ALLIED ESPORTS ENTERTAINMENT, INC.

17877 Von Karman Avenue, Suite 300

Irvine, California 92614

(949) 225-2600

CONSENT SOLICITATION STATEMENT

Your consent is solicited by the Board of Directors of Allied Esports Entertainment, Inc., also referred to throughout this Consent Solicitation Statement as “we,” “our,” “us” or “the Company.” This Consent Solicitation Statement and the accompanying Notice of Consent Solicitation and consent card are being first mailed on or about [•], 2021 to our stockholders of record on [•], 2021.

The Company is soliciting your consent to approve the sale of 100% of the outstanding capital stock of Club Services, Inc., or “CSI,” to Element Partners, LLC, or “Buyer.” CSI is an indirect wholly-owned subsidiary of the Company 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. We refer to this transaction throughout this Consent Solicitation Statement as the “Sale Transaction.”

On January 19, 2021, we and certain of our direct and indirect subsidiaries entered into a stock purchase agreement with Buyer, or the “Stock Purchase Agreement,” to govern the Sale Transaction. After careful consideration, our Board of Directors has unanimously approved the Stock Purchase Agreement and the Sale Transaction, and determined that the Sale Transaction is in the best interests of the Company and its stockholders.

The Sale Transaction may constitute the sale of substantially all of our assets under Delaware law and, accordingly, it cannot be completed unless it is approved by the affirmative vote of the holders of a majority of the issued and outstanding shares of our common stock.

We have decided to seek the written consent of our stockholders through a consent solicitation process rather than a special meeting of stockholders, in order to eliminate the costs, in dollars and management’s time, of holding a special meeting.

The Sale Transaction, including the Stock Purchase Agreement, is described in greater detail in this Consent Solicitation Statement. You may also obtain additional information about the Company from documents filed with the Securities and Exchange Commission. We urge you to read this Consent Solicitation Statement in its entirety before making a decision regarding this Consent Solicitation.

Important Notice Regarding the Availability of Consent Solicitation Materials

A copy of this Consent Solicitation Statement and the consent card are available at: https://www.cstproxy.com/alliedesportsent/cs2021.

This Consent Solicitation Statement is dated [•], 2021.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

This Consent Solicitation Statement contains certain forward-looking statements under federal securities laws. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other comparable terminology. For example, when we discuss the impacts of the Sale Transaction, the satisfaction of the closing conditions to the Sale Transaction, the timing of the completion of the Sale Transaction and our plans following the Sale transaction, we are using forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement for the Sale Transaction or could otherwise cause the Sale Transaction to fail to close; the outcome of any legal proceedings that may be instituted against us following the announcement of the Sale Transaction; the inability to complete the Sale Transaction, including due to failure to obtain approval of our stockholders or other conditions to closing; and the receipt of an unsolicited offer from another party for an alternative business transaction that could interfere with the Sale Transaction. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of the Company are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this Consent Solicitation Statement. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” in our amended Annual Report on Form 10-K/A for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, or SEC, on March 17, 2020. Readers are also urged to carefully review and consider the various disclosures we have made in this Consent Solicitation Statement and in such amended Annual Report on Form 10-K/A.

QUESTIONS AND ANSWERS ABOUT THE CONSENT SOLICITATION
AND THE SALE TRANSACTION

The following information, in question and answer format, summarizes many of the material terms of the Sale Transaction. For a complete description of the material terms of the Sale Transaction, you are advised to carefully read this entire Consent Solicitation Statement and the other documents referred to herein. The actual terms and conditions of the Sale Transaction are contained in the Stock Purchase Agreement. The Stock Purchase Agreement is included as Annex A to this Consent Solicitation Statement.

What is the Proposal?

We are seeking consent from our stockholders to sell 100% of the outstanding capital stock of CSI, which may be considered a sale of substantially all of the Company’s operating assets under Delaware law. CSI is an indirect wholly-owned subsidiary of the Company that directly or indirectly owns 100% of the outstanding capital stock of each of the legal entities that collectively operate or engage in the WPT Business. By consummating the Sale Transaction, we will be disposing of the WPT Business in its entirety.

What vote is required to approve the Proposal?

The Proposal requires the affirmative vote of holders of a majority of the Company’s outstanding shares in order to be approved by stockholders. An abstention or “broker non-vote” will have the effect of a vote against the Proposal. Buyer and certain of our key stockholders, including certain of our directors and executive officers, entered into stockholder support agreements pursuant to which they have agreed to vote their shares of Company common stock in favor of approval of the Sale Transaction and against the approval or adoption of any alternative transactions. These stockholders also granted to Buyer a proxy to vote their shares of Company common stock in favor of approval of the Sale Transaction and agreed not to transfer their respective shares of Company common stock prior to the expiration of the stockholder support agreements. These key stockholders collectively own or control an aggregate of approximately 16.1% of the Company’s outstanding common stock. In addition, the Company has agreed to use its reasonable efforts to cooperate with Buyer to obtain executed copies of a stockholder support agreement from Primo Vital Limited, the holder of 30.6% of the Company’s outstanding common stock, as promptly as possible after entering into the Stock Purchase Agreement, and to obtain a Deed of Irrevocable Undertaking containing covenants to support the Sale Transaction from stockholders of Ourgame International Holdings Limited, the parent company of Primo Vital Limited, within one business day after entering into the Stock Purchase Agreement. The forms of stockholder support agreements and Deed of Irrevocable Undertaking are attached as Exhibits A, C and D to the Stock Purchase Agreement.

What constitutes a majority of the Company’s outstanding common stock?

On [•], 2021, the Record Date for this consent solicitation, we had [•] shares of common stock issued and outstanding and, as a result, [•] shares constitutes a majority of the shares of our common stock issued and outstanding as of the Record Date.

Why isn’t the Company holding a special meeting of stockholders to vote on the Proposal?

In order to lawfully complete the Sale Transaction, Delaware law requires that holders of a majority of issued and outstanding shares of Common Stock vote in favor of the adoption and approval of the Proposal. Because approving a transaction by the written consent of stockholders can be accomplished more quickly and cost-effectively than holding a special meeting of stockholders for that purpose, our Board of Directors decided not to conduct a meeting of stockholders.

What happens if I fail to submit a consent card, and how are abstentions treated?

The failure to submit a consent card or, if your shares are held in “street name,” to give appropriate instructions to your broker or nominee, will have the same effect as voting against the Proposal. Abstentions also have the same effect as voting against the Proposal.

How will Consents be solicited?

We will bear the entire cost of solicitation, including the preparation, assembly, printing, and mailing of this Consent Solicitation Statement, the consent, and any additional solicitation material furnished to stockholders. Copies of solicitation material will be furnished to fiduciaries and custodians holding shares in their names that are beneficially owned by others. The original solicitation of consents by mail may be supplemented by a solicitation by

telephone, telegram, or other means by our directors, officers, or employees. No additional compensation will be paid to these individuals for any of those services. Except as described above, we do not presently intend to solicit consents other than by mail.

Can I revoke my Consent?

A Consent executed by a stockholder may be revoked at any time up until unrevoked Consents approving the Proposal have been submitted by the holders of a majority of our issued and outstanding capital stock as of the record date. To revoke a Consent, a stockholder must deliver a written, signed and dated revocation prior to that time. A revocation may be in any written form validly signed by the record holder as long as it clearly states that the Consent previously given is no longer effective. The revocation must be delivered to our principal executive offices or any other address provided by us for that purpose. The executed Consents will be deemed to be effective when we have received executed consents from stockholders holding a majority of our issued and outstanding capital stock.

When do Consents expire?

All Consents, regardless of when dated, will expire 60 days after the date which the earliest Consent is delivered to us unless valid, unrevoked Consents constituting the requisite number of outstanding shares of our common stock are delivered to us prior to that time. Buyer and certain of our key stockholders, including certain of our directors and executive officers, entered into stockholder support agreements pursuant to which they have agreed to vote their shares of Company common stock in favor of approval of the Sale Transaction and against the approval or adoption of any alternative transactions. We expect to receive Consents from such key stockholders on the date that this Consent Solicitation Statement and the accompanying Notice of Consent Solicitation are first sent to our stockholders. As a result, we expect that all Consents will expire unless valid, unrevoked Consents constituting the requisite number of outstanding shares of our common stock are delivered to us on or before [•], 2021.

What is the recommendation of our Board of Directors regarding the Proposal?

After careful consideration, our Board of Directors has unanimously approved the Stock Purchase Agreement and the Sale Transaction, and determined that the Sale Transaction is in the best interests of the Company and our stockholders. Accordingly, our Board of Directors unanimously recommends that you consent to the Sale Transaction so that it may be effected.

Do the Company’s stockholders have any appraisal rights in connection with the Sale Transaction?

No. The Company’s stockholders do not have appraisal rights in connection with the Sale Transaction.

What do I need to do now?

After reading and considering the information contained in this Consent Solicitation Statement, please vote as soon as possible. You may vote by completing and submitting the enclosed consent card ,either by mail or using the Internet. To submit your consent card by mail, simply complete, sign and date the consent card and return it promptly in the envelope provided. To submit your consent card using the Internet, go to www.cstproxyvote.com and follow the instructions. Have your consent card available when you access the web site.

If your shares are held by a broker, your broker will vote your shares only if you provide instructions to your broker on how to vote. You should instruct your broker on how to vote your shares using the voting instruction card provided by your broker.

Why are we proposing to sell the WPT Business?

The Board of Directors noted that the historical operations of the WPT Business and the COVID-19 pandemic adds risk to its long-term viability. Although the net profit of the WPT Business was approximately $630,571 for the nine months ended September 30, 2020, the Board of Directors is concerned that such profit may not be sustainable in light of the present global economic conditions. The Board of Directors considered a number of risks and uncertainties about continuing to operate the WPT Business, including the risks involved in any expansion of the current WPT Business into new jurisdictions or markets, the need for additional capital to expand the WPT Business, and the adverse impacts that COVID-19 has had on the WPT Business’ ability to host in-person events and the delays in the production of its television shows.

After considering the risks and challenges facing the WPT Business in the future as compared to the opportunities available to WPT Business in the future, as well as the availability of strategic alternatives, the Board of Directors has concluded that the Sale Transaction is the best alternative for seeking to maximize value to stockholders.

What are the terms of the Stock Purchase Agreement?

Pursuant to the Stock Purchase Agreement, we intend to sell, and Buyer intends to purchase, 100% of the outstanding capital stock of CSI for a base purchase price of $68.25 million. This base purchase price will be adjusted to reflect the amount of CSI’s cash, indebtedness (other than indebtedness related to an outstanding $685,300 Paycheck Protection Program loan) and accrued and unpaid transaction expenses as of the closing of the Sale Transaction. Buyer remitted a $4.0 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. Buyer has also agreed to make future payments to us totaling $10.0 million. These future payments will be made on a quarterly basis over the three year period following the closing of the Sale Transaction, with each payment to be equal to five percent of the aggregate entry fees from World Poker Tour-branded tournaments during the applicable quarterly period (but not to exceed $10.0 million in the aggregate). If the aggregate quarterly payments over such three year period are less than $10.0 million, Buyer will pay the shortfall to us on the three year anniversary of the closing of the Sale Transaction.

The Stock Purchase Agreement is described in greater detail in this Consent Solicitation Statement under the caption “The Stock Purchase Agreement” beginning on page 45. A copy of the Stock Purchase Agreement, excluding the schedules thereto, is included as Annex A to this Consent Solicitation Statement.

Will Company stockholders receive any distributions from the Sale Transaction?

The Company does not currently intend to distribute any of the proceeds from the Sale Transaction to the Company’s stockholders.

What will happen to the Company after the Sale Transaction?

After completion of the Sale Transaction, the Company will continue to be a public reporting company and our common stock will continue to trade on the Nasdaq Capital Market. The Company’s assets will consist primarily of cash and the assets utilized in the operation of the Company’s esports business, Allied Esports.

The rapid growth and popularity of gaming and esports during the COVID-19 pandemic has driven interest in the Company’s esports business, Allied Esports. The Company recently announced that its Board of Directors has decided to explore strategic options for the esports business in order to maximize value to its stockholders, including a possible sale, and the Company has engaged a financial advisor to assist with the process. If the Company pursues and ultimately completes a sale of the esports business in addition to the sale of the WPT Business in the Sale Transaction, we expect to proceed (likely under a new name) as a publicly traded holding company focused on using our cash resources to explore opportunities in online entertainment, including but not limited to, real money gaming and other gaming sectors. However, the Company does not plan to limit itself to any particular industry or geographic location in its efforts to identify prospective target businesses. Currently, the Company does not have any specific merger, asset acquisition, reorganization or other business combination under consideration or contemplation. We have not, nor has anyone on our behalf, had substantive discussions, formal or otherwise, with respect to such a transaction.

We will continue to be a public company and our common stock will continue to trade on the Nasdaq Capital Market following completion of the Sale Transaction. We do not intend to go private or terminate our public reporting obligations under the Exchange Act.

Are there any risks associated with the Sale Transaction?

Yes. You should carefully review the section of this Consent Solicitation Statement entitled “Risk Factors,” which presents risks and uncertainties related to the Sale Transaction, in the event the Stock Purchase Agreement is terminated prior to completion of the Sale Transaction, and our operations following the completion of the Sale Transaction.

What factors were considered by management and our Board of Directors in deciding to enter into the Stock Purchase Agreement?

In reaching its decision to adopt and approve the Stock Purchase Agreement and the Sale Transaction, our Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, such as the price to be paid including the future participation in the revenues earned by Buyer, the strategic alternative evaluation process and fairness opinion of Shot Tower Securities LLC that led to entering into the Stock Purchase Agreement, the prospects of the WPT Business and the terms and conditions of the Stock Purchase Agreement.

The Board also considered, and balanced against the potential benefits of the Sale Transaction, certain adverse factors. The Board of Directors noted that the historical operations of the WPT Business and the COVID-19 pandemic adds risk to its long-term viability. Although the net profit of the WPT Business was approximately $630,571 for the nine months ended September 30, 2020, the Board of Directors is concerned that such profit may not be sustainable in light of the present global economic conditions. The Board of Directors considered a number of risks and uncertainties about continuing to operate the WPT Business, including the risks involved in any expansion of the current WPT Business into new jurisdictions or markets, the need for additional capital to expand the WPT Business, and the adverse impacts that COVID-19 has had on the WPT Business’ ability to host in-person events and the delays in the production of its television shows.

Based on the available strategic and alternatives, and considering the factors identified above, our Board of Directors concluded that it would be in the best interest of the Company and its stockholders to sell the WPT Business, and that the Sale Transaction and the Stock Purchase Agreement reflect the highest value for the WPT Business reasonably attainable for our stockholders.

How is the purchase price for the Sale Transaction being financed by Buyer?

Buyer has advised the Company that the total amount of funds required to be delivered to the Company at closing will be funded from Buyer’s cash on hand.

What are the conditions of the Sale Transaction?

The following list includes what our Board of Directors and our management believe are the material conditions to the Sale Transaction, all of which must be satisfied or waived at the time of the closing. In view of the fact that interpretations of “materiality” can be subjective, the list is qualified by reference to the Stock Purchase Agreement, which is attached as Annex A to this Consent Solicitation Statement. You are urged to carefully read this entire document including the Stock Purchase Agreement.

•        Our stockholders must approve the Proposal;

•        No legal process preventing or making illegal the consummation of the Sale Transaction shall be in effect.

•        The respective representations and warranties of the parties to each other must be true in all material respects;

•        Each party must have performed in all material respects all obligations required to be performed by it under the Stock Purchase Agreement at or prior to the closing;

•        No “Material Adverse Effect” (as defined in the Stock Purchase Agreement) with respect to the Company, Seller or CSI shall have occurred;

•        Buyer shall have received copies of certain identified third party consents and approvals for the Sale Transaction; and

•        The parties shall have delivered to each other the various closing deliverables outlined in the Stock Purchase Agreement.

When is the closing of the Sale Transaction expected to occur?

We intend to consummate the Sale Transaction shortly after obtaining stockholder approval for the Proposal, assuming all other conditions to the completion of the Sale Transaction have been satisfied or waived. Pursuant to the Stock Purchase Agreement, the Outside Date for closing the Sale Transaction is March 31, 2021, after which either we or Buyer may terminate the Stock Purchase Agreement.

How may the Stock Purchase Agreement be terminated?

The parties to the Stock Purchase Agreement may mutually agree to terminate the Stock Purchase Agreement at any time.

We, on the one hand, or Buyer, on the other hand, may terminate the Stock Purchase Agreement if:

•        any governmental entity that must grant a regulatory approval for the Sale Transaction denies approval of the Sale Transaction, or any governmental entity issues a final and nonappealable order, injunction or decree permanently prohibiting the consummation of the Sale Transaction;

•        the Sale Transaction is not consummated on or before the Outside Date, which is March 31, 2021; or

•        there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth in the Stock Purchase Agreement by us, in the case of a termination by Buyer, or Buyer, in the case of a termination by us.

Buyer, may terminate the Stock Purchase Agreement:

•        if, prior to receipt of stockholder approval, our Board of Directors changes its recommendation that our stockholders approve the Sale Transaction, or if we materially breach our covenant not to solicit a competing acquisition proposal; or

•        in its discretion at any time prior to the Outside Date.

We may terminate the Stock Purchase Agreement if we receive a competing acquisition proposal from a third party that our Board of Directors determines is more favorable to our stockholders than the Sale Transaction, our Board of Directors authorizes our entry into a definitive agreement to consummate the transaction contemplated by such competing proposal, and we enter into such definitive agreement concurrently with the termination of the Stock Purchase Agreement.

What will happen if the Proposal is not approved by our stockholders or the Sale Transaction is not completed for any other reason?

Depending on the circumstances surrounding a termination of the Stock Purchase Agreement, either party may be required to pay a $3.0 million termination or non-performance fee to the other, and we may be required to return to Buyer the $4.0 million advance payment of 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 termination or 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 obligation, to require the Buyer to into such license agreement with Peerless Media Limited. The form of the agreement governing the license is attached as Exhibit B to the Stock Purchase Agreement.

If the Sale Transaction is not completed, we may explore other potential transactions, including a sale of the WPT Business to another party on such terms as our Board of Directors may approve. The terms of an alternative transaction may be more or less favorable to us than the terms of the Sale Transaction and there can be no assurance that we will be able to reach agreement with or complete an alternative transaction with another party. We may also decide to retain the WPT Business and continue to operate it. If we receive a competing acquisition proposal prior to termination of the Stock Purchase Agreement, enter into a definitive agreement within 12 months after termination of the Stock Purchase Agreement to sell the WPT Business and consummate such sale, we must pay to Buyer the $3.0 million termination fee.

What are the federal income tax consequences of the Sale Transaction?

We will treat the Sale Transaction as a taxable stock sale of a U.S. consolidated return subsidiary. The Sale Transaction will be fully taxable to the Company based on the fair market value of the consideration received as compared to the stock basis in CSI (and therefore in the WPT Business) at the closing of the Sale Transaction. Based on an estimated analysis of the Sale Transaction by the Company’s tax advisors, the Company does not expect that the Sale Transaction will result in any material U.S. federal income tax consequences.

The Company does not expect that the Sale Transaction will result in any federal income tax consequences for its stockholders because they will not receive any of the proceeds from the Sale Transaction.

How will the Sale Transaction be accounted for?

Upon completion of the Sale Transaction, we will remove from our consolidated balance sheet all of the assets and liabilities associated with the WPT Business sold to Buyer and will reflect therein the effect of the receipt and the use of the proceeds of the Sale Transaction and other related transactions, including (a) the repayment of any remaining convertible debt or bridge notes, (b) the payment of our transaction expenses, and (c) the impact of the acceleration of vesting of stock-based compensation awards held by employees of the WPT Business. We will record a gain on the sale of the WPT Business in our consolidated statement of operations equal to the difference between the purchase price received or expected to be received and the book value of the assets and liabilities sold. Furthermore, any financial statements that are issued in the future, relating to periods prior to the closing of the Sale Transaction, will present the assets and liabilities of the WPT business on a condensed basis as “held for sale” and the revenues and operating results of the WPT business will be condensed and presented as “income (loss) from discontinued operations”.

Are any government approvals required in connection with the Sale Transaction?

Except for compliance with the applicable regulations of the SEC in connection with this Consent Solicitation Statement and with the DGCL in connection with the Sale Transaction, we are not required to comply with any federal or state regulatory requirements, and no federal or state regulatory approvals are required in connection with Sale Transaction.

Who can help answer my questions?

If you would like additional copies, without charge, of this Consent Solicitation Statement or if you have questions about the Sale Transaction, including the procedures for voting your shares, you should contact David Polgreen, General Counsel, at (949) 225-2600.

RISK FACTORS

In addition to the other information included in this Consent Solicitation Statement, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Information,” you should carefully consider each of the risks described below before deciding whether to vote for approval of the Sale Transaction. You should also read and consider the other information in this Consent Solicitation Statement. See the section entitled “Where You Can Find More Information.”

Risks Related to the Sale Transaction

If the Company fails to complete the Sale Transaction, it may not be able to successfully complete another strategic transaction.

The consummation of the proposed Sale Transaction is subject to a number of closing conditions, including that the Company’s stockholders approve the Sale Transaction. The obligation of Buyer to complete the Sale Transaction is also subject to the absence of a change in circumstances that are materially adverse to the Company’s financial condition, assets, business or results of operations. If the closing conditions for the Sale Transaction are not satisfied, then the Stock Purchase Agreement can be terminated.

