ESE Entertainment Inc. — Management Reports 2021

Feb 24, 2021

ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

The following is a management’s discussion and analysis (“MD&A”) of ESE Entertainment Inc. (formerly Kepler Acquisition Corp.) (the “Company”), prepared as of February 22, 2021. This MD&A should be read together with the audited consolidated financial statements for the year ended October 31, 2020 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, in addition 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”), formerly ESE Entertainment Inc. 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 6[th] Floor, 905 West Pender Street, Vancouver, British Columbia, V6C 1L6 and its head office is located at 1000409 Granville Street, Vancouver, British Columbia, V6C 1T2.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

On August 12, 2020, the Company completed the proposed 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 are a continuation of the financial statements of ESE.

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 revenue streams include media rights, sponsorships and advertising, events and merchandise, and competition earnings.

The Company is building extensive partnerships to add value and streamline growth in multiple areas. Current partners include Nuvei, one of the largest payment processing companies in the world, Action S.A., a top European information technology distribution company,Brief.pl, a reputable European media 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.

Simracing and Digital Motorsport Solutions

ESE is operating 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.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

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 Components.

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.

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.

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.

Esports Media Publishing

The Company currently has business ventures for its developing media publishing business with reputable companies based in Europe, such as Brief.pl. For example, the Brief.pl business venture includes ESE setting up and managing a dedicated gaming media channel for European fans and readers who are frequently engaged in consumption of esports media related content.

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.

Selected Annual Financial Information

The table below sets out certain selected financial information regarding the operations of the Company for the periods indicated. The selected financial information has been prepared in accordance with IFRS and should be read in conjunction with the Company’s consolidated financial statements and related notes.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

	Year ended October 31, 2020	Period ended October 31, 2019
Revenue	$ 390,171	$ 337
Net loss for the period	$ (3,802,333)	$ (183,701)
Total comprehensive loss	$ (3,795,554)	$ (184,497)
Loss per share	$ (0.14)	$ (0.01)
Total assets	$ 842,093	$ 171,417

The Company was incorporated on June 18, 2019 and October 31, 2019 was the Company’s first fiscal year end. The Company recorded nominal revenue in the period ended October 31, 2019 and incurred a net loss of $183,701. The net loss of $183,701 in the period are largely attributed to legal fees incurred in connection with the acquisition of ESE Europe and the operations of ESE Europe.

The Company’s total assets for the period ended October 31, 2019 were $171,417 which is mainly made up of cash and receivables.

The Company’s total assets for the year ended October 31, 2020 were $842,093 which is mainly made up of cash and receivables.

The Company has not declared any dividends since its incorporation and does not anticipate paying cash dividends in the foreseeable future on its common shares, but intends to retain any future earnings to finance internal growth, acquisitions and development of its business. Any future determination to pay cash dividends will be at the discretion of the board of directors of the Company and will depend upon the Company's financial condition, results of operations, capital requirements and such other factors as the board of directors of deems relevant.

Selected Quarterly Financial Information

A summary of results for the six quarters since incorporation follows:

	October 31, 2020 Qtr 4	July 31, 2020 Qtr 3	April 30, 2020 Qtr 2	January 31, 2020 Qtr 1
Revenue	$ 200,152	$ 138,035	$ 42,174	$ 9,810
Net loss	$ (2,754,294)	$ (516,928)	$ (317,121)	$ (213,990)
Comprehensive loss	$ (2,721,659)	$ (547,102)	$ (313,437)	$ (213,356)
Loss per share	$ (0.07)	$ (0.02)	$ (0.01)	$ (0.01)
	October 31, 2019 Qtr 4	July 31, 2019 Qtr 3
Revenue	$ 337	$ -
Net loss	$ (183,701)	$ -
Comprehensive loss	$ (184,497)	$ -
Loss per share	$ (0.01)	$ -

