☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 6, 2020, 35,110,843~~May 19, 2021, 39,162,811 shares of common stock, par value $0.0001 per share, were issued and outstanding.

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

For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020

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

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

Allied Esports Entertainment Inc., (“AESE” or “the Company”), operates a public esports and ~~formerly known as Black Ridge Acquisition Corp, or “BRAC”) was incorporated in Delaware on May 9, 2017 as a blank check~~entertainment company, ~~for~~consisting of the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”).

Allied Esports ~~Media, Inc. (“AEM”), a Delaware corporation, was formed in November 2018 to act as a holding company for~~and World Poker Tour businesses. Allied Esports International Inc. (“Allied Esports”) and immediately prior to the close of the Merger (see below) to also include Noble Link Global Limited (“Noble Link”). Allied Esports, together with its subsidiaries described below, owns and operates ~~the esports-related businesses of AESE. Noble Link (prior to the AEM Merger) and~~through its wholly owned subsidiaries Peerless Media Limited, Club Services, Inc. and WPT Enterprises, Inc. operate the poker-related business of AESE and are collectively referred to herein as “World Poker Tour” or “WPT”. Prior to the Merger, as described below, Noble Link and Allied Esports ~~were subsidiaries of Ourgame~~ International, ~~Holdings Limited (the “Former Parent”).~~

~~On December 19, 2018, BRAC, Noble Link and AEM executed an Agreement and Plan of Reorganization (as amended from time to time, the “Merger Agreement”). On August 9, 2019 (the “Closing Date”~~Inc., (“AEII”), Noble Link was merged with and into AEM, with AEM being the surviving entity, which was accounted for as a common control merger (the “AEM Merger”). Further, on August 9, 2019, a subsidiary of AESE merged with AEM pursuant to the Merger Agreement with AEM being the surviving entity (the “Merger”). The Merger was accounted for as a reverse recapitalization, and AEM is deemed to be the accounting acquirer. Consequently, the assets and liabilities and the historical operations that are reflected in these condensed consolidated financial statements prior to the Merger are those of Allied Esports and WPT. The preferred stock, common stock, additional paid in capital and earnings per share amounts in these condensed consolidated financial statements for the period prior to the Merger have been restated to reflect the recapitalization in accordance with the shares issued to the Former Parent as a result of the Merger. References herein to the “Company” are to the combination of AEM and WPT during the period prior to the AEM Merger and are to AESE and its subsidiaries after the Merger.

~~Allied Esports operates directly and through its wholly-owned subsidiaries~~ Esports Arena Las Vegas, LLC (“ESALV”) and ~~Allied Esports~~ELC Gaming ~~GmbH. Allied Esports~~GMBH (“ELC Gaming”). AEII operates global competitive esports properties designed to connect players and fans via a network of connected arenas. ESALV operates a flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada. ~~Allied Esports GmbH~~ELC Gaming operates a mobile esports truck that serves as both a battleground and content generation hub and also operates a studio for recording and streaming gaming events.

AESE’s wholly owned subsidiaries, Peerless Media Limited, Club Services, Inc. (“CSI”) and WPT Enterprises, Inc., operate the poker-related business of AESE and are collectively referred to herein as “World Poker Tour” or “WPT”. The World Poker Tour is an internationally televised gaming and entertainment company ~~with brand presence in land-based tournaments, television, online and mobile applications. WPT~~that has been involved in the sport of poker since 2002 and created a television show based on a series of high-stakes poker tournaments. ~~WPT has broadcasted globally in more than 150 countries~~

On January 19, 2021, the Company entered into a stock purchase agreement (the “SPA”) for the sale of 100% of the capital stock of its wholly-owned subsidiary, CSI. CSI owns 100% of each of the legal entities which comprise the World Poker Tour.

As the result of the Company’s entry into the SPA, the Consolidated Balance Sheets as of March 31, 2021 and ~~territories~~December 31, 2020, the Consolidated Statements of Operations for the three months ended March 31, 2021 and its shows are sponsored by established brands in many areas, including watches, crystal, playing cards and online social poker operators. WPT also operates ClubWPT.com, a subscription-based site that offers its members inside access to the WPT content database, as well as sweepstakes-based poker product that allows members to play for real cash and prizes in 43 states and territories across the United States Australia, Canada, France2020, and the ~~United Kingdom, with no purchase necessary. WPT also participates in strategic brand licensing, partnership,~~Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and ~~sponsorship opportunities.~~2020, present the results and accounts of World Poker Tour as discontinued operations and the related assets and liabilities are presented as held for sale. See Note 4 – Discontinued Operations.

As of ~~September 30, 2020,~~March 31, 2021, the Company had cash of ~~approximately $5.8~~$10.5 million ~~(excluding~~(not including approximately $5.0 million of restricted ~~cash)~~cash and approximately $2.9 million of cash held for sale and included in current assets of discontinued operations) and a working capital deficit (defined as total current assets of continuing operations less total current liabilities of continuing operations) of approximately ~~$53 thousand.~~$13.6 million. For the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company incurred net losses from continuing operations of approximately ~~$26.2~~$5.0 million and ~~$10.9~~$9.1 million, respectively, and ~~used~~has cash inflows provided by (used in) continuing operations of approximately ~~$6.5~~$0.2 million and ~~$7.8~~$(0.7) million, respectively.

As of ~~September 30, 2020,~~March 31, 2021, the Company ~~had~~has convertible debt and bridge note obligations in the aggregate gross principal amount of ~~$2.0~~$3.4 million (see Note 6 - Convertible Debt and Note 7 – Bridge Note Payable) which ~~matures~~mature on February 23, 2022 ~~and convertible debt in~~but will be paid upon the ~~gross principal amount of $5.7 million which is payable in 12 monthly installments through September 1, 2021, and for which certain payments can be accelerated at the option~~closing of the ~~lender~~sale of WPT (see Note 74 – ~~Convertible Debt and Convertible Debt, Related Party)~~Discontinued Operations). As of September 30, 2020, the Company also has a Bridge Note outstanding in the amount of approximately $1.4 million which matures on February 23, 2022 (see Note 8 – Bridge Note Payable) and loans payable in the aggregate amount of $1.6 million, which are due in monthly installments beginning November 2020 through April 2022 (see Note 9 – Loans Payable). During the period from October 1, 2020 through November 2, 2020, the Company issued an aggregate 3,120,869 shares of its common stock in satisfaction of $2.6 million and $0.4 million of principal and interest, respectively, owed on the convertible debt.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States. As a global entertainment company that hosts numerous live events with spectators and participants in destination cities, the outbreak has caused people to avoid traveling to and attending these events. Allied Esports’ ~~and WPT’s businesses have~~has cancelled or postponed live events, and before the reopening of Allied Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada on June 25, 2020 ~~these businesses were~~the business was operating online only. The arena is currently running under a modified schedule and limited capacity (up to ~~65%~~80% capacity depending on the event) for daily play and weekly ~~tournaments, and the WPT business continues to operate online only, other than a recent live event in Tokyo, Japan.~~tournaments. The Company is continuing to monitor the outbreak of COVID-19 and the related business and travel restrictions, and changes to behavior intended to reduce its spread, and the related impact on the Company’s operations, financial position and cash flows, as well as the impact on its employees. Due to the rapid development and fluidity of this situation, the magnitude and duration of the pandemic and its impact on the Company’s future operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on operations and liquidity of the Company, at the time of issuance, the extent of the impact cannot be determined.

The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s continuation is dependent upon attaining and maintaining profitable operations and, until that time, raising additional capital as needed, but there can be no assurance that it will be able to close on sufficient financing. The Company’s ability to generate positive cash flow from operations is dependent upon generating sufficient revenues. To date, the Company’s operations have been funded ~~by the Former Parent, as well as~~ through the issuance of ~~convertible~~ debt and equity securities, by its former parent, and with cash acquired in the ~~Merger.~~merger with Black Ridge Acquisition Corp on August 9, 2019. The Company expects to receive cash in connection with the sale of the WPT business, which is expected to close late in the second quarter of 2021 or early in the third quarter of 2021 (see Note 4 – Discontinued Operations). The Company cannot provide any assurances that it will be able to secure additional funding, either from equity offerings or debt financings, on terms acceptable to the Company, if at ~~all.~~all, or that the sale of the WPT business will close as planned. If the Company is unable to obtain the requisite amount of financing needed to fund its planned operations, including the repayment of convertible debt, it would have a material adverse effect on its business and ability to continue as a going concern, and it may have to explore the sale of, or curtail or even cease, certain operations.

There ~~are~~have been no material changes ~~from~~to the Company’s significant accounting policies as set forth in ~~Note 3 – Significant Accounting Policies of~~ the Company’s ~~accompanying notes to the~~ audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, except ~~for the following accounting policies and required disclosures.~~ as disclosed in this note.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual consolidated financial statements. For additional information, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements of and notes thereto included in the Company’s ~~amended annual report~~Annual Report on Form ~~10-K/A~~10-K filed with the Securities and Exchange Commission (“SEC”) on ~~March 17, 2020.~~ April 13, 2021.

In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of ~~September 30, 2020~~March 31, 2021, and for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the operating results for the full year ending December 31, ~~2020~~2021 or any other period. These unaudited condensed consolidated financial statements have been derived from the accounting records of AESE, WPT and Allied Esports and should be read in conjunction with the accompanying notes thereto.

Basic loss per common share is computed by dividing net loss attributable to ~~AESE common stockholders~~the Company by the weighted average number of common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, plus the impact of common shares, if dilutive, resulting from the exercise of outstanding stock options and warrants and the conversion of convertible instruments.

The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

~~The Company recognizes revenue primarily from~~Entities must consider whether to classify contracts that may be settled in its own stock, such as warrants, as equity of the ~~following sources:~~entity or as an asset or liability. If an event that is not within the entity’s control could require net cash settlement, then the contract should be classified as an asset or a liability rather than as equity.

~~In-person revenue~~As of March 31, 2021 and December 31, 2020, the fair value of our warrant liabilities totaled $39,300 and $3,000, respectively, which are included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet.

Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

This hierarchy requires management to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The carrying amounts of the Company’s financial instruments, such as accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these instruments. The Company’s convertible debt, bridge notes and loans payable approximates fair value due to its short-term nature and market rate of interest.

The sponsor warrants are carried at fair value as of March 31, 2021 and December 31, 2020. The sponsor warrants are valued using level 3 inputs. The fair value of the sponsor warrants is estimated using a modified version of the Black-Scholes option pricing formula for European calls. Specifically, we assumed a term for the sponsor warrants equal to the contractual term from the August 9, 2019 business combination date. Significant level 3 inputs used to calculate the fair value of the sponsor warrants include the share price on the valuation date, expected volatility, expected term and the risk-free interest rate.

The key inputs into the Black-Scholes model at the relevant measurement dates were as follows:

To determine the proper revenue recognition method, the Company evaluates each of its contractual arrangements to identify its performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the Company’s contracts have a single performance obligation because the promise to transfer the individual good or service is not separately identifiable from other promises within the contract and is therefore not distinct. Some of the Company’s contracts have multiple performance obligations, primarily related to the provision of multiple goods or services. For contracts with more than one performance obligation, the Company allocates the total transaction price in an amount based on the estimated relative standalone selling prices underlying each performance obligation.

Revenue recognized from continuing operations during the three months ended March 31, 2021 and 2020 was from in-person revenue sources. The Company’s in-person revenue is comprised of event revenue, sponsorship revenue, merchandising revenue and other revenue. Event revenue is generated through ~~World Poker Tour events – TV, non-TV, and DeepStacks Entertainment, LLC and DeepStacks Poker Tour, LLC (collectively “DeepStacks”) events – held at the Company’s partner casinos as well as~~ Allied Esports events held at the Company’s esports properties. Event revenues recognized from the rental of the Allied Esports arena and gaming trucks are recognized at athe point in time when the event occurs. In-person revenue also includes revenue from ticket sales, admission fees and food and beverage sales for events held at the Company’s esports properties. Ticket revenue is recognized at the completion of the applicable event. Point of sale revenues, such as food and beverage, gaming and merchandising revenues, are recognized when control of the related goods are transferred to the customer.

The Company also generates sponsorship revenues for naming rights for, and rental of, the Company’s arena and gaming trucks. Sponsorship revenues from naming rights of the Company’s Las Vegas esports arena and from sponsorship arrangements are recognized on a straight-line basis over the contractual term of the agreement. The Company records deferred revenue to the extent that payment has been received for services that have yet to be performed.

~~In-person~~The following table summarizes our revenue ~~was comprised~~recognized in our condensed consolidated statements of ~~the following for the three and nine months ended September 30, 2020 and 2019:~~operations:

The Company’s multiplatform content revenue is comprised of distribution revenue, sponsorship revenue, music royalty revenue, online advertising revenue and content revenue. Distribution revenue is generated primarily through the distribution of content from World Poker Tour’s library. World Poker Tour provides video content to global television networks, who then have the right to air the content and place advertisements on the content during the related license period. Revenue from the distribution of video content to television networks is received pursuant to the contract payment terms and is recognized at the point in time that advertisements are aired on the WPT content. Occasionally, WPT will bundle third-party content with its own content in a distribution arrangement and will share the revenue with the third party; however, the revenues related to third party content are de minimis. The Company recognizes distribution revenue pursuant to the terms of each individual contract with the customer and records deferred revenue to the extent the Company has received a payment for services that have yet to be performed or products that have yet to be delivered.

The Company also distributes video content to online channels. Both the global television networks and the online channels place ads within the WPT content and any advertising revenue earned by the global TV network or online channel is shared with WPT. The Company recognizes online advertising revenue at the point in time when the advertisements are placed in the video content.

	For the Three Months Ended
	March 31,
	2021		2020

Revenues Recognized at a Point in Time:
Event revenue	$	110,441	$	223,447
Food and beverage revenue		70,704		232,299
Ticket and gaming revenue		68,644		138,687
Sponsorship revenue		-		2,502
Merchandising revenue		6,945		18,049
Other revenue		-		104
Total Revenues Recognized at a Point in Time		256,734		615,088

Revenues Recognized Over a Period of Time:
Sponsorship revenue		244,294		442,653
Total Revenues Recognized Over a Period of Time		244,294		442,653
Total Revenues	$	501,028	$	1,057,741

Sponsorship revenue is generated through the sponsorship of the Company’s TV content, live and online events and online streams. Online advertising revenue is generated from third-party advertisements placed on the Company’s website. Music royalty revenue is generated when the Company’s music is played in the Company’s TV series, both on TV networks and online. The Company recognizes sponsorship revenue pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract. The Company records deferred revenue to the extent the Company has received a payment for services that have yet to be performed or products that have yet to be delivered.

~~Music royalty revenue is recognized at the point in time when the music is played.~~

~~Multiplatform content revenue was comprised of the following for the three and nine months ended September 30, 2020 and 2019:~~

The Company’s interactive revenue is primarily comprised of subscription revenue, licensing, social gaming, and virtual product revenue. Subscription revenue is generated through fixed rate (monthly, quarterly, and annual) subscriptions which offer the opportunity for subscribers to play unlimited poker and access benefits not available to non-subscribers.

The Company recognizes subscription revenue on a straight-line basis and records deferred revenue to the extent the Company receives payments for services that have yet to be provided. Social gaming revenue arises from the sale of online tokens and other online purchases on the Company’s social gaming website and is recognized at the point the product is delivered. Virtual product revenue is generated from the licensing of the Company’s various brands to be used on the customers’ virtual product and social gaming platforms and is recognized over the term of the contractual agreement. The Company generates licensing revenue by licensing the right to use the Company’s brands on products to third parties. Licensing revenue is recognized pursuant to the terms of each individual contract with the customer and is recognized over the term of the contractual agreement. Deferred revenue is recorded to the extent the Company has received a payment for products that have yet to be delivered.

~~Interactive revenue was comprised of the following for the three and nine months ended September 30, 2020 and 2019:~~

~~The following table summarizes our revenue recognized under ASC 606 in our condensed consolidated statements of operations~~

The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

As of September 30, 2020, there remained approximately $622,000 of contract liabilities which were included within deferred revenue on the consolidated balance sheet as of December 31, 2019, and for which performance obligations had not yet been satisfied as of September 30, 2020. The Company expects to satisfy its remaining performance obligations within the next twelve months.Concentration Risks

~~Advertising Costs~~Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses in such accounts, periodically evaluates the creditworthiness of the financial institutions and has determined the credit exposure to be negligible.

~~The Company expenses advertising and marketing costs as they are incurred. Marketing and advertising expense was $17,343 and $133,103 during~~During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, 10% and ~~$59,698 and $245,259 during~~11%, respectively, of the ~~three and nine months ended September 30, 2019, respectively.~~Company’s revenues from continuing operations were from customers in foreign countries.

During the three months ended March 31, 2021, the Company’s 2 largest customers accounted for 31% and 16% of the Company’s consolidated revenues from continuing operations. During the three months ended March 31, 2020, the Company’s largest customer accounted for 37% of the Company’s consolidated revenues from continuing operations.