If the Company does not complete the Sale Transaction, it will review all options for continuing operations, possibly including seeking to identify and effect an alternative business combination, sale of assets or another similar strategic transaction or transactions. However, the Company may not be able to consummate such an alternative transaction on favorable terms, if at all, and a third party may not offer to purchase the Company’s assets for a price equal to or greater than the price proposed to be paid by Buyer. If the Company is unable to successfully consummate one or more alternative strategic transactions relating to its business, the Company will continue to execute on its current business plan. The Company intends to continue exploring strategic options for its esports business, including the possible sale of such business.

If we fail to complete the Sale Transaction, the Company’s business may be harmed.

The Company cannot predict whether it will succeed in obtaining the approval of its stockholders, or that the other conditions to close the Sale Transaction will be satisfied. As a result, the Company cannot guarantee that the Sale Transaction will be completed.

Following the Company’s public announcement of the Sale Transaction, third parties may be unwilling to enter into material agreements with the Company. New and existing customers and business partners may prefer to enter into agreements with the Company’s competitors because such customers and partners perceive that its relationships are likely to be more stable. If the Company fails to complete the Sale Transaction, the failure to maintain existing relationships with our customers, suppliers and employees or enter into new relationships, may harm our business, and the results of operations, financial condition and the market price for our common stock may decline.

In addition, if we are required to pay a termination fee or expense reimbursements in connection with the termination of the Stock Purchase Agreement, we may have difficulty recouping such costs, in addition to the costs incurred in connection with negotiating the Sale Transaction.

Pending the completion of the Sale Transaction, the Company may not make certain changes in the business and may not be able to enter into a business combination with another party.

Covenants in the Stock Purchase Agreement impede the Company’s ability to enter into specified transactions that are not in the ordinary course of business pending completion of the Sale Transaction. Existing and potential customers and vendors of our poker business may delay or cease entering into transactions with our poker business until the ownership and management of the poker business is clarified and employees and other key partners in the poker business may choose to leave the poker business due to uncertainties inherent in the Sale Transaction process.

Moreover, while the Stock Purchase Agreement is in effect and subject to limited exceptions, the Company is prohibited from soliciting, initiating, encouraging, taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to, or entering into discussions or negotiations with regard to, an acquisition proposal with any third party, subject to specified exceptions. Any such acquisition proposal could be favorable to the Company’s stockholders.

The Company will incur significant expenses in connection with the Sale Transaction and could be required to make significant payments if the Stock Purchase Agreement is terminated under certain conditions.

Depending on the circumstances surrounding a termination of the Stock Purchase Agreement, the Company may be required to pay a $3.0 termination fee to Buyer, and we may be required to 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. In addition, the Company expects to pay legal fees, accounting fees and financial and other advisory fees and expenses whether or not the Sale Transaction is completed. As a result, we may have difficulty recouping the costs incurred in connection with pursuing the Sale Transaction, and our cash position would be adversely impacted.

The WPT business will be subject to the terms of a license agreement for real money gaming in Asia if the Stock Purchase Agreement is terminated under certain circumstances.

Effective upon any termination of the Stock Purchase Agreement, other than a termination in which Buyer is required to pay a termination or 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 obligation, to require the Buyer to into such license agreement with Peerless Media Limited. The form of the agreement governing the license is attached as Exhibit B to the Stock Purchase Agreement. The existence of the license will prevent us from pursuing and entering into a similar license in the Asian territory with another third party that may have contained terms that are more advantageous to us. In addition, if we wish to pursue a sale of the WPT Business to another purchaser after termination of the Stock Purchase Agreement, the existence of this license may deter another otherwise interested third party purchaser from pursuing an acquisition of the WPT Business, or reduce the consideration such a party would be will to pay for it.

The announcement and pendency of the Sale Transaction, whether or not completed, may adversely affect us.

The announcement and pendency of the Sale Transaction may adversely affect the trading price of our common stock, our business or our relationships with clients, customers, suppliers and employees. Third parties may be unwilling to enter into material agreements with respect to the WPT Business. Additionally, employees working in the WPT Business may become concerned about the future of the WPT Business, and lose focus or seek other employment. In addition, while the completion of the Sale Transaction is pending, we may be unable to attract and retain key personnel and our management’s focus and attention and employee resources may be diverted from operational matters or the exploration of strategic operations for our esports business, including its possible sale.

The Stock Purchase Agreement limits our ability to pursue alternatives to the Sale Transaction.

The Stock Purchase Agreement contains provisions that may make it more difficult for us to sell our entire company or the WPT Business to any party other than Element Partners, LLC. These provisions include the prohibition on our ability to solicit competing proposals and the requirement that we pay Buyer a termination fee of $3 million if we terminate the Stock Purchase Agreement to enter into a definitive agreement with respect to a superior proposal. These provisions could make it less advantageous for a third party that might have an interest in acquiring us or all of or a significant part of the WPT Business to consider or propose an alternative transaction, even if that party were prepared to pay consideration with a higher value than the consideration to be paid by Buyer.

Risks Related to us if the Sale Transaction is Completed

Buyer may not honor all of its obligations under the Stock Purchase Agreement.

Effective upon any termination of the Stock Purchase Agreement, other than a termination in which Buyer is required to pay a termination or 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 obligation, to require the Buyer to into such license agreement with Peerless Media Limited. The form of the agreement governing the license is attached as Exhibit B to the Stock Purchase Agreement. Buyer may not honor all of its obligations under the Stock Purchase Agreement and the licensing agreement.

The Company will become a company with cash and investments, our esports business and a participation in future WPT brand revenues, which may prove difficult for investors to evaluate our ability to achieve stated business objectives.

After the Sale Transaction is completed, we will have disposed of substantially all of our operating assets other than cash, investments and our esports business. The Company recently announced that its Board of Directors has decided to explore strategic options for the esports business in order to maximize its value to stockholders, including a possible sale, and the Company has engaged a financial advisor to assist with the process. If the Company pursues and ultimately completes a sale of the esports business, we would then become a development stage company with no historic operating results. In that situation we would expect to proceed (likely under a new name) as a publicly traded holding company focused on using our cash resources to explore opportunities in online entertainment, including but not limited to, real money gaming and other gaming sectors; however we do not plan to limit ourselves to any particular industry or geographic location in its efforts to identify prospective target businesses. Currently, however, we have no specific merger, asset acquisition, reorganization or other business combination under consideration or contemplation. We have not, nor has anyone on our behalf, had substantive discussions, formal or otherwise, with respect to such a transaction. We may be unsuccessful in pursuing acquisition targets, or acquisition targets, if acquired, may not prove to have successful operations.

We have no current plans to pay cash dividends on our common stock with the proceeds of the Sale Transaction; as a result, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We have no current plans to pay dividends on our common stock with the proceeds of the Sale Transaction. Any future determination to pay dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, general business conditions and other factors that our board of directors may deem relevant. As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it.

Following the closing of the Sale Transaction, we will be subject to five-year non-solicitation and non-competition covenants under the Stock Purchase Agreement, which will limit our ability to operate in poker related fields.

Following the closing of the Sale Transaction, we will be subject to five-year non-solicitation and non-competition covenants made in the Stock Purchase Agreement. During such five-year period, we will be prohibited from participating or engaging in, in any manner or capacity, the Restricted Business, and from soliciting the customers, suppliers or employees of the WPT Business. For this purpose, the “Restricted Business” means, generally, any business involving variants of the game of poker specified in the Stock Purchase Agreement and any activities ancillary or related to such variants of poker, including, without limitation, (i) organizing, hosting, operating, promoting, and/or conducting events relating to poker, (ii) broadcasting or distributing content relating to such events, (iii) organizing, hosting,

operating, promoting, and/or conducting clubs or organizations related to poker, and (iv) commercializing products and merchandise relating to poker. While we do not believe these limitations will negatively affect our esports business, these restrictions may adversely impact our future opportunities.

Risks Related to the Current Business

In addition to the other information contained in this Consent Solicitation Statement, you should carefully consider each of the risks described below. Until the close of the Sale Transaction, the Company expects to continue to execute its current business strategy with respect to its esports and poker-related business. Except as specifically described below, the following discussion of risks related to the Company does not reflect changes to the Company’s business that may occur if it consummates the Sale Transaction. Allied Esports International, Inc., together with its subsidiaries, owns and operates the esports-related businesses of AESE, and are collectively referred to as “Allied Esports.”. Peerless Media Limited, CSI and WPT Enterprises, Inc. operate the poker-related business of AESE and are collectively referred to herein as “World Poker Tour” or “WPT.”

Allied Esports Risk Factors

Allied Esports is subject to risks associated with operating in a rapidly developing industry and a relatively new market.

Many elements of Allied Esports’ business are unique, evolving and relatively unproven. Its business and prospects depend on the continuing development of live streaming of competitive esports gaming. The market for esports gaming competition is relatively new and rapidly developing and is subject to significant challenges. 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. In addition, Allied Esports’ continued growth depends, in part, on its ability to respond to constant changes in the esports gaming industry, including 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, and Allied Esports will try to adapt its business model as needed to accommodate change and remain on the forefront of its competitors, Allied Esports may be unsuccessful in doing so and does not provide any guarantees or assurances of success as the industry continues to evolve.

Allied Esports may not be able to generate sufficient revenue to achieve and sustain profitability.

Allied Esports 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). In addition, Allied Esports expects to continue to incur significant legal, accounting and other expenses related to being a public company. If its revenue declines or fails to grow at a rate faster than these increases in operating expenses, it will not be able to achieve and maintain profitability in future periods. As a result, Allied Esports may generate losses. Allied Esports cannot assure you that it will achieve or maintain profitability.

Allied Esports generates a portion of its revenues from advertising and sponsorship. If it fails to attract more advertisers and sponsors to its live events, tournaments or content, or if advertisers or sponsors are less willing to advertise with or sponsor Allied Esports, its revenues may be adversely affected.

Allied Esports generates revenue from advertising and sponsorship, and it expects to further develop and expand its focus on these revenues in the future. These revenues partly depend on the advertisers’ willingness to advertise in the esports gaming industry. If the esports gaming advertising and sponsorship market does not continue to grow, or if Allied Esports is unable to capture and retain a sufficient share of that market, Allied Esports’ profitability may be materially and adversely affected. Furthermore, with unfavorable economic external factors, sponsors and advertisers may not have enough budget allocations for spending in sponsorship and advertising in esports, which would also lead to an adverse impact on Allied Esports’ revenue stream.

Allied Esports’ business model may not remain effective and it cannot guarantee that its future monetization strategies will be successfully implemented or generate sustainable revenues and profit.

Allied Esports generates revenues from advertising and sponsorship of its live events, its content, the sale of merchandising, and the operation of its esports arenas. Allied Esports has generated, and expects to continue to generate, a substantial portion of revenues using this revenue model in the near term. Although Allied Esports anticipates growth in Allied Esports’ business utilizing this revenue model, there is no guarantee that growth will continue in the future, and the demand for its offerings may change, decrease substantially or dissipate, or it may fail to anticipate and serve esports gamer demands effectively. The COVID-19 outbreak may also continue to cause the demand for our in-person events to reduce and shift demand to online gaming. Allied Esports may determine to enter into new opportunities to expand its business, including online gaming platforms, which may or may not be successful. Any such expansions involve additional risks and costs that could materially and adversely affect its business.

Allied Esports’ growth strategy depends on the availability of suitable locations for its proprietary and licensed esports arenas and its ability to open new locations and operate them profitably.

A key element of Allied Esports’ growth strategy is to extend its brand by opening additional flagship arenas throughout the world and licensing the Allied Esports brand to third party esports arena operators, which it believes will provide attractive returns on investment. However, desirable locations may not be available at an acceptable cost. Opening these additional locations will depend upon a number of factors, many of which are beyond Allied Esports’ control, including its ability or the ability of the selected licensee to:

•        reach acceptable agreements regarding the lease of the locations;

•        comply with applicable zoning, licensing, land use and environmental regulations and orders (including those related to social distancing policies during the COVID-19 pandemic);

•        raise or have available an adequate amount of cash or currently available financing for construction and opening costs;

•        timely hire, train and retain the skilled management and other employees necessary to meet staffing needs;

•        negotiate acceptable terms with any unions representing employees;

•        obtain, for acceptable cost, required permits and approvals, including liquor licenses; and

•        efficiently manage the amount of time and money used to build and open each new location.

If Allied Esports succeeds in opening new arenas on a timely and cost-effective basis, it may nonetheless be unable to attract enough gamers or spectators to the new location (or to existing locations of affiliated arenas) because its entertainment and menu options might not appeal to them. Failure to do so could have a significant adverse effect on Allied Esports’ overall operating results.

Allied Esports has not entered into definitive license agreements with all game publishers that it currently has relationships with, and it may never do so.

Although Allied Esports has relationships with many game publishers for tournament event and content experiences involving their respective intellectual properties and enters into definitive license agreements with such game publishers from time to time, Allied Esports does not have definitive license agreements in place with all of its game publishers. No assurances can be given as to when or if it will be able to come to agreeable terms with game publishers for any future license agreements. If Allied Esports is unable to come to mutually agreeable terms and enter into definitive license agreements with game publishers, game publishers may unilaterally choose to discontinue its relationship with Allied Esports, thereby preventing Allied Esports from offering tournament event and content experiences using their game intellectual property. Should game publishers choose not to allow Allied Esports to offer tournament event and content experiences involving their intellectual property to Allied Esports’ customers, the popularity of Allied Esports’ tournaments and content may decline, which could materially and adversely affect its results of operations and financial condition.

Even if Allied Esports is able to license its brand to third party esports operators, there is a risk that those operators could damage its brand by operating esports arenas that are not at Allied Esports’ standards of operation.

As Allied Esports licenses the Allied Esports brand to third party esports arena operators around the world, it will depend on those operators to run those arenas at a quality level similar to Allied Esports’ owned and operated arenas. Allied Esports’ strategy depends on customers associating the third party esports arenas as part of Allied Esports’ network of affiliated arenas, which it believes will expand its brand recognition and increase customers, revenue, and growth. If Allied Esports’ affiliate arenas are poorly operated, or if those operators fail to use Allied Esports’ name and branding in a manner consistent with Allied Esports’ corporate messaging and branding, or if there are safety issues or other negative occurrences at affiliate arenas, Allied Esports’ name and brand could be significantly damaged, which would make its expansion difficult and materially adversely affect its results of operations and financial condition.

Allied Esports’ growth strategy includes deploying additional mobile arenas in the U.S. and Europe to host its tournaments and events and it must operate them profitably.

A key element of Allied Esports’ growth strategy is to extend its brand by increasing and adding to its portfolio of mobile arenas in the U.S. and Europe, as we believe doing so will provide attractive returns on investment. Adding these mobile arenas will depend upon a number of factors, many of which are beyond Allied Esports’ control, including but not limited to our ability, or the ability of our licensees, to:

•        reach acceptable agreements regarding the lease or acquisition of the trucks that are the basis of the mobile arenas;

•        comply with applicable zoning, licensing, land use and environmental regulations and orders (including those related to social distancing policies during the COVID-19 pandemic) and obtain required permits and approvals;

•        raise or have available an adequate amount of cash or currently available financing for construction of the mobile arenas and the related operational costs;

•        timely hire, train and retain the skilled management and other employees necessary to operate the mobile arenas;

•        efficiently manage the amount of time and money used to build and operate each new mobile arena; and

•        manage the risks of road hazards, accidents, traffic violations, etc. that may impede the operations of the mobile arenas.

The nature of hosting esports events exposes Allied Esports to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at the arenas, and health and safety concerns.

Allied Esports’ business of hosting esports events inherently exposes it to negative publicity or customer complaints as a result of accidents, injuries or, in extreme cases, deaths arising from incidents occurring at our arenas, including health, safety or security issues, and quality and service standards. Even isolated or sporadic incidents or accidents may have a negative impact on Allied Esports’ brand image and reputation, the arenas’ popularity with gamers and spectators or the ability to host esports events at all.

Allied Esports’ marketing and advertising efforts may fail to resonate with gamers.

Allied Esports’ live events, tournaments and competitions are marketed through a diverse spectrum of advertising and promotional programs such as online and mobile advertising, marketing through websites, event sponsorship and direct communications with the esports gaming community including via email, blogs and other electronic means. An increasing portion of Allied Esports’ marketing activity is taking place on social media platforms that are either outside, or not totally within, its direct control. Changes to gamer preferences, marketing regulations, privacy and data protection laws, technology changes or service disruptions may negatively impact its ability to reach target gamers. Allied Esports’ ability to market its tournaments and competitions is dependent in part upon the success of these programs.

The esports gaming industry is competitive, and gamers may prefer competitors’ arenas, leagues, competitions or tournaments over those offered by Allied Esports.

The esports gaming industry is competitive. Competitors range from established leagues and championships owned directly, as well as leagues franchised by well-known and capitalized game publishers and developers, interactive entertainment companies, diversified media companies and emerging start-ups. New competitors will likely continue to emerge. Many of these competitors may have greater financial resources than Allied Esports. If Allied Esports’ competitors develop and launch competing arenas, leagues, tournaments or competitions, Allied Esports’ revenue, margins, and profitability could decline.

Allied Esports may not provide events or tournaments with games or titles for which the esports gaming community is interested.

Allied Esports must attract and retain the popular esports gaming titles in order to maintain and increase the popularity of its live events, leagues, tournaments and competitions. Allied Esports must identify and license popular games that resonate with the esports gamer community on an ongoing basis. Allied Esports cannot assure you that it can attract and license popular esports games from their publishers, and failure to do so would have a material and adverse impact on Allied Esports’ results of operations and financial conditions.

If Allied Esports fails to keep its existing gamers engaged, acquire new gamers and expand interest in its live events, leagues, tournaments and competitions, its business, profitability and prospects may be adversely affected.

Allied Esports’ success depends on its ability to maintain and grow the number of gamers attending its live events, tournaments and competitions, and keep its gamers and attendees highly engaged. In order to attract, retain and engage gamers and remain competitive, Allied Esports must continue to develop and expand its live events, leagues, produce engaging tournaments and competitions, and implement new content formats, technologies and strategies to improve its product offerings. There is no assurance it will be able to do so.

A decline in the number of gamers may adversely affect the engagement level of gamers with Allied Esports’ tournament and entertainment platform under development may reduce our revenue opportunities and have a material and adverse effect on our business, financial condition and results of operations.

It is vital to Allied Esports’ operations that its planned online esports tournament and gaming subscriptions platform be responsive to evolving gamer preferences and offer first-tier esports game content and other services that attracts gamers. Allied Esports must also keep providing gamers new features and functions to enable superior content viewing and interaction, or the number of gamers utilizing the platform will likely decline. Any decline in the number of gamers will likely have a material and adverse effect on our operations.

There is no guarantee that Allied Esports will be able to complete its planned online esports tournament and gaming subscription platform, or that such platform once completed will be or remain popular.

Allied Esports cannot assure you that the online esports tournament and gaming subscription platform it intends to develop will be completed in a timely manner or, if completed, become popular with gamers to offset the costs incurred to operate and expand it. This will require substantial costs and expenses. If such increased costs and expenses do not effectively translate into improved gamer engagement, Allied Esports’ results of operations may be materially and adversely affected.

If Allied Esports fails to maintain and enhance its brands, its business, results of operations and prospects may be materially and adversely affected.

Allied Esports believes that maintaining and enhancing its brands is important for its business to succeed by increasing the number of gamers and engagement by the esports community. Since Allied Esports operates in a highly competitive market, brand maintenance and enhancement directly affects its ability to maintain and enhance its market position. As Allied Esports expands, it may conduct various marketing and brand promotion activities using various methods to continue promoting its brands, but it cannot assure you that these activities will be successful. In addition, negative publicity, regardless of its veracity, could harm Allied Esports’ brands and reputation, which may materially and adversely affect Allied Esports’ business, results of operations and prospects.

If Allied Esports fails to anticipate and successfully implement new esports technologies or adopt new business strategies, technologies or methods, its business may suffer.

Rapid technology changes in the esports gaming market requires Allied Esports to anticipate, sometimes years in advance, which technologies it must develop, implement and take advantage of in order to be and remain competitive in the esports gaming market. Allied Esports has invested, and in the future may invest, in new business strategies including its to-be-developed online esports tournament and entertainment subscription platform, technologies, products, or games to engage a growing number of gamers and deliver the best gaming experiences possible. These endeavors involve significant risks and uncertainties, and no assurance can be given that the technology it adopts and the features it pursues will be successful. If Allied Esports does not successfully implement these new technologies, its reputation may be materially adversely affected and its financial condition and operating results may be impacted.

Allied Esports uses third-party services in connection with its business, and any disruption to these services could result in a disruption to its business, negative publicity and a slowdown in the growth of its users, materially and adversely affecting its business, financial condition and results of operations.

Allied Esports’ business depends on services provided by, and relationships with, various third parties, including cloud hosting, server operators, broadband providers, and computing peripheral suppliers, among others. The failure of any of these parties to perform in compliance with our agreements may negatively impact Allied Esports’ business.

Additionally, if such third parties increase their prices, fail to provide their services effectively, terminate their service or agreements or discontinue their relationships with Allied Esports, Allied Esports could suffer service interruptions, reduced revenues or increased costs, any of which may have a material adverse effect on its business, financial condition and results of operations.

Allied Esports may not be able to procure the necessary permits and licenses to operate its arenas.

