Rivalry Corp. — Management Reports 2021

Nov 24, 2021

Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

RIVALRY CORP.

MANAGEMENT DISCUSSION AND ANALYSIS

The following Management Discussion and Analysis (“ MD&A ”) should be read in conjunction with Rivalry Corp.’s (the “ Company ” or “ Rivalry ” or “ we ”) consolidated financial statements and notes for the three and nine months ended September 30, 2021 and 2020 (the “ Financial Statements ”). This MD&A was prepared with reference to the MD&A disclosure requirements set out by the National Instrument 51102 – Continuous Disclosure Obligations . The Financial Statements, together with this MD&A are intended to provide investors with a reasonable basis for assessing the financial performance of the Company as well as forward-looking statements relating to future performance. Results are reported in Canadian dollars unless otherwise noted. The Financial Statements are prepared in accordance with the International Financial Reporting Standards (“ IFRS ”). Information contained herein is presented as at November 24, 2021, unless otherwise indicated. Additional information regarding the Company is available on SEDAR at www.sedar.com.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements and forward looking information (collectively referred to herein as “ forward-looking statements ”) within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to the Company’s current expectations and views of future events or future performance. All statements other than statements of historical fact may be forward-looking statements. The forward-looking statements are included in this MD&A are made only as of the date of this MD&A.

In some cases, these forward-looking statements can be identified by words or phrases such as “ may ”, “ might ”, “ will ”, “ expect ”, “ anticipate ”, “ estimate ”, “ intend ”, “ plan ”, “ indicate ”, “ seek ”, “ believe ”, “ predict ” or “ likely ”, or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Forward-looking statements include estimates, plans, expectations, opinions, forecasts, projections, targets, guidance, or other statements that are not statements of fact. These statements involve known and unknown risks, uncertainties and other factors, including those risk factors identified in the Company’s prospectus dated September 17, 2021 (the “ Prospectus ”) under the heading “ Risk Factors ”, that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs.

Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate, and are subject to risks and uncertainties. Although we believe that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and we cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under Risks and Uncertainties. Except as required by law, the Company does not have any obligation to advise any person if it becomes aware of any inaccuracy in or omission of any forward-looking statement, nor does it intend, or assume any obligation, to update or revise these forward-looking statements to reflect new events or circumstances.

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

DESCRIPTION OF BUSINESS

The Company was incorporated on October 28, 2016 under the Business Corporations Act (Ontario) as “PMML Corp.”. The registered head office is located at 116 Spadina Avenue Suite 701, Toronto, ON Canada M5V 2K6. On September 20, 2021, PMML Corp. filed articles of amendment and changed its name to “Rivalry Corp.”.

Rivalry is an emerging sports betting and sports media company with the ambition to become a leader in both esports and sports betting for a younger demographic (young Millennials and Gen Z generations). Rivalry has developed an in-house technology platform offering fixed odds sports betting on both esports and traditional sports, in addition to an originally developed casino product called Rushlane. As sports and esports betting is a regulated industry, on January 19, 2018, Rivalry Limited, a wholly owned subsidiary of the Company, was granted an Isle of Man Licence (“ IOM Licence ”) to operate by the Gambling Supervision Commission (“ GSC ”), pursuant to the Online Gambling Regulation Act 2011. The IOM Licence allows Rivalry to offer multiple forms of sports betting such as esports and traditional sports and casino games. On March 15, 2021, Rivalry Australia Pty Ltd., a wholly owned subsidiary of the Company, was granted a conditional licence from the Northern Territory Racing Commission (the “ Australian Conditional Licence ”). The Company is currently undergoing the final review with the Northern Territory Racing Commission prior to launching in Australia. The Company has a close working relationship with the local regulator and is working collaboratively with them to ensure the earliest possible launch date. It was previously anticipated that launch would occur in Q4 2021 but as this is dependent on the local regulator’s schedule and with the upcoming holiday season, the Company conservatively updates its anticipated launch in Australia to Q1 2022.

