gcn_ex991.htm

EX-99.1 2 gcn_ex991.htm CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS gcn_ex991.htm

EXHIBIT 99.1

GameSquare Esports Inc.'s condensed interim consolidated financial statements for the three and nine months ended September 30, 2022 and August 31, 2021 are being refiled to remove the "Notice of No Auditor Reviewed of Condensed Consolidated Interim Financial Statements" as the financial statements have now been reviewed and to add disclosure under Note 19 - Subsequent Events for the disclosure of transactions subsequent to the original filing date. No other changes were made to the document.

GAMESQUARE ESPORTS INC.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022

and the three and nine months ended August 31, 2021

(Unaudited)

GAMESQUARE ESPORTS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

($ U.S. dollars)

September 30, 2022

December 31, 2021

November 30, 2020

(Restated - Note 3)

ASSETS

Current

Cash

$ 4,023,102

$ 6,028,232

$ 509,592

Amounts receivable (Note 5)

7,695,456

3,085,375

294,446

Prepaid expenses and deposits

601,446

304,180

84,182

Other investments

-

-

48,311

Other current assets (Note 8)

581,648

306,419

-

Total current assets

12,901,652

9,724,206

936,531

Long-term

Equipment (Note 6)

3,166,116

3,628,758

1,094

Intangibles (Note 7)

5,639,433

7,366,442

1,821,494

Goodwill (Note 7)

-

-

1,741,696

Right-of-use asset (Note 11)

2,479,488

2,761,961

-

Reclamation deposits

-

268,531

261,169

Non-current assets held for sale (Note 9)

-

78,510

-

Total assets

$ 24,186,689

$ 23,828,408

$ 4,761,984

LIABILITIES

Current

Accounts payable and accrued liabilities (Note 16)

$ 6,014,344

$ 2,205,991

$ 651,966

Deferred revenue

1,218,996

327,045

80,702

Current portion of lease liability (Note 11)

327,239

301,354

-

Loan payable (Note 10)

-

120,133

-

Total current liabilities

7,560,579

2,954,523

732,668

Deferred consideration on acquisition of Code Red (Note 4(a))

-

-

258,388

Long term loan

-

-

30,852

Lease liability, net of current portion (Note 11)

2,449,672

2,698,677

-

Reclamation provision

-

255,508

249,852

Deferred tax liability

203,058

274,458

357,887

Total liabilities

10,213,309

6,183,166

1,629,647

SHAREHOLDERS' EQUITY

Common shares (Note 12(b))

43,397,170

36,218,116

4,764,970

Share based payments reserve (Note 13)

2,903,091

3,101,014

552,752

Contingently issuable shares (Notes 4(b) and 4(d))

52,662

52,662

-

Warrants (Note 14)

2,497,376

2,287,484

622,155

Accumulated other comprehensive income

(371,321 )

135,981

86,380

Accumulated deficit

(34,505,598 )

(24,059,541 )

(2,893,920 )

Equity attributable to owners of the parent

13,973,380

17,735,716

3,132,337

Non-controlling interest (Note 15)

-

(90,474 )

-

Total Shareholders' Equity

13,973,380

17,645,242

3,132,337

Total liabilities and shareholders' equity

$ 24,186,689

$ 23,828,408

$ 4,761,984

Nature of operations and going concern (Note 1)

Contingencies and commitments (Notes 1 and 17)

Subsequent events (Note 19)

Approved by the Board of Directors on January 20, 2023

“KEVIN WRIGHT”, Director

“Paul Lebreux”, Director

See accompanying notes to the condensed interim consolidated financial statements.

GAMESQUARE ESPORTS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Unaudited)

Three months ended

Three months ended

Nine months ended

Nine months ended

($ U.S. dollars)

September 30, 2022

August 31, 2021

September 30, 2022

August 31, 2021

(Restated - Note 3)

(Restated - Note 3)

Revenue

$ 10,133,280

$ 1,979,031

$ 21,829,246

3,692,301

Cost of sales

6,547,235

1,422,408

13,580,839

2,823,864

Gross profit (Note 18)

3,586,045

556,623

8,248,407

868,437

Other income

Interest and other income

1,512

2,521

6,053

3,287

Total other income

1,512

2,521

6,053

3,287

Expenses

Salaries, consulting and management fees (Note 16)

2,413,028

1,244,060

7,442,140

2,717,564

Player compensation

426,705

290,383

1,315,745

290,139

Professional fees

437,672

399,892

1,425,585

734,914

General office expenses

301,738

167,445

1,155,941

523,653

Selling and marketing expenses

2,780,025

860,106

3,239,090

876,512

Travel expenses

361,724

189,486

799,496

288,026

Shareholder communications and filing fees

12,454

33,585

101,994

130,554

Interest expense

56,885

127,493

276,238

129,475

Bad debt expense

114,750

(1,898 )

114,750

45,064

Foreign exchange loss

(20,695 )

10,606

(66,675 )

5,566

Change in provision for reclamation deposit

15,403

-

15,403

(75,119 )

Share-based compensation (Note 13)

265,105

1,351,213

1,206,332

1,954,369

Transaction costs

-

4,718,091

-

12,057,971

Gain on disposition of assets available for sale (Note 9)

(46,915 )

-

(46,915 )

-

Amortization (Notes 6, 7 and 11)

669,490

1,579,167

2,030,108

2,261,824

Total expenses

7,787,369

10,969,629

19,009,232

21,940,512

Loss for the period before income taxes

(4,199,812 )

(10,410,485 )

(10,754,772 )

(21,068,788 )

Income tax (recovery)

(17,770 )

(141,975 )

(54,276 )

(323,381 )

Loss for the period

(4,182,042 )

(10,268,510 )

(10,700,496 )

(20,745,407 )

Other comprehensive loss

Items that will subsequently be reclassified to operations:

Foreign currency translation

(372,085 )

(100,095 )

(507,302 )

220,537

Total comprehensive loss for the period

$ (4,554,127 )

$ (10,368,605 )

$ (11,207,798 )

$ (20,524,870 )

(Loss) profit for the period attributable to:

Owners of the parent

(4,182,042 )

(10,294,076 )

(10,714,214 )

(20,775,628 )

Non-controlling interest

-

25,566

13,718

30,221

$ (4,182,042 )

$ (10,268,510 )

$ (10,700,496 )

$ (20,745,407 )

Basic and diluted net loss per share

$ (0.02 )

$ (0.05 )

$ (0.04 )

$ (0.18 )

Weighted average number of common shares outstanding - basic and diluted

272,426,342

191,051,221

255,057,363

117,061,379

See accompanying notes to the condensed interim consolidated financial statements.

GAMESQUARE ESPORTS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

($ U.S. dollars)

Share Capital

Contributed Surplus

Warrants

Contingently Issuable Shares and Options

Accumulated other comprehensive income

Non-Controlling Interest

Accumulated Deficit

Shareholders'

Equity

$

  $

$

  $

$

  $

$

  $

Balance, January 1, 2022 (Restated - Note 3)

36,218,116

3,101,014

2,287,484

52,662

135,981

(90,474 )

(24,059,541 )

17,645,242

Private placements (Note 12(b))

6,162,534

-

140,677

-

-

-

-

6,303,211

Share issuance costs (Note 12(b))

(42,822 )

-

-

-

-

-

-

(42,822 )

Options granted (Note 13(a))

-

530,473

-

-

-

-

-

530,473

Options expired (Note 13(a))

-

(344,913 )

-

-

-

-

344,913

-

Restricted share units (Note 13(b))

-

675,859

-

-

-

-

-

675,859

Restricted share units exercised (Note 13(b))

1,059,342

(1,059,342 )

-

-

-

-

-

-

Warrants issued for credit facility

-

-

69,215

-

-

69,215

Non-controlling interest on sale of Biblos

-

-

-

-

-

76,756

(76,756 )

-

Other comprehensive income

-

-

-

-

(507,302 )

-

-

(507,302 )

Net (loss) for the period

-

-

-

-

-

13,718

(10,714,214 )

(10,700,496 )

Balance, September 30, 2022

43,397,170

2,903,091

2,497,376

52,662

(371,321 )

-

(34,505,598 )

13,973,380

Balance, December 1, 2020 (Restated - Note 3)

4,764,970

552,752

622,155

-

86,380

-

(2,893,920 )

3,132,337

Issued on acquisiton of Reciprocity

9,852,217

577,301

-

213,244

-

-

-

10,642,762

Non-controlling interest acquired on acquisition of Reciprocity

-

-

-

-

-

33,733

-

33,733

Contingent consideration on acquisition of Cut&Sew (Note 4(d))

-

-

-

25,679

-

-

-

25,679

Issued on acquisition of Complexity (Note 4(c))

17,368,154

-

-

-

-

-

-

17,368,154

Issued on acquisition of Cut&Sew (Note 4(d))

416,531

-

-

-

-

-

-

416,531

Private placements (Note 12(b))

16,152,729

-

3,718,077

-

-

-

-

19,870,806

Share issuance costs (Note 12(b))

(1,996,767 )

-

469,405

-

-

-

-

(1,527,362 )

Options granted (Note 13(a))

-

1,534,122

-

-

-

-

-

1,534,122

Option exercise

143,833

(60,149 )

-

-

-

-

-

83,684

Restricted share units (Note 13(b))

-

420,247

-

-

-

-

-

420,247

RSUs exercised (Note 13(b))

317,371

(317,371 )

-

-

-

-

-

-

Other comprehensive income

-

-

-

-

220,537

-

-

220,537

Net (loss) for the period

-

-

-

-

-

30,221

(20,775,628 )

(20,745,407 )

Balance, August 31, 2021

47,019,038

2,706,902

4,809,637

238,923

306,917

63,954

(23,669,548 )

31,475,823

See accompanying notes to the condensed interim consolidated financial statements.