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

The Company was incorporated on June 18, 2019 and July 31, 2019 was the Company’s first fiscal quarter of operations. There were no activities during the quarter ended July 31, 2019. During the three months ended October 31, 2019, the Company recorded a net loss of $183,701 which includes the operations of ESE Europe and the cost of associated with the acquisition. During the quarter ended January 31, 2020, the Company recorded a net loss of $213,990 which is comparable to the $183,701 net loss from the previous quarter. During the quarter ended April 30, 2020, the Company recorded a net loss of $317,121 as compared to the previous quarter of $213,990 an increase of approximately $103,000. The increase can be attributed to the legal fees incurred in connection with the preparation of the filing statement which was ongoing as at April 30, 2020. During the quarter ended July 31, 2020, the Company recorded a net loss of $516,928 as compared to the previous quarter of $317,121 an increase of approximately $200,000. The increase can be attributed to the Company engaging numerous consultants for business developments. During the quarter ended October 31, 2020, the Company recorded a net loss of $2,754,294 as compared to the previous quarter of $516,928 an increase of approximately $2,237,000 which can be mainly attributed to the recording of $1,600,287 in listing and share-based payments of $150,651.

Results of Operations

During the year ended October 31, 2020, the Company recorded a net loss of $3,752,333 as compared to $183,701 for the previous period ended October 31, 2019. Included in the current net loss was the listing cost of $1,600,287.

Total expenses for October 31, 2020 amounted to $2,596,712 as compared to $143,992 for the previous period an increase of approximately $2,450,000 which can be attributed to the current year being a full year of operations as compared to the prior year which only representing operations from the date of incorporation (June 18, 2019) to October 31, 2019.

The increase in expenses can be attributed to the following:

Advertising and event planning have increased from $22,156 to $282,192 in the current year due to an increase in the operations of the Company and the number of events the Company participated.

Consulting fees have increased from $2,500 to $1,394,191 in the current year which can be attributed to the Company engaging numerous third parties for business developments, capital markets advisory services and administrative services. Also included in consulting fees were compensations to its officers and directors of the Company (see related parties for details).

Professional fees have increased from $72,082 to $286,660 in the current year which can be attributed to the cost associated with the preparation and filing of the filing statement.

Share-based payments have increased from $Nil to $150,651 in the current year. During the year the Company granted 2,050,000 stock options to directors, officers and consultants of the Company. The Company fair valued these stock options using the black-scholes option valuation model. Share-based payments is a non-cash transaction.

Transfer agent and filing fees have increased from $Nil to $42,644 in the current year is due to cost associated with filing of the filing statement with the securities and cost of being a public company.

Travel and conferences have increased from $Nil to $48,230 in the current year is due to management of the Company traveling to meet with investors, attending capital conferences and to Poland to review its operations.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

Wages and benefit have increased from $10,329 to $245,315 in the current year. The increase in wages and benefits is due to the increase in operations in Poland.

During the year the Company recorded revenues of $390,171 as compared to $337 for the previous period. The increase can be attributed to the numerous sponsorship agreements entered into during the year. The Company had three sponsorship agreements which amounted to 63% of the total revenue recorded in October 31, 2020.

Fourth Quarter

During the fourth quarter the Company recorded a net loss of $2,754,294 for the period ended October 31, 2020 as compared to $183,701 for the previous quarter ended October 31, 2019. Included in the current net loss for the quarter was the listing cost of $1,600,287 as the Company completed the transaction on August 12, 2020.

Total expenses for the quarter amounted to $1,280,265 as compared to $143,992 for the previous quarter an increase of approximately $1,136,000.

The main increase in expenses in the fourth quarter can be attributed to an increase in consulting fees to $725,166 from $2,500 for continued services provided as noted in the results of operations, the recording of share-based payments of $150,651 as compared to $Nil in connection with the granting of the stock option on August 17, 2020, increase in advertising and event planning to $118,330 from $22,156 coincide with the increase in revenues, wages and benefits increased to $86,259 from $10,329 and an increase in transfer agent and filing fees to $39,350 from $Nil due to the completion of the transaction in this quarter.

During the fourth quarter the Company recognized $200,152 in revenues as compared to $337 for the previous quarter.

Liquidity and Capital Resources

The Company’s cash position as at October 31, 2020 was $550,011 (2019 - $154,044) with a working capital of $463,628 (2019 - $86,053). Total assets as at October 31, 2020 was $842,093 (2019 - $171,417).

