ESE Entertainment : Management Discussion and Analysis Q2

ESE ENTERTAINMENT INC.

Management's discussion and analysis

For the three months and six ended April 30, 2022

Dated: June 16, 2022

The following is a management's discussion and analysis ("MD&A") of ESE Entertainment Inc. (formerly Kepler Acquisition Corp.) (the "Company"), prepared as of June 16, 2022. This MD&A should be read together with the unaudited condensed interim consolidated financial statements for the three and six months ended April 30, 2022 and related notes, which are prepared in accordance with International Financial Reporting Standards ("IFRS"). All financial amounts are stated in Canadian dollars unless otherwise indicated.

Certain information included in this MD&A may constitute forward-looking statements. Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements. Readers are cautioned not to put undue reliance on forward-looking statements.

Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company may differ materially from those reflected in forward-looking statements due to a variety of risks, uncertainties and other factors. The Company's forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements. Important factors that could cause actual results to differ materially from the Company's expectations include uncertainties involved in disputes and litigation, the assumption that the Company will become fully compliant with regulatory filing and continued listing requirements, uncertainty as to timely availability of permits and other government approvals and other risks and uncertainties disclosed in other information released by the Company from time to time and filed with the appropriate regulatory agencies.

It is the Company's policies that all forward-looking statements are based on the Company's beliefs and assumptions which are based on information available at the time these assumptions are made. The forward- looking statements contained herein are as of the date of the MD&A and are subject to change after this date, and the Company assumes no obligation to publicly update or revise the statements to reflect new events or circumstances, except as may be required pursuant to applicable laws. Although management believes that the expectations represented by such forward-looking information or statements are reasonable, there is significant risk that the forward-looking information or statements may not be achieved, and the underlying assumptions thereto will not prove to be accurate.

Actual results or events could differ materially from the plans, intentions and expectations expressed or implied in any forward-looking information or statements, including the underlying assumptions thereto, as a result of numerous risks, uncertainties and other factors such as those described above and in "Risks and Uncertainties" below. The Company has no policy for updating forward looking information beyond the procedures required under applicable securities laws.

Additional information related to this Company is available for view on SEDAR at www.sedar.com.

The Company's Business

ESE Entertainment Inc. (the "Company") (formerly Kepler Acquisition Corp. ("Kepler")) is the parent company of ESE Entertainment Holdings Inc. ("ESE"). The Company's principal business activity is focusing on esports, and particularly, on media rights relating to esports, physical and digital content creation and distribution of esports related content. The Company's registered office is at 6th Floor, 905 West Pender Street, Vancouver, British Columbia, V6C 1L6 and its head office is located at 1000-409 Granville Street, Vancouver, British Columbia, V6C 1T2.

ESE ENTERTAINMENT INC.

Management's discussion and analysis

For the three months and six ended April 30, 2022

Dated: June 16, 2022

On August 12, 2020, the Company completed the business combination with ESE by way of a plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). Pursuant to the Arrangement, ESE was acquired by and became a wholly-owned subsidiary of Kepler for legal purposes.

Upon closing of the transaction, the shareholders of ESE had control of the Company, and as a result, the transaction is considered a reverse acquisition of Kepler by ESE. For accounting purposes, ESE is considered the acquirer and Kepler, the acquiree. Accordingly, the consolidated financial statements are a continuation of the financial statements of ESE.

On April 12, 2021, the Company acquired 51% of the business of World Phoning Group Inc, Encore Telecom Inc., and their two European operating subsidiaries, WPG Racing Solutions and Foresight Resolution (collectively, "WPGI"). Certain assets and liabilities of WPGI were rolled into a newly incorporated Canadian company, World Performance Group Ltd. ("WPG"), and, pursuant to a share purchase agreement dated February 15, 2021, the Company acquired 51% of the issued and outstanding shares of WPG.

