UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended June 30, 2025

 

or

 

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

 

For the transition period from _______to _______

 

Commission file number: 001-39389

 

 

 

GAMESQUARE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware		99-1946435
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

6775 Cowboys Way, Ste. 1335

Frisco, Texas, USA 75034

(Address of principal executive offices) (Zip Code)

 

(216) 464-6400

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value		GAME		The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

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

 

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

 

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

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class		Outstanding on August 12, 2025
Common Stock - $0.0001 par value		98,998,596

 

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve substantial risks and uncertainties. These forward-looking statements depend upon events, risks and uncertainties that may be outside of our control. All statements other than statements of historical fact are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, without limitation, our expectations concerning the outlook for our business, productivity, plans and goals for future operational improvements and capital investments, operational performance, future market conditions or economic performance and developments in the capital and credit markets and expected future financial performance, expected return of its ETH based treasury program, as well as any information concerning possible or assumed future results of operations.

 

Forward-looking statements involve a number of risks, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

 

	●	the sufficiency of our cash and investments to meet our liquidity needs;
	●	our limited operating history and uncertain future prospects and rate of growth due to our limited operating history, including our ability to implement business plans and other expectations;
	●	our ability to grow market share in our existing markets or any new markets we may enter;
	●	our ability to maintain and grow the strength of our brand reputation;
	●	the Company’s ability to achieve its objectives;
	●	our ability to manage our growth effectively;
	●	our ability to retain existing and attract new Esports professionals, content creators and influencers;
	●	our success in retaining or recruiting, or changes required in, our officers, directors and other key employees or independent contractors;
	●	our ability to maintain and strengthen our community of brand partners, engaged consumers, content creators, influencers and Esports professionals, and the success of our strategic relationships with these and other third parties;
	●	our ability to effectively compete within the industry;
	●	our presence on the internet and various third-party mass media platforms;
	●	risks related to data security and privacy, including the risk of cyber-attacks or other security incidents;
	●	risks resulting from our global operations;
	●	our ability to maintain the listing of our Common Stock on Nasdaq;
	●	our securities’ potential liquidity and trading, including that the price of our securities may be volatile;
	●	future issuances, sales or resales of our securities;
	●	the impact of our recent underwritten offerings, including potential dilution to existing shareholders, changes to our capital structure, and the manner in which we deploy the proceeds;
	●	the grant and future exercise of registration rights;

 

 

	●	our ability to secure future financing, if needed, and our ability to repay any future indebtedness when due;
	●	the ability of the Company to complete offerings on acceptable terms;
	●	the impact of the regulatory environment in our industry and complexities with compliance related to such environment, including our ability to comply with complex regulatory requirements;
	●	volatility, liquidity, and market acceptance of digital assets;
	●	changes in accounting, tax, or valuation standards applicable to digital assets;
	●	our ability to execute on our crypto treasury allocation, diversification, and hedging strategies;
	●	our ability to maintain an effective system of internal controls over financial reporting;
	●	our ability to respond to general economic conditions, including market interest rates;
	●	our ability to execute on future acquisitions, mergers or dispositions; and
	●	changes to accounting principles and guidelines.

 

We caution you not to rely on forward-looking statements, which reflect current beliefs and are based on information currently available as of the date a forward-looking statement is made. Forward-looking statements set forth herein speak only as of the date of this Quarterly Report on Form 10-Q. Forward-looking statements are not guarantees of performance. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Other sections of this report describe additional factors that could adversely affect our business, financial condition or results of operations. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

 

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. In the event that any forward-looking statement is updated, no inference should be made that we will make additional updates with respect to that statement, related matters, or any other forward-looking statements except to the extent required by law. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. Any corrections or revisions and other important assumptions and factors that could cause actual results to differ materially from forward-looking statements may appear in our public filings with the U.S. Securities and Exchange Commission (“SEC”), which are or will be (as appropriate) accessible at www.sec.gov, and which you are advised to consult.

 

 

GAMESQUARE HOLDINGS, INC.

INDEX

 

			Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets – June 30, 2025 and December 31, 2024		1
	Condensed Consolidated Statements of Operations and Other Comprehensive (Loss) Income - Three and Six Months Ended June 30, 2025 and 2024		2
	Condensed Consolidated Statements of Stockholders’ Equity – Six Months Ended June 30, 2025 and 2024		3
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2025 and 2024		4
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		40
Item 4.	Controls and Procedures		40
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		42
Item 1A.	Risk Factors		43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 3.	Defaults Upon Senior Securities		43
Item 4.	Mine Safety Disclosures		43
Item 5.	Other Information		43
Item 6.	Exhibits		44
	Exhibit Index		44
	Signatures		45

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GAMESQUARE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

		June 30, 2025				December 31, 2024
Assets
Cash		$	4,697,832			$	12,094,950
Restricted cash			1,789,259				1,054,030
Accounts receivable, net			12,954,496				21,330,847
Government remittances			121,617				119,721
Promissory note receivable, current			176,647				379,405
Prepaid expenses and other current assets			884,038				1,493,619
Total current assets			20,623,889				36,472,572
Investment			2,199,909				2,199,909
Promissory note receivable			8,754,585				9,212,785
Property and equipment, net			119,989				303,950
Goodwill			5,557,551				12,704,979
Intangible assets, net			5,231,027				15,265,736
Right-of-use assets			1,600,843				2,570,516
Total assets		$	44,087,793			$	78,730,447
Liabilities and Shareholders’ Equity
Accounts payable		$	26,129,652			$	27,349,372
Accrued expenses and other current liabilities			11,174,343				13,694,179
Players liability account			47,535				47,535
Deferred revenue			2,473,552				2,726,121
Current portion of operating lease liability			425,461				748,916
Line of credit			3,228,001				3,501,457
Promissory note payable, current			2,871,076				-
Convertible debt carried at fair value			1,669,330				6,481,704
Warrant liability			27,164				14,314
Arbitration reserve			210,008				199,374
Total current liabilities			48,256,122				54,762,972
Convertible debt carried at fair value			-				9,908,784
Operating lease liability			1,374,054				2,054,443
Total liabilities			49,630,176				66,726,199
Commitments and contingencies (Note 14)			-				-
Preferred stock ($0.001 par value, 50,000,000 authorized, zero shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively)			-				-
Common stock and Additional paid-in capital ($0.001 par value, 100,000,000 shares authorized, 39,123,968 and 32,635,995 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively)			125,396,697				119,441,634
Accumulated other comprehensive loss			(594,074	)			(208,617	)
Non-controlling interest			-				14,942,287
Accumulated deficit			(130,345,006	)			(122,171,056	)
Total shareholders’ equity			(5,542,383	)			12,004,248
Total liabilities and shareholders’ equity		$	44,087,793			$	78,730,447

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

GAMESQUARE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

		2025				2024				2025				2024
		Three months ended June 30,								Six months ended June 30,
		2025				2024				2025				2024
Revenue		$	15,852,706			$	17,829,175			$	30,583,937			$	33,406,699
Cost of revenue			13,426,252				15,307,881				24,793,857				28,816,057
Gross profit			2,426,454				2,521,294				5,790,080				4,590,642
Operating expenses:
General and administrative			4,076,391				4,917,730				8,350,837				9,402,195
Selling and marketing			1,497,096				1,636,571				2,944,853				3,449,227
Research and development			557,403				585,031				1,113,010				1,189,305
Depreciation and amortization			302,360				564,346				558,825				1,182,368
Restructuring charges			165,328				-				782,541				-
Other operating expenses			547,188				994,717				1,292,565				2,088,137
Total operating expenses			7,145,766				8,698,395				15,042,631				17,311,232
Loss from continuing operations			(4,719,312	)			(6,177,101	)			(9,252,551	)			(12,720,590	)
Other income (expense), net:
Interest income (expense)			44,590				(192,257	)			(4,968	)			(627,385	)
Change in fair value of convertible debt carried at fair value			(5,561	)			563,360				327,916				456,759
Change in fair value of warrant liability			(17,731	)			15,643				(12,384	)			52,900
Arbitration settlement reserve			(66,217	)			43,500				(10,634	)			138,625
Other income (expense), net			(1,274,450	)			(3,913,773	)			(1,347,992	)			(4,031,043	)
Total other income (expense), net			(1,319,369	)			(3,483,527	)			(1,048,062	)			(4,010,144	)
Loss from continuing operations before income taxes			(6,038,681	)			(9,660,628	)			(10,300,613	)			(16,730,734	)
Income tax benefit			-				-				-				-
Net loss from continuing operations			(6,038,681	)			(9,660,628	)			(10,300,613	)			(16,730,734	)
Net income (loss) from discontinued operations			3,020,335				(2,342,513	)			108,531				(533,355	)
Net loss			(3,018,346	)			(12,003,141	)			(10,192,082	)			(17,264,089	)
Net loss attributable to non-controlling interest			-				389,590				2,018,132				389,590
Net loss attributable to attributable to GameSquare Holdings, Inc.		$	(3,018,346	)		$	(11,613,551	)		$	(8,173,950	)		$	(16,874,499	)
Comprehensive loss, net of tax:
Net loss		$	(3,018,346	)		$	(12,003,141	)		$	(10,192,082	)		$	(17,264,089	)
Change in foreign currency translation adjustment			(547,983	)			(540,813	)			(385,457	)			13,183
Comprehensive loss			(3,566,329	)			(12,543,954	)			(10,577,539	)			(17,250,906	)
Comprehensive income attributable to non-controlling interest			-				389,590				2,018,132				389,590
Comprehensive loss		$	(3,566,329	)		$	(12,154,364	)		$	(8,559,407	)		$	(16,861,316	)
Income (loss) per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution:
From continuing operations		$	(0.15	)		$	(0.32	)		$	(0.27	)		$	(0.70	)
From discontinued operations			0.07				(0.06	)			0.05				(0.01	)
Loss per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution		$	(0.08	)		$	(0.38	)		$	(0.22	)		$	(0.71	)
Weighted average common shares outstanding - basic and diluted			38,968,089				30,442,837				37,850,112				23,905,674

