GameSquare Holdings, Inc 6-K/A, filed Aug 21, 2023
GameSquare Holdings, Inc. (GAME)
About this 6-K/A
GameSquare Holdings, Inc filed this 6-K/A on August 21, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Amendment No. 1
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2023.
Commission File Number:
(Exact Name of Registrant as Specified in Charter) |
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ⊠ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
EXPLANATORY NOTE
This Report on Form 6-K/A (the “Amendment”) amends the Report on Form 6-K filed on August 14, 2023 (the “Original 6-K”) containing the Unaudited Interim Condensed Consolidated Financial Statements of GameSquare Holdings, Inc. (the “Company”) as of and for the three and six months ended June 30, 2023, and 2022. The purpose of this Amendment is solely to provide the Company’s Unaudited Interim Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2023 and 2022, formatted in Inline eXtensible Business Reporting Language (“iXBRL”) in accordance with Rule 405 of Regulation S-T and paragraph C(6)(a)(ii) of the General Instructions to Form 6-K, attached hereto as Exhibit 99.1, and filed within six business days of the Original 6-K, in accordance with the temporary hardship exemption provided by Rule 201 of Regulation S-T. Such Unaudited Interim Condensed Consolidated Financial Statements were previously filed without iXBRL as Exhibit 99.1 to the Original 6-K.
Except as described above, this Amendment speaks as of the original filing date of the Original 6-K and does not amend, update or restate any information set forth in the Original 6-K or reflect any events that occurred subsequent to the original filing date of the Original 6-K.
| 2 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GAMESQUARE HOLDINGS, INC. |
| |
| (Registrant) |
| |
|
|
|
|
Date: August 21, 2023 | By: | /s/ Justin Kenna |
|
| Name: | Justin Kenna |
|
| Title: | Chief Executive Officer and Director |
|
| 3 |
EXHIBIT INDEX
| ||
101.INS |
| The following materials from this Report on Form 6-K/A are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Unaudited Condensed Interim Consolidated Statements of Financial Position; (ii) Unaudited Condensed Interim Consolidated Statements of Income (loss) and Comprehensive Income (loss); (iii) Unaudited Condensed Interim Consolidated Statements of Shareholders’ Equity (Deficiency); (iv) Unaudited Condensed Interim Consolidated Statements of Cash Flows; and (v) Notes to the Unaudited Condensed Interim Consolidated Financial Statements. |
| 4 |
EXHIBIT 99.1
GAMESQUARE HOLDINGS, INC.
(formerly Engine Gaming and Media, Inc.)
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the three and six months ended
(Expressed in United States Dollars)
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the condensed interim consolidated financial statements, the financial statements must be accompanied by a notice indicating that the condensed interim consolidated financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed interim consolidated financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor. |
| 1 |
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying interim condensed consolidated financial statements of GameSquare Holdings, Inc.) (the "Company") are the responsibility of management and the Board of Directors.
The interim condensed consolidated financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the interim condensed consolidated financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement of financial position date. In the opinion of management, the interim condensed consolidated financial statements have been prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances.
Management has established processes, which are in place to provide it with sufficient knowledge to support management representations that it has exercised reasonable diligence in that (i) the interim condensed consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of, and for the periods presented by, the interim condensed consolidated financial statements and (ii) the interim condensed consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the interim condensed consolidated financial statements.
The Board of Directors are responsible for reviewing and approving the interim condensed consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. The Company’s Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the interim condensed consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the interim condensed consolidated financial statements together with other financial information of the Company for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
| 2 |
Table of Contents
| 3 |
| Table of Contents |
GameSquare Holdings, Inc.
(formerly Engine Gaming and Media, Inc.)
Condensed Interim Consolidated Statements of Income (loss) and Comprehensive Income (loss)
(Unaudited)
(Expressed in United States Dollars)
|
| Note |
|
| June 30, 2023 |
|
| December 31, 2022 |
| |||
|
|
|
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
| |||
| ASSETS |
|
|
|
|
|
|
|
|
| |||
Current |
|
|
|
|
|
|
|
|
| |||
Cash |
|
|
|
|
|
|
|
|
| |||
Restricted cash |
|
|
|
|
|
|
|
|
| |||
Accounts and other receivables |
|
| 6 |
|
|
|
|
|
|
| ||
Government remittances |
|
|
|
|
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
|
| 10 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
| Non-Current |
|
|
|
|
|
|
|
|
|
|
|
|
Investment at FVTPL |
|
| 7 |
|
|
|
|
|
|
| ||
Property and equipment |
|
| 8 |
|
|
|
|
|
|
| ||
Goodwill |
|
| 9 |
|
|
|
|
|
|
| ||
Intangible assets |
|
| 9 |
|
|
|
|
|
|
| ||
Right-of-use assets |
|
| 12 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
|
|
|
| $ |
|
| $ |
| ||||
| LIABILITIES |
|
|
|
|
|
|
|
|
| |||
Current |
|
|
|
|
|
|
|
|
| |||
Accounts payable |
|
|
|
|
|
|
|
|
| |||
Accrued liabilities |
|
|
|
|
|
|
|
|
| |||
Consideration payable |
|
|
|
|
|
|
|
|
| |||
Players liability account |
|
|
|
|
|
|
|
|
| |||
Deferred revenue |
|
|
|
|
|
|
|
|
| |||
Lease liabilities, current |
|
| 12 |
|
|
|
|
|
|
| ||
Credit facility payable |
|
| 11 |
|
|
|
|
|
|
| ||
Promissory notes payable |
|
| 13 |
|
|
|
|
|
|
| ||
Warrant liability |
|
| 17 |
|
|
|
|
|
|
| ||
Convertible debt, current |
|
| 14 |
|
|
|
|
|
|
| ||
Arbitration reserve |
|
| 19 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt, non-current |
|
| 14 |
|
|
|
|
|
|
| ||
Lease liabilities, non-current |
|
| 12 |
|
|
|
|
|
|
| ||
Deferred tax liability |
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| SHAREHOLDERS' EQUITY (DEFICIENCY) |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
| 15 |
|
|
|
|
|
|
| ||
Contributed surplus |
|
| 16 |
|
|
|
|
|
|
| ||
Warrants |
|
| 17 |
|
|
|
|
|
|
| ||
Contingently issuable shares |
|
|
|
|
|
|
|
|
|
| ||
Accumulated other comprehensive (loss) income |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Deficit |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Stockholder's equity |
|
|
|
|
|
|
|
|
|
| ||
Liabilities and stockholder's equity |
|
|
|
|
|
|
|
|
|
| ||
| Going concern |
|
| 1(b) |
|
|
|
|
|
|
|
| |
| Commitments and contingencies |
|
| 19 |
|
|
|
|
|
|
|
|
|
| Subsequent events |
|
| 22 |
|
|
|
|
|
|
|
|
|
| Approved on Behalf of Board: | "Justin Kenna" | "Travis Goff" | ||||
Director | Director | |||||
See accompanying notes to the condensed interim consolidated financial statements.
| 4 |
| Table of Contents |
GameSquare Holdings, Inc.