The Company’s reporting currency is the United States Dollar. The functional currencies of the Company’s operating subsidiaries are their local currencies (United States Dollar and Euro). Euro-denominated assets and liabilities are translated into the United States Dollar using the exchange rate at the balance sheet date (1.1727 and 1.2264, at March 31, 2021 and December 31, 2020, respectively), and revenue and expense accounts are translated using the weighted average exchange rate in effect for the ~~period.~~period (1.2053 and 1.1033 for the three months ended March 31, 2021 and 2020, respectively). Resulting translation adjustments are made directly to accumulated other comprehensive (loss) income. ~~Gains (losses) arising from exchange rate fluctuations on transactions denominated in a currency other than~~

The Company evaluates events that have occurred after the ~~reporting currency were $5,124 and $3,868 during~~balance sheet date but before the ~~three and nine months ended September 30, 2020, respectively, and $(3,651) and $(3,563) during~~financial statements are issued. Based upon the ~~three and nine months ended September 30, 2019, respectively, and are~~evaluation, the Company did not identify any recognized ~~in operating results~~or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.

The assets and liabilities of ~~operations. The Euro to United States Dollar exchange rate was $1.1724 and $1.1215 at September 30, 2020~~WPT are classified as “held for sale” as of March 31, 2021 and December 31, ~~2019, respectively.~~2020 and are reflected in the accompanying condensed consolidated balance sheets as “Current assets held for sale” and “Current liabilities held for sale.” The ~~Company engages~~results of operations of WPT are included in ~~foreign currency denominated transactions with customers~~“Income (loss) from discontinued operations, net of tax provision” in the accompanying condensed consolidated statements of operations and ~~suppliers, as well as between subsidiaries with different functional currencies.~~ comprehensive loss. For comparative purposes, all prior periods presented have been reclassified to reflect the classifications on a consistent basis.

Certain prior ~~period~~year balances have been reclassified in order to conform to ~~the~~ current year presentation. These reclassifications have no effect on previously reported results of operations or loss per share.

OnIn March ~~27, 2020, President Trump signed into law~~2019, the ~~Coronavirus Aid, Relief~~FASB issued ASU 2019-02, which aligns the accounting for production costs of episodic television series with the accounting for production costs of films. In addition, ASU 2019-02 modifies certain aspects of the capitalization, impairment, presentation and Economic Security Act (“CARES Act”). The CARES Act, amongst other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Pursuant todisclosure requirements in Accounting Standards Codification ~~Topic~~ (“ASC”) 926-20 and the impairment, presentation and disclosure requirements in ASC ~~740”), the Company recognizes the tax effects of new tax legislation upon enactment. Accordingly, the CARES Act~~920-350. This ASU must be adopted on a prospective basis and is effective beginning in the quarter ended March 31, 2020. The Company does not believe that the new tax provisions outlined in the CARES Act will have a material impact on the Company’s consolidated financial statements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This amendment will be effective for private companies and emerging growth companies for fiscal yearsannual periods beginning after December 15, 2020, ~~and~~including interim periods within ~~fiscal~~those years, beginning after December 15, 2021. The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” in July 2018 (“ASU 2018-10” and “ASU 2018-11”), and ASU No. 2018-20 “Leases (Topic 842) - Narrow Scope Improvements for Lessors” in December 2018 (“ASU 2018-20”). ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method ofwith early adoption under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance simplifies the accounting for goodwill impairment by eliminating Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value.permitted. This standard was adopted on January 1, ~~2020~~2021 and did not have a material impact on the Company’s condensed consolidated financial statements or disclosures.

In ~~July 2018,~~December 2019, the FASB issued ASU ~~No. 2018-09, “Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including~~2019-12, “Income Taxes (Topic 740): Simplifying the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation -Accounting for Income Taxes, ~~(Topic 718-740), Business Combinations – Income Taxes (Topic 805-740), Derivatives~~” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and ~~Hedging – Overall (Topic 815-10),~~also clarifies and ~~Fair Value Measurement – Overall (Topic 820-10).~~amends existing guidance to improve consistent application. The ~~majority of the amendments in~~Company adopted ASU ~~2018-09 will be~~2019-12 effective ~~in annual periods beginning after December 15, 2019. This standard was adopted on~~for January 1, ~~2020~~2021 and its adoption did not have a material impact on the Company’s condensed consolidated financial statements orand related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. This standard was adopted on January 1, 2020 and did not have a material impact on the Company’s consolidated financial statements or disclosures.Transaction

During the first quarter of 2021, AESE entered into the SPA to sell the equity interests of its subsidiaries that own and operate its WPT business (the “Sale Transaction”), subject to shareholder and regulatory approvals, for a total purchase price of $105 million. This base purchase price will be adjusted to reflect the amount of CSI’s cash, indebtedness and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. Prior to December 31, 2020, management committed to a plan to sell the WPT business. Accordingly, the WPT business has been recast as discontinued operations, and the assets and liabilities of WPT are classified as held for sale. See Note 1 – Business Organization and Nature of Operations.

In ~~February 2020,~~reaching its decision to enter into the ~~FASB issued ASU No. 2020-02, Financial Instruments - Credit Losses (Topic 326)~~SPA, the Company’s Board of Directors, in consultation with management as well as its financial and ~~Leases (Topic 842) – Amendments~~legal advisors, considered a number of factors, including the risks and challenges facing the WPT business in the future as compared to ~~SEC Paragraphs Pursuant~~the opportunities available to ~~SEC Staff Accounting Bulletin No. 119~~the WPT business in the future, and ~~Update to SEC Section on Effective Date (“ASU 2020-02”) which provides clarifying guidance~~the availability of strategic alternatives. After careful consideration, the Board of Directors unanimously approved the Stock Purchase Agreement and ~~minor updates to ASU No. 2016-13 – Financial Instruments – Credit Loss (Topic 326) (“ASU 2016-13”) and related to ASU No. 2016-02 - Leases (Topic 842). ASU 2020-02 amends~~determined that the ~~effective date~~Sale Transaction is in the best interests of ~~ASU 2016-13, such that ASU 2016-13~~the Company and its ~~amendments will be effective~~stockholders, and that the Sale Transaction and the Stock Purchase Agreement reflect the highest value for the ~~Company~~WPT business reasonably attainable for ~~interim and annual periods in fiscal years beginning after December 15, 2022. The adoption of ASU 2016-13 is not expected to have a material impact on~~ the Company’s ~~consolidated financial statements or disclosures.~~stockholders.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this ASU improves disclosure requirements for convertible instruments and earnings-per-share guidance. The ASU also revises the derivative scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The amendments in this update are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption will be permitted, but no earlier than for fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements.

~~Note 4 – Other Assets~~ Notes to Condensed Consolidated Financial Statements

~~The Company’s other assets consist~~WPT is an internationally televised gaming and entertainment company with brand presence in land-based tournaments, television, online and mobile applications. WPT has been involved in the sport of poker since 2002 and created a television show based on a series of high-stakes poker tournaments. WPT has broadcasted globally in more than 150 countries and territories and its shows are sponsored by established brands in many areas, including watches, crystal, playing cards and online social poker operators. WPT also operates ClubWPT.com, a subscription-based site that offers its members inside access to the ~~following:~~WPT content database, as well as sweepstakes-based poker product that allows members to play for real cash and prizes in 43 states and territories across the United States, Australia, Canada, France and the United Kingdom. WPT also participates in strategic brand licensing, partnership, and sponsorship opportunities.

AsResults of September 30, 2020, the Company owns a 25% non-voting membership interest in Esports Arena, LLC (“ESA”) and ESA’s wholly owned subsidiary. The investment is accounted for as a cost method investment since the Company does not have the ability to exercise significant influence over the operating and financial policies of ESA. Discontinued Operations

During January 2019, the Company contributed $1,238,631 to ESA, in order to fulfill the remainder of its funding commitment to ESA. The Company recognized an immediate impairment of $600,000 related to this funding. During June 2020, the Company recorded an additional impairment charge in the amount of $1,138,631, related to its investment in ESA. Net income from discontinued operations details are as follows:

~~The Company paid $3,500,000~~Other income for the three months ended March 31, 2021 consists primarily of income recognized upon the forgiveness of a loan received pursuant to ~~TV Azteca, S.A.B. DE C.V., a Grupo Salinas company~~the Paycheck Protection Program (“~~TV Azteca”~~PPP”) under the CARES Act which was included in ~~August 2019, and on March 4, 2020~~Loans Payable in the ~~Company paid an additional $1,500,000 to TV Azteca in connection with a Strategic Investment Agreement with TV Azteca in order to expand the~~ table below at December 31, 2020.

Allied Esports ~~brand into Mexico. See Note 11 – Commitments~~Entertainment, Inc. and ~~Contingencies, Investment Agreements for additional details.~~Subsidiaries

Assets and liabilities held for sale are classified as current because the Sale Transaction is expected to close during 2021. The details are as follows:

~~Production costs of $724,762~~Allied Esports Entertainment, Inc. and $1,457,602 for the three and nine months ended September 30, 2020 and $605,077 and $2,225,442 for the three and nine months ended September 30, 2019, respectively, were expensed and are reflected in multiplatform content costs in the condensed consolidated statements of operations and comprehensive loss.Subsidiaries

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s convertible debt consisted of the following:

Convertible ~~Bridge Notes~~Debt and Convertible ~~Bridge Notes,~~Debt, Related Party

~~Pursuant to an Amendment and Acknowledgement Agreement dated August 5, 2019, the convertible~~Convertible bridge notes (the ~~“Bridge~~“Convertible Bridge Notes”) are secured by the assets of ~~the Company~~WPT and ~~originally matured~~mature on ~~August~~February 23, ~~2020~~2022 (the “Maturity Date”). ~~The Bridge Notes are convertible into shares of AESE common stock at any time at a conversion price of $8.50 per share.~~ Further, the minimum interest to be paid under each Convertible Bridge Note shall be the greater of (a) 18 months of accrued interest at 12% per annum; or (b) the sum of the actual interest accrued plus 6 months of additional interest at 12% per annum. In the event of default, the Convertible Bridge Notes shall become immediately due and payable upon the written notice of the holder. The Company intends to repay the Convertible Bridge Notes from the proceeds of the Sale Transaction.

The Convertible Bridge Notes are convertible into shares of AESE common stock at any time at a conversion price of $8.50 per share. If any holder elects to convert their Convertible Bridge Note into common stock, they would also be entitled to receive additional shares of common stock (“Contingent Consideration Shares”) equal to the product of (i) 3,846,153 shares, multiplied by (ii) that holder’s investment amount, divided by (iii) $100,000,000, if at any time within five years after the August 9, 2019 closing date, the last exchange-reported sale price of common stock trades at or above $13.00 for thirty (30) consecutive calendar days.

On April 29, 2020, the Company and a holder of a $5,000,000 Bridge Note (the “Noteholder”), entered into a Secured Convertible Note Modification and Conversion Agreement (the “Amendment 1”), pursuant to which the Noteholder converted $2,000,000 of the principal amount of its $5,000,000 Bridge Note into 1,250,000 shares of the Company’s common stock at a reduced conversion price of $1.60 per share. On May 22, 2020, the Company and the Noteholder entered into a Secured Convertible Note Modification and Conversion Agreement No. 2 (“Amendment 2”), pursuant to which the remaining principal amount of the $5,000,000 Bridge Note ($3,000,000) was converted into 2,142,857 shares of the Company’s common stock at a reduced conversion price of $1.40 per share. Further, pursuant to Amendment 1 and Amendment 2, interest on the $5,000,000 principal owed to the Noteholder prior to conversion will continue to accrue through the maturity date as if the principal amount had not been converted. Minimum accrued interest payable pursuant to Amendment 2 in the amount of $1,421,096 (the “Accrued Interest”) is payable on or before the maturity date. No Contingent Consideration Shares were issued in connection with the conversion since the requirements for issuance were not met.

On June 8, 2020, the Company and the Noteholder entered into Secured Convertible Note Modification Agreement No. 3 (“Amendment 3” and together with Amendment 1 and Amendment 2, the “Amendments”). Pursuant to Amendment 3, the Accrued Interest is converted into principal under the Noteholder’s Bridge Note (the “Amended Bridge Note”). See Note 8 - Bridge Note Payable for additional details.

The Company recorded a conversion inducement charge of $5,247,531 as a result of the Amendments, consisting of $4,998,845 representing the value of common stock issued upon conversion in excess of the common stock issuable under the original terms of the $5,000,000 Bridge Note, and $248,686, representing the excess of minimum interest payable pursuant to Amendment 3 over the interest payable pursuant to the original terms of the $5,000,000 Bridge Note.

On June 8, 2020, the Company paid $8,670,431 in satisfaction of principal in the amount of $7,000,000 and interest in the amount of $1,670,431 owed in connection with other Bridge Notes. Further, on June 8, 2020, the Company and the holders (the “Extending Bridge Noteholders”) of the two remaining Bridge Notes outstanding in the aggregate principal amount of $2,000,000 (together, the “Extended Bridge Notes”), of which principal in the amount of $1,000,000 is owed to the spouse of the Company’s Chief Executive Officer and Director, entered into a Secured Convertible Note Modification (Extension) Agreement with the Company (together, the “Bridge Note Extensions”) pursuant to which, among other things, the Extending Bridge Noteholders agreed to extend the maturity date of their respective Extended Bridge Note until February 23, 2022. Interest on the Extended Bridge Notes will continue to accrue at 12.0% per year and may be prepaid without penalty. The remaining provisions of the Extended Bridge Notes remain unchanged and in effect.

On August 13, 2020 the Company paid in cash an aggregate of $425,096 related to interest payable on the Extended Bridge Notes, such that the balance of principal and interest outstanding under the Extended Bridge Notes as of September 30, 2020 is $2,000,000 and $24,760, respectively.

The Company recorded interest expense of ~~$65,836~~$59,138 related to the Convertible Bridge Notes during the three months ended March 31, 2021 and ~~$1,355,549~~recorded interest expense of $682,940 (including amortization of debt discount of ~~$5,386 and $166,385), respectively, related to the Bridge Notes and the Extended Bridge Notes~~$64,193) during the three ~~and nine~~ months ended September 30, 2020, and recorded interest expense of $447,847, and $505,710 (including amortization of debt discount of $36,414 and $36,414), respectively, during the three and nine months ended September 30, 2019.March 31, 2020. As of ~~September 30, 2020,~~March 31, 2021, all debt discount on the Convertible Bridge Notes ~~and Extended Bridge Notes~~ has been fully amortized.

On June 8, 2020, pursuant to a securities purchase agreement (the “Purchase Agreement”) between the Company and certain accredited investors (the “Investors”), the Company issued two senior secured convertible notes (the “Senior Notes”) with an aggregate principal balance of $9,600,000 and immediately vested five-year warrants to purchase an aggregate 1,454,546 shares of common stock at an exercise price of $4.125 per share for net cash proceeds of $9,000,000. The Senior Notes are secured by the assets of the Company, bear interest at 8% per annum and mature on June 8, 2022, with an aggregate of $1,536,000 of interest guaranteed to be paid to the Investors. The Purchase Agreement contains customary representations and warranties, and the Company agreed it would not take on additional debt from third parties without the Investors’ written approval, subject to certain exceptions for ordinary course trade debt. The Company also agreed to use 35% of the proceeds from future financings in excess of $3 million (or $5 million if approved by the Investors) to pay down the outstanding balance on the Loan. The Company reserves its rights under the Purchase Agreement to consummate, subject to certain exceptions, a debtor or equity offering of up to $5 million in the future.

The Senior Notes and two years of interest are payable in equal monthly installments (the “Monthly Redemption Payment”), commencing on August 7, 2020. Each Monthly Redemption Payment may be paid at the Company’s option in cash, or in shares of common stock (the “Stock Settlement Option”) at a price equal to 87% of the lowest daily volume weighted average price in the 10 days prior to the scheduled payment date (the “Stock Settlement Price”), provided that (i) the Company gives thirty days written irrevocable notice prior to the Monthly Redemption Payment (the “Monthly Redemption Notice”), (ii) all amounts due have been paid timely, (iii) there are sufficient number of authorized shares available to be issued, (iv) the Investors do not possess any material non-public information at the time the Company issues the common stock, and (v) the Company’s shares have met certain minimum volume and closing price thresholds. The Stock Settlement Price cannot be lower than $0.734 per share. Monthly Redemption Payments paid in cash require the payment of a 10% premium in addition to the monthly installment.

Each Investor may accelerate up to four Monthly Redemption Payments in any calendar month and may elect to have such accelerated Monthly Redemption Payments paid in shares of the Company’s common stock at the Stock Settlement Price of the contemporaneous or immediately prior Monthly Redemption Payment, instead of in cash.

The Senior Notes are convertible at each Investor’s option, in whole or in part, and from time to time, into shares of the Company’s common stock (the “Holder Conversion Option” and together, with the Stock Settlement Option, the “ECOs”) at $3.30 per share (subject to adjustment to convert at the same price as any subsequent issuances of Company common stock at a lower issuance price, subject to certain exceptions) (the “Holder Conversion Price”); provided, however, that the parties may not affect any such conversion that would result in an Investor (together with its affiliates) owning in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the conversion (the “Beneficial Ownership Limitation”). Each Investor, upon notice to the Company, may elect to increase or decrease its Beneficial Ownership Limitation, provided that the Beneficial Ownership Limitation may not exceed 9.99%. The Company determined that the ECOs contained a beneficial conversion feature (“BCF”) in the amount of $523,636, which was credited to additional paid in capital.