The Company believes that the current capital resources are not sufficient to pay overhead expenses for the next twelve months and is in the process of raising additional funding to fund its overhead expenses and its development of its products. The Company will continue to monitor the current economic and financial market conditions and evaluate their impact on the Company’s liquidity and future prospects.

Since the Company may not be able to generate enough cash from its operations in the foreseeable future, the Company will have to rely on loans from external or related parties and the issuance of shares, to fund ongoing operations and investment. The ability of the Company to raise capital will depend on market conditions and it may not be possible for the Company to issue shares on acceptable terms or at all.

On October 7, 2019, the Company obtained a credit facility of $50,000 which bears interest at prime rate plus 3% which is secured by the CEO of the Company. As at October 31, 2020 and 2019, the Company has not utilized any of the credit facility.

On April 14, 2020, the Company issued 200,000 common at a price of $0.15 per share for total proceed of $30,000.

On May 13, 2020, the Company entered into a promissory note with Konrad Wasiela, CEO in the amount of $20,000, unsecured bears interest at 8% per annum and due on or before May 13, 2021. On August 17, 2020 the Company repaid the loan plus interest of $1,600.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

On July 22, 2020, the Company issued 3,800,000 common shares at a price of $0.25 per share for total proceeds of $950,000.

On August 12, 2020, the Company converted 5,243,724 subscription receipts at a price of $0.25 per subscription receipts for gross proceeds of $1,310,931 into common shares of the Company. In connection with the subscription receipts the Company paid a cash finders fee of $41,580 and issued 166,320 Agent’s warrants exercisable into one common share of the Company at an exercise price of $0.25 for two years expiring on August 12, 2022. The Agent’s warrants were fair valued at $21,600 using the Black-Scholes option valuation mode with the following assumptions: Share price at the time of issuance $0.25; risk-free interest rate of 0.29%; Expected life of two years; Dividend rate – 0%; Forfeiture rate – 0% and annualized volatility of 100%. Since the Company does not have enough history of trading price, the Company utilized annualized volatility of comparable startup companies.

The Company manages its capital structure in order to ensure sufficient resources are available to meet operational requirements and safeguard its ability to continue as a going concern. There are no externally imposed capital requirements on the Company. Management considers the items included in shareholders’ equity (deficit) and working capital as capital. The Company manages the capital structure and makes adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets. The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the operation of the Company. To secure the additional capital necessary to pursue these plans, the Company intends to raise additional funds through equity or debt financing.

Going Concern

The consolidated financial statements for the year ended October 31, 2020 have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company was not expected to continue operations for the foreseeable future. At October 31, 2020, the Company has not achieved profitable operations, has accumulated losses of $3,986,034 since inception and expects to incur further losses in the development of its business. The above material uncertainties cast significant doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon successful results from its operations, its ability to attain profitable operations to generate funds, and/or its ability to raise equity capital or borrowings sufficient to meet its current and future obligations. Although the Company has been successful in the past in raising funds to continue operations, there is no assurance it will be able to do so in the future.

During the year there was a global pandemic outbreak of COVID-19. The actual and threatened spread of the virus globally has had a material adverse effect on the global economy and, specifically, the regional economies in which the Company operates. The pandemic could continue to have a negative impact on the stock market, including trading prices of the Company’s shares and its ability to raise new capital. These factors, among others, could have a significant impact on the Company’s operations.

Off Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements.

Financial Instruments

The Company’s risk exposures and the impact on the Company’s condensed interim consolidated financial statements are summarized below.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and trade accounts receivable. The Company limits its exposure to credit loss by placing its cash with major financial institutions. Trade accounts receivable of $172,525 was collected subsequent to October 31, 2020.

Interest rate risk

The Company is exposed to interest rate risk to the extent that the cash maintained at the financial institutions is subject to floating rate of interest. The interest rate risks on cash and on the Company’s obligations are not considered significant.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure and financial leverage as outlined in the note.

The Company monitors its ability to meet its short-term administrative expenditures by matching investment income received to expenditures to be incurred. All of the Company’s financial liabilities have contractual maturities of 30 days or are due on demand and are subject to normal trade terms.

As at October 31, 2020, the Company had a cash balance of $550,011 and Receivable of $262,596 to settle accounts payable and accrued liabilities of $263,425.

