Exhibit 99.1
GAMESQUARE HOLDINGS, INC.
(formerly Engine Gaming and Media, Inc.)
Interim Condensed Consolidated Financial Statements
(Unaudited)
For the three and six months ended
February 28, 2023, and 2022
(Expressed in United States Dollars)
GameSquare Holdings, Inc.
(formerly Engine Gaming and Media, Inc.)
Table of Contents
Page 2 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
NOTICE OF NO AUDITOR REVIEW OF
UNAUDITED INTERIM CONDENSED 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 consolidated interim financial statements, the financial statements must be accompanied by a notice indicating that the condensed consolidated interim financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed consolidated interim 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 consolidated interim 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.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying interim condensed consolidated financial statements of GameSquare Holdings, Inc., (formerly Engine Gaming & Media, 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.
Page 3 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Interim Condensed Consolidated Statements of Financial Position
(Unaudited)
(Expressed in United States Dollars)
| Note | February 28, 2023 | August 31, 2022 | ||||||||||
| $ | $ | |||||||||||
| ASSETS | ||||||||||||
| Current | ||||||||||||
| Cash | ||||||||||||
| Restricted cash | 14 | |||||||||||
| Accounts and other receivables | 6 | |||||||||||
| Government remittances | ||||||||||||
| Publisher advance, current | 6 | |||||||||||
| Prepaid expenses and other | ||||||||||||
| Promissory notes receivable | 7 | |||||||||||
| Non-Current | ||||||||||||
| Publisher advance, non-current | 6 | |||||||||||
| Investment at FVTPL | 8 | |||||||||||
| Property and equipment | 9 | |||||||||||
| Goodwill | 10 | |||||||||||
| Intangible assets | 11 | |||||||||||
| Right-of-use assets | 12 | |||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 4 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Interim Condensed Consolidated Statements of Financial Position
(Unaudited)
(Expressed in United States Dollars)
| Note | February 28, 2023 | August 31, 2022 | ||||||||||
| $ | $ | |||||||||||
| LIABILITIES | ||||||||||||
| Current | ||||||||||||
| Accounts payable | 26 | |||||||||||
| Accrued liabilities | 26 | |||||||||||
| Players liability account | 14 | |||||||||||
| Deferred revenue | ||||||||||||
| Lease liabilities, current | 13 | |||||||||||
| Promissory notes payable | 15 | |||||||||||
| Warrant liability | 17 | |||||||||||
| Convertible debt, current | 16 | |||||||||||
| Arbitration reserve | 22 | |||||||||||
| Convertible debt, non-current | 16 | |||||||||||
| SHAREHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||||
| Share capital | 18 | |||||||||||
| Contributed surplus | ||||||||||||
| Foreign currency translation reserve | ( | ) | ( | ) | ||||||||
| Deficit | ( | ) | ( | ) | ||||||||
| Going concern | 1 | |||||||||||
| Commitments and contingencies | 22 | |||||||||||
| Subsequent events | 28 | |||||||||||
| Approved on Behalf of Board: | “Tom Rogers” | “Lou Schwartz” | ||
| Director | Director |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 5 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Interim Condensed 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 | February 28, 2023 | February 28, 2022 | February 28, 2023 | February 28, 2022 | ||||||||||||||||
| CONTINUING OPERATIONS | $ | $ | $ | $ | ||||||||||||||||
| REVENUE | ||||||||||||||||||||
| Direct to consumer | ||||||||||||||||||||
| Software-as-a-service | ||||||||||||||||||||
| Advertising | ||||||||||||||||||||
| EXPENSES | ||||||||||||||||||||
| Salaries and wages | 25 | |||||||||||||||||||
| Consulting | 25 | |||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Revenue sharing expense | ||||||||||||||||||||
| Sponsorships and tournaments | ||||||||||||||||||||
| Advertising and promotion | ||||||||||||||||||||
| Office and general | ||||||||||||||||||||
| Technology expenses | ||||||||||||||||||||
| Amortization and depreciation | 9,11,12 | |||||||||||||||||||
| Share-based payments | 19,20 | |||||||||||||||||||
| Interest expense | 15, 16 | |||||||||||||||||||
| (Gain) loss on foreign exchange | ( | ) | ||||||||||||||||||
| Gain on modification of debt | ( | ) | ||||||||||||||||||
| Transaction costs | ||||||||||||||||||||
| Arbitration settlement reserve | 22 | ( | ) | ( | ) | |||||||||||||||
| Restructuring costs | 27 | |||||||||||||||||||
| Change in fair value of promissory notes receivable | 7 | |||||||||||||||||||
| Change in fair value of warrant liability | 17 | ( | ) | ( | ) | |||||||||||||||
| Change in fair value of convertible debt | 16 | ( | ) | ( | ) | |||||||||||||||
| Net income (loss) for the period before discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income tax expense | ||||||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
| DISCONTINUED OPERATIONS | ||||||||||||||||||||
| Gain (loss) from discontinued operations | 23 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| Net income (loss) for the period from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net (income) loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||||||
| Net loss attributable to owners of the Company | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||||
| Items that may be reclassified subsequently to profit or loss | ||||||||||||||||||||
| Foreign currency translation differences | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive loss for the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| INCOME (LOSS) PER SHARE | ||||||||||||||||||||
| Basic income (loss) per share - continuing operations | 5 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| Basic income (loss) per share - discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Basic and diluted loss per share | 5 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| Weighted average number of shares outstanding - Basic and Diluted | 5 | |||||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 6 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Interim Condensed Consolidated Statements of Shareholders’ Equity (Deficiency)
(Unaudited)
(Expressed in United States Dollars)
| Share
capital: Number | Share
capital: Amount | Shares to be issued | Contributed surplus | Foreign currency translation reserve | Deficit | Total equity before non-controlling interest | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||
| # | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Balance, as at August 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||||||
| Shares issued on vesting of RSUs | ( | ) | ||||||||||||||||||||||||||||||||||
| Non-controlling interest in subsidiary | - | |||||||||||||||||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation differences | - | |||||||||||||||||||||||||||||||||||
| Balance, as at February 28, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance, as at August 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||||||
| Return to treasury - Sideqik acquisition | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued on vesting of RSUs | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued under shares for services | ( | ) | ||||||||||||||||||||||||||||||||||