On September 15, 2021, the Company acquired 100% of the issued and outstanding shares of Auto Simulation Limited trading as Digital Motorsports ("Digital Motorsports").

On November 12, 2021, the Company acquired 100% of the issued and outstanding shares of Frenzy sp. Z.o.o ("Frenzy").

On February 1, 2022, the Company acquired 100% of the issued and outstanding shares of 9327-7358 Quebec Inc. DBA GameAddik ("GameAddik).

On June 6, 2022, the Company began trading on the OTCQX Best Market under the ticket symbol of "ENTEF".

Description of the Business

ESE is an entertainment and technology company focused on gaming, particularly on esports. ESE consists of multiple assets and world-class operators in the gaming and esports industries. Capabilities include physical infrastructure, broadcasting, global distribution for gaming and esports-related content, advertising, a simulation racing business unit, and a growing esports team franchise, K1CK Esports. The Company intends to consolidate the fragmented gaming industry by bridging Europe and the rest of the world. The Company operates across the gaming and media production value chain, cultivating, producing and facilitating in the process of media content creation. The Company's revenue streams include media rights, sponsorships and advertising, events and merchandise, and competition earnings.

In addition to these four original sources of revenue, through the Company's acquisition of WPG, Digital Motorsports, Frenzy and GameAddik, the Company has expanded into the following business lines: fan engagement, telecom infrastructure and advanced simulation racing infrastructure, technology, and support.

WPG is a Canadian and European based infrastructure business for management of fan engagement for OTT

• esports. WPG works with its customers to build new and improved business-to-consumer & business-to business processes that align with the customer's brand, boost retention, enhance off-site fan interaction, and improve ROI. WPG provides bespoke, omni-channel solutions, that encompass traditional channels (voice, chat, email), social media channels (Twitter, Facebook) and embrace new community channels (Discord, Reddit, etc.), used by millennials and many younger fans.

Digital Motorsports is one of the leading simulation racing solutions providers in Europe, specializing in building bespoke simulators and offering turnkey simulator packages. Digital Motorsports has key vendor distribution rights and partnerships in the industry.

Frenzy is an European-based media and product infrastructure company focused on the video game industry, which creates and executes esports and gaming events, broadcasts, and media content.

GameAddik is a Canadian-based technology company focused on gaming and esports, bringing a new revenue channel of video-game advertising to the Company's service offerings.

The Company is building extensive partnerships to add value and streamline growth in multiple areas. Current partners include Riot Games, one of the largest video game developers in the world, Nuvei, one of the largest

ESE ENTERTAINMENT INC.

Management's discussion and analysis

For the three months and six ended April 30, 2022

Dated: June 16, 2022

payment processing companies in the world, Corsair Gaming Inc., a top video game hardware and peripherals company, and more.

Esports Professional Teams

ESE operates professional esports teams under the wholly-owned esports brand K1CK. It operates in multiple high profile games including League of Legends, Apex Legends, and FIFA 20. The Company currently has three active teams consisting of professional esports players supported by experienced coaches to compete on the world stage with other international teams alongside Vodafone Giants, FC Schalke 04 Esports, Movistar Riders Esports, Fnatic, and more, for competition prize winnings.

The Company collaborates with Kinguin, a global digital alternative marketplace for games, to provide a state- of-the-art training facility that includes rooms and sleeping quarters for players, teams and coaches, and facilities including a weight room and several gaming and broadcasting rooms.

Simulation racing and Digital Motorsport Solutions

ESE operates a business unit for simulation racing and digital motorsports. Key services include 3D laser scanning of the facility and the adjacent area, aerial photography, preparation of documentation with architectural standards, creation of multimedia animations (virtual tour), development of 3D models for the game Assetto Corsa or Factor 2, creating promotional video clips, and creating a model for virtual reality presentations.

ESE takes geodetic measurements of race tracks and creates photographic documentation. ESE also creates cars on the basis of real models by taking measurements, collecting detailed technical data, recording sounds and then programming the appropriate driving physics for the selected model. The inventory is made using some of the most accurate 3D laser scanning methods available today.