GAMESQUARE ESPORTS INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

($ U.S. dollars)

Nine months ended September 30, 2022

Nine months ended August 31, 2021

CASH (USED IN) PROVIDED BY:

(Restated - Note 3)

OPERATING ACTIVITIES

Net (loss)

$ (10,700,496 )

$ (20,745,407 )

Adjustment for:

Income tax recovery

(54,276 )

(323,381 )

Transaction costs

-

10,466,656

Gain on disposition of assets available for sale (Note 9)

(46,915 )

-

Share-based compensation (Note 13)

1,206,332

1,954,369

Gain on forgiveness of small business loan

-

(501,473 )

Interest expense (Notes 10 and 11)

276,232

122,904

Change in provision for reclamation deposit

15,403

(75,119 )

Amortization (Notes 6, 7 and 11)

2,030,108

2,267,774

Bad debt

114,750

-

(7,158,862 )

(6,833,677 )

Net change in non‑cash working capital

(523,535 )

(52,364 )

Net cash flow from operating activities

(7,682,397 )

(6,886,041 )

FINANCING ACTIVITIES

Proceeds received from long term loan (Note 17)

-

15,692

Repayment of loans (Notes 10 and 17)

(149,442 )

(387,500 )

Principal reduction in lease liability (Note 11)

(400,828 )

(88,125 )

Private placement (Note 12(b))

6,303,211

19,870,806

Share issue costs (Note 12(b))

(42,822 )

(1,527,362 )

Proceeds from option exercise

-

83,684

Net cash flow from financing activities

5,710,119

17,967,195

INVESTING ACTIVITIES

Cash acquired on acquisition of Reciprocity

-

414,481

Cash acquired on acquisition of Complexity

-

434,392

Acquistion of Cut &Sew shares

-

(2,385,000 )

Cash acquired on acquisition of Cut & Sew

-

315,035

Cash received on sale of assets held for sale

49,356

-

Equipment purchase (Note 6)

(31,264 )

(21,682 )

Net cash flow from investing activities

18,092

(1,242,774 )

Effect of exchange rate changes on cash

(50,944 )

18,369

CHANGE IN CASH

(2,005,130 )

9,856,749

CASH, beginning of the period

6,028,232

509,592

CASH, end of the period

$ 4,023,102

$ 10,366,341

SUPPLEMENTAL INFORMATION:

Value of shares issued on acquisition of Reciprocity

-

9,852,217

Value of options issued on acquisition of Reciprocity

-

577,301

Value of shares issued on acquisiton of Cut & Sew

-

416,531

Value of shares issued on acquistion of Complexity

-

17,368,154

Value of broker warrants issued (Note 14)

-

469,405

Value of warrants issued for credit facility

69,215

-

Right of use asset and lease liability at modification of lease

-

1,738,076

Interest paid

11,948

6,571

See accompanying notes to the condensed interim consolidated financial statements.

GAMESQUARE ESPORTS INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2022 and the three and nine months ended August 31, 2021

(Amounts in U.S. dollars)

1. NATURE AND CONTINUANCE OF OPERATIONS

GameSquare Esports Inc. (formerly Magnolia Colombia Ltd.) (the “Company” or “GameSquare”) was incorporated under the Ontario Business Corporations Act on June 01, 2009. The Company is a publicly traded company with the registered office located at 150 York Street, Suite 1008, Toronto, Ontario, M5H 3S5, Canada.

GameSquare is focused on esports market. The Company bridges the gap between global brands and the gaming and esports communities. GameSquare does this by signing talent in the influencer, on-screen talent and player categories as well as adding new companies to its roster of global brand relationships. On October 2, 2020, the Company completed a reverse acquisition with GameSquare (Ontario) Inc., which acquired all the outstanding shares of Code Red Esports Ltd. (“Code Red”) on the same day. On December 1, 2020, the Company completed the amalgamation with GameSquare (Ontario) Inc. On March 16, 2021, the Company acquired all the outstanding shares of Reciprocity Corp. (“Reciprocity”), which owned 100% of common shares of GCN Inc. (“GCN”), 100% of common shares of GameSquare Esports (USA) Inc. and 40% of the common shares of Biblos Gaming S.A. de C.V. (“Biblos”). On June 30, 2021, the Company acquired all the outstanding shares of NextGen Tech, LLC (dba. Complexity Gaming) (“Complexity”). On July 27, 2021, the Company acquired 100% of the outstanding shares of Swingman LLC. (dba Cut+Sew and Zoned) (“Cut+Sew”). The Company is 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”.

These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries listed in the following table:

Country of

Functional

Name of Subsidiary

Incorporation

Currency

Ownership Percentage

September 30,

December 31,

2022

2021

Code Red Esports Ltd. ("Code Red")

England and Wales

UK pound sterling

100%

100%

Stetson Oil & Gas Corporation

USA

Canadian Dollar

NA

NA

GameSquare (Ontario) Inc.

Canada

Canadian Dollar

NA

NA

GameSquare Esports (USA) Inc.

USA

U.S. Dollar

100%

100%

Biblos Gaming S.A. de C.V. ("Biblos")

Mexico

Mexican Peso

NA

40%

GCN Inc. ("GCN")

USA

U.S. Dollar

100%

100%

NextGen Tech, LLC (dba as Complexity Gaming) ("Complexity")

USA

U.S. Dollar

100%

100%

Swingman LLC. (dba Cut+Sew and Zoned) (“Cut+Sew”)

USA

U.S. Dollar

100%

100%

On May 3, 2021, Stetson Oil & Gas Corporation was dissolved. On December 1, 2021, the Company and Reciprocity were amalgamated. During the nine months ended September 30, 2022, the Company sold its 40% interest in Biblos.

The accompanying condensed consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Accordingly, the condensed interim consolidated financial statements 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 meet its liabilities and commitments in other than the normal course of business and at amounts different from those in the consolidated financial statements. Such adjustments could be material.

As at September 30, 2022, the Company had working capital of $5,341,073 (December 31, 2021 – $6,769,683). On June 30, 2022, the Company entered into an agreement for a US$5 million credit facility for a one-year term, subject to extension, which will provide the Company with access to capital, if required, to execute on its strategic priorities. As at September 30, 2022, the Company had not drawn down on the credit facility. The Company’s continuation as a going concern is dependent upon its ability to raise equity capital or borrowings sufficient to meet current and future obligations and ultimately achieve profitable operations. Management intends to finance operating costs over the next twelve months with issuance of common shares, loans, draw downs on its credit facility or profits from its business activities. There is no assurance that the Company will be able to obtain such financings or obtain them on favorable terms. These matters represent material uncertainties that cast significant doubt on the Company’s ability to continue as a going concern.

2. BASIS OF PRESENTATION

The accompanying condensed interim consolidated financial statements have been prepared by management in conformity with IAS 34, Interim Financial Reporting and do not include all the disclosures required in full annual financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These condensed interim consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the thirteen months ended December 31, 2021.

The condensed interim consolidated financial statements were authorized for issue by the Board of Directors on November 14, 2022.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 thirteen months ended December 31, 2021, with the exception of the following new accounting standards and change in presentation currency noted below.

Change in presentation currency

On January 1, 2022, the Company elected to change its presentation currency from Canadian dollars (“CAD”) to United States dollars (“U.S. dollars” or “USD”). The change in presentation currency is to better reflect the Company’s business activities and to improve investors’ ability to compare the Company’s financial results with other publicly traded businesses in similar industries. The Company applied the change to U.S. dollar presentation currency retrospectively and restated the comparative financial information as if U.S. dollars had always been the Company’s presentation currency.

The functional currency of GameSquare is the Canadian dollar, and the functional currency of the Company’s subsidiaries are listed in the table in Note 1. For periods prior to January 1, 2022, the statements of financial position for each period presented have been translated from the functional currency of the Company and each of its subsidiaries to U.S. dollar at the rate of exchange prevailing at the respective financial position date with the exception of equity items which have been translated at the exchange rate prevailing at the date of the transaction. The statements of loss and comprehensive income (loss) were translated at the average exchange rates for the respective reporting periods. Exchange differences arising on translation from the functional currency to the U.S. dollar have been recorded in accumulated other comprehensive income (loss) in the shareholders’ equity.

4. ACQUISITIONS

a) Acquisition of Reciprocity

On March 16, 2021, the Company acquired 100% of the outstanding shares of Reciprocity, a privately held gaming and esports company. Reciprocity owned 100% of GameSquare Esports USA Inc. (formerly Reciprocity Corp of Nevada, Inc.) and GCN Inc. In addition, Reciprocity held a 40% interest in Biblos Gaming S.A. de C.V. Management determined that this acquisition meets the definition of a business under IFRS 3 and therefore the transaction was accounted as a business combination.

As consideration for the acquisition, the Company issued 43,749,996 of its common shares with an estimated fair value of $5,897,614 (CAD$7,345,478) to certain shareholders of Reciprocity and 3,000,000 options of the Company with an estimated fair value of $333,367 (CAD$415,208) to option-holders of Reciprocity. The consideration shares were subject to a 12-month lock-up period, a third of which was released every four months following the closing date of March 16, 2021.

4. ACQUISITIONS (continued)

a) Acquisition of Reciprocity (continued)

Certain Reciprocity shareholders will also be entitled to receive (i) 5.255 million common shares of the Company if the Reciprocity business generates a minimum of $5 million of revenue and $1 million of net earnings before interest, taxes, and depreciation and amortization (“EBITDA^”) within 12 months of the acquisition date of March 16, 2021 (the “Acquisition Date”) and (ii) 9 million Common Shares if the Reciprocity business generates a minimum of $7 million of revenue and $1.4 million of EBITDA. In addition, the Company has agreed to grant or issue (i) up to 6,168,000 options to certain Reciprocity securityholders exercisable for 24 months to acquire an equal number of Common Shares at an exercise price of $1.00 per share if certain performance targets of Reciprocity are achieved 12 months and 24 months following the Acquisition Date and (ii) up to 3,725,000 common shares to certain Reciprocity securityholders if certain performance targets of Reciprocity are achieved 12 months and 24 months following the Acquisition Date. The estimated fair value of the contingent consideration at the date of acquisition was $nil due to the uncertainty of future performance targets.

The following table summarizes the consideration for the acquisition:

Estimated fair value of shares issued

$ 5,897,614

Estimated fair value of options issued

333,367

$ 6,230,981

The following table summarizes the preliminary accounting estimates of the acquisition with a purchase price of $6,230,981:

Cash

$ 414,481

Amounts receivable

211,452

Prepaids

8,023

Equipment

9,523

Accounts payable and accrued liabilities

(791,080 )

Loan payable

(800,000 )

(947,601 )

Excess of purchase price over fair value of assets acquired (expensed)

7,178,582

$ 6,230,981

On December 1, 2021, the Company and Reciprocity were amalgamated.

b) Acquisition of Complexity

On June 30, 2021, the Company acquired 100% of the issued and outstanding shares of Complexity, an esports organization in Texas USA. Management determined that this acquisition meets the definition of a business under IFRS 3 and therefore the transaction was accounted as a business combination. As total purchase consideration for the acquisition, the Company issued 83,328,750 common shares of the Company with an estimated fair value of $8,097,100 (CAD$10,035,546) to former shareholders of Complexity. The shares were subject to a 180-day trading hold post the closing date of June 30, 2021.

4. ACQUISITIONS (continued)

b) Acquisition of Complexity (continued)

The following table summarizes the consideration for the acquisition:

Estimated fair value of shares issued

$ 14,955,257

Share consideration received

(6,858,157 )

$ 8,097,100

The following table summarizes the preliminary accounting estimates of the acquisition with a purchase price of $8,097,100:

Cash

$ 434,392

Amounts receivable

90,624

Other current assets

708,490

Fixed assets

3,796,057

ROU asset

2,950,277

Brand name

4,244,501

Accounts payable and accrued liabilities

(487,253 )

Lease Liability

(3,138,515 )

Loans

(501,473 )

$ 8,097,100

c) Acquisition of Cut+Sew

On July 27, 2021, the Company acquired 100% of the issued and outstanding shares of Cut+Sew, a privately held marketing agency operating in the sports and esports industries. Management determined that this acquisition meets the definition of a business under IFRS 3 and therefore the transaction is a business combination.