| Net income for the year | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation differences | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, as at February 28, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 7 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States Dollars)
| For the six months ended | ||||||||||||
| Note | February 28, 2023 | February 28, 2022 | ||||||||||
| $ | $ | |||||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Net loss for the period | ( | ) | ( | ) | ||||||||
| Items not affecting cash: | ||||||||||||
| Amortization and depreciation | 9,11,12 | |||||||||||
| Impairment expense | ||||||||||||
| Arbitration settlement reserve | 22 | ( | ) | |||||||||
| Gain on modification of debt | ( | ) | ||||||||||
| Change in fair value of promissory notes receivable | 7 | |||||||||||
| Change in fair value of warrant liability | 17 | ( | ) | |||||||||
| Change in fair value of convertible debt | 16 | ( | ) | |||||||||
| Accretion of debt | ||||||||||||
| Share-based payments | 19, 20 | |||||||||||
| ( | ) | ( | ) | |||||||||
| Changes in non-cash working capital: | ||||||||||||
| Restricted cash | ||||||||||||
| Accounts and other receivables | ( | ) | ||||||||||
| Government remittances | ( | ) | ( | ) | ||||||||
| Publisher advance | 6 | |||||||||||
| Prepaid expenses and other | ||||||||||||
| Held for sale - Eden | ( | ) | ||||||||||
| Accounts payable | ( | ) | ||||||||||
| Accrued liabilities | ( | ) | ||||||||||
| Players liability account | ( | ) | ||||||||||
| Deferred revenue | ( | ) | ||||||||||
| ( | ) | ( | ) | |||||||||
| INVESTING ACTIVITIES | ||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||||||
| ( | ) | ( | ) | |||||||||
| FINANCING ACTIVITIES | ||||||||||||
| Proceeds (payments) on promissory notes payable, net | 15 | ( | ) | |||||||||
| Payments on lease financing | 13 | ( | ) | ( | ) | |||||||
| Payments on long-term debt | ( | ) | ||||||||||
| ( | ) | |||||||||||
| Impact of foreign exchange on cash | ( | ) | ||||||||||
| Change in cash | ( | ) | ( | ) | ||||||||
| Cash, beginning of period | ||||||||||||
| Cash, end of period | ||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
Page 8 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed 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 2110 Powers Ferry Road, Suite 450, Atlanta Georgia, USA.
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc.), (NASDAQ: GAME; TSXV: GAME) completed its previously announced 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 28.
The Company focuses on accelerating new, live, immersive esports and interactive gaming experiences for consumers through its partnerships with traditional and emerging media companies and providing online interactive technology and monetization services.
| (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 $
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.
Prior to the closing of the Arrangement, the Company closed a public offering of subscription receipts (the “Subscription Receipts”) at an issue price of US$ per Subscription Receipt, including the partial exercise of the over-allotment option, for aggregate gross proceeds of US$ million.
Page 9 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
2. Basis of preparation
| (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 August 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 April 17, 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 February 28, 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.
Page 10 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed 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) | Income taxes |
The Company had no income tax expense for the six months ended February 28, 2023, and 2022. As of February 28, 2023, deferred tax assets have not been recognized because it has not been determined as probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.
3. 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.
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 a material uncertainty regarding the Company’s ability to continue as a going concern.
Page 11 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| (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 26 | Expected credit losses; | |
| Note 17 | Valuation of warrant liability; | |
| Notes 10 and 11 | Goodwill and intangible assets; | |
| Notes 19 and 20 | Valuation of share-based payments; | |
| Note 16 | Valuation of convertible debt; and | |
| Note 22 | 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.
4. Changes in significant accounting policies
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 - Classification of liabilities as current or non-current
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 12 Income Taxes - Deferred Tax Related to Assets and liabilities Arising from a Single Transaction
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 to the Company’s financial statements.
Page 12 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Basic net income (loss) per share is calculated using the weighted-average number of common shares outstanding during each period. Diluted net income (loss) per share assumes the conversion, exercise, or issuance of all potential common share equivalents unless the effect is to reduce the loss or increase the income per share. For purposes of this calculation, stock options, warrants and RSU’s are potential common shares and are only included in the calculation of diluted net income (loss) per share when their effect is dilutive.
Due to the net loss from continuing operations during the three and six months ended February 28, 2023, and 2022 all outstanding options, restricted share units and warrants were excluded from diluted weighted-average common shares outstanding as their effect was anti-dilutive. Weighted average common shares outstanding for the three and six months ended February 28, 2023, were and , respectively (February 28, 2022- and ), respectively.
6. Accounts, other receivables, and publisher advance
| (a) | Accounts and other receivables |
The Company’s accounts and other receivables are comprised of the following:
| February
28, 2023 | August
31, 2022 | |||||||
| $ | $ | |||||||
| Trade accounts receivable | ||||||||
| Other receivables | ||||||||
| Allowance for doubtful accounts | ( | ) | ( | ) | ||||
A continuity of the Company’s allowance for doubtful accounts is as follows:
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Balance, August 31, | ( | ) | ( | ) | ||||
| Provision, bad debt expense | ( | ) | ||||||
| Write-offs | ||||||||
| Balance, February 28, | ( | ) | ( | ) | ||||
| (b) | Publisher advance |
On
February 7, 2021, the Company’s subsidiary Frankly Media LLC, amended its commercial agreement with its largest publisher, which
secured a long-term extension. The contract is expected to go through January 2024. One of the key terms of the amended agreement required
the Company to advance $
| (i) | $ | |
| (ii) | $ | |
| (iii) | $ |
Page 13 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The advance is to be recouped through additional withholding on future advertising revenue share payments made to the publisher, beyond Frankly’s share, and is effective for amounts billed for periods February 1, 2021, forward.