(formerly Engine Gaming and Media, Inc.)
Condensed Interim Consolidated Statements of Income (loss) and Comprehensive Income (loss)
(Unaudited)
(Expressed in United States Dollars)
|
|
|
| For the three months ended |
|
| For the six months ended |
| ||||||||||||
|
| Note |
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| |||||
| CONTINUING OPERATIONS |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
| REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue |
|
| 20 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, consulting and management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Player compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Advertising and promotion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Office and general |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Technology expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization and depreciation |
|
| 8,9,12 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Share-based payments |
|
| 16 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| 11,12,13,14 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Gain) loss on foreign exchange |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Transaction costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Arbitration settlement reserve |
|
| 19 |
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Restructuring costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Legal settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in fair value of warrant liability |
|
| 17 |
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Change in fair value of convertible debt |
|
| 14 |
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Total expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Net loss for the period before discontinued operations and taxes |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Income tax recovery |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Net loss for the period before discontinued operations |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DISCONTINUED OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from discontinued operations |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
| Net loss for the period from discontinued operations |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
| Net loss for the period |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Items that will subsequently be reclassified to operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Total comprehensive loss for the period |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Loss) profit for the period attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Owners of the parent |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Non-controlling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| - |
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted net loss per share - continuing operations |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Basic and diluted net loss per share - discontinued operations |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
| Basic and diluted net loss per share |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Weighted average number of common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
See accompanying notes to the condensed interim consolidated financial statements.
| 5 |
| Table of Contents |
GameSquare Holdings, Inc.
(formerly Engine Gaming and Media, Inc.)
Condensed Interim Consolidated Statements of Shareholders’ Equity (Deficiency)
(Unaudited)
(Expressed in United States Dollars)
|
| Number of Proportionate Voting Shares |
|
| Number of common shares |
|
| Share Capital |
|
| Contributed Surplus |
|
| Warrants |
|
| Contingently Issuable Shares and Options |
|
| Accumulated other comprehensive (loss) income |
|
| Non-Controlling Interest |
|
| Accumulated Deficit |
|
| Shareholders' Equity (Deficit) |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance, January 1, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||||||||
Conversion from Proportionate Voting Shares to Common |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Impact of rounding down after exchange for GSQ Esports |
|
| - |
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Contingent consideration on acquisition of Cut+Sew (Note 11) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Acquisition of Engine |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Reclassify former GSQ Esports Inc. warrants to warrant liability |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | ||||||
Shares issued for legal settlements |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Options (Note 16(a)) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Options expired (Note 16(a)) |
|
| - |
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Restricted share units (Note 16(b)) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Restricted share units exercised (Note 16(b)) |
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Restricted share units cancelled (Note 16(b)) |
|
| - |
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Shares issued for debt |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||
Net loss for the period |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Balance, June 30, 2023 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2022 |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| |||||||
Conversion from Common to Proportionate Voting Shares |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Private placements |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Share issuance costs |
|
| - |
|
|
| - |
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | ||||||
Options granted |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Options expired |
|
| - |
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Restricted share units |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Warrants issued for credit facility |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other comprehensive loss |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
| ( | ) | ||||||
Net loss for the period |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Balance, June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| ||||||||
See accompanying notes to the condensed interim consolidated financial statements.
| 6 |
| Table of Contents |
GameSquare Holdings, Inc.
(formerly Engine Gaming and Media, Inc.)
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States Dollars)
|
|
|
|
| For the six months ended |
| ||||||
|
| Note |
|
| June 30, 2023 |
|
| June 30, 2022 |
| |||
|
|
|
|
| $ |
|
| $ |
| |||
| OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
| |||
Net loss for the period |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
| |
Amortization and depreciation |
|
| 8, 9, 12 |
|
|
|
|
|
|
| ||
Income tax recovery |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Arbitration settlement reserve |
|
| 19 |
|
|
| ( | ) |
|
|
| |
Shares issued for legal settlements |
|
|
|
|
|
|
|
|
|
| ||
Change in fair value of warrant liability |
|
| 17 |
|
|
| ( | ) |
|
|
| |
Change in fair value of convertible debt |
|
| 14 |
|
|
| ( | ) |
|
|
| |
Non-cash interest expense |
|
|
|
|
|
|
|
|
|
| ||
Share-based payments |
|
| 16 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Changes in non-cash working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and other receivables |
|
|
|
|
|
|
|
|
| ( | ) | |
Government remittances |
|
|
|
|
|
| ( | ) |
|
|
| |
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
| ( | ) | |
Reclamation deposits |
|
|
|
|
|
|
|
|
|
| ||
Assets held for sale |
|
|
|
|
|
|
|
|
| ( | ) | |
Accounts payable and accrued liabilities |
|
|
|
|
|
|
|
|
|
| ||
Consideration payable |
|
|
|
|
|
| ( | ) |
|
|
| |
Deferred revenue |
|
|
|
|
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
| INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
|
|
|
|
|
| ( | ) | |
Proceeds from sale of assets held for sale |
|
|
|
|
|
|
|
|
|
| ||
Acquisition of Engine |
|
| 5 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
| FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from private placement |
|
|
|
|
|
|
|
|
|
| ||
Share issue costs |
|
|
|
|
|
|
|
|
| ( | ) | |
Proceeds (payments) on promissory notes payable, net |
|
|
|
|
|
|
|
|
| ( | ) | |
Payments on lease financing |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Payments on credit facility |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| |
| Impact of foreign exchange on cash |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
| Change in cash |
|
|
|
|
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash, beginning of period |
|
|
|
|
|
|
|
|
|
| ||
| Cash, end of period |
|
|
|
|
|
|
|
|
|
| ||
See accompanying notes to the condensed interim consolidated financial statements.
| 7 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
1. Corporate information and going concern
(a) Corporate information
GameSquare Holdings, Inc. (formerly Engine Gaming & Media, Inc.) ("GameSquare" or the "Company”) is a corporation existing under the Business Corporations Act (British Columbia) (and was originally incorporated under the Business Corporations Act (Ontario) on April 8, 2011). The registered head office of the Company is 6775 Cowboys Way, Ste. 1335, Frisco, Texas, USA, 75034.