Allied Esports must obtain certain permits and licenses, including liquor licenses, to operate its arenas. Often these processes can be expensive and time consuming. There is no guarantee that Allied Esports will be able to obtain such permits and licenses on a timely or cost-effective basis. Any delays could jeopardize the ability of Allied Esports to operate the arenas and host events. As a result, Allied Esports’ business could suffer.

Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate Allied Esports’ ability to generate revenues on its esports gaming platform it intends to develop, which could materially and adversely impact the viability of this business.

As part of its esports gaming platform to be developed, Allied Esports intends to offer subscribers the chance to win cash and prizes when playing esports games and tournaments on the platform. Awarding cash and prizes would require compliance with the laws or regulations in various states or countries over sweepstakes, promotions and giveaways, which are complex and constantly changing. Any negative finding of law regarding the characterization of the type of online activity carried out on the esports gaming platform could limit or prevent Allied Esports’ ability to obtain subscribers in those jurisdictions, which in turn could significantly impact Allied Esports’ ability to generate revenue. The ability or willingness to work with Allied Esports by payment processors and other service providers necessary to conduct the esports gaming platform business also may be limited due to such changes in laws or any perceived negative consequences of engaging in the business of sweepstakes, promotions and giveaways that will be utilized by the esports gaming platform.

Negotiations with unionized employees could delay opening or operating Allied Esports’ arenas.

Certain of Allied Esports’ employees are represented by one or more unions. Allied Esports will need to engage such unions to seek to employ the services of the employees on mutually acceptable terms. However, Allied Esports cannot guarantee that such negotiations will be timely concluded to avoid interruption in its tournament schedule, or that such negotiations will ultimately result in an agreement. Any failure to timely conclude the negotiations could cause a delay in Allied Esports’ ability to timely open arenas or host events. Either of these events would adversely affect Allied Esports’ profitability.

Allied Esports’ business is subject to regulation, and changes in applicable regulations may negatively impact its business.

Allied Esports is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. In addition, laws and regulations relating to user privacy, data collection, retention, electronic commerce, consumer protection, content, advertising, localization, and information security have been adopted or are being considered for adoption by many jurisdictions and countries throughout the world. These laws could harm Allied Esports’ business by limiting the products and services it can offer consumers or the manner in which it offers them. The compliance costs for these laws may increase in the future as a result of changes in interpretation. Furthermore, Allied Esports’ failure to comply with these laws or the application of these laws in an unanticipated manner may harm its business and result in penalties or significant legal liability.

Risks Related to Allied Esports’ Intellectual Property

Allied Esports licenses certain brand names under agreements that will expire and may also be subject to claims of infringement of third-party intellectual property rights.

Allied Esports has a three-year license with a third party, ending in July 2021, to use the names “Esports Arena Las Vegas” and “Esports Arena Drive”, which are part of the branding for its Las Vegas flagship esports arena location and its US-based mobile arena, respectively. Once that license expires, there is no assurance that Allied Esports will be able to further license those names or purchase them on satisfactory terms. Although Allied Esports intends to market and promote its esports arenas using intellectual property it owns and controls, there are no assurances that those efforts will be fruitful and that it will be able to maintain brand awareness once the license expires.

Furthermore, third parties may claim that Allied Esports has infringed their intellectual property rights. Although Allied Esports takes steps to avoid violating the intellectual property rights of others, it is possible that third parties still may claim infringement. Infringement claims against us, whether valid or not, may be expensive to defend and divert the attention of Allied Esports’ management and employees from business operations. Such claims or litigation could require Allied Esports to pay damages, royalties, legal fees and other costs. Allied Esports also could be required to stop offering, distributing or supporting esports games, its to-be-developed gaming platform or other features or services which incorporate the affected intellectual property rights, redesign products, features or services to avoid infringement, or obtain a license, all of which could be costly and harm its business.

Allied Esports’ technology, content and brands are subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement.

Allied Esports regards its technology, content and brands as proprietary and takes measures to protect it from infringement. Piracy and other forms of unauthorized copying and use of technology, content and brands are persistent, and policing is difficult. Further, the laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States, or are poorly enforced. Legal protection of Allied Esports’ rights may be ineffective in such countries, which could have a material adverse effect on its business, financial condition and results of operations.

Allied Esports may not be able to prevent others from unauthorized use of its intellectual property, which could harm our business and competitive position.

Allied Esports regards its registered trademark and pending trademarks, service marks, pending patents, domain names, trade secrets, proprietary technologies and similar intellectual property as critical to its success. Allied Esports relies on trademark and patent law, trade secret protection and confidentiality and license agreements with its employees and others to protect its proprietary rights.

Allied Esports has invested significant resources to develop its own intellectual property and acquire licenses to use and distribute the intellectual property of others. Failure to maintain or protect these rights could harm its business. In addition, any unauthorized use of our intellectual property by third parties may adversely affect its current and future revenues.

Allied Esports may not be able to develop compelling intellectual property content or secure media content distributors to promote, sell, and distribute such content, which could harm its business and competitive position.

Allied Esports intends to produce licensable content from the various live events, tournaments, and its own initiatives and brands to sell to viewers worldwide. There is no guarantee that it will be able to develop content that is compelling to its targeted customers. Media and gaming company competitors, many of which are better funded, are also creating content from esports events, and it will be difficult to create content that stands out and attracts customers. Furthermore, to carry out Allied Esports’ worldwide distribution plans, film and media distribution partners will be needed and, in the event, Allied Esports is not able to secure content distributors on terms acceptable to Allied Esports, this will have a significant adverse impact on revenue streams from the sale or licensing of intellectual property.

Risks Related to WPT’s Current Business

WPT’s broadcast agreement with Fox Sports Net (“FSN”) sets a minimum level of distribution that is significantly less than the current distribution level. If WPT’s current level of distribution is reduced, the reduction could materially and adversely affect WPT’s results of operations.

Currently, WPT broadcasts certain of its worldwide Main Tour events throughout the United States on FSN (whose regional sports networks, or “RSN’s” were purchased by Sinclair Broadcast Group and Entertainment Studios, Inc. (collectively, “Sinclair”), and they are also available on ClubWPT.com on demand, and on various digital streaming platforms. WPT’s programming agreement to broadcast the television series does not provide for any license fees to be paid to WPT for the broadcast rights, and contains a minimum level of distribution. Currently, WPT’s programming is broadcast significantly more frequently that the minimum threshold under the programming agreement. With no license fee in place for the distribution, WPT benefits from the program’s distribution and promotion of WPT’s online products (ClubWPT) and generates fees from sponsors by integrating sponsor logos and other advertising materials into its programs and around the broadcast of the shows through music royalties and distribution of the shows in other markets. The Season 17 sponsors included Hublot S.A., a luxury watch maker, Rockstar, Inc., an energy drink company, Baccarat, Inc., a manufacturer and retailer of fine crystal, Faded Spade Poker, LLC, a playing card manufacturer, and Zynga Inc., a social gaming operator. If WPT’s level of distribution were reduced by Sinclair, the value of the foregoing would be significantly reduced and it may be difficult for WPT to find sponsors on terms acceptable to WPT, or at all.

WPT’s production costs may increase.

In May 2016, WPT entered into a programming agreement for FSN (now Sinclair) to broadcast Seasons 15 through 18 of the WPT television series through calendar year 2021 on terms that are similar to the prior programming agreement discussed above. WPT may be required to pay the cost to produce these shows for Sinclair and depending on the amount of the related revenues it is able to generate, the lack of license fees could have a material adverse effect on WPT’s financial condition, results of operations and cash flows.

WPT’s production of its television show has been halted, and it is not known when production may resume.

Due to the ongoing COVID-19 pandemic, WPT has been unable to film and produce final tables from some of its previous main tour events. Although WPT anticipates filming those final tables in 2021, there is no way to predict when or if WPT will be able to film those final tables. Furthermore, the casino partners from whose events those final tables derive, as well as the players that are waiting to play such final tables, may decide not to play the final table and split the prize money, or enter into other arrangements that will make it difficult to film such final tables. If WPT cannot film those final tables, and if its production of future final tables remain in jeopardy due to COVID-19 or other factors, WPT may not be able to meet its obligations to the distributors of its content, its sponsors, or its casino partners, which could have a material adverse effect on WPT’s financial condition and future business prospects.

Sinclair’s acquisition of FSN could have negative consequences on World Poker Tour.

The Walt Disney Company (“Disney”) recently acquired 21st Century Fox (“FOX”). Under the terms of the acquisition, FOX’s non-regional news and sports assets, including FSN, were spun off into a new company, Fox Corporation (which is commonly referred to as “New Fox”), which remains owned by the prior FOX shareholders. The Department of Justice required Disney to sell all RSNs obtained as part of the acquisition within ninety (90) days after the closing of the Disney/FOX acquisition. WPT’s programming agreement with FSN’s owner requires

FSN to ensure WPT’s programming reaches a certain amount of households, which requires FSN’s owner to ensure we are broadcast on the RSNs. The FSN agreement also has other important broadcast requirements to ensure that WPT’s programming remains “appointment television” and airs at particular times on both the FSN networks and the RSNs. The RSNs (including FSN) were ultimately purchased by a joint venture company owned by Sinclair. Although Sinclair purchased all or substantially all of FOX’s RSNs, it will be difficult to ensure WPT’s programming is carried on all of the RSNs, or at the times and dates WPT finds desirable. Even though WPT’s FSN programming agreement will remain an enforceable obligation against Sinclair, there is no assurance that Sinclair will continue to broadcast WPT’s programming on FSN on terms WPT finds reasonable, if at all. Furthermore, the sale of the RSN’s to Sinclair and the changes to the FOX and the FSN business could negatively affect WPT’s ability to find other traditional television network distribution of the WPT shows in the United States. Any reduction or change of WPT’s distribution footprint has the potential to negatively affect its brand and associated sponsorship, marketing and promotional efforts.

There is no assurance that Sinclair will broadcast future seasons of the World Poker Tour, which would materially and adversely affect WPT’s results of operations.

In May 2016, WPT entered into an agreement for FSN (now Sinclair) to broadcast Seasons 15 through 18 of the WPT television series through calendar year 2021. If Sinclair elects to discontinue airing either series and WPT cannot replace its programming agreement with an agreement with a comparable U.S. broadcaster, it may be difficult for WPT to obtain sponsorship funds, it will be detrimental to the viability of the WPT brand and, consequently, would have a material adverse effect on WPT’s financial condition, results of operations and cash flows.

Consumers shifting to online video on-demand services like Hulu and Netflix and away from cable could have negative consequences on World Poker Tour.

Historically, WPT has relied on traditional television network distribution in order to build its brand and generate sponsorship revenue. As online video on-demand services such as Hulu and Netflix have become increasingly popular compared to traditional cable subscriptions, WPT has increased its digital distribution. If these “cable-cutting” trends intensify, however, there is no assurance that WPT can maintain or increase its total distribution and if it cannot, it may be difficult for WPT to obtain sponsorship funds, it will be detrimental to the viability of the WPT brand and, consequently, it would have a material adverse effect on WPT’s financial condition, results of operations and cash flows.

The ClubWPT.com business is currently heavily dependent upon television as a major source for the generation of new monthly subscribers and WPT continually seeks cost effective online and traditional marketing to generate new subscribers, which if not achieved could materially and adversely affect its results of operations.

ClubWPT is the official subscription online poker club of the World Poker Tour. VIP users pay a monthly subscription fee for exclusive access to full episodes from every past season of the WPT television show, plus magazine access, coupons, and more. Each month, members can play poker to win a share of cash and prizes, including seats to WPT events. In addition, in January 2019, WPT added free-to-play (also known as “freemium”) social poker and casino gaming on the platform, whereby free chips are offered for play, but additional chips can be purchased (there are no cash prizes offered for freemium play). WPT has produced ClubWPT.com-branded television shows that aired on FSN (such as our “King of the Club” television shows), as well as incorporating significant branding and advertising of ClubWPT into the WPT television shows to build awareness and drive traffic to ClubWPT.com. In order for the ClubWPT business (including its freemium offering) to continue as a viable business, WPT needs to continuously identify cost efficient marketing tools to generate new subscribers for ClubWPT. Traditionally, WPT has marketed by using its large library of content online as a driver to the platform, or through its social media footprint. The number of paid subscribers at ClubWPT grew throughout 2019 as a result of a significant promotion by FSN, while daily active users of our freemium products has increased since we introduced them in January 2019. The number of paid subscribers could decrease in future quarters due to the lack of current spending on marketing for new players. WPT will need to increase its marketing and promotion of ClubWPT through alternative means, such as social media, in person at WPT live events, via cross-promotion with the Allied Esports business, and via other means to ensure ClubWPT remains viable.

WPT’s reliance on Pala Interactive LLC (“Pala”) as a third-party systems provider is subject to system security risks and business viability risks that could disrupt services provided to ClubWPT.com customers, and any such disruption could reduce WPT’s revenue, increase its expenses and harm its reputation.

Experienced computer programmers and hackers may be able to penetrate Pala’s network security and misappropriate confidential information, create system disruptions or cause shutdowns. In addition, computer programmers and hackers may be able to develop and deploy viruses, worms and other malicious software programs that attack their products or otherwise exploit security vulnerabilities in their products. As a result, WPT could lose its existing or potential customers. Pala is a third-party vendor whose business is dependent upon the real money gaming and social gaming business environment. Any business interruption or failure by Pala would directly affect WPT’s online business as WPT would need to find a suitable alternative platform provider.

Rules and regulations governing sweepstakes, promotions and giveaways vary by state and country and these rules and regulations could restrict or eliminate WPT’s ability to generate revenues at ClubWPT.com, which could materially and adversely impact the viability of this business.

Changes in laws or regulations in various states or countries over sweepstakes, promotions and giveaways or a negative finding of law regarding the characterization of the type of online activity carried out on ClubWPT.com could result in WPT’s inability to obtain subscribers in those jurisdictions, which in turn could significantly impact WPT’s ability to generate revenue. The ability or willingness to work with WPT by payment processors and other service providers necessary to conduct the ClubWPT.com business also may be limited due to such changes in laws or any perceived negative consequences of engaging in the business of sweepstakes, promotions and giveaways that are utilized by ClubWPT.com.

WPT’s success depends in part on our brands and any future brands it may develop, and if the value of its brands were to diminish, its business would be adversely affected. Licensees of WPT’s brands may diminish the value of its brands.

WPT’s success depends on its World Poker Tour and Alpha 8 brands, which consist of a portfolio of trademarks, service marks and copyrighted materials. WPT’s intellectual property portfolio includes, but is not limited to, existing and future episodes of the televised programming produced in connection with its existing and future brands and certain elements of these episodes, trade names and other intellectual property rights. In connection with WPT’s branding and licensing operations, WPT entered into agreements with certain licensors to utilize the WPT brand and intellectual property in connection with mobile, social media and casual games, horse racing, amateur poker leagues, governmental lottery games, and in-person and online education and training poker workshops. While specific contractual provisions require that the licensees maintain the quality of WPT’s licensed brands, WPT cannot be certain that its licensees or their manufacturers and distributors will honor their contractual obligations or that they will not take other actions that will diminish the value of WPT’s brands prior to its ability to detect and prevent any such actions.

WPT may not be able to protect the format of its episodes, its current and future brands and its other proprietary rights.

WPT is susceptible to others imitating its television show format and other products and infringing on its intellectual property rights. Litigation may be necessary to enforce WPT’s intellectual property rights and to determine the validity and scope of its proprietary rights. Any litigation could result in substantial expense, may reduce WPT’s profits and may not adequately protect its intellectual property rights upon which it is substantially dependent. In addition, the laws of certain foreign countries do not always protect intellectual property rights to the same extent as the laws of the U.S. Imitation of WPT’s television show formats and other products or infringement of its intellectual property rights could diminish the value of its brands or otherwise adversely affect its revenues.

Any litigation or claims against WPT based upon its intellectual property or other third-party rights, whether or not successful, could result in substantial costs and harm its reputation. In addition, such litigation or claims could force WPT to do one or more of the following: to cease exploitation of the WPT television series and related products or portions thereof that violate the potentially infringed third party rights or intellectual property, which would adversely affect WPT’s revenue; to negotiate a license from the holder of the intellectual property or other right alleged to have

been infringed, which license may not be available on reasonable terms, if at all; or to modify the WPT television series and related products or portions thereof to avoid infringing the intellectual property or other rights of a third party, which may be costly and time-consuming or impossible to accomplish.

Early termination of WPT’s agreements with member casinos or violation by member casinos of the restrictive covenants contained in these agreements could negatively affect the size of telecast audiences and lead to declines in the performance of WPT’s other lines of business.

WPT entered into written agreements with all of the “member casinos” that host WPT tournament stops. However, any member casino may elect to withdraw its tournament from the WPT lineup and terminate the agreement by giving WPT notice by a specified date or, if earlier, a specified length of time before the date of the tournament, which is generally four to six months. While each agreement remains in effect and, in some cases, for varying periods of time thereafter, the member casino is prohibited from televising the tournament itself, permitting any third party to televise the tournament or licensing its name, trademarks or likeness to any other party in conjunction with the telecast of a poker tournament. If a significant number of these member casinos were to terminate their agreements and/or allow a competing company to telecast their tournaments after their expiration for the restricted time period, this could result in a decline in WPT’s future telecast audiences, which in turn would lead to declines in the performance and success of WPT’s other lines of business. If one or more member casinos were to breach the exclusivity provisions of their contracts with WPT by letting a competing company telecast their tournaments within the restricted time period, litigation may be necessary to enforce those rights. Any litigation could result in substantial expense.

Refusal of any gaming commission to register WPT as a non-gaming vendor for its branded casino tournaments could jeopardize the ability of WPT to continue holding its events at member casinos.

Some states require WPT to register with the state’s gaming commissions as a non-gaming vendor of the member casino that runs a WPT-branded tournament. If such gaming commissions refuse to provide the necessary vendor license, the member casino may not be able to hold WPT’s tournaments, and WPT’s business could suffer.

Termination or impairment of WPT’s relationships with key licensing and strategic partners could adversely affect its revenues and results of operations.

WPT has developed relationships with key strategic partners in many areas of its business, including poker tournament event sponsorship, merchandise licensing, social poker and casino games, corporate sponsorship and international distribution. WPT hopes to derive significant income from its licensing arrangements and its agreements with its strategic partners are vital to finding these licensing arrangements. If WPT were to fail to manage its existing licensing relationships, this failure could have a material adverse effect on its financial condition and results of operations. WPT would also be materially adversely affected if it were to lose rights under any of its other key contracts or if the counterparty to any of these contracts were to breach its obligations to WPT. WPT relies on a limited number of contracts under which third parties provide it with services vital to WPT’s business.

These agreements include WPT’s agreements with:

•        FSN (now Sinclair), pursuant to which Sinclair broadcasts the WPT television series;

•        Pala, who hosts and operates the ClubWPT product;

•        Zynga, Inc., who licenses the WPT brand for use on its social poker platform;

•        Partypoker Live Ltd., who licenses the WPT brand in connection with online and land-based poker tournaments in Europe;

•        Hugeous Mass Media, who maintains WPT’s database of music and collects music royalty revenue for WPT worldwide;

•        CaptivePlay LLC, who licenses the WPT brand in order to operate a social poker product, PlayWPT;

•        HongKong Triple Sevens Interactive Co., Ltd, who licenses the Alpha8 brand to operate a social poker product;

•        Rogers Network and Game TV, for broadcasting in key international territories such as Canada;

Risks Related to WPT’s Current Industry

WPT’s television programming may be unable to maintain a sufficient audience for a variety of reasons, many of which are beyond its control.

Television production is a speculative business because revenues and income derived from television depend primarily upon the continued acceptance of that programming by the public, which is difficult to predict. Public acceptance of particular programming is dependent upon, among other things, the quality of the programming, the strength of networks on which the programming is telecast, the promotion and scheduling of the programming and the quality and acceptance of competing television programming and other sources of entertainment and information. Popularity of programming can also be negatively impacted by excessive telecasting of the programming beyond viewers’ saturation thresholds.

WPT’s ability to create and sponsor its television programming profitably may be negatively affected by adverse trends that apply to the television production business generally.

Television revenues and income may be affected by a number of factors, many of which are not within WPT’s control. These factors include a general decline in television viewers, pricing pressure in the television advertising industry, strength of the stations on which its programming is telecast, general economic conditions, increases in production costs and availability of other forms of entertainment and leisure time activities. Furthermore, as the popularity of streaming content over the Internet increases and more consumers “cut the cord” and cease watching traditional broadcast television, the audience for WPT’s programming will be dispersed across multiple platforms and its programming could have less overall impact and watchability. All of these factors, as well as others, may quickly change and these changes cannot be predicted with certainty. WPT’s future sponsorship opportunities may also be adversely affected by these changes. Accordingly, if any of these changes were to occur, the revenues WPT generates from television programming could decline.

A decline in general economic conditions or the popularity of WPT’s brand of televised poker tournaments could adversely impact its business.

Because WPT’s operations are affected by general economic conditions and consumer tastes, its future success is unpredictable. The demand for entertainment and leisure activities tends to be highly sensitive to consumers’ disposable incomes and thus a decline in general economic conditions could, in turn, have a material adverse effect on WPT’s business, operating results and financial condition and the price of the Company’s common stock. An economic decline, including the current economic decline as a result of the global COVID-19 pandemic, could also adversely affect WPT’s corporate sponsorship business, sales of its branded merchandise and other aspects of its business.

