of
stock options
Exercise
price
Grant-date
fair value
Remaining
contractual
term
# $ $ (yrs.)
Balance, August 31, 2020 253,121 12.73 4.39 4.31
Expired/Cancelled (2,353 ) 112.73 29.40
Balance, November 30, 2020 250,768 11.79 4.43 4.06
Balance, August 31, 2021 692,938 11.64 7.06 4.46
Granted 10,000 9.82 2.92
Issued on exercise of options - - -
Expired/Cancelled - - -
Balance, November 30, 2021 702,938 11.61 7.00 4.30
Exercisable as at November 30, 2021 181,936 12.10 4.36 2.43
Page 27 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The following tables reflect the stock options issued and outstanding as of November 30, 2021:

Outstanding Weighted average exercise price Weighted average remaining contractual term
Expiry date options CAD USD (Years)
December 10, 2021 1,564 93.30 71.84 0.03
June 30, 2022 4,428 153.45 118.15 0.58
April 1, 2023 84,165 11.25 7.91 1.33
October 31, 2023 64,997 11.25 7.91 1.92
January 29, 2025 46 106.50 76.43 3.17
August 25, 2025 340 106.50 76.43 3.74
September 23, 2025 11 106.50 76.43 3.82
February 10, 2026 1,443 106.50 76.43 4.20
May 19, 2026 4 106.50 76.43 4.47
May 23, 2026 9 106.50 76.43 4.48
June 24, 2026 375,188 15.04 12.21 4.57
July 1, 2026 10,000 14.87 12.00 4.59
July 2, 2026 57,762 15.08 12.21 4.59
August 20, 2026 32,500 7.78 6.05 4.72
March 3, 2027 1,256 106.50 76.43 5.26
July 31, 2027 159 106.50 76.43 5.67
November 3, 2027 133 106.50 76.43 5.93
November 7, 2029 46,251 7.50 5.38 7.94
April 20, 2030 666 7.05 5.06 8.39
December 2, 2030 1,333 9.50 7.38 9.01
June 14, 2031 10,683 14.20 11.69 9.54
November 23, 2031 10,000 12.45 9.82 9.99
702,938 14.82 11.61 4.30

Of the 702,938options outstanding as of November 30, 2021 (August 31, 2021 - 692,938), 181,936are exercisable as of November 30, 2021 (August 31, 2020 - 209,950). During the three months ended November 30, 2021, share-based compensation expense for the Company's stock options was $841,712(2020 - $49,054).

19.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 1,548,174common shares.

Page 28 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The Company's outstanding RSUs are as follows:

Number
#
Balance, August 31, 2020 402,372
Granted 322,547
Vested (66,666 )
Cancelled -
Balance, November 30, 2020 658,253
Balance, August 31, 2021 490,174
Granted 100,626
Vested (91,635 )
Cancelled (5,034 )
Balance, November 30, 2021 494,131

In October 2021, the Company granted 100,626to members of the board of directors pursuant to the Company's incentive plan. The fair value of the RSUs will be recognized as stocked-based compensation expense over the vesting period, which is approximately ten months.

During the three months ended November 30, 2021, share-based compensation expense for the Company's RSUs was $479,326(2020 - $1,039,584).

20.Capital management

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

As of November 30, 2021, the Company had shareholders' equity (deficit) before non-controlling interests of $25,559,149(August 31, 2021 - equity of $25,422,165). The Company's objective when managing its capital is to seek continuous improvement in the return to its shareholders while maintaining a moderate to high tolerance for risk. The objective is achieved by prudently managing the capital generated through internal growth and profitability, through the use of lower cost capital, including raising share capital or debt when required to fund opportunities as they arise.

The Company may also return capital to shareholders through the repurchase of shares, pay dividends or reduce debt where it determines any of these to be an effective method of achieving the above objective. The Company does not use ratios in the management of its capital. There have been no changes to management's approach to managing its capital during the three months ended November 30, 2021, and 2020.

Page 29 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

21.Commitments and contingencies

Litigation and arbitration

In April 2020, the Company announced its renegotiation of the acquisition of Allinsports. The revised purchase agreement provided for the acquisition of 100% of Allinsports in exchange for the issuance of 966,667common shares of the Company and other consideration, including payments of $1,200,000as a portion of the purchase consideration. In September 2020, the Company advised the shareholders of Allinsports that closing conditions of the transaction, including the requirement 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 966,667common shares of the Company to those shareholders. As alternative relief, the shareholders of Allinsports sought up to US$20,000,000in damages. As of August 31, 2020, the Company had recorded an impairment against the entire balance of advances to Allinsports, amounting to $2,625,657. A hearing in this matter was held in May of 2021, and by a decision dated September 30, 2021, the Arbitrator determined that the closing of the transaction had previously occurred and directed the Company to issue the 966,667common shares. The Company is pursuing regulatory approval to issue the shares and is also pursuing relief against the Allinsports shareholders for various alleged breaches of the share purchase agreement. The Company recognized a liability for the arbitration ruling of $3,728,278, which represents the fair value of the common shares directed to be delivered as of November 30, 2021. The liability is recorded as Arbitration reserve on the Company's Consolidated Statements of Financial Position. This liability will be adjusted to fair value at the end of each reporting period.