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc.), (NASDAQ: GAME; TSXV: GAME) completed its plan of arrangement (the "Arrangement") with GameSquare Esports Inc. ("GSQ") on April 11, 2023, resulting in the Company acquiring all the issued and outstanding securities of GSQ (see Note 5).
The Arrangement constituted a Reverse Takeover of the Company by GameSquare Esports, Inc. with GameSquare Esports, Inc as the reverse takeover acquirer and the Company as the reverse takeover acquiree, under applicable securities laws and for accounting purposes under IFRS. At completion of the Arrangement Engine Gaming and Media, Inc. changed its name to GameSquare Holdings Inc.
GameSquare Esports, Inc was traded on the Canadian Securities Exchange (CSE) under the symbol “GSQ” and on the OTCQB Venture Market in the Unites States under the symbol “GMSQF” until April 11, 2023.
GameSquare is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. GameSquare's end-to-end platform includes GCN, a digital media company focused on gaming and esports audiences, Swingman LLC dba as Zoned, a gaming and lifestyle marketing agency, Code Red Esports Ltd. (“Code Red”), a UK based esports talent agency, NextGen Tech, LLC, dba as Complexity Gaming (“Complexity”), a leading esports organization, GameSquare Esports Inc. dba as Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform.
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries.
(b) Going concern
These interim condensed consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying consolidated financial statements. Such adjustments could be material. It is not possible to predict whether the Company will be able to raise adequate financing or to ultimately attain profit levels of operations.
The Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit of $
| 8 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.
2. Basis of presentation
(a) Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These unaudited interim condensed consolidated financial statements are prepared on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2022; and should be read in conjunction with those audited consolidated financial statements. Interim results are not necessarily indicative of the results expected for the fiscal year.
These interim condensed consolidated financial statements were authorized for issuance by the Board of Directors of the Company on August 14, 2023.
(b) Basis of consolidation
The interim condensed consolidated financial statements comprise the accounts of the Company and its controlled subsidiaries. The financial statements of subsidiaries are included in the interim condensed consolidated financial statements from the date that control commences until the date that control ceases. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances.
All transactions and balances between the Company and its subsidiaries are eliminated on consolidation, including unrealized gains and losses on transactions between companies. Unrealized gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
The Company’s material subsidiaries as of June 30, 2023, are as follows:
Name of Subsidiary | Country of Incorporation | Ownership Percentage | Functional Currency |
Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
| 9 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
(c) Functional and presentation currency
The functional currency of the Company is the US Dollar (“USD). The functional currencies of the Company’s subsidiaries are disclosed in Note 2(b). The presentation currency of the interim condensed consolidated financial statements is the US Dollar ("USD").
(d) Error correction and reclassifications to the first quarter of 2023
These unaudited condensed interim consolidated financial statements include one error correction and two reclassifications on the Statements of Income (loss) and Comprehensive Income (loss) for the first quarter of 2023. These changes included the following: (1) decrease to revenue of $
3. Changes in significant accounting policies
The unaudited condensed interim consolidated financial statements were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2022, except for the following new accounting standards below.
New accounting standards
Effective January 1, 2023, the Company adopted the following new accounting standards. Adoption of these standards on January 1, 2023, did not have a material impact on the Company’s consolidated financial statements.
Amendments to IAS 8 – Definition of accounting estimates
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
Amendments to IAS 12 – Deferred Taxes related to Assets and Liabilities arising from a Simple Transaction
Future accounting pronouncements
The following standards have not yet been adopted and are being evaluated to determine their impact on the Company:
Amendments to IAS 1 – Non-current Liabilities with Covenants
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
Amendments to IAS 8 – Definition of Accounting Estimates
Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements
Amendments to IAS 21 – Lack of Exchangeability
Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or the Company is still assessing what the impact will be on the Company’s financial statements.
4. Significant judgments, estimates and assumptions
The preparation of these interim condensed consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the interim condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to unsettled transactions and events as at the date of the interim condensed consolidated financial statements.
On an ongoing basis, management evaluates its judgments and estimates in relation to assets, liabilities, revenues, and expenses. Management uses historical experience and various other factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates.
Actual outcomes may differ from these estimates under different assumptions and conditions. Significant estimates and judgments made by management in the preparation of these interim condensed consolidated financial statements are outlined below.
| 10 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
The assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There is material uncertainty regarding the Company’s ability to continue as a going concern.
(a) Significant estimates and critical judgments
Information about significant estimates and critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the interim condensed consolidated financial statements is included in the following notes:
| Note 1 |
| Going concern; |
| Note 17 |
| Valuation of warrant liability; |
| Note 9 |
| Intangible assets and goodwill; |
| Notes 16 |
| Valuation of share-based payments; |
| Note 14 |
| Valuation of convertible debt; and |
| Note 19 |
| Contingencies. |
(b) Uncertainty about the effects of COVID-19
The global COVID-19 pandemic remains an evolving situation. The Company will continue to actively monitor the developments of the pandemic and may take further actions that could alter business operations as may be required by federal, state, local, or foreign authorities, or that management determines are in the best interests of our employees, customers, partners, and shareholders. It is not clear what effects any such potential actions may have on the Company’s business, including the effects on our employees, players and consumers, customers, partners, development and content pipelines, the Company’s reputation, financial condition, results of operations, revenue, cash flows, liquidity, or stock price.
5. Acquisitions
Acquisition of GameSquare Esports, Inc.
On April 11, 2023, GameSquare Esports, Inc. completed its plan of arrangement with Engine Gaming and Media, Inc. (“Engine”) resulting in Engine acquiring all the issued and outstanding securities of the GameSquare Esports, Inc.
Resulting from the Arrangement, Engine acquired all issued and outstanding GameSquare Esports, Inc. shares based on one GameSquare Esports, Inc. share in exchange for 0.020655 of an Engine common share (the "Exchange Ratio"). Each outstanding option of GameSquare was exchanged for an Engine option entitling the holder to a number of Engine common shares, as adjusted on the basis of the Exchange Ratio, and be subject to exercise thereof in accordance with the terms of the options, including payment of the exercise price, which will also be adjusted based upon the Exchange Ratio. All other material terms of the options will remain the same. Each outstanding restricted share unit of GameSquare will be exchanged for an Engine restricted share unit entitling the holder to a number of Engine common shares, as adjusted on the basis of the Exchange Ratio. All other material terms of the restricted share units will remain the same. Each outstanding warrant of GameSquare will be adjusted pursuant to its governing contractual instrument to entitle the holder to receive, upon due exercise, Engine common shares, adjusted on the basis of the Exchange Ratio.