Foreign currency risk

The Company may be exposed to foreign currency risk on fluctuations related to cash, accounts receivable included in receivables, accounts payable and accrued liabilities that are denominated in a foreign currency. As at October 31, 2020, the Company held cash denominated in Polish Zloty of PLN115,004 (2019 – PLN7,282), accounts receivable of PLN270,108 (2019 – Nil) and accounts payable and accrued liabilities of PLN181,353 (2019 – PLN54,613) translated at PLN1 for every CDN$0.34. These factors expose the Company to foreign currency exchange rate risk, which could have a material adverse effect on the profitability of the Company. A 10% change in the exchange rate would change other comprehensive income/loss by approximately $7,000. The Company currently does not plan to enter into foreign currency future contracts to mitigate this risk.

Related Party Transactions

Related party transactions are comprised of services rendered by directors and/or officers of the Company or by a company with a director and/or officer in common. Related party transactions are in the ordinary course of business and are measured at the exchange amount.

Key Management Compensation

Key management personnel are those having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, and include the Company’s executive officers and members of the Board of Directors. Key management compensation consisted of the following:

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

	For the year ended October 31, 2020 Period from June 18, 2019 (date of incorporation) to October 31, 2019
	Consulting fees Konrad Wasiela, CEO and Director $ 114,000 $ - 1176149 BC Ltd., a company controlled by Ryan Maarschalk, Director 54,000 - Wasiela Services Ltd., a company controlled by Konrad Wasiela Ron Segev, Director 66,000 50,000 - -
	284,000 - Share-based payments Konrad Wasiela, CEO and Director 21,147 - Rob Kang, CFO and Director 11,535 - Ryan Maarschalk, Director 25,901 - Raj Dewan, Director 11,535 - Ron Segev, Director 69,000 -
	139,118 -
	$ 423,118 $ -

Included in accounts payable and accrued liabilities at October 31, 2020 is $Nil (2019 - $7,200) in unpaid consulting fees and other balances owing to an officer of the Company and to companies with an officer or director in common.

On May 13, 2020, the Company entered into a promissory note with Konrad Wasiela, CEO in the amount of $20,000, unsecured bears interest at 8% per annum and due on or before May 13, 2021. On August 17, 2020 the Company repaid the loan plus interest of $1,600.

On October 7, 2019, the Company obtained a credit facility of $50,000 which bears interest at prime rate plus 3% which is secured by the CEO of the Company. As at October 31, 2020 and 2019, the Company has not utilized any of the credit facility.

On August 11, 2020, the Company entered into an agreement with Ron Segev to be a director of the Company, as consideration, the Company agreed to issue 200,000 common shares and granted 300,000 in stock options at a price of $0.25 per share for a period of 5 years. On August 17, 2020, the Company granted the stock option and recorded the 200,000 common shares at the fair market value of $0.25 per share for $50,000. This amount is included in commitment to issue shares at October 31, 2020.

Consulting agreements

On November 6, 2019, the Company entered into a management consulting agreement with 1176149 BC Ltd., a company controlled by Ryan Maarschalk, for the position of CFO commencing on December 1, 2019 for a period of six months at a monthly rate of $4,000 per month and on a month to month basis thereafter. In addition, the Company agreed to granted 75,000 stock options at $0.15 per share upon listing on the TSXV. On August 17, 2020, the Company granted the 75,000 stock option at a revised price of $0.25 per share. On August 12, 2020 Ryan resigned as CFO and became a director of the Company.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

On November 12, 2019, the Company entered into a management consulting agreement with Konrad Wasiela for the position of CEO for a period of one year at a monthly rate of $9,500 per month which shall automatically be renewed annually unless one party provides written notice at least one months prior to the end of the term.

On November 18, 2019, the Company entered into a management consulting agreement with Wasiela Services Ltd. for management and advisory services for a period of one year at a monthly rate of $5,500 per month which shall automatically be renewed annually unless one party provides written notice at least one month prior to the end of the term.