As
of February 28, 2023, $
The breakout of the publisher advance into current and non-current portions is based on an estimate of advertising billings over the next twelve months and the resulting additional withholding on the related advertising revenue share payments.
7. Promissory notes receivable at FVTPL
| Promissory notes receivable | ||||
| $ | ||||
| Balance, August 31, 2022 | ||||
| Payments | ( | ) | ||
| Change in fair value | ( | ) | ||
| Effect of foreign exchange | ||||
| Balance, February 28, 2023 | ||||
To
facilitate the sale of Eden Games, under a separate agreement, the Company agreed to purchase Euro- denominated
8. Investment at FVTPL
On
August 25, 2020, 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 25. The
fair value of this investment was $
Page 14 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
9. Property and equipment
A continuity of the Company’s property and equipment is as follows:
| Cost | Leasehold improvements | Computer equipment | Furniture
and fixtures | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| August 31, 2021 | ||||||||||||||||
| Additions | ||||||||||||||||
| Impairment | ( | ) | ( | ) | ||||||||||||
| Held for sale - Eden Games | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange | ( | ) | ( | ) | ( | ) | ||||||||||
| February 28, 2022 | ||||||||||||||||
| August 31, 2022 | ||||||||||||||||
| Additions | ||||||||||||||||
| Foreign exchange | ( | ) | ( | ) | ||||||||||||
| February 28, 2023 | ||||||||||||||||
| Accumulated depreciation | Leasehold improvements | Computer equipment | Furniture
and fixtures | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| August 31, 2021 | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Held for sale - Eden Games | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| February 28, 2022 | ||||||||||||||||
| August 31, 2022 | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Foreign exchange | ( | ) | ( | ) | ||||||||||||
| February 28, 2023 | ||||||||||||||||
| Net book value | Leasehold improvements | Computer equipment | Furniture
and fixtures | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| August 31, 2022 | ||||||||||||||||
| February 28, 2023 | ||||||||||||||||
Page 15 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
10. Goodwill
A continuity of the Company’s goodwill is as follows:
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Balance, August 31, | ||||||||
| Held for sale - Eden Games | ( | ) | ||||||
| Effect of foreign exchange | ( | ) | ( | ) | ||||
| Balance, February 28, | ||||||||
11. Intangible assets
A continuity of the Company’s intangibles is as follows:
| Accumulated amortization | Patents | Application Platforms | Software | Brand | Customer
Lists and Contracts | Total | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| August 31, 2021 | ||||||||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Held for Sale - Eden | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Foreign exchange | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| February 28, 2022 | ||||||||||||||||||||||||
| August 31, 2022 | ||||||||||||||||||||||||
| Amortization | ||||||||||||||||||||||||
| Foreign exchange | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| February 28, 2023 | ||||||||||||||||||||||||
| Net book value | Patents | Application Platforms | Software | Brand | Customer
Lists and Contracts | Total | ||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||
| August 31, 2022 | ||||||||||||||||||||||||
| February 28, 2023 | ||||||||||||||||||||||||
Page 16 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
12. Right-of-use assets
A continuity of the Company’s right-of-use assets is as follows:
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Balance, August 31, | ||||||||
| Depreciation | ( | ) | ( | ) | ||||
| Held for sale - Eden Games | ( | ) | ||||||
| Effect of foreign exchange | ( | ) | ||||||
| Balance, February 28, | ||||||||
Right of use assets consist primarily of leases for corporate office facilities and are amortized monthly over the term of the lease, or useful life, if shorter.
13. Lease liabilities
Lease liabilities are measured at the present value of the lease payments that were not paid at the financial statement date. The lease payments are discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate. The continuity of the lease liabilities is presented in the table below:
| Equipment | Office lease | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Balance, August 31, 2021 | ||||||||||||
| Held for sale - Eden Games | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||
| Payments | ( | ) | ( | ) | ( | ) | ||||||
| Effect of foreign exchange | ( | ) | ( | ) | ||||||||
| Balance, February 28, 2022 | ||||||||||||
| Balance, August 31, 2022 | ||||||||||||
| Acquired | ||||||||||||
| Disposal of Eden Games | ||||||||||||
| Interest expense | ||||||||||||
| Payments | ( | ) | ( | ) | ||||||||
| Balance, February 28, 2023 | ||||||||||||
Page 17 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The Company’s lease obligation is classified between current and non-current liabilities as follows:
| Equipment | Office lease | Total | ||||||||||
| $ | $ | $ | ||||||||||
| As of February 28, 2022: | ||||||||||||
| Less than one year | ||||||||||||
| Greater than one year | ||||||||||||
| Total lease obligation | ||||||||||||
| Equipment | Office lease | Total | ||||||||||
| $ | $ | $ | ||||||||||
| As of February 28, 2023: | ||||||||||||
| Less than one year | ||||||||||||
| Total lease obligation | ||||||||||||
The future minimum undiscounted lease payments as of February 28, 2022, are presented below:
| Equipment | Office lease | Total | ||||||||||
| Less than one year | ||||||||||||
| Total undiscounted lease obligation | ||||||||||||
14. Players liability account
The Players liability account consists of UMG and Winview cash deposited by players, plus any prize winnings, less any fees for match game play and withdrawal requests processed to date. As of February 28, 2023, the players liability account balance is the total amount payable if all players were to request closure of their accounts. As of February 28, 2023, the players account liability and corresponding restricted cash balances were the same.