At completion of the Arrangement Engine Gaming and Media, Inc. changed its name to GameSquare Holdings, Inc.
| 11 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
All transaction costs associated with this acquisition were expensed as incurred. The loss attributed to acquiree’s operations from the acquisition date to April 11, 2023, was $
All transaction costs associated with this acquisition were expensed as incurred. The loss attributed to acquiree’s operations from the acquisition date to June 30, 2023, was $
The following preliminary table summarizes the consideration for the acquisition:
Purchase Price Consideration Paid |
| # |
|
| $ |
| ||
|
|
|
|
|
|
| ||
Common shares |
|
|
|
|
|
| ||
Warrants - Equity |
|
|
|
|
|
| ||
Options - Vested |
|
|
|
|
|
| ||
RSUs - Vested |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
The following table summarizes the preliminary fair value of acquired assets and liabilities acquired as follows:
Net Assets Acquired |
|
|
| |
Cash |
|
|
| |
Restricted cash |
|
|
| |
Accounts and other receivables |
|
|
| |
Government remittances |
|
|
| |
Prepaid expenses and other current assets |
|
|
| |
Investment at FVTPL |
|
|
| |
Property and equipment |
|
|
| |
Goodwill |
|
|
| |
Intangible - Software |
|
|
| |
Intangible - Brand name |
|
|
| |
Intangible - Customer relationships |
|
|
| |
Right-of-use assets |
|
|
| |
Accounts payable |
|
| ( | ) |
Accrued liabilities |
|
| ( | ) |
Players liability account |
|
| ( | ) |
Deferred revenue |
|
| ( | ) |
Promissory notes payable |
|
| ( | ) |
Warrant liability |
|
| ( | ) |
Arbitration reserve |
|
| ( | ) |
Lease liabilities |
|
| ( | ) |
Convertible debt |
|
| ( | ) |
|
|
|
| |
| 12 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
6. Accounts and other receivables
The Company’s accounts and other receivables are comprised of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
|
| $ |
|
| $ |
| ||
Trade accounts receivable |
|
|
|
|
|
| ||
Insurance receivable |
|
|
|
|
|
|
| |
Tax receivable |
|
|
|
|
|
| ||
Other receivables |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
7. Investment at FVTPL
In conjunction with completion of the Arrangement, the Company acquired a
The fair value of the Company’s investment in One Up is estimated at each reporting period, with reference to valuations underlying privately placed financing transactions closed by One Up and is classified with a level 3 in the fair value hierarchy (see Note 21). The fair value of this investment was $
| 13 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
8. Property and equipment
A continuity of the Company’s property and equipment is as follows:
Cost |
| Equipment |
|
| Leasehold improvements |
|
| Total |
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
December 31, 2021 |
|
|
|
|
|
|
|
|
| |||
Additions |
|
|
|
|
|
|
|
|
| |||
Foreign exchange |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
Acquisition of Engine |
|
|
|
|
|
|
|
|
| |||
Additions |
|
|
|
|
|
|
|
|
| |||
Foreign exchange |
|
|
|
|
|
|
|
|
| |||
June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
Accumulated depreciation |
| Equipment |
|
| Leasehold improvements |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
December 31, 2021 |
|
|
|
|
|
|
|
|
| |||
Depreciation |
|
|
|
|
|
|
|
|
| |||
Foreign exchange |
|
| ( | ) |
|
|
|
|
| ( | ) | |
December 31 2022 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
Depreciation |
|
|
|
|
|
|
|
|
| |||
Foreign exchange |
|
|
|
|
|
|
|
|
| |||
June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
Net book value |
| Equipment |
|
| Leasehold improvements |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
| 14 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
9. Intangibles and goodwill
Intangibles
A continuity of the Company’s intangibles is as follows:
Cost |
| Customer relationships |
|
| Brand name |
|
| Software |
|
| Total |
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisition of Engine |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization |
| Customer relationships |
|
| Brand name |
|
| Software |
|
| Total |
| ||||
|
|
| $ |
|
|
| $ |
|
|
| $ |
|
|
| $ |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Foreign exchange |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
| Customer relationships |
|
| Brand name |
|
| Software |
|
| Total |
| ||||
|
|
| $ |
|
|
| $ |
|
|
| $ |
|
|
| $ |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
The Company reviews the carrying value of its intangible assets with definite lives at each reporting period for indicators of impairment. During the year ended December 31, 2022, the Company recorded an impairment of intangible assets acquired on the acquisition of Code Red of $
| 15 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Goodwill
A continuity of the Company’s goodwill is as follows:
Balance, December 31, 2022 and 2021 |
|
|
| |
Acquisition of Engine |
|
|
| |
Effect of foreign exchange |
|
|
| |
Balance, June 30, 2023 |
|
|
|
10. Prepaid expenses and other current assets
Prepaid expenses and other assets consist primarily of prepaid expenses such as insurance as well as acquisition costs of players and security deposits. Acquisition costs of players are amortized on a straight-line basis over the players’ contract terms.
11. Credit facility payable
On June 30, 2022, the Company entered into an agreement for a $
Interest accrued on the outstanding principal amount of the Facility from and including the date of the advance of funds, as well as on all overdue amounts outstanding in respect of interest, costs or other fees, expenses or other amounts payable under the Facility, at an interest rate, calculated and payable in arrears on (i) the last business day of each calendar month, (ii) the date of any prepayment of all or any portion of the principal amount of the Facility, and (iii) the Maturity Date (each, an “Interest Payment Date”), as well as after each of maturity, default and judgment. The Facility bears interest based on the sum of the SOFR published for the second U.S. Government Securities Business Day prior to the end of the period ending on an Interest Payment Date. The Facility provides for the issuance of warrants to the lender on the date of signing of the Facility and with respect to each draw down on the Facility.
During the six months ended June 30, 2023, the Company accrued $
12. Leases
On April 11, 2023, the Company acquired lease liabilities as part of the Arrangement (see Note 5). On June 30, 2021, the Company acquired Complexity. Complexity leases a building in Frisco, Texas.
| 16 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
A reconciliation of the of right of use assets for the six months ended June 30, 2023, and year ended December 31, 2022, is as follows:
|
| $ |
| |
|
|
|
| |
December 31, 2021 |
|
|
| |
| Depreciation |
|
| ( | ) |
December 31, 2022 |
|
|
| |
|
|
|
|
|
| December 31, 2022 |
|
|
| |
| Acqusition of Engine |
|
|
| |
| Depreciation |
|
| ( | ) |
June 30, 2023 |
|
|
| |
Lease liabilities are measured at the present value of the lease payments that are not paid at the statement of financial position date. Lease payments are apportioned between interest expenses and a reduction of the lease liability using the Company’s incremental borrowing rate to achieve a constant rate of interest on the remaining balances of the liabilities.