Subsequent Events/Proposed Transaction

On November 19, 2020, the Company entered into an asset purchase agreement with the owner of K1CK Esports Club (“Vendor”), whereby the Company has agreed to acquire certain assets from Vendor. As consideration, the Company will pay an aggregate of $207,500, consisting of the following (1) $120,000 cash with $60,000 paid on closing and the balance due on demand after January 20, 2021; (2) $87,500 in common shares of the Company at a deemed price of $0.25 per share for a total of 350,000 common shares of the Company (issued subsequent to the year-end).

On December 1, 2020, the Company entered into a letter of intent (“LOI”) to acquire the assets of World Phoning Group Inc. and Encore Telecom Inc. (the “Vendors”) Under the terms of the LOI, business will be reorganized into a newly incorporated company, in which the Company will hold 51% interest and WPG will hold the remaining 49%. The Company will have the right to acquire the remaining 49% interest pursuant to a call option, exercisable for three years following closing. Pursuant to the terms of the LOI, the Company advanced a refundable termination fee of $10,000 to WPG. This fee is refundable unless the Company terminates the transaction. The Company has up to 90 days to complete its due diligence and enter into a definitive agreement. On February 15, 2021, the Company entered into a binding share purchase agreement (the “Agreement”), which supersedes the LOI, to acquire 51% of the business of World Phoning Group Inc., Encore Telecom Inc., and their two European operating subsidiaries, WPG Racing Solutions SRL and Foresight Resolution SRL (collectively, “WPG”). Under the terms of the Agreement, substantially all of the assets of WPG will be rolled into a newly incorporated Canadian company, World Performance Group (the “Corporation”). Upon completion of the Agreement, ESE will acquire 51% of the issued and outstanding shares of the Corporation (the “Transaction”). The purchase price will consist of (i) $10,000 refundable deposit (paid), (ii) $128,019 in cash payable on the closing of the Transaction (the “Closing”), (iii) $146,289 paid by 585,156 common shares of the Company (each, a “Common Share”) issuable on Closing and (iiv) $1,666,211 paid by the issuance of 6,664,845 Common Shares to be released in monthly installments over the 36 months following the Closing. ESE will have the option to acquire the remaining 49% of the issued and outstanding shares of the Corporation at any time within 34 months following the Closing by (i) paying $624,613 in cash and (ii) issuing 2,500,000 Common Shares. The Vendors will have the option to require ESE to acquire the remaining 49% of the issued and outstanding shares of the Corporation at any time following a Change in Control (as defined in the Agreement) by (i) paying $780,767 in cash and (ii) issuing 3,125,000 Common Shares. Closing of the Transaction is subject to customary closing conditions including the approval of the TSXV and completion of the asset transfer to the Corporation.

On December 24, 2020, the Company completed a non-brokered private placement of 3,315,482 units at a price of $1.10 per unit for total proceeds of $3,647,030. Each unit consist of one common share and onehalf of one common share purchase warrant, each whole warrant is exercisable into one common share of the Company at a price of $1.50 per share expiring two years from closing. In connection with the private placement, the Company paid cash finders’ fees of $204,983 and issued 180,346 finders’ warrants. Each finders’ warrants is exercisable at $1.10 per share expiring two years from closing.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

On December 7, 2020, the Company granted 750,000 stock options to a consultant exercisable at $0.56 per share expiring on December 7, 2022 which vest in four equal tranches on December 7, 2020, March 7, 2021, June 7, 2021, and December 7, 2021.

On January 25, 2021, the Company granted 750,000 stock options to a consultant exercisable at $1.24 per share expiring on January 25, 2024 which vest in 24 equal monthly tranches on the first day of each month starting February 1, 2021.

Subsequent to the year end, 382,537 stock options and 293,165 agent’s warrants were exercised for the issuance of 675,702 common shares.

Outstanding Share Data

Below is the summary of the Company’s share capital as at October 31, 2020 and as of the date of this report:

	As at	As at
Securitydescription	February22, 2021	October 31, 2020
Common shares – issued and outstanding	42,997,948	38,656,764
Stock options	3,550,000	2,432,573
Agent’s warrants	344,591	457,410
Share purchase warrants	1,657,741	-
Common shares – fully diluted	48,550,280	41,546,747

Critical Accounting Estimates and Judgments

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both.

Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are discussed in note 3 to the consolidated financial statements.