15. Promissory notes payable and other borrowings
| (a) | Promissory notes |
The
Company has promissory notes with a balance of $
The
Company, through its WinView subsidiary, has a secured promissory note outstanding for amounts due for the provision of services by the
noteholder. As of February 28, 2023, $
| (b) | Paycheck Protection Program (the “PPP”) loans |
During
April and May 2020, the Company entered into promissory notes (the “Notes”) with three banks. The Notes evidence loans to
the Company of $
Page 18 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Interest
will accrue on the outstanding balance of the Notes at a rate of
Subject
to any forgiveness granted under the PPP,
Upon
the receipt of the proceeds of $
16. Convertible debt
The continuity of convertible debt for the six months ended February 28, 2023, and 2022, is as follows:
| 2019
Series | 2020
Series | EB CD | Total | |||||||||||||
| $ | $ | $ | ||||||||||||||
| Balance, August 31, 2021 | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Accrued interest on conversion / interest payments | ( | ) | ( | ) | ||||||||||||
| Effect of foreign exchange | ( | ) | ( | ) | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance, February 28, 2022 | ||||||||||||||||
| 2019
Series | 2020
Series | EB CD | Total | |||||||||||||
| $ | $ | $ | ||||||||||||||
| Balance, August 31, 2022 | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Accrued interest on conversion / interest payments | ( | ) | ( | ) | ||||||||||||
| Principal and interest at maturity | ( | ) | ( | ) | ||||||||||||
| Gain on modification of debt | ( | ) | ( | ) | ||||||||||||
| Change in fair value | ||||||||||||||||
| Balance, February 28, 2023 | ||||||||||||||||
Page 19 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The Company’s convertible debt obligations are classified between current and non-current liabilities on February 28, 2023, as follows:
| 2020
Series | EB CD | Total | ||||||||||
| $ | $ | $ | ||||||||||
| As of February 28, 2023: | ||||||||||||
| Less than one year | ||||||||||||
| Greater than one year | ||||||||||||
| Total convertible debt obligation | ||||||||||||
| (a) | 2020 Series |
The
2020 Series debentures will
The
2020 Series debenture holders may convert all or a portion of the principal amount of the debentures into units (“Units”)
of the Company at a price (the “Conversion Price”) equal to the lesser of (a) $
Notwithstanding
the foregoing, if by December 19, 2020, the Company has not obtained registration rights in the United States to allow sale in the United
States of the common shares (“Common Shares”) of the Company and the exercise of warrants (the “Warrants”) of
the Company to be issued pursuant to the conversion of the 2020 Series debentures, holders of 2020 Series debentures may convert such
debentures into Units at $
Each
Unit is comprised of one common share and one-half of one Warrant, with each Warrant exercisable into one common share of the Company
at an exercise price of $
In
the event that the Company’s common shares are listed for trading on the NASDAQ Capital Market and the Company completes a Public
Offering for an aggregate amount of at least US$
| (b) | 2020 Series – Standby |
In
September 2020, the Company entered into an $
Page 20 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The
proceeds of $
The
remaining $
On
September 1, 2022, the Company extended convertible debentures that were due to expire in October and November 2022 with an aggregate
principal amount of US$
The
remaining $
Page 21 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
As of February 28, 2023, the fair value of the 2020 Series convertible debentures was estimated using the binomial lattice model with the below assumptions:
| 2020 Series | February
28, 2023 (US$) | August
31, 2022 (US$) | ||||||
| Share price | ||||||||
| Conversion price | ||||||||
| Term, in years | ||||||||
| Interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| (c) | EB CD |
On
February 24, 2021, the Company extinguished the Amended EB Loan and issued the Lender a secured convertible debenture in the principal
amount of $
As of February 28, 2023, the fair value of the EB CD convertible debenture was estimated using the binomial lattice model with the below assumptions:
| EB CD | February
28, 2023 (US$) | August
31, 2022 (US$) | ||||||
| Share price | ||||||||
| Conversion price | ||||||||
| Warrant exercise price | ||||||||
| Term, in years | ||||||||
| Interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
Page 22 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| (d) | 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 February 28, 2023 has been calculated using a binomial lattice methodology. | Key observable inputs | The estimated fair value would increase (decrease) if: | |||
| Share price CAD $ (USD $) | The share price was higher (lower) | |||||
| Risk-free
interest rate ( |
The risk-free interest rate was higher (lower) | |||||
| Dividend
yield ( |
The dividend yield was lower (higher) | |||||
| Key unobservable inputs | ||||||
| Credit
spread ( |
The credit spread was lower (higher) | |||||
| Discount
for lack of marketability ( |
The discount for lack of marketability was lower (higher) | |||||
| Convertible debt | The fair value of the convertible debentures as of August 31, 2022 has been calculated using a binomial lattice methodology. | Key observable inputs | The estimated fair value would increase (decrease) if: | |||
| Share price CAD$ (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) |
Page 23 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
17. Warrant liability
Liability measured warrants having CAD exercise price
The following tables reflect the continuity of the Company’s liability measured warrants for the six months ended February 28, 2023, and 2022:
| Amount | ||||
| $ | ||||
| Balance at August 31, 2021 | ||||
| Change in fair value | ( | ) | ||
| Foreign exchange | ( | ) | ||
| Balance, February 28, 2022 | ||||
| Amount | ||||
| $ | ||||
| Balance at August 31, 2022 | ||||
| Change in fair value | ||||
| Foreign exchange | ( | ) | ||
| Balance, February 28, 2023 | ||||
The following tables reflects the continuity of the Company’s outstanding liability warrants for the six months ended February 28, 2023, and 2022:
| Number of | Weighted-average | |||||||
| exercise price | ||||||||
| warrants | CAD | |||||||
| # | $ | |||||||
| Outstanding, August 31, 2021 | ||||||||
| Outstanding as of February 28, 2022 | ||||||||
| Weighted-average | ||||||||
| Number of | exercise price | |||||||
| warrants | CAD | |||||||
| # | $ | |||||||
| Outstanding, August 31, 2022 | ||||||||
| Expired | ( | ) | ||||||
| Outstanding as of February 28, 2023 | ||||||||
Page 24 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| Warrants outstanding | ||||||||||||
| Expiry date | Number outstanding | Average exercise price CAD | Average remaining contractual life (years) | |||||||||
| $ | ||||||||||||
As
at February 28, 2023, the fair value of the warrants outstanding
(August 31, 2022 – )
was determined to be $
If
all liability measured warrants outstanding and exercisable as of February 28, 2023, were exercised, the Company would receive cash from
exercise of approximately $
Equity measured warrants having USD exercise price
The Company’s equity measured warrants as of February 28, 2023, and as of August 31, 2022, had an average weighted-average exercise price of $.