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

GAMESQUARE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

 

		Shares				capital				income				deficit				interest				equity
		Common stock				Common stock and Additional paid-in				Accumulated other comprehensive (loss)				Accumulated				Non- controlling				Shareholders’
		Shares				capital				income				deficit				interest				equity
Balance, January 1, 2025			32,635,995	-		$	119,441,634			$	(208,617	)		$	(122,171,056	)		$	14,942,287			$	12,004,248
Disposal of Faze Media Inc.			-	-			-				-				-				(12,924,155	)			(12,924,155	)
Conversion of convertible debt			5,032,233	-			3,992,238				-				-				-				3,992,238
Shares issued to settle outstanding amounts payable			1,393,240	-			1,928,211				-				-				-				1,928,211
Restricted share units exercised			62,500	-			-				-				-				-				-
Share-based compensation - options and RSUs			-	-			34,614				-				-				-				34,614
Other comprehensive income			-	-			-				(385,457	)			-				-				(385,457	)
Net loss			-	-			-				-				(8,173,950	)			(2,018,132	)			(10,192,082	)
Balance, June 30, 2025			39,123,968	-		$	125,396,697			$	(594,074	)		$	(130,345,006	)		$	-			$	(5,542,383	)
Balance, January 1, 2024			12,989,128	-		$	91,915,169			$	(132,081	)		$	(73,420,149	)		$	-			$	18,362,939
Balance			12,989,128			$	91,915,169			$	(132,081	)		$	(73,420,149	)		$	-			$	18,362,939
Acquisition of Faze Clan			10,132,884	-			14,587,000				-				-				-				14,587,000
Private placements, net of issuance costs			7,194,244	-			9,865,058				-				-				-				9,865,058
Restricted share units exercised			674,591	-			-				-				-				-				-
Minority interest in Faze Media, Inc.			-	-			-				-				-				15,750,000				15,750,000
Share-based compensation - options and RSUs			-	-			1,021,367				-				-				-				1,021,367
Other comprehensive loss			-	-			-				13,183				-				-				13,183
Net loss			-	-			-				-				(16,874,499	)			(389,590	)			(17,264,089	)
Balance, June 30, 2024			30,990,847	-		$	117,388,594			$	(118,898	)		$	(90,294,648	)		$	15,360,410			$	42,335,458
Balance			30,990,847	-		$	117,388,594			$	(118,898	)		$	(90,294,648	)		$	15,360,410			$	42,335,458

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

GAMESQUARE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

		2025				2024
		Six months ended June 30,
		2025				2024
Cash flows from operating activities:
Net loss		$	(10,192,082	)		$	(17,264,089	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation			884,155				1,936,744
Amortization of operating lease right-of-use assets			274,136				178,588
Gain on disposition of subsidiary			(2,721,953	)			(3,009,891	)
Loss on disposition of assets			1,477,619				3,764,474
Accretion of promissory note receivable			(614,415	)			(300,337	)
Change in fair value of contingent consideration			-				(42,327	)
Change in fair value of warrant liability			12,384				(52,900	)
Change in fair value of arbitration reserve			10,634				(138,625	)
Change in fair value of convertible debt carried at fair value			(327,916	)			(456,759	)
Share-based compensation			34,614				1,021,367
Changes in operating assets and liabilities:							-
Accounts receivable, net			5,042,422				(5,134,046	)
Government remittances			(1,896	)			38,946
Prepaid expenses and other current assets			383,364				(662,394	)
Accounts payable, accrued expenses and other current liabilities			(1,105,722	)			4,013,446
Deferred revenue			236,067				(1,312,406	)
Operating lease liability			(274,558	)			(179,949	)
Net cash used in operating activities			(6,883,147	)			(17,600,158	)
Cash flows from investing activities:
Purchase of property and equipment			(77,014	)			(2,370	)
Purchase of intangible assets			(300,000	)			-
Cash acquired in Faze Clan acquisition			-				2,406,812
Disposal of Frankly Media assets			-				35,500
Disposal of Complexity, net of cash disposed			-				328,284
Disposal of Faze Media, net of cash disposed			(636,377	)			-
Net cash provided by investing activities			(1,013,391	)			2,768,226
Cash flows from financings activities:
Proceeds from private placements			-				10,000,000
Payment of equity issuance costs			-				(134,942	)
Non-controlling interest in Faze Media, Inc.			-				15,750,000
Proceeds on promissory notes receivable, net			225,000				-
Proceeds (repayments) on promissory notes payable, net			2,000,000				-
Repayment of principal on convertible debt			-				(100,000	)
Proceeds (repayments) on line of credit, net			(273,456	)			766,200
Net cash provided by financing activities			1,951,544				26,281,258
Effect of exchange rate changes on cash and restricted cash			(716,895	)			100,934
Net increase (decrease) in cash and restricted cash			(6,661,889	)			11,550,260
Cash and restricted cash, beginning of period			13,148,980				2,992,838
Cash and restricted cash, end of period		$	6,487,091			$	14,543,098

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

GAMESQUARE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(unaudited)

 

		Six months ended June 30,
		2025				2024
Supplemental disclosure with respect to cash flows:
Cash paid for interest expense		$	283,162			$	633,518
Cash paid for income taxes			-				-
Operating lease payments in operating cash flows			365,703				272,904
Supplemental disclosure of non-cash investing and financing activities:
Disposal of Faze Media in exchange for conversion of convertible debt		$	10,000,000			$	-
Disposal of Frankly assets in exchange for promissory note receivable			-				1,706,797
Disposal of Complexity in exchange for promissory note receivable			-				7,125,628
Shares, options, and warrants issued for acquisition of FaZe			-				14,587,000
Conversion of convertible debt			3,992,238				-
Shares issued to settle legal and other amounts payable			1,928,211				-

 

Reconciliation of cash and restricted cash:

 

		June 30, 2025				December 31, 2024
Cash		$	4,697,832			$	12,094,950
Restricted cash			1,789,259				1,054,030
Cash and restricted cash shown in the consolidated statements of cash flows		$	6,487,091			$	13,148,980

  

 

GAMESQUARE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Corporate information and going concern

 

(a) Corporate information

 

GameSquare Holdings, Inc. (formerly Engine Gaming & Media, Inc.) (“GameSquare” or the “Company”) is a corporation existing under the laws of the State of Delaware as of March 7, 2024 (and was a corporation existing under the Business Corporations Act (Province of British Columbia) prior to March 7, 2024). The registered head office of the Company is 6775 Cowboys Way, Ste. 1335, Frisco, Texas, USA, 75034.

 

GameSquare, (NASDAQ: GAME) completed its Plan of Merger (the “Merger”) with FaZe Holdings, Inc. (“FaZe”) on March 7, 2024, resulting in the Company acquiring all the issued and outstanding securities of FaZe (see Note 4).

 

GameSquare is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. GameSquare’s end-to-end platform includes Gaming Community Network (“GCN”), a digital media company focused on gaming and esports audiences, Swingman LLC dba as Zoned, a gaming and lifestyle marketing agency, Code Red Esports Ltd. (“Code Red”), a UK based esports talent agency, FaZe Holdings Inc. (“FaZe”), a lifestyle and media platform rooted in gaming and youth culture whose premium brand, talent network, and large audience can be monetized across a variety of products and services, GameSquare Esports, (USA), Inc. dba as Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform.

 

(b) Going concern

 

These accompanying financial statements have been prepared on a going concern basis, which contemplates that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the unaudited condensed consolidated financial statements. Such adjustments could be material. It is not possible to predict whether the Company will be able to raise adequate financing or ultimately attain profit levels of operations.

 

The Company has not yet realized profitable operations and has incurred significant losses to date resulting in an accumulated deficit of $130.3 million as of June 30, 2025 ($122.2 million as of December 31, 2024). The recoverability of the carrying value of the assets and the Company’s continued existence is dependent upon the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary. While management has been historically successful in raising the necessary capital, it cannot provide assurance that it will be able to execute its business strategy or be successful in future financing activities. As of June 30, 2025, the Company had a working capital deficiency of $27.6 million (as of December 31, 2024, a working capital deficiency of $18.3 million) which is comprised of current assets less current liabilities.

 

These conditions indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.