As consideration for the acquisition, the Company paid $2,385,117 (CAD$3,000,000) in cash and issued 2 million of its common shares with an estimated fair value of $191,498 (CAD$240,866). The shares were subject to a six-month trading hold following the closing date of July 27, 2021.

Additionally, certain members of Cut+Sew became entitled to receive (i) up to $970,045 (CAD$1,250,000) paid in common shares of the Company and up to $116,405 (CAD$150,000) paid in cash if Cut+Sew generates up to $1.0 million of EBITDA in the 12 months following the closing date of July 27, 2021 of the acquisition, and (ii) up to $1,715,040 (CAD$2,210,000) paid in common shares of the Company and up to $186,249 (CAD$240,000) paid in cash if Cut+Sew generates EBITDA of up to $1.5 million in the period of 12 to 24 months following the Closing date of July 27, 2021, for a maximum contingent consideration of up to $6.09 million (CAD$7.85 million) paid in cash and common shares. The estimated fair value of the contingent consideration at the date of acquisition was $52,662.

The following table summarizes the consideration for the acquisition:

Cash

$ 2,385,117

Estimated fair value of shares issued

191,498

Contingent consideration - shares

52,662

$ 2,629,277

4. ACQUISITIONS (continued)

c) Acquisition of Cut+Sew (continued)

The following table summarizes the preliminary accounting estimates of the acquisition with a purchase price of $2,629,277:

Cash

$ 315,035

Amounts receivable

149,672

Prepaid expenses

4,607

Other current assets

9,000

Customer relationships

1,130,117

Brand name

1,274,387

Accounts payable and accrued liabilities

(203,435 )

Deferred revenue

(50,106 )

$ 2,629,277

5. AMOUNTS RECEIVABLE

Amounts receivable balances as at September 30, 2022 and December 31, 2021 consist of:

September 30, 2022

December 31, 2021

Trade receivables

$ 6,482,515

$ 3,047,772

HST receivable

51,685

29,090

Other receivables

1,161,256

8,513

Balance, end of period

$ 7,695,456

$ 3,085,375

6. EQUIPMENT

Equipment

Leasehold improvements

Total

Cost:

Balance, January 1, 2022

$ 238,988

$ 3,655,734

$ 3,894,722

Additions

31,264

-

31,264

Effect of foreign exchange

(914 )

(115 )

(1,029 )

Balance, September 30, 2022

$ 269,338

$ 3,655,619

$ 3,924,957

Depreciation:

Balance, January 1, 2022

$ 27,434

$ 238,530

$ 265,964

Depreciation charge for the period

84,700

408,489

493,189

Effect of foreign exchange

(312 )

-

(312 )

Balance, September 30, 2022

$ 111,822

$ 647,019

$ 758,841

Net book value:

Balance, September 30, 2022

$ 157,516

$ 3,008,600

$ 3,166,116

Balance, January 1, 2022

$ 211,554

$ 3,417,204

$ 3,628,758

Cost:

Balance, December 1, 2020

$ 1,094

$ -

$ 1,094

Acquisition of Reciprocity

9,523

-

9,523

Acquisition of Complexity

140,323

3,655,734

3,796,057

Additions

88,711

-

88,711

Transfer to assets available for sale

(633 )

-

(633 )

Effect of foreign exchange

(30 )

-

(30 )

Balance, December 31, 2021

$ 238,988

$ 3,655,734

$ 3,894,722

Depreciation:

Balance, December 1, 2020

$ -

$ -

$ -

Depreciation charge for the period

27,548

238,530

266,078

Effect of foreign exchange

(114 )

-

(114 )

Balance, December 31, 2021

$ 27,434

$ 238,530

$ 265,964

Net book value:

Balance, December 31, 2021

$ 211,554

$ 3,417,204

$ 3,628,758

Balance, December 1, 2020

$ 1,094

$ -

$ 1,094

7. INTANGIBLES AND GOODWILL

Intangibles

The components of intangible assets as of September 30, 2022 are as follows:

Customer relationships

Brand name

Total

Balance, November 30, 2020

$ 1,225,762

$ 595,732

$ 1,821,494

Acquisition of Complexity

-

4,244,501

4,244,501

Acquisition of Cut&Sew

1,130,117

1,274,387

2,404,504

Amortization

(377,612 )

(661,266 )

(1,038,878 )

Effect of foreign exchange

22,053

(87,232 )

(65,179 )

Balance, December 31, 2021

$ 2,000,320

$ 5,366,122

$ 7,366,442

Amortization

(358,450 )

(895,996 )

(1,254,446 )

Effect of foreign exchange

(127,180 )

(345,383 )

(472,563 )

Balance, September 30, 2022

$ 1,514,690

$ 4,124,743

$ 5,639,433

On June 30, 2021, the Company acquired all the outstanding shares of Complexity. The intangible assets acquired consisted of the Complexity brand name and its ties to the Dallas Cowboys. On July 27, 2021, the Company acquired all the issued and outstanding shares of Cut+Sew. The intangible assets acquired consisted of the Cut+Sew brand name and customer relationships.

Goodwill

Changes in the carrying value of goodwill were as follows:

Balance, November 30, 2020

$ 1,741,696

Impairment of goodwill

(1,798,430 )

Effect of foreign exchange

56,734

Balance, September 30, 2022 and December 31, 2021

$ -

During the year ended December 31, 2021, the Company impaired goodwill to $nil.

8. OTHER ASSETS

Other assets consist of acquisition costs of players and security deposits. Acquisition costs of players are amortized on a straight-line basis over the players’ contract terms.

9. ASSETS AND LIABILITIES HELD FOR SALE

(a) Biblos

During the nine months ended September 30, 2022, the Company entered into an agreement to sell it’s 40% share of Biblos for $125,000. The net carrying amount of the assets and liabilities related to Biblos was $78,085 at the date of disposition. As a result, the Company recorded a gain on the disposition of Biblos of $46,915, included in the statements of loss and comprehensive loss for the nine months ended September 20, 2022.

(b) Irati Energy Corporation (“Irati”)

Irati is a private company primarily focused on the development of its northern oilshale block located in Brazil.

On April 25, 2022, the Company sold its investment in Irati for $49,356 (CAD$62,635) or CAD$0.05 per common share of Irati.

10. LOAN PAYABLE

The Company’s loan payable bore an interest rate of 20% per annum and had a maturity date of February 13, 2021 which was one year from the date of issuance. On May 18, 2021, the loan was amended to reduce the interest rate to 10% per annum and extend the maturity date to March 31, 2022. During the nine months ending September 30, 2022, the Company accrued an interest expense of $29,309 (nine months ended August 31, 2021 - $13,486) and repaid principal and interest of $149,442 (nine months ended August 31, 2021 - $143,979). As at September 30, 2022, the principal and accrued interest were carried at $nil (December 31, 2021 - $120,133).

11. LEASE

On June 30, 2021, the Company acquired Complexity (see Note 4(b)). Complexity leases a building in Frisco, Texas. The lease commenced on April 9, 2019 and expires in April 2029. The lease had a carrying amount of $2,950,277 at the date of acquisition of Complexity. The amortization charge during the period was $282,473 (nine months ended August 31, 2021 - $188,316).

The lease liability is 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. For the nine months ended September 30, 2022, the Company recognized $177,708 (nine months ended August 31, 2021 - $125,892) in interest expense related to its lease liabilities.

A reconciliation of the lease liabilities for the nine months ended September 30, 2022 is as follows:

September 30, 2022

December 31, 2021

Balance, beginning of period

$ 3,000,031

$ -

Acquisiton of Complexity

-

3,138,515

Cash outflows

(400,828 )

(264,376 )

Finance costs

177,708

125,892

$ 2,776,911

$ 3,000,031

September 30, 2022

December 31, 2021

Lease Liability - current

$ 327,239

$ 301,355

Lease Liability - non-current

2,449,672

2,698,676

$ 2,776,911

$ 3,000,031

12. CAPITAL STOCK

a) Authorized

The authorized share capital of the Company, which has no par value, is comprised of the following:

(i)

Unlimited common shares – common shares shall be convertible at the option of the holder into proportionate voting shares on the basis of 100 common shares per 1 proportionate voting share.

(ii)

Unlimited Proportionate Voting Shares (“PVS”) – each PVS shall be convertible at the option of the holder into common shares at a ratio of 100 common shares per PVS. Each PVS is entitled to 100 votes per PVS at shareholder meetings of the Company.

b) Share Capital

Number of Proportionate

Voting Shares

Number of

common

shares

Amount

Balance as of November 30, 2020

-

51,928,911

$ 4,764,970

Shares issued on acquisition of Reciprocity (Note 4(a))

-

43,749,996

5,897,614

Shares issued on acquisition of NextGen (Note 4(b))

-

83,328,750

8,097,100

Shares issued on acquisition of Cut&Sew (Note 4(c))

-

2,000,000

191,498

Private placements

-

61,581,477

18,344,487

Share issue costs

-

(1,689,245 )

Options exercised

-

312,766

119,705

RSUs exercised

-

1,000,000

317,371

Warrants exercised

-

480,000

174,616

Balance as of December 31, 2021

-

244,381,900

$ 36,218,116

Private placements

-

59,855,285

6,162,534

Share issue costs

-

-

(42,822 )

RSUs exercised

-

3,304,281

1,059,342

Conversion from Common to Proportionate Voting Shares

150,000

(15,000,000 )

-

Balance as of September 30, 2022

150,000

292,541,466

$ 43,397,170

On February 19, 2021, the Company closed a non-brokered private placement financing of 2,381,477 units at a price of CAD$0.42 per Unit for gross proceeds of $792,945 (CAD$1,000,220) (the “Offering”). Each Unit consists of one common share of the Company and one-half of one common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant entitles the holder thereof to acquire one additional common share at an exercise price of CAD$0.60 for a period of 36 months from issuance. In connection with the financing, the Company paid finder’s fees of $1,165 (CAD$1,470) and issued 166,703 finder warrants. Each finder warrant entitles the holder to acquire one Common Share at a price of CAD$0.60 per Common Share for a period of 36 months following issuance. The gross proceeds were prorated to common shares and warrants based on their relative fair values. See Note 14.