The continued popularity of WPT’s type of poker entertainment is vital in maintaining the ability to leverage its brand and develop products or services that appeal to its target audiences, which, in turn, is important to WPT’s long-term results of operations. Public tastes are unpredictable and subject to change and may be affected by changes in the political and social climates of those countries and territories in which WPT operates. A change in public opinion could have a material adverse effect on WPT’s business, operating results and financial condition and, ultimately, the price of the Company’s common stock.

The political or social climate regarding gaming and poker could negatively impact WPT’s ability to negotiate future telecast license arrangements and could negatively impact its chances of renewal.

Although the popularity of poker, in particular, and gaming, in general, has continued to grow in the U.S. and abroad, gaming has historically experienced backlash from various constituencies and communities. Currently, the legal operational status of Internet-based casinos and card rooms remains unclear in some countries. The U.S. government has taken steps to curb activities that it believes constitutes unlawful online gaming through legislation such as the Unlawful Internet Gambling Enforcement Act of 2006 and through arrests of off-shore online gaming operators traveling in the U.S. Also, on November 2, 2018, the U.S. Department of Justice (the “DOJ”) issued an opinion that interprets the federal Wire Act as prohibiting any gambling that crosses state lines, including non-sports related gambling. This opinion expands the prior opinion issued by the DOJ in 2011 that interpreted the Wire Act as prohibiting interstate sports gambling only.

Based on the uncertain regulatory environment surrounding the marketing and promotion of Internet-based casinos and card rooms to viewers in the U.S., Sinclair has final edit rights to the shows that it broadcasts. Sinclair had indicated that it will only display the “dot com” names or logos of Internet-based casinos and card rooms in its telecasts that are explicitly legal in select territories in the United States. However, if Sinclair elects not to allow the display of “dot com” logos on the WPT show, whether because of the recent DOJ opinion or otherwise, WPT may not be able to attract other Internet-based casino sponsors or retain existing online card rooms sponsoring WPT’s tour. Additionally, increased regulatory scrutiny on Internet gambling sites may eliminate these sites as sources of advertising revenue for television networks that exhibit poker-related programming, thereby potentially impacting the value of such programming to these networks. Additionally, many participants in WPT’s tournament events are sponsored by Internet-based casino sponsors and existing online card rooms. If such sponsors’ revenues are reduced, they may not be able to sponsor WPT’s tournament participants at the same level or at all, which could cause WPT’s tournament participation to decline (in terms of numbers and professional players) and the quality and distribution of our WPT series could suffer.

The television entertainment market in which WPT operates is highly competitive and competitors with greater financial resources or marketplace presence may enter this market to WPT’s detriment.

WPT competes with other poker-related television programming, including ESPN’s coverage of the “World Series of Poker” and its “World Series of Poker” Circuit Events, among others. These and other producers of poker-related programming may be well established and may have significantly greater resources than WPT does. Based on the popularity of these poker-related televised programs, WPT believes that additional competing televised poker programs may currently be in development or may be developed in the future. WPT’s programming also competes for telecast audiences and advertising revenue with telecasts of mainstream professional and amateur sports, as well as other entertainment and leisure activities. These competing programs and activities, and the brands that they build may decrease the popularity of the WPT television series and dilute the WPT’s brand. This would adversely affect WPT’s operating results and financial condition and, ultimately, the price of the Company’s common stock.

Risks Related to the Businesses of Both Allied Esports and WPT

Allied Esports and WPT have historically operated at a net loss on a consolidated basis, and there is no guarantee that that the consolidated company will be able to be profitable.

The combined historical operations of Allied Esports and the WPT have resulted in net losses of $16,738,729 and $31,019,725 for the years ended December 31, 2019 and 2018, respectively. We do not know with any degree of certainty whether or when the consolidated operations of Allied Esports and the WPT will become profitable. Even if we are able to achieve profitability in future periods, we may not be able to sustain or increase our profitability in successive periods.

We have formulated our business plans and strategies based on certain assumptions regarding the acceptance of our business model and the marketing of our products and services. Nevertheless, our assessments regarding market size, market share, market acceptance of our products and services and a variety of other factors may prove incorrect. Our future success will depend upon many factors, including factors beyond our control and those that cannot be predicted at this time.

Forecasts of our market and market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, there can be no assurance that our business will grow at similar rates, or at all.

Growth forecasts included in SEC filings relating to our market opportunities and the expected growth in those markets are subject to significant uncertainty and are based on assumptions and estimates which may prove to be inaccurate. We also plan to operate in a number of foreign markets, and a downturn in any of those markets could have a significant adverse effect on our businesses. Even if these markets meets our size estimate and experiences the forecasted growth, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth should not be taken as indicative of our future growth.

Any actual or perceived failure by us to comply with our privacy policies or legal or regulatory requirements in one or multiple jurisdictions could result in proceedings, actions or penalties against us.

Allied Esports and WPT have implemented various features intended to better comply with applicable privacy and security requirements in the collection and use of customer data, but these features do not ensure compliance and may not be effective against all potential privacy and data security concerns. A wide variety of domestic and foreign laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, disposal and other processing of personal data. These data protection and privacy-related laws and regulations are evolving and may result in regulatory and public scrutiny and escalating levels of enforcement and sanctions. Our failure to comply with applicable laws and regulations, or to protect any personal data, could result in enforcement actions against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could adversely affect our business, operating results, financial performance and prospects.

Evolving and changing definitions of personal data and personal information within the EU, the United States and elsewhere may limit or inhibit our ability to operate or expand our business. In jurisdictions outside of the United States, we may face data protection and privacy requirements that are more stringent than those in place in the United States. We are at risk of enforcement actions taken by certain EU data protection authorities until such point in time that we may be able to ensure that all transfers of personal data to us in the United States from the EU are conducted in compliance with all applicable regulatory obligations, the guidance of data protection authorities and evolving best practices. The European General Data Protection Regulation (“GDPR”) may impose additional obligations, costs and risks upon our business. The GDPR may increase substantially the penalties to which we could be subject in the event of any non-compliance. In addition, we may incur substantial expense in complying with the obligations imposed by the GDPR and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall.

Loss, retention or misuse of certain information and alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose us to potential liability and may require us to expend significant resources on data security and in responding to and defending such allegations and claims. In addition, future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could impair our ability to collect, use or disclose data relating to individuals, which could increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

Allied Esports and WPT publicly post their privacy policies and practices concerning processing, use and disclosure of the personally identifiable information provided to them by website visitors. Publication of such privacy policies and other statements published that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive or misrepresentative of actual policies and practices or if actual practices are found to be unfair. Evolving and changing definitions of what constitutes “Personal Information” and “Personal Data” within the EU, the United States and elsewhere, especially relating to classification of IP addresses, machine or device identification numbers, location data and other information, may limit or inhibit our ability to operate or expand our business, including limiting technology alliance relationships that may involve the sharing of data.

Our failure to raise additional capital or generate cash flows necessary to pay debt, expand our operations and invest in new business initiatives in the future could reduce our ability to compete successfully and harm our operating results.

In the future we need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we cannot raise capital on acceptable terms, or at all, we may not be able to, among other things:

•        develop and enhance our products and services;

•        continue to expand our network of arenas;

•        hire, train and retain employees;

•        respond to competitive pressures or unanticipated working capital requirements; or

•        pursue acquisition opportunities.

Although we have been able to fund our current working capital requirements through operations, debt and equity financing, there is no assurance that we will be able to do so in the future. As a result, our auditors have indicated that the above-mentioned conditions raise substantial doubt about our ability to continue as a going concern.

Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel, and our business operations may be severely disrupted if we lose the services of such personnel.

Our future success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees are unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all. Since the esports gaming and poker industry is characterized by high demand and intense competition for talent, we cannot assure you that we will be able to attract or retain qualified staff or other highly skilled employees. If any of our executive officers or key employees terminate their services with us, our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses to recruit, train and retain qualified personnel.

We may experience security breaches and cyber threats.

We face cyber risks and threats that could damage, disrupt or allow third parties to gain improper access to our networks and platforms, supporting infrastructure, intellectual property and other assets. In addition, we rely on technological infrastructure, including third party cloud hosting and broadband, provided by third party business partners to support the functionality of our platforms and content distribution. These business partners are also subject to cyber risks and threats. Such cyber risks and threats may be difficult to detect. The techniques that may be used to obtain unauthorized access or disable, degrade, exploit or sabotage these networks and gaming platforms change frequently and often are not detected. Our systems and processes and those of our third-party business partners may not be adequate. Any failure to prevent or mitigate security breaches or cyber risks, or respond adequately to a security breach or cyber risk, could result in interruptions to our platforms, degrade the gamer/user experiences, cause gamers/users to lose confidence in our platforms and cease utilizing them, as well as significant legal and financial exposure. This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position.

Global health threats, such as the current COVID-19 pandemic, may adversely affect the operations of our Allied Esports and WPT businesses, which could have a material adverse effect on our business.

Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of the COVID-19 respiratory illness first identified in Wuhan, Hubei Province, China. A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services. Specifically, as a global entertainment company that hosts numerous live events with spectators and participants in destination cities, outbreaks may cause such people to avoid traveling to our destination cities and attending our events. Sponsors of such events may also cancel such events as precautionary measures or based on guidelines from local or federal health agencies. As a result of the COVID-19 pandemic, live events to be hosted by both of our Allied Esports and WPT businesses have been cancelled. Allied Esports and WPT businesses started conducting live events again on a limited basis in June 2020. However, many other previously scheduled live events remain indefinitely postponed or have been cancelled. And at this time, we cannot determine the extent that such outbreak will continue to have on our future operations.

Risks Related to Owning Our Common Stock

The market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.

The market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock regardless of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly operating results or dividends, if any, to stockholders, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about the industries we participate in or individual scandals, and, in response, the market price of shares of our common stock could decrease significantly. You may be unable to resell your shares of common stock at or above a price you feel is appropriate.

In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We have no current plans to pay cash dividends on our common stock; as a result, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We have no current plans to pay dividends on our common stock. Any future determination to pay dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, general business conditions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay cash dividends is restricted by the terms of our debt financing arrangements, and any future debt financing arrangement likely will contain terms restricting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, you may not receive any return on an investment in our common stock unless you sell your common stock for a price greater than that which you paid for it.

If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the market price of our common stock may decline.

We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in our public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline as well. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled interest payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors, some of which are beyond our control. In some cases, we will also be required to obtain the consent our lenders to refinance material portions of our indebtedness. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the

principal, premiums, and interest, if any, on our indebtedness. Some of our indebtedness is maturing in the near term, and if we are unable to raise sufficient capital or generate cash through our operations, we will be unable to meet our debt obligations at maturity.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, reduce or eliminate the payment of dividends, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to attempt to meet our debt service and other obligations. We may not be able to consummate those dispositions or consummate dispositions at prices that we believe are fair, and the proceeds that we do receive may not be adequate to meet any debt service obligations then due.

We incur increased costs and are subject to additional regulations and requirements as a result of being a public company, which could lower our profits or make it more difficult to run our business.

As a public company, we incur significant legal, accounting and other expenses that are not incurred by private companies, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act, and related rules implemented by the SEC and the Nasdaq Capital Market. The expenses generally incurred by public companies for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. These laws and regulations also may make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, on our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock on the Nasdaq market, fines, sanctions and other regulatory action and potentially civil litigation.

We are an “emerging growth company,” and the reduced public company reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We qualify as an “emerging growth company,” as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include, but are not limited to: being permitted to have only two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure; an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act; not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; reduced disclosure obligations regarding executive compensation arrangements in our periodic reports, registration statements and proxy statements; and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We intend to take advantage of the exemptions discussed above. As a result, the information we provide will be different than the information that is available with respect to other public companies. In our SEC filings, we do not include all of the executive compensation-related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our

common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock may be more volatile.

We will remain an emerging growth company until the earliest of (i) the end of our 2022 fiscal year, (ii) the first fiscal year after our annual gross revenues exceed $1.07 billion, (iii) the date on which we have, during the immediately preceding three-year period, issued more than $1.00 billion in non-convertible debt securities or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year.

Our failure to achieve and maintain an effective system of disclosure controls and internal control over financial reporting could adversely affect our financial position and lower our stock price.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports. Nevertheless, all internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. As of September 30, 2020, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were not effective to ensure that the information required to be disclosed in our SEC 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, which continue to persist:

•        inadequate internal controls, including inadequate segregation of duties, over the preparation and review of the consolidated financial statements and untimely annual closings of the books;

•        inadequate controls and procedures as they relate to completeness of information reported by certain third parties that process transactions related to specific revenue streams; and

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

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. This diversion of management’s time and attention may have a material adverse effect on our business, financial condition and results of operations.

These material weaknesses and any significant deficiencies could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and any annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we may be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our common stock listed on Nasdaq.

Increases in interest rates may cause the market price of our common stock to decline.

While interest rates are falling and have in recent years been at record low levels, any return to increases in interest rates may cause a corresponding decline in demand for equity investments. Any such increase in interest rates or reduction in demand for our common stock resulting from other relatively more attractive investment opportunities may cause the market price of our common stock to decline.

If securities or industry analysts do not publish research or reports about our business or publish negative reports, the market price of our common stock could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one of more of these analysts ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume of our common stock to decline. Moreover, if one or more of the analysts who cover us downgrades our common stock or if our reporting results do not meet their expectations, the market price of our common stock could decline.

You will be diluted by the future issuance of common stock, preferred stock, or securities convertible into common or preferred stock, in connection with our incentive plans, acquisitions, capital raises or otherwise.

Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board of Directors in its sole discretion, whether in connection with acquisitions or otherwise.

In the future, we expect to obtain financing or to further increase our capital resources by issuing additional shares of our capital stock or offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity or shares of preferred stock. Issuing additional shares of our capital stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our common stock or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. As a result, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their stockholdings in us.

Additionally, we have reserved an aggregate of 3,463,305 shares of common stock for issuance under our 2019 Equity Incentive Plan (the “2019 Plan”). Any common stock that we issue, including under our 2019 Plan or other equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by our common stockholders. We have filed an effective registration statement on Form S-8 under the Securities Act to register shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our 2019 Plan. Accordingly, shares registered under such registration statement will be available for sale in the open market upon issuance.

The Company’s amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could limit the Company’s stockholders’ ability to obtain a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or employees.

The Company’s Certificate of Incorporation, as amended, provides that unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation, as amended, or the Company’s Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or if the Court of Chancery does not have jurisdiction, another state court located within the State of Delaware, or if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive

forum provision and asserts claims under the Securities Act, inasmuch as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rule and regulations thereunder. There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.

If a court were to find the choice of forum provision contained in our Certificate of Incorporation, as amended, to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to the Company’s management.

Our Board of Directors’ ability to issue undesignated preferred stock and the existence of anti-takeover provisions may depress the value of our common stock.

The Company’s authorized capital includes 1,000,000 shares of undesignated preferred stock. Our Board has the power to issue any or all of the shares of preferred stock, including the authority to establish one or more series and to fix the powers, preferences, rights and limitations of such class or series, without seeking stockholder approval, subject to certain limitations on this power under Nasdaq listing requirements. Further, as a Delaware corporation, we are subject to provisions of the Delaware General Corporation Law regarding “business combinations.” We may, in the future, consider adopting additional anti-takeover measures. The authority of our Board to issue undesignated stock and the anti-takeover provisions of Delaware law, as well as any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in control of our company that are not approved by our Board. As a result, our stockholders may lose opportunities to dispose of their shares at favorable prices generally available in takeover attempts or that may be available under a merger proposal and the market price, voting and other rights of the holders of common stock may also be affected.

THE SALE TRANSACTION

Parties to the Sale Transaction

Allied Esports Entertainment, Inc.

Allied Esports Entertainment, Inc. is a global leader in esports entertainment, providing innovative infrastructure, transformative live experiences, multiplatform content and interactive services to audiences worldwide through its strategic fusion of two powerful brands: Allied Esports and the World Poker Tour. See “Description of Allied Esports Entertainment, Inc.” beginning on page 58 of this Consent Solicitation Statement for a more fulsome description of our company and our businesses.

Element Partners, LLC

Element Partners, LLC is a Delaware limited liability company formed for the purposes of acquiring the WPT Business in the Sale Transaction. Element Partners, LLC is owned by an investment fund.

Background of the Sale Transaction

Our Board of Directors and the members of our senior management team regularly review our operations and strategy to maximize long-term value to our stockholders. As part of this ongoing review, our Board of Directors and management have considered a variety of strategic alternatives to enhance stockholder value, including potential financings, changes to our offerings, strategic partnerships, and divestitures.

On September 9, 2020, Adam Pliska, the Chief Executive Officer and President of World Poker Tour, was introduced by a mutual friend to a representative of Buyer. After this introduction was made, Buyer’s representative requested an introductory call with Mr. Pliska to discuss the possibility of a partnership or acquisition of the WPT Business directly.

On September 16, 2020, a phone conference was held among Mr. Pliska, the Company’s President, David Polgreen, the Company’s General Counsel and representatives of the Buyer. During the call, Mr. Pliska provided Buyer’s representatives with details about the operations of the WPT Business, and the parties discussed potential acquisition opportunities. Buyer’s representatives expressed an interest in the WPT Business and requested the opportunity to begin a due diligence process with respect to the same. After the conclusion of the call, Mr. Pliska related the substance of the call to the Company’s Chief Executive Officer, Frank Ng, and its Chief Financial Officer, Tony Hung.

On October 12, 2020, a follow-up teleconference was held between Buyer and Company during which the parties further discussed the potential partnership or acquisition deal and the structure of the Company and its related subsidiaries. After this conference, Buyer’s representative sent Mr. Pliska an email reiterating Buyer’s interest in pursuing a license of the intellectual property of the WPT Business or an acquisition of the WPT Business.

On October 29, 2020, the Company’s Board of Directors held a meeting to discuss, among other things, the possibility of a sale of the WPT Business. All directors were present at this meeting, along with Mr. Hung and representatives of Maslon LLP, outside counsel to the Company. After discussion at the meeting, the Board directed the Company’s officers to further investigate with Buyer a potential license of the intellectual property of the WPT Business or a sale of the WPT Business.

On November 4, 2020, Mr. Pliska and Mr. Polgreen held a teleconference with Buyer’s representative, during which Buyer’s representative indicated that Buyer sought to acquire the WPT Business instead of an intellectual property license. Buyer’s representative requested that the Company present Buyer with a proposed sale price for the WPT Business on or before November 9, 2020.

On November 5, 2020, the Company’s Board of Directors held a meeting where Mr. Pliska presented the Board with the substance of his conversations with the representatives of Buyer. Acknowledging that a sale of the WPT Business was not being actively pursued by the Company at that time, the Board discussed Buyer’s general proposal to purchase the WPT Business, taking into account the Company’s operations, financial performance, and independent valuations proposed by prior interested parties and certain investment bankers.

Such opinion noted that, using publicly available information for comparable transactions, an appropriate multiple of the WPT Business’ EBITDA for December 31, 2019 ranges from 11.0x - 15.0x, and based on these multiples, the WPT Business has an implied valuation range of $48.0 million to $65.5 million, which is significantly less than the total purchase price of $78.25 million in the Sale Transaction.

After evaluating these factors and consulting with financial consultants and outside legal counsel, our Board of Directors believes that Sale Transaction is advisable, fair to, and in the best interests of the Company and its stockholders and has unanimously approved the Sale Transaction. Our Board of Directors unanimously recommends that our stockholders consent to and approve the Proposal.

Opinion of the Company’s Financial Advisor

In connection with the Sale Transaction, our Board of Directors received a written opinion, dated January 12, 2021, from our financial advisor, Shot Tower Securities LLC, or “Shot Tower,” as to the fairness, from a financial point of view as of the date of such opinion, of the consideration to be received by us from the Sale Transaction. The full text of Shot Tower’s written opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this Consent Solicitation Statement and is incorporated herein by reference. Shot Tower’s opinion was provided for the use and benefit of our Board of Directors (solely in its capacity as such) in its evaluation of the Sale Transaction. Shot Tower’s opinion is limited solely to the fairness as of the date of such opinion, from a financial point of view, of the consideration to be received by us from the Sale Transaction pursuant to the Stock Purchase Agreement, and does not address our underlying business decision to effect the Sale Transaction or the relative merits of the Sale Transaction as compared to any alternative business strategies or transactions that might be available with respect to us. Shot Tower’s opinion does not constitute a recommendation to any of our stockholders as to how such stockholder should vote or act with respect to the Sale Transaction or any other matter. Shot Tower Capital is a leading investment banking boutique providing advisory and capital raising services in the media and consumer sectors.

Operations of the Company After the Sale Transaction

The Company’s Board has considered a number of alternatives with respect to the use of the Company’s assets following the completion of the Sale Transaction. We intend to retain our cash and investments and the other assets and liabilities that are not part of the Sale Transaction.

The rapid growth and popularity of gaming and esports during the COVID-19 pandemic has driven interest in the Company’s esports business, Allied Esports, and the Company’s Board of Directors has agreed to explore strategic options for the esports business, including a possible sale. The Company has engaged investment bank Lake Street Capital Markets to assist with the process.

Upon completion of the Sale Transaction, and assuming the realization and completion of a sale of the esports business, we would proceed, under a new corporate name, as a publicly traded holding company focused on using our cash resources to explore opportunities in online entertainment, including but not limited to, real money gaming and other gaming sectors. The Company does not have any specific merger, asset acquisition, reorganization or other business combination under consideration or contemplation. We have not, nor has anyone on our behalf, had substantive discussions, formal or otherwise, with respect to such a transaction. The Company does not plan to limit itself to any particular industry or geographic location in its efforts to identify prospective target businesses.