Upon the issuance of the Senior Notes, the Company recorded a debt discount at issuance in the aggregate amount $6,296,555, consisting of (i) the $600,000 difference between the aggregate principal amount of the Senior Notes and the cash proceeds received, (ii) the relative fair value of the warrants of $1,205,959 (which were credited to additional paid in capital), (iii) two years’ guaranteed interest of $1,536,000 (credited to interest payable), (iv) the BCF of $523,636 (credited to additional paid in capital), (v) non-cash interest in the amount of $1,664,000, representing the difference between the anticipated issuance date fair value of common stock issued and the Stock Settlement Price, for Monthly Redemption Payments (credited to interest payable), and (vi) financing costs of $766,961. The debt discount is being amortized using the effective interest method over the term of the Senior Notes. During the three and nine months ended September 30, 2020, the Company recorded amortization of debt discount of $1,219,323 and $1,472,766, respectively, related to the Senior Notes, and recorded an extinguishment loss of $1,733,768 and $1,733,768, respectively, in connection with the extinguishment of Senior Notes resulting from accelerated Monthly Redemption Payments. Debt discount in the amount of $3,090,021 remains to be amortized as of September 30, 2020.

During the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the Company issued ~~3,161,970~~529,383 shares of its common stock, as Monthly Redemption Payments in satisfaction of aggregate amount of ~~$3,927,273~~$581,818 of principal and ~~$628,364~~$93,091 of interest payable owed on the Senior Notes as well as $146,958 of ~~which 2,472,302~~non-cash interest accrued on the Senior Notes. Of the 529,383 shares issued, 132,346 shares were issued in connection with accelerated Monthly Redemption Payments in the aggregate amount of ~~$3,543,273~~$168,727 (representing ~~$3,054,546~~$145,454 and ~~$488,727~~$23,273 of principal and interest, respectively). The Company recorded additional non-cash interest expense in the amount of ~~$183,373~~$46,110 in connection with Monthly Redemption Payments during the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021. As of ~~September 30, 2020, gross~~March 31, 2021 all principal and ~~guaranteed~~ interest ~~of $5,672,727 and $907,636, respectively, remains outstanding on~~owed in connection with the Senior Notes ~~and is payable~~has been repaid in ~~12 monthly installments through September 1, 2021.~~full.

The Bridge Note Payable consists of the Amended Bridge Note (see Note 7 – Convertible Debt and Convertible Debt, Related Party, Convertible Bridge Notes and Convertible Bridge Notes, Related Party). The Amended Bridge Notebridge note payable (the “Bridge Note”) matures on February 23, ~~2022. Interest on the Amended Bridge Note began to accrue on August 23, 2020~~2022 and bears interest at 12% per annum (increasing to 15% per annum upon an event of default as defined in the ~~Amended~~ Bridge ~~Note)~~Note agreement). Principal ($1,421,096) and interest owed under the ~~Amended~~ Bridge Note is not convertible into shares of the Company’s common stock. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company recorded interest expense of ~~$17,742~~$42,020 and ~~$17,742,~~$0, respectively, in connection with the ~~Amended~~ Bridge Note. The Company intends to repay the Bridge Note from the proceeds of the Sale Transaction.

During May 2020, the Company’s ~~subsidiaries~~continuing operations received aggregate cash proceeds of ~~$1,592,429~~$907,129 pursuant to ~~three~~two loans (the “PPP Loans”) provided in connection with the Paycheck Protection Program (“PPP”) under the CARES Act. The PPP Loans ~~mature two years from their dates of issuance. Of the total principal owed under the PPP Loans, $907,129 bears~~bear interest at 0.98% per ~~annum and $685,300 bears interest at 1.00% per annum, respectively.~~annum. Monthly amortized principal and interest payments ~~are deferred for six months after~~begin in July 2021 and the ~~date of disbursement.~~notes mature in April 2022. While the PPP Loans currently have two-year maturities, the amended law permits the borrower to request five-year maturities from its lenders. The Company has not yet applied for forgiveness on the PPP Loans.

The Company recorded interest expense of $2,192 related to the PPP Loans three months ended March 31, 2021.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, the Company’s subsidiaries are eligible to apply for and receive forgiveness for all or a portion of PPP Loans. Such forgiveness will be determined, subject to limitations, based on the use of PPP loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during the twenty-four week period following the funding of the PPP Loan. The Company intends to use the proceeds of the PPP Loans solely for Qualifying Expenses. However, no assurance is provided that the Company will be able to obtain forgiveness of the PPP Loans, in whole or in part.

~~The Company recorded interest expense of $3,936 and $6,626, respectively, related to the PPP Loans during the three and nine months ended September 30, 2020.~~

~~Each of the Company’s business segments offer different, but synergistic products and services, and are managed separately, by different chief operating decision makers.~~

~~The following tables present segment information for the three and nine months ended September 30, 2020 and 2019 and as of September 30, 2020 and December 31, 2019:~~

~~One customer of the Gaming~~Allied Esports Entertainment, Inc. and Entertainment segment accounted for 14% and 16%, respectively, of that segment’s revenues and during the three and nine months ended September 30, 2020, respectively, and accounted for 13% and 14% of total Company revenues during the three and nine months ended September 30, 2020, respectively. There were no customer concentrations greater than 10% for the Gaming and Entertainment segment for the three and nine months ended September 30, 2019. Subsidiaries

One customer of the Esports segment account for 18% and 14% of that segments revenues during the three and nine months ended September 30, 2020. There were no customer concentrations for the E-Sports segment during the three and nine months ended September 30, 2019.

~~During the nine months ended September 30, 2020, 10% of the Gaming and Entertainment revenues were from foreign sources.~~

The Company is involved in various disputes, claims, liens and litigation matters arising out of the normal course of business. While the outcome of these disputes, claims, liens and litigation matters cannot be predicted with certainty, after consulting with legal counsel, management does not believe that the outcome of these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On ~~March 23,~~November 5, 2020, ~~an employee of~~ Allied Esports ~~filed a claim~~entered into an amendment of its lease of event space in ~~Los Angeles Superior Court alleging various employment misconduct against~~Las Vegas Nevada (the “Amended Las Vegas Lease”), pursuant to which (i) $299,250 of deferred minimum monthly rent and additional rent due under the lease for the period from April 1, 2020 through June 3, 2020 must be paid in its entirety by December 31, 2021; (ii) the monthly rent to be paid for the period from June 25 through December 31, 2020 (the “Rent Relief Period) was reduced to an amount equal to 20% of gross sales (excluding food sales) at the event space (the “Percentage Rent”), (iii) the initial term of the lease was extended for two additional months until May 31, 2023, and (iv) the option period to extend the lease was extended to between April 1, 2022 and September 30, 2022. Pursuant to the Amended Las Vegas Lease, if the aggregate Percentage Rent during the Rent Relief Period is less than $194,000, Allied Esports must pay the shortfall no later than December 31, 2021. The Company and ~~an officer~~the landlord of the ~~Company in connection with a competition hosted by Allied Esports. The claim alleged damages in excess of $3.1 million. The parties~~event space have verbally agreed to ~~a mediation and all claims asserted against~~extend the ~~Company by~~Rent Relief Period through the ~~employee for were settled on September 10, 2020 for an amount significantly less than the original claim. The matter is now closed.~~first quarter of 2021.

The Company’s aggregate rent expense incurred ~~was $650,438 and $711,302~~ during the three months ended ~~September 30,~~March 31, 2021 and 2020 amounted to $351,699 and ~~2019,~~$384,101, respectively, of which $263,550 and was $2,113,909 and $2,079,801 during the nine months ended September 30, 2020 and 2019, respectively. Of the aggregate rent incurred during the three months ended September 30, 2020 and 2019, $96,278 and $96,278,$312,501, respectively, ~~was capitalized into deferred production costs, $353,887 and $448,861, respectively, was~~is included within in-person ~~cost of revenues,~~costs and ~~$200,273~~$146,941 and ~~$166,163,~~$71,600, respectively, ~~was~~is included ~~within~~in general and administrative expenses on the condensed consolidated statements of operations. During the nine months ended September 30, 2020, the Company received a rent abatement in the amount of $91,667 and rent deferrals totaling $250,000 due to the impact of the COVID-19 pandemic. Of the aggregate rent incurred during the nine months ended September 30, 2020 and 2019, $288,835 and $288,835, respectively, was capitalized into deferred production costs, $1,068,440 and $1,073,864, respectively, was included within in-person cost of revenues, and $756,634 and $717,102, respectively, was included within general administrative expenses on the condensed consolidated statements of operations.

In June 2019, the Company entered into an exclusive ten-year strategic investment and revenue sharing agreement (the “TV Azteca Agreement”) with TV Azteca, in order to expand the Allied Esports brand into Mexico. Pursuant to the terms of the TV Azteca Agreement, as amended, TV Azteca purchased 742,692 shares of AESE common stock for $5,000,000 (the “Purchased Shares”).

In connection with the TV Azteca Agreement, AESE will provide $7,000,000 to be used for various strategic initiatives including digital channel development, facility and flagship construction in Mexico, co-production of Spanish language content, platform localization, and marketing initiatives. The Company will be entitled to various revenues generated from the investment. As of September 30, 2020, the Company has paid $5,000,000.

On July 20, 2020, the Company entered into an Amendment to TV Azteca Agreement (the “Azteca Amendment). The Azteca Amendment provides that, subject to the approval of the terms of the Azteca Amendment by the Company’s Board of Directors: (i) TV Azteca waives the Company’s obligations under the Term Sheet to pay TV Azteca $1,000,000 on each of March 1, 2021 and March 1, 2022 for various strategic initiatives, and to further invest in and develop an esports platform for the Mexican market; (ii) the Company waives the 24-month lock-up that prohibits TV Azteca from selling or transferring the 763,904 shares of Company common stock TV Azteca purchased pursuant to the Share Purchase Agreement (the “Purchased Shares”); (iii) TV Azteca may sell the Purchased Shares in compliance with applicable securities laws, subject to selling at a reasonable market price and subject to a daily volume cap not to exceed 25% of the Company’s total daily Nasdaq trading volume; and (iv) if TV Azteca sells all of the Purchased Shares within a three-month period following the Company’s Board of Directors approval of the Azteca Amendment, for gross proceeds of less than $1,600,000, then on March 1, 2021, the Company shall contribute additional capital to the parties’ strategic alliance pursuant to the Term Sheet in an amount equal to such shortage.

In June 2019, the Company entered into an agreement (the “Simon Agreement”) with Simon Equity Development, LLC (“Simon”), a shareholder of the Company, pursuant to which Allied Esports would conduct a series of mobile esports gaming tournaments and events at selected Simon shopping malls and online called the Simon Cup, in each of 2019, 2020 and 2021, and would also develop esports and gaming venues at certain Simon shopping malls in the U.S.

In connection with the Simon Agreement, AESE placed $4,950,000 of cash into an escrow account to be utilized for various strategic initiatives including the build-out of branded esports facilities at Simon malls, and esports event programs. On October 22, 2019, $1,300,000 was released from escrow in order to fund expenses incurred in connection with the 2019 Simon Cup. As of December 31, 2019, the balance in the escrow account was $3,650,000, which is shown as restricted cash on the accompanying condensed consolidated balance sheet.

The Simon Agreement and the related Escrow Agreement, as amended, permitted Simon to request the return of any funds remaining in escrow if the parties did not agree on the 2020 spending plan by March 8, 2020. On March 18, 2020, as the COVID-19 pandemic accelerated in the United States, Simon notified the escrow agent that the parties had not agreed on a 2020 spending plan and requested the return of the remaining funds in the escrow account. The escrow agent returned the remaining $3,650,000 to Simon on March 26, 2020. During the three months and nine months ended September 30, 2020, the Company recorded $0 and $3,650,000, respectively, of stock-based compensation related to the return of cash held in escrow, which is reflected in stock-based compensation expense on the accompanying condensed consolidated statements of ~~operations and comprehensive loss.~~ operations.

~~The COVID-19 pandemic has delayed indefinitely~~AESE is currently the parties’ ability to plan and budget for the 2020 and 2021 esports programming and esports venues. The parties have agreed to extend the due date under the applicable agreements from March 8, 2020 to January 31, 2021, in order to continue to develop and budget for the annual esports program and esports venues in future years once the COVID-19 pandemic has ended.

~~On January 14, 2020, the Company issued 758,725 shares~~guarantor of ~~its common stock to BPR Cumulus LLC, an affiliate~~WPT’s lease of ~~Brookfield Property Partners (“Brookfield”) in exchange for $5,000,000~~Irvine, California office space (the ~~“Purchase Price”) pursuant to a Share Purchase Agreement (the “Brookfield Agreement”~~“Irvine Lease”). The Purchase Price was placed into escrow and is to be used by the Company or its subsidiaries to develop integrated esports experience venues at mutually agreed upon shopping malls owned and/or operated by Brookfield or any of its affiliates (each, an “Investor Mall”), that will include a dedicated gaming space and production capabilities to attract and to activate esports and other emerging live events (each, an “Esports Venue”). To that end, half of the Purchase Price will be released from escrow to the Company upon the execution of a written lease agreement between Brookfield and the Company for the first Esports Venue, and the other half will be released to the Company upon the execution of a written lease agreement between Brookfield and the Company for the second Esports Venue. Further,expires on October 1, 2033. Current base rent pursuant to the ~~Brookfield Agreement,~~Irvine Lease is $41,027 per month, increasing to $58,495 per month over the ~~Company must create, produce, and execute three (3) esports events during each calendar year 2020, 2021 and 2022~~term of the lease. It is anticipated that AESE will ~~include~~no longer act as guarantor of the ~~Company’s esports truck at one or more Investor Malls at mutually agreed times. The balance held in escrow as~~Irvine Lease, effective upon the closing of ~~September 30, 2020 is $5,000,000 and is reflected in restricted cash on~~ the ~~accompanying condensed consolidated balance sheet.~~

On April 24, 2020, the employment agreement between the Company and the Chief Executive Officer of WPT (the “WPT CEO”) was amended such that effective as of May 1, 2020, the WPT CEO annual salary will be reduced by 10% to approximately $377,000 for a six-month period, and thereafter his full annual salary will be restored.

On April 24, 2020, the employment agreement (the “CEO Agreement”) between the Company and its Chief Executive Officer (the “CEO”), was amended such that effective May 1, 2020, the CEO’s annual salary will be reduced by 80% to $60,000 for a six-month period. On September 30, 2020, the CEO Agreement was further amended such that effective November 1, 2020, the CEO’s annual salary will be $210,000 for a six month period, and thereafter the initial annual base salary of $300,000 set forth in the CEO Agreement will be restored.Sale Transaction. See Note 4 – Discontinued Operations.

On ~~July 27, 2020, the~~January 4, 2021, Company ~~filed an Amendment~~issued to its ~~Second Amended and Restated Certificate~~non-executive directors an aggregate of ~~Incorporation with the Secretary of State of the State of Delaware to increase the number of~~126,584 shares of common stock ~~currently authorized by~~from its 2019 Equity Incentive Plan for their director services to the ~~Certificate by 10,000,000 shares, from 65,000,000 shares to 75,000,000 shares.~~

~~On February 25, 2020 (the “Effective Date”), the~~Company. The Company ~~entered into a Put Option Agreement (the “Agreement”)~~recognized stock-based compensation of $200,000 in connection with the ~~Chairman~~issuance of the Company’s Board of Director (the “Chairman”), pursuant to which the Company has an option in its discretion, to sell shares of its common stock (the “Option Shares”) to the Chairman for aggregate gross proceeds of up to $2.0 million, at a purchase price of $1.963 per Option Share, subject to the following limitations:

On March 9, 2020, the Company provided notice to the Chairman that it had elected to exercise the Put Option to sell 1,018,848 Option Shares at a purchase price of $1.963 per share for total proceeds of $2,000,000, which was recorded as subscription receivable and common stock subscribed on the accompanying condensed consolidated balance sheet. The Option Shares were not deemed to be issued until the closing of the sale of the Option Shares on May 15, 2020. On September 29, 2020, the Company received proceeds of $21,875 from the Chairman, representing the disgorgement of short swing profits realized from the sale ofthese shares.

~~A summary of the option activity during the nine months ended September 30, 2020 is presented below:~~

~~Options outstanding and exercisable as of September 30, 2020 are as follows:~~

Effective June 30, 2020 two of the Company’s directors (the “Resigning Members”) resigned from their positions as members of the Company’s Board of Directors. Options for the purchase of an aggregate of 20,000 shares of common stock, with a grant date value of $43,356, held by the Resigning Directors were modified such that the options will be fully vested on September 20, 2020 and will be exercisable through September 20, 2029. The Company recorded $8,386 of incremental stock-based compensation expense as a result of the option modification during the three and nine months ended September 30, 2020.

~~On August 7, 2020, the Company’s Board approved, in connection with its general counsel’s transition~~

Notes to a part-time employee, the Company’s waiver of any forfeiture of non-vested options in connection with such transition and termination of employment scheduled for February 2021, such that the options for the purchase of 170,000 shares of common stock (grant date value of $266,733) held by the Company’s general counsel will continue to vest according to their original vesting schedules and will expire ninety days after November 21, 2023. The incremental value of the modified option award of $64,093, along with the unamortized portion of the original award, will be amortized through the termination date in February 2021.