On March 4, 2021, the Company closed a bought deal private placement financing and upsize led by Canaccord Genuity Corp., on behalf of a syndicate of underwriters (collectively, the “Underwriters”) issuing 16,700,000 units of the Company for gross proceeds of $5,550,368 (CAD$7,014,000). Each Unit consists of one common share of the Company and one-half of one common share purchase warrant (each whole warrant, a "Warrant"). Each Warrant entitles the holder thereof to purchase one Common Share at an exercise price of CAD$0.60 for a period of 36 months from the closing date of the offering, subject to a Warrant acceleration right exercisable by the Company if, at any time following the date that is four months and one day from the date of the closing of the Offering, the daily volume weighted average trading price of the Company's common shares on the Canadian Securities Exchange is greater than CAD$1.00 for the preceding five consecutive trading days.

12. CAPITAL STOCK (continued)

b) Share Capital (continued)

As consideration for their services with respect to the Offering, the Underwriters received fees of $395,664 (CAD$500,000), a cash commission of $388,526 (CAD$490,980) and 1,169,000 warrants of the Company (the “Broker Warrants”), exercisable for a period of 36 months following the closing date, to acquire 1,169,000 Units of the Company. Each Unit consists of one common share of the Company and one half of one common share purchase warrant. Each warrant is exercisable to purchase one common share of the Company at an exercise price of CAD$0.60 per common share for a period of 36 months from the Escrow Release Date. In addition, the Company incurred legal and other expenses totaling $126,970 (CAD$159,995) in connection with the Offering.

On March 24, 2021, 212,766 options with exercise prices of CAD$0.47 were exercised for gross proceeds of $79,624 (CAD$100,000).

On July 6, 2021, 1,000,000 shares were issued on the exercise of RSUs (see Note 13(b).

On July 22, 2021, the Company closed a bought deal private placement offering led by Canaccord Genuity Corp. acted as lead underwriter on behalf of a syndicate of underwriters, issuing 21,250,000 units of the Company at a price of CAD$0.40 per unit for gross proceeds of $6,763,747 (CAD$8.5 million). Each Unit consists of one common share of the Company and one half of one purchase warrant. Each Warrant is exercisable for one common share at an exercise price of CAD$0.60 per common share for a period of 24 months from the closing date of the offering, subject to the Warrant Acceleration Right (as defined below). If, at any time following the closing of the offering, the daily volume weighted average trading price of the common shares on the Canadian Securities Exchange is greater than CAD$1.00 per common share for the preceding 10 consecutive trading days, the Company shall have the right to accelerate the expiry date of the Warrants to a date that is at least 30 trading days following the date of such written notice and press release (the “Warrant Acceleration Right”).

On July 22, 2021, the Company also closed a concurrent non-brokered private placement whereby the Jones family and the Goff family subscribed for an additional 21,250,000 units of the Company for gross proceeds of $6,763,746 (CAD$8.5 million) on the same terms as those in the bought deal private placement offering.

As consideration for the services rendered by the Underwriters in connection with the Offering, the Company has (i) paid the Underwriters a cash commission of $473,462 (CAD$595,000), and (ii) issued an aggregate of 1,487,500 broker warrants. Each broker warrant is exercisable into that number of Units at an exercise price of CAD$0.40 for a period of 36 months from the closing date. In addition, the Company incurred legal and other expenses totaling $141,936 in connection with the Offering.

On May 30, 2022, the Company closed the first tranche of a non-brokered private placement. The Company issued 20,040,429 common shares of the Company at a price of CAD$0.14 per common share for gross proceeds of $2,215,811 (CAD$2,805,660). The Company incurred legal and other expenses totaling $38,063 in connection with the private placement.

On June 23, 2022, 15,000,000 common shares were converted into 150,000 PVS.

On July 20, 2022, the Company closed the second tranche of a non-brokered private placement. The Company issued 926,285 common shares of the Company at a price of CAD$0.14 per common share for gross proceeds of $100,652 (CAD$129,680).

On August 11, 2022, the Company closed the third tranche of a non-brokered private placement. The Company issued 8,988,571 common shares of the Company at a price of CAD$0.14 per common share for gross proceeds of $986,748 (CAD$1,258,400). The Company incurred legal and other expenses totaling $4,759 in connection with the private placement.

On September 30, 2022, the Company closed a non-brokered private placement financing of 29,900,000 units at a price of CAD$0.14 per unit for gross proceeds of $3,000,000 (CAD$4,186,000). Each unit consists of one common share of the Company and 0.20 of one common share purchase warrant. Each whole warrant entitles the holder thereof to acquire one additional common share at an exercise price of CAD$0.20 commencing on September 30, 2023 and expiring on September 30, 2027. The gross proceeds were prorated to common shares and warrants based on their relative fair values. See Note 14.

During the nine months ended September 30, 2022, 3,304,281 shares were issued on the exercise of RSUs (see Note 13(b).

13. SHARE BASED PAYMENTS

a) Options

The Company has granted options for the purchase of common shares to its directors, consultants, employees and officers. The aggregate number of shares that may be issuable pursuant to options granted under the Company’s stock option plan (the “Option Plan”) will not exceed 10% of the issued common shares of the Company at the date of grant. No more than 5% of the issued shares of the Company may be granted to any one optionee. The options are non-transferable and non-assignable and may be granted for a term not exceeding five years. The exercise price of the options may not be less than the greater of CAD$0.05 and the market price, subject to all applicable regulatory requirements.

The following is a summary of stock options outstanding at September 30, 2022 and December 31, 2021 and changes during the periods then ended.

Information relating to share options outstanding as at September 30, 2022 is as follows:

Number of stock options

Weighted average

exercise price (CAD$)

Balance, November 30, 2020

2,185,344

$ 0.46

Granted

14,509,241

0.45

Issued on acquisition of Reciprocity

3,000,000

0.40

Exercised

(312,766 )

0.34

Balance as of December 31, 2021

19,381,819

$ 0.45

Granted

3,800,000

0.32

Cancelled

(1,775,861 )

0.46

Balance as of September 30, 2022

21,405,958

$ 0.42

Exercise price (CAD$)

Options outstanding

Options exercisable

Expiry date

Weighted average grant date fair value vested

Weighted average remaining life in years

$
0.40

3,000,000

3,000,000

Thursday, March 16, 2023

333,367

0.46

$
0.61

34,483

34,483

Sunday, October 1, 2023

1,816

1.00

$
0.41

350,000

350,000

Sunday, April 28, 2024

42,771

1.58

$
0.48

925,000

925,000

Tuesday, November 25, 2025

252,521

3.16

$
0.44

2,000,000

1,500,000

Thursday, January 22, 2026

276,843

3.32

$
0.50

250,000

250,000

Tuesday, February 24, 2026

43,985

3.41

$
0.47

500,000

312,500

Monday, March 2, 2026

81,253

3.42

$
0.44

1,000,000

1,000,000

Monday, March 16, 2026

155,354

3.46

$
0.47

1,100,000

725,000

Tuesday, April 28, 2026

126,385

3.58

$
0.51

2,300,000

2,300,000

Sunday, July 5, 2026

392,038

3.76

$
0.44

6,396,475

2,812,148

Monday, September 21, 2026

665,727

3.98

$
0.35

200,000

50,000

Tuesday, February 16, 2027

6,181

4.38

$
0.35

550,000

-

Monday, March 1, 2027

25,261

4.42

$
0.35

950,000

350,000

Wednesday, March 24, 2027

10,527

4.48

$
0.18

1,287,500

-

Tuesday, August 31, 2027

4,433

4.92

$
0.20

312,500

312,500

Tuesday, August 31, 2027

16,348

4.92

$
0.13

250,000

-

Tuesday, September 14, 2027

347

4.96

Total

21,405,958

13,921,631

$ 2,435,157

3.38

13. SHARE BASED PAYMENTS (continued)

a) Options (continued)

On January 22, 2021, the Company granted 2,000,000 options to the Chief Executive Officer of the Company. The options vest in equal quarterly instalments over a two-year period. Each option is exercisable at a price of CAD$0.44 per common share and expire January 22, 2026. The fair market value of the options of $283,601 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.44 based on the closing price of the Company’s shares on January 21, 2021, risk free rate of 0.44%, expected volatility of 52.7%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $52,470 in share-based compensation related to the vesting of these options.

On February 24, 2021, the Company granted 500,000 options to consultants of the Company. The options vest in quarterly installments over one year. Each option is exercisable at a price of CAD$0.50 per common share and expire February 19, 2026. The fair market value of the options of $87,969 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of $0.50 based on the closing price of the Company’s shares on February 23, 2021, risk free rate of 0.73%, expected volatility of 52.9%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period.

On March 2, 2021, the Company granted 550,000 options to consultants of the Company. 50,000 of the options vest immediately and 500,000 vest in quarterly installments over two years. Each option is exercisable at a price of CAD$0.47 per common share and expire March 2, 2026. The fair market value of the options of $92,957 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.47 based on the closing price of the Company’s shares on March 1, 2021, risk free rate of 0.78%, expected volatility of 52.6%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options was amortized over the vesting period.

On March 16, 2021, the Company completed the acquisition of Reciprocity (Note 4(a)) and issued 3,000,000 replacement options for Reciprocity options outstanding immediately prior to the transaction. The options are exercisable for one common share of the Company at an exercise price of $0.40 per common share for period of two years from the date of grant. The fair market value of the options of $333,367 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.44 based on the closing price of the Company’s shares on March 15, 2021, risk free rate of 0.31%, expected volatility of 50.1%, based on the historical volatility of comparable companies, an estimated life of 2 years and an expected dividend yield of 0%.

On March 16, 2021, the Company granted 1,000,000 options to a consultant of the Company. The options vest in quarterly installments over one year. Each option is exercisable at a price of CAD$0.44 per common share and expire March 16, 2026. The fair market value of the options of $155,354 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.44 based on the closing price of the Company’s shares on March 15, 2021, risk free rate of 1.03%, expected volatility of 50.1%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $7,980 in share-based compensation related to the vesting of these options.

On March 18, 2021, the Company granted 212,766 options to consultants of the Company. The options vested immediately. Each option is exercisable at a price of CAD$0.47 per common share and expire March 18, 2026. The fair market value of the options of $34,038 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.46 based on the closing price of the Company’s shares on March 16, 2021, risk free rate of 1.01%, expected volatility of 50.1%, an estimated life of 5 years and an expected dividend yield of 0%.

On April 9, 2021, the Company granted 100,000 options to consultants of the Company. The options vest in quarterly installments over one year. Each option was exercisable at a price of CAD$0.43 per common share and expire April 8, 2026. The fair market value of the options of $14,083 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.43 based on the closing price of the Company’s shares on April 8, 2021, risk free rate of 0.95%, expected volatility of 46.5%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options was amortized over the vesting period.