We will continue to be a public company and our common stock will continue to trade on the Nasdaq Capital Market following completion of the Sale Transaction. The Company does not intend to go private or terminate its Exchange Act reporting obligations.

Required Approvals

Corporate approval of the Sale Transaction requires the affirmative vote of the holders of a majority of the Company’s outstanding common stock in favor of the Sale Transaction. Not voting, or abstaining from voting on the Proposal, has the same effect as a vote against the Sale Transaction.

In connection with the execution of the Stock Purchase Agreement, Buyer and certain of our key stockholders, including certain of our directors and executive officers, entered into stockholder support agreements pursuant to which

they have agreed to vote their shares of Company common stock in favor of approval of the Sale Transaction and against the approval or adoption of any alternative transactions. These stockholders also granted to Buyer a proxy to vote their shares of Company common stock in favor of approval of the Sale Transaction and agreed not to transfer its shares of Company common stock prior to the expiration of the stockholder support agreements. These key stockholders collectively own or control an aggregate of approximately 16.1% of the Company’s outstanding common stock. In addition, the Company has agreed to use its reasonable efforts to cooperate with Buyer to obtain executed copies of a stockholder support agreement from Primo Vital Limited, the holder of 30.6% of the Company’s outstanding common stock, as promptly as possible after entering into the Stock Purchase Agreement, and to obtain a Deed of Irrevocable Undertaking containing covenants to support the Sale Transaction from stockholders of Ourgame International Holdings Limited, the parent company of Primo Vital Limited, within one business day after entering into the Stock Purchase Agreement. The forms of stockholder support agreements and Deed of Irrevocable Undertaking are attached as Exhibits A, C and D to the Stock Purchase Agreement.

The Sale Transaction is subject to the absence of any action commenced by or before any governmental authority challenging the Sale Transaction.

Except for compliance with the applicable regulations of the SEC in connection with this Consent Solicitation Statement and with the Delaware General Corporation Law in connection with the Sale Transaction, we are not required to comply with any federal or state regulatory requirements, and no federal or state regulatory approvals are required in connection with Sale Transaction.

Closing of the Sale Transaction

We intend to consummate the Sale Transaction shortly after obtaining stockholder approval for the Proposal, assuming all other conditions to the completion of the Sale Transaction have been satisfied or waived. Pursuant to the Stock Purchase Agreement, the “Outside Date” for closing the Sale Transaction is March 31, 2021, after which either we or Buyer may terminate the Stock Purchase Agreement.

Interests of Our Directors and Executive Officers in the Sale Transaction

Certain of our directors and executive officers may have interests in the Sale Transaction that are different from, or in addition to, those of our stockholders generally. These interests may create potential conflicts of interest. Our Board of Directors was aware that these interests existed when it approved the Stock Purchase Agreement. All such interests are described below to the extent material, and except as described below, our directors and executive officers have, to our knowledge, no material interest in the Sale Transaction apart from those of stockholders generally.

On January 19, 2021, we entered into a Restricted Stock Agreement with Frank Ng, who serves as our Chief Executive Officer and as a Director. Pursuant to this agreement, effective upon the closing of the Sale Transaction, Mr. Ng is entitled to receive $1,000,000 upon the earlier of the two-year anniversary of the closing date of the Sale Transaction, or the termination of Mr. Ng’s employment without cause. At the time of payment, the Company may elect to pay the $1,000,000 award in cash or 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.

On December 31, 2020, we entered into a Change in Control Agreement with Adam Pliska, who serves as our President and Director, and Chief Executive Officer of the World Poker Tour. Pursuant to this agreement, if Mr. Pliska is and remains employed by the Company on the occurrence of a “Change in Control” (as such term is defined in the agreement), Mr. Pliska will be entitled to a cash bonus in the amount of $420,000 upon the closing of the Change in Control. Under the agreement, a “Change in Control” will occur if a third party becomes a beneficial owner of securities of WPT representing 50% or more of the voting power of all of WPT’s then-outstanding securities; or if our Board of Directors approves of the sale of all, or substantially all, of the business or assets of WPT or the liquidation or dissolution of WPT, and such transaction is consummated. The Sale Transaction will constitute a Change in Control and, as a result, Mr. Pliska will receive a cash bonus of $420,000 upon the closing of the Sale Transaction.

Mr. Pliska holds 11,521 shares of our common stock that remain subject to transfer and forfeiture restrictions and options to purchase 170,000 shares of our common stock that are currently unvested. Upon the closing of the Sale Transaction, the transfer and forfeiture restrictions on such shares of restricted stock will lapse and the vesting of such options will accelerate. Mr. Pliska’s option to purchase 40,000 shares of our common stock in consideration of his services as a director of the Company remain unaffected by the Sale Transaction.

As a condition to the closing of the Sale Transaction, we are required to deliver an amendment to Mr. Pliska’s current employment agreement with the Company in the form attached as Exhibit E to the Stock Purchase Agreement. Mr. Pliska’s amended employment agreement will be assumed by CSI upon the closing of the Sale Transaction, resulting in Mr. Pliska’s services being a part of the WPT Business acquired by Buyer in the Sale Transaction.

Material U.S. Federal Income Tax Consequences of the Sale Transaction

We will treat the Sale Transaction as a taxable stock sale of a U.S. consolidated return subsidiary. The Sale Transaction will be fully taxable to the Company based on the fair market value of the consideration received as compared to the stock basis in CSI (and therefore in the WPT Business) at the closing of the Sale Transaction. Under the U.S. consolidated return regulations, the stock basis of CSI must first be adjusted for items of taxable income incurred for the income tax return filing period reflecting the Sale Transaction. As a result, it will not be certain as of the closing date of the Sale Transaction whether or not a capital gain or loss will result.

Based on an estimated analysis of the Sale Transaction by the Company’s tax advisors, the Company does not expect that the Sale Transaction will result in any material U.S. federal income tax consequences. In the event that a capital gain is recognized on the Sale Transaction, such gain may be deferred under the installment method for any payment not received in the year the Sale Transaction is completed. If a capital loss results, such loss may be reduced or otherwise permanently eliminated under the U.S. consolidated return regulations (i.e., the “unified loss rules” of Treas. Reg. § 1.1502-36).

As a consequence of the Sale Transaction, the activity of the WPT Business will only be reflected in the Company’s U.S. federal income tax filings for the portion of the year ending on the date of the Sale Transaction. Any historic tax attributes of the WPT Business, such as net operating losses and tax credits, will transfer to Buyer to the extent they are not utilized by taxable income of the Company on the income tax filing reflecting the Sale Transaction.

The Company does not expect that the Sale Transaction will result in any federal income tax consequences for its stockholders because they will not receive any of the proceeds from the Sale Transaction.

Anticipated Accounting Treatment

Upon completion of the Sale Transaction, we will remove from our consolidated balance sheet all of the assets and liabilities associated with the WPT Business sold to Buyer and will reflect therein the effect of the receipt and the use of the proceeds of the Sale Transaction and other related transactions, including (a) the repayment of any remaining convertible debt or bridge notes, (b) the payment of our transaction expenses, and (c) the impact of the acceleration of vesting of stock-based compensation awards held by employees of the WPT Business. We will record a gain on the sale of the WPT Business in our consolidated statement of operations equal to the difference between the purchase price received or expected to be received and the book value of the assets and liabilities sold. Furthermore, any financial statements that are issued in the future, relating to periods prior to the closing of the Sale Transaction, will present the assets and liabilities of the WPT business on a condensed basis as “held for sale” and the revenues and operating results of the WPT business will be condensed and presented as “income (loss) from discontinued operations”.

Appraisal Rights

Holders of the Company common stock are not entitled to appraisal rights in connection with the Sale Transaction.

THE STOCK PURCHASE AGREEMENT

The terms and conditions of the Sale Transaction, which is the sale of 100% of the outstanding capital stock of CSI, our 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 WPT Business, are set forth in the Stock Purchase Agreement, dated as of January 19, 2021, between us and Element Partners, LLC. A copy of the Stock Purchase Agreement, excluding the schedules thereto, is included as Annex A to this Consent Solicitation Statement. The description in this Consent Solicitation Statement of the terms and conditions of the Sale Transaction and of the Stock Purchase Agreement is a summary only and may not contain all of the information that is important to you. To fully understand the Sale Transaction and the terms of the Stock Purchase Agreement, you should carefully read in its entirety the copy of the Stock Purchase Agreement included as Annex A hereto.

Sale of the WPT Business

Pursuant to the Stock Purchase Agreement, we have agreed to sell 100% of the outstanding capital stock of CSI, to Element Partners, LLC (the “Buyer”). CSI is an indirect wholly-owned subsidiary of the Company that directly or indirectly owns 100% of the outstanding capital stock of each of the legal entities that collectively operate or engage in the WPT Business. By consummating the Sale Transaction, we will be disposing of the WPT Business in its entirety. Allied Esports Media, Inc. (“Esports Media”), a wholly-owned subsidiary of the Company and the direct holder of the outstanding capital stock of CSI, is also a party to the Stock Purchase Agreement.

Purchase Price and Tournament Payments

In consideration for the WPT Business, Buyer has agreed to pay the Company at closing a base purchase price of $68.25 million, subject to certain adjustments. Buyer remitted a $4.0 million advance payment of the purchase price upon the execution of the Stock Purchase Agreement and is required to pay the balance of the purchase price at the closing of the Sale Transaction. The purchase price will be adjusted upward by the amount of net cash position of CSI (including its subsidiaries) as of the closing date, and adjusted downward (i) the amount of indebtedness of CSI (including its indebtedness, but excluding a $685,300 Paycheck Protection Program loan) as of the closing date, (ii) accrued and unpaid Sale Transaction expenses of CSI (including its subsidiaries), and (iii) taxes of CSI (including its subsidiaries) attributable to periods prior to the closing date.

Buyer has also agreed to make future payments after the closing of the Sale Transaction to the Company totaling $10.0 million, which are referred to herein as “Tournament Payments.” Buyer is required to make such Tournament Payments on a quarterly basis over the three year period following the closing of the Sale Transaction, with each Tournament Payment to be equal to 5% of the aggregate entry fees from World Poker Tour-branded tournaments during the applicable quarterly period; provided that the maximum aggregate amount of Tournament Payments will not exceed $10.0 million. If aggregate Tournament Payments over such three year period are less than $10.0 million, Buyer will pay the shortfall to the Company on the three year anniversary of the closing of the Sale Transaction. Buyer’s obligations to remit Tournament Payments are subject to Buyer’s setoff rights with respect to indemnification obligations of the Company and Esports Media.

Representations and Warranties

The representations and warranties of each party set forth in the Stock Purchase Agreement have been made solely for the benefit of the other parties thereto for the purpose of allocating contractual risk between the parties and not for the purpose of establishing matters as to fact. In particular, the assertions embodied in the representations and warranties contained in the Stock Purchase Agreement (i) may have been qualified, modified, or excepted by confidential disclosures made to the other parties in connection with the Sale Transaction for the purpose of allocation of contractual risk, (ii) are subject to materiality qualifications contained in the Stock Purchase Agreement which may differ from what may be viewed as material by investors and (iii) were made only as of the date of the Stock Purchase Agreement or such other date as is specified in the therein. Accordingly, the representations and warranties in the Stock Purchase Agreement should not be viewed or relied upon as characterizations of the actual state of facts about the parties thereto.

The Stock Purchase Agreement contains representations and warranties made by CSI to Buyer. These representations and warranties relate to, among other things:

•        CSI’s corporate organization, good standing, qualification to do business, corporate power and authority;

•        CSI’s corporate authorization in relation to the Stock Purchase Agreement, the related transactions and related transaction documents to which it is a party, and the absence of conflict with CSI’s organizational documents and material contracts as a result of the execution and delivery of, and performance under, the Stock Purchase Agreement;

•        the applicability of governmental approvals to the Stock Purchase Agreement and related transactions;

•        the absence of conflict with CSI’s organizational documents and material contracts as a result of the execution and delivery of, and performance under, the Stock Purchase Agreement;

•        CSI’s capital structure;

•        the identification of CSI’s subsidiaries, and the corporate organization, good standing, qualification to do business, corporate power and authority of such subsidiaries;

•        the absence of certain changes in CSI’s operating and financial condition since the specified balance sheet date;

•        the status and validity of CSI’s accounts receivable;

•        tax matters;

•        title to and condition of CSI’s real and tangible and intangible property, and the sufficiency of CSI’s assets to conduct the WPT Business;

•        intellectual property;

•        material contracts;

•        employee benefits;

•        labor and employment matters;

•        the existence and compliance with consents licenses, permits and other authorizations required to be obtained in connection with the conduct of the WPT Business;

•        compliance with laws;

•        the existence or absence of litigation;

•        maintenance of adequate insurance;

•        interests of related parties (e.g., CSI officers and directors) in CSI transactions;

•        the existence or absence of fees being paid to brokers in connection with the Sale Transaction;

•        restrictions on the conduct of the WPT Business;

•        the availability of and Buyer’s access to CSI’s books and records;

•        customer and supplier relations; and

•        the PPP Loan (as defined below).

The Stock Purchase Agreement also contains representations and warranties made by the Company and Esports Media to Buyer. These representations and warranties relate to, among other things:

•        the corporate organization, good standing, qualification to do business, corporate power and authority of the Company and Esports Media;

•        the corporate authorization of the Company and Esports Media in relation to the Stock Purchase Agreement, the related transactions and related transaction documents to which each is a party, and the absence of conflict with their respective organizational documents and material contracts as a result of the execution and delivery of, and performance under, the Stock Purchase Agreement;

•        requirements to obtain consents and approvals for the Stock Purchase Agreement and related transactions;

•        compliance with securities laws and rules of self-regulatory organizations;

•        the accuracy of financial statements the effectiveness of disclosure controls and procedures;

•        the absence of proceedings pending by or before governmental entities;

•        title to the issued and outstanding capital stock of CSI to be acquired by Buyer in the Sale Transaction;

•        the inapplicability of anti-takeover provisions under applicable law or in the Company’s charter documents;

•        receipt by the board of directors of the Company of the opinion of Shot Tower Securities LLC to the effect that, subject to certain assumptions, limitations, qualifications and other matters, the purchase price to be paid in the Sale Transaction is fair, from a financial point of view, to Esports Media;

•        the accuracy of information contained in this Consent Solicitation Statement and any other applications, notifications or other documents filed with any governmental entity in connection with the Stock Purchase Agreement and the Sale Transaction; and

•        tax withholding information made available by or on behalf of CSI to Buyer.

The Stock Purchase Agreement also contains representations and warranties made by Buyer to Esports Media and CSI. These representations and warranties relate to, among other things:

•        the entity organization, good standing, company power and authority of Buyer;

•        the entity authorization of Buyer in relation to the Stock Purchase Agreement, the related transactions and related transaction documents to which it is a party, and the absence of conflict with its organizational documents and material contracts as a result of the execution and delivery of, and performance under, the Stock Purchase Agreement;

•        requirements to obtain consents and approvals for the Stock Purchase Agreement and related transactions;

•        the existence or absence of fees being paid to brokers in connection with the Sale Transaction;

•        the inapplicability of anti-takeover provisions under applicable law or in Buyer’s charter documents;

•        the accuracy of information provided by Buyer for use in this Consent Solicitation Statement and any other applications, notifications or other documents filed with any governmental entity in connection with the Stock Purchase Agreement and the Sale Transaction;

•        the absence of proceedings pending by or before governmental entities;

•        the sufficiency of funds available to Buyer to enable Buyer to satisfy its payment obligations under the Stock Purchase Agreement;

•        the existence or absence of contracts, undertakings, commitments, agreements or obligations or understandings between Buyer and its affiliates, on one hand, and the management or directors of the Company or Esports Media, or any stockholder of the Company, on the other hand, relating to the Sale Transaction or the operations of CSI and its subsidiaries following the closing of the Sale Transaction; and

•        Buyer’s status as a “sophisticated” investor and/or an “accredited” investor under application securities laws.

No Solicitation of Competing Proposal

In the Stock Purchase Agreement, the Company has agreed to, and has agreed to cause Esports Media and its subsidiaries to, immediately cease and cause to be terminated any existing solicitation of, or discussions or negotiations with, any third party relating to any competing proposal or any inquiry, discussion, offer or request that could reasonably be expected to lead to a competing proposal. The Stock Purchase Agreement generally defines a “competing proposal” as any inquiry, proposal or offer made by a third party to purchase or otherwise acquire the Company, Esports Media, CSI, any of their respective subsidiaries and/or the WPT Business.

In addition, until the earlier of the closing of the Sale Transaction or the termination of the Stock Purchase Agreement, the Company has agreed to:

•        promptly (and in any event within two business days of receipt) notify Buyer upon receiving any competing proposal, any inquiry or request for nonpublic information that would reasonably be expected to lead to a competing proposal;

•        disclose to Buyer the identity of the third party making the competing proposal (or inquiry or request for non-public information) and the material terms and conditions of any such competing proposal;

•        deliver to Buyer copies of any draft agreements or other written materials setting forth the terms of such competing proposal, inquiry or request for nonpublic information;

•        keep Buyer reasonably informed of discussions, negotiations or developments in respect of and the status and details of any such competing proposal; and

•        promptly (and in any event within two business days of receipt) provide Buyer with copies of all correspondence, documents and agreements, including drafts thereof.

Further, until the earlier of the closing of the Sale Transaction or the termination of the Stock Purchase Agreement, the Company and Esports Media have agreed not to, and have agreed to cause their subsidiaries not to:

•        initiate, solicit, induce or knowingly encourage the making of any proposal or offer with respect to a competing proposal; or

•        engage in negotiations or substantive discussions with, or furnish any information to, or enter into any agreement, arrangement or understanding with, any third party relating to a competing proposal or any inquiry or proposal that could reasonably be expected to lead to a competing proposal.

Despite this provision prohibiting solicitations of a competing proposal, at any time prior to the approval of the Proposal by the Company’s stockholders, the Company and Esports Media may, in response to an unsolicited competing proposal from a third party that did not result from a breach of the Company’s non-solicitation obligations under the Stock Purchase Agreement:

•        contact such third party to clarify any ambiguous terms and conditions thereof;

•        engage in negotiations or substantive discussions with, or furnish any information and other access to, such third party if the board of directors of each of the Company and Esports Media determines in good faith (after consultation with its outside financial advisors and legal counsel) that such competing proposal constitutes a superior proposal (or could reasonably be expected to lead to a superior proposal), pursuant to a confidentiality agreement containing confidentiality terms that are not less favorable to the Company than the confidentiality agreement that the Company entered into with Buyer.

As used in the Stock Purchase Agreement, a “superior proposal” means a bona fide written competing proposal made by a third party that the Board determines in good faith, after consultation with its outside financial advisors and legal advisors, is reasonably likely to be consummated without undue delay relative to the Sale Transaction and is more favorable to the Company’s stockholders from a financial point of view than the Sale Transaction, after consideration of any modifications to the Stock Purchase Agreement proposed by Buyer (as discussed below).

The Stock Purchase Agreement provides that the Company’s Board may propose to or actually withdraw, modify or qualify its recommendation with respect to stockholder approval of the Proposal or approve or recommend any superior proposal if the Company’s Board determines in good faith, after consultation with its outside financial advisors and legal counsel, that failure to do so would reasonably be expected to be inconsistent with its fiduciary duties under applicable law.

The Company also agreed that prior to the Board changing its recommendation to approve the Proposal, terminating the Stock Purchase Agreement or entering into transaction documentation with another party, the Company and Esports Media would provide Buyer with notice of their intention to do so at least three business days in advance, which notice must specify the reasons therefor and, if the basis of the proposed action is a superior proposal, disclose the material terms and conditions of any such superior proposal.

At Buyer’s option, the Company and Esports Media will negotiate in good faith with Buyer during such period to amend the terms and conditions of this Agreement in such a manner that would result in the Board recommending that Company stockholders approve the amended Stock Purchase Agreement with Buyer. Any subsequent material amendment to the superior proposal will require the Company and Esports Media to provide Buyer with notice thereof at least three business days prior terminating the Stock Purchase Agreement or entering into transaction documentation for the superior proposal, and at Buyer’s option will again negotiate in good faith regarding further amendments to the terms and conditions of the Stock Purchase Agreement.

Covenants and Agreements

The Stock Purchase Agreement sets forth various additional covenants and agreements among the parties to the Stock Purchase Agreement, including the following:

•        Conduct of Business Pending Closing. Until the closing, except as otherwise provided in the Stock Purchase Agreement or consented to in writing by Buyer, CSI and its subsidiaries will use commercially reasonable efforts to operate the their respective businesses in the usual, regular and ordinary course, preserve intact the present business organizations, keep available the services of the present officers, and preserve their relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with them. The Company and its subsidiaries have also agreed to refrain from taking certain actions specified in the Stock Purchase Agreement prior to the closing of the Sale Transaction.

•        Closing Efforts. Each of the parties to the Stock Purchase Agreement will use commercially reasonable efforts to take all actions necessary, proper or advisable to consummate and make effective the transactions contemplated by the Stock Purchase Agreement;

•        Stockholder Approval. We will prepare and file with the SEC this Consent Solicitation Statement to solicit the required vote of our stockholders to approve the Proposal. Buyer will reasonably cooperate to furnish all information required by applicable federal securities laws or the SEC for inclusion in this Consent Solicitation Statement, and our Board has agreed to recommend that our stockholders approve the Proposal.

•        Access to information. We have agreed to afford Buyer reasonable access to the properties, books, contracts, commitments, management employees and records of the Company, Esports Media and their subsidiaries, and to make available to Buyer all other information as Buyer may reasonably request.