 

 

2. Significant accounting policies

 

(a) Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared following generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the SEC for interim reporting. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of December 31, 2024 was derived from the Company’s audited consolidated financial statements but does not include all disclosures required by GAAP for annual financial statements. In management’s opinion, the interim information contains all adjustments, which include normal recurring adjustments necessary for a fair statement of the results for the interim periods. The footnote disclosures related to the interim financial information contained herein are also unaudited. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on April 15, 2025, and amended on April 30, 2025 (the “2024 Form 10-K”).

 

(b) Principles of consolidation

 

The unaudited condensed consolidated financial statements include the accounts of the Company, all wholly owned and majority-owned subsidiaries in which the Company has a controlling voting interest and, when applicable, variable interest entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated.

 

All significant intercompany transactions and balances have been eliminated upon consolidation.

 

The Company’s material subsidiaries as of June 30, 2025, are as follows:

 

Schedule of Material Subsidiaries 

Name of Subsidiary		Country of Incorporation		Ownership Percentage				Functional Currency
Frankly Media LLC		USA			100.00	%		US Dollar
Stream Hatchet S.L.		Spain			100.00	%		Euro
Code Red Esports Ltd.		United Kingdom			100.00	%		UK Pound
GameSquare Esports (USA) Inc. (dba as Fourth Frame Studios)		USA			100.00	%		US Dollar
Faze Clan Inc.		USA			100.00	%		US Dollar
Swingman LLC (dba as Zoned)		USA			100.00	%		US Dollar
SideQik, Inc.		USA			100.00	%		US Dollar

 

(c) Use of estimates

 

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on historical experience, current and expected future conditions, third-party evaluations and various other assumptions that management believes are reasonable under the circumstances. Significant estimates have been used by management in conjunction with the following: (i) credit losses on promissory notes receivable; (ii) valuation of convertible debt; (iii) contingent liabilities; (iv) share-based compensation; (v) assumptions used in business combinations, primarily related to management forecasting of operating cash flows; and (vi) testing for impairment of long-lived assets and goodwill. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.

 

 

(d) Concentration of credit risk

 

The Company places its cash, which may at times be in excess of United States’ Federal Deposit Insurance Corporation insurance limits, with high credit quality financial institutions and attempts to limit the amount of credit exposure with any one institution.

 

The Company had one customer whose revenue accounted for approximately 50% and 65% of total revenue for the six months ended June 30, 2025 and 2024, respectively.

 

One customer individually accounted for more than 10% of the Company’s accounts receivable as of June 30, 2025, and no customers accounted for more than 10% of the Company’s accounts receivable as of December 31, 2024.

 

(e) Segment reporting

 

In accordance with the ASC 280, Segment Reporting, the Company’s Chief Operating Decision Maker (“CODM”) has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. There were no significant changes to the Company’s segment reporting disclosures as a result of adopting ASU No. 2023-07.

 

The CODM uses gross profit, as reviewed at periodic business review meetings, as the key measure of the Company’s results as it reflects the Company’s underlying performance for the period under evaluation to determine resource allocation. As of June 30, 2025, the Company is organized into the three operating segments, which also represent its three reportable segments: Teams, Agency and Software-as-service (SaaS) + Advertising.

 

ASC 280 establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

 

3. Recent accounting pronouncements

 

(a) Adopted

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The ASU is to be applied prospectively. Retroactive application is permitted. The adoption of this ASU on January 1, 2025 did not have a significant impact on the Company’s consolidated financial statements.

 

In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this ASU on December 31, 2024 did not have a significant impact on the Company’s consolidated financial statements.

 

4. Acquisitions and divestitures

 

(a) FaZe Merger

 

On March 7, 2024, the Company completed its acquisition of FaZe (the Merger). Prior to the Merger, the Company created GameSquare Merger Sub I, Inc. (“Merger Sub”) to effect the Merger. As a result of the Merger, Merger Sub merged with FaZe, with FaZe continuing as the surviving corporation and as a wholly-owned subsidiary of the Company.

 

 

The Company acquired all issued and outstanding FaZe common shares in exchange for 0.13091 of a GameSquare common share for each FaZe common share (the “Exchange Ratio”). All outstanding FaZe equity awards and warrants to purchase shares of FaZe common stock were acquired and exchanged for GameSquare equity awards and warrants to purchase GameSquare common stock on substantially the same terms, with exercise prices, where applicable, and shares issuable adjusted for the Exchange Ratio.

 

The Merger was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, which requires that the Company recognize the identifiable assets acquired and the liabilities assumed at their fair values on the date of acquisition.

 

The following table summarizes the consideration for the acquisition:

 

Schedule of purchase consideration 

Purchase consideration		Number of shares				Amount
Common shares			10,132,884			$	12,763,000
Warrants - Equity			775,415				26,000
Options - Vested			1,169,619				1,256,000
RSUs / RSAs - Vested			413,988				542,000
Total purchase price			12,491,906			$	14,587,000

 

The purchase price allocation is as follows:

 

Schedule of preliminary purchase price allocation 

Purchase price allocation		Amount
Cash		$	1,806,747
Restricted cash			600,065
Accounts receivable, net			7,933,515
Prepaid expenses and other current assets			1,158,554
Property and equipment			773,893
Goodwill			7,147,428
Intangible assets			12,000,000
Total assets acquired			31,420,202
Accounts payable			8,067,850
Accrued liabilities			6,844,817
Deferred revenue			1,920,535
Total liabilities assumed			16,833,202
Net assets acquired		$	14,587,000

 

Goodwill

 

The difference between the estimated acquisition date fair value of the consideration transferred and the estimated values assigned to the assets acquired and liabilities assumed represents goodwill of $7.1 million.

 

The goodwill recorded represents the following:

 

	●	Cost savings and operating synergies expected to result from combining the operations of FaZe with those of the Company.
	●	Intangible assets that do not qualify for separate recognition such as the assembled workforce.

 

Goodwill arising from the Merger is expected to be deductible for tax purposes.

 

 

(b) Sale of Complexity

 

On March 1, 2024, the Company, through its wholly owned subsidiary GameSquare Esports (USA), Inc., entered into a Membership Interest Purchase Agreement (the “MIPA”) to sell all of the issued and outstanding equity interest of NextGen Tech, LLC (“Complexity”) to Global Esports Properties, LLC (the “Buyer”) (the “Transaction”).

 

Pursuant to the MIPA, Buyer paid the Company aggregate purchase consideration with a Transaction closing date fair value of $7.9 million in exchange for the equity interests of Complexity, including $0.8 million paid in cash upon closing of the transaction and issuance of a secured subordinated promissory note (the “Note”) with a Transaction closing date fair value of $7.1 million. The Note was valued using a discount rate of 15% (Level 3).

 

As a result of the Transaction, during the three and six months ended June 30, 2025 and 2024, Complexity met the requirements to be reported as discontinued operations (see Note 17). The Company recognized a gain of $3.0 million in net income (loss) from discontinued operations in the consolidated statements of operations and comprehensive loss after offsetting the consideration received with the carrying value of the disposed assets and liabilities. Complexity assets and liabilities disposed had a net carrying value of $4.9 million and consist primarily of $2.6 million of accounts receivable, $2.2 million of property and equipment, and $1.8 million of intangible assets, partially offset by $0.8 million of accounts payable $1.4 million of accrued liabilities.

 

The Note has a principal amount of $9.5 million and bears interest at 3.0% per annum. The principal amount of the Note, together with all accrued interest, is due on February 28, 2027. The Note is secured by assets of the Buyer pursuant to a Security Agreement executed in conjunction with the MIPA between the Company and the Buyer.

 

The promissory note receivable is classified as not held-for-sale and measured at amortized cost, net of any allowance for credit losses, in accordance with ASC 310, Receivables. The promissory note receivable was initially recorded at its transaction closing date fair value on March 1, 2024 and no allowance for credit losses had been recognized as of June 30, 2025.

 

(c) Frankly Media asset disposal

 

On May 31, 2024, the Company, through its wholly owned subsidiary Frankly Media LLC (“Frankly”), entered into an Asset Purchase Agreement (the “UNIV APA”) to sell the producer content management software platform and associated software technology (“CMS Assets”) of Frankly to UNIV, Ltd (“UNIV”) (the “UNIV Asset Sale”).

 

Pursuant to the UNIV APA, UNIV paid the Company aggregate purchase consideration with a transaction closing date fair value of $1.2 million in exchange for the CMS Assets, including $25 thousand paid in cash upon closing of the transaction and issuance of a secured subordinated promissory note (the “UNIV Note”) with a transaction closing date fair value of $1.2 million. The UNIV Note was valued using a discount rate of 13.7% (Level 3).

 

Additionally on May 31, 2024, the Company, through its wholly owned subsidiary Frankly, entered into an Asset Purchase Agreement (the “XPR APA”) to sell the press release and content distribution service assets (the “PR Assets”) of Frankly to XPR Media LLC (“XPR”) (the “XPR Asset Sale” and, collectively with the UNIV Asset Sale, the “Frankly Asset Sales”).

 

Pursuant to the XPR APA, XPR paid the Company aggregate purchase consideration with a transaction closing date fair value of $0.6 million in exchange for the PR Assets, including $10.5 thousand paid in cash upon closing of the transaction and issuance of a secured subordinated promissory note (the “XPR Note”) with a transaction closing date fair value of $0.5 million. The XPR Note was valued using a discount rate of 13.7% (Level 3).