13. SHARE BASED PAYMENTS (continued)

a) Options (continued)

On April 28, 2021, the Company granted 1,100,000 options to consultants of the Company. 1,000,000 of the options vest in quarterly installments over two years and 100,000 vest in quarterly installments over one year. Each option is exercisable at a price of CAD$0.47 per common share and expire April 28, 2026. The fair market value of the options of $134,423 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.40 based on the closing price of the Company’s shares on April 27, 2021, risk free rate of 0.93%, expected volatility of 46.3%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $34,632 in share-based compensation related to the vesting of these options.

On April 28, 2021, the Company granted 350,000 options to a consultant of the Company. The options vest in quarterly installments over one year. Each option is exercisable at a price of CAD$0.47 per common share and expire April 28, 2024. The fair market value of the options of $42,772 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of $0.40 based on the closing price of the Company’s shares on April 27, 2021, risk free rate of 0.48%, expected volatility of 46.3%, an estimated life of 3 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $4,546 in share-based compensation related to the vesting of these options.

On July 5, 2021, the Company granted 2,300,000 options to a consultant of the Company. Half of the of the options vested immediately and half of the options vested in equal monthly tranches over a six-month period commencing July 30, 2021. Each option is exercisable at a price of CAD$0.51 per common share and expire July 5, 2026. The fair market value of the options of $392,038 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.51 based on the closing price of the Company’s shares on July 5, 2021, risk free rate of 0.99%, expected volatility of 46.6%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options was amortized over the vesting period.

On September 20, 2021, the Company granted 6,396,475 options to officers, directors and consultants of the Company. 200,000 of the options vest in two equal installments on March 13, 2022 and September 13, 2022, 450,000 of the options vest on March 13, 2022, 100,000 of the options vest on September 13, 2022, 145,000 options vest on December 31, 2021, 500,000 of the options vest in four equal instalments of 125,000 every six months starting on March 13, 2022 and 5,001,475 of the options vest in 35 monthly instalments of 138,929 starting on October 20, 2021 and the remaining 138,960 vesting on September 20, 2024. Each option is exercisable at a price of CAD$0.435 per common share and expire September 21, 2026. The fair market value of the options of $887,200 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.435 based on the closing price of the Company’s shares on September 17, 2021, risk free rate of 0.85%, expected volatility of 46.4%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $362,930 in share-based compensation related to the vesting of these options.

On February 15, 2022, the Company granted 200,000 options to a consultant of the Company. The options vest on February 15, 2023. Each option is exercisable at a price of CAD$0.35 per common share and expire February 16, 2027. The fair market value of the options of $10,541 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.23 based on the closing price of the Company’s shares on February 14, 2022, risk free rate of 1.82%, expected volatility of 46.92%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $6,181 in share-based compensation related to the vesting of these options.

On February 28, 2022, the Company granted 1,400,000 options to consultants of the Company. The options vest on March 1, 2023. Each option is exercisable at a price of CAD$0.35 per common share and expire March 1, 2027. The fair market value of the options of $43,204 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.19 based on the closing price of the Company’s shares on February 27, 2022, risk free rate of 1.64%, expected volatility of 46.95%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $25,621 in share-based compensation related to the vesting of these options.

13. SHARE BASED PAYMENTS (continued)

a) Options (continued)

On March 23, 2022, the Company granted 950,000 options to a consultant of the Company. 150,000 options vested on the date of grant with the remaining options vesting in 8 equal installments every three months starting June 23, 2022. Each option is exercisable at a price of CAD$0.35 per common share and expire March 24, 2027. The fair market value of the options of $16,548 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.13 based on the closing price of the Company’s shares on March 22, 2022, risk free rate of 2.2%, expected volatility of 46.92%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $10,527 in share-based compensation related to the vesting of these options.

On August 31, 2022, the Company granted 1,287,500 options to employees and consultants of the Company. 643,750 options vest on August 31, 2023 and 643,750 options vest on August 31, 2024. Each option is exercisable at a price of CAD$0.18 per common share and expire August 31, 2027. The fair market value of the options of $71,952 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.16 based on the closing price of the Company’s shares on August 30, 2022, risk free rate of 3.34%, expected volatility of 52.68%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $4,433 in share-based compensation related to the vesting of these options.

On August 31, 2022, the Company granted 312,500 options to employees and consultants of the Company. The options vested immediately on the date of grant. Each option is exercisable at a price of CAD$0.20 per common share and expire August 31, 2027. The fair market value of the options of $16,348 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.16 based on the closing price of the Company’s shares on August 30, 2022, risk free rate of 3.34%, expected volatility of 52.68%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $16,348 in share-based compensation related to the vesting of these options.

On September 14, 2022, the Company granted 250,000 options to the COO of the Company. 125,000 of the options vest on September 14, 2023 and 125,000 options vest on September 14, 2024. Each option is exercisable at a price of CAD$0.13 per common share and expire September 14, 2027. The fair market value of the options of $10,547 was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: share price of CAD$0.12 based on the closing price of the Company’s shares on September 13, 2022, risk free rate of 3.39%, expected volatility of 51.81%, an estimated life of 5 years and an expected dividend yield of 0%. The fair value of the options is amortized over the vesting period. During the nine months ended September 30, 2022, the Company expensed $347 in share-based compensation related to the vesting of these options.

During the nine months ended September 30, 2022, 1,775,861 options with weighted average exercise prices of CAD$0.46, expired, unexercised.

b) Restricted share units (“RSU”)

On June 4, 2021, the Company adopted a restricted share unit (“RSU”) plan (the “RSU Plan”). The Plan provides for the grant of RSUs to employees, officers or directors of the Company and allows the Company the ability to issue on common share from treasury for each RSU held on the vesting date as determined by the board on the date of grant. The aggregate number of shares that may be issuable pursuant to RSUs granted under the Company’s RSU Plan together with the Option plan will not exceed 10% of the issued common shares of the Company at the date of grant. The number of shares to be reserved for issue under the RSU Plan together with shares reserved for issuance under the Option Plan to any one person within a twelve-month period may not exceed 5% of the number of shares issued and outstanding.

On June 4, 2021, the Company granted 2,000,000 RSUs to the Company’s Chief Executive Officer. 1,000,000 of the RSUs vested immediately and 1,000,000 of the RSUs vested 12 months following the date of grant. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $150,389. On July 6, 2021, 1,000,000 of the RSUs were exercised for 1, 000,000 common shares of the Company and on July 26, 2022 the remaining 1,000,000 of the RSUs were exercised for 1,000,000 common shares of the Company.

13. SHARE BASED PAYMENTS (continued)

b) Restricted share units (“RSU”) (continued)

On July 26, 2021, the Company granted 1,575,000 RSUs to key management of Complexity. Half of the RSUs vested on June 30, 2022 and half vest on June 30, 2023. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $228,635.

On September 20, 2021, the Company granted 2,667,158 RSUs according to the terms of a talent agreement with a consultant of Complexity. 1,000,000 of the RSUs vested on the date of grant, 1,620,815 of the RSUs vest in thirty-five equal installments of 46,309 per month starting on October 20, 2021 and the remaining 46,343 vest on September 20, 2024. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $225,434.

On February 15, 2022, the Company granted 200,000 RSUs to a consultant of the Company. The RSUs vest on February 15, 2023. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $20,712.

On March 23, 2022, the Company granted 800,000 RSUs to a consultant of the Company. The RSUs vest in 8 equal installments every three months starting June 24, 2022. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $45,115.

On August 31, 2022, the Company granted 1,250,000 RSUs to an employee of the Company. The RSU will vest on the date on which the Company’s common shares start trading on the New York Stock Exchange (“NYSE”) or NASDAQ if such date occurs prior to November 30, 2024. The estimated fair value of the RSUs on the date of grant is amortized over the vesting periods. During the nine months ended September 30, 2022, the Company recognized an expense of $5,574.

During the nine months ended September 30, 2022, 3,304,281 vested RSUs were exchanged for common shares of the Company. As at September 30, 2022, 4,187,877 RSUs were outstanding, of which 288,927 were vested.

14. WARRANTS

The following is a summary of warrants outstanding at September 30, 2022 and December 31, 2021 and changes during the periods then ended.

Number of warrants

Weighted average exercise prices (CAD$)

Grant date fair value

Balance, November 30, 2020

13,052,900

$ 0.54

$ 622,155

Private placements

30,790,738

0.60

1,526,319

Broker warrants issued

2,823,203

0.49

161,883

Warrants exercised

(480,000 )

0.40

(22,873 )

Balance, December 31, 2021

46,186,841

$ 0.47

$ 2,287,484

Private placements

6,000,000

$ 0.20

140,677

Warrants issued for credit facility

4,494,286

0.14

69,215

Balance, September 30, 2022

56,681,127

$ 0.47

$ 2,497,376

14. WARRANTS (continued)

In connection with the private placement on February 19, 2021 (Note 12(b)), 1,190,738 warrants were issued. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.60 until February 19, 2024. The fair value of the warrants of $86,785, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price of CAD$0.34, expected dividend yield of 0%, expected volatility of 52.8%, based on the historical volatility of comparable companies, a risk-free interest rate of 0.30% and an expected life of 3 years. In addition, the Company issued 166,703 broker warrants in connection with the financing. The fair value of the broker warrants of $10,570 was estimated using the Black-Scholes option pricing model with the same weighted average assumptions.

In connection with the bought deal private placement on March 4, 2021 (Note 12(b)), 8,350,000 warrants were issued. Each warrant entitles the holder to purchase one common share of the Company at a price of CAD$0.60 until March 4, 2024. The fair value of the warrants of $607,635, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price of CAD$0.42, expected dividend yield of 0%, expected volatility of 52.6%, based on the historical volatility of comparable companies, a risk-free interest rate of 0.48% and an expected life of 3 years. In addition, the Company issued 1,169,000 broker warrants in connection with the financing. The fair value of the broker warrants of $73,969 was estimated using the Black-Scholes option pricing model with the same weighted average assumptions.

In connection with the bought deal private placement on July 22, 2021 (Note 12(b)), 21,250,000 warrants were issued. Each warrant entitles the holder to purchase one common share of the Company at a price of CAD$0.20 until July 22, 2023. The fair value of the warrants of $832,169, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price of CAD$0.40, expected dividend yield of 0%, expected volatility of 46.6%, based on the historical volatility of comparable companies, a risk-free interest rate of 0.45% and an expected life of 2 years. In addition, the Company issued 1,487,500 broker warrants with exercise prices of CAD$0.40 in connection with the financing. The fair value of the broker warrants of $77,374 was estimated using the Black-Scholes option pricing model with the same weighted average assumptions.

On June 30, 2022, 4,494,286 warrants were issued in connection with a credit facility (Note 1). Each warrant entitles the holder to purchase one common share of the Company at a price of CAD$0.14 until June 30, 2024. The fair value of the warrants of $69,215, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price of CAD$0.105, expected dividend yield of 0%, expected volatility of 48.06%, based on the historical volatility of comparable companies, a risk-free interest rate of 3.1% and an expected life of 2 years.