~~The option grants described below were issued from the Company’s 2019~~ Stock ~~Incentive Plan (“Incentive Plan”).~~Options

~~On July 1, 2020, the Company issued ten-year options for the purchase of 80,000 shares of common stock, with a grant date value of $61,186, to two directors~~A summary of the ~~Company. The options are exercisable at $2.11 per share and have a 4-year vesting term, with 25% vesting on each anniversary of~~option activity during the ~~date of grant.~~three months ended March 31, 2021 is presented below:

Options outstanding and exercisable as of ~~120,000 shares of common stock, with an aggregate grant date value of $97,947 to WPT’s general counsel. The options~~March 31, 2021 are ~~exercisable at $2.17 per share and have a 4-year vesting term with 25% vesting on each anniversary of the date of grant.~~as follows:

~~The grant date value of options granted during the three and nine months ended September 30, 2020 were calculated using the Black-Scholes option pricing model, with the following assumptions used:~~

The expected term used for options is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

~~During~~For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company recorded $282,999 and $240,399, respectively, of stock-based compensation expense related to stock options issued as compensation, of ~~$312,117~~which $56,296 and ~~$766,279~~$50,816, respectively, ~~and during~~was included in net income of discontinued operations on the ~~three and nine months ended September 30, 2019, the Company recorded $5,940 and $5,940, respectively.~~accompanying condensed consolidated statements of operations. As of ~~September 30, 2020,~~March 31, 2021, there was ~~$2,789,317~~$1,722,027 of unrecognized stock-based compensation expense related to the stock options that will be recognized over the weighted average remaining vesting period of ~~3.2~~2.6 years.

A summary of the non-vested restricted common stock activity during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 is presented below:

~~The stock grants described below were issued from the Company’s Incentive Plan.~~

On July 1, 2020, the Company issued 18,958 shares of restricted common stock with a grant date value $40,000 to two directors of the Company. The restricted common stock remains subject to transfer and forfeiture restrictions until the shares vest on the one-year anniversary of the date of grant.

~~On August 7,~~For the three months ended March 31, 2021 and 2020, the Company ~~issued 50,000 shares~~recorded $80,006 and $113,436, respectively, of its common stock and 50,000 shares of restricted common stock, with an aggregate grant date value of $218,000 to its Chief Financial Officer (“CFO”). The 50,000 shares of restricted common stock have transfer and forfeiture restrictions until the shares vest in two equal installments on August 18, 2021 and August 18, 2022.

On August 7, 2020, the Company issued 217,999 shares of common stock with a grant date value of $474,000 to certain officers and employees of the Company, in satisfaction of bonus obligations incurred in previous years, which were included in accrued expenses as of December 31, 2019.

On August 7, 2020, the Company issued 94,471 shares of restricted common stock with a grant date value $205,000 to certain officers and directors. The restricted common stock remains subject to transfer and forfeiture restrictions until the shares vest on the one-year anniversary of the date of grant.

On September 24, 2020, the Company issued 35,714 shares of restricted common stock with a grant date value of $50,000 to its CFO. The restricted common stock remains subject to transfer and forfeiture restrictions until the shares vest in two equal installments on August 18, 2021 and August 18, 2022.

On September 24, 2020, the Company issued 14,286 shares of common stock to the Chairman of the Board of Directors. The common stock was immediately vested with no restrictions and had grant date value of $20,000.

~~The Company recorded~~ stock-based compensation expense of $265,050 and $496,334, during the three and nine months ended September 30, 2020 respectively, and recorded stock-based compensation of $12,467, during the three and nine months ended September 30, 2019, respectively, related to restricted stock issued as ~~compensation.~~compensation of which $13,561 and $6,233, respectively, was included in net income of discontinued operations on the accompanying condensed consolidated statements of operations. As of ~~September 30, 2020,~~March 31, 2021, there was ~~$364,487~~$173,333 of unrecognized stock-based compensation expense related to restricted stock that will be recognized over the weighted average remaining vesting period of ~~1.2~~1.0 years.

~~A summary~~On January 19, 2021, the Company entered into a Restricted Stock Unit Agreement with its Chief Executive Officer (“CEO”), pursuant to which the CEO received restricted stock units having a stated value equal to $1,000,000. The restricted stock units represent the right to receive $1,000,000, contingent upon the closing of ~~warrant activity~~the Sale Transaction, which is payable upon the earlier of the two-year anniversary of the closing date of the Sale Transaction (provided that the CEO remains continuously employed by the Company through such date), or the termination of the CEO’s employment without cause after the closing of the Sale Transaction (as defined in his employment agreement) (as applicable, the “Vesting Date”). At the time of payment, the Company may elect to pay the $1,000,000 award in cash or in shares of common stock valued at the fair market value of our common stock on the Vesting Date, or any combination thereof. All issuances of common stock will be issued from our 2019 Equity Incentive Plan. If payments or benefits provided or to be provided by the Company or its affiliates to the CEO pursuant to the agreement or otherwise (“Covered Payments”) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986 (the “Code”) that would be subject to the excise tax imposed under Section 4999 of the Code (collectively, the “Excise Tax”), payments to be made under the agreement will be reduced to the minimum extent necessary to ensure that no portion of the Covered Payments is subject to the Excise Tax. On March 22, 2021, the agreement was amended to provide that the Vesting Date would apply after the two-year anniversary of the sale of CSI to Element Partners, LLC, Bally’s Corporation, or their affiliates (provided that the CEO remains continuously employed by the Company through such date). The Company recorded a charge to stock-based compensation and a corresponding credit to accrued compensation expense in the amount of $100,000 representing the amortization of this award during the ~~nine~~three months ended ~~September 30, 2020 is presented below:~~

~~Warrants outstanding and exercisable as of September 30, 2020 are as follows:~~

~~On June 8, 2020, the Company issued five-year warrants~~Notes to purchase 1,454,546 shares of common stock (the “Warrant Shares”) at an exercise price of $4.125 per share, in connection with the issuance of Senior Notes (see Note 7 – Convertible Debt and Convertible Debt, Related Party). The warrants could be exercised on a cashless basis if there was no effective registration statement registering the Warrant Shares at the time of exercise. The registration of the Warrant Shares became effective on July 31, 2020.

The Company computed the fair value of the warrants using a Black-Scholes option pricing model using the following assumptions: expected volatility of 45%, risk-free rate of 0.45%, expected term of 5 years, and expected dividends of 0.00%.Condensed Consolidated Financial Statements

From October 1, 2020 through November 2, 2020, the Company issued 1,070,091 shares of its common stock, as Monthly Redemption Payments in the aggregate amount of $1,020,364 on the Senior Notes, and 2,050,778 shares of its common stock, as accelerated Monthly Redemption Payments in the aggregate amount of $2,024,727.

On October 30, 2020, ESALV entered into an Assent Agreement to Labor Agreement (the “Assent Agreement”) with the International Alliance of Theatrical Stage Employees, Moving Pictures Technicians, Artists and Allied Crafts of the United States, its Territories and Canada, and Local 720, Las Vegas, Nevada (together, the “Union”), pursuant to which ESALV agreed that the Union would be the exclusive bargaining representative for all stagehand employees, audio visual technicians, wardrobe technicians, wardrobe dressers, and working lead persons employed by ESALV and working at Allied Esports’ flagship arena at the Luxor Hotel and Casino in Las Vegas, Nevada. The Assent Agreement provides for carveouts from the agreement in connection with third party customers or clients (including the World Poker Tour) producing events at the arena, and in connection with certain ESALV-produced events at the arena utilizing up to a maximum of six (6) regular employees of the Allied Esports group.

On November 4, 2020, the Company filed with the Delaware Secretary of State an amendment (the “Amendment”) to its Second Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of its common stock from 75,000,000 shares to 100,000,000 shares.

On ~~November 5, 2020, Allied Esports entered into~~May 6, 2021, the Company granted ten-year stock options to purchase 160,000 shares of common stock to its directors. The shares vest in equal annual installments over four years and have an ~~amendment~~exercise price of ~~its lease of event space in Las Vegas Nevada (the “Amended Las Vegas Lease”), pursuant to~~$2.48 per share, which ~~(i)~~represents the ~~monthly rent to be paid for~~Company’s closing stock price on the period from June 25 through December 31, 2020 (the “Rent Relief Period) was reduced to an amount equal to 20% of gross sales (excluding food sales) at the event space (the “Percentage Rent”), (ii) the initial term of the lease was extended for two additional months until May 31, 2023, and (iii) the option period to extend the lease was extended to between April 1, 2022 and September 30, 2022. Pursuantday prior to the ~~Amended Las Vegas Lease, if the aggregate Percentage Rent during the Rent Relief Period is less than $194,000, Allied Esports must pay the shortfall no later than December 31, 2021.~~date of grant.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~OPERATIONS.

The following discussion and analysis of the results of operations and financial condition of Allied Esports Entertainment Inc. (the “Company”) as of ~~September 30, 2020~~March 31, 2021 and for the three months ended March 31, 2021 and ~~nine months ended September 30,~~ 2020 ~~and 2019~~ should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, ~~2019~~2020 and for the year then ended, which are included in the ~~amended~~ Form ~~10-K/A~~10-K (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on ~~March 17, 2020.~~April 13, 2021. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” in our Annual Report, and other factors that we may not know. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements above, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Allied Esports Entertainment Inc. (“AESE”), formerly known as Black Ridge Acquisition Corp, or “BRAC”) was incorporated in Delaware on May 9, 2017. Allied Esports Media, Inc. (“AEM”), a Delaware corporation, was formed in November 2018 to act as a holding company for Allied Esports International Inc. (“Allied Esports”) and Noble Link Global Limited (“Noble Link”). Allied Esports, together with its subsidiaries, owns and operates the esports-related businesses of AESE. Noble Link (prior to the Merger) and its wholly owned subsidiaries Peerless Media Limited, Club Services, Inc. and WPT Enterprises, Inc. operate the poker-related business of AESE ~~and are collectively referred to herein as “World Poker Tour” or “WPT”. On August 9, 2019, a subsidiary of AESE merged with AEM, with AEM being the surviving entity (the “Merger”).~~

~~Allied Esports Entertainment, Inc.~~ operates a premier public esports and entertainment company, consisting of the Allied Esports and World Poker Tour businesses. ~~For~~

Gaming is one of the ~~past 16 years of its 18-year history, WPT’s business model has successfully utilized the following three pillars~~largest and fastest growing markets in the ~~sport~~entertainment sector, with an estimated 2.56 billion gamers playing esports globally, and esports is the major driver of ~~poker, which the Company believes can~~this growth. Esports, short for “electronic sports,” is a general label that comprises a diverse offering of competitive electronic games that gamers play against each other. It is projected that by 2023, 646 million people will be ~~utilized by Allied Esports:~~ watching esports globally, and that global esports revenue will grow to approximately $1.5 billion.

The esports gaming industry is relatively new and is challenging. Competition is rapidly developing. Allied Esports’ business relies upon its ability to grow and garner an active gamer community, and successfully monetize this community through tournament fees, live event ticket sales, and advertising and sponsorships utilizing a three-pillar approach, which includes:

~~The Company plans~~Its growth also depends, in part, on its ability to ~~continue operating the WPT business~~respond to technological evolution, shifts in gamer trends and demands, introductions of new games, game publisher intellectual property right practices, and industry standards and practices. While change in this industry may be inevitable, Allied Esports will try to ~~utilize~~adapt its business model as needed to ~~execute~~accommodate change and remain on the forefront of its ~~growth strategy in the multibillion-dollar esports industry. Allied Esports will do this~~competitors, by collaborating with its strategic investors, including certain affiliates of Simon Property Group, Inc. ~~(collectively, “Simon”)~~, a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations ~~BPR Cumulus, LLC~~ (“~~Brookfield”~~Simon”) ~~a world~~, and with certain affiliates of Brookfield Property Partners, one of the world’s premier real estate ~~company, and TV Azteca, a premier television network in Mexico, to deliver best-in-class live events, content and online products.~~companies.

Allied Esports’ business plan requires significant capital expenditures, and it expects its operating expenses to increase significantly as it continues to expand its marketing efforts and operations in existing and new geographies and vertical markets (including its online esports tournament and gaming subscription platform it intends to develop). A key element of Allied Esports’ growth strategy is to extend its brand by opening additional flagship arenas throughout the world and by licensing the Allied Esports brand to third party esports arena operators, which it believes will provide attractive returns on investment.

The World Poker Tour is a premier name in internationally televised gaming and entertainment with brand presence in land-based poker tournaments, television, online and mobile. Leading innovation in the sport of poker since 2002, WPT helped ignite the global poker boom with the creation of a unique television show based on a series of high-stakes poker tournaments. WPT’s Tour Events are held at locations throughout the world and have awarded more than one billion in prize dollars in its 18-year history. WPT has broadcast globally in more than 150 countries and territories, and is currently producing its 18th season, which airs on Bally Sports Network, formerly known FOX Sports Regional Networks in the United States. Season 18 of WPT is currently sponsored by its online subscription-based poker service, ClubWPT.com. WPT offers a suite of online poker services which it operates by itself and through its partners offering consumers the ability to access gaming content on a year-round 24/7 basis. ClubWPT.com is a unique online membership site that offers inside access to the WPT, as well as a sweepstakes-based poker club available in 43 states and territories across the United States, Australia, Canada, France, and the United Kingdom, with innovative features and state-of-the-art creative elements inspired by WPT’s 18 years of experience in gaming entertainment. In addition, WPT licenses its brand to social gaming sites through partners like Zynga as well as to educational learning platforms such as LearnWPT. These online products are scalable and offer geographic access that might be limited if WPT relied on tour stop participation alone. Additionally, WPT benefits from managing its own distribution business which currently has more than 1,100 hours of broadcast-ready content, and offers demographically similar programming to its poker content, such as esports, golf and MMA. WPT uses this large suite of programming as leverage to seek preferred airtimes on its various distribution channels where it may promote its online products or offer airtime to sponsors in territories they seek to enter. WPT also participates in strategic brand license, partnership, sponsorship opportunities and music licensing, applying its three-pillar model of in-person experiences, multiplatform content and interactive services, described above, to the sport of poker.

Sale of WPT Business. On January 19, 2021, the Company and its direct and indirect wholly-owned subsidiaries, Allied Esports Media, Inc. (“Esports Media,” and together with the Company, the “Selling Parties”) and Club Services, Inc. (“CSI”), entered into a Stock Purchase Agreement (the “Original Agreement”) with Element Partners, LLC (“Buyer”), pursuant to which the Selling Parties have agreed to sell 100% of the outstanding capital stock of CSI to Buyer. CSI is the Company’s indirect wholly-owned subsidiary that directly or indirectly owns 100% of the outstanding capital stock of each of the legal entities that collectively operate or engage in the Company’s poker-related business and assets (the “WPT Business”). The proposed sale of CSI is referred to herein as the “Sale Transaction.” In connection with the Original Agreement, Buyer agreed to pay Esports Media a total purchase price of $78.25 million for the stock of CSI, including an initial purchase price at closing of $68.25 million and $10.0 million in future payments after the closing of the Sale Transaction. After the execution of the Original Agreement, the Company received multiple unsolicited competing proposals to sell the Company and/or CSI to Bally’s Corporation. As a result of such proposals and further negotiation with Buyer, the Selling Parties, CSI and Buyer entered into an Amended and Restated Stock Purchase Agreement on March 19, 2021, and thereafter amended such agreement on March 29, 2021 (as amended, the “Stock Purchase Agreement”).

Buyer has agreed to pay Esports Media a total purchase price of $105 million for the stock of CSI (the “base purchase price”) at the closing of the Sale Transaction, as further described below. The base purchase price will be adjusted to reflect the amount of CSI’s cash, indebtedness and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. Buyer remitted a $10.0 million advance payment of the base purchase price upon the execution of the Stock Purchase Agreement and is required to pay the balance of the base purchase price at the closing of the Sale Transaction.

The Stock Purchase Agreement contains customary representations and warranties, covenants and indemnification provisions. The closing of the Sale Transaction is subject to closing conditions, including the approval of the Sale Transaction by the Company’s stockholders and other customary closing conditions. The Company intends to consummate the Sale Transaction shortly after obtaining stockholder approval, assuming all other conditions to the completion of the Sale Transaction have been satisfied or waived by the appropriate parties.

The Stock Purchase Agreement may be terminated by Buyer or the Company if the closing of the Sale Transaction has not occurred by September 30, 2021, or upon the occurrence of certain customary events as set forth in the Stock Purchase Agreement. Depending on the circumstances surrounding a termination of the Stock Purchase Agreement, the Buyer may be required to pay a $10.0 million non-performance fee to the Company, and the Selling Parties may be required to pay a $3.45 million termination fee to the Buyer, and the Selling Parties may be required to return to Buyer the $10.0 million advance payment of the purchase price and reimburse Buyer for up to $1.0 million of its documented out of pocket expenses incurred in connection with the authorization, preparation, negotiation, execution and performance of the Stock Purchase Agreement and the Sale Transaction.