 

The UNIV Note had a principal amount of $1.5 million, inclusive of the $25 thousand paid in cash upon closing. The principal amount of the UNIV Note was to be repaid in monthly installments, beginning August 2024. Monthly principal payments will be $25 thousand from August 2024 to June 2025, $45 thousand from July 2025 to June 2026, and $55 thousand from July 2026 to final maturity on June 30, 2027. The UNIV Note is secured by assets of the UNIV pursuant to a Security Agreement executed in conjunction with the UNIV APA between the Company and UNIV.

 

The XPR Note has a principal amount of $0.7 million, inclusive of the $10.5 thousand paid in cash upon closing. The principal amount of the XPR Note will be repaid in monthly installments, beginning August 2024. Monthly principal payments will be $12.5 thousand from August 2024 to June 2025, $20 thousand from July 2025 to June 2026, and $26 thousand from July 2026 to final maturity on June 30, 2027. The XPR Note is secured by all rights of XPR to customer agreements and publisher agreements pursuant to a Security Agreement executed in conjunction with the XPR APA between the Company and XPR.

 

The promissory notes receivable are classified as not held-for-sale and measured at amortized cost, net of any allowance for credit losses, in accordance with ASC 310, Receivables. The promissory note receivable was initially recorded at its transaction closing date fair value on Mat 31, 2024. During the second quarter of 2025, the Company recorded a full reserve on the UNIV Note of $1.5 million as the buyer ceased making payments under the note. The reserve for credit losses was recorded within Other income (expense), net on the consolidated statements of operations and comprehensive loss.

 

 

(d) Faze Media, Inc. asset contribution

 

On May 2, 2024, the Company created FaZe Media, Inc. (“Faze Media”). On May 15, 2024, the Company entered into a business venture with Gigamoon Media, LLC (“Gigamoon”). As part of this venture, the Company contributed certain media assets of Faze Clan, Inc. to Faze Media and Gigamoon invested $11.0 million in Faze Media in exchange for 11,000,000 shares of Series A-2 Preferred Stock of Faze Media, 49% of Faze Media’s voting equity interests, pursuant to a Securities Purchase Agreement (the “SPA”). The Company was issued 11.45 million shares of Series A-1 Preferred Stock of Faze Media, 51% of Faze Media’s voting equity interests.

 

On June 17, 2024, the Company entered into an agreement to sell 5,725,000 of its 11,450,000 shares of Series A-1 Preferred Stock of Faze Media to M40A3 LLC (“M4”) in exchange for $9.5 million (the “Secondary SPA”). The first 2,862,500 share tranche was issued on June 17, 2024 for consideration of $4.75 million and the remaining 2,862,500 was issued on August 15, 2024 for consideration of $4.75 million.

 

Contemporaneous with the execution of the Secondary SPA, the Company and M4 entered into a Limited Proxy and Power of Attorney with respect to all of the shares of Series A-1 Preferred Stock of Faze Media held by M4 (the “Faze Media Voting Proxy”).

 

Faze Media is not a variable interest entity. Due to the Faze Media Voting Proxy, the Company maintains a controlling financial interest in Faze Media and Faze Media is a consolidated subsidiary of the Company as of May 15, 2024 (Faze Media formation date). The Preferred Stock of Faze Media held by M4 and Gigamoon represent a non-controlling interest of the Company.

 

As a result of the above transactions, the Company recorded a non-controlling interest in Faze Media, Inc. of $20.5 million, the sum of cash consideration received, within the consolidated statements of stockholders’ equity.

 

(e) Sale of Faze Media

 

On April 1, 2024, the Company, through its wholly owned subsidiary Faze Media Holdings, LLC, entered into an Exchange Agreement with Gigamoon, effective April 1, 2025 (the “Exchange Agreement”), pursuant to which the Company agreed to accelerate the conversion date under Gigamoon’s convertible debenture dated as of December 16, 2024, in the principal amount of $10 million. Pursuant to the terms of the Exchange Agreement, FaZe Media Holdings, LLC transferred to Gigamoon 5,725,000 shares of Series A-1 Preferred Stock of FaZe Media, Inc. In addition, GameSquare issued 87,946 shares of its common stock to Gigamoon as payment of accrued interest on the convertible debenture through the conversion date.

 

As a result of the Exchange Agreement, during the three and six months ended June 30, 2025 and 2024, Faze Media met the requirements to be reported as discontinued operations (see Note 17). The Company recognized a gain of $3.0 million in net income (loss) from discontinued operations in the consolidated statements of operations and comprehensive loss after offsetting the consideration received, conversion of $10 million Gigamoon convertible debenture discussed above (see Note 8), with the carrying value of the disposed assets and liabilities. The fair value of consideration received was concluded to be $10 million, the principal value of convertible debt being converted by Gigamoon. Faze Media assets and liabilities disposed had a net carrying value of $7.0 million and consist of $0.6 million of cash, $2.9 million of accounts receivable, $0.2 million of prepaid expenses and other current assets, $1.6 million of amounts due from GameSquare, $0.1 million of property and equipment, $0.7 million of right-of-use assets, $9.6 million of intangible assets and $7.1 million of goodwill, partially offset by $0.2 million of accounts payable, $1.7 million of accrued liabilities, $0.5 million of deferred revenue, $0.7 million of lease liabilities and $12.9 million in non-controlling interests in Faze Media.

 

5. Goodwill and intangible assets

 

(a) Goodwill

 

The following table presents the changes in the carrying amount of goodwill:

Schedule of goodwill 

Balance, December 31, 2023		$	16,303,989
Acquisition of FaZe			7,147,428
Disposal of Frankly Media assets			(3,315,139	)
Impairment of Stream Hatchet			(4,945,299	)
Impairment of Sideqik			(2,486,000	)
Balance, December 31, 2024		$	12,704,979
Disposal of FaZe Media			(7,147,428	)
Balance, June 30, 2025		$	5,557,551

 

Goodwill resulting from the acquisition of FaZe was allocated to the Teams operating and reportable segment.

 

There were no impairment charges related to goodwill incurred during the three and six months ended June 30, 2025 and 2024, respectively.

 

 

(b) Intangible assets

 

Intangible assets consist of the following:

Schedule of  intangible assets 

		As of June 30, 2025
		Original cost				Accumulated amortization				Accumulated impairment losses				Carrying value
Customer relationships		$	9,438,861			$	(2,261,232	)		$	(2,655,946	)		$	4,521,683
Talent network			740,000				(293,083	)		$	-				446,917
Brand name			2,425,203				(1,378,556	)		$	(784,220	)			262,427
Software			1,830,000				(608,589	)		$	(1,221,411	)			-
Total intangible assets		$	14,434,064			$	(4,541,460	)		$	(4,661,577	)		$	5,231,027

 

		As of December 31, 2024
		Original cost				Accumulated amortization				Accumulated impairment losses				Carrying value
Customer relationships		$	12,058,560			$	(2,056,023	)		$	(2,655,946	)		$	7,346,591
Talent network		$	1,100,000			$	(458,333	)			-				641,667
Brand name			9,540,261				(1,478,563	)			(784,220	)			7,277,478
Software			1,830,000				(608,589	)			(1,221,411	)			-
Total intangible assets		$	24,528,821			$	(4,601,508	)		$	(4,661,577	)		$	15,265,736

 

The Company recognized amortization expense for intangible assets of $0.7 million and $1.6 million for the six months ended June 30, 2025 and 2024, respectively; and $0.5 million and $0.8 million for the three months ended June 30, 2025 and 2024, respectively.

 

Amortization expense for the intangible assets is expected to be as follows over the next five years, and thereafter:

Schedule of amortization expense for intangible assets 

2025		$	485,202
2026			850,820
2027			255,969
2028			255,969
2029			255,969
Thereafter			3,127,098
Total estimated amortization expense		$	5,231,027

 

There were no impairment charges related to other intangible assets incurred during the six months ended June 30, 2025 and 2024, respectively.

 

6. Leases

 

On June 30, 2021, the Company acquired Complexity. Complexity leased a building in Frisco, Texas. Upon the sale of Complexity (see Note 4), the lease was assigned to GameSquare Esports (USA), Inc. and the Company entered into an agreement to sublease the building to Complexity for a 12-month period. The lease has an original lease period expiring in April 2029. The lease agreement does not contain any material residual value guarantees or material restrictive covenants.

 

On April 1, 2024, GameSquare Holdings, Inc. leased a building in Culver City, CA, which it later assigned to Faze Media Inc. on May 15, 2024. The lease has an original lease period expiring in March 2027. The lease agreement does not contain any material residual value guarantees or material restrictive covenants. The Company disposed of Faze Media Inc. on April 1, 2025, including the lease right-of-use assets and lease liabilities (see Note 17).

 

 

The components of operating lease expense are as follows:

Schedule of components operating lease expense 

		2025				2024				2025				2024
		Three months ended June 30,								Six months ended June 30,
		2025				2024				2025				2024
Operating lease expense			135,771				135,771				365,280				271,543
Variable lease expense			64,025				78,170				149,949				124,510
Total operating lease costs			199,796				213,941				515,229				396,053

 

As of June 30, 2025, the remaining lease-term and discount rate on the Frisco, TX lease was 3.8 years and 8.3%, respectively.