In connection with the private placement on September 30, 2022 (Note 12(b)), 6,000,000 warrants were issued. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.20 commencing on September 30, 2023 until September 30, 2027. The fair value of the warrants of $140,677, was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: share price of CAD$0.09, expected dividend yield of 0%, expected volatility of 64.69%, based on the historical volatility of comparable companies, a risk-free interest rate of 3.32% and an expected life of 5 years.

At September 30, 2022, outstanding warrants to acquire common shares of the Company were as follows:

Exercise price (CAD$)

Number of warrants

Expiry date

Weighted average

remaining life in years

$
0.40

11,972,900

Sunday, October 2, 2022

0.01

$
0.40

600,000

Thursday, November 17, 2022

0.13

$
0.60

21,250,000

Saturday, July 22, 2023

0.81

$
0.60

1,357,441

Monday, February 19, 2024

1.39

$
0.60

9,519,000

Monday, March 4, 2024

1.43

$
0.14

4,494,286

Sunday, June 30, 2024

1.75

$
0.40

1,487,500

Monday, July 22, 2024

1.81

$
0.20

6,000,000

Thursday, September 30, 2027

5.00

Total

56,681,127

1.29

15. NON-CONTROLLING INTEREST

On March 16, 2021, the Company acquired all the issued and outstanding common shares of Reciprocity (see Note 4(a)) which held a 40% interest in Biblos. During the nine months ended September 30, 2022, the Company entered into an agreement to sell it’s 40% interest in Biblos (see Note 9).

The following summarizes the changes in non-controlling interest in Biblos for the nine months ended September 30, 2022:

Balance, December 1, 2020

$ -

Non-controlling interest acquired on acquisiton of Reciprocity

(57,745 )

Share of profit for the period

(32,729 )

Balance, December 31, 2021

$ (90,474 )

Share of profit for the period

13,718

Non-controlling interest on sale of Biblos

76,756

Balance, September 30, 2022

$ -

16. RELATED PARTY TRANSACTIONS

Key management personnel compensation:

Three months ended September 30, 2022

Three months ended August 31, 2021

Nine months ended September 30, 2022

Nine months ended August 31, 2021

Short term employee benefits

$ 263,957

$ 275,436

$ 774,624

$ 785,150

Share-based payments

15,436

505,062

244,641

770,730

Short term employee benefits

$ 279,393

$ 780,497

$ 1,019,265

$ 1,555,879

The Company recorded $244,641 in share-based compensation related to the vesting of options and RSUs granted during the nine months ended September 30, 2022 and the 13 months ended December 31, 2021 (see Notes 13(a) and (b)).

Other related party transactions:

Included in accounts payable and accrued liabilities at September 30, 2022 is $150,288 (December 31 - $178,244) owed to the chairman of the board of directors of the Company. This amount is due on demand, unsecured, and non-interest bearing.

See Note 17.

17. CONTINGENCIES AND COMMITMENTS

Management Commitments

The Company is party to certain management contracts. These contracts require payments of approximately $1,990,000 to be made upon the occurrence of a change in control to the officers of the Company. The Company is also committed to payments upon termination of approximately $845,000 pursuant to the terms of these contracts. As a triggering event has not taken place, these amounts have not been recorded in these consolidated financial statements.

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 ($250,742) to be remote, the outcome of any such contingent matters is inherently uncertain.

17. CONTINGENCIES AND COMMITMENTS (continued)

Legal Matters

From time to time, the Company is named as a party to claims or involved in proceedings, including legal, regulatory and tax related, in the ordinary course of its business. While the outcome of these matters may not be estimable at period end, the Company makes provisions, where possible, for the estimated outcome of such claims or proceedings. Should a loss result from the resolution of any claims or proceedings that differs from these estimates, the difference will be accounted for as a charge to net income (loss) in that period.

COVID-19

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

Government Assistance Loans

On May 27, 2020, the Company received a $31,551 (CAD$40,000) Canada Emergency Business Account (“CEBA”) loan from the Government of Canada via its commercial bank. On January 11, 2021, the Company received an additional $15,775 (CAD$20,000) increasing the loan to $47,326 (CAD$60,000). The loan was interest free until December 31, 2022 and matured on December 31, 2025. If $31,551 (CAD$40,000) loan is repaid by December 31, 2022, the remaining $15,775 (CAD$20,000) would be forgiven. If the loan was not repaid by December 31, 2022, interest at 5% would be charged per annum commencing on January 1, 2023 until maturity on December 31, 2025. The loan is unsecured. On October 8, 2021, the Company repaid $31,551 (CAD$40,000) of the loan and on November 30, 2021, the remaining $15,775 (CAD$20,000) was forgiven. The gain on the loan forgiveness is included in salaries, consulting and management fees in the condensed interim consolidated statements of loss.

On June 30, 2021, the Company acquired Complexity (see Note 4(b)). Complexity had a Paycheck Protection Program (“PPP”) loan from J.P. Morgan in the amount of $501,473 under the PPP established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan was subject to a note dated April 15, 2020 and may be forgiven to the extent proceeds of the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act. The loan expires in two years from drawn down date. On July 15, 2021, the Company received full forgiveness of the balance. The gain on the loan forgiveness is included in salaries, consulting and management fees in the condensed interim consolidated statements of loss.

18. 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 managing director as he is primarily responsible for the allocation of resources and the assessment of performance. The CODM uses net income, 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 having three operating segments under IFRS 8.

18. REVENUE AND SEGMENTED INFORMATION (continued)

Three months ended September 30, 2022

United Kingdon

USA

Canada

Mexico

Total

Revenue channel

$

$

$

$

$

Sponsorship

-

1,554,229

-

-

1,554,229

Winning/Player buyout/Other

-

2,596,812

-

-

2,596,812

Total Team Revenue

-

4,151,041

-

-

4,151,041

Cost of Sales

-

2,356,997

-

-

2,356,997

Gross profit

-

1,794,044

-

-

1,794,044

Influencer / on screen talent representation

1,540,915

-

-

-

1,540,915

Digital media

-

4,043,714

-

-

4,043,714

Total Agency Revenue

1,540,915

4,043,714

-

-

5,584,629

Cost of sales

1,268,089

2,606,303

-

-

3,874,392

Gross profit

272,826

1,437,411

-

-

1,710,237

Content production

-

397,610

-

-

397,610

Cost of sales

-

315,846

-

-

315,846

Gross profit

-

81,764

-

-

81,764

Nine months ended September 30, 2022

United Kingdon

USA

Canada

Mexico

Total

Revenue channel

$

$

$

$

$

Sponsorship

-

5,758,471

-

-

5,758,471

Winning/Player buyout/Other

-

2,596,812

-

99,848

2,696,660

Total Team Revenue

-

8,355,283

-

99,848

8,455,131

Cost of Sales

-

4,572,178

-

51,951

4,624,129

Gross profit

-

3,783,105

-

47,897

3,831,002

Influencer / on screen talent representation

4,035,666

-

-

-

4,035,666

Digital media

-

8,481,339

-

-

8,481,339

Total Agency Revenue

4,035,666

8,481,339

-

-

12,517,005

Cost of sales

3,280,655

4,856,750

-

-

8,137,405

Gross profit

755,011

3,624,589

-

-

4,379,600

Content production

-

857,110

-

-

857,110

Cost of sales

-

819,305

-

-

819,305

Gross profit

-

37,805

-

-

37,805

Non-current assets

1,071,708

10,213,329

-

-

11,285,037

Substantially all of the Company’s revenues are recognized as services are rendered throughout the term of the contract for the nine months ended September 30, 2022.

18. REVENUE AND SEGMENTED INFORMATION (continued)

Three months ended August 31, 2021*

United Kingdon

USA

Canada

Mexico

Total

Revenue channel

$

$

$

$

$

Sponsorship

-

483,662

-

-

483,662

Winning/Player buyout/Other

-

-

-

137,643

137,643

Total Team Revenue

-

483,662

-

137,643

621,305

Cost of Sales

-

528,455

-

-

528,455

Gross profit

-

(44,793 )

-

137,643

92,850

Influencer / on screen talent representation

962,379

-

-

-

962,379

Digital media and marketing

-

395,347

-

-

395,347

Total Agency Revenue

962,379

395,347

-

-

1,357,726

Cost of sales

770,990

122,963

-

-

893,953

Gross profit

191,389

272,384

-

-

463,773

Nine months ended August 31, 2021*

United Kingdon

USA

Canada

Mexico

Total

Revenue channel

$

$

$

$

$

Sponsorship

-

483,662

-

-

483,662

Winning/Player buyout/Other

-

-

-

207,909

207,909

Total Team Revenue

-

483,662

-

207,909

691,571

Cost of Sales

-

528,455

-

-

528,455

Gross profit

-

(44,793 )

-

207,909

163,116

Influencer / on screen talent representation

2,594,036

-

-

-

2,594,036

Digital media and marketing

-

406,694

-

-

406,694

Total Agency Revenue

2,594,036

406,694

-

-

3,000,730

Cost of sales

2,172,446

122,963

-

-

2,295,409

Gross profit

421,590

283,731

-

-

705,321

Non-current assets

3,393,229

25,921,817

269,378

644

29,585,068

* Comparative figures have been reclassified to conform with presentation adopted for the current period.

19. SUBSEQUENT EVENTS

On October 2, 2022, 11,972,900 warrants, with exercised prices of CAD$0.40, expired, unexercised.

On December 7, 2022, the Company granted 2,000,000 restricted share units to its CEO. The RSU’s vested immediately.

On December 7, 2022, the Company entered into a Definitive Arrangement Agreement with Engine Gaming & Media Inc. (“Engine”) pursuant to which, and subject to the terms and conditions of the Arrangement Agreement, GameSquare and Engine will combine their businesses via an all share deal whereby Engine will acquire all of the issued and outstanding shares of GameSquare in exchange for shares of Engine in accordance with a plan of arrangement of GameSquare under the Business Corporations Act (Ontario) (the "Arrangement").

Pursuant to the terms of the Arrangement Agreement, Engine will acquire each outstanding GameSquare share in exchange for 0.08262 of an Engine common share (the "Exchange Ratio"). Each outstanding option of GameSquare will be 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.