A reconciliation of the lease liabilities for the six months ended June 30, 2023, and year ended December 31, 2022, is as follows:
|
| Equipment |
|
| Office lease |
|
| Total |
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
|
|
|
|
|
|
|
|
|
| |||
| Balance, December 31, 2021 |
|
|
|
|
|
|
|
|
| |||
| Interest expense |
|
|
|
|
|
|
|
|
| |||
| Payments |
|
|
|
|
| ( | ) |
|
| ( | ) | |
| Balance, December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
| Acquisition of Engine |
|
|
|
|
|
|
|
|
| |||
| Interest expense |
|
|
|
|
|
|
|
|
| |||
| Payments |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
| Balance, June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
|
| Equipment |
|
| Office lease |
|
| Total |
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
| As of June 30, 2023: |
|
|
|
|
|
|
|
|
| |||
Less than one year |
|
|
|
|
|
|
|
|
| |||
Greater than one year |
|
|
|
|
|
|
|
|
| |||
| Total lease obligation |
|
|
|
|
|
|
|
|
| |||
The future minimum undiscounted lease payments as of June 30, 2023, are presented below:
Maturity analysis - contractual undiscounted cash flows as of June 30, 2023:
|
| Equipment |
|
| Office lease |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Less than one year |
|
|
|
|
|
|
|
|
| |||
Greater than one year |
|
|
|
|
|
|
|
|
| |||
Total undiscounted lease obligation |
|
|
|
|
|
|
|
|
| |||
| 17 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
13. Promissory note payable
In conjunction with completion of the Arrangement, the Company acquired the following Promissory note (see Note 5):
The Company has a secured promissory note outstanding for amounts due for the provision of services by the noteholder. As of June 30, 2023, $
14. Convertible debt
In conjunction with completion of the Arrangement, the Company acquired the following Convertible debt (see Note 5):
The reconciliation of the convertible debt for the six months ended June 30, 2023, is as follows:
|
| 2020 Series |
|
| EB CD |
|
| Total |
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
Balance, December 31, 2022 and 2021 |
|
|
|
|
|
|
|
|
| |||
Acquisition of Engine |
|
|
|
|
|
|
|
|
| |||
Interest expense |
|
|
|
|
|
|
|
|
| |||
Accrued interest on conversion / interest payments |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Change in fair value |
|
| ( | ) |
|
|
|
|
| ( | ) | |
Balance, June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
The Company’s convertible debt obligations are classified between current and non-current liabilities on June 30, 2023, as follows:
As of June 30, 2023: |
| $ |
| |
Less than one year |
|
|
| |
Greater than one year |
|
|
| |
Total convertible debt obligation |
|
|
| |
(a) 2020 Series
On September 1, 2022, Engine extended convertible debentures that were due to expire in October and November 2022 with an aggregate principal amount of US$
| 18 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
As of June 30, 2023, and on April 11, 2023 (the Arrangement completion date) the fair value of the 2020 Series convertible debentures was estimated using the binomial lattice model with the below assumptions:
2020 Series |
| June 30, 2023 (US$) |
|
| April 11, 2023 (US$) |
| ||
|
|
|
|
|
|
| ||
Share price |
|
|
|
|
|
| ||
Conversion price |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Term, in years |
|
|
|
|
|
| ||
Interest rate |
|
| % |
|
| % | ||
Expected volatility |
|
| % |
|
| % | ||
Risk-free interest rate |
|
| % |
|
| % | ||
Expected dividend yield |
|
| % |
|
| % | ||
(b) EB CD
On February 24, 2021, Engine issued a secured convertible debenture in the principal amount of $5 million (the “EB CD”). The EB CD is convertible into units of the Company at a conversion price of $
As of June 30, 2023, and on April 11, 2023 (the Arrangement completion date) the fair value of the EB CD convertible debenture was estimated using the binomial lattice model with the below assumptions:
EB CD |
| June 30, 2023 (US$) |
|
| April 11, 2023 (US$) |
| ||
|
|
|
|
|
|
| ||
Share price |
|
|
|
|
|
| ||
Conversion price |
|
|
|
|
|
| ||
Warrant exercise price |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Term, in years |
|
|
|
|
|
| ||
Interest rate |
|
| % |
|
| % | ||
Expected volatility |
|
| % |
|
| % | ||
Risk-free interest rate |
|
| % |
|
| % | ||
Expected dividend yield |
|
| % |
|
| % | ||
| 19 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
(c) Fair value
The following table gives information about how the fair values of these financial liabilities are determined (in particular, the valuation technique and key inputs used).
Financial assets / financial liabilities | Valuation technique | Key Inputs | Relationship and sensitivity of unobservable inputs to fair value to fair value |
Convertible debt | The fair value of the convertible debentures as of June 30, 2023 has been calculated using a binomial lattice methodology. | Key observable inputs | The estimated fair value would increase (decrease) if: |
Share price USD $ | The share price was higher (lower) | ||
Risk-free interest rate ( | The risk-free interest rate was higher (lower) | ||
Dividend yield ( | The dividend yield was lower (higher) | ||
Key unobservable inputs | |||
Credit spread ( | The credit spread was lower (higher) | ||
| Discount for lack of marketability ( | The discount for lack of marketability was lower (higher) | |
Convertible debt | The fair value of the convertible debentures as of April 11, 2023 has been calculated using a binomial lattice methodology. | Key observable inputs | The estimated fair value would increase (decrease) if: |
Share price USD $ | The share price was higher (lower) | ||
Risk-free interest rate ( | The risk-free interest rate was higher (lower) | ||
Dividend yield ( | The dividend yield was lower (higher) | ||
Key unobservable inputs | |||
Credit spread ( | The credit spread was lower (higher) | ||
|
| Discount for lack of marketability ( | The discount for lack of marketability was lower (higher) |
| 20 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
15. Capital Stock
(a) Authorized
The Company is authorized to issue an unlimited number of common shares and an unlimited number of preference shares.