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 $2,890,000. On July 6, 2021, the Company filed motion to dismiss the complaint in this matter.

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 defendants have filed a motion to dismiss the claims, which is pending. 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.

In July of 2021, Winview Inc. filed separate patent infringement lawsuits against DraftKings Inc. and FanDuel, Inc in the United States District Court for the District of New Jersey, alleging that Sportsbook and Daily Fantasy Sports offerings of DraftKings and FanDuel infringe four of Winview's patents. These actions seek the recovery of damages and other appropriate relief. Draft Kings and FanDuel have filed motions to dismiss, which are pending. While potential damages may be significant if these lawsuits are wholly or partially successful, at this time the Company cannot predict the outcome of the suits or determine the extent of potential damages if they are successful in whole or in part.

The outcomes of pending litigations in which the Company is involved are necessarily uncertain as are the Company's expenses in prosecuting and defending these actions. From time to time the Company may modify litigation strategy and/or the terms on which it retains counsel and other professionals in connection with such actions, which may affect the outcomes of and/or the expenses incurred in connection with such actions.

Page 30 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

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.

22.Discontinued operations

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

Consideration transferred for the Motorsport Group was as follows:

Amount
$
Consideration received or receivable:
Accounts payable assumed 101,322
Deferred purchase consideration of LGR 333,503
Fair value of contingent consideration 1,321,281
Total disposal consideration 1,756,106
Carrying amount of net assets sold (2,334,303 )
Loss on disposal before income tax and reclassification of foreign currency translation reserve (578,197 )
Reclassification of foreign currency translation reserve (100,734 )
Loss on disposal of Motorsports (678,931 )
Page 31 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

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

Amount
$
Carrying amounts of assets as at the date of sale:
Cash and cash equivalents (24,348 )
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 508,881
Accrued liabilities 422,139
Total liabilities of disposal group 931,020
Net assets of disposal group 2,334,303
Page 32 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The operating results and net cash flows of the Motorsports Group for the three months ended November 30, 2021, and 2020 are presented as discontinued operations as follows:

For the three months ended
Nov 30, 2021 Nov 30, 2020
$ $
Revenues
Advertising revenue - 90,934
Operating expenses
Salaries and wages - 212,546
Consulting - 267,933
Professional fees - 22,681
Sponsorships and tournaments - 203,637
Advertising and promotion - 1,740
Office and general - 7,374
Technology expenses - 86,590
Amortization and depreciation - 201,335
Interest expense - 572
(Gain) loss on foreign exchange 9,656 36,741
Net loss from discontinued operations (9,656 ) (950,215 )

23.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:

Gaming - Services related to competitive organized video gaming or sporting events;
Media - 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 33 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

The following is an analysis of the Company's revenue and results by reportable segment for the three months ended November 30, 2021:

Gaming Media Corporate
and Other
Total
$ $ $ $
Revenue
External sales 2,537,394 11,812,084 - 14,349,478
Results
Segment loss (2,511,025 ) (1,981,915 ) - (4,492,940 )
Central administration costs - - 2,828,505 2,828,505
Other gains and losses 1,006,452 (1,643 ) (7,221,762 ) (6,216,953 )
Finance costs 17,357 375 196,876 214,608
Income (loss) before tax (3,534,834 ) (1,980,647 ) 4,196,381 (1,319,100 )
Income tax - - - -
Gain (Loss) for the year from:
Discontinued operations (9,656 ) - - (9,656 )
Non-controlling interest in net loss - - (24,764 ) (24,764 )
Net income (loss) (3,544,490 ) (1,980,647 ) 4,171,617 (1,353,520 )

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

Gaming Media Corporate
and Other
Total
$ $ $ $
Revenue
External sales 762,941 6,703,450 - 7,466,391
Results
Segment loss (2,697,438 ) (1,392,595 ) - (4,090,033 )
Central administration costs - - 3,309,789 3,309,789
Other gains and losses (2,352 ) (3,693 ) (3,467,235 ) (3,473,280 )
Finance costs 59,571 186,990 161,528 408,089
Loss before tax (2,754,657 ) (1,575,892 ) (4,082 ) (4,334,631 )
Income tax - - - -
Gain (Loss) for the year from:
Share of net loss of associate - - (66,686 ) (66,686 )
Discontinued operations (950,215 ) - (678,931 ) (1,629,146 )
Non-controlling interest in net loss - - 31,030 31,030
Net loss (3,704,872 ) (1,575,892 ) (718,669 ) (5,999,433 )
Page 34 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

Geographical breakdown

North
America
European
Union
Total
$ $ $
August 31, 2021
Assets 64,943,049 2,519,798 67,462,847
Long-term assets 35,796,241 108,924 35,905,165
November 30, 2021
Assets 58,654,084 2,484,492 61,138,576
Long-term assets 33,994,329 85,659 34,079,988

24.Related party transactions and balances

(a) Key management compensation

Key management includes the Company's directors, officers and any consultants with the authority and responsibility for planning, directing, and controlling the activities of an entity, directly or indirectly. Compensation awarded to key management for the three months ended November 30, 2021 includes the following:

For the three months ended
November 30, 2021 November 30, 2020
$ $
Total compensation paid to key management 347,256 534,738
Share based payments 153,671 895,814

Total compensation paid to key management is recorded in consulting fees, salaries and wages and share based payments in the consolidated statement of loss and comprehensive loss for the three months ended November 30, 2021, and 2020.