Effective upon any termination of the Stock Purchase Agreement, other than a termination in which Buyer is required to pay a non-performance fee to us, Buyer (or its affiliate) and Peerless Media Limited, an indirect subsidiary of the Company that owns intellectual property related to the WPT Business, will enter into a 3-year brand license for Buyer’s (or its affiliate’s) use of the WPT brand in the territory of Asia for real-money gaming in exchange for revenue-based royalty payments of 20% of qualifying revenues, and minimum annual guaranteed royalty payments of $4.0 million, $6.0 million and $8.0 million for the first, second and third years, respectively. Such license will be subject to further customary terms and conditions and provide Peerless Media Limited with a $2.0 million buy-out right after the first year. In the event of any termination of the Stock Purchase Agreement under any circumstance in which the Buyer is required to pay a termination fee to us, the Company will have the option, but not the obligation, to require the Buyer to enter into such license agreement with Peerless Media Limited.

COVID-19 Pandemic.The recent outbreak of the COVID-19 respiratory illness has had an adverse effect on the Company. As a global entertainment company that hosts numerous live events with spectators and participants in destination cities, such outbreak has caused people to avoid traveling to and attending our events. Allied Esports and WPT businesses have cancelled or postponed live events, and until Allied Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada reopened on June 25, 2020 these businesses were operating online only. The arena is currently running under a modified schedule for daily play and weekly tournaments, and the WPT business continues to operate primarily ~~online.~~online, although live events have recently resumed under appropriate health safety protocols. Production of certain content has been temporarily halted. At this time, we cannot determine the full extent of the impact that such outbreak may have on our operations.

~~TV Azteca Amended Agreement.~~ On July 20, 2020, we entered into an Amendment to TV Azteca Agreement (the “Azteca Amendment). The Azteca Amendment provides that, subject to the approval of the terms of the Azteca Amendment by the Company’s Board of Directors: (i) TV Azteca waives our obligations under the Term Sheet to pay TV Azteca $1,000,000 on each of March 1, 2021 and March 1, 2022 for various strategic initiatives, and to further invest in and develop an esports platform for the Mexican market; (ii) we shall waive the 24-month lock-up that prohibits TV Azteca from selling or transferring the 763,904 shares of Company common stock TV Azteca purchased pursuant to the Share Purchase Agreement (the “Purchased Shares”); (iii) TV Azteca may sell the Purchased Shares in compliance with applicable securities laws, subject to selling at a reasonable market price and subject to a daily volume cap not to exceed 25% of the our total daily Nasdaq trading volume; and (iv) if TV Azteca sells all of the Purchased Shares within a three-month period following our Board of Directors approval of the Azteca Amendment, for gross proceeds of less than $1,600,000, then on March 1, 2021, we shall contribute additional capital to the parties’ strategic alliance pursuant to the Term Sheet in an amount equal to such shortage.

~~Simon Partnership.~~ We previously entered into a Share Purchase Agreement and an Escrow Agreement (the “Purchase Agreements”) and related services agreements with Simon Equity Development, LLC and its affiliates (collectively, “Simon”), which set forth the terms of a strategic investment by Simon to develop an annual esports program in collaboration with the Company. Pursuant to the Purchase Agreements, $5,000,000 was previously held in an escrow account to be used for development of such activities. The COVID-19 pandemic has delayed indefinitely the parties’ ability to plan and budget for the 2020 and 2021 esports programming and esports venues. On March 26, 2020, the remaining balance in the escrow account, $3,650,000, was transferred to Simon. The parties have agreed to extend the due date from March 8, 2020 to January 31, 2021 under the applicable agreements to continue to develop and budget for the annual esports program and esports venues in future years once the COVID-19 pandemic has ended.

~~Brookfield Partnership.~~ On January 14, 2020, we issued 758,725 shares of its common stock to BPR Cumulus LLC, an affiliate of Brookfield Property Partners (“Brookfield”) in exchange for $5,000,000 (the “Purchase Price”) pursuant to a Share Purchase Agreement. The Purchase Price was placed into escrow and is to be used by us or our subsidiaries to develop integrated esports experience venues at mutually agreed upon shopping malls owned and/or operated by Brookfield or any of its affiliates, that will include a dedicated gaming space and production capabilities to attract and to activate esports and other emerging live events.

~~Litigation.~~ On March 23, 2020, an employee of Allied Esports filed a claim in Los Angeles Superior Court alleging various employment misconduct against Allied Esports, the Company, and an officer of the Company in connection with a competition being hosted by Allied Esports. The claim alleged damages in excess of $3.1 million and suggested that the defendants could be subject to punitive damages. The parties agreed to a mediation and all claims asserted against us by the employee were settled on September 10, 2020 for an amount significantly less than the original claim. The matter is now closed.

~~CARES Act.~~ ~~On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)~~

Our continuing operations consist of our esports gaming operations, which ~~contains tax and spending provisions intended to address the impact of the COVID-19 pandemic. The CARES Act includes the Paycheck Protection Program (“PPP”), a program~~take place at global competitive esports properties designed to ~~aid small-~~connect players and ~~medium-sized businesses through federally guaranteed loans distributed through banks. These loans~~fans via a network of connected arenas. Through our subsidiary Allied Esports, we offer esports fans state-of-the-art facilities to compete against other players in esports competitions, host live events with esports superstars that potentially stream to millions of viewers worldwide, produce and distribute esports content with at our on-site production facilities and studios. At our flagship arena in Las Vegas, Nevada, we provide an attractive facility for hosting corporate events, tournaments, game launches or other events. Additionally, Allied Esports has two mobile esports arenas, which are ~~intended to guarantee eight weeks of payroll~~18-wheel semi-trailers that convert into first class esports arenas and ~~other costs to provide support to participating businesses~~competition stages with full content production capabilities and increase the ability of these businesses to retain workers. During May 2020, we received aggregate cash proceeds of $1,592,429 pursuant to three loans provided in connection with the PPP (the “PPP Loans”). While the PPP Loans currently have a two-year maturity, the amended law permits each borrower to request a five-year maturity from its lender.interactive talent studios.

WPT is an internationally televised gaming and entertainment company with brand presence in land-based tournaments, television, online and mobile applications. WPT has been involved in the ~~terms~~sport of ~~the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, we are eligible to apply for~~poker since 2002 and ~~receive forgiveness for all or~~created a ~~portion of PPP Loans. Such forgiveness will be determined, subject to limitations,~~television show based on a series of high-stakes poker tournaments. WPT has broadcasted globally in more than 150 countries and territories and its shows are sponsored by established brands in many areas, including watches, crystal, playing cards and online social poker operators. WPT also operates ClubWPT.com, a subscription-based site that offers its members inside access to the ~~use of PPP Loans proceeds~~WPT content database, as well as sweepstakes-based poker product that allows members to play for ~~certain permissible purposes as set forth~~real cash and prizes in 43 states and territories across the ~~PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”),~~United States, Australia, Canada, France and the ~~maintenance of employee~~United Kingdom. WPT also participates in strategic brand licensing, partnership, and compensation levels during the twenty-four week period following the funding of the PPP Loan. We intend to use the proceeds of the PPP Loan for Qualifying Expenses. However, no assurance is provided that we will be able to obtain forgiveness of any PPP Loans in whole or in part.sponsorship opportunities.

~~Debt Conversion.~~On ~~April 29, 2020,~~January 19, 2021, we entered into a ~~Secured Convertible Note Modification~~Stock Purchase Agreement (as amended and ~~Conversion Agreement (the “Amendment 1”~~restated on March 22, 2021 and subsequently amended on March 29, 2021, the “SPA”)~~, with a holder of a $5,000,000 Bridge Note (the “Noteholder”), pursuant~~ to ~~which~~sell the ~~Noteholder converted $2,000,000 of the principal amount of its Bridge Note into 1,250,000 shares~~equity interests of our ~~common stock at~~subsidiaries that own and operate the WPT business, subject to shareholder and regulatory approvals, for a ~~reduced conversion~~base purchase price of ~~$1.60 per share. On May 22, 2020, we entered into a Secured Convertible Note Modification and Conversion Agreement No. 2 (“Amendment 2”) with the Noteholder pursuant~~$78.25 million, which was subsequently amended to ~~which~~$105 million (the “Sale Transaction”). This base purchase price will be adjusted to reflect the ~~remaining principal~~ amount of the ~~Note ($3,000,000) was converted~~WPT business cash, indebtedness and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. Prior to December 31, 2020, we have committed to a plan to sell the WPT business. Accordingly, the WPT business has been recast as discontinued operations.

In reaching the decision to enter into ~~2,142,857 shares~~the SPA, our Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing the WPT business in the future as compared to the opportunities available to the WPT business in the future, and the availability of strategic alternatives. After careful consideration, the Board of Directors unanimously approved the SPA and determined that the Sale Transaction is in our best interest and is in the best interest of our ~~common stock at a reduced conversion price of $1.40 per share. Further, pursuant to Amendment 2, interest on~~stockholders, and that the ~~$5,000,000 principal owed to~~Sale Transaction and the ~~Noteholder prior to conversion will continue to accrue through~~SPA reflect the ~~original maturity date of~~highest value for the Bridge Note, as if the principal amount had not been converted. On June 8, 2020, we entered into Secured Convertible Note Modification Agreement No. 3 (“Amendment 3” and together with Amendment 1 and Amendment 2, the “Amendments”) with the Noteholder. Pursuant to Amendment 3, the total minimum accrued interest payable pursuant to Amendment 2 in the amount of $1,421,096 was converted into principal under the Noteholder’s Bridge Note (the “Amended Bridge Note”) The Amended Bridge Note matures on February 23, 2022. Interest on the Amended Bridge Note will accrue commencing on August 23, 2020 at 12% per annum (increasing to 15% per annum upon an event of default as defined). Principal and interest owed under the Amended Bridge Note is not convertible into shares of the Company’s common stock. WPT business reasonably attainable for our stockholders.

We recorded a conversion inducement charge of $5,247,531 as a result of the Amendments, consisting of $4,998,845 representing the value of common stock issued upon conversion in excess of the common stock issuable under the original terms of the $5,000,000 Bridge Note, and $248,686, representing the excess of minimum interest payable pursuant to Amendment 3 over the interest payable pursuant to the original terms of the $5,000,000 Bridge Note.

~~Extension of Bridge Notes.~~ On June 8, 2020, the Company and the holders (the “Extending Bridge Noteholders”) of two Bridge Notes in the aggregate principal amount of $2,000,000 (together, the “Extended Bridge Notes”), each entered into a Secured Convertible Note Modification (Extension) Agreement with the Company (together, the “Bridge Note Extensions”) pursuant to which, among other things, the Extending Bridge Noteholders agreed to extend the maturity date of their respective Extended Bridge Note until February 23, 2022. Interest on the Extended Bridge Notes will continue to accrue at 12.0% per year and may be prepaid without penalty. The remaining provisions of the Extended Bridge Notes remain unchanged and in effect. One of the Extending Bridge Noteholders is Man Sha, the spouse of Frank Ng, the Company’s Chief Executive Officer and a Director.

On August 13, 2020 we paid an aggregate of $425,096 related to interest payable on the Extended Bridge Notes, such that the balance of principal and interest outstanding under the Extended Bridge Notes as of September 30, 2020 is $2,000,000 and $24,760, respectively.

~~Senior Secured Convertible Notes.~~ On June 8, 2020, pursuant to a securities purchase agreement (the “Purchase Agreement”) between the Company and certain accredited investors (the “Investors”), we issued two senior secured convertible notes (the “Senior Notes”) with an aggregate principal balance of $9,600,000 and immediately vested five-year warrants to purchase an aggregate 1,454,546 shares of common stock at an exercise price of $4.125 per share for net cash proceeds of $9,000,000. The Senior Notes bear interest at 8% per annum and mature on June 8, 2022, with an aggregate of $1,536,000 of interest guaranteed to be paid to the Investors. The Purchase Agreement contains customary representations and warranties, and the Company agreed it would not take on additional debt from third parties without the Investors’ written approval, subject to certain exceptions for ordinary course trade debt. The Company also agreed to use 35% of the proceeds from future financings in excess of $3 million (or $5 million if approved by the Investors) to pay down the outstanding balance on the Senior Notes. The Company reserves its rights under the Purchase Agreement to consummate, subject to certain exceptions, a debtor or equity offering of up to $5 million in the future.

The Senior Notes and two years of interest are payable in equal monthly installments (the “Monthly Redemption Payment”), commencing on August 7, 2020. Each Monthly Redemption Payment may be paid at the Company’s option in cash, or in shares of common stock (the “Stock Settlement Option”) at a price equal to 87% of the lowest daily volume weighted average price in the 10 days prior to the scheduled payment date (the “Stock Settlement Price”), provided that (i) the Company gives thirty days written irrevocable notice (the “Monthly Redemption Notice”), (ii) all amounts due have been paid timely, (iii) there are sufficient number of authorized shares available to be issued, (iv) the Investors do not possess any material non-public information at the time the Company issues the common stock, and (v) the Company’s shares have met certain minimum volume and closing price thresholds. The Stock Settlement Price cannot be lower than $0.734 per share. Monthly Redemption Payments paid in cash require the payment of a 10% premium in addition to the monthly installment.

Between August 7 and November 2, 2020, we issued 6,282,839 shares of our common stock, as redemption payments on the Senior Notes, of which 4,532,080 shares were issued in connection with accelerated Monthly Redemption Payments.

~~Additional Common Stock Issuance.~~ On May 15, 2020, the Company closed on a sale of 1,018,848 shares of common stock to the Company’s Chairman of the Board, in exchange for $2,000,000 of cash proceeds, pursuant to the Company’s March 9, 2020 exercise of a February 25, 2020 put option agreement.

~~On September 29, 2020, the Company received proceeds of $21,875 from the Chairman, representing the disgorgement of short swing profits realized from the sale of shares.~~

Results of Operations for the Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~Compared With the Three Months Ended September 30, 2019~~

In-person experience revenues decreased by approximately ~~$1.9 million,~~$557 thousand, or ~~73%~~53%, to approximately ~~$0.7~~$501 thousand for the three months ended March 31, 2021 from approximately $1.1 million for the three months ended ~~September 30, 2020 from approximately $2.6 million for~~March 31, 2020. The decrease of in-person experience revenues was driven by a $200 thousand decrease in Esports Arena Las Vegas revenue, a $200 thousand decrease in sponsorship revenue, and a $100 thousand decrease in truck rental revenue. These decreases are a direct result of the COVID-19 pandemic and the resulting limited ability to hold events during the three months ended September 30, 2019. The decrease in in-person revenues is primarily due to a decrease in revenue generated from in-person events, which consists of ticket, merchandising, food, and beverage revenue and sponsorship revenue, due to government mandated closures of our facilities, postponed events, and social distancing measures resulting from the COVID-19 pandemic. March 31, 2021.

Multiplatform content revenues increased by approximately $0.3 million, or 22%, to approximately $1.3 million for the three months ended September 30, 2020 from approximately $1.0 million for the three months ended September 30, 2019. Increase in multiplatform content revenues primarily related to an increase in distribution revenue from two major customers, partially offset by decreased music royalty revenues.

Interactive revenues increased by approximately $1.5 million, or 62%, to approximately $3.9 million for the three months ended September 30, 2020 from approximately $2.4 million for the three months ended September 30, 2019. The increase in interactive revenues all relates to the WPT business and is primarily attributable to the increase in subscription revenue and increased online participation related to social gaming revenue due to the mandatory quarantine and stay-at-home measures imposed as a result of the COVID-19 pandemic.

In-person costs (exclusive of depreciation and amortization) decreased by approximately ~~$0.6 million,~~$449 thousand, or ~~47%~~45%, to approximately ~~$0.6 million~~$538 thousand for the three months ended ~~September 30, 2020~~March 31, 2021 from approximately ~~$1.2 million~~$987 thousand for the three months ended ~~September 30, 2019.~~March 31, 2020. The decrease inof in-person costs is primarily related to the decrease inof in-person revenues ~~due to~~as a result of the postponement or cancellation of events ~~and the reduced capacity and temporary closure of Allied Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada~~ due to the COVID-19 pandemic.

~~Multiplatform content costs (exclusive of depreciation and amortization) increased~~Online operating expenses decreased by approximately ~~$0.1 million,~~$22 thousand, or ~~18%~~35%, to approximately ~~$0.9 million~~$40 thousand for the three months ended ~~September 30, 2020~~March 31, 2021, from approximately ~~$0.8 million~~$62 thousand for the three months ended September 30, 2019. Certain film production costs are deferred when incurred and are amortized in the proportion of the current year revenues to management’s estimate of ultimate revenue to be recognized from the related production. Increases in estimated ultimate revenues result in a lower amortization rate, and less amortization of capitalized costs, while decreases in estimated ultimate revenues increase the amortization rate and result in higher amortization of capitalized costs. During the three months ended September 30, 2020, management reduced its estimate of ultimate revenues to be earned in connection with certain productions, which resulted in an increase in amortization of capitalized costs during the period.March 31, 2020.