(b) Issued and outstanding, common shares
|
| Number of Proportionate Voting Shares |
|
| Number of common shares |
|
| Share Capital |
| |||
|
| # |
|
| # |
|
| $ |
| |||
Balance, December 31, 2021 |
|
|
|
|
|
|
|
|
| |||
Conversion from Common to Proportionate Voting Shares |
|
|
|
|
| ( | ) |
|
|
| ||
Private placements |
|
|
|
|
|
|
|
|
| |||
Share issuance costs |
|
|
|
|
|
|
|
| ( | ) | ||
Balance, June 30, 2022 |
|
|
|
|
|
|
|
|
| |||
|
| Number of Proportionate Voting Shares |
|
| Number of common shares |
|
| Share Capital |
| |||
|
|
|
|
| # |
|
| $ |
| |||
Balance, December 31, 2022 |
|
|
|
|
|
|
|
|
| |||
Conversion from Proportionate Voting Shares to Common |
|
| ( | ) |
|
|
|
|
|
| ||
Impact of rounding down after exchange for GSQ Esports |
|
| - |
|
|
| ( | ) |
|
| - |
|
Contingent consideration on acquisition of Cut+Sew |
|
| - |
|
|
|
|
|
|
| ||
Acquisition of Engine |
|
| - |
|
|
|
|
|
|
| ||
Shares issued for legal settlements |
|
| - |
|
|
|
|
|
|
| ||
Restricted share units exercised |
|
| - |
|
|
|
|
|
|
| ||
Shares issued for debt |
|
|
|
|
| 9,109 |
|
|
|
| ||
Balance, June 30, 2023 |
|
| - |
|
|
|
|
|
|
| ||
(c) Activity for the periods presented
Six months ended June 30, 2022
On May 30, 2022, the Company closed the first tranche of a non-brokered private placement. The Company issued
On June 23, 2022,
Six months ended June 30, 2023
On March 10, 2023,
On March 24, 2023,
| 21 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
On April 3, 2023, 3,098 PVS were converted into
On April 11, 2023,
On April 3 and 10, 2023, an aggregate of
During the six months ended June 30, 2023,
16. Share based payments
On April 11, 2023, the Company adopted the amended and restated Omnibus equity incentive plan (“Omnibus Plan”). Under the Omnibus plan, the total number of common shares reserved and available for grant and issuance pursuant to stock options shall not exceed 10% of the then issued and outstanding shares.
Options may be exercisable over periods of up to
The Omnibus Plan allows the Company to award restricted share units to officers, employees, directors and consultants of the Company and its subsidiaries upon such conditions as the Board may establish, including the attainment of performance goals recommended by the Company’s compensation committee. The purchase price for common shares of the Company issuable under each Restricted Share Unit (“RSU”) award, if any, shall be established by the Board at its discretion. Common shares issued pursuant to any RSU award may be made subject to vesting conditions based upon the satisfaction of service requirements, conditions, restrictions, time periods or performance goals established by the board.
The TSXV requires the Company to fix the number of common shares to be issued in settlement of awards that are not options. The maximum number of Shares available for issuance pursuant to the settlement of RSU shall be an aggregate of
(a) Options
The following is a summary of stock options outstanding on June 30, 2023, and December 31, 2022, and changes during the periods then ended by option exercise currency:
|
|
|
|
| Weighted-average |
| ||
|
| Number of |
|
| Exercise price |
| ||
|
| options |
|
| USD |
| ||
|
| # |
|
| $ |
| ||
Balance, December 31, 2022 |
|
|
|
|
| - |
| |
Acquisition of Engine |
|
|
|
|
|
| ||
Cancelled |
|
| ( | ) |
|
|
| |
Balance, June 30, 2023 |
|
|
|
|
|
| ||
| 22 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
|
|
|
|
| Weighted-average |
| ||
|
| Number of |
|
| Exercise price |
| ||
|
| options |
|
| CAD |
| ||
|
| # |
|
| $ |
| ||
Balance, December 31, 2021 |
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
| ||
Cancelled |
|
| ( | ) |
|
|
| |
Balance, December 31, 2022 |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
| ||
Cancelled |
|
| ( | ) |
|
|
| |
Balance, June 30, 2023 |
|
|
|
|
|
| ||
Information relating to options outstanding by exercise currency as of June 30, 2023, is as follows:
|
| Outstanding |
|
| Weighted average exercise price |
|
| Weighted average remaining contractual term |
| |||
Expiry date |
| options |
|
| USD |
|
| (Years) |
| |||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| |||
| 23 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
|
| Outstanding |
|
| Weighted average exercise price |
|
| Weighted average remaining contractual term |
| |||
Expiry date |
| options |
|
| CAD |
|
| (Years) |
| |||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| |||
On February 22, 2023, the Company granted
During the six months ended June 30, 2023, the Company expensed $
| 24 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
(b) RSUs
The following is a summary of RSUs outstanding on June 30, 2023, and December 31, 2022, and changes during the periods then ended:
|
| Number |
| |
|
| # |
| |
Balance, December 31, 2021 |
|
|
| |
Granted |
|
|
| |
Exercised |
|
| ( | ) |
Cancelled |
|
|
| |
Balance, December 31, 2022 |
|
|
| |
|
|
|
|
|
Balance, December 31, 2022 |
|
|
| |
Acquisition of Engine |
|
|
| |
Granted |
|
|
| |
Exercised |
|
| ( | ) |
Cancelled |
|
| ( | ) |
Balance, June 30, 2023 |
|
|
| |
On February 22, 2023, the Company granted
On March 10, 2023, the Company granted
During the six months ended June 30, 2023, the Company recognized expense for RSUs of $
17. Warrants
Liability measured warrants having CAD exercise price
The following is a summary of liability measured warrants outstanding on June 30, 2023, and changes during the period then ended.
|
| Amount |
| |
|
| $ |
| |
Balance at December 31, 2022 and 2021 |
|
|
| |
Acquisition of Engine |
|
|
| |
Reclassify former GSQ Esports Inc. warrants to warrant liability |
|
|
| |
Change in fair value |
|
| ( | ) |
Foreign exchange |
|
| ( | ) |
Balance, June 30, 2023 |
|
|
| |
| 25 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
|
|
|
|
| Weighted -average |
| ||
|
| Number of |
|
| exercise price |
| ||
|
| warrants |
|
| CAD |
| ||
|
| # |
|
| $ |
| ||
Outstanding, December 31, 2022 and 2021 |
|
|
|
|
|
| ||
Acquisition of Engine |
|
|
|
|
|
| ||
Reclassify former GSQ Esports Inc. warrants to warrant liability |
|
|
|
|
|
| ||
Expired |
|
|
|
|
|
| ||
Outstanding as of June 30, 2023 |
|
|
|
|
|
| ||
The following table reflects the liability measured warrants issued and outstanding as of June 30, 2023:
|
|
|
|
| Warrants outstanding |
| ||||||
|
| Number |
|
| Average exercise price |
|
| Average remaining contractual |
| |||
Expiry date |
| outstanding |
|
| CAD | life (years) |
| |||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| $ |
|
|
|
| |||
As of June 30, 2023, the fair value of the
| 26 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Equity measured warrants having USD exercise price
The following is a summary of liability measured warrants outstanding on June 30, 2023, and changes during the period then ended.