The following table reflects the equity measured warrants issued and outstanding as of February 28, 2023:
| Warrants outstanding | ||||||||||||
| Expiry date | Number outstanding | Average exercise price USD | Average remaining contractual life (years) | |||||||||
| $ | ||||||||||||
If
all equity measured warrants outstanding and exercisable as of February 28, 2023, were exercised, the Company would receive cash from
exercise of approximately $
Page 25 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| (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 |
| Shares | Consideration | |||||||
| # | $ | |||||||
| Balance, August 31, 2021 | ||||||||
| Shares issued on vesting of RSUs | ||||||||
| Balance, February 28, 2022 | ||||||||
| Shares | Consideration | |||||||
| # | $ | |||||||
| Balance, August 31, 2022 | ||||||||
| Return to treasury - Sideqik acquisition | ( | ) | ||||||
| Shares issued on vesting of RSUs | ||||||||
| Shares issued under shares for services | ||||||||
| Balance, February 28, 2023 | ||||||||
| (c) | Activity for the period |
During the six months ended February 28, 2023, shares related to the completion of the Sideqik acquisition were returned to the Company. The Company issued common shares upon vesting of an equal number of RSUs, see (Note 20) and shares for services provided by certain officers of Sideqik.
During the six months ended February 28, 2022, the Company issued common shares upon vesting of an equal number of RSUs, see (Note 20).
On October 6, 2021, the Company adopted an amended and restated equity incentive plan (“Omnibus Plan”), which amends and restates the equity incentive plan which was previously established as of July 15, 2020. Under the amendments, there were no changes in the terms of previously issued awards. Under the Omnibus Plan, the total number of common shares reserved and available for grant and issuance pursuant to stock options shall not exceed % of the then issued and outstanding shares.
Options may be exercisable over periods of up to years as determined by the Board of Directors of the Company and the exercise price shall not be less than the closing price of the shares on the day preceding the award date, subject to regulatory approval.
Page 26 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Weighted-average | ||||||||||||||||
| Number of stock options | Exercise price | Grant-date fair value | Remaining contractual term | |||||||||||||
| # | $ | $ | (yrs.) | |||||||||||||
| Balance, August 31, 2021 | ||||||||||||||||
| Granted | ||||||||||||||||
| Forefitures | ( | ) | ||||||||||||||
| Balance, February 28, 2022 | ||||||||||||||||
| Balance, August 31, 2022 | ||||||||||||||||
| Granted | ||||||||||||||||
| Cancelled | ( | ) | ||||||||||||||
| Forefitures | ( | ) | ||||||||||||||
| Balance, February 28, 2023 | ||||||||||||||||
| Exercisable as of February 28 2023 | ||||||||||||||||
On December 2, 2022, the Company completed an option repricing in which options were exchanged or with an exercise price of $, the exchanged options were at various exercise prices above $.
Page 27 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| Expiry date | Outstanding options | Weighted average exercise price USD | Weighted average remaining contractual term (Years) | |||||||||
Of the options outstanding as of February 28, 2023 (August 31, 2022 – ), are exercisable as of February 28, 2023 (August 31, 2022 – ). During the six months ended February 28, 2023, share-based compensation expense for the Company’s stock options was $ (February 28, 2022 – $).
The Omnibus Plan allows the Company to award restricted share units to officers, employees, directors and consultants of the Company and its subsidiaries upon such conditions as the Board may establish, including the attainment of performance goals recommended by the Company’s compensation committee. The purchase price for common shares of the Company issuable under each Restricted Share Unit (“RSU”) award, if any, shall be established by the Board at its discretion. Common shares issued pursuant to any RSU award may be made subject to vesting conditions based upon the satisfaction of service requirements, conditions, restrictions, time periods or performance goals established by the board.
Page 28 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The TSXV requires the Company to fix the number of common shares to be issued in settlement of awards that are not options. The maximum number of common shares available for issuance pursuant to the settlement of RSUs shall be an aggregate of common shares.
The Company’s outstanding RSUs are as follows:
| Number | ||||
| # | ||||
| Balance, August 31, 2021 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Cancelled | ( | ) | ||
| Balance, February 28, 2022 | ||||
| Balance, August 31, 2022 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Cancelled | ( | ) | ||
| Balance, February 28, 2023 | ||||
During the six months ended February 28, 2023, , the Company granted to key management employees pursuant to the Company’s incentive plan. The fair value of these RSUs was estimated based on the closing price CAD$ for a total fair value of CAD$. These RSUs have a performance condition that the Company estimates will be achieved during the fiscal quarter ending May 31, 2023. The fair value of the RSUs will be recognized as share-based compensation over the vesting period of five months. During the period the Company also granted RSUs to members of the board of directors pursuant to the Company’s incentive plan. The fair value of these RSUs was estimated based on the closing prices of CAD$ for a total fair value of CAD$. The fair value of the RSUs will be recognized as share-based compensation expense over the vesting period, which is approximately ten months.
During the six months ended February 28, 2022, the Company granted to members of the board of directors pursuant to the Company’s incentive plan. The fair value of these RSUs was estimated based on the closing prices of CAD$ to CAD$ for a total fair value of CAD$. The fair value of the RSUs will be recognized as share-based compensation expense over the vesting period, which is approximately twelve months.