Interactive costs (exclusive of depreciation and amortization) increased by approximately $0.7 million, or 120%, to approximately $1.3 million for the three months ended September 30, 2020 from approximately $0.6 million for the three months ended September 30, 2019, primarily in connection with increased interactive revenues during the period. Beginning in June 2020, the Company introduced a new poker subscription service, resulting in higher prize pools and revenue share costs. The Company expects that margins related to the new platform will improve as it gains recognition.

Online operating expenses increased by approximately $0.1 million, or 91%, to approximately $0.3 million for the three months ended September 30, 2020 from approximately $0.2 million for the three months ended September 30, 2019, primarily related to increased software maintenance expenses.

Selling and marketing expenses decreased by approximately ~~$0.5 million,~~$32 thousand, or ~~76%~~42%, to approximately ~~$0.2 million~~$44 thousand for the three months ended ~~September 30, 2020~~March 31, 2021 from approximately ~~$0.7 million~~$76 thousand for the three months ended ~~September 30, 2019, primarily due to the decrease in events held during 2020 as a result of the COVID-19 pandemic.~~ March 31, 2020.

General and administrative expenses decreased by approximately ~~$1.1 million,~~$223 thousand, or 23%, to approximately $3.6 million for the three months ended September 30, 2020 from approximately $4.7 million for the three months ended September 30, 2019. The decrease in general and administrative costs primarily results from decreases in accounting, legal, and consulting fees incurred in connection with the Merger during the three months ended September 30, 2019, decreases in travel, meals, and entertainment as a result of the COVID-19 pandemic, and decreases in bonuses earned during the period.

Stock-based compensation increased by approximately $0.6 million to approximately $0.6 million for the three months ended September 30, 2020, from approximately $18 thousand for the three months ended September 30, 2019, which represents the amortization of stock options and restricted stock which were granted during September 2019 and during the third quarter of 2020.

~~Depreciation and amortization was approximately $1.7 million for the three months ended September 30, 2020 and 2019.~~

~~Other expense increased by approximately $2.8 million, or 640%~~6%, to approximately $3.2 million for the three months ended ~~September 30, 2020,~~March 31, 2021, from approximately ~~$0.4~~$3.5 million for the three months ended ~~September 30, 2019.~~March 31, 2020. Compensation and other operating expenses in connection with Allied Esports gaming operations decreased during the three months ended March 31, 2021 as a result of the Company’s limited ability to hold events at the Esports Arena Las Vegas due to the COVID-19 pandemic. These decreases were partially offset by increases in legal and professional fees incurred during the period in connection with the sale of WPT.

~~Extinguishment loss on acceleration~~Stock based compensation was $643 thousand for the three months ended March 31, 2021, compared to $4.0 million for the three months ended March 31, 2020. The decrease included $3.7 million related to the return of ~~debt redemption~~cash held in escrow associated with an escrow agreement with Simon (the “Simon Agreement”) that occurred during the three months ended March 31, 2020.

Depreciation and amortization decreased by approximately $17 thousand, or 2%, to approximately $882 thousand for the three months ended March 31, 2021, from approximately $899 thousand for the three months ended March 31, 2020.

Other income (expense) increased by approximately $57 thousand, to approximately $55 thousand for the three months ended March 31, 2021 from approximately $(2) thousand for the three months ended March 31, 2020. The increase was due to an insurance payment received for a claim submitted for damaged equipment.

Interest expense was approximately $153 thousand for the three months ended March 31, 2021 compared to $683 thousand for the three months ended March 31, 2020, a decrease of $530 thousand, or 78%. The decrease is a result of the decrease in the principal balance of notes payable outstanding during the period.

We recognized income from discontinued operations, net of tax, of approximately ~~$1.7~~$1.6 million and $0.3 million during the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~resulted~~respectively, representing an increase of $1.4 million. The improvement in results from ~~the from acceleration of monthly payments on the Senior Secured notes that were issued in June 2020. There was no extinguishment loss recorded for the three months ended September 30, 2019.~~

Interest expense increased by approximately $1.0 million, or 230%, to approximately $1.5 million for the three months ended September 30, 2020, from approximately $0.5 million for the three months ended September 30, 2019. The increase wasdiscontinued operations is primarily due to an increase in revenues from our subscription-based poker service and other online products during the ~~amortization of debt discount on~~period in response to the ~~Senior Notes issued in June 2020. Debt discount on the Senior Notes initially aggregated to approximately $6.3 million and is being amortized over the term of the Senior Notes.~~

~~Results of Operations for the Nine months Ended September 30, 2020 Compared With the Nine months Ended September 30, 2019~~COVID-19 pandemic.

The following table summarizes our total current assets, liabilities and working capital deficit from continuing operations at March 31, 2021 and December 31, 2020, respectively:

In-person revenues decreased by approximately $4.9 million, or 57% to approximately $3.7 million for the nine months ended September 30, 2020 from approximately $8.6 million for the nine months ended September 30, 2019. The decrease in in-person revenues is primarily due to a decrease in revenue generated from in-person events, which consists of ticket, merchandising, food, and beverage revenue and sponsorship revenue, due to government mandated closures of our facilities, postponed events, and social distancing measures resulting from the COVID-19 pandemic.

Multiplatform content revenues decreased by approximately $0.7 million, or 18%, to approximately $3.2 million for the nine months ended September 30, 2020 from approximately $3.9 million for the nine months ended September 30, 2019, primarily related to decreased music royalty revenues. Music royalties are estimated each quarter and are subsequently trued up when actual royalties earned are reported to the Company. There was a $0.6 million decrease in music royalties recorded during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, as the result of true up charges recorded in each of the periods.

Interactive revenues increased by approximately $2.4 million, or 34%, to approximately $9.6 million for the nine months ended September 30, 2020 from approximately $7.2 million for the nine months ended September 30, 2019. The increase in interactive revenues all relates to the WPT business and is primarily attributable to the increase in subscription revenue and increased online participation related to social gaming revenue due to the mandatory quarantine and stay-at-home measures imposed as a result of the COVID-19 pandemic.

In-person costs (exclusive of depreciation and amortization) decreased by approximately $1.2 million, or 36%, to approximately $2.1 million for the nine months ended September 30, 2020 from approximately $3.3 million for the nine months ended September 30, 2019. The decrease in in-person costs is primarily related to the decrease in in-person revenues due to the postponement or cancellation of events and the temporary closure of, and reduced capacity at, Allied Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada due to the COVID-19 pandemic.

Multiplatform content costs (exclusive of depreciation and amortization) decreased by approximately $0.9 million, or 33%, to approximately $2.0 million for the nine months ended September 30, 2020 from approximately $2.9 million for the nine months ended September 30, 2019, primarily due to a decrease in production costs related to television content, since production of content was temporarily stopped as a result of the COVID-19 pandemic.

Interactive costs (exclusive of depreciation and amortization) increased by approximately $1.0 million, or 51%, to approximately $3.0 million for the nine months ended September 30, 2020 from approximately $2.0 million for the nine months ended September 30, 2019, primarily in connection with increased interactive revenues during the period.

Online operating expenses increased by approximately $0.6 million, or 148%, to approximately $1.0 million for the nine months ended September 30, 2020 from approximately $0.4 million for the nine months ended September 30, 2019, primarily related to increased software maintenance expenses.

Selling and marketing expenses decreased by approximately $1.3 million, or 54%, to approximately $1.1 million for the nine months ended September 30, 2020 from approximately $2.4 million for the nine months ended September 30, 2019, primarily due to the decrease in events held during 2020 as a result of the COVID-19 pandemic.

General and administrative expenses decreased by approximately $1.1 million, or 8%, to approximately $12.2 million for the nine months ended September 30, 2020 from approximately $13.3 million for the nine months ended September 30, 2019. The decrease in general and administrative costs primarily results from decreases in accounting, legal, and consulting fees incurred in connection with the Merger during the nine months ended September 30, 2019, decreases in travel, meals, and entertainment as a result of the COVID-19 pandemic, and decreases in bonuses earned during the period.

Stock-based compensation increased by approximately $4.9 million to approximately $4.9 million for the nine months ended September 30, 2020, from approximately $18 thousand for the nine months ended September 30, 2019. Of the $4.9 million of stock-based compensation recognized during the nine months ended September 30, 2020, approximately $1.3 million related to the amortization of stock options and restricted stock, and approximately $3.7 million was recognized upon the return of cash held in escrow in connection with an escrow agreement with Simon. The $18 thousand of stock-based compensation recognized during the nine months ended September 30, 2019 related to the amortization of stock options and restricted stock.

Depreciation and amortization increased by approximately $0.2 million, or 4%, to approximately $5.3 million for the nine months ended September 30, 2020, from approximately $5.1 million for the nine months ended September 30, 2019.

~~Impairment expense of approximately $1.1 million and $0.6 million during the nine months ended September 30, 2020 and 2019, respectively, related to our investment in Esports Arena LLC (“ESA”).~~

Other expense increased by approximately $9.5 million to approximately $10.0 million for the nine months ended September 30, 2020, from approximately $0.5 million for the nine months ended September 30, 2019.

Extinguishment loss on acceleration of debt redemption of approximately $1.7 million during the nine months ended September 30, 2020, resulted from the from acceleration of monthly payments on the Senior Notes during the period. There was no extinguishment loss on acceleration of debt redemption recorded for the nine months ended September 30, 2019.

Conversion inducement expense of approximately $5.2 million during the nine months ended September 30, 2020, resulted from the reduction in the conversion price and the increase in interest payable to induce conversion of certain convertible debt converted during the period. There was no conversion inducement expense recorded for the nine months ended September 30, 2019.

Interest expense was approximately $3.0 million for the nine months ended September 30, 2020, compared to approximately $0.5 million for the nine months ended September 30, 2019. The increase was primarily due to the amortization of debt discount on the Senior Notes issued in June 2020. Debt discount on the Senior Notes initially aggregated to approximately $6.3 million and is being amortized over the term of the Senior Notes.

~~The following table summarizes our total current assets, current liabilities and working capital at September 30, 2020 and December 31, 2019, respectively:~~

~~The Company’s~~Our primary sources of liquidity and capital resources are cash on the balance sheet and funds raised through debt or equity financing.

As of ~~September 30, 2020,~~March 31, 2021, we had cash ~~and working capital~~ of ~~approximately $5.8~~$10.5 million ~~(excluding~~(not including approximately $5.0 million of restricted cash) and ~~$53 thousand,~~a working capital deficit from continuing operations of approximately $13.6 million. For the three months ended March 31, 2021 and 2020, we incurred net losses from continuing operations of approximately $5.0 million and $9.1 million, respectively, and had cash provided by (used in) continuing operations of approximately $0.2 million and $(0.7) million, respectively. ~~Current liabilities include Senior Notes~~Further, convertible debt and bridge note obligations in the aggregate gross principal amount of ~~$5.7~~$3.4 million which is payable in 12 monthly installments through September 1, 2021, and for which certain payments can be accelerated at the option of the lender. As of September 30, 2020, the Company also has a Bridge Note outstanding in the amount of approximately $1.4 million and convertible debt in the aggregate amount of $2.0 million, which mature on February 23, 2022 ~~and loans payable in~~but will be paid upon the ~~aggregate amount~~closing of ~~$1.6 million outstanding under~~ the Paycheck Protection Program as described below, which are due in monthly installments beginning in November and continuing through April 2022. For the nine months ended September 30, 2020 and 2019, we incurred net lossessale of approximately $26.2 million and $10.9 million, respectively, and used cash in operations of approximately $6.5 million and $7.8 million, respectively. The aforementioned factors raise substantial doubt about our ability to continue as a going concern within one year after the issuance date of our condensed consolidated financial statements. During the period from October 1, 2020 and November 2, 2020, the Company issued an aggregate 3,120,869 shares of its common stock in satisfaction of $2.6 million and $0.4 million of principal and interest, owed on the Senior Notes, such that the principal owed on the Senior Notes as of November 2, 2020 is approximately $3.1 million.WPT (see Recent Developments).

The Company’s continuation is dependent upon attaining and maintaining profitable operations and the ability to generate positive cash flow from the various revenue sources it is pursuing. Until that time, we will need to raise additional capital to fund the operation at adequate levels to achieve our objectives. There can be no assurance that we will be able to close on sufficient financing to meet our needs. Prior to the Merger, in addition to our revenues, our operations relied heavily on investment from Ourgame by means of operational support and through the issuance of debt.

We continue to pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing or other means, including equity financing in the capital markets now available to us. However, pursuant to the terms of the Purchase Agreement in connection with the Senior Note, the Company agreed it would not take on additional debt from third parties without the Investors’ written approval, subject to certain exceptions for ordinary course trade debt. The Company also agreed to use 35% of the proceeds from future financings in excess of $3.0 million (or $5.0 million if approved by the Investors) to pay down the outstanding balance on the Senior Notes. The Company reserves its rights under the Purchase Agreement to consummate, subject to certain exceptions, a debtor or equity offering of up to $5.0 million in the future.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus ~~(COVID-19)~~(“COVID-19”) as a pandemic which continues to spread throughout the United States. As a global entertainment company that hosts numerous live events with spectators and participants in destination cities, ~~such~~the outbreak has caused people to avoid traveling to and attending ~~our~~these events. Allied ~~Esports and WPT businesses have~~Esports’ has cancelled or postponed live events, and ~~until Allied Esports’ flagship gaming arena located at the Luxor Hotel in Las Vegas, Nevada reopened on June 25, 2020 these businesses were operating online only. The arena~~ is currently running under a modified schedule and limited capacity (up to 80% capacity depending on the event) for daily play and weekly ~~tournaments, and except for a recent WPT live event in Tokyo, the WPT business continues to operate primarily online. Production of new content has been temporarily halted.~~tournaments. We ~~are continuing~~continue to monitor the outbreak of COVID-19 and the related business and travel restrictions, and changes to behavior intended to reduce its spread, and the related impact on our operations, financial position and cash flows, as well as the impact on our employees. ~~Due to the rapid development and fluidity of this situation, the~~The magnitude and duration of the pandemic and its impact on our future operations and liquidity is uncertain as of the date of this report. While there could ultimately be a material impact on our operations and liquidity, at the time of issuance, the extent of the impact cannot be determined.

~~Paycheck Protection Program Loans~~The aforementioned factors raise substantial doubt about our ability to continue as a going concern within one year after the issuance date of our condensed consolidated financial statements.

~~During May 2020,~~Our continuation is dependent upon attaining and maintaining profitable operations and the ability to generate positive cash flow from the various revenue sources we ~~received aggregate~~are pursuing. Until that time, we will likely need to raise additional capital to fund operations at adequate levels to achieve our objectives. There can be no assurance that we will be able to close on sufficient financing to meet our needs. To date, in addition to our revenues, we have funded our operations using cash ~~proceeds~~acquired in the Merger, through investments from Ourgame, our former parent, by means of ~~$1,592,429 pursuant~~operation support, and through the issuance of debt.

We continue to ~~three loans (the “PPP Loans”) provided~~pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, debt financing or other means, including equity financing in the capital markets now available to us. We may also seek to leverage our strategic partnerships to alter capital requirements or expand our available financing network. Further, we expect to receive cash in connection with the ~~Paycheck Protection Program (“PPP”) under~~sale of the ~~CARES Act. The PPP Loans mature two years from date~~WPT business, which is expected to close late in the second quarter of ~~issuance~~2021 or early in the third quarter of 2021. However, we may not be successful in identifying suitable or reasonably priced funding and/or alternative funding options in a sufficient time period (or at all) and ~~bear interest at a rate~~there can be no assurance that the sale of ~~0.98% per annum. Monthly amortized principal and interest payments~~the WPT business will close as planned. If we are ~~deferred for nine months after~~unable to obtain the ~~date~~requisite amount of ~~disbursement. While the PPP Loans currently~~financing needed to fund our planned operations, it would have a ~~two-year maturity, the amended law permits the borrower~~material adverse effect on our business and our ability to ~~request~~continue as a ~~five-year maturity from its lenders.~~ going concern, and we may have to curtail, divest, or even cease, certain operations.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020, we are eligible to apply for and receive forgiveness for all or a portion of PPP Loans. Such forgiveness will be determined, subject to limitations, based on the use of PPP Loans proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs (as defined under the PPP) and mortgage interest, rent or utility costs (collectively, “Qualifying Expenses”), and on the maintenance of employee and compensation levels during the twenty-four week period following the funding of the PPP Loans. We intend to use the proceeds of the PPP Loans for Qualifying Expenses. However, no assurance is provided that we will be able to obtain forgiveness of any of the PPP Loans in whole or in part.

The table below summarizes cash flows from continuing operations for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Net cash ~~used in~~provided by (used in) operating activities primarily represents the results of operations exclusive of non-cash expenses (including depreciation, amortization, ~~bad debt expense,~~ deferred rent, ~~conversion inducement expense, extinguishment loss, impairment expense,~~and stock-based ~~compensation, non-cash interest and amortization of debt discount)~~compensation) and the impact of changes in operating assets and liabilities.