	Three months ended			Three months ended			Nine months ended			Nine months ended
($ U.S. dollars)	September 30, 2022			August 31, 2021			September 30, 2022			August 31, 2021
				(Restated - Note 3)						(Restated - Note 3)
Revenue	$	10,133,280		$	1,979,031		$	21,829,246			3,692,301

Cost of sales		6,547,235			1,422,408			13,580,839			2,823,864

Gross profit (Note 18)		3,586,045			556,623			8,248,407			868,437

Other income
Interest and other income		1,512			2,521			6,053			3,287

Total other income		1,512			2,521			6,053			3,287

Expenses
Salaries, consulting and management fees (Note 16)		2,413,028			1,244,060			7,442,140			2,717,564
Player compensation		426,705			290,383			1,315,745			290,139
Professional fees		437,672			399,892			1,425,585			734,914
General office expenses		301,738			167,445			1,155,941			523,653
Selling and marketing expenses		2,780,025			860,106			3,239,090			876,512
Travel expenses		361,724			189,486			799,496			288,026
Shareholder communications and filing fees		12,454			33,585			101,994			130,554
Interest expense		56,885			127,493			276,238			129,475
Bad debt expense		114,750			(1,898	)		114,750			45,064
Foreign exchange loss		(20,695	)		10,606			(66,675	)		5,566
Change in provision for reclamation deposit		15,403			-			15,403			(75,119	)
Share-based compensation (Note 13)		265,105			1,351,213			1,206,332			1,954,369
Transaction costs		-			4,718,091			-			12,057,971
Gain on disposition of assets available for sale (Note 9)		(46,915	)		-			(46,915	)		-
Amortization (Notes 6, 7 and 11)		669,490			1,579,167			2,030,108			2,261,824

Total expenses		7,787,369			10,969,629			19,009,232			21,940,512

Loss for the period before income taxes		(4,199,812	)		(10,410,485	)		(10,754,772	)		(21,068,788	)
Income tax (recovery)		(17,770	)		(141,975	)		(54,276	)		(323,381	)
Loss for the period		(4,182,042	)		(10,268,510	)		(10,700,496	)		(20,745,407	)

Other comprehensive loss
Items that will subsequently be reclassified to operations:
Foreign currency translation		(372,085	)		(100,095	)		(507,302	)		220,537

Total comprehensive loss for the period	$	(4,554,127	)	$	(10,368,605	)	$	(11,207,798	)	$	(20,524,870	)

(Loss) profit for the period attributable to:
Owners of the parent		(4,182,042	)		(10,294,076	)		(10,714,214	)		(20,775,628	)
Non-controlling interest		-			25,566			13,718			30,221
	$	(4,182,042	)	$	(10,268,510	)	$	(10,700,496	)	$	(20,745,407	)
Basic and diluted net loss per share	$	(0.02	)	$	(0.05	)	$	(0.04	)	$	(0.18	)

Weighted average number of common shares outstanding - basic and diluted		272,426,342			191,051,221			255,057,363			117,061,379

*($ U.S. dollars)*
	Share Capital			Contributed Surplus			Warrants		Contingently Issuable Shares and Options		Accumulated other comprehensive income			Non-Controlling Interest			Accumulated Deficit			Shareholders' Equity
	$			$			$		$		$			$			$				$
Balance, January 1, 2022 (Restated - Note 3)		36,218,116			3,101,014			2,287,484		52,662		135,981			(90,474	)		(24,059,541	)			17,645,242
Private placements (Note 12(b))		6,162,534			-			140,677		-		-			-			-				6,303,211
Share issuance costs (Note 12(b))		(42,822	)		-			-		-		-			-			-				(42,822	)
Options granted (Note 13(a))		-			530,473			-		-		-			-			-				530,473
Options expired (Note 13(a))		-			(344,913	)		-		-		-			-			344,913				-
Restricted share units (Note 13(b))		-			675,859			-		-		-			-			-				675,859
Restricted share units exercised (Note 13(b))		1,059,342			(1,059,342	)		-		-		-			-			-				-
Warrants issued for credit facility		-			-			69,215		-		-										69,215
Non-controlling interest on sale of Biblos		-			-			-		-		-			76,756			(76,756	)			-
Other comprehensive income		-			-			-		-		(507,302	)		-			-				(507,302	)
Net (loss) for the period		-			-			-		-		-			13,718			(10,714,214	)			(10,700,496	)
Balance, September 30, 2022		43,397,170			2,903,091			2,497,376		52,662		(371,321	)		-			(34,505,598	)			13,973,380

Balance, December 1, 2020 (Restated - Note 3)		4,764,970			552,752			622,155		-		86,380			-			(2,893,920	)			3,132,337
Issued on acquisiton of Reciprocity		9,852,217			577,301			-		213,244		-			-			-				10,642,762
Non-controlling interest acquired on acquisition of Reciprocity		-			-			-		-		-			33,733			-				33,733
Contingent consideration on acquisition of Cut&Sew (Note 4(d))		-			-			-		25,679		-			-			-				25,679
Issued on acquisition of Complexity (Note 4(c))		17,368,154			-			-		-		-			-			-				17,368,154
Issued on acquisition of Cut&Sew (Note 4(d))		416,531			-			-		-		-			-			-				416,531
Private placements (Note 12(b))		16,152,729			-			3,718,077		-		-			-			-				19,870,806
Share issuance costs (Note 12(b))		(1,996,767	)		-			469,405		-		-			-			-				(1,527,362	)
Options granted (Note 13(a))		-			1,534,122			-		-		-			-			-				1,534,122
Option exercise		143,833			(60,149	)		-		-		-			-			-				83,684
Restricted share units (Note 13(b))		-			420,247			-		-		-			-			-				420,247
RSUs exercised (Note 13(b))		317,371			(317,371	)		-		-		-			-			-				-
Other comprehensive income		-			-			-		-		220,537			-			-				220,537
Net (loss) for the period		-			-			-		-		-			30,221			(20,775,628	)			(20,745,407	)
Balance, August 31, 2021		47,019,038			2,706,902			4,809,637		238,923		306,917			63,954			(23,669,548	)			31,475,823

($ U.S. dollars)	Nine months ended September 30, 2022			Nine months ended August 31, 2021
CASH (USED IN) PROVIDED BY:				(Restated - Note 3)
OPERATING ACTIVITIES
Net (loss)	$	(10,700,496	)	$	(20,745,407	)
Adjustment for:
Income tax recovery		(54,276	)		(323,381	)
Transaction costs		-			10,466,656
Gain on disposition of assets available for sale (Note 9)		(46,915	)		-
Share-based compensation (Note 13)		1,206,332			1,954,369
Gain on forgiveness of small business loan		-			(501,473	)
Interest expense (Notes 10 and 11)		276,232			122,904
Change in provision for reclamation deposit		15,403			(75,119	)
Amortization (Notes 6, 7 and 11)		2,030,108			2,267,774
Bad debt		114,750			-

		(7,158,862	)		(6,833,677	)

Net change in non‑cash working capital		(523,535	)		(52,364	)
Net cash flow from operating activities		(7,682,397	)		(6,886,041	)

FINANCING ACTIVITIES
Proceeds received from long term loan (Note 17)		-			15,692
Repayment of loans (Notes 10 and 17)		(149,442	)		(387,500	)
Principal reduction in lease liability (Note 11)		(400,828	)		(88,125	)
Private placement (Note 12(b))		6,303,211			19,870,806
Share issue costs (Note 12(b))		(42,822	)		(1,527,362	)
Proceeds from option exercise		-			83,684

Net cash flow from financing activities		5,710,119			17,967,195

INVESTING ACTIVITIES
Cash acquired on acquisition of Reciprocity		-			414,481
Cash acquired on acquisition of Complexity		-			434,392
Acquistion of Cut &Sew shares		-			(2,385,000	)
Cash acquired on acquisition of Cut & Sew		-			315,035
Cash received on sale of assets held for sale		49,356			-
Equipment purchase (Note 6)		(31,264	)		(21,682	)

Net cash flow from investing activities		18,092			(1,242,774	)

Effect of exchange rate changes on cash		(50,944	)		18,369
CHANGE IN CASH		(2,005,130	)		9,856,749
CASH, beginning of the period		6,028,232			509,592
CASH, end of the period	$	4,023,102		$	10,366,341

SUPPLEMENTAL INFORMATION:
Value of shares issued on acquisition of Reciprocity		-			9,852,217
Value of options issued on acquisition of Reciprocity		-			577,301
Value of shares issued on acquisiton of Cut & Sew		-			416,531
Value of shares issued on acquistion of Complexity		-			17,368,154
Value of broker warrants issued (Note 14)		-			469,405
Value of warrants issued for credit facility		69,215			-
Right of use asset and lease liability at modification of lease		-			1,738,076
Interest paid		11,948			6,571

	Country of	Functional
Name of Subsidiary	Incorporation	Currency	Ownership Percentage
			September 30,	December 31,
			2022	2021

Code Red Esports Ltd. ("Code Red")	England and Wales	UK pound sterling	100%	100%
Stetson Oil & Gas Corporation	USA	Canadian Dollar	NA	NA
GameSquare (Ontario) Inc.	Canada	Canadian Dollar	NA	NA
GameSquare Esports (USA) Inc.	USA	U.S. Dollar	100%	100%
Biblos Gaming S.A. de C.V. ("Biblos")	Mexico	Mexican Peso	NA	40%
GCN Inc. ("GCN")	USA	U.S. Dollar	100%	100%
NextGen Tech, LLC (dba as Complexity Gaming) ("Complexity")	USA	U.S. Dollar	100%	100%
Swingman LLC. (dba Cut+Sew and Zoned) (“Cut+Sew”)	USA	U.S. Dollar	100%	100%

Estimated fair value of shares issued	$	5,897,614
Estimated fair value of options issued		333,367

	$	6,230,981

Cash	$	414,481
Amounts receivable		211,452
Prepaids		8,023
Equipment		9,523
Accounts payable and accrued liabilities		(791,080	)
Loan payable		(800,000	)

		(947,601	)

Excess of purchase price over fair value of assets acquired (expensed)		7,178,582

	$	6,230,981

Estimated fair value of shares issued	$	14,955,257
Share consideration received		(6,858,157	)

	$	8,097,100

Cash	$	2,385,117
Estimated fair value of shares issued		191,498
Contingent consideration - shares		52,662

	$	2,629,277

	September 30, 2022		December 31, 2021
Trade receivables	$	6,482,515	$	3,047,772
HST receivable		51,685		29,090
Other receivables		1,161,256		8,513

Balance, end of period	$	7,695,456	$	3,085,375

	Equipment			Leasehold improvements			Total

Cost:

Balance, January 1, 2022	$	238,988		$	3,655,734		$	3,894,722
Additions		31,264			-			31,264
Effect of foreign exchange		(914	)		(115	)		(1,029	)

Balance, September 30, 2022	$	269,338		$	3,655,619		$	3,924,957

Depreciation:

Balance, January 1, 2022	$	27,434		$	238,530		$	265,964
Depreciation charge for the period		84,700			408,489			493,189
Effect of foreign exchange		(312	)		-			(312	)

Balance, September 30, 2022	$	111,822		$	647,019		$	758,841

Net book value:
Balance, September 30, 2022	$	157,516		$	3,008,600		$	3,166,116
Balance, January 1, 2022	$	211,554		$	3,417,204		$	3,628,758