During the six months ended February 28, 2023, and 2022, share-based compensation expense for the Company’s RSUs was $ and , respectively.
21. Capital management
The Company considers its capital to be its shareholders’ equity.
As
of February 28, 2023, the Company had shareholders’ equity (deficit) before non-controlling interests of $
Page 29 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The Company may also return capital to shareholders through the repurchase of shares, pay dividends, or reduce debt where it determines any of these to be an effective method of achieving the above objective. The Company does not use ratios in the management of its capital. There have been no changes to management’s approach to managing its capital during the six months ended February 28, 2023, and 2022.
22. Commitments and contingencies
Litigation and arbitration
In
April 2020, the Company 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 common shares
of the Company to those shareholders. As alternative relief, the shareholders of Allinsports sought up to US$
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.
Page 30 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
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.
23. Discontinued operations
Winview
During the fourth quarter of fiscal 2022, The Company executed a plan to discontinue operating the Winview business, following a strategic decision to focus the Company’s resources on the key revenue streams of software-as-a-service and advertising. Winview was previously part of the Company’s Gaming segment.
Accordingly, WinView results for the current and comparative periods have been presented as discontinued operations within the Consolidated Statements of Loss and Comprehensive Loss. Winview revenue was previously categorized as Direct to consumer.
During
the three months ended August 31, 2022, the Company recognized patent impairment expense amounting to $
Page 31 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Results from the discontinued operations for Winview and the related cash flows are as follows:
| For the three months ended | For the six months ended | |||||||||||||||
| February 28, 2023 | February 28, 2022 | February 28, 2023 | February 28, 2022 | |||||||||||||
| $ | $ | |||||||||||||||
| Revenues | ||||||||||||||||
| Revenue | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Consulting | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Sponsorships and tournaments | ||||||||||||||||
| Advertising and promotion | ||||||||||||||||
| Office and general | ||||||||||||||||
| Technology expenses | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Impairment expense | ||||||||||||||||
| Restructuring Costs | ||||||||||||||||
| Interest expense | ||||||||||||||||
| (Gain) loss on foreign exchange | ||||||||||||||||
| Non-operational professional fees | ||||||||||||||||
| Net income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| For the six months ended | ||||||||
| February 28, 2023 | February 28, 2022 | |||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ||||||
| Change in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ( | ) | ||||||
UMG
The
Company entered into an agreement on June 13, 2022, to sell certain assets of UMG for $
Accordingly, UMG results for the current and comparative periods have been presented as discontinued operations within the Consolidated Statements of Loss and Comprehensive Loss. UMG revenue was previously categorized as Direct to consumer.
During
the quarter ended May 2022, the Company recognized impairment expense relating to assets not disposed of in connection with the UMG asset
sale amounting to $
Page 32 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Results from the discontinued operations for UMG and the related cash flows are as follows:
| For the three months ended | For the six months ended | |||||||||||||||
| February 28, 2023 | February 28, 2022 | February 28, 2023 | February 28, 2022 | |||||||||||||
| $ | $ | |||||||||||||||
| Revenues | ||||||||||||||||
| Revenue | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Consulting | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Sponsorships and tournaments | ( | ) | ( | ) | ||||||||||||
| Advertising and promotion | ||||||||||||||||
| Office and general | ||||||||||||||||
| Technology expenses | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Impairment expense | ||||||||||||||||
| Restructuring Costs | ||||||||||||||||
| Interest expense | ||||||||||||||||
| (Gain) loss on foreign exchange | ( | ) | ( | ) | ||||||||||||
| Net income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| For the six months ended | ||||||||
| February 28, 2023 | February 28, 2022 | |||||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ||||||
| Change in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ( | ) | ||||||
Eden Games
The Company committed to a plan to sell Eden Games, S.A. (“Eden Games”) during the second quarter of fiscal 2022, following a strategic decision to focus the Company’s resources on the key revenue streams of direct-to- consumer, software-as-a-service, and advertising. Eden Games was previously part of the Company’s Gaming segment. On April 6, 2022, the Company completed the sale of Eden Games.
To
facilitate the sale of Eden Games, under a separate agreement, the Company agreed to purchase Euro- denominated
Accordingly, Eden Games’ results for the current and comparative periods have been presented as discontinued operations within the Interim Condensed Consolidated Statements of Income (loss) and Comprehensive Income (loss).
Page 33 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Results of discontinued operations for Eden and the related cash flows are as follows:
| For the three months ended | For the six months ended | |||||||||||||||
| February 28, 2023 | February 28, 2022 | February 28, 2023 | February 28, 2022 | |||||||||||||
| $ | $ | |||||||||||||||
| Revenues | ||||||||||||||||
| Revenue | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Consulting | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Sponsorships and tournaments | ||||||||||||||||
| Advertising and promotion | ||||||||||||||||
| Office and general | ||||||||||||||||
| Technology expenses | ||||||||||||||||
| Amortization and depreciation | ||||||||||||||||
| Share-based payments | ( | ) | ( | ) | ||||||||||||
| Interest expense | ||||||||||||||||
| (Gain) loss on foreign exchange | ||||||||||||||||
| Net income (loss) from discontinued operations | ||||||||||||||||
| For the six months ended | ||||||||
| February 28, 2023 | February 28, 2022 | |||||||
| $ | $ | |||||||
| Net cash provided by (used in) operating activities | ||||||||
| Net cash used in financing activities | ( | ) | ||||||
| Change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ||||||||
Motorsport Group
On November 3, 2020, the Company, following a detailed strategic review in connection with the merger of Torque Esports, Frankly and WinView, announced that it has completed the sale of IDEAS+CARS, The Race Media, WTF1, Driver DataDB and Lets Go Racing (collectively the “Motorsport Group”) to Ideas + Cars Holdings Limited, a third party investment group based in the UK. As a result, the Company eliminated its funding obligations related to the cost of maintaining and growing these auto media businesses and certain accrued liabilities. Accordingly, the operational results for this group were presented as a discontinued operation.