|
| Amount |
| |
|
| $ |
| |
|
|
|
| |
| Balance at December 31, 2021 |
|
|
| |
Private placements |
|
|
| |
Warrants issued for credit facility |
|
|
| |
Warrants expired |
|
| ( | ) |
| Balance, December 31, 2022 |
|
|
| |
|
|
|
|
|
| Balance at December 31, 2022 |
|
|
| |
| Acquisition of Engine |
|
|
| |
| Reclass equity warrants to warrant liability |
|
| ( | ) |
| Balance, June 30, 2023 |
|
|
| |
|
|
|
|
| Weighted-average |
| ||
|
| Number of |
|
| exercise price |
| ||
|
| warrants |
|
| CAD |
| ||
|
| # |
|
| $ |
| ||
|
|
|
|
|
|
| ||
Outstanding, December 31, 2021 |
|
|
|
|
|
| ||
Private placements |
|
|
|
|
|
| ||
Warrants issued for credit facility |
|
|
|
|
|
| ||
Warrants expired |
|
| ( | ) |
|
|
| |
| Outstanding as of December 31, 2022 |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2022 |
|
|
|
|
|
| ||
| Reclassify former GSQ Esports Inc. warrants to warrant liability |
|
| ( | ) |
|
|
| |
| Outstanding as of June 30, 2023 |
|
|
|
|
|
| ||
|
|
|
|
| Weighted-average |
| ||
|
| Number of |
|
| exercise price |
| ||
|
| warrants |
|
| USD |
| ||
|
| # |
|
| $ |
| ||
|
|
|
|
|
|
| ||
Outstanding, December 31, 2022 |
|
|
|
|
|
| ||
| Acquisition of Engine |
|
|
|
|
|
| ||
| Outstanding as of June 30, 2023 |
|
|
|
|
|
| ||
The following table reflects the equity measured warrants issued and outstanding as of June 30, 2023:
|
|
|
| Warrants outstanding |
| |||||||
|
| Number |
|
| Average exercise price |
|
| Average remaining contractual |
| |||
Expiry date |
| outstanding |
| USD | life (years) |
| ||||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| $ |
|
|
|
| |||
18. Related party transactions
Key management personnel compensation:
|
| For the three months ended |
|
| For the six months ended |
| ||||||||||
|
| June 30, 2023 |
|
| June 30, 2022 |
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Total compensation paid to key management |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Share based payments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Credit facility payable
On June 30, 2022, the Company entered into an agreement for a $
Convertible debenture with a director of the Company as counterparty
On September 1, 2022, Engine extended
The convertible debenture is beneficially held by a director of the Company. The participation of a director in the original issuance of the convertible debenture constitutes a "related party transaction" as such term is defined by Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company is relying on an exemption from the formal valuation requirements and the minority shareholder approval requirements under MI 61-101 as the fair market value of the convertible debenture did not exceed 25% of the market capitalization of the Company.
| 27 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Commitment to former holders of WinView to proceeds from the patent portfolio enforcement action
Pursuant to the Business Combination agreement dated March 9, 2020, among Engine, Frankly Inc. and Winview Inc., the Company is required to pay to certain former Winview securities holders (“Stubholders”) fifty percent (
19. Contingencies and commitments
Management commitments
The Company is party to certain management contracts. These contracts require payments of approximately $
Former activities
The Company was previously involved in oil and gas exploration activities in Canada, the United States and Colombia. The Company ceased all direct oil and gas exploration activities in 2014. While management estimated that the exposure to additional liabilities from its former oil and gas activities over and above the reclamation deposits held in trust for the Alberta Energy Regulator of CAD$343,691 ($
Litigation and arbitration
In April 2020, Engine announced its renegotiation of the acquisition of Allinsports. The revised purchase agreement provided for the acquisition of
In response, in November 2020, the shareholders of Allinsports commenced arbitration in Alberta, Canada seeking, among other things, to compel the Company to complete the acquisition of Allinsports without the audited financial statements, and to issue
| 28 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
On January 21, 2021, eight former shareholders of Winview filed a Complaint in Delaware Chancery Court against four Winview directors (David Lockton, et al. v. Thomas S. Rogers, et al.) alleging that the defendants breached their fiduciary duties in connection with the sale of Winview to the Company. The relief sought includes rescission of the sale of Winview to the Company and compensatory damages. The defendants have filed a motion to dismiss the claims. By Decision dated March 1, 2022, the Court granted in part and denied in part, the defendants’ Motion to Dismiss the Complaint. Neither the Company nor Winview have been named as parties to this action. Under the March 9, 2020, Business Combination Agreement pursuant to which the Company acquired Winview, the Company agreed to indemnify Winview’s directors for any claims arising out of their service as directors for Winview.
In July of 2021, Winview Inc. filed separate patent infringement lawsuits against DraftKings Inc. and FanDuel, Inc in the United States District Court for the District of New Jersey, alleging that Sportsbook and Daily Fantasy Sports offerings of DraftKings and FanDuel infringe four of Winview’s patents. These actions seek the recovery of damages and other appropriate relief. Draft Kings and FanDuel have filed motions to dismiss, which are pending, and the court’s review of these motions has been suspended pending the outcome of inter partes review proceedings filed with the United States Patent Office regarding some of the patents involved in these actions.
By Order to Continue dated May 5, 2022, the Company was substituted in as the plaintiff in a matter pending in the Ontario Superior Court of Justice, seeking recovery of €
The outcomes of pending litigations in which the Company is involved are necessarily uncertain as are the Company’s expenses in prosecuting and defending these actions. From time to time the Company may modify litigation strategy and/or the terms on which it retains counsel and other professionals in connection with such actions, which may affect the outcomes of and/or the expenses incurred in connection with such actions.
The Company is subject to various other claims, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable, and the amounts are estimable. Although the outcome of such matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations, or liquidity.
20. Revenue and segmented information
IFRS 8 requires operating segments to be determined based on the Company’s internal reporting to the Chief Operating Decision Maker (“CODM”). The CODM has been determined to be the Company’s chief executive officer as he is primarily responsible for the allocation of resources and the assessment of performance. The CODM uses gross profit, as reviewed at periodic business review meetings, as the key measure of the Company’s results as it reflects the Company’s underlying performance for the period under evaluation.
The CODM’s primary focus for review and resource allocation is the Company as a whole and not any component part of the business. Having considered these factors, management has judged that the Company has one operating segment under IFRS 8.
| 29 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
The following disaggregates revenue by revenue stream and geographic region for the three and six months ended June 30, 2023, and 2022.