•        Litigation. We have agreed to give Buyer the opportunity to participate in the defense or settlement of any stockholder litigation against the Company, Esports Media or CSI and any other entity that is part of the WPT Business being acquired in the Sale Transaction (including any director or officer thereof), and to not settle or offer to settle any such litigation commenced on or after the date of the Stock Purchase Agreement.

•        Post-closing Director and Officer Indemnification and Insurance. From and after the closing, Buyer has agreed to cause CSI and its subsidiaries to indemnify and hold harmless their current and former directors officers from losses, costs or expenses resulting from claims related to their services to CSI or its subsidiaries in such capacities. CSI has agreed, at the election of the Company, to obtain six year non-cancellable “tail” director and officer liability insurance policies for the individuals who are or were prior to the closing of the Sale Transaction covered by the existing director and officer liability insurance

policies maintained by the Company, with terms, conditions, retentions and levels of coverage at least as favorable as such existing policies with respect to matters existing or occurring at or prior to the closing. Buyer has agreed to pay 50% of the fees and expenses incurred in connection with obtaining such policies.

•        PPP Loan Forgiveness. In May 2020, WPT Enterprises, Inc., a subsidiary of CSI, received a two-year loan (the “PPP Loan”) provided in connection with the Paycheck Protection Program, or PPP, under the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, in the original principal amount of $685,300. CSI has applied for forgiveness for the PPP Loan. If confirmation of forgiveness of the PPP Loan is not received prior to the maturity date of the PPP Loan, Buyer will repay the PPP Loan (less any amounts forgiven). In such case, Buyer will thereafter be entitled to first offset the payoff amount against the remaining balance of the $10.0 million of Tournament Payments otherwise required to be paid by Buyer to the Company, and thereafter seek indemnity from the Company.

•        Non-Competition and Non-Solicitation. Each of the Company and Esports Media has agreed, for a period of five years after the closing of the Sale Transaction, not to (and to cause their affiliates not to) participate or engage in, in any manner or capacity, the Restricted Business, and not to solicit the customers, suppliers or employees of the WPT Business. For this purpose, the “Restricted Business” means, generally, any business involving the game of poker or variants thereof specified in the Stock Purchase Agreement and any activities ancillary or related to such activities, including, without limitation, (i) organizing, hosting, operating, promoting, and/or conducting events relating to poker, (ii) broadcasting or distributing content relating to such events, (iii) organizing, hosting, operating, promoting, and/or conducting clubs or organizations related to poker, and (iv) commercializing products and merchandise relating to poker.

•        Intercompany and Related Party Payments. The Company and Esports Media have agreed to settle, discharge or satisfy (or cause to be settled, discharged or satisfied) in full prior to the closing of the Sale Transaction all obligations or amounts due, payable or outstanding between CSI and its subsidiaries, on the one hand, and the Company, Esports Media and any of their subsidiaries or affiliates (excluding CSI and its subsidiaries), on the other hand, as well as any other amount due, payable or outstanding from CSI and its subsidiaries to parties related to the Company.

•        Payment of Bonuses and Change of Control Payments. The Company and Esports Media have agreed to settle, discharge or satisfy (or cause to be settled, discharged or satisfied) in full prior to the closing of the Sale Transaction all performance awards or remuneration of any kind with respect to pre-closing services provided by any past or present employee of CSI or its subsidiaries.

Conditions to the Completion of the Sale Transaction

The following list includes what our Board of Directors and our management believe are the material conditions to the Sale Transaction, all of which must be satisfied or waived at the time of the closing. In view of the fact that interpretations of “materiality” can be subjective, the list is qualified by reference to the Stock Purchase Agreement, which is attached as Annex A to this Consent Solicitation Statement. You are urged to carefully read this entire document including the Stock Purchase Agreement.

The respective obligations of the Buyer, on one hand, and the Company and Esports Media, on the other, to complete the Sale Transaction is subject to the satisfaction or waiver of several conditions set forth in the Stock Purchase Agreement, including the following:

•        Our stockholders must approve the Proposal;

•        Regulatory approval set forth in the Stock Purchase Agreement, if any, shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired;

•        No order, injunction or decree issued by any court or agency of competent jurisdiction or other law preventing or making illegal the consummation of the Sale Transactions shall be in effect; and

•        There shall be no pending suit, action or proceeding by any governmental authority (A) challenging or seeking to restrain or prohibit the consummation of the Sale Transaction or seeking to obtain material damages from us, or seeking to prohibit the Buyer from effectively controlling the WPT Business.

The obligation of Buyer to complete the Sale Transaction is subject to the satisfaction or waiver of several additional conditions set forth in the Stock Purchase Agreement, including the following:

•        The representations and warranties of the Company, Esports Media and CSI set forth in the Stock Purchase Agreement must be true in all material respects;

•        Seller must have performed in all material respects all obligations required to be performed by it under the Stock Purchase Agreement at or prior to the closing;

•        No “Material Adverse Effect” with respect to the Company, Esports Media or CSI shall have occurred;

•        Buyer shall have received copies of certain identified third party consents and approvals for the Sale Transaction;

•        Buyer shall have received the resignation of each person serving as a director of CSI and/or its subsidiaries; and

•        The Company and Esports Media shall have delivered the various closing deliverables outlined in the Stock Purchase Agreement.

The obligation of the Company and Esports Media to complete the Sale Transaction is subject to the satisfaction or waiver of several additional conditions set forth in the Stock Purchase Agreement, including the following:

•        The representations and warranties of the Buyer set forth in the Stock Purchase Agreement must be true in all material respects;

•        Buyer must have performed in all material respects all obligations required to be performed by it under the Stock Purchase Agreement at or prior to the closing; and

•        Buyer shall have delivered the various closing deliverables outlined in the Stock Purchase Agreement.

Termination

The Company, Esports Media and Buyer can jointly agree to terminate the Stock Purchase Agreement at any time.

Either the Company and Esports Media, on the one hand, or Buyer, on the other hand, may terminate the Stock Purchase Agreement if:

•        any governmental entity that must grant a regulatory approval for the Sale Transaction denies approval of the Sale Transaction and such denial has become final and nonappealable, or any governmental entity issued a final and nonappealable order, injunction or decree permanently enjoining or otherwise prohibiting or making illegal the consummation of the Sale Transaction;

•        the Sale Transaction shall not have been consummated on or before the Outside Date (March 31, 2021), provided that the right to terminate the Stock Purchase is not available to any party who is then in material breach of any representation, warranty, covenant or other agreement contained the Stock Purchase Agreement which breach is the reason for the failure of the closing to occur by that date; or

•        there shall have been a breach of any of the covenants or agreements or any of the representations or warranties set forth in the Stock Purchase Agreement on the part of the Company, Esports Media or CSI, in the case of a termination by Buyer, or Buyer, in the case of a termination by the Company or Esports Media, which breach would result in the failure to satisfy closing conditions, and which is not cured within 15 days following written notice to the party committing such breach or by its nature or timing cannot be cured within such time period.

Buyer may terminate the Stock Purchase Agreement:

•        at any time after the board of directors of the Company and Esports Media shall have effected an “adverse recommendation change” prior to receipt of stockholder approval for the Sale Transaction, or in the event the Company and/or Esports Media materially breaches any of their covenants not to solicit a competing proposal; or

•        in its discretion at any time prior to the Outside Date.

Under the Stock Purchase Agreement, an “adverse recommendation change” means (i) the failure to include the Board recommendation to approve the Sale Transaction in this Consent Solicitation Statement, (ii) withholding, withdrawing or modifying or qualifying the Board’s recommendation to approve the Sale Transaction, or propose publicly to do so, (iii) failing to reaffirm the Board’s recommendation to approve the Sale Transaction or failing to publicly state that the Sale Transaction is in the best interests of the Company’s stockholders within ten business days after being requested by Buyer to do so, (iv) failing to publicly announce, within ten business days after a tender offer or exchange relating to the Company’s securities shall have been commenced, an unqualified statement disclosing the rejection of such tender offer or exchange offer by the Company’s board of directors, (v) taking or resolving to take other actions or making other public statements inconsistent with the Board’s recommendation to approval the Sale Transaction, or (vi) approving, determining to be advisable, or recommending any competing proposal, or proposing publicly to do so.

The Company and Esports Media may terminate the Stock Purchase Agreement if: (i) the Company or Esports Media receives a superior proposal, (ii) the respective boards of directors of the Company or Esports Media shall have authorized the Company and Esports Media to enter into a definitive agreement to consummate the transaction contemplated by such superior proposal, and (iii) concurrently with the termination of the Stock Purchase Agreement, the Company and Esports Media collectively pay Buyer a $3.0 million termination fee and enter into the definitive agreement to consummate the transaction contemplated by such superior proposal.

Effect of Termination

In the event of termination of the Stock Purchase Agreement as described above, the Stock Purchase Agreement will be of no further force or effect, except:

•        designated provisions of the Stock Purchase Agreement, including if applicable, the termination fees, non-performance fees and expense reimbursements described below, will survive termination; and

•        the Company and Esports Media will not be relieved or released from any liabilities or damages arising out of their knowing and intentional breach of the Stock Purchase Agreement prior to its termination.

Expense Reimbursement and Termination Fees

If (i) the Stock Purchase Agreement is terminated due to the Sale Transaction not being consummated on or before the Outside Date, (ii) the Company and Esports Media shall have failed to obtain, before the time of termination, stockholders support agreements from specified stockholders and their affiliates, and (iii) the Company has failed to obtain the written consent of a sufficient number of the Company’s stockholders to approve the Sale Transaction, and provided that Buyer is not in material breach of its representations, warranties, covenants or agreements under the Stock Purchase Agreement at the time of termination, then the Company and Esports Media will be required to reimburse Buyer for 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 Transactions, up to a maximum of $1.0 million, and will be required to return to Buyer the $4.0 million advance payment of purchase price.

The Company and Esports Media will collectively be obligated to return to Buyer the $4.0 million advance payment of purchase price and pay Buyer a $3.0 million termination fee in the following circumstances:

•        If Buyer terminates the Stock Purchase Agreement due to the breach of covenants, agreements or representations or warranties of the Company, Esports Media or CSI set forth therein, which breach would result in the failure to satisfy closing conditions, and which is not cured within 30 days following written notice to the breaching party (or by its nature or timing cannot be cured within such time period);

•        If Buyer terminates the Stock Purchase Agreement at any time after the board of directors of the Company and Esports Media shall have effected an adverse recommendation change prior to receipt of stockholder approval for the Sale Transaction, or in the event the Company and/or Esports Media materially breaches any of their covenants not to solicit a competing proposal;

•        If the Company and Esports Media terminate the Stock Purchase Agreement and contemporaneously with entering into a definitive agreement for a superior proposal; or

•        If (i) the Stock Purchase Agreement is terminated due to the Sale Transaction not being consummated on or before the Outside Date, (ii) prior to such termination, a competing proposal shall have been made to the Company or Esports Media and disclosed to the Company’s stockholders, or a competing proposal shall have been made to the Company’s stockholders, or any party shall have publicly announced an intention to make a competing proposal prior to the date the Stock Purchase Agreement is terminated, (iii) within twelve months after the date of such termination, the Company, Esports Media and/or any of their respective subsidiaries enters into a definitive agreement with respect to a competing proposal (or transaction that would have constituted a competing proposal if made prior to the termination of this Agreement) or consummates a competing proposal (a “Tail Transaction”) and (iv) such Tail Transaction is consummated (any termination fees payable in such circumstance will be reduced, if applicable, by the amount of any Buyer transaction expenses previously reimbursed by the Company as contemplated by the first paragraph under the caption “Expense Reimbursement and Termination Fees” above).

Buyer will be obligated to pay the Company a $3.0 million non-performance fee (in addition to the Company’s retention of the $4.0 million advance payment of purchase price) in the following circumstances:

•        If the Company and Esports Media terminate the Stock Purchase Agreement due to Buyer’s breach of covenants, agreements or representations or warranties set forth therein, which breach would result in the failure to satisfy closing conditions, and which is not cured within 30 days following written notice to Buyer (or by its nature or timing cannot be cured within such time period); or

•        If Buyer terminates the Stock Purchase Agreement pursuant to its discretion at any time prior to the Outside Date.

WPT Brand License

Effective upon any termination of the Stock Purchase Agreement, other than a termination in which Buyer is required to pay a termination or 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 obligation, to require the Buyer to into such license agreement with Peerless Media Limited. The form of the agreement governing the license is attached as Exhibit B to the Stock Purchase Agreement.

Indemnification

The representations and warranties in the Stock Purchase Agreement generally survive for 18 months after the closing date of the Sale Transaction. Representations and warranties about organization, standing and power, authority, conflicts with charter documents, capitalization, ownership of CSI, the absence of brokers, the PPP Loan, the accuracy of information in documents filed with governmental entities, tax matters and the amount of CSI’s indebtedness and accrued and unpaid transaction expenses (“fundamental representations”) survive until the three year anniversary of the closing date. All covenants in the Stock Purchase Agreement and all claims related to fraud survive forever unless the covenants have specific terms in Stock Purchase Agreement.

The Company and Esports Media have agreed to jointly and severally indemnify Buyer and (after the closing) CSI and its subsidiaries for any damages suffered or incurred to the extent resulting from (i) any breach of the representations and warranties of the Company, Esports Media or CSI, (ii) any failure by the Company, Esports Media or (prior to the Closing Date) CSI to perform or comply with their respective covenants or agreements, (iii) fraud, (iv) any post-closing obligation to repay the PPP Loan or any failure to obtain consent from the lender of the PPP Loan or the U.S. Small Business Administration with respect to the Transaction (or violation of any applicable law with respect to such failure), (v) any breach or alleged breach by the Company, Esports Media or their affiliates of any CSI service provider benefit or compensatory plan, and (vi) various tax matters.

Buyer and (from and after the closing of the Sale Transaction) CSI agreed to jointly and severally indemnify the Company and Esports Media for any damages suffered or incurred to the extent resulting from any breach of the representations and warranties of Buyer, any failure by Buyer to perform or comply with its covenants or agreements, or fraud.

Indemnifiable damages will be reduced in amount by any insurance proceeds, indemnification payments, contribution payments or reimbursements actually received by the indemnified party, and further reduced by any associated tax benefits to the indemnified party.

We and Buyer will not have indemnification liability for breach of representations and warranties other than fundamental representations unless and until the aggregate amount of our or Buyer’s indemnifiable losses, as the case may be, exceeds a deductible amount of $1.0 million, and then only to the extent the aggregate amount exceeds such deductible. Our maximum aggregate liability, on one hand, and the maximum aggregate liability of Buyer, on the other, for indemnifiable losses resulting from breach of representations and warranties other than fundamental representations is $8.0 million. Our maximum aggregate indemnification obligation under the Stock Purchase Agreement, including for breach of fundamental representations, may not exceed the purchase price (including the Tournament Payments), however indemnification claims resulting from fraud and claims related to the PPP Loan are not subject to any indemnification limit.

The Stock Purchase Agreement provides that Buyer will first offset the amount of indemnifiable damages against the remaining balance of the Tournament Payments otherwise required to be paid by Buyer to the Company except in cases of fraud, and requires that Buyer must employ and exhaust such right of offset prior to making claims for direct indemnification payment from the Company or Esports Media.

The Company has not obtained any insurance policies covering the matters as to which it will indemnify Buyer.

Amendment

Subject to applicable laws, the Company, Esports Media and Buyer may mutually amend or waive any provision of the Stock Purchase Agreement. The Company does not currently expect to waive any material provision of the Sale Transaction.

Governing Law

The Stock Purchase Agreement is governed by the laws of the State of Delaware.

DESCRIPTION OF ALLIED ESPORTS ENTERTAINMENT, INC.

Until the close of the proposed Sale Transaction, the Company expects to continue to execute its existing business strategy.

Overview of Business

Unless otherwise stated or the context otherwise requires, the terms “we,” “us,” “our,” “AESE” and the “Company” refer to Allied Esports Entertainment, Inc. and its subsidiaries.

The Company operates a premier public esports and entertainment company, consisting of the Allied Esports and World Poker Tour businesses. For the past 16 years of its 18-year history, WPT’s business model has successfully utilized the following three pillars for its business model in the sport of poker, which the Company believes can be utilized by Allied Esports:

•        in-person experiences;

•        developing multiplatform content; and

•        providing interactive services.

The Allied Esports Business

Gaming is one of the largest and fastest growing markets in the entertainment sector, with an estimated 2.56 billion gamers globally, and esports is the major driver of 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. Some of the popular esports games currently being played include Fortnite, League of Legends, Dota 2, Counter-Strike, Call of Duty, Overwatch and FIFA. Although you can play games on your own against the computer or console, one of the ways esports is different than the video games of old is the community and spectator nature of esports, whereby competitive play against another person — either one-on-one or in teams — that is viewed by an online and in-person audience, is a central feature of esports. Since players play against each other online, a global network of players and viewers has developed as these players compete against each other worldwide. Additionally, game developers have greatly increased the watchability of games, which has made the spectator aspect of gaming much more prevalent and further drives expansion of the gaming market. The expanded reach of high-speed Internet service and the computer technology advances in the last decade have also greatly accelerated the growth of esports. Esports has now become so popular that many colleges offer scholarships in esports and the best-known esports teams are receiving mainstream sponsorships and are being bought or invested in by celebrities, athletes and professional sports teams. The highest profile esports gamers have significant online audiences as they stream themselves playing against other players online and potentially can generate millions of dollars in sponsorship money and subscription fees from their online streaming channels. It is projected that by 2023, 646 million people will be watching esports globally, and that global esports revenue will grow to approximately $1.5 billion.

WPT successfully implemented a three-pillar strategy for over 16 years of its 18-year history. We believe this model can continue and also be applied to Allied Esports and the esports industry over time. Allied Esports intends to use those same pillars — in-person experiences, multiplatform content, and interactive services—independently and in connection with its strategic partners.

In June 2019, Allied Esports entered into a series of strategic transactions with Simon Equity Development, LLC and its affiliates (collectively, “Simon”), a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations, pursuant to which Allied Esports organized and staged an esports event program called the Simon Cup at certain Simon shopping centers in the U.S. and online. In June 2019, the Company also launched a strategic partnership with TV Azteca, a premier television network in Mexico. In January 2020, Allied Esports entered into a strategic partnership with Brookfield Property Partners, one of the world’s premier real estate companies, in which Allied Esports will develop integrated esports experience venues at mutually agreed upon shopping malls owned and/or operated by Brookfield or its affiliates that will include a dedicated gaming space and production capabilities to attract and to activate esports and other emerging live events. In connection with the foregoing partnerships, each of Brookfield and TV Azteca made a $5 million equity investment into the Company.

In-person Experiences

Allied Esports will continue delivering first-in-class live experiences to customers at Allied Esports’ branded properties worldwide. Starting with the flagship esports arena, the HyperX Esports Arena Las Vegas, the HyperX Esports Studio in Germany, its on-mall esports venues – the first of which that is planned to be open at the Mall of Georgia with construction and opening dates postponed until further assessment can be made following the COVID-19 pandemic, and its affiliate arenas in China and Australia, Allied Esports offers 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 incredible esports content with its on-site production facilities and studios and provide an attractive facility for hosting corporate events, tournaments, game launches or other events. Additionally, Allied Esports has two mobile esports arenas, which are 18-wheel semi-trailers that convert into first class esports arenas and competition stages with full content production capabilities and interactive talent studios. Through this worldwide network of arenas, Allied Esports believes it can offer customers an unmatched ability to participate in simultaneous global esports events and offer sponsors and partners a truly scalable global platform and audience to promote their businesses and products. Allied Esports’ flagship HyperX Esports Arena Las Vegas serves as a marquee destination for esports fans globally, which it hopes will become the Madison Square Garden or Yankee Stadium of esports.

Flagship Arena.    In March 2018, Allied Esports opened its first flagship arena, the HyperX Esports Arena Las Vegas, at the Luxor Casino on the Vegas strip, whose pyramid is one of the most visible landmarks in Las Vegas. This arena has 80 to 100 gaming stations, two bars, food service, private rooms, a production facility, and space for up to 1,000 people for events. The arena is custom-built for esports tournaments and has a broadcast-ready television studio to broadcast live events and produce content. Allied Esports monetizes the arena through renting the space for live events; merchandise sales; daily usage fees from day-to-day gamers using the gaming stations; food and beverage; and sponsorship (i.e., our HyperX naming rights relationship).

Affiliate Arenas.    One of Allied Esports’ strategic advantages is its global network of esports arena partners, which enables it to host events and promote competitions around the world, with those competitions culminating in live events held at the flagship arena in Las Vegas. Allied Esports achieves this through its Affiliate Program, which consists of strategic partnerships with third-party esports operators around the globe. Allied Esports generally charges these affiliates an upfront fee and a minimal annual revenue share of gross revenue, starting in the second year of the operation of the venue. Allied Esports’ brand visibility and reputation have already resulted in affiliate arrangements with arenas and gaming centers in California, China and a multi-year agreement with Fortress Esports Pty Ltd, a new gaming, esports and entertainment venue enterprise in Australia, which opened its first affiliate arena in Melbourne in March 2020. This network of affiliate arenas allows Allied Esports to scale its brand penetration worldwide on a rapid basis, driving more gamers into the Allied Esports ecosystem, with minimal costs to Allied Esports. Furthermore, the content that can be produced by these affiliate arenas can be on-sold by Allied Esports, with minimal production costs.