Page 34 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Results of discontinued operations for the Motorsports Group are as follows:
| For the six months ended | ||||||||
| February 28, 2023 | February 28, 2022 | |||||||
| $ | $ | |||||||
| Net cash provided by (used in) operating activities | ||||||||
| Disposal of Motorsports | ||||||||
| Change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ||||||||
24. Segmented information
Information reported to the Company’s Co-Chief Executives, the Chief Operating Decision Makers (“CODM”), for the purposes of resource allocation and assessment of segment performance is focused on the category of services for each type of activity. The principal categories of services are Gaming, Media, Corporate and Other. Discontinued operations have been removed from the segment information and prior periods have been rested to conform with current year presentation. The Group’s reportable segments under IFRS 8 Operating Segments are therefore as follows:
| Gaming | - | Services related to competitive organized video gaming or sporting events; |
| Media | - | Platform and advertising services provided to other broadcasters, primarily local TV and radio broadcasters; |
| Corporate and Other | - | Services provided to other businesses and other revenues; |
The Corporate and Other segment primarily consists of support costs not allocated to the two other segments.
Page 35 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The following is an analysis of the Company’s revenue and results by reportable segment for the three months ended February 28, 2023:
| Three months ended | Gaming | Media | Corporate and Other | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| External sales | ||||||||||||||||
| Results | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ||||||||||||
| Central administration costs | ||||||||||||||||
| Other gains and losses | ||||||||||||||||
| Finance costs | ( | ) | ||||||||||||||
| Loss before tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax | ||||||||||||||||
| Gain (Loss) for the year from: | ||||||||||||||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
The following is an analysis of the Company’s revenue and results by reportable segment for the six months ended February 28, 2023:
| Six months ended | Gaming | Media | Corporate and Other | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| External sales | ||||||||||||||||
| Results | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ||||||||||||
| Central administration costs | ||||||||||||||||
| Other gains and losses | ||||||||||||||||
| Finance costs | ( | ) | ||||||||||||||
| Income (loss) before tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax | ||||||||||||||||
| Gain (Loss) for the period from: | ||||||||||||||||
| Discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
Page 36 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The following is an analysis of the Company’s revenue and results by reportable segment for the three months ended February 28, 2022:
| Three months ended | Gaming | Media | Corporate and Other | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| External sales | ||||||||||||||||
| Results | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Central administration costs | ||||||||||||||||
| Other gains and losses | ( | ) | ( | ) | ||||||||||||
| Finance costs | ||||||||||||||||
| Loss before tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax | ||||||||||||||||
| Gain (Loss) for the year from: | ||||||||||||||||
| Discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Non-controlling interest in net loss | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
The following is an analysis of the Company’s revenue and results by reportable segment for the six months ended February 28, 2022:
| Six months ended | Gaming | Media | Corporate and Other | Total | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | ||||||||||||||||
| External sales | ||||||||||||||||
| Results | ||||||||||||||||
| Segment loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Central administration costs | ||||||||||||||||
| Other gains and losses | ( | ) | ( | ) | ||||||||||||
| Finance costs | ( | ) | ||||||||||||||
| Loss before tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax | ||||||||||||||||
| Gain (Loss) for the period from: | ||||||||||||||||
| Discontinued operations | ( | )- | ( | ) | ( | ) | ||||||||||
| Non-controlling interest in net loss | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||
Segment loss - Segment loss includes total revenue less operating expenses including the following: salaries and wages, consulting, professional fees, revenue sharing expense, advertising and promotion, office and general, technology expenses, amortization and depreciation and share based payments.
Central administration costs - Central administration costs include corporate operating expenses including the following: salaries and wages, consulting, professional fees, advertising and promotion, office and general, technology expenses, amortization and depreciation and share based payments.
Other gains and losses - Other gains and losses includes gain / loss on foreign exchange, loss on extinguishment of debt, gain on retained interest in former associate, transaction costs, arbitration settlement reserve, impairment expense, restructuring costs, change in fair value of investment at FVTPL, change in fair value of warrant liability and change in fair value of convertible debt.
Page 37 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Finance costs - Finance costs include interest expenses.
Geographical breakdown
| North America | European Union | Total | ||||||||||
| $ | $ | $ | ||||||||||
| August 31, 2022 | ||||||||||||
| Assets | ||||||||||||
| Long-term assets | ||||||||||||
| February 28, 2023 | ||||||||||||
| Assets | ||||||||||||
| Long-term assets | ||||||||||||
25. Related party transactions and balances
| (a) | Key management compensation |
Key management includes the Company’s directors, officers and any consultants with the authority and responsibility for planning, directing, and controlling the activities of an entity, directly or indirectly. Compensation awarded to key management for the six months ended February 28, 2023, and 2022, includes the following:
| For the three months ended | For the six months ended | |||||||||||||||
| February 28, 2023 | February 28, 2022 | February 28, 2023 | February 28, 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Total compensation paid to key management | ||||||||||||||||
| Share based payments | ||||||||||||||||
Total compensation paid to key management is recorded in consulting fees, salaries and wages and share based payments in the consolidated statement of income (loss) and comprehensive income (loss) for the six months ended February 28, 2023, and 2022.
Amounts
due to related parties as of February 28, 2023, with respect to the above fees were $
Convertible debenture with a director of the Company as counterparty
On
September 1, 2022, the Company extended
Page 38 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
Each of the expiring convertible debentures and the replacement convertible debenture is beneficially held by a director of the Company. The participation of a director in the amendment of the convertible debentures 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 amendment of the convertible debentures does not exceed 25% of the market capitalization of the Company.
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 the Company, Frankly Inc. and Winview Inc., the Company is required
to pay to certain former Winview securities holders (“Stubholders”) fifty percent (
26. 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.
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.
| (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.