Three months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| United Kingdom |
|
| USA |
|
| Canada |
|
| Spain |
|
| Total |
| |||||
Revenue channel |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Team Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Agency Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Content production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| United Kingdom |
|
| USA |
|
| Canada |
|
| Mexico |
|
| Total |
| |||||
Revenue channel |
|
| $ |
|
| $ |
|
|
| $ |
|
| $ |
|
| $ |
| |||
Team Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Agency Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Content production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| 30 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Six months ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| United Kingdom |
|
| USA |
|
| Canada |
|
| Spain |
|
| Total |
| |||||
Revenue channel |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Team Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Agency Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Content production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| United Kingdom |
|
| USA |
|
| Canada |
|
| Mexico |
|
| Total |
| |||||
Revenue channel |
|
| $ |
|
| $ |
|
|
| $ |
|
| $ |
|
| $ |
| |||
Team Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Agency Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Content production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Advertising |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
21. Financial instruments and risk management
(a) Financial risk management objectives and policies
The Company’s activities expose it to a variety of financial risks including foreign currency risk, interest rate risk, credit risk, liquidity risk and market risk and other price risk. These financial instrument risks are actively managed by the Company under the policies approved by the Board of Directors. On an ongoing basis, the finance department actively manages market conditions with a view to minimizing the exposure of the Company to changing market factors, while at the same time limiting the funding costs to the Company. There have been no changes in objectives, policies or how the Company manages these risks.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Company uses information supplied by independent rating agencies where available, and if not available, the Company uses other publicly available financial information and its own records to rate its customers.
Credit risk arises from cash and deposits with banks as well as credit exposure to outstanding receivables, the carrying amounts represent the Company’s maximum exposure to credit risk.
| 31 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company establishes an allowance for doubtful accounts that represents its estimate of expected losses in respect of accounts receivable. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
The Company’s accounts receivable are concentrated among customers in the media and broadcasting industry, which may be affected by adverse economic factors impacting that industry. The Company performs ongoing credit evaluations of its major customers, maintains reserves for expected credit losses, and does not require any collateral deposits.
As of June 30, 2023, no customers (December 31, 2022 – N/A) accounted for greater than
The Board approves and monitors the risk management processes. The Board’s main objectives for managing risks are to ensure liquidity, the fulfillment of obligations and limited exposure to credit and market risks while ensuring greater returns on any surplus funds.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company is exposed to liquidity risk with respect to its contractual obligations and financial liabilities. The Company manages liquidity risk by continuously monitoring forecasted and actual cash flows and matching maturity profiles of financial assets and liabilities. The Company seeks to ensure that it has sufficient capital to meet short-term financial obligations after taking into account its operating obligations and cash on hand.
The Company’s policy is to seek to ensure adequate funding is available from operations and other sources, including debt and equity capital markets, as required.
The following table describes our contractual obligations and financial liabilities on June 30, 2023:
|
| < 1 year |
|
| 1-2 years |
|
| 2-5 years |
| |||
|
|
|
|
|
|
|
|
|
| |||
Accounts payable |
|
|
|
|
|
|
|
|
| |||
Accrued liabilities |
|
|
|
|
|
|
|
|
| |||
Consideration payable |
|
|
|
|
|
|
|
|
| |||
Players liability account |
|
|
|
|
|
|
|
|
| |||
Promissory notes payable |
|
|
|
|
|
|
|
|
| |||
Convertible debt |
|
|
|
|
|
|
|
|
| |||
(d) Market Risk
Market risk represents the risk of loss that may impact the Company’s financial position, results of operations, or cash flows due to adverse changes in financial market prices, including interest rate risk, foreign currency exchange rate risk, and other relevant market or price risks. The Company does not use derivative instruments to mitigate this risk.
| 32 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to fair value risk with respect to debt which bears interest at fixed rates.
Currency Risk
The Company's exposure to the risk of changes in foreign exchange rates relates primarily to fluctuations of financial instruments related to cash, accounts and other receivables, and accounts payable denominated in Euros, UK pound sterling as well as debt denominated in Canadian dollars.
(e) Fair value hierarchy
The following tables combine information about:
| · | classes of financial instruments based on their nature and characteristics; |
| · | The carrying amounts of financial instruments; |
| · | fair values of financial instruments (except financial instruments when carrying amount approximates their fair value); and |
| · | fair value hierarchy levels of financial assets and financial liabilities for which fair value was disclosed. |
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
| ■ | Level 1: unadjusted quoted prices in active markets for identical assets or liabilities; |
| ■ | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; or |
| ■ | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
| 33 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
Carrying value at June 30, 2023 |
| FVTPL - mandatorily measured |
|
| FVOCI - mandatorily measured |
|
| FVOCI - designated |
|
| Amortized cost |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts and other receivables |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Government remittances |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Carrying value at June 30, 2023 |
| FVTPL - mandatorily measured |
|
| FVTPL - designated |
|
| Amortized cost |
| |||
|
|
|
|
|
|
|
|
|
| |||
Financial liabilities: |
|
|
|
|
|
|
|
|
| |||
Accounts payable |
|
|
|
|
|
|
|
|
| |||
Accrued liabilities |
|
|
|
|
|
|
|
|
| |||
Consideration payable |
|
|
|
|
|
|
|
|
| |||
Players liability account |
|
|
|
|
|
|
|
|
| |||
Credit facility payable |
|
|
|
|
|
|
|
|
| |||
Promissory notes payable |
|
|
|
|
|
|
|
|
| |||
Convertible debt |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Carrying value at December31, 2022 |
| FVTPL - mandatorily measured |
|
| FVOCI - mandatorily measured |
|
| FVOCI - designated |
|
| Amortized cost |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts and other receivables |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Government remittances |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Carrying value at December31, 2022 |
| FVTPL - mandatorily measured |
|
| FVTPL - designated |
|
| Amortized cost |
| |||
|
|
|
|
|
|
|
|
|
| |||
Financial liabilities: |
|
|
|
|
|
|
|
|
| |||
Accounts payable |
|
|
|
|
|
|
|
|
| |||
Accrued liabilities |
|
|
|
|
|
|
|
|
| |||
Consideration payable |
|
|
|
|
|
|
|
|
| |||
Players liability account |
|
|
|
|
|
|
|
|
| |||
Credit facility payable |
|
|
|
|
|
|
|
|
| |||
Promissory notes payable |
|
|
|
|
|
|
|
|
| |||
Convertible debt |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
| 34 |
| Table of Contents |
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc. Notes to the Condensed Interim Consolidated Financial Statements For the three and six months ended June 30, 2023, and 2022 (Unaudited) (Amounts in United States dollars) |
A summary of instruments, with their classification in the fair value hierarchy is as follows:
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Fair value as of June 30, 2023 |
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Convertible debt |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment at FVTPL |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Some of the Company’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
22. Subsequent events
The Company has evaluated subsequent events from the balance sheet date through August 14, 2023, the date at which the unaudited interim condensed consolidated financial statements were available to be issued and determined there were no additional items to be disclosed.
| 35 |