Ecommerce

ESE operates a business unit for ecommerce. This business unit owns and develops ecommerce platforms in order to sell products to customers globally. The platforms are primarily through online ecommerce websites, where customers can purchase goods directly. The primary platforms available include digital- motorsports.com, an online store focused on simulation racing equipment and hardware, and K1CK.com, which sells branded esports and gaming merchandise.

Digital Events

ESE has both digital and physical infrastructure to organize events, competitions, tournaments, leagues and more for the gaming industry. For example, Rocketmania is a premier league competition based on the game Rocket League (owned by Psyonix and Epic Games). This event is hosted in Europe by the Company, and invites the best teams covering Poland, Hungary, Czech and Slovakia.

The Company also has the business relationships to host esports events at state-of-the-art arenas in Europe.

Future events will obtain sponsorships which will be recognized as additional revenue streams. Previous sponsors include major brands like Redbull and Corsair Gaming.

The events will generate ticketing sales from customers purchasing to attend either digitally or in person. Ticketing mechanics are powered by business partner eBilet, a leader of online ticket sales in the cultural and entertainment industry in Europe, or other available ticket providers.

Esports Events Broadcasting

ESE provides viewers and fans the ability to stream content hosted by the Company and other event organizers on multiple media outlets. To do so, license to broadcast is required to be purchased from the game publisher such as Riot Games, Activision Blizzard, EA, and more. Competitions will be broadcasted on third party media outlets including Twitch and Youtube that allows revenue generated by sponsors and/or the fans and viewers, on a subscription or one-time basis.

ESE ENTERTAINMENT INC.

Management's discussion and analysis

For the three months and six ended April 30, 2022

Dated: June 16, 2022

The Company will continue to feature events and gaming related content to be broadcasted on television network operated and owned by Polsat Group, the largest television channels offering based in Poland.

Brand Ambassador

ESE provides sponsorship to individuals with strong fan bases on social media as part of revenue generation and additional marketing initiatives. The Company has currently engaged individuals with sponsorships and is actively building out its influencer, celebrity, and professional athlete roster.

Esports and Gaming Infrastructure

Through its 51% ownership of WPG, the Company is an enhanced solutions provider operating an infrastructure business for management of fan engagement for OTT & esports. WPG works with its customers to build new and improved B2C & B2B processes that align with the customer's brand, boost retention, enhance fan interaction, improve ROI, and increase sales and profit margins. WPG provides bespoke, omni- channel solutions that encompass the traditional esports channels (voice, chat, email) and embrace new contact channels (Discord, Reddit, etc.) and social media used by millennials and many of today's younger fans. WPG also offers robust out-sourced network services, including B2B and B2C services, and operates a global telecom network.

Infrastructure, technology, and support

The Company further provides infrastructure, technology, and support in gaming to clients through its subsidiaries. The Company has a portfolio of intellectual property related to racing simulator solutions, components, and is developing cloud-based racing services. Additionally, the Company is developing both products and technology to reduce the complexity and barriers to entry in gaming.

Acquisition of WPG

On April 12, 2021, the Company acquired 51% of the issued and outstanding shares of WPG. The acquisition of WPG was an important step to build infrastructure, as customer service is expected to be an important part of gaming and esports moving forward. WPG has the framework that can support esports and gaming events in the future. The purchase price consisted of (i) $10,000 refundable deposit (paid), (ii) $128,019 in cash on closing of the transaction (the "Closing") (paid), and (iii) issuance of 585,156 common shares of the Company. The Company is also required to (i) issue 6,664,845 common shares (the "Deferred Compensation Shares"), vesting over three years, and (ii) advance $750,000 to WPG (the "Working Capital Amount"). The Deferred Compensation Shares are considered a post- combination expense. Pursuant to the agreement, WPG is not required to repay or reimburse the Company all or any portion of the Working Capital Amount.