Rivalry’s overall strategic vision is to market and grow the existing sportsbook and build out Rivalry into a positive cash flow business. The Company views its overall strategy in three broad pillars: continued market leading product innovation, ongoing expansion into new jurisdictions under the Company’s existing IOM Licence and new regulated market licences such as its recently granted Australian Conditional Licence, and developing best in class video content and social media properties to create global brand resonance for the brand Rivalry and its portfolio of brand intellectual property such as independently branded content series or on-site products such as Rushlane.

The Company will continue to apply for additional licences to further expand its active legal betting markets. The Company will ensure that when seeking licences, it has understood the requirements in each market it operates in and will maintain and develop protocols to address compliance. Finally, the Company endeavours to develop and maintain the appropriate financial processes to provide transparency to shareholders.

Together with its management team, the Company continues to work towards delivering a profitable betting business. The Company seeks to identify strategic investments and partnerships to expand the Company’s network. The Company is continually reviewing potential acquisitions and strategic partnerships and joint ventures and it is in the normal course of the Company’s business to routinely consider and evaluate offers on assets or acquisitions that fit within its business model.

The Company believes that the available funds together with cash flow from operations will be sufficient to achieve the Company’s objectives over the next twelve months.

Management of the Company will provide operational, marketing and administrative expertise to all operating subsidiaries.

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

QUARTERLY HIGHLIGHTS

Escrow Release of Subscription Receipt Funds

On September 24, 2021, the Company satisfied the escrow release conditions in connection with its previously announced offering of 8,403,242 subscription receipts for total gross proceeds of approximately USD $21,932,500 (the “ Subscription Receipt Offering ”. The Company delivered an escrow release notice to Odyssey Trust Company pursuant to the terms of a subscription receipt agreement dated June 9, 2021 between the Company, the Subscription Receipt Agent, Eight Capital and Cormark Securities Inc. confirming that the Company has satisfied the escrow release conditions contemplated therein, including (i) being issued a receipt for the Prospectus; (ii) obtaining all requisite corporate, shareholder and regulatory approvals in connection with the listing of the Company’s subordinate voting shares (the “ Subordinate Voting Shares ”) on the TSX Venture Exchange (the “ TSXV ”); and (iii) obtaining conditional approval from the TSXV for the listing of the Subordinate Voting Shares.

Share Consolidation and Multiple Voting Structure

Subsequent to receipt of shareholder approval on September 20, 2021, the Company completed: (a) a share consolidation resulting in four and a half pre-consolidation shares for one post-consolidation share; and (b) reorganized its share capital such that all: (i) common shares were reclassified as Subordinate Voting Shares; and (ii) all Class A shares were reclassified as multiple voting shares (the “Multiple Voting Shares”) with each Multiple Voting Share carrying 100 votes per share on all matters where the holders of shares of the Company are entitled to vote and the holders of Subordinate Voting Shares and Multiple Voting Shares shall vote together, except to the extent that a separate vote of holders as a separate class is required by law or provided by the Company’s articles. The previously reported number of common shares, Class A shares, stock options and warrants are all presented on a post-consolidated basis of 4.5:1 in the consolidated interim financial statements for the three and nine months ended September 30, 2021 and in this MD&A.

Casino

In May 2021, Rivalry soft launched its first originally developed casino game called Rushlane. The Company had been internally developing this casino product for nearly twelve months, and following full regulatory approval from the GSC and a third-party provably fair certification from Gaming Laboratories International (“ GLI ”), the game was soft launched to the public. As a result of this soft launch, the Company has generated a significant volume of user feedback which allowed the Company’s development team to enhance the product to increase odds of user success and monetization for the Company. On October 20, 2021, the Company announced the official launch of Rushlane.

BASIS OF PRESENTATION

The Financial Statements have been prepared in accordance with International Financial Reporting Standards (“ IFRS ”) as issued by the International Accounting Standards Board (“ IASB ”).