 

Maturities of the lease liability are as follows:

Schedule of Maturities of Lease Liability 

2025			272,904
2026			545,808
2027			545,808
2028			545,808
2029			181,936
Thereafter			-
Total lease payments			2,092,264
Less: Interest			(292,749	)
Total lease liability		$	1,799,515

 

 

7. Line of credit

 

On September 14, 2023, the Company entered into an accounts receivable financing and security agreement with a maximum availability of $10.0 million for a three-year term with SLR Digital Finance, LLC (the “LOC”). The LOC matures on September 14, 2026. Interest accrues on the outstanding principal amount of the LOC at a rate equal to the greater of Prime plus 4.00% or 9.50%, per annum. The terms of the LOC provide for the lender to fund 85% of the purchased accounts receivable and it includes various service fees.

 

As of June 30, 2025, the outstanding principal, and unpaid accrued interest, on the LOC was $3.2 million. During the six months ended June 30, 2025 and 2024, the Company recognized interest expense of $0.3 million and $0.5 million on the LOC.

 

 

8. Convertible debt

 

Yorkville CD and SEPA

 

On July 8, 2024, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”), pursuant to which the Company has the right to sell to Yorkville up to $20.0 million of its shares of common stock, par value $0.0001 per share, subject to certain limitations and conditions set forth in the SEPA.

 

Each advance the Company requests in writing to Yorkville under the SEPA may be for a number of shares of common stock up to the greater of (i) 500,000 shares or (ii) such amount as is equal to 100% of the average daily volume traded of the common stock during the five trading days immediately prior to the date the Company requests each advance. The shares of common stock purchased pursuant to an advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive trading days commencing on the date of the delivery of the advance notice.

 

The SEPA will automatically terminate on the earliest to occur of (i) the 36-month anniversary of the date of the SEPA or (ii) the date on which the Company shall have made full payment of advances pursuant to the SEPA.

 

In connection with the execution of the SEPA, the Company paid a diligence fee in cash to Yorkville in the amount of $25,000. Additionally, the Company agreed to pay a commitment fee of $200,000 to Yorkville, payable as follows: (i) $100,000 payable within three days of the date of the SEPA, in the form of the issuance of 80,000 shares of common stock, and (ii) $100,000 payable on the three-month anniversary of the date of the SEPA, payable in either cash or in the form of an advance.

 

Additionally, Yorkville agreed to advance to the Company, in exchange for a convertible promissory note (the “Yorkville CD”), an aggregate principal amount of up to $6.5 million, which was funded on July 8, 2024. The purchase price for the Yorkville CD was 93.0% of the principal amount or $6.045 million. Interest shall accrue on the outstanding balance of the Yorkville CD at an annual rate equal to 0%, subject to an increase to 18% upon an event of default. The maturity date of the Yorkville CD will be 12 months after the issuance date. Yorkville may convert the convertible debenture into shares of common stock at any time at a conversion price equal to the lower of (i) $1.375 (the “Fixed Price”) or (ii) a price per share equal to 93% of the lowest daily VWAP during the seven consecutive trading days immediately prior to the conversion date (the “Variable Price”), but which Variable Price shall not be lower than the floor price of $0.25 per share. Additionally, the Company, at its option, shall have the right, but not the obligation, to redeem early a portion or all amounts outstanding under the Yorkville CD at a redemption amount equal to the outstanding principal balance being repaid or redeemed, plus a 7% prepayment premium.

 

At any time during the term that there is a balance outstanding under the Yorkville CD, Yorkville may convert an amount that shall not exceed during any calendar month period, the greater of (i) an amount equal to 15% of the product of (A) the average of the daily traded amount on each trading day during such period and (B) the VWAP for such trading day, and (ii) $750,000.

 

 

On January 22, 2025, Yorkville converted $3.7 million of its then outstanding $4.1 million convertible debt balance for 5,032,233 common shares of the Company. The Company terminated the remaining outstanding balance on the Yorkville CD of $0.4 million and SEPA with Yorkville Advisors Global L.P. (“Yorkville”). Under the strategic transaction, GameSquare issued a zero-coupon, 60-day promissory note to Yorkville associated with remaining unconverted principal of $0.4 million and a prepayment penalty of $0.4 million. Additionally, all shares previously owned by Yorkville, were purchased by outside investors in block transactions that occurred on January 21, 2025. The prepayment penalty was recorded within Other operating expenses on the consolidated statements of operations and comprehensive loss.

 

Gigamoon CD

 

On November 13, 2024, the Company and Gigamoon entered into a senior secured convertible promissory note in the principal amount of $10 million (the “Gigamoon CD”). On December 15, 2024, the Company received cash of $10 million from Gigamoon for issuance of the Gigamoon CD.

 

The Gigamoon CD bears an interest rate of 7.5% per annum, which automatically shall be increased to 10.0% in the event of an event of default. The Gigamoon CD has a maturity date of five years from the issuance, unless earlier accelerated upon the occurrence of an event of default upon the election of the holder. Interest shall accrue as of the issuance date and shall be payable by the Company on (i) each anniversary of such issuance date, and (ii) the earlier of (a) the maturity date and (b) the conversion or exchange of the Gigamoon CD. Interest payments under the Gigamoon CD are payable in the Company’s common stock, equal to the quotient of (a) the aggregate amount of any accrued and unpaid interest as of such payment date, and (b) the conversion price of $2.50 per common share.

 

At the option of the holder, at any time on or after December 31, 2025, or upon an event of default or certain change of control events, the Gigamoon CD can be converted into either (i) GameSquare common stock at a conversion price of $2.50 per common share or (ii) exchanged for the 5,725,000 shares of Series A-1 Preferred Stock of Faze Media Inc. held by the Company.

 

On April 2, 2025, GameSquare and Gigamoon entered into an exchange agreement, effective April 1, 2025, pursuant to which, the parties agreed to accelerate the exercise date under the Gigamoon CD to April 1, 2025. As a result, on April 1, 2025, GameSquare transferred the 5,725,000 shares of Series A-1 Preferred Stock of Faze Media Inc. to Gigamoon (See Note 4).

 

Outstanding as of June 30, 2025

 

(a) Three Curve CD

 

On September 1, 2022, Engine extended convertible debentures that were due to mature in October and November 2022 with an aggregate principal amount of $1.3 million. Key terms include (a) a maturity date of August 31, 2025, (b) an interest rate of 7% per annum (interest to be paid in full at maturity) and (c) a conversion price of $4.40 per share.

 

The fair value of the Three Curve CD was estimated using the binomial lattice model with the below assumptions:

 

Schedule of detailed information about fair value of convertible debentures

		June 30, 2025				December 31, 2024
Share price		$	0.87			$	0.83
Conversion price		$	4.40			$	4.40
Term, in years			0.17				0.67
Interest rate			7	%			7	%
Expected volatility			85.00	%			95.00	%
Risk-free interest rate			4.35	%			4.21	%
Expected dividend yield			0	%			0	%
Debt instrument measurement input			0	%			0	%

 

 

The change in fair values of the Company’s convertible debentures subject to recurring remeasurement at fair value were as follows:

 

Schedule of convertible debentures subject to recurring remeasurement at fair value

		Three Curve CD				Yorkville CD				Gigamoon CD				Total
Balance, December 31, 2024		$	1,629,448			$	4,852,256			$	9,908,784			$	16,390,488
Interest expense			43,390				-				184,932				228,322
Interest payments			-				-				(217,808	)			(217,808	)
Transfer to promissory note payable			-				(411,518	)			-				(411,518	)
Conversion of debt			-				(3,992,238	)			(10,000,000	)			(13,992,238	)
Change in fair value(1)			(3,508	)			(448,500	)			124,092				(327,916	)
Balance, June 30, 2025		$	1,669,330			$	-			$	-			$	1,669,330
Contractual principal balances outstanding:
As of December 31, 2024		$	1,250,000			$	4,124,299			$	10,000,000			$	15,374,299
As of June 30, 2025		$	1,250,000			$	-			$	-			$	1,250,000
Contractual principal balances outstanding		$	1,250,000			$	-			$	-			$	1,250,000

 

(1)

None of the changes in fair value during the period were due to instrument-specific changes in credit risk.

 

9. Shareholders’ Equity

 

(a) Description of the Company’s securities

 

The Company is authorized to issue an unlimited number of common shares, with no par value. Holders of common shares are entitled to one vote in respect of each common share held at shareholder meetings of the Company.

 

(b) Activity for the periods presented

 

On January 22, 2025, Yorkville converted $3.7 million of its then outstanding $4.1 million convertible debt balance (see Note 8).. Yorkville was issued 5,032,233 common shares for conversion of $3.7 million principal ($4.0 million fair value), with the remaining $411 thousand refinanced into the promissory note with Yorkville (see Note 8)..

 

On March 10, 2025, the Company issued 1,094,891 common shares to pay an outstanding settlement due to the former CEO of Faze Clan for $1.5 million.

 

On April 1, 2025, the Company issued 87,946 common shares to Gigamoon as payment of accrued interest on the Gigamoon CD through the conversion date (see Note 4).

 

On June 6, 2025, the Company issued 210,403 common shares to Faze Media for payment of Faze tradename license fees for the period covering May 15, 2024 to December 31, 2024. Fees are computed as 2.5% of total revenue generated by Faze Esports.