Mobile Arenas.    The mobile arenas are 18-wheeler trucks that expand out into fully functional esports arenas with event hosting, broadcasting and production capabilities. The mobility of the trucks makes them ideal for sponsors to reach a large audience in multiple locations at an economical cost. The trucks serve as mobile billboards for potential third-party sponsorship, as well as the Allied Esports’ brand, providing highly visible brand presence wherever they appear. Allied Esports currently has two mobile arena trucks, with the first truck based in Germany and serving the European market, and a second truck based in Las Vegas and serving the U.S. market.

Strategic Investor Events.    In addition to Allied Esports utilizing in-person experiences at its flagship, mobile and affiliate arenas, Allied Esports is leveraging its experience to develop events and content with its strategic investors, Simon Property Group, Brookfield Property Partners, and TV Azteca. Moreover, Allied Esports is working with TV Azteca to create in-person experiences in Mexico.

Allied Esports is collaborating with Brookfield Property Partners to create a new product offering focused on delivering esports experiences through integrated gaming venues and production facilities in select shopping centers around the U.S. that are owned and/or operated by Brookfield. The on-mall venues will be designed to activate esports

and other emerging live events through tournament play of all levels and daily use, featuring PC and console gaming, plus full food and beverage options, and experiential retail. The venues will have the capability to be expanded into common areas for larger esports activations and live events.

In addition, on September 30, 2019, Allied Esports and Simon launched The Simon Cup, a co-branded esports competition and gaming tournament series of on-mall regional festivals combining online and in-person play at select Simon centers in the New York and Los Angeles markets, with the winners of the regionals moving on to HyperX Esports Arena Las Vegas, where the first Simon Cup Champion was crowned on November 23, 2019. As a result of the COVID-19 pandemic, Simon and the Company are currently reevaluating the terms of such partnership moving forward.

Multiplatform Content: Leveraging Branded Properties and Strategic Partnerships to Develop Content

Allied Esports’ worldwide network of branded esports properties provides Allied Esports with a platform to potentially develop a significant amount of content to distribute via digital live streams, broadcast and cable, and social media outlets. Allied Esports believes that its arenas will draw top-level esports talent (such as professional streamer Ninja, who was the featured talent at a successful event at Allied Esports’ Las Vegas arena in April 2018) for purposes of hosting events and developing content, which it can distribute live, post-produce into fully-produced episodic content, or repackage for social media distribution. Allied Esports intends to monetize the content in multiple ways, including direct sales of the content, sponsorship revenue, and subscription and/or advertising fees for viewers of the content.

We believe Allied Esports’ ecosystem of esports branded properties gives it the reach, reputation and experience to produce world-class live events, in partnership with some of the most prominent names in the esports industry. These live events provide Allied Esports with the material to produce exciting content that can be distributed via three different formats, each of which has its own revenue generation model: live streaming, post-produced episodic content, and short-form repackaged content.

Live Streaming.    Live streaming is the most popular esports content delivery channel today, as it offers the best interactive experiences for the audience. Vast improvements in technology and Internet service and speed have made live streaming with large audiences widely available today. Well-known gamers live stream themselves playing their favorite games on any of the popular streaming services (Twitch, Mixer, YouTube Gaming, Facebook Gaming, etc.) to a worldwide audience. The streamers derive revenue from ad sales, sponsorship, subscription fees and gift payments from spectators. Through Allied Esports’ ecosystem of esports arenas, Allied Esports can offer streamers a large platform to put on live events that can be simultaneously streamed on both the streamer’s channels and on Allied Esports’ channels. An example is a streaming event Allied Esports held with one of the most prominent streamers in esports, Tyler Blevins, AKA Ninja, in April 2018. Famous for his streaming channel where he plays the popular esports game Fortnite, Ninja held a live event at the Las Vegas flagship arena that set records for Twitch live streams, with over 667,000 peak concurrent viewers and 2.4 million unique viewers. To put those audience numbers in perspective, those numbers are significantly higher than viewership of the average regular season NBA game in 2019. Allied Esports was able to sell multiple sponsorships for the event and earned significant revenue from the food and beverage, merchandise sales and usage fees from the gaming stations. Although large audiences can be garnered through these live event streams, there are limitations on the streams, as they have a one-and-done nature; repeat viewing is not popular for these events, which limits the sponsorship opportunities. Furthermore, due to the live nature of these events and streams, it is difficult to create a narrative or tell a story to compel viewership past an initial viewing. This leads to Allied Esports’ development of post-produced episodic content.

Post-Produced Content.    Allied Esports intends to develop esports entertainment programming around its live experiences and, using its experienced editing and production teams, create serial, episodic content and segments that tell compelling storylines around its gaming talent, in person experiences, and gaming events around the world. Allied Esports developed this technique through the WPT, who took the slow-paced game of poker and dramatized it and created storylines that made for exciting and compelling viewing. This post-produced content can be valuable real estate for sponsors, as Allied Esports can integrate sponsors seamlessly into the show in a way that feels organic to the viewers. Allied Esports can focus on different storylines, create excitement via editing and music inclusion, and generally elevate the production quality from that achievable in a live stream. Allied Esports can then monetize this

episodic content via sponsorship, advertising, selling the content itself to third party distributors, or even use it as a marketing tool to drive customers to come to Allied Esports’ branded properties, buy its merchandise or otherwise interact with Allied Esports.

Repackaged Content.    The library of content Allied Esports will develop from events can be cut into smaller clips that can be used as marketing and promotion of the Allied Esports brand on social media. Allied Esports can also edit content to create new content, such as “best of” shows, focusing on one particular game as played by multiple well-known streamers, regional shows focusing on talent from a particular country, and so on.

Allied Esports’ global branded esports properties ecosystem will create opportunities for live events which provide material to develop great content, all of which Allied Esports can monetize in multiple ways. The large customer base Allied Esports develops through these in-person experiences, live streams and content distribution will give it a customer base to launch interactive services.

Interactive Services: Developing an Esports Entertainment Platform

Allied Esports intends to develop its own online platform where esports players and fans can watch, play and win with other members of the esports community and top esports personalities. The online platform will enable fans to compete against each other as well as participate in esports programs starring their favorite players. Subscriptions will provide members with exclusive access to numerous unique and proprietary experiences, products and services that are not available outside of Allied Esports’ ecosystem, such as exclusive online content, member-only tournaments, prizes and cash awards, exclusive live event and merchandise access, exclusive opportunities to be part of our entertainment programming, VIP treatment at Allied Esports’ arenas, and much more. Allied Esports intends to use the authenticity and reach driven by its in-person experiences and content viewership to drive platform adoption by esports fans. Allied Esports’ executive team has years of experience developing online platforms — its CEO, Frank Ng, has managed and run online platforms with approximately 700 million registered users in China for over 14 years, and its COO, David Moon, has produced, published and operated numerous game services for over 20 years, including helping build NHN Corporation’s global footprint to over 1 million concurrent users. Furthermore, WPT has developed and operated its subscription platform for poker fans, ClubWPT, since 2010, and developed and operated a social poker product, PlayWPT, starting in 2016. PlayWPT was licensed to a third party in May of 2018.

The WPT Business

The Company owns the World Poker Tour® (WPT®) — a premier name in internationally televised gaming and entertainment with brand presence in land-based poker tournaments, television, online and mobile. A leading innovator 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 FOX Sports Regional Networks in the United States. Season 18 of WPT is 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 June 2020, ClubWPT launched a premium level of ClubWPT membership called ClubWPT Diamond, which allows members to play for larger prize pools, more qualifying seats to official WPT live events, and exclusive line-ups of unique experience packages. 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. As described below, WPT applies a three-pillar model of in-person experiences, developing multiplatform content and providing interactive services, to the sport of poker.

In-person Experiences: Worldwide Poker Tournaments

World Poker Tour Events. The WPT is a sports league of affiliated poker tournaments that are held at prestigious casinos and poker rooms around the world. WPT licenses the WPT brand to these casinos and card rooms so that they can brand their poker tournaments as WPT events, and these events are integrated into WPT’s tour. These events form the backbone of WPT’s brand identity and have turned the WPT into one of the most recognizable names in gaming. WPT has developed different types of tours, generally distinguishable by the size of the buy-in for competitors in the applicable tour’s events. The WPT Main Tour events generally have the biggest buy-ins (usually between $3,500 and $10,000), are held at the largest and most prestigious casinos and card rooms and are attended by many of the top professional poker players in the world. The WPT DeepStacks Tour and WPT500 events are smaller than Main Tour events, with buy-ins ranging from $300 to $1,000, and are meant to cater to the lower- to medium-stakes players. In addition, through a third-party licensing arrangement, WPT licenses its name to a third party operating the WPT League, which are small bar-league poker events held at bars and clubs on a social basis. These live events create touchpoints to a large community of poker players to whom WPT can market other WPT live events, advertise and market its sponsor’s products, and push towards its interactive products. Furthermore, the live events create the content WPT uses to monetize its brand, as set forth below. The World Poker Tour live events have been postponed during the recent outbreak of the COVID-19 virus throughout the world.

Multiplatform Content: The World Poker Tour Television Shows

The Content.    WPT films the final table of six participants from a select group of WPT’s Main Tour stops, where the players compete for some of the poker world’s largest tournament prize pools. We then edit the footage from these tour stops, resulting in a series of one-hour or two-hour episodes which are distributed for telecast to both domestic audiences via our broadcast agreement with Sinclair, and international television audiences via numerous international distribution agreements. WPT has an agreement with Poker Go, a prominent poker-centric online platform, pursuant to which WPT live streams many of its events to Poker Go’s customer base. Many of WPT’s live events that are not broadcast on Sinclair are live streamed on Poker Go, which ensures almost all of WPT’s events are broadcast on some format. In addition, WPT films and produces special episodes based on a variety of non-traditional poker tournaments and/or cash games, which it also distributes for telecast along with the episodes based on WPT’s regular tour stops. Furthermore, WPT produced specialized shows meant to promote and market its ClubWPT membership site, such as its “King of the Club” shows in which ClubWPT members won the right, by winning certain tournaments on the ClubWPT platform, to play against each other for cash and prizes in a single-table tournament that was filmed and broadcast on FSN. WPT also filmed and prepared for distribution another series of shows to promote ClubWPT called “Challenge the Champs”, in which ClubWPT members who qualified on the ClubWPT platform received the chance to play against former WPT Main Tour champions for cash and prizes. These episodes premiered on FSN in August and September 2019.

WPT previously produced and broadcasted on FSN a series of shows called WPT Alpha8, based on a series of high-stakes poker tournaments with buy-ins of $100,000. In the Alpha8 events, some of the most elite high-stakes players in the world played in poker tournaments against one another in glamorous casinos and card rooms around the world, with the final eight players of each tournament filmed for production of the television episodes. The inaugural season of WPT Alpha8 began in 2013 and aired for three seasons, ending in 2016 and continues to be distributed internationally. WPT has continued to expand its global footprint by entering into an agreement with TV Azteca, pursuant to which WPT and TV Azteca are creating modified content using footage from WPT’s current library of content and translating the shows and integrating localized hosts for distribution in the territory of Mexico. This strategy of localizing WPT content has previously proven successful, namely in France, and we believe this localized content in the territory of Mexico will become a significant driver for a jointly owned social gaming platform. WPT and TV Azteca recently launched in beta this August 2019. Interest in the show so far is high, with viewership already exceeding 3 million viewers of a single episode. In addition to the strategic advantage of the “World Poker Tour” and WPT-related brands, WPT has created significant efficiencies in its content programming through its affiliation and use of Allied ESports’ HyperX Esports Arena Las Vegas venue to film some of its Main Tour final tables and other special events. This change, which just began for Season 17, has significantly reduced production costs by reducing transportation and set up fees and has allowed for more content to be produced at a significantly more efficient cost. Moreover, by reducing the physical location needs from its casino partners that would otherwise be featured in a WPT televised event, WPT has greatly expanded the number of potential casino customers that can meet the requirements

for hosting a WPT televised final table. Finally, WPT creates, owns and publishes its own music for WPT shows. In addition to receiving royalties for the music integrated into these programs, WPT has created a database of over 2,300 musical pieces which may be licensed for itself or for other third-party producers.

WPT Distribution Footprint.    All of the WPT television programs air on Sinclair’s RSNs in the U.S., and in 33 different territories worldwide pursuant to licensing and distribution arrangements with various linear and digital networks. Virtually all of WPT’s 17-season poker library is fully available for distribution, providing hundreds of hours of top-tier broadcast grade poker sports content. WPT has greatly expanded the reach of its content by licensing it for broadcast on many digital platforms as well, such as PlutoTV, Unreel Entertainment, Samsung TV Plus, and many others. WPT does not receive fees from Sinclair for the domestic distribution of our content. Instead, WPT uses the WPT show to heavily promote its ClubWPT product and other online products and partnerships, such as Zynga’s WPT social poker game. WPT does provide Sinclair with a guaranteed revenue share from ClubWPT’s operations in exchange for significant promotion and distribution of the programs featuring ClubWPT marketing. This arrangement ensures that Sinclair has an incentive to keep WPT’s show on the air and to market and promote the show, as they share in the show’s success to the extent ClubWPT’s revenue increases. Since the ClubWPT customer base and broadcast television viewers are similar in demographics, the symbiotic relationship between Sinclair and WPT works well to keep WPT’s brand widely known and accessible to millions of people in the U.S. The Sinclair agreement also has other important broadcast requirements to ensure that WPT’s programming remains “appointment television” and airs at particular times on both the Sinclair networks and the RSNs. Internationally, some of WPT’s distribution partners pay WPT fees to broadcast content, but usually, WPT’s international revenues are based on distribution deals that pay via advertising time and sponsorship sales, as well as the intrinsic value of spreading WPT’s brand awareness worldwide. The international reach of WPT-related shows has grown meaningfully throughout 2019, both as a result of WPT’s strategic relationship agreement with TV Azteca and our expanding digital distribution footprint. WPT receives additional fees from our digital distribution agreements, but again see these as brand-building exercises and as avenues to get more people exposure for WPT’s online products, sponsors and advertisers. In addition to its World Poker Tour content, WPT also distributes various sports and lifestyle programming through its distribution business. As a result, WPT now controls over 1,100 hours of programming from which it may generate distribution fees, license fees, sponsorship revenue and music licensing revenue, as well as serving as a vehicle to promote its online gaming products worldwide. The ability to “bundle,” or offer large amounts of content, provides WPT distribution leverage in negotiating the amount of airings or preferred airing times of its content.

The Walt Disney Company (“Disney”) recently acquired 21st Century Fox (“FOX”). Under the terms of the acquisition, FOX’s non-regional news and sports assets, including FSN, were spun off into a new company, Fox Corporation (which is commonly referred to as “New Fox”), which remains owned by the prior FOX shareholders. The Department of Justice required Disney to sell all RSNs within ninety (90) days after the closing of the Disney/FOX acquisition. The RSNs (including FSN) were recently purchased by a joint venture company owned by Sinclair Broadcast Group and Entertainment Studios, Inc. (collectively, “Sinclair”). To date, Sinclair’s acquisition of the RSNs (including FSN) has not had any material effect on the airing of WPT’s content.

Sponsorship Revenue.    Sponsorship revenue is the prime economic driver of the distribution of WPT content. WPT partners with prestigious brands, such as Dr. Pepper (soft drinks), Hublot (high-end timepieces), Corona (beer), Rockstar (energy drinks), Baccarat (fine crystal), Party Poker (online gaming in Europe), and offers them the ability to become the “Official ________ of the World Poker Tour”. The Season 17 sponsors have included Hublot, Rockstar, Baccarat, Faded Spade Poker (a playing card manufacturer), and Zynga Inc. (social gaming operator). WPT is able to seamlessly integrate its sponsors into the WPT television show by displaying sponsors on poker tables, on television sets, and specialized segments that are brought to viewers by the applicable sponsor. By integrating WPT’s sponsors into the show, WPT provides a powerful marketing tool in that viewers are seeing the sponsor as part of the show they are watching, as opposed to an advertisement that they may mute or skip if possible. WPT’s live events also offer WPT sponsors a great advertising platform to market directly to WPT players via signage, product sampling suites, flyers, and similar marketing endeavors.

Interactive Services: Poker Platforms

WPT’s live event global footprint and distribution of its content via broadcast, streaming and social media, allow WPT to generate significant marketing opportunities for both its sponsors and its own products. WPT has taken advantage of this marketing arm to promote several interactive products: ClubWPT, its subscription-based online poker club that WPT owns and operates, which also offers social poker; PlayWPT, a web and mobile social poker

product that is operated by a third party utilizing software and branding that WPT licenses to such provider; Zynga Poker, who operates one of the world’s largest social poker products, to whom WPT has licensed its brand for certain WPT-branded poker tournaments on their platform; and HongKong Triple Sevens Interactive Co., Ltd, who licenses WPT’s Alpha8 brand to operate a social poker product they are in the process of developing.

ClubWPT.    WPT’s subscription-based online club, ClubWPT.com, is operated in accordance with the principles of sweepstakes law and is available in 43 states and territories across the United States, Australia, Canada, France and the United Kingdom. A free alternative means of entry is offered for participants who wish to play in the tournaments but do not wish to purchase the other membership benefits. VIP members can play poker to win a share of $100,000 in cash and prizes every month, including seats in live WPT poker tournaments. Other benefits include access to every season of the WPT television series and all related content, discounted tickets to live events through ScoreBig, everyday savings for everyday things via the ClubWPT Entertainment Savers Guide, and other member benefits. In January of 2019, WPT added freemium social poker and casino gaming on the platform. Since that time, daily active revenue has risen steadily, and we anticipate the freemium products on the platform will be a meaningful driver of ClubWPT revenue going forward. The subscription fee for ClubWPT remains the same each month and players are not allowed to wager actual money online. One must be eighteen or older to participate. In June 2020, ClubWPT launched a premium level of ClubWPT membership called ClubWPT Diamond, which allows members to play for larger prize pools, more qualifying seats to official WPT live events, and exclusive line-up of unique experience packages.

Zynga Poker.    WPT entered into a 3-year licensing agreement with Zynga, Inc. in 2018 pursuant to which Zynga agreed to pay WPT $3 million per year in exchange for the right to license the WPT name and brand to its massive social gaming database for WPT-branded poker tournaments on the Zynga social poker platform. WPT supports Zynga’s efforts through extensive marketing of its brand through its marketing network which includes its television programs, advertisements, and social media channels. Zynga has further used the WPT tournaments as a vehicle to reward their players through qualifying players to play in real money poker tournaments at WPT affiliated casinos. The partnership means that the Zynga and WPT brands elevate each other’s profile in the poker community through millions of impressions annually.

PlayWPT and Alpha8 Social Poker.    WPT’s 3-year license agreements for PlayWPT and the Alpha8 social poker product that each commenced in 2018 provide WPT with a share of all revenue generated on those respective platforms, with annual minimums of the greater of $500,000 or 20% of revenue generated for PlayWPT, and the greater of $200,000 or 20% of revenue generated for the Alpha8 social poker product. These arrangements offer WPT significant annual payments based on the value and prestige of WPT’s brands and WPT’s ability to market and promote the platforms.

In addition to the three-pillar approach to monetizing the WPT brands as described above, WPT has also been able to combine these approaches in a regional manner to create localized versions of the WPT in other parts of the world. For example, WPT has an agreement with Adda52, one of the largest online poker operators in India, pursuant to which Adda52 utilizes WPT brands to put on WPT-branded tournaments, create and sell WPT merchandise, sponsor and distribute WPT content, and otherwise market and promote their own products using the WPT name. WPT had a similar arrangement for the Asia-Pacific region with WPT’s former parent company, Ourgame, and is negotiating similar arrangements with parties in other parts of the world, such as Latin America. These brand licensing arrangements not only provide WPT with revenue derived from upfront payments and revenue share, but they broaden WPT’s brand reach in localized ways to parts of the world that WPT would be hard-pressed to effectively market to on its own. WPT believes that this increased reach will have long-term benefits to WPT’s brand image and profitability.

Corporate Organization

Our principal offices are located at 17877 Von Karman Avenue, Suite 300, Irvine, California, 92614, and our telephone number at that office is (949) 225-2600.

Allied Esports Entertainment Inc., (“AESE”), formerly known as Black Ridge Acquisition Corp, or “BRAC”, was incorporated in Delaware on May 9, 2017 as a blank check company for 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.

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 immediately prior to close of the Merger (as defined 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 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 (“Ourgame”).

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”), 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 the combined 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 amount in the combined 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 subsidiaries after the Merger.

Allied Esports operates through its wholly owned subsidiaries Allied Esports International, Inc., (“AEII”), Esports Arena Las Vegas, LLC (“ESALV”) and Allied Esports GmbH (“AEGmbH”). 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. AEGmbH 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.

Our fiscal year ends December 31. Neither we nor any of our predecessors have been in bankruptcy, receivership or any similar proceeding.

Business Strategy

For the past 16 years of its 18-year history, WPT’s business model has successfully utilized the following three pillars in the sport of poker for its business model, which the Company believes can be utilized by Allied Esports:

•        in-person experiences;

•        developing multiplatform content; and

•        providing interactive services.

The Company plans to continue operating the WPT business and to utilize its business model to execute on its growth strategy in the multibillion-dollar esports industry. Allied Esports will do this by collaborating with its strategic investors, including certain affiliates of Simon, a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations, certain affiliates of Brookfield Property Partners, a world premier real estate company, and TV Azteca, a premier television network in Mexico, to deliver best-in-class live events, content and online products.