IMPACT OF COVID-19

In March 2020, the World Health Organization declared the coronavirus outbreak (“ COVID-19 ”) a "Public Health Emergency of International Concern” and on March 11, 2020, declared it a pandemic which continues to exist as of the date of these financial statements causing business disruptions and, in some cases, business closures. The extent of the impact on the Company’s operations, its suppliers and other vendors, customer base, and employees will depend on certain developments, including the duration and

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

spread of the virus, and vaccine availability. To address the uncertainties posed by COVID-19, the Company and its management have taken certain steps and measures to address the risks to its operations, and potential impacts on future results. Measures taken include cash management and implementation of new health and safety and remote work procedures where possible.

Rivalry’s business could be significantly and adversely affected by the effects of any widespread global outbreak of the contagious disease. A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn and cancellation of esports and traditional sports events that could affect demand for Rivalry’s services and likely impact operating results. In particular, the outbreak of COVID-19 has had a negative impact on global financial conditions. Rivalry cannot accurately predict the impact COVID-19 will have on Rivalry’s ability to remain open for business in response to government public health efforts to contain COVID-19. The Company cannot accurately predict the impact of COVID-19 on the ability to obtain financing or third parties’ ability to meet their obligations with the Company, including due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak and the length of travel and quarantine restrictions imposed by governments of affected countries, and future demand of Rivalry’s products and services. In the event that the prevalence of the coronavirus continues to increase (or fears in respect of the coronavirus continue to increase), governments may increase regulations and restrictions regarding the flow of labour or products, and travel bans, and Rivalry’s operations, suppliers, customers and distribution channels, and ability to advance its projects, could be adversely affected. In particular, should any employees or consultants of the Company become infected with COVID-19 or similar pathogens, it could have a material negative impact on Rivalry’s operations and prospects.

After the release of the traditional sports betting platform on Rivalry in early 2020, the COVID-19 pandemic began. Although this initially hampered growth in Rivalry’s traditional sports betting product given the near complete global shutdown of all traditional sports, it proved to be a boon to esports viewership and betting. With COVID-19 and the lockdown measures taken by many jurisdictions across the globe, video games became an optimal medium to connect with others. This resulted in a surge in sales, and viewership on live streaming platforms of general gaming content. Esports hit all-time monthly records, which consequently drove significant interest in esports betting.

FINANCIAL HIGHLIGHTS

The following table sets forth a summary of our highlighted financial results as indicated in our consolidated financial statements for the three and nine month period ended September 30, 2021 and September 30, 2020 as well as the most recently completed year ending December 31, 2020:

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

RESULT OF OPERATIONS

Revenue

The Company recognized revenue of $3,697,226 and $474,833 for the three months ended September 30, 2021 and 2020 from online wagering and $8,928,584 and $1,244,352 for the nine months ended September 30, 2021 and 2020. The Company generated $23,217,976 and $9,632,519 in Handle[1] for the three months ended September 30, 2021 and 2020 and $53,356,594 and $20,809,600 for the nine months ended September 30, 2021 and 2020.

Revenue increased by $3,222,393 for the three months ended September 30, 2021 in comparison to the three months ended September 30, 2020. The increase for the nine months ended September 30, 2021 was $7,684,232. This significant increase is due to the continuous success of Rivalry's marketing efforts, and growth in global brand equity, which enabled the Company to more effectively attract and retain users to the site in the quarter ended September 30, 2021.

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Cost of Revenues

Cost of sales increased by $2,834,003 for the three months ended September 30, 2021 in comparison to the same time period in the previous year as a function of the increased level of betting activity which also drove the increase in revenue. The increase for the nine months ended September 30, 2021 and 2020 was $6,456,023.

Operating Expenses

The Company incurred operating expenses of $4,759,052 and $1,714,712 for the three months ended September, 2021 and 2020, respectively. The operating expenses for the nine months ended September 30, 2021 and 2020 were $10,909,536 and $4,515,720, respectively. The breakdown is provided below with commentary on all variances above 10% or greater than $25,000.

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1 The Company defines “Betting Handle” or “Handle” as the total dollar value accepted in wagers, adjusted for cancellations and corrections.