Net cash ~~used in~~provided by (used in) operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was approximately ~~$6.5~~$0.2 million and ~~$7.8~~$(0.7) million, ~~respectively,~~ representing ~~a decrease~~an increase of ~~$1.3~~$0.9 million. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the net cash used in operating activities was primarily attributable to the net loss from continuing operations of approximately ~~$26.2~~$5.0 million and ~~$10.9~~$9.0 million, respectively, adjusted for approximately ~~$20.4~~$1.5 million and ~~$6.1~~$4.8 million, respectively, of net non-cash expenses, and approximately ~~$0.7~~$3.7 million and ~~$2.9~~$3.5 million, respectively, of cash ~~used to fund~~provided by changes in the levels of operating assets and liabilities.

Net cash ~~used in~~provided by (used in) investing activities primarily relates to the purchase of property and equipment and other investment ~~activity, partially offset by lease incentive reimbursements received.~~ activity.

Net cash provided by investing activities during the three months ended March 31, 2021 was approximately $10.0 million, which consisted primarily of a $10 million deposit for the sale of WPT.

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 was approximately ~~$4.7~~$5.4 million, ~~as compared to net cash provided by investing activities~~which consisted primarily of approximately ~~$7.9 million for the nine months ended September 30, 2019, a difference of approximately $12.6 million. During the nine months ended September 30, 2020, we returned~~ $3.7 million of cash ~~held in escrow in connection with~~used for the return of the Simon ~~Agreement, invested~~Investment, $1.5 million of cash used for our investment with TV Azteca as part of ~~our~~a Strategic Investment Agreement, ~~received $1.0~~and $0.2 million ~~in lease incentive reimbursements, and purchased $0.5 million~~used for the purchases of property and equipment and intangible assets. During the nine months ended September 30, 2019, we received $14.9 million of net cash acquired related to the Merger, partially offset by our $1.2 million investment in ESA, $3.5 million investment in TV Azteca, and purchase of $2.3 million of property and equipment and intangible assets.equipment.

~~Net cash provided by financing activities primarily relates to proceeds received through equity and debt financings, partially offset by repayments of debt.~~

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~approximately $9.8 million as~~$0 for the three months ended March 31, 2021 compared to ~~net cash provided by financing activities of approximately $3.7~~$5.0 million for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020. The decrease was a ~~difference~~result of ~~approximately $6.1 million. During the nine months ended September 30, 2020, we received approximately $9.0~~$5.0 million of proceeds from the issuance of ~~convertible debt, $7.0 million~~common stock for the three months ended March 31, 2020.

Cash held by our WPT business is classified as held for sale and is included in current assets of ~~proceeds~~discontinued operations. No cash was provided to, or used by, discontinued operations from the sale of our common stock, and approximately $1.6 million of proceeds received from loans payable, partially offset by approximately $7.0 million of convertible debt repayments and $0.8 million of issuance costs paid. During the nine months ended September 30, 2019, we received $4.0 million of proceeds from convertible debt, partially offset by approximately $0.3 million of repayments to our former Parent. WPT business.

WeThe Company will require additional investment to facilitate ~~our~~its growth plans. As a result, we plan to pivot our business goals to focus on expanding and strengthening our strategic partnerships and developing other potential avenues of business, which we are in the process of finalizing. We will provide further updates in future filings as we update our business plans.

The Company does not engage in any off-balance sheet financing activities, nor does the Company have any interest in entities referred to as variable interest entities.

Refer to our ~~amended~~ Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on ~~March 17, 2020,~~April 13, 2021 and Note 3 to the condensed consolidated financial statements of this Quarterly Report on Form 10-Q, for a discussion of our critical accounting policies and use of ~~estimates, as well as Note 3 of Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of changes in significant accounting policies.~~estimates.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. This amendment will be effective for private companies and emerging growth companies for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The FASB issued ASU No. 2018-10 “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11 “Leases (Topic 842) Targeted Improvements” in July 2018 (“ASU 2018-10” and “ASU 2018-11”), and ASU No. 2018-20 “Leases (Topic 842) - Narrow Scope Improvements for Lessors” in December 2018 (“ASU 2018-20”). ASU 2018-10 and ASU 2018-20 provide certain amendments that affect narrow aspects of the guidance issued in ASU 2016-02. ASU 2018-11 allows all entities adopting ASU 2016-02 to choose an additional (and optional) transition method of adoption, under which an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The new guidance simplifies the accounting for goodwill impairment by eliminating Step 2 of the goodwill impairment test. Under current guidance, Step 2 of the goodwill impairment test requires entities to calculate the implied fair value of goodwill in the same manner as the amount of goodwill recognized in a business combination by assigning the fair value of a reporting unit to all of the assets and liabilities of the reporting unit. The carrying value in excess of the implied fair value is recognized as goodwill impairment. Under the new standard, goodwill impairment is recognized based on Step 1 of the current guidance, which calculates the carrying value in excess of the reporting unit’s fair value. We adopted this standard on January 1, 2020 and it did not have a material impact on our consolidated financial statements or disclosures.

In July 2018, the FASB issued ASU No. 2018-09, “Codification Improvements” (“ASU 2018-09”). These amendments provide clarifications and corrections to certain ASC subtopics including the following: Income Statement - Reporting Comprehensive Income – Overall (Topic 220-10), Debt - Modifications and Extinguishments (Topic 470-50), Distinguishing Liabilities from Equity – Overall (Topic 480-10), Compensation - Stock Compensation - Income Taxes (Topic 718-740), Business Combinations - Income Taxes (Topic 805-740), Derivatives and Hedging – Overall (Topic 815-10), and Fair Value Measurement – Overall (Topic 820-10). The majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2019. This standard was adopted on January 1, 2020 and it did not have a material impact on our consolidated financial statements or disclosures.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements associated with fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. This standard was adopted on January 1, 2020 and did not have a material impact on our consolidated financial statements or disclosures.

In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date (“ASU 2020-02”) which provides clarifying guidance and minor updates to ASU No. 2016-13 – Financial Instruments – Credit Loss (Topic 326) (“ASU 2016-13”) and related to ASU No. 2016-02 - Leases (Topic 842). ASU 2020-02 amends the effective date of ASU 2016-13, such that ASU 2016-13 and its amendments will be effective for us for interim and annual periods in fiscal years beginning after December 15, 2022. We do not expect the adoption of ASU 2016-13 to have material impact on our consolidated financial statements or disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, this ASU improves disclosure requirements for convertible instruments and earnings-per-share guidance. The ASU also revises the derivative scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The amendments in this update are effective for us in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption will be permitted, but no earlier than for fiscal years beginning after December 15, 2020. We are currently evaluating the impact that this guidance will have on its consolidated financial statements.

Our management, under the direction of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September 30, 2020.~~March 31, 2021. Based on this evaluation our management, including the Company’s Chief Executive Officer and Chief Financial Officer, has concluded that the Company’s disclosure controls and procedures were not effective as of ~~September 30, 2020~~March 31, 2021 to ensure that the information required to be disclosed in our Exchange Act reports was recorded, processed, summarized and reported on a timely basis.

Despite not conducting a formal assessment regarding internal control over financial reporting, management identified the following material weaknesses as of December 31, ~~2019,~~2020, which persist as of ~~September 30, 2020:~~ March 31, 2021:

A material weakness is a control deficiency or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements.

Management has taken significant steps to enhance our internal control over financial reporting and plans to take additional steps to remediate the material weaknesses, including:

Our management ~~will establish procedures to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are~~is committed to taking further action and implementing necessary enhancements or improvements. ~~Management expects to complete its assessment of~~Notwithstanding the ~~design and operating effectiveness of its~~material weaknesses in internal ~~controls~~control over financial reporting ~~and~~described above, our management has ~~a plan~~concluded that our condensed consolidated financial statements included in ~~place to complete~~this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with accounting principles generally accepted in the ~~remediation~~United States of the foregoing deficiencies during 2020. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. America.

There were no changes in our internal control over financial reporting which occurred during our fiscal quarter ended ~~September 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On March 23, 2020, an employee of Allied Esports filed a claim in Los Angeles Superior Court alleging various employment misconduct against Allied Esports, the Company and an officer of Allied Esports in connection with a competition being hosted by Allied Esports. The claim alleged damages in excess of $3.1 million and suggested that the defendants could be subject to punitive damages. The parties agreed to a mediation and all claims asserted against us by the employee for were settled on September 10, 2020 for an amount significantly less than the original claim. The matter is now closed.None.

As a “smaller reporting company” ~~as defined by Item 10 of Regulation S-K,~~, we are not required to provide information required by this Item. However, our current risk factors are set forth in our ~~amended~~ Annual Report on Form 10-K/A for the year ended December 31, ~~2019,~~2020, filed with the SEC on ~~March 17, 2020.~~ April 13, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS~~PROCEEDS.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Unallocated corporate operating losses result from general corporate overhead expenses not directly attributable to any one of the business segments. These expenses are reported separate from the Company’s identified segments and are included are included in total operating costs and expenses on the accompanying condensed consolidated statements of operations and comprehensive loss. false --12-31 Q3 0001708341iso4217:USD xbrli:shares

ALLIED ESPORTS ENTERTAINMENT INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware		82-1659427
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		AESE		NASDAQ

Large accelerated filer	☐	Accelerated filer	☒☐
Non-accelerated filer	☐☒	Smaller reporting company	☒
		Emerging growth company	☒

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements	1

Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 (unaudited) and December 31, ~~2019~~2020	1

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	2

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020	3

Unaudited Condensed Consolidated Statements of ~~Changes in Stockholders’ Equity~~Cash Flows for the Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2021 and 2020	4

Notes to Unaudited Condensed Consolidated Financial Statements ~~of Cash Flows for the Nine Months Ended September 30, 2020 and 2019~~	5

~~Notes to Unaudited Condensed Consolidated Financial Statements~~	7

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	28

~~ITEM 3. Quantitative and Qualitative Disclosures About Market Risk~~	41

ITEM 4. Controls and Procedures	4128

PART II

OTHER INFORMATION

ITEM 1. Legal ~~Proceedings~~Proceedings.	4230

ITEM 1A. Risk ~~Factors~~Factors.	4230

ITEM 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.	4230

ITEM 3. Defaults Upon Senior ~~Securities~~Securities.	4230

ITEM 4. Mine Safety ~~Disclosures~~Disclosures.	4230

ITEM 5. Other ~~Information~~Information.	4230

ITEM 6. ~~Exhibits~~Exhibits.	4230

Signatures	4331

	September 30,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
	(unaudited)						(unaudited)
Assets
Current Assets
Cash	$	5,772,970		$	8,440,573		$	10,543,015		$	424,223
Restricted cash		5,000,000			3,650,000			5,000,000			5,000,000
Accounts receivable		1,342,629			2,121,326			62,297			271,142
Prepaid expenses and other current assets		1,371,539			1,367,795			618,876			909,766
Current assets held for sale								47,286,263			45,363,817
Total Current Assets		13,487,138			15,579,694			63,510,451			51,968,948
Property and equipment, net		17,610,568			20,554,307			8,386,189			9,275,729
Goodwill		4,083,621			4,083,621
Intangible assets, net		12,954,948			14,789,876			29,820			30,818
Deposits		704,500			712,463			625,000			625,000
Deferred production costs		11,446,098			10,962,482
Other assets		5,000,000			4,638,631
Total Assets	$	65,286,873		$	71,321,074		$	72,551,460		$	61,900,495
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	985,481		$	956,871		$	1,090,025		$	901,353
Deposit for sale of WPT								10,000,000			-
Accrued expenses and other current liabilities		3,960,864			3,892,471			2,254,191			1,987,017
Accrued interest, current portion		1,905,899			2,088,994			256,249			152,899
Due to affiliates								11,968,377			9,433,975
Deferred revenue		3,070,726			3,855,459			98,903			57,018
Bridge note payable								1,421,096			1,421,096
Convertible debt, net of discount, current portion		2,582,705			12,845,501			1,000,000			1,000,000
Convertible debt, related party, net of discount, current portion		-			988,115			1,000,000			1,000,000
Loans payable, current portion		928,660			-			814,960			539,055
Current liabilities held for sale								9,248,465			9,169,247
Total Current Liabilities		13,434,335			24,627,411			39,152,266			25,661,660
Deferred rent		3,782,940			2,472,837			1,827,909			1,693,066
Bridge note payable		1,421,096			-
Accrued interest, non-current portion		17,742			-			-			193,939
Convertible debt, non-current portion		1,000,000			-
Convertible debt, related party, non-current portion		1,000,000			-
Convertible debt, net of discount, non-current portion								-			578,172
Loans payable, non-current portion		663,769			-			92,169			368,074
Total Liabilities		21,319,882			27,100,248			41,072,344			28,494,911

Commitments and Contingencies

Stockholders’ Equity
Preferred stock, $0.0001 par value, 1,000,000 shares authorized, NaN issued and outstanding		-			-
Common stock, $0.0001 par value; 100,000,000 shares authorized, 31,989,974 and 23,176,146 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		3,199			2,317

Preferred stock, $0.0001 par value, 1,000,000 shares authorized, none issued and outstanding								-			-
Common stock, $0.0001 par value; 100,000,000 shares authorized, 39,162,811 and 38,506,844 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively								3,917			3,851
Additional paid in capital		187,206,726			161,300,916			196,872,987			195,488,181
Accumulated deficit		(143,424,659	)		(117,218,584	)		(165,614,090	)		(162,277,414	)
Accumulated other comprehensive income		181,725			136,177			216,302			190,966
Total Stockholders’ Equity		43,966,991			44,220,826			31,479,116			33,405,584
Total Liabilities and Stockholders’ Equity	$	65,286,873		$	71,321,074		$	72,551,460		$	61,900,495

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30,						September 30,						March 31,
	2020			2019			2020			2019			2021			2020

Revenues:
In-person	$	696,890		$	2,586,965		$	3,701,139		$	8,554,030		$	501,028		$	1,057,741
Multiplatform content		1,264,346			1,031,383			3,186,494			3,873,709
Interactive		3,927,066			2,423,193			9,628,009			7,187,196
Total Revenues		5,888,302			6,041,541			16,515,642			19,614,935			501,028			1,057,741
Costs and Expenses:
In-person (exclusive of depreciation and amortization)		640,409			1,196,572			2,134,964			3,334,803			537,867			987,443
Multiplatform content (exclusive of depreciation and amortization)		928,354			786,706			1,953,561			2,907,827
Interactive (exclusive of depreciation and amortization)		1,249,799			569,478			2,982,899			1,976,012
Online operating expenses		329,639			172,879			993,802			401,394			40,319			61,707
Selling and marketing expenses		168,080			705,714			1,093,295			2,392,929			43,934			75,727
General and administrative expenses		3,578,760			4,693,285			12,165,463			13,265,767			3,229,555			3,453,097
Stock-based compensation		577,167			18,407			4,912,640			18,407			643,148			3,946,786
Depreciation and amortization		1,738,020			1,716,103			5,330,317			5,133,947			881,959			899,097
Impairment of investment in ESA		-			-			1,138,631			600,000
Total Costs and Expenses		9,210,228			9,859,144			32,705,572			30,031,086			5,376,782			9,423,857
Loss From Operations		(3,321,926	)		(3,817,603	)		(16,189,930	)		(10,416,151	)		(4,875,754	)		(8,366,116	)
Other (Expense) Income:
Other income		(2,973	)		15,684			1,210			15,684
Conversion inducement expense		-			-			(5,247,531	)		-
Extinguishment loss on acceleration of debt redemption		(1,733,768	)		-			(1,733,768	)		-
Other Income (Expense):
Other income (expense), net														55,142			(2,202	)
Interest expense		(1,490,210	)		(451,553	)		(3,036,056	)		(518,443	)		(153,106	)		(682,940	)
Total Other Expense		(3,226,951	)		(435,869	)		(10,016,145	)		(502,759	)		(97,964	)		(685,142	)

Loss from continuing operations														(4,973,718	)		(9,051,258	)
Income from discontinued operations, net of tax provision														1,637,042			274,789
Net loss													$	(3,336,676	)	$	(8,776,469	)

Basic and Diluted Net (Loss) Income per Common Share
Continuing operations													$	(0.13	)	$	(0.38	)
Discontinued operations, net of tax													$	0.04		$	0.01

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted														38,522,107			23,818,144

Comprehensive Loss
Net Loss		(6,548,877	)		(4,253,472	)		(26,206,075	)		(10,918,910	)		(3,336,676	)		(8,776,469	)
Other comprehensive income:
Foreign currency translation adjustments		45,358			(21,083	)		45,548			(13,366	)		25,336			-
Total Comprehensive Loss	$	(6,503,519	)	$	(4,274,555	)	$	(26,160,527	)	$	(10,932,276	)	$	(3,311,340	)	$	(8,776,469	)

Basic and Diluted Net Loss per Common Share	$	(0.22	)	$	(0.24	)	$	(0.99	)	$	(0.79	)

Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		29,626,222			18,098,797			26,508,006			13,791,896