 

During the six months ended June 30, 2025, the Company issued 62,500 common shares from the exercise of Restricted Share Units (“RSUs”) under its equity incentive plan (see Note 11(b)).

 

On March 7, 2024, 10,132,884 common shares of the Company were issued for the completion of the Merger (see Note 4).

 

In conjunction with the Merger, on March 7, 2024, the Company completed a private placement in public equity financing (the “PIPE Financing”) with certain investors in which the Company offered 7,194,244 units at a purchase price of $1.39 per unit for aggregate gross proceeds of $10.0 million. Each unit consisted of one share of the Company’s common stock and a warrant to purchase 0.15 shares of the Company’s common stock. As a result, the Company issued an aggregate of 7,194,224 common shares of the Company and warrants to purchase up to 1,079,136 shares of the Company pursuant to the PIPE Financing. Each warrant has an exercise price of $1.55 per share and expire on March 7, 2029 (see Note 12).

 

During the six months ended June 30, 2024, the Company issued 674,591 common shares from the exercise of Restricted Share Units (“RSUs”) under its equity incentive plan (see Note 11(b)).

 

10. Net loss per share

 

As the Company incurred a net loss for the three and six months ended June 30, 2025 and 2024, the inclusion of certain options, restricted stock units, warrants, and contingent shares in the calculation of diluted earnings per share would be anti-dilutive and, accordingly, were excluded from the diluted loss per share calculation.

 

  

The following table summarizes potential common shares that were excluded as their effect is anti-dilutive:

 

Schedule of potential common shares excluded as their effect is anti-dilutive

		Three and six months ended June 30,
		2025				2024
Options and RSUs outstanding			3,264,257				2,560,116
Warrants outstanding			1,978,481				2,294,221
Shares issuable upon conversion of convertible debt			284,090				2,159,090
Total			5,526,828				7,013,427

  

11. Share-based compensation

 

The Company grants share purchase options (“Options”) for the purchase of common shares to its directors, officers, employees and consultants.

 

Options may be exercisable over periods of up to 10 years as determined by the Board of Directors of the Company. The Option price for shares that are the subject of any Option shall be fixed by the Board when such Option is granted but shall not be less than the market value of such shares at the time of grant.

 

The Omnibus Plan allows the Company to award restricted share units to directors, officers, employees and consultants of the Company and its subsidiaries upon such conditions as the Board may establish, including the attainment of performance goals recommended by the Company’s compensation committee. The purchase price for common shares of the Company issuable under each RSU award, if any, shall be established by the Board at its discretion. Common shares issued pursuant to any RSU award may be made subject to vesting conditions based upon the satisfaction of service requirements, conditions, restrictions, time periods or performance goals established by the board.

 

The maximum number of common shares available for issuance pursuant to the settlement of RSUs and Options shall be 20% of the issued and outstanding common shares, or 7.8 million common shares as of June 30, 2025.

 

(a) Options

 

The following is a summary of Options outstanding as of June 30, 2025 and December 31, 2024, and changes during the six months then ended, by Option exercise currency:

 

Schedule of option outstanding

		Number of shares				Weighted- average exercise price (CAD)				Weighted- average remaining contractual term				Aggregate intrinsic value
Outstanding at December 31, 2024			416,621			$	19.34				1.96			$	-
Outstanding at June 30, 2025			416,621			$	19.34				1.46			$	-
Exercisable at June 30, 2025			416,621			$	19.34				1.46			$	-

 

		Number of shares				Weighted- average exercise price (USD)				Weighted- average remaining contractual term				Aggregate intrinsic value
Outstanding at December 31, 2024			2,344,594			$	2.47				6.91			$	-
Outstanding at June 30, 2025			2,344,594			$	2.47				6.42			$	-
Exercisable at June 30, 2025			2,315,850			$	2.47				6.42			$	-

 

 

See Note 4 for a summary of the significant valuation inputs used to value Options issued in relation to the acquisition of FaZe.

 

Share-based compensation expense related to the vesting of Options was $4 thousand and $34 thousand for the six months ended June 30, 2025 and 2024, respectively, and is included in general and administrative expense on the consolidated statements of operations and comprehensive loss.

 

(b) RSUs

 

The following is a summary of RSUs outstanding on June 30, 2025, and December 31, 2024, and changes during the six months then ended:

 

Schedule of RSUs outstanding

		Number of shares				Weighted-average grant date fair value
Outstanding at December 31, 2024			578,042			$	2.70
Granted			25,000				0.80
Exercised			(62,500	)			0.86
Forfeited			(37,500	)			0.90
Outstanding at June 30, 2025			503,042			$	2.97

 

The grant-date fair values of RSUs are based on the Company’s stock price as of the grant date (see Note 4).

 

Shared-based compensation expense related to the vesting of RSU’s was $30 thousand and $1.0 million for the six months ended June 30, 2025 and 2024, respectively, and is included in general and administrative expense on the consolidated statements of operations and comprehensive loss.

 

12. Warrants

 

(a) Liability-classified warrants having CAD exercise price

 

The functional currency of the Company is USD and certain of the Company’s warrants have an exercise price in CAD, resulting liability classification of the warrants.

 

The following is a summary of changes in the value of the warrant liability for the six months ended June 30, 2025:

Schedule of changes in value of warrant liability 

		Amount
Balance, December 31, 2024		$	14,314
Change in fair value			12,384
Foreign exchange			466
Balance, June 30, 2025		$	27,164

 

The following assumptions were used to determine the fair value of the warrant liability using the Black-Scholes option pricing model:

 

Schedule of assumptions fair value of warrant liability

		June 30, 2025				December 31, 2024
Share price			CAD$1.19				CAD$1.19
Term, in years			2.25				2.75
Exercise price			CAD$9.68				CAD$9.68
Expected volatility			100.00	%			100.00	%
Risk-free interest rate			2.66	%			2.85	%
Expected dividend yield			0	%			0	%

 

 

Volatility was estimated by using the average historical volatility of the Company. The expected life in years represents the period of time that warrants issued are expected to be outstanding. The risk-free rate is based on government treasury bond rates issued with a remaining term approximately equal to the expected life of the warrants.

 

The Company had 123,930 liability-classified warrants with a weighted average exercise price of CAD$9.68 outstanding as of June 30, 2025 and December 31, 2024. There we no changes during the six months ended June 30, 2025.

 

(b) Equity-classified warrants

 

As discussed in Note 4 above in conjunction with the acquisition of FaZe, the Company issued 775,415 warrants with an acquisition fair value of $26 thousand, included in the FaZe acquisition purchase price consideration.

 

As discussed in Note 9, in conjunction with the PIPE Financing on March 7, 2024, 1,079,136 warrants were issued with an exercise price of $1.55 and a contractual term of 5 years. The relative fair value of the warrants of $1.1 million was estimated using the Black-Scholes option pricing model with the following assumptions: share price of $1.56, expected dividend yield of 0%, expected volatility rate of 120.00%, based on the historical volatility of comparable companies, a risk free rate of 3.36% and an expected life of 5 years. The warrants have an exercise price in USD and are equity-classified.

 

The Company had 1,854,551 equity-classified warrants with a weighted average exercise price of $37.63 outstanding as of June 30, 2025 and December 31, 2024. There we no changes during the six months then ended June 30, 2025.

 

13. Related party transactions

 

(a) Convertible debenture with a director of the Company as counterparty

 

On September 1, 2022, Engine extended convertible debentures that were due to expire in October and November 2022 with an aggregate principal amount of $1.3 million. Key terms include (a) maturity date of August 31, 2025, (b) interest rate of 7% (interest to be paid in full at maturity) and (c) conversion price of $4.40. The convertible debenture is beneficially held by a director of the Company (see Note 8).

 

(b) Promissory note with significant investor

 

On March 25, 2025, the “Company entered into a secured promissory note with Blue & Silver Ventures, Ltd. The principal amount of $2 million under the promissory note is payable on demand and no later than July 1, 2025. The promissory note bears interest at a rate of ten percent (10%) per annum, with a default interest rate of fifteen percent (15%) per annum, and is payable on demand and no later than July 1, 2025 with the principal amount. The Company, at its option, may prepay the promissory note, in whole or in part, without a prepayment penalty of any kind.

 

In connection with the promissory note, the Company entered into a security agreement, by and between the Company and Blue & Silver Ventures, Ltd. to provide a security interest in the assets of the Company to Blue & Silver Ventures, Ltd. in order to secure the obligations underlying the promissory note.

 

Subsequent to June 30, 2025, the Company paid $2.1 million, principal and accrued interest, to pay down the Blue & Silver promissory note in full.

 

 

14. Commitments and contingencies

 

Allinsports - In April 2020, Engine announced its renegotiation of the acquisition of Allinsports. The revised purchase agreement provided for the acquisition of 100% of Allinsports in exchange for the issuance of 241,666 common shares of the Engine and other considerations, including payments of $1,200,000 as a portion of the purchase consideration. In September 2020, Engine advised the shareholders of Allinsports that closing conditions of the transaction, including the requirement to provide audited financial statements, had not been satisfied.