Regulation

WPT tournaments are conducted by the host casinos and card rooms, and we believe WPT is not subject to government gaming regulation in connection with its affiliation with and telecasts of these events. We continue to monitor the legality of Internet gaming in domestic and international jurisdictions, but cannot be certain that changes in existing regulations will be beneficial to the gaming market. WPT’s subscription-based online club, ClubWPT.com, is operated in accordance with the principles of sweepstakes law. A free alternative means of entry is offered for participants who wish to play in the tournaments but do not wish to purchase the other membership benefits. The

subscription fee for ClubWPT remains the same each month and players are not allowed to wager actual money online. One must be eighteen or older to participate. However, the awarding of cash and prizes will require compliance with the laws or regulations in various states or countries over sweepstakes, promotions and giveaways, are complicated and constantly changing.

Allied Esports intends to offer subscribers the chance to win cash and prizes when playing esports games and tournaments on the esports gaming platform it intends to develop. Similar to WPT, Allied Esports will be subject to the complicated laws and regulations in various states or countries over sweepstakes, promotions and giveaways. Any negative finding of law regarding the characterization of the type of online activity carried out on the esports gaming platform could limit or prevent Allied Esports’ ability to obtain subscribers in those jurisdictions. In addition, Allied Esports is subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the Internet. In addition, laws and regulations relating to user privacy, data collection, retention, electronic commerce, consumer protection, content, advertising, localization, and information security have been adopted or are being considered for adoption by many jurisdictions and countries throughout the world.

Intellectual Property

We believe that to maintain a competitive advantage in the marketplace, we must develop and maintain protection of the proprietary aspects of our technology. We rely on a combination of trademarks, patent, trade secret intellectual property rights and other measures to protect our intellectual property.

WPT has filed trademarks for the names of its shows, including the World Poker Tour name and logos. The trademark “World Poker Tour” has been registered with the U.S. Patent and Trademark Office (“USPTO”) on the principal register in connection with entertainment services, clothing, playing cards and poker chips, and housewares and glass; and on the supplemental register in connection with electronic and scientific apparatus. Other registered marks around the world include: “Alpha8” in the U.S., Canada, China, Europe, South Africa and Uruguay; “Battle of Champions” in the U.S.; “Card Design” in Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Puerto Rico, and Venezuela; “Doyle Brunson North American Poker Championship” in the U.S.; “Hollywood Home Game” in the U.S.; “Ladies’ Night” in the U.S.; “Latin American Poker Tour” in Peru and Europe; “Poker Détente” in Europe; “Poker Walk of Fame” in the U.S.; “PPT” in the U.S., Canada and Europe; “PPT & Design” in the U.S. and Canada; “Professional Poker Tour” in the U.S.; “Professional Poker Tour PPT & Design” in the U.S.; “Royal Flush Girls” in the U.S.; “Time Slots” in Canada, Europe and the U.S.; “World Poker Tour” in Argentina, Australia, Brazil, Canada, Chile, Colombia, Costa Rica, Europe, Mexico, Peru, Puerto Rico, South Africa and Venezuela; “World Poker Tour & Design” in the U.S., Canada and Europe; “WPT” in the U.S., Argentina, Australia, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Puerto Rico, South Africa, and Venezuela; “WPT8 Design” in U.S., Australia, Canada, China, Europe, South Africa and Uruguay; “WPT Academy” in Europe; “WPT Alpha8 Design” in Australia, Canada, China, Europe, South Africa and Uruguay; “WPT Boot Camp” in the U.S.; “WPT Poker Corner” in the U.S., Canada and Europe; “WPT Spade Card Design” in China; “WPT World Poker Tour & Design” in the U.S., Australia, Canada, Europe and Korea. We have registered approximately 2,100 Internet domain names in 70 regions around the world. We also have proprietary rights to our portfolio of registered and unregistered copyrighted materials, which includes the episodes of the televised programming and music that we produce, subject to licenses related to these episodes provided under our agreements with our distributors and our international telecast license agreements, as well as the WPT Academy database and online videos.

WPT has filed five U.S. and international patent applications. One patent relating to a specially designed game table that uses integral lighting, was issued by the USPTO in 2007. Another patent, relating to systems and methods reducing fraud in electronic games having virtual currency, was issued by the USPTO in April 2020. A third patent relating to systems and methods for securing virtual currencies and enhancing electronic products, was issued by the USPTO in May 2020. WPT’s remaining patent applications relate to (1) systems and methods to reduce impact of network disruptions; and (2) systems and methods to provide multiple commentary streams for the same broadcast content.

Allied Esports has one patent in the U.S. related to systems and methods for latency in networked competitive multiplayer gaming that was issued by the UPSTO in July 2020. It has also registered approximately 45 domain names. Allied Esports has filed for trademark protection for the following marks as well: “Allied Esports” has been filed in the U.S., “Allied Esports” bold mark has been filed in China and Europe; The “Allied Esports” logos have been filed in the U.S. and Europe; the “Allied Esports Member Property Network” logo has been filed in China and Europe; the “Big Betty” logos have been registered in Europe; “E-sports Arena” have been registered in China, “Esports Superstars” logo has been filed in the U.S.; “Legend Series” logo has been filed in the U.S. and Europe; and the “Allied Esports” emblem has been filed in China and Europe.

Competition

WPT competes with other poker-related television programming, including ESPN’s coverage of the “World Series of Poker” and its “World Series of Poker” Circuit Events, among others. These and other producers of poker-related programming are well established and may have significantly greater resources than WPT does. Based on the popularity of these poker-related televised programs, WPT believes that additional competing televised poker programs may currently be in development or may be developed in the future. WPT’s programming also competes for telecast audiences and advertising revenue with telecasts of mainstream professional and amateur sports, as well as other entertainment and leisure activities.

The esports gaming industry is also competitive. Competitors range from established leagues and championships owned directly, as well as leagues franchised by well-known and capitalized game publishers and developers, interactive entertainment companies, diversified media companies and emerging start-ups. New competitors will likely continue to emerge, and many of these competitors will have greater financial resources than Allied Esports.

Territories

We sell products and services throughout the world.

Employees

As of January 6, 2021, we had approximately 117 employees, including 29 employees that operated under collective-bargaining agreements.

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. TV Azteca did not sell all of the Purchased Shares within such timeframe and the Company is no longer is required to contribute additional capital to the parties’ strategic alliance pursuant to the Term Sheet.

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”) 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 designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee eight weeks of payroll and other costs to provide support to participating businesses 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.

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 the maintenance of employee 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.

Debt Conversion.    On April 29, 2020, we entered into a Secured Convertible Note Modification and Conversion Agreement (the “Amendment 1”), with a holder of a $5,000,000 Bridge Note (the “Noteholder”), pursuant to which the Noteholder converted $2,000,000 of the principal amount of its Bridge Note into 1,250,000 shares of our common stock at a reduced conversion 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 to which the remaining principal amount of the Note ($3,000,000) was converted into 2,142,857 shares of our common stock at a reduced conversion price of $1.40 per share. Further, pursuant to Amendment 2, interest on the $5,000,000 principal owed to

the Noteholder prior to conversion will continue to accrue through the original maturity date of 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.

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.

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%.

Between August 7 and November 2, 2020, we issued 6,282,839 shares of our common stock as redemption payments on the Senior Notes.

Between November 16 and January 4, 2021, we issued 3,925,484 shares of our common stock as redemption payments on the Senior Notes. As of the close of business on January 4, 2021, the principal and accrued interest associates with the Senior Notes was repaid in full.

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.

On January 4, 2021, the Company issued to its non-executive directors an aggregate of 126,584 shares of common stock from its 2019 Equity Incentive Plan. The shares were issued for their director services to the Company.

Results of Operations

Results of Operations for the Three Months Ended September 30, 2020 Compared With the Three Months Ended September 30, 2019

Revenues

In-person revenues decreased by approximately $1.9 million, or 73%, to approximately $0.7 million for the three months ended September 30, 2020 from approximately $2.6 million for 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.

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.

Costs and expenses

In-person costs (exclusive of depreciation and amortization) decreased by approximately $0.6 million, or 47%, to approximately $0.6 million for the three months ended September 30, 2020 from approximately $1.2 million for the three 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 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 by approximately $0.1 million, or 18%, to approximately $0.9 million for the three months ended September 30, 2020 from approximately $0.8 million 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.

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, or 76%, to approximately $0.2 million for the three months ended September 30, 2020 from approximately $0.7 million 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.

General and administrative expenses decreased by approximately $1.1 million, 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 income (expense)

Other expense increased by approximately $2.8 million, or 640%, to approximately $3.2 million for the three months ended September 30, 2020, from approximately $0.4 million for the three months ended September 30, 2019.

Extinguishment loss on acceleration of debt redemption of approximately $1.7 million during the three months ended September 30, 2020, resulted 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 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.

Results of Operations for the Nine Months Ended September 30, 2020 Compared With the Nine Months Ended September 30, 2019

Revenues

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.

Costs and expenses

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 income (expense)

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.

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Revenues

In-person experience revenues increased by approximately $2.9 million, or 36%, to approximately $11.1 million for the year ended December 31, 2019 from approximately $8.2 million for the year ended December 31, 2018. The increase in in-person experience revenues was driven by revenue from Allied Esports. Allied Esports’ in-person revenues increased by approximately $3.0 million when comparing the year ended December 31, 2019 to the same period in 2018, of which approximately $2.5 million was generated by Esports Arena Las Vegas, approximately $0.2 million was generated from increased revenues for the U. S. mobile arena truck, approximately $0.5 million was generated from increased revenues for the European mobile arena truck and approximately $0.7 million was generated from increased sponsorship and internet revenues, offset by approximately $0.9 million resulting from the deconsolidation of Esports affiliates in Santa Ana and Oakland (together “ESA”) on August 1, 2018.

Multiplatform content revenues increased by approximately $2.3 million, or 69%, to approximately $5.5 million for the year ended December 31, 2019 from approximately $3.2 million for the year ended December 31, 2018. The increase in multiplatform content revenues related primarily to the WPT business with increases in distribution revenue of approximately $0.8 million, sponsorship and advertising revenue of approximately $1.3 million and music royalty revenue of approximately $0.5 million, offset by an aggregate decrease of approximately $0.2 million in revenues from television sponsorship, streaming and online advertising.

Interactive revenues increased by approximately $0.3 million, or 3%, to approximately $9.4 million for the year ended December 31, 2019 from approximately $9.1 million for the year ended December 31, 2018.

Costs and expenses

In-person costs (exclusive of depreciation and amortization) increased by approximately $0.3 million, or 6%, to approximately $4.8 million for the year ended December 31, 2019 from approximately $4.5 million in for the year ended December 31, 2018. Increases of approximately $1.3 million of in-person costs as a result of increased activity from the opening of the Las Vegas flagship arena in March of 2018, approximately $0.8 million increase in event costs and approximately $0.2 million increase in costs related to our mobile arena trucks, were partially offset by a decrease of $2.0 million in costs related to ESA prior to its deconsolidation on August 1, 2018.

Multiplatform costs (exclusive of depreciation and amortization) increased by approximately $1.5 million, or 66%, to approximately $3.8 million for the year ended December 31, 2019 from approximately $2.3 million for the year ended December 31, 2018, as a result of increases in multiplatform revenues during the period.

Interactive costs (exclusive of depreciation and amortization) were approximately $2.5 million in each of the years ended December 31, 2019 and December 31, 2018, on flat revenues

Online operating expenses decreased by approximately $1.5 million, or 70%, to approximately $0.7 million for the year ended December 31, 2019 from approximately $2.2 million for the year ended December 31, 2018. The PlayWPT platform was managed and operated by the Company through May 2018. Since May 2018, the operation of PlayWPT has been licensed to a third party in exchange for a royalty based on revenues earned by the third party.

Selling and marketing expenses decreased by approximately $0.4 million, or 11%, to approximately $3.6 million for the year ended December 31, 2019 from approximately $4.0 million for the year ended December 31, 2018. The decrease in selling and marketing expenses is primarily the result of expenses incurred in 2018 related to the grand opening of Allied Esports’ flagship arena in Las Vegas.

General and administrative expenses increased by approximately $2.0 million, or 12%, to approximately $18.5 million for the year ended December 31, 2019 from approximately $16.5 million for the year ended December 31, 2018. Corporate expenses increased approximately $2.2 million at the corporate level, including approximately $1.0 million of legal and professional fees, $0.8 million of compensation expense, $0.2 million of insurance expense and $0.1 million of travel expenses. WPT expenses increased by approximately $1.7 million at WPT, which included approximately $1.1 million of increases in compensation expense (of which $0.8 million resulted from a 2018 credit to stock based compensation expense due to the forfeiture of certain equity awards, and $0.3 million resulted in from increased employee costs) and $0.5 million increase in legal and professional fees incurred preparation for the Merger. The corporate and WPT increases were partially offset by an approximate $1.9 million decrease in general and administrative expense at Allied, primarily as a result of the deconsolidation of ESA.

Depreciation and amortization increased by approximately $0.06 million or 1%, for the year ended December 31, 2019 as compared to the year ended December 31, 2018. The approximate $0.8 million increase in depreciation and amortization related to Allied Esports’ flagship arena in Las Vegas, which was put into service in March of 2018, was partially offset by decreases in depreciation of fixed assets and amortization of intangibles at WPT resulting from assets becoming fully depreciated or amortized.

Impairment of investment in ESA was approximately $0.6 million for the year ended December 31, 2019 as compared to $9.7 million for the year ended December 31, 2018. The losses were the result of the derecognition and disposal of the assets, liabilities and equity of an investment made in 2018 by Allied for which Allied conveyed a portion of its membership interests to the former non-controlling interest members in order to reduce its ongoing cash contribution requirements, thus reducing its membership interest to a non-voting 25 percent equity interest.

Impairment of deferred production costs and intangible assets decreased by approximately $0.7 million, to approximately $0.3 million for the year ended December 31, 2019 from approximately $1.0 million for the year ended December 2018. The impairment resulted from management’s determination that the projected cash flows from certain deferred production costs and intellectual property will not be sufficient to recover the carrying value of those assets.

Interest expense, net

Interest expense, net, was approximately $1.2 million and approximately $2.1 million for the years ended December 31, 2019 and 2018, respectively. Interest expense incurred during 2019 consisted of interest incurred on convertible debt. Interest expense incurred during 2018 consisted primarily of interest incurred on loans to Allied Esports from its parent company and/or affiliates to fund operating and capital costs.

Net loss attributable to non-controlling interest

Net loss attributable to non-controlling interest was approximately $0.4 million for the year ended December 31, 2018. This was due to attributing the non-controlling share of losses to minority shareholders from January through July 31, 2018 while Allied Esports was the majority shareholder in ESA prior to its deconsolidation on August 2, 2018. There were no similar attributions of losses or net income in the 2019 comparative period.

Liquidity and Capital Resources

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 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, we had cash and working capital of approximately $5.8 million (excluding approximately $5.0 million of restricted cash) and $53 thousand, respectively. Current liabilities include Senior Notes in 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 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 the aggregate amount 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 losses 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. In addition, during the period from November 16, 2020 and January 4, 2021, the Company issued an aggregate 3,925,484 shares of its common stock in satisfaction of $3.1 million and $0.5 million of principal and interest, owed on the Senior Notes, such that the principal and accrued interest owed on the Senior Notes as of the close of business on January 4, 2021 is repaid in full.

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.

On January 19, 2021, we signed a definitive agreement to sell the WPT business for an immediate cash payment of $68.25 million (of which we received a $4.0 million upon the signing of the agreement) and another $10.0 million that will be paid over a three-year period. There can be no assurance that we will be successful in closing on the sale of the WPT business. In fact, if we do not close on the sale of the WPT business, depending on the circumstances, we may have to (a) return the $4.0 million advance; (b) pay a $3.0 million termination or non-performance fee; and/or (c) reimburse the Buyer for up to $1.0 million of its out-of-pocket costs.

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, 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 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. We are 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 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 magnitude and duration of the pandemic and its impact on our operations and liquidity is uncertain as of the date of this Consent Solicitation Statement. While there could ultimately be a material impact on our operations and liquidity, at the time of issuance, the impact cannot be determined.

Paycheck Protection Program Loans

During May 2020, we received aggregate cash proceeds of $1,592,429 pursuant to three loans (the “PPP Loans”) provided in connection with the Paycheck Protection Program (“PPP”) under the CARES Act. The PPP Loans mature two years from date of issuance and bear interest at a rate of 0.98% per annum. Monthly amortized principal and interest payments are deferred for nine months after the date of disbursement. While the PPP Loans currently have a two-year maturity, the amended law permits the borrower to request a five-year maturity from its lenders.

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.

Cash Flows from Operating, Investing and Financing Activities

The table below summarizes cash flows for the nine months ended September 30, 2020 and 2019:

Net Cash Used in Operating Activities

Net cash 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, stock-based compensation, non-cash interest and amortization of debt discount) and the impact of changes in operating assets and liabilities.

Net cash used in operating activities for the nine months ended September 30, 2020 and 2019 was approximately $6.5 million and $7.8 million, respectively, representing a decrease of $1.3 million. During the nine months ended September 30, 2020 and 2019, the net cash used in operating activities was primarily attributable to the net loss of approximately $26.2 million and $10.9 million, respectively, adjusted for approximately $20.4 million and $6.1 million, respectively, of net non-cash expenses, and approximately $0.7 million and $2.9 million, respectively, of cash used to fund changes in the levels of operating assets and liabilities.

Net Cash (Used In) Provided by Investing Activities

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

Net cash used in investing activities for the nine months ended September 30, 2020 was approximately $4.7 million as compared to net cash provided by investing activities 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 the Simon Agreement, invested $1.5 million with TV Azteca as part of our Strategic Investment Agreement, received $1.0 million in lease incentive reimbursements, and purchased $0.5 million 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.

Net Cash Provided By Financing Activities

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 months ended September 30, 2020 was approximately $9.8 million as compared to net cash provided by financing activities of approximately $3.7 million for the nine months ended September 30, 2019, a difference of approximately $6.1 million. During the nine months ended September 30, 2020, we received approximately $9.0 million of proceeds from the issuance of convertible debt, $7.0 million of proceeds 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.

Capital Expenditures

We will require additional investment to facilitate our 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.

Off-Balance Sheet Arrangements

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.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company regularly evaluates estimates and judgments based on historical experience and other relevant facts and circumstances.

The Company discusses its significant estimates used in the preparation of the financial statements in the notes accompanying the financial statements. Listed below are the accounting policies the Company believes are critical to its financial statements due to the degree of uncertainty regarding the estimates or assumptions involved. Refer to Note 3 of Part I, Item 1 of our Quarterly Report on Form 10-Q for the period ending September 30, 2020, filed with the SEC on November 9, 2020, for a summary of changes in significant accounting policies.

Impairment of Long-Lived Assets

The Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

Deferred Production Costs

Capitalized production costs represent the costs incurred to develop and produce the Company’s proprietary shows. These costs primarily consist of labor, equipment, production overhead costs and travel expenses. Capitalized production overhead costs include rent incurred in connection with our leased space in Los Angeles, California, which is used exclusively for film production. Capitalized production costs are stated at the lower of cost, less accumulated amortization and tax credits, if applicable, or fair value. Production costs in an amount up to the amount of ultimate revenue expected to be earned from the related production are capitalized in accordance with FASB ASC Topic 926-20, “Other Assets — Film Costs”. Amortization of capitalized film costs begins when the related film is released and begins to recognize revenue. Capitalized film costs are expensed over the expected revenue period (not to exceed ten years) using a ratio of revenue earned during the period to estimated ultimate revenues for the related production. Costs incurred in excess of expected ultimate revenue are expensed as incurred and included in multiplatform costs in the accompanying consolidated statements of operations. Unamortized capitalized production costs are evaluated for impairment at each reporting period on a season-by-season basis. If estimated remaining revenue is not sufficient to recover the unamortized capitalized production costs for that season, the unamortized capitalized production costs will be written down to fair value. During the years ended December 31, 2019 and 2018, the Company recognized impairment expense of $330,340 and $768,459, respectively, related to deferred production costs that were deemed impaired due to management’s determination that the remaining revenue associated with the deferred production costs is not sufficient to recover the unamortized cost.

Revenue Recognition

We recognize revenue from the following sources:

•        Multiplatform content revenue is comprised of distribution revenue, sponsorship revenue, music royalty revenue, content revenue and online advertising revenue.

•        Interactive revenue is primarily comprised of subscription revenue, licensing, social gaming and virtual product revenue.

•        In-person revenue is comprised of event revenue, sponsorship revenue, food and beverage revenue, ticket and gaming revenue, merchandising revenue and other revenue.

We evaluate each of our contractual arrangements to identify the performance obligations existing in the contract and allocate the transaction price to each separate performance obligation. Revenue is recognized as each performance obligation is fulfilled. Cash received in advance of the sale or rendering of services is recorded as deferred revenue and is recognized when the related performance obligation has been satisfied.

Recent Accounting Pronouncements

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.

World Poker Tour
Condensed Carve-Out Statements of Operations
(unaudited)

The accompanying notes are an integral part of these condensed carve-out financial statements.

World Poker Tour
Condensed Carve-Out Statements of Changes in Stockholder’s Equity
(unaudited)

The accompanying notes are an integral part of these condensed carve-out financial statements.

World Poker Tour
Condensed Carve-Out Statements of Cash Flows
(unaudited)

The accompanying notes are an integral part of these condensed carve-out financial statements.

World Poker Tour
Condensed Carve-Out Statements of Cash Flows
(unaudited)