The transaction was accounted for as a business combination, as the operations of WPG meet the definition of a business. As the transaction was accounted for as a business combination, transaction costs were expensed.

The fair value of the 585,156 common shares issued ($1,345,858) was determined based on the share price of the Company on the date of acquisition. The consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase price was allocated as follows:

ESE ENTERTAINMENT INC.

Management's discussion and analysis

For the three months and six ended April 30, 2022

Dated: June 16, 2022

Cash	$	128,019
585,156 common shares of the Company		1,345,858
Fair value of consideration		1,473,877
Allocated to the fair value of net assets acquired (liabilities
assumed):
Cash		69,823
Receivables		501,275
Prepaid expenses		34,593
Equipment and right-of-use asset		136,239
Accounts payable and accrued liabilities		(437,125)
Lease Liabilities		(104,693)
Income tax payable		(5,059)
Funds from the Company prior to the acquisition		(290,000)
Loans and credit facilities		(509,086)
Deferred revenue		(54,325)
Total net liabilities assumed		(658,358)
Non-Controlling interest		(1,416,078)
Unallocated purchase price	$	3,548,313

The Company relied on the work of third-party valuation specialists and the initial assessment did not support the recognition of intangible assets that would meet the recognition criteria under IAS 38. Therefore the unallocated purchase price of $3,548,313 has been recorded as an impairment loss during the year ended October 31, 2021. The Company also issued 434,999 common shares to consultants for a total value of $1,000,498 for providing M&A advisory services in connection with the acquisition of WPG.

The Company has the option to acquire the remaining 49% of the issued and outstanding shares of WPG (the "Minority Interest") at any time within 34 months following the closing by: (i) paying $624,613 in cash; and (ii) issuing 2,500,000 common shares. World Phoning Group Inc. and Encore Telecom Inc. also have the right to sell the Minority Interest to the Company at any time within 34 months following the closing upon the occurrence of a change of control event in exchange for the Company: (i) paying $780,767 in cash; and (ii) issuing 3,125,000 common shares.

The operating results for WPG have been recognized in the consolidated statement of loss and comprehensive loss beginning on April 12, 2021, the effective date of obtaining control. During the three and six months ended April 30, 2022 the Company recorded revenues of $5,761,743 and $11,023,856 and net income of $206,399 and $109,595 related to WPG.

Acquisition of Digital Motorsports

On September 15, 2021, the Company acquired 100% of the issued and outstanding shares of Digital Motorsports. The acquisition is intended to build on ESE's position in the sim racing market, and bring it one step closer to becoming a significant gaming and esports company. The purchase price consisted of (i) $1,681,250 in cash on closing of the transaction (the "Closing") (paid), (ii) issuance of 941,500 common shares of the Company, and (iii) up to 8,473,500 contingent earn-out common shares (the "DMS Contingent Shares") to be issued in six equal installments, with the first installment being issued on October 14, 2021, subject to DMS generating revenue (as defined) greater than €2,587,005 for the prior four quarters, assessed every six months between Closing and January 1, 2027. The Company will also advance €250,000 to Digital Motorsports (the "DMS Working Capital Amount"). Pursuant to the agreement, Digital Motorsports is not required to repay or reimburse the Company all or any portion of the DMS Working Capital Amount.

The transaction was accounted for as a business combination, as the operations of Digital Motorsports meet the definition of a business. As the transaction was accounted for as a business combination, transaction costs were expensed. The goodwill resulting from the allocation of the purchase price to the total fair value of net assets will represent the sales and growth potential of Digital Motorsports.

The fair value of the consideration transferred was determined on a preliminary basis. The fair value of the 941,500 common shares issued ($950,915) was determined based on the share price of the Company on the date of acquisition. For the DMS Contingent Shares, the Company is evaluating several valuation models which will best incorporate the probability of whether, and when, the revenue threshold would be met, amongst