 

In response, in November 2020, the shareholders of Allinsports commenced arbitration in Alberta, Canada seeking, among other things, to compel Engine to complete the acquisition of Allinsports without the audited financial statements, and to issue 241,666 common shares of Engine to those shareholders. As alternative relief, the shareholders of Allinsports sought up to $20.0 million in damages. A hearing in this matter was held in May of 2021, and by a decision dated September 30, 2021, the Arbitrator determined that the closing of the transaction had previously occurred and directed Engine to issue 241,666 common shares. In conjunction with completion of the Arrangement, the Company assumed this obligation to issue 241,666 common shares. The Company has not yet issued the shares and is pursuing relief against Allinsports shareholders for various alleged breaches of the share purchase agreement. The Company recognized a liability for the arbitration ruling of $1.5 million, which represented the fair value of the common shares directed to be delivered as of April 11, 2023, the closing date of the Arrangement. The liability is recorded as arbitration reserve on the Company’s consolidated balance sheets. This liability will be adjusted to fair value at the end of each reporting period.

 

Promissory Note Recovery - By Order to Continue dated May 5, 2022, Engine was substituted in as the plaintiff in a matter pending in the Ontario Superior Court of Justice, seeking recovery of $2.1 million (€1.9 million) of principal and additional amounts of accrued interest under promissory notes acquired by Engine. The matter is in the discovery stage.

 

SPAC Complaint - A complaint has been filed in Delaware Chancery Court against several former directors of Faze Holdings, Inc.’s predecessor, B Riley 150 Merger Corp., and several other B Riley affiliated entities, challenging the disclosures made in connection with the July 2022 merger between B. Riley 150 Merger Corp. and Faze Holdings, Inc. The Company has indemnification obligations to the former B. Riley 150 Merger Corp. directors. Under the terms of a proposed settlement agreement, B. Riley and the Company will each contribute a total of $1,050,000 of cash and Company common stock to resolve the matter. The terms of the proposed settlement of this matter are currently being reviewed by the Delaware Chancery Court.

 

Villanueva v. Faze Clan, Inc. - On June 20, 2024, Plaintiff Harold Villanueva (“Plaintiff”) filed a Complaint in the California Superior Court for the County of Los Angeles, seeking damages against FaZe Clan, Inc. and other parties. Plaintiff asserts causes of action for (1) Negligence, (2) Negligent Hiring, Retention, and Supervision, and (3) Premises Liability in connection with injuries alleged incurred on FaZe Clan’s premises. FaZe Clan has denied liability for the alleged injuries and this matter is in the discovery stage. FaZe Clan’s insurer is providing defense of these claims pursuant to a reservation of rights letter.

 

Alta Partners v. FaZe Holdings, Inc. – On April 23, 2025, Alta Partners, LLC filed a Complaint against FaZe Holdings, Inc. and GameSquare Holdings, Inc., in the United States District Court for the Southern District of New York, alleging that in 2022, FaZe Holdings breached a warrant agreement between FaZe Holdings and Alta. On August 11, 2025, the Company entered into a Settlement and Release Agreement with Alta Partners, LLC, pursuant to which the Company agrees to issue to Alta $150,000 of the Company’s restricted common stock (“Settlement Shares”). In the event that the collective value of the Settlement Shares drops below $150,000 on the six month anniversary date following issuance of the Settlement Shares, or the next business day if the six-month anniversary date falls on a weekend or holiday (the collective value to be computed based on the Nasdaq closing price of GameSquare’s common stock on that six-month anniversary date, or the next business day if the six-month anniversary date falls on a weekend or holiday), then within three (3) business days of that date, GameSquare shall pay the difference between the collective value and $150,000 to Alta in cash (the “True-Up Payment”). Upon GameSquare’s delivery of the Settlement Shares and True Up Payment, if applicable, the public warrants that are owned and/or beneficially held by Alta at that time shall be cancelled immediately and Alta shall have no ownership, right, claim, interest or benefit in such public warrants. Moreover, within three (3) business days of Alta’s receipt of the Settlement Shares, Alta shall file the Stipulation of Voluntary Dismissal with Prejudice, dismissing all claims asserted in the Action against GameSquare with prejudice.

 

The outcomes of pending litigations in which the Company is involved are necessarily uncertain as are the Company’s expenses in prosecuting and defending these actions. From time to time the Company may modify litigation strategy and/or the terms on which it retains counsel and other professionals in connection with such actions, which may affect the outcomes of and/or the expenses incurred in connection with such actions.

 

The Company is subject to various other claims, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable, and the amounts are estimable. Although the outcome of such matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations, or liquidity.

 

15. Revenue and segmented information

 

The CODM uses gross profit, as reviewed at periodic business review meetings, as the key measure of the Company’s results as it reflects the Company’s underlying performance for the period under evaluation to determine resource allocation. As of June 30, 2025, the Company was organized into the three operating segments, which also represent its three reportable segments: Teams, Agency and Software-as-service (SaaS) + Advertising.

 

 

Revenue, cost of sales and gross profit for the Company’s operating and reportable segments, disaggregated into geographic locations, are as follows:

 

Schedule of disaggregated into geographic regions

		Six months ended June 30, 2025
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	4,894,879			$	-			$	4,894,879
Agency			454,568				4,052,199				-				4,506,767
SaaS + Advertising			-				16,136,685				5,045,606				21,182,291
Total Revenue			454,568				25,083,763				5,045,606				30,583,937
Cost of sales
Teams			-				3,487,588				-				3,487,588
Agency			358,631				3,188,117				-				3,546,748
SaaS + Advertising			-				15,258,488				2,501,033				17,759,521
Total Cost of sales			358,631				21,934,193				2,501,033				24,793,857
Gross profit
Teams			-				1,407,291				-				1,407,291
Agency			95,937				864,082				-				960,019
SaaS + Advertising			-				878,197				2,544,573				3,422,770
Total Gross profit		$	95,937			$	3,149,570			$	2,544,573			$	5,790,080

 

		Six months ended June 30, 2024
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	2,933,101			$	-			$	2,933,101
Agency			729,584				4,250,742				-				4,980,326
SaaS + Advertising			-				23,912,430				1,580,842				25,493,272
Total Revenue			729,584				31,096,273				1,580,842				33,406,699
Cost of sales
Teams			-				2,660,741				-				2,660,741
Agency			534,098				3,698,755				-				4,232,853
SaaS + Advertising			-				21,754,515				167,948				21,922,463
Total Cost of sales			534,098				28,114,011				167,948				28,816,057
Gross profit
Teams			-				272,360				-				272,360
Agency			195,486				551,987				-				747,473
SaaS + Advertising			-				2,157,915				1,412,894				3,570,809
Total Gross profit		$	195,486			$	2,982,262			$	1,412,894			$	4,590,642

 

		Three months ended June 30, 2025
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	1,806,373			$	-			$	1,806,373
Agency			224,862				1,981,870				-				2,206,732
SaaS + Advertising			-				8,418,367				3,421,234				11,839,601
Total Revenue			224,862				12,206,610				3,421,234				15,852,706
Cost of sales
Teams			-				1,734,744				-				1,734,744
Agency			141,682				1,923,245				-				2,064,927
SaaS + Advertising			-				8,058,085				1,568,496				9,626,581
Total Cost of sales			141,682				11,716,074				1,568,496				13,426,252
Gross profit
Teams			-				71,629				-				71,629
Agency			83,180				58,625				-				141,805
SaaS + Advertising			-				360,282				1,852,738				2,213,020
Total Gross profit		$	83,180			$	490,536			$	1,852,738			$	2,426,454

 

 

		Three months ended June 30, 2024
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	2,520,848			$	-			$	2,520,848
Agency			350,935				1,686,534				-				2,037,469
SaaS + Advertising			-				12,469,920				800,938				13,270,858
Total Revenue			350,935				16,677,302				800,938				17,829,175
Cost of sales
Teams			-				1,906,062				-				1,906,062
Agency			283,466				1,538,081				-				1,821,547
SaaS + Advertising			-				11,492,930				87,342				11,580,272
Total Cost of sales			283,466				14,937,073				87,342				15,307,881
Gross profit
Teams			-				614,786				-				614,786
Agency			67,469				148,453				-				215,922
SaaS + Advertising			-				976,990				713,596				1,690,586
Total Gross profit		$	67,469			$	1,740,229			$	713,596			$	2,521,294

 

Management does not evaluate operating segments using discrete asset information. The Company’s consolidated assets are generally shared across, and are not specifically ascribed to, operating and reportable segments.

 

Property and equipment, net, by geographic region, are summarized as follows:

 

Schedule of property and equipment net by geographic region

		June 30, 2025				December 31, 2024
USA		$	113,854			$	297,727
United Kingdom			1,461				1,337
Spain			4,674				4,886
Total		$	119,989			$	303,950

 

 

16. Fair value measurements

 

The carrying value of cash approximates fair value. The carrying amount of other current assets and liabilities, such as accounts and other receivables and accounts payable, approximates fair value due to the short-term maturity of the amounts, and such current assets and liabilities are considered Level 2 in the fair value hierarchy.