Cost:

Balance, December 1, 2020	$	1,094		$	-		$	1,094
Acquisition of Reciprocity		9,523			-			9,523
Acquisition of Complexity		140,323			3,655,734			3,796,057
Additions		88,711			-			88,711
Transfer to assets available for sale		(633	)		-			(633	)
Effect of foreign exchange		(30	)		-			(30	)

Balance, December 31, 2021	$	238,988		$	3,655,734		$	3,894,722

Depreciation:

Balance, December 1, 2020	$	-		$	-		$	-
Depreciation charge for the period		27,548			238,530			266,078
Effect of foreign exchange		(114	)		-			(114	)

Balance, December 31, 2021	$	27,434		$	238,530		$	265,964

Net book value:
Balance, December 31, 2021	$	211,554		$	3,417,204		$	3,628,758
Balance, December 1, 2020	$	1,094		$	-		$	1,094

	Customer relationships			Brand name			Total
Balance, November 30, 2020	$	1,225,762		$	595,732		$	1,821,494

Acquisition of Complexity		-			4,244,501			4,244,501
Acquisition of Cut&Sew		1,130,117			1,274,387			2,404,504
Amortization		(377,612	)		(661,266	)		(1,038,878	)
Effect of foreign exchange		22,053			(87,232	)		(65,179	)

Balance, December 31, 2021	$	2,000,320		$	5,366,122		$	7,366,442

Amortization		(358,450	)		(895,996	)		(1,254,446	)
Effect of foreign exchange		(127,180	)		(345,383	)		(472,563	)

Balance, September 30, 2022	$	1,514,690		$	4,124,743		$	5,639,433

Balance, November 30, 2020	$	1,741,696

Impairment of goodwill		(1,798,430	)
Effect of foreign exchange		56,734

Balance, September 30, 2022 and December 31, 2021	$	-

	September 30, 2022			December 31, 2021

Balance, beginning of period	$	3,000,031		$	-
Acquisiton of Complexity		-			3,138,515
Cash outflows		(400,828	)		(264,376	)
Finance costs		177,708			125,892

	$	2,776,911		$	3,000,031

	September 30, 2022			December 31, 2021

Lease Liability - current	$	327,239		$	301,355
Lease Liability - non-current		2,449,672			2,698,676

	$	2,776,911		$	3,000,031

	(i)	Unlimited common shares – common shares shall be convertible at the option of the holder into proportionate voting shares on the basis of 100 common shares per 1 proportionate voting share.

	(ii)	Unlimited Proportionate Voting Shares (“PVS”) – each PVS shall be convertible at the option of the holder into common shares at a ratio of 100 common shares per PVS. Each PVS is entitled to 100 votes per PVS at shareholder meetings of the Company.

	Number of Proportionate Voting Shares		Number of common shares			Amount

Balance as of November 30, 2020		-		51,928,911		$	4,764,970

Shares issued on acquisition of Reciprocity (Note 4(a))		-		43,749,996			5,897,614
Shares issued on acquisition of NextGen (Note 4(b))		-		83,328,750			8,097,100
Shares issued on acquisition of Cut&Sew (Note 4(c))		-		2,000,000			191,498
Private placements		-		61,581,477			18,344,487
Share issue costs		-					(1,689,245	)
Options exercised		-		312,766			119,705
RSUs exercised		-		1,000,000			317,371
Warrants exercised		-		480,000			174,616

Balance as of December 31, 2021		-		244,381,900		$	36,218,116

Private placements		-		59,855,285			6,162,534
Share issue costs		-		-			(42,822	)
RSUs exercised		-		3,304,281			1,059,342
Conversion from Common to Proportionate Voting Shares		150,000		(15,000,000	)		-

Balance as of September 30, 2022		150,000		292,541,466		$	43,397,170

	Number of stock options			Weighted average exercise price (CAD$)
Balance, November 30, 2020		2,185,344		$	0.46

Granted		14,509,241			0.45
Issued on acquisition of Reciprocity		3,000,000			0.40
Exercised		(312,766	)		0.34

Balance as of December 31, 2021		19,381,819		$	0.45

Granted		3,800,000			0.32
Cancelled		(1,775,861	)		0.46

Balance as of September 30, 2022		21,405,958		$	0.42

Exercise price (CAD$)		Options outstanding		Options exercisable		Expiry date	Weighted average grant date fair value vested		Weighted average remaining life in years
$	0.40		3,000,000		3,000,000	Thursday, March 16, 2023		333,367		0.46
$	0.61		34,483		34,483	Sunday, October 1, 2023		1,816		1.00
$	0.41		350,000		350,000	Sunday, April 28, 2024		42,771		1.58
$	0.48		925,000		925,000	Tuesday, November 25, 2025		252,521		3.16
$	0.44		2,000,000		1,500,000	Thursday, January 22, 2026		276,843		3.32
$	0.50		250,000		250,000	Tuesday, February 24, 2026		43,985		3.41
$	0.47		500,000		312,500	Monday, March 2, 2026		81,253		3.42
$	0.44		1,000,000		1,000,000	Monday, March 16, 2026		155,354		3.46
$	0.47		1,100,000		725,000	Tuesday, April 28, 2026		126,385		3.58
$	0.51		2,300,000		2,300,000	Sunday, July 5, 2026		392,038		3.76
$	0.44		6,396,475		2,812,148	Monday, September 21, 2026		665,727		3.98
$	0.35		200,000		50,000	Tuesday, February 16, 2027		6,181		4.38
$	0.35		550,000		-	Monday, March 1, 2027		25,261		4.42
$	0.35		950,000		350,000	Wednesday, March 24, 2027		10,527		4.48
$	0.18		1,287,500		-	Tuesday, August 31, 2027		4,433		4.92
$	0.20		312,500		312,500	Tuesday, August 31, 2027		16,348		4.92
$	0.13		250,000		-	Tuesday, September 14, 2027		347		4.96
Total			21,405,958		13,921,631		$	2,435,157		3.38

	Number of warrants			Weighted average exercise prices (CAD$)		Grant date fair value
Balance, November 30, 2020		13,052,900		$	0.54	$	622,155

Private placements		30,790,738			0.60		1,526,319
Broker warrants issued		2,823,203			0.49		161,883
Warrants exercised		(480,000	)		0.40		(22,873	)
Balance, December 31, 2021		46,186,841		$	0.47	$	2,287,484

Private placements		6,000,000		$	0.20		140,677
Warrants issued for credit facility		4,494,286			0.14		69,215
Balance, September 30, 2022		56,681,127		$	0.47	$	2,497,376

Balance, December 1, 2020	$	-
Non-controlling interest acquired on acquisiton of Reciprocity		(57,745	)
Share of profit for the period		(32,729	)

Balance, December 31, 2021	$	(90,474	)

Share of profit for the period		13,718
Non-controlling interest on sale of Biblos		76,756

Balance, September 30, 2022	$	-

	Three months ended September 30, 2022		Three months ended August 31, 2021		Nine months ended September 30, 2022		Nine months ended August 31, 2021
Short term employee benefits	$	263,957	$	275,436	$	774,624	$	785,150
Share-based payments		15,436		505,062		244,641		770,730
Short term employee benefits	$	279,393	$	780,497	$	1,019,265	$	1,555,879

Three months ended September 30, 2022
	United Kingdon		USA		Canada		Mexico		Total
Revenue channel	$		$		$		$		$

Sponsorship		-		1,554,229		-		-		1,554,229
Winning/Player buyout/Other		-		2,596,812		-		-		2,596,812
Total Team Revenue		-		4,151,041		-		-		4,151,041

Cost of Sales		-		2,356,997		-		-		2,356,997
Gross profit		-		1,794,044		-		-		1,794,044

Influencer / on screen talent representation		1,540,915		-		-		-		1,540,915
Digital media		-		4,043,714		-		-		4,043,714
Total Agency Revenue		1,540,915		4,043,714		-		-		5,584,629

Cost of sales		1,268,089		2,606,303		-		-		3,874,392
Gross profit		272,826		1,437,411		-		-		1,710,237

Content production		-		397,610		-		-		397,610

Cost of sales		-		315,846		-		-		315,846
Gross profit		-		81,764		-		-		81,764

Nine months ended September 30, 2022
	United Kingdon		USA		Canada		Mexico		Total
Revenue channel		$	$			$	$			$

Sponsorship		-		5,758,471		-		-		5,758,471
Winning/Player buyout/Other		-		2,596,812		-		99,848		2,696,660
Total Team Revenue		-		8,355,283		-		99,848		8,455,131

Cost of Sales		-		4,572,178		-		51,951		4,624,129
Gross profit		-		3,783,105		-		47,897		3,831,002

Influencer / on screen talent representation		4,035,666		-		-		-		4,035,666
Digital media		-		8,481,339		-		-		8,481,339
Total Agency Revenue		4,035,666		8,481,339		-		-		12,517,005

Cost of sales		3,280,655		4,856,750		-		-		8,137,405
Gross profit		755,011		3,624,589		-		-		4,379,600

Content production		-		857,110		-		-		857,110

Cost of sales		-		819,305		-		-		819,305
Gross profit		-		37,805		-		-		37,805

Non-current assets		1,071,708		10,213,329		-		-		11,285,037

Three months ended August 31, 2021*
	United Kingdon		USA			Canada		Mexico		Total
Revenue channel	$		$			$		$		$

Sponsorship		-		483,662			-		-		483,662
Winning/Player buyout/Other		-		-			-		137,643		137,643
Total Team Revenue		-		483,662			-		137,643		621,305

Cost of Sales		-		528,455			-		-		528,455
Gross profit		-		(44,793	)		-		137,643		92,850

Influencer / on screen talent representation		962,379		-			-		-		962,379
Digital media and marketing		-		395,347			-		-		395,347
Total Agency Revenue		962,379		395,347			-		-		1,357,726

Cost of sales		770,990		122,963			-		-		893,953
Gross profit		191,389		272,384			-		-		463,773

Nine months ended August 31, 2021*
	United Kingdon		USA			Canada		Mexico		Total
Revenue channel		$	$				$	$		$

Sponsorship		-		483,662			-		-		483,662
Winning/Player buyout/Other		-		-			-		207,909		207,909
Total Team Revenue		-		483,662			-		207,909		691,571

Cost of Sales		-		528,455			-		-		528,455
Gross profit		-		(44,793	)		-		207,909		163,116

Influencer / on screen talent representation		2,594,036		-			-		-		2,594,036
Digital media and marketing		-		406,694			-		-		406,694
Total Agency Revenue		2,594,036		406,694			-		-		3,000,730

Cost of sales		2,172,446		122,963			-		-		2,295,409
Gross profit		421,590		283,731			-		-		705,321

Non-current assets		3,393,229		25,921,817			269,378		644		29,585,068