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

Marketing, advertising and promotion

Marketing, advertising and promotion expenses increased by $1,032,968 to $1,781,363 for the three months ended September 30, 2021 in comparison to the same time period the previous year, due to additional spending on marketing campaigns to attract and retain users to the site in additional regions under the IOM License. For the nine months ended September 30, 2021, and 2020 marketing, advertising and promotion expenses increased by $1,637,940 to $3,659,825. The effects of this additional expenditure can be seen in the direct increase of betting revenue for the three months ending September 30, 2021 and for the nine months ending September 30, 2021.

General and Administration

General and Administration expenses increased by $944,083 to $1,528,100 for the three months ended September 30, 2021 in comparison to the same time period the previous year as the Company increased its headcount across the organization as it scales its business and incurred legal and professional fees to support its operations. For the nine months ended September 30, 2021, and 2020 general and administration expenses increased by $1,950,461 to $3,474,747.

Bad debt expense

On September 30, 2021, the Company recorded a total bad debt expense of $1,541,662 for the nine months ended September 30, 2021 due to a loan made to a related party, GG Corp, for operational purposes. There have been no additional loans made since August 24, 2021.

Technology and content

Technology and content expenses increased by $98,745 to $277,317 for the three months ended September 30, 2021 in comparison to the same time period the previous year from fees paid to odds providers but also as a result of the additional technology support required from an increase in user base and the launch of Rushlane. For the nine months ended September 30, 2021 and 2020, the increase was $429,242 to $911,982.

Miscellaneous expenses

Miscellaneous expenses increased by $120,256 to $270,748 for the three months ended September 30, 2021 in comparison to the same time period the previous year as a result of the material increase in revenue driving various ancillary costs. For the nine months ended September 30, 2021 and 2020, the increase was $306,850 to $634,347.

Finders warrants expense

On March 3, 2021, the Company issued 273,610 finders warrants in connection with the closing of its fourth round non-brokered private placement of 2,841,829 units at the price of USD $1.53. After satisfying the escrow release conditions on September 24, 2021, the Company issued 419,235 warrants to the agents at an exercise price of USD $2.61. The total warrants outstanding as of September 30, 2021 are valued at $570,270 based on a Black-Scholes valuation model.

CONSOLIDATED QUARTERLY RESULTS

The following is selected consolidated quarterly financial data which relates to the preceding eight quarters, inclusive of the quarter ended September 30, 2021:

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Rivalry Corp.

Management Discussion and Analysis

For the Three and Nine Months Ended September 30, 2021

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Quarterly revenue fluctuations are due to the seasonality of the esports calendar of events which can be irregular throughout the calendar year into the quarter ended September 30, and historically goes into the ‘off-season’ in early November through to early January. This ‘off-season’ period sees a material reduction in events which historically impacts user activity. In 2021, the International 10 Dota 2 Championship was moved from the quarter ended to September 30, 2021 to October 2021 which was a record Betting Handle month ($12.8M) for the Company.

LIQUIDITY AND CAPITAL RESOURCES

As at September 30, 2021, the Company had working capital of $42,357,371 (June 30, 2021 – $18,477,317) which includes the net proceeds released from escrow in connection with the Subscription Receipt Offering. The Company’s management continues to finance its cash needs through the issuance of Subordinate Voting Shares. As of September 30, 2021, $1,674,338 were held in trust as funds received from the exercise of warrants.

Debt

The Company had no debt as of September 30, 2021 nor has it entered debt agreements in the past. The only form of debt at the Company is intercompany debt among its subsidiaries.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

Operating Activities

Cash used in operating activities includes the impact of changes in accounts receivable and payables and also attributed to player balances. Player balances are composed of the net cash deposited, won or lost, and withdrawn by each user which is recorded as current liabilities on the balance sheet. Cash used in operating activities for the nine months ended September 30, 2021 decreased by $253,351. The difference can be attributed to fluctuations in prepaids and the net loss.

Investing Activities

The amounts impacting cash used in investing are from purchases of property and equipment.

Financing Activities

The cash provided by financing activities increased by $39,378,082 to $43,151,980. The increase was due to the financing rounds completed in the three months ended March 31, 2021 in the amount of $16,881,208 and the additional funds from the Subscription Receipt Offering completed on June 9, 2021 in the amount of $25,756,647.