Reverse Acquisition

The determination of the acquirer in the Arrangement between the Company and ESE requires significant judgment assessing the relative voting rights, composition of the governing body, and composition of senior management of the combined entity, amongst other factors. The Company concluded ESE is the acquirer, and its acquisition of all of the outstanding shares of Kepler has been determined to be an asset acquisition as Kepler does not meet the definition of a business under IFRS 3 - Business Combinations. As a result, the transaction has been accounted for as reverse takeover by ESE of Kepler’s net assets and its public listing in accordance with the guidance under IFRS 2, Share-based Payment.

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ESE ENTERTAINMENT INC. (formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

Risk and Uncertainty Factors Risks Related to our Business Limited Operating History

The Company is a development stage company which has a limited operating history and has not generate enough revenues to sustain its operations.

The Company's near-term focus remains in actively developing its products and building sales, marketing and support capabilities. As a result of these and other factors, the Company may not be able to achieve, achieve or increase profitability on an ongoing basis.

The Company is subject to many risks common to development stage enterprises, including undercapitalization, cash shortages, limitations with respect to personnel, financial and other resources, lack of revenues, technology, and market acceptance issues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of the Company's early stage of operations.

Business and Industry Risks

Speculative Nature of Investment Risk

An investment in our common shares carries a high degree of risk and should be considered as a speculative investment by purchasers. We have limited history of earnings, limited cash reserves, a limited operating history, have not paid dividends, and are unlikely to pay dividends in the immediate or near future. We are in the development and planning phases of our business and have only very recently offered some of our planned products and services for sale. Operations are not yet sufficiently established such that we can mitigate the risks associated with planned activities.

Liquidity and Future Financing Risk

We are in the development stage and have not generated a significant amount of revenue. We will likely operate at a loss until business becomes established and we may require additional financing in order to fund future operations and expansion plans, including developing new products, enhancing existing products, enhancing our operating infrastructure and acquiring complementary businesses and technologies. Our ability to secure any required financing to sustain operations will depend in part upon prevailing capital market conditions, as well as business success. There can be no assurance that we will be successful in our efforts to secure any additional financing or additional financing on terms satisfactory to management. If additional financing is raised by issuing authorized capital, control may change, and shareholders may suffer additional dilution.

Volatility in the price of our common shares could cause investors to lose all or part of their investment because they may not be able to sell their common shares at or above the price they paid. Factors that could cause fluctuations in the market price of our common shares include the following:

• price and volume fluctuations in the overall stock market from time to time;

• sales of common shares by our shareholders;

• changes in the financial projections that we may provide to the public, or our failure to meet those projections;

• announcements by us or our competitors of new products or services;

• the public’s reaction to our press releases, other public announcements and filings with the securities commissions;

• rumors and market speculation involving us or other companies in our industry;

• actual or anticipated changes in our operating results or fluctuations in our operating results;

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(formerly Kepler Acquisition Corp.) Management’s Discussion and Analysis For the year ended October 31, 2020 Dated: February 22, 2021

ESE ENTERTAINMENT INC.

• actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

• litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• announced or completed acquisitions of businesses or technologies by us or our competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

• changes in accounting standards, policies, guidelines, interpretations or principles;

• any significant change in our management; and

• general economic conditions and slow or negative growth of our markets.

Competition

The esports industry is still extremely fragmented and very few teams, companies, organizations and leagues are finding success in monetizing their companies. However, there are several companies that have excelled in certain sectors of the industry, namely: media rights; teams/prize pool; and leagues.

We believe ESE may have a competitive advantage over its competitors which are larger and more established through its potential ability, as a smaller and more agile corporation, to create high-level production at a cheaper cost relative to these larger organizations. ESE also has the advantage of having existing partnerships and business arrangements with some of the largest companies in the European Region, particularly in Poland, as well as a management team with over 20 years combined experience doing business in the region, with a demonstrated ability to bridge language gaps and navigate cultural nuances.

Additional Disclosure for Venture Issuers without Significant Revenue

Additional disclosure concerning the Company’s general and administrative expenses is provided in the Company’s consolidated statements of loss and comprehensive loss in its consolidated financial statements for the periods ended October 31, 2020 and 2019, which is available on the Company’s website or through www.sedar.com.

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