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 collective loss allowance is determined
based on historical data of payment statistics for similar financial assets. As of February 28, 2023, the allowance for doubtful accounts
was $
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.
Page 39 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
As
of February 28, 2023, one customer (August 31, 2022 – one) accounted for greater than
The below table reflects the aging of the Company’s aging by invoice date of gross trade accounts receivable and allowance for doubtful accounts as of February 28, 2023:
| Current | 0 - 30 | 31 - 60 | 61 - 90 | 91+ | Total | |||||||||||||||||||
| Trade accounts receivable | ||||||||||||||||||||||||
| Allowance for doubtful accounts | ||||||||||||||||||||||||
| % Allowance | % | % | % | % | % | % | ||||||||||||||||||
| (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.
| < 1 year | 2-5 years | |||||||
| $ | $ | |||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Players liability account | ||||||||
| Promissory notes payable | ||||||||
| Convertible debt | ||||||||
Page 40 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| (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.
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, 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). |
| Carrying value at February 28, 2023 | FVTPL - mandatorily measured | Amortized cost | ||||||
| $ | $ | |||||||
| Financial assets: | ||||||||
| Cash | ||||||||
| Restricted cash | ||||||||
| Accounts and other receivables | ||||||||
| Government remittances | ||||||||
| Publisher advance | ||||||||
| Promissory notes receivable | ||||||||
| Investment at FVTPL | ||||||||
Page 41 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
| Carrying value at February 28, 2023 | FVTPL - mandatorily measured | FVTPL - designated | Amortized cost | |||||||||
| $ | $ | $ | ||||||||||
| Financial liabilities: | ||||||||||||
| Accounts payable | ||||||||||||
| Accrued liabilities | ||||||||||||
| Players liability account | ||||||||||||
| Promissory notes payable | ||||||||||||
| Warrant liability | ||||||||||||
| Convertible debt | ||||||||||||
| Carrying value at August 31, 2022 | FVTPL
- mandatorily measured | Amortized cost | ||||||
| $ | $ | |||||||
| Financial assets: | ||||||||
| Cash | ||||||||
| Restricted cash | ||||||||
| Accounts and other receivables | ||||||||
| Government remittances | ||||||||
| Publisher advance | ||||||||
| Promissory notes receivable | ||||||||
| Investment at FVTPL | ||||||||
| Carrying value at August 31, 2022 | FVTPL - mandatorily measured | FVTPL - designated | Amortized cost | |||||||||
| $ | $ | $ | ||||||||||
| Financial liabilities: | ||||||||||||
| Accounts payable | ||||||||||||
| Accrued liabilities | ||||||||||||
| Players liability account | ||||||||||||
| Promissory notes payable | ||||||||||||
| Warrant liability | ||||||||||||
| Convertible debt | ||||||||||||
Page 42 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed 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 February 28, 2023 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Warrant liability | ||||||||||||||||
| Convertible debt | ||||||||||||||||
| Publisher advance | ||||||||||||||||
| Promissory notes receivable | ||||||||||||||||
| Investment at FVTPL | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair value as of August 31, 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Warrant liability | ||||||||||||||||
| Convertible debt | ||||||||||||||||
| Publisher advance | ||||||||||||||||
| Promissory notes receivable | ||||||||||||||||
| 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.
27. Restructuring charges
During
the six months ended February 28, 2023, a restructuring provision of $
During
the six months ended February 28, 2022, a restructuring provision of $
28. Subsequent events
The Company has evaluated subsequent events from the balance sheet date through April 17, 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 except for the transaction described below.
Arrangement Agreement
GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc.), completed its previously announced plan of arrangement with GameSquare Esports Inc. (“GSQ”) on April 11, 2023, resulting in the Company acquiring all the issued and outstanding securities of GSQ. The combined entity is now known as GameSquare Holdings, Inc. with shares traded on the Nasdaq Capital Market and TSX Venture Exchange under the ticker symbol GAME.
Page 43 of 44 |
GameSquare Holdings, Inc.
(formerly Engine Gaming & Media, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
For the three and six months ended February 28, 2023, and 2022
(Unaudited)
(Expressed in United States Dollars)
The Company and GSQ entered into a definitive arrangement agreement dated December 7, 2022, to combine their businesses via an all-share deal, whereby each common share of GameSquare will be exchanged for common shares of the Company (on a pre-Consolidation basis).
Public Offering and Share Consolidation
Prior to the closing of the Arrangement, the Company closed a public offering of subscription receipts (the “Subscription Receipts”) at an issue price of US$ per Subscription Receipt, including the partial exercise of the over-allotment option, for aggregate gross proceeds of US$ million. As a result of the closing of the Arrangement, the Subscription Receipts were consolidated on the same ratio as the Consolidation (as discussed below) and automatically exchanged on a one-to-one basis for common shares of the Company without any further action on the part of the holder and without payment of additional consideration.
On April 10, 2023, the Company enacted a reverse stock split to consolidate (the “Consolidation”) the Company’s outstanding common shares on the basis of one new common share for every four existing common shares. As a result, the Company has approximately million shares outstanding following completion of the Consolidation, the Arrangement and the conversion of the Subscription Receipts.
GameSquare Board of Directors and Management Team
The board of directors of GameSquare includes Justin Kenna, Tom Walker, Travis Goff, Jerami Gorman, Tom Rogers (Executive Chairman), Lou Schwartz, and Stu Porter.
The management team of GameSquare includes Justin Kenna as Chief Executive Officer, Lou Schwartz as President, Mike Munoz as Chief Financial Officer, Sean Horvath as Chief Revenue Officer, Paolo DiPasquale as Chief Strategy Officer, Tyler “Ninja” Blevins as Chief Innovation Officer, John Wilk as General Counsel, and Matt Ehrens as Chief Technology Officer.
Shares for Debt Settlement
The
Company announced on March 23, 2023, that it has completed its shares for debt transaction whereby an aggregate of US$
Page 44 of 44 |