OFF BALANCE SHEET ARRANGEMENTS

As of the date of this MD&A, the Company has not entered into any off-balance sheet arrangements.

RELATED PARTY DISCLOSURES

The remuneration of directors and key management personnel during the three and nine-month period ended September 30, 2021, included management fees of $286,414 and $582,381, respectively. The remuneration of directors and key management personnel during the three and nine-month period ended September 30, 2020, included management fees of $98,771 and $296,382, respectively. These transactions are in the normal course of operations and are measured at the exchange amount which is the amount of consideration established and agreed to by both parties.

As of and through the nine-month period ended September 30, 2021, the Company has loaned a related party, GG Corp, $2,605,070 for operating purposes. As of September 30, 2021, this entire amount has been fully reserved.

OUTSTANDING SHARE DATA

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

USE OF PROCEEDS

Consistent with disclosures made in the Prospectus, there have been no material variances in the estimated use of proceeds from the net proceeds of the subscription receipt issued June 9, 2021 and other available funds.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Right-of-Use Assets and Lease Liabilities

The Company assesses whether a contract is or contains a lease, at inception of a contract. Leases are recognized as a right-of-use asset and corresponding liability at the commencement date. The right-of-use asset is amortized over the estimated life of the asset. Each lease payment included in the lease liability is apportioned between the repayment of the liability and a finance cost. The finance cost is recognized in net finance costs in the consolidated statements of operations and comprehensive income (loss) over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Share-Based Payments

The estimation of share-based payments requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The model used by the Company is the Black-Scholes valuation model at the date of the grant. The Company makes estimates as to the volatility, the expected life, dividend yield and the time of exercise, as applicable. The expected volatility is based on the average volatility of share prices of similar companies over the period of the expected life of the applicable warrants and stock options. The expected life is based on historical data. These estimates may not necessarily be indicative of future actual patterns.

Loss per Share

Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of Subordinate Voting Shares outstanding during each of the years presented. Contingently issuable shares (including shares held in escrow) are not considered outstanding Subordinate Voting Shares and consequently are not included in the loss per share calculations.

Diluted loss per share is calculated by adjusting the weighted average number of Subordinate Voting Shares outstanding to assume conversion of all dilutive potential Subordinate Voting Shares. The Company has two categories of dilutive potential Subordinate Voting Shares: warrants and stock options. In order to determine diluted loss per share, it is assumed that any proceeds from the exercise of dilutive stock options would be used to repurchase Subordinate Voting Shares at the average market price during the period. The

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Rivalry Corp. Management Discussion and Analysis For the Three and Nine Months Ended September 30, 2021

diluted loss per share calculation excludes any potential conversion of options or warrants that would increase earnings per share or decrease loss per share.

SIGNIFICANT AND SUBSEQUENT EVENTS

All subsequent events requiring recognition as at September 30, 2021 have been incorporated into the consolidated financial statements.

On October 7, 2021, the Company issued 400,000 Subordinate Voting Shares from the exercise of 400,00 Series B warrants at the exercise price of $0.23 for gross proceeds of $90,000.

On October 7, 2021, the Company issued 133,975 Subordinate Voting Shares from the exercise of 133,975 compensation warrants at the exercise price of US $1.53 for gross proceeds of US $204,982.

On October 8, 2021, the Company issued 173,204 Subordinate Voting Shares from the exercise of 173,204 compensation warrants at the exercise price of US $1.53 for gross proceeds of US $265,002.

On October 18, 2021, the Company issued 222,222 Subordinate Voting Shares from the exercise of 222,222 Series B warrants at the exercise price of $0.23 for gross proceeds of $50,000.

On October 22, 2021, the Company issued 88,889 Subordinate Voting Shares from the exercise of 88,889 Series B warrants at the exercise price of $0.23 for gross proceeds of $20,000.

On October 28, 2021, the Company submitted an application to the Alcohol and Gaming Commission of Ontario (the “ AGCO ”) to become a fully registered operator of internet gaming and sports betting in Ontario, Canada.

ADDITIONAL INFORMATION

Additional information relating to the Company is available on SEDAR at www.sedar.com.

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