																Accumulated
					Common Stock						Additional					Other					Total
	Common Stock				Subscribed						Paid-in		Subscription			Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Shares			Amount			Capital		Receivable			Income		Deficit			Equity
Balance - January 1, 2020		23,176,146	$	2,317		-		$	-		$	161,300,916	$	-		$	136,177	$	(117,218,584	)	$	44,220,826
Common stock issued for cash		758,725		76		-			-			4,999,924		-			-		-			5,000,000
Stock-based compensation:
Stock options		-		-		-			-			240,399		-			-		-			240,399
Restricted stock		-		-		-			-			113,436		-			-		-			113,436
Subscription of common stock in connection with exercise of put option		-		-		1,018,848			102			1,999,898		(2,000,000	)		-		-			-
Net loss		-		-		-			-			-		-			-		(8,776,469	)		(8,776,469	)
Balance - March 31, 2020		23,934,871		2,393		1,018,848			102			168,654,573		(2,000,000	)		136,177		(125,995,053	)		40,798,192
Cash received for subscription		1,018,848		102		(1,018,848	)		(102	)		-		2,000,000			-		-			2,000,000
Shares issued upon conversion of debt		3,392,857		339		-			-			9,998,506		-			-		-			9,998,845
Beneficial conversion feature associated with convertible debt		-		-		-			-			523,636		-			-		-			523,636
Warrants issued with convertible debt		-		-		-			-			1,205,959		-			-		-			1,205,959
Stock-based compensation:
Stock options		-		-		-			-			213,763		-			-		-			213,763
Restricted stock		-		-		-			-			117,875		-			-		-			117,875
Net loss		-		-		-			-			-		-			-		(10,880,729	)		(10,880,729	)
Other comprehensive income		-		-		-			-			-		-			190		-			190
Balance - June 30, 2020		28,346,576		2,834		-			-			180,714,312		-			136,367		(136,875,782	)		43,977,731
Shares issued for redemption of debt and accrued interest		3,161,970		316		-			-			5,419,421		-			-		-			5,419,737
Shares issued in satisfaction of employee bonus obligations		217,999		22								473,978		-			-		-			474,000
Disgorgement of short swing profits		-		-		-			-			21,875		-			-		-			21,875
Stock-based compensation:
Stock options		-		-		-			-			312,117		-			-		-			312,117
Common Stock		64,286		7		-			-			128,993		-			-		-			129,000
Restricted stock		199,143		20		-			-			136,030		-			-		-			136,050
Net loss		-		-		-			-			-		-			-		(6,548,877	)		(6,548,877	)
Other comprehensive income		-		-		-			-			-		-			45,358		-			45,358
Balance - September 30, 2020		31,989,974	$	3,199		-		$	-		$	187,206,726	$	-		$	181,725	$	(143,424,659	)	$	43,966,991

	For The Three Months Ended March 31, 2021
	Common Stock				Common Stock Subscribed				Additional Paid-in		Subscription			Accumulated Other Comprehensive		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Receivable			Income		Deficit			Equity
Balance - January 1, 2021		38,506,844	$	3,851		-		-	$	195,488,181	$	-		$	190,966	$	(162,277,414	)	$	33,405,584

Stock-based compensation:
Common stock		126,584		13		-		-		199,987		-			-		-			200,000
Restricted common stock		-		-		-		-		80,006		-			-		-			80,006
Stock options		-		-		-		-		282,999		-			-		-			282,999

Shares issued for redemption of debt and accrued interest		529,383		53		-		-		821,814		-			-		-			821,867

Net loss		-		-		-		-		-		-			-		(3,336,676	)		(3,336,676	)

Other comprehensive income		-		-		-		-		-		-			25,336		-			25,336
Balance - March 31, 2021		39,162,811	$	3,917		-	$	-	$	196,872,987	$	-		$	216,302	$	(165,614,090	)	$	31,479,116

	For The Three Months Ended March 31, 2020
	Common Stock				Common Stock Subscribed				Additional Paid-in		Subscription			Accumulated Other Comprehensive		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Receivable			Income		Deficit			Equity
Balance - January 1, 2020		23,176,146	$	2,317		-	$	-	$	161,300,916	$	-		$	136,177	$	(117,218,584	)	$	44,220,826

Common stock issued for cash		758,725		76		-		-		4,999,924		-			-		-			5,000,000

Stock-based compensation:
Restricted common stock		-		-		-		-		113,436		-			-		-			113,436
Stock options		-		-		-		-		240,399		-			-		-			240,399

Subscription of common stock in connection with exercise of put option		-		-		1,018,848		102		1,999,898		(2,000,000	)		-		-			-

Net loss		-		-		-		-		-		-			-		(8,776,469	)		(8,776,469	)
Balance - March 31, 2020		23,934,871	$	2,393		1,018,848	$	102	$	168,654,573	$	(2,000,000	)	$	136,177	$	(125,995,053	)	$	40,798,192

	For the Three Months Ended March 31,
	2021		2020
Restricted common shares		199,143		-
Common shares subscribed		-		1,018,848
Options		2,430,000		2,360,000
Warrants		20,091,549		18,637,003
Convertible debt		235,294		1,647,058
Equity purchase options		600,000		600,000
Contingent consideration shares		269,231		3,846,153
		23,825,217		28,109,062

Level 1	Unadjusted quoted market prices for identical assets or liabilities;

Level 2	Quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets or liabilities; and

Level 3	Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

Balance, December 31, 2020	$	3,000
Change in fair value of sponsor warrants		36,300
Balance, March 31, 2021	$	39,300

	March 31,			December 31,
Input	2021			2020
Risk-free rate		0.35	%		0.27	%
Remaining term in years		3.36			3.61
Expected volatility		45.0	%		42.0	%
Exercise price	$	11.50		$	11.50
Fair value of common stock	$	2.88		$	1.58

	September 30, 2020							December 31, 2019							March 31, 2021								December 31, 2020
	Gross Principal Amount		Debt Discount			Convertible Debt, Net of Debt Discount		Gross Principal Amount		Debt Discount			Convertible Debt, Net of Debt Discount		Gross Principal Amount			Debt Discount		Convertible Debt, Net of Debt Discount			Gross Principal Amount			Debt Discount			Convertible Debt, Net of Debt Discount
Convertible bridge notes	$	1,000,000	$	-		$	1,000,000	$	13,000,000	$	(154,499	)	$	12,845,501
Convertible bridge notes, related party		1,000,000		-			1,000,000		1,000,000		(11,885	)		988,115
Convertible debt															$	1,000,000		$	-	$	1,000,000		$	1,000,000		$	-		$	1,000,000
Convertible debt, related party																1,000,000			-		1,000,000			1,000,000			-			1,000,000
Senior secured convertible notes		5,672,727		(3,090,022	)		2,582,705		-		-			-		-			-		-			581,818			(3,646	)		578,172
Total	$	7,672,727	$	(3,090,022	)	$	4,582,705	$	14,000,000	$	(166,384	)	$	13,833,616		2,000,000			-		2,000,000			2,581,818			(3,646	)		2,578,172
Less: current portion																(2,000,000	)		-		(2,000,000	)		(2,000,000	)		-			(2,000,000	)
Convertible debt, non-current															$	-		$	-	$	-		$	581,818		$	(3,646	)	$	578,172

	For the Three Months Ended September 30, 2020											For the Three Months Ended September 30, 2019
	Gaming & Entertainment		E-sports			Corporate⁽¹⁾			TOTAL			Gaming & Entertainment			E-sports			Corporate⁽¹⁾			TOTAL
Revenues	$	5,291,419	$	596,883		$	-		$	5,888,302		$	4,137,091		$	1,904,450		$	-		$	6,041,541
Income (Loss) from Operations	$	663,919	$	(1,945,413	)	$	(2,040,432	)	$	(3,321,926	)	$	(172,502	)	$	(2,984,047	)	$	(661,054	)	$	(3,817,603	)

	For the Nine Months Ended September 30, 2020											For the Nine Months Ended September 30, 2019
	Gaming & Entertainment		E-sports			Corporate⁽¹⁾			TOTAL			Gaming & Entertainment			E-sports			Corporate⁽¹⁾			TOTAL
Revenues	$	14,240,556	$	2,275,086		$	-		$	16,515,642		$	14,022,841		$	5,592,094		$	-		$	19,614,935
Income (Loss) from Operations	$	1,115,410	$	(11,639,966	)	$	(5,665,374	)	$	(16,189,930	)	$	(1,069,712	)	$	(8,685,385	)	$	(661,054	)	$	(10,416,151	)

	As of September 30, 2020								As of December 31, 2019
	Gaming & Entertainment		E-sports		Corporate⁽²⁾		TOTAL		Gaming & Entertainment		E-sports		Corporate⁽²⁾		TOTAL
Total Assets	$	36,673,898	$	27,470,708	$	1,142,267	$	65,286,873	$	39,290,001	$	28,852,158	$	3,178,915	$	71,321,074

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Remaining		Intrinsic
	Options			Price		Term (Yrs)		Value

Outstanding, January 1, 2020		2,480,000		$	4.34		9.86	$	-
Granted		200,000			2.15
Exercised		-			-
Expired		-			-
Forfeited		(250,000	)		4.47
Outstanding, September 30, 2020		2,430,000		$	4.15		9.15	$	-

Exercisable, September 30, 2020		100,000		$	5.66		2.38	$	-

Options Outstanding				Options Exercisable
				Weighted
		Outstanding		Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options
$	2.11		80,000		-		-
$	2.17		120,000		-		-
$	4.09		1,890,000		-		-
$	5.66		340,000		2.38		100,000
			2,430,000				100,000

Options Outstanding				Options Exercisable
				Weighted
		Outstanding		Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options
$	2.11		80,000		-		-
$	2.17		120,000		-		-
$	4.09		1,890,000		8.64		472,500
$	5.66		340,000		8.47		85,000
			2,430,000		8.62		557,500

~~Risk free interest rate~~	~~0.55% – 0.69~~	%
~~Expected term (years)~~	~~6.25~~
~~Expected volatility~~	38	%
~~Expected dividends~~	~~0.00~~	%

	Number of Restricted Stock			Weighted Average Grant Date Fair Value
Non-vested balance, January 1, 2020		80,393		$	5.66
Granted		199,143			2.02
Vested		(80,393	)		5.66
Forfeited		-			-
Non-vested balance, September 30, 2020		199,143		$	2.02

	Number of Restricted Stock		Weighted Average Grant Date Fair Value
Non-vested balance, January 1, 2021		199,143	$	2.03
Granted		-		-
Vested		-		-
Forfeited		-		-
Outstanding, March 31, 2021		199,143	$	2.03

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Intrinsic Value
Outstanding, January 1, 2020		18,637,003	$	11.50		4.6	$	-
Issued		1,454,546		4.13
Exercised		-		-
Cancelled		-		-
Outstanding, September 30, 2020		20,091,549	$	10.97		3.9	$	-

Exercisable, September 30, 2020		20,091,549	$	10.97		3.9	$	-

Warrants Outstanding					Warrants Exercisable
Exercise Price		Exercisable Into	Outstanding Number of Warrants		Weighted Average Remaining Life in Years	Exercisable Number of Warrants
$	11.50	Common Stock		18,637,003	3.9		18,637,003
$	4.13	Common Stock		1,454,546	4.7		1,454,546
				20,091,549			20,091,549

	●
	●	developing multiplatform content; and

	●	providing interactive services.

	For the									Percentage of Revenue						For the Three Months Ended March 31,						Increase
	Three Months Ended									Three Months Ended
	September 30,						Increase			September 30,
in thousands, except for percentage of revenue data	2020			2019			(Decrease)			2020			2019
(in thousands, except for percentage of revenue data)																2021			2020			(Decrease)

Revenues:
In-person	$	697		$	2,587		$	(1,890	)		12	%		43	%	$	501		$	1,058		$	(557	)
Multiplatform content		1,264			1,032			232			21	%		17	%
Interactive		3,927			2,423			1,504			67	%		40	%
Total Revenues		5,888			6,042			(154	)		100	%		100	%		501			1,058			(557	)
Costs and Expenses:
In-person (exclusive of depreciation and amortization)		640			1,197			(557	)		11	%		20	%		538			987			(449	)
Multiplatform content (exclusive of depreciation and amortization)		928			787			141			16	%		13	%
Interactive (exclusive of depreciation and amortization)		1,250			569			681			21	%		9	%
Online operating expenses		330			173			157			6	%		3	%		40			62			(22	)
Selling and marketing expenses		168			706			(538	)		3	%		12	%		44			76			(32	)
General and administrative expenses		3,578			4,693			(1,115	)		61	%		78	%		3,230			3,453			(223	)
Stock-based compensation		577			18			559			10	%		0	%		643			3,947			(3,304	)
Depreciation and amortization		1,738			1,716			22			30	%		28	%		882			899			(17	)
Total Costs and Expenses		9,209			9,859			(650	)		156	%		163	%
Loss From Operations		(3,321	)		(3,817	)		496			(56	%)		(63	%)		(4,876	)		(8,366	)		(3,490	)
Other (Expense) Income:
Other income		(3	)		16			19			(0	%)		0	%
Extinguishment loss on acceleration of debt redemption		(1,734	)		-			1,734			(29	%)		0	%
Other income (expense), net																	55			(2	)		57
Interest expense		(1,490	)		(452	)		1,038			(25	%)		(7	%)		(153	)		(683	)		530
Total Other Expense		(3,227	)		(436	)		2,791			(55	%)		(7	%)
Loss from continuing operations																	(4,974	)		(9,051	)		(4,077	)
Income from discontinued operations, net of tax provision																	1,637			275			1,362
Net Loss	$	(6,548	)	$	(4,253	)	$	2,295			(111	%)		(70	%)	$	(3,337	)	$	(8,776	)	$	(5,439	)

	For the									Percentage of Revenue
	Nine Months Ended									Nine Months Ended
	September 30,						Increase			September 30,
in thousands, except for percentage of revenue data	2020			2019			(Decrease)			2020			2019

Revenues:
In-person	$	3,701		$	8,554		$	(4,853	)		22	%		44	%
Multiplatform content		3,187			3,874			(687	)		19	%		20	%
Interactive		9,628			7,187			2,441			58	%		37	%
Total Revenues		16,516			19,615			(3,099	)		100	%		100	%
Costs and Expenses:
In-person (exclusive of depreciation and amortization)		2,135			3,335			(1,200	)		13	%		17	%
Multiplatform content (exclusive of depreciation and amortization)		1,954			2,908			(954	)		12	%		15	%
Interactive (exclusive of depreciation and amortization)		2,983			1,976			1,007			18	%		10	%
Online operating expenses		994			401			593			6	%		2	%
Selling and marketing expenses		1,093			2,393			(1,300	)		7	%		12	%
General and administrative expenses		12,165			13,266			(1,101	)		74	%		68	%
Stock-based compensation		4,913			18			4,895			30	%		0	%
Depreciation and amortization		5,330			5,134			196			32	%		26	%
Impairment of investment in ESA		1,139			600			539			7	%		3	%
Total Costs and Expenses		32,706			30,031			2,675			198	%		153	%
Loss From Operations		(16,190	)		(10,416	)		(5,775	)		(98	%)		(53	%)
Other Income (Expense):
Other income		1			15			14			0	%		0	%
Conversion inducement expense		(5,247	)		-			5,247			32	%		0	%
Extinguishment loss on acceleration of debt redemption		(1,734	)		-			1,734			10	%		0	%
Interest expense		(3,036	)		(518	)		2,518			18	%		(3	%)
Total Other Expense		(10,016	)		(503	)		9,513			61	%		(3	%)
Net Loss	$	(26,206	)	$	(10,919	)	$	15,287			(159	%)		(56	%)

(in thousands)	March 31, 2021			December 31, 2020
Current Assets	$	16,224		$	6,605
Current Liabilities	$	29,904		$	16,492
Working Capital Deficit	$	(13,680	)	$	(9,887	)

(in thousands)	September 30, 2020		December 31, 2019
Current Assets	$	13,487	$	15,580
Current Liabilities	$	13,434	$	24,627
Working Capital (Deficit)	$	53	$	(9,047	)

(in thousands)							Three Months Ended March 31,
	Nine Months Ended September 30,						2021		2020
(in thousands)	2020			2019
Net cash (used in) provided by
Net cash provided by (used in)
Operating activities	$	(6,525	)	$	(7,751	)	$	171	$	(706	)
Investing activities	$	(4,666	)	$	7,930		$	9,990	$	(5,375	)
Financing activities	$	9,847		$	3,653		$	-	$	5,000


	●	inadequate information technology general controls as it relates to user access and change management.

	●
	●	transitioning oversight of financial reporting to a principal financial officer; and

	●
	●	engaging a national accounting advisory firm to assist with the documentation, evaluation, remediation and testing of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

Exhibit		Description
~~3.1~~31.1*		~~Amendment to the Second Amended and Restated Certificate of Incorporation of Allied Esports Entertainment, Inc.~~
31.1*		Section 302 Certification of Chief Executive Officer
31.2*		Section 302 Certification of Chief Financial Officer
32.1*		Section 906 Certification of Chief Executive Officer
32.2*		Section 906 Certification of Chief Financial Officer
99.1101.INS		~~Press Release~~
101.INS*		XBRL Instance Document
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document
101.LAB*		XBRL Labels Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document

	ALLIED ESPORTS ENTERTAINMENT, INC.

Dated: ~~November 9, 2020~~May 24, 2021	By:	/s/ Frank Ng
		Frank Ng, Chief Executive Officer (Principal Executive Officer)

Dated: ~~November 9, 2020~~May 24, 2021	By:	/s/ Anthony Hung
		Anthony Hung, Chief Financial Officer (Principal Financial Officer)