Amounts due to related parties as of November 30, 2021, with respect to the above fees were $0(August 31, 2021 - $33,349). 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.

Commitment to former holders of WinView to proceeds from the patent portfolio enforcement action

Pursuant to the Business Combination agreement dated March 9, 2020, among the Company, Frankly Inc. and Winview Inc., the Company is required to pay to certain former Winview securities holders ("Stubholders") fifty percent (50%) of the net license fees, damages awards or settlement amounts collected from third parties in connection with the Winview Patent Portfolio, after deduction of certain expenses. Certain directors of the Company are among the pool of Stubholders.

Page 35 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

25.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 November 30, 2021, one customer (August 31, 2021 - one) accounted for greater than 10% of the Company's accounts receivable balance. In total, this one customer (August 31, 2021 - one) accounted for 13%of the Company's accounts and other receivables balance as of November 30, 2021 (August 31, 2021 - 13%). During the three months ended November 30, 2021, one (2020 - one) customers represented 61%(2020 - 58%) 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 November 30, 2021:

0 - 30 31 - 60 61 - 90 91+ Total
Trade accounts receivable 8,579,042 250,750 235,950 2,030,380 11,096,122
Allowance for doubtful accounts 3,500 1,500 - 1,079,305 1,084,305
% Allowance 0 % 1 % 0 % 53 % 10 %
Page 36 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

(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 considering 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 2-5 years
$ $ $
Accounts payable 9,610,276 - -
Accrued liabilities 8,568,864 - -
Players liability account 360,372 - -
Lease obligation 198,663 325,631 -
Long-term debt 69,507 - -
Promissory notes payable 753,652 - -
Convertible debt 2,557,505 - 5,628,059
(d) Interest rate risk

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

(e) Foreign exchange rates

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

(f) Fair value hierarchy

The following tables combine information about:

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

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

Page 37 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

Carrying value at November 30, 2021 FVTPL -
mandatorily
measured
Amortized
cost
$ $
Financial assets:
Cash - 9,678,803
Restricted cash - 360,372
Accounts and other receivables - 10,061,734
Government remittances - 1,195,102
Publisher advance - 3,631,052
Investment at FVTPL 2,629,851 -
2,629,851 24,927,063
Carrying value at November 30, 2021 FVTPL -
mandatorily
measured
FVTPL -
designated
Amortized
cost
$ $ $
Financial liabilities:
Accounts payable - - 9,610,276
Accrued liabilities - - 8,568,864
Players liability account - - 360,372
Arbitration reserve

-

3,728,278

-

Long-term debt - - 69,507
Promissory notes payable - - 753,652
Warrant liability 1,851,311 - -
Convertible debt - 8,185,564 -
1,851,311 11,913,842 19,362,671
Carrying value at August 31, 2021 FVTPL -
mandatorily
measured
Amortized
cost
$ $
Financial assets:
Cash - 15,305,996
Restricted cash - 331,528
Accounts and other receivables - 8,646,807
Government remittances - 1,070,216
Publisher advance - 4,534,218
Investment at FVTPL 2,629,851 -
2,629,851 29,888,765
Page 38 of 39

Engine Gaming and Media, Inc.

(formerly Engine Media Holdings, Inc)

Notes to the Interim Condensed Consolidated Financial Statements

For the three months ended November 30, 2021 and 2020

(Unaudited)

(Expressed in United States Dollars)

Carrying value at August 31, 2021 FVTPL -
mandatorily
measured
FVTPL -
designated
Amortized
cost
$ $ $
Financial liabilities:
Accounts payable - - 10,403,665
Accrued liabilities - - 5,722,470
Players liability account - - 331,528
Arbitration reserve

-

6,468,330

-

Long-term debt - - 96,664
Promissory notes payable - - 821,948
Warrant liability 4,868,703 - -
Convertible debt - 9,951,496 -
4,868,703

16,419,826

17,376,275

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

Level 1 Level 2 Level 3 Fair value as
of November 30, 2021
$ $ $ $
Warrant liability - 1,851,311 - 1,851,311
Convertible debt - - 8,185,564 8,185,564
Investment at FVTPL - - 2,629,851 2,629,851
Level 1 Level 2 Level 3 Fair value as
of August 31, 2021
$ $ $ $
Warrant liability - 4,868,703 - 4,868,703
Convertible debt - - 9,951,496 9,951,496
Investment at FVTPL - - 2,629,851 2,629,851

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

26.Subsequent events

The Company has evaluated subsequent events from the balance sheet date through January 14, 2022, the date at which the interim condensed consolidated financial statements were available to be issued and determined there were no additional items to be disclosed.

Page 39 of 39