 

The following tables summarize financial assets and liabilities measured at fair value on a recurring basis:

 

Schedule of financial assets and liabilities measured at fair value on a recurring basis

		As of June 30, 2025
Description		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant liability			-				-				27,164				27,164
Arbitration reserve			210,008				-				-				210,008
Convertible debt			-				-				1,669,330				1,669,330

 

		As of December 31, 2024
Description		Level 1				Level 2				Level 3				Total
Liabilities:
Warrant liability			-				-				14,314				14,314
Arbitration reserve			199,374				-				-				199,374
Convertible debt			-				-				16,390,488				16,390,488

 

(a) Fair values measured on a non-recurring basis

 

The Company’s non-financial assets, such as property and equipment, goodwill and intangible assets, are recorded at fair value upon a business combination and are remeasured at fair value only if an impairment charge is recognized. The Company’s investment, accounted for under the measurement alternative of ASC 321, is remeasured at fair value only upon an observable price change or if an impairment charge is recognized. The Company uses unobservable inputs to the valuation methodologies that are significant to the fair value measurements, and the valuations require management’s judgment due to the absence of quoted market prices. The Company determines the fair value of its held and used assets, goodwill and intangible assets using an income, cost or market approach as determined reasonable.

 

17. Discontinued operations

 

(a) Complexity

 

As discussed in Note 4, on March 1, 2024, the Company sold Complexity and recognized a gain on disposition of $3.0 million, resulting in Complexity meeting the requirements for presentation as discontinued operations. Prior to disposition, Complexity was part of the Teams operating and reportable segment.

 

The Company recognized a pretax net loss of $1.4 million for the six months ended June 30, 2024, in net income (loss) from discontinued operations in the consolidated statements of operations and comprehensive loss in relation to Complexity. The pretax net loss of $1.4 million during the six months ended June 30, 2024, includes revenue of $1.0 million, cost of revenue of $0.9 million, and operating expenses of $1.5 million.

 

Complexity had amortization and depreciation of $0.2 million for the six months ended June 30, 2024. Complexity did not have significant capital expenditures or significant noncash activity during the periods presented.

 

(b) FaZe Media

As discussed in Note 4, on April 1, 2025, the Company sold FaZe Media and recognized a gain on disposition of $3.0 million, resulting in FaZe Media meeting the requirements for presentation as discontinued operations. Prior to disposition, FaZe Media was part of the Teams operating and reportable segment.

 

The Company recognized a pretax net loss of $2.6 million and $1.9 million for the six months ended June 30, 2025 and 2024, in net income (loss) from discontinued operations in the consolidated statements of operations and comprehensive loss in relation to FaZe Media. The pretax net loss of $2.6 million during the six months ended June 30, 2025, includes revenue of $6.4 million, cost of revenue of $6.4 million, and operating expenses of $2.6 million. The pretax net loss of $1.9 million during the six months ended June 30, 2024, includes revenue of $12.9 million, cost of revenue of $9.9 million, and operating expenses of $4.9 million.

 

The Company recognized a pretax net loss of $0 and $2.1 million for the three months ended June 30, 2025 and 2024, in net income (loss) from discontinued operations in the consolidated statements of operations and comprehensive loss in relation to FaZe Media. The pretax net loss of $2.1 million during the three months ended June 30, 2024, includes revenue of $10.8 million, cost of revenue of $9.0 million, and operating expenses of $3.9 million.

 

FaZe Media had amortization and depreciation of $0.3 million and $0.5 million for the six months ended June 30, 2025 and 2024. FaZe Media did not have significant capital expenditures or significant noncash activity during the periods presented.

 

 

18. Subsequent events

 

At-The-Market Sales Agreement

 

On June 27, 2025, the Company entered into an At-The-Market Sales Agreement with ThinkEquity LLC (the “Agent”), pursuant to which GameSquare may offer and sell, from time to time, through or to the Agent, as sales agent, shares of Common Stock, par value $0.0001 per share (the “Shares”). On June 27, 2025, the Company filed a prospectus supplement relating to the offer and sale of the Shares from time to time pursuant to the At-The-Market Sales Agreement up to an aggregate amount of $9,250,000. However, on July 7, 2025, the Company delivered notice to the Agent that it was suspending and terminating the prospectus supplement, dated June 27, 2025, related to the Company’s common stock, $0.0001 par value per share, issuable pursuant to the terms of the At-The-Market Sales Agreement. The Company will not make any sales of its common stock pursuant to the At-The-Market Sales Agreement, unless and until a new prospectus or prospectus supplement is filed with the Securities and Exchange Commission.

 

July 9, 2025 Offering

 

On July 8, 2025, the Company entered into an underwriting agreement with Lucid Capital Markets, LLC (the “Underwriter”) pursuant to which the Company issued and sold to the Underwriter pursuant to the Underwriting Agreement 4,692,866 shares of common stock, par value $0.0001 per share and 3,728,188 pre-funded warrants (each representing the right to purchase one Share of Common Stock at an exercise price of $0.0001, the “Pre-Funded Warrant”) to purchase shares of Common Stock, at an offering price of $0.95 per Share (or $0.9499 per Pre-Funded Warrant), and grant to the Underwriter an option for the issuance and sales of up to 1,263,157 additional Shares or Pre-Funded Warrants (the “Option”) to be sold by the Company (the “Offering”). The Offering closed on July 9, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $8.56 million, after deducting an underwriting discount of 7% of the price to the public, but before deducting expenses payable by the Company in connection with the Offering. Pursuant to the Underwriting Agreement we also agreed to issue the Underwriter’s common stock purchase warrants (the “Representative’s Warrant”) to purchase up to 10% of the securities sold in the Offering at an exercise price of $1.14.

 

On July 9, 2025, the Underwriter fully exercised its Option pursuant to the Underwriting Agreement and purchased and exercised 1,263,157 Pre-Funded Warrants at a price of $0.9499 per Pre-Funded Warrant and at an exercise price of $0.0001 per Pre-Funded Warrant. The Underwriter’s exercise of its Option resulted in additional gross proceeds to the Company of $1,199,872.83 after deducing the underwriting discount of 7% of the price to the public.

 

July 18, 2025 Offering

 

On July 17, 2025, the Company entered into an underwriting agreement with Lucid Capital Markets, LLC (the “Underwriter”) pursuant to which the Company will issue and sell to the Underwriter pursuant to the Underwriting Agreement 46,666,667 shares of common stock, par value $0.0001 per share , at an offering price of $1.50 per Share, and grant to the Underwriter an option for the issuance and sales of up to 7,000,000 additional Shares (the “Option”) to be sold by the Company (the “Offering”). The Offering closed on July 18, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $61.5 million, after deducting an underwriting discount of 7% of the price to the public, but before deducting expenses payable by the Company in connection with the Offering. Pursuant to the Underwriting Agreement we also agreed to issue the Underwriter’s common stock purchase warrants (the “Representative’s Warrant”) to purchase up to 10% of the securities sold in the Offering at an exercise price of $1.80.

 

On July 18, 2025, the Underwriter partially exercised its Option pursuant to the Underwriting Agreement and purchased 3,500,000 Shares at a price of $1.50 per Share. The Underwriter’s partial exercise of its Option resulted in additional gross proceeds to the Company of $4,882,500 after deducting the underwriting discount of 7% of the price to the public.

 

 

Series A-1 Preferred Stock

 

On July 23, 2025, the board of directors of the Company approved a Certificate of Designation of Series A-1 Convertible Preferred Stock of the Company (the “Certificate of Designation”) establishing the rights, preferences, powers, restrictions and limitations of the Company’s newly authorized 3,433.33 shares of the Series A-1 Preferred Stock. The Certificate of Designation was filed with the Secretary of State of the State of Delaware on July 24, 2025, and became effective upon filing.

 

The Series A-1 Preferred Stock ranks senior to all junior securities, including Common Stock, and carries a $1.50 per share liquidation preference on an as-converted basis, with such preference subject to the Shareholder Vote Condition. After satisfying this preference, holders participate pro rata with junior securities. The Series A-1 Preferred Stock has no voting rights, and upon satisfaction of the Shareholder Vote Condition, each share of Series A-1 Preferred Stock will automatically convert into 1,000 shares of the Common Stock.

 

Subscription

 

On July 24, 2025, the Company entered into a Subscription Agreement with Robert Leshner (“Subscriber”), pursuant to which Subscriber purchased from the Company 3,433.33 shares of Series A-1 Convertible Preferred Stock of the Company, par value $0.0001 per share (the “Series A-1 Preferred Stock”), in consideration for that certain Crypto Punk 5577 non-fungible token, which has been deemed to have a fair market value of $5,149,995.00 (the “Issuance”). Each share of Series A-1 Preferred Stock was issued at a price of $1,500 per share and automatically converts, at a fixed ratio to 1,000 shares of common stock of the Company, par value $0.0001 per share, resulting in an effective conversion price of $1.50 per share.

 

Repurchase Program

 

On August 1, 2025, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company may purchase shares of common stock, par value $0.0001 per share up to $5,000,000 worth of Common Stock. Under the repurchase program, GameSquare may purchase shares of its Common Stock on a discretionary basis from time to time through open market repurchases, in privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The timing and actual number of shares repurchased will be determined by management depending on a variety of factors, including, among other factors, stock price, trading volume, market conditions and other general business considerations. The repurchase program has no expiration date and may be modified, suspended, or terminated at any time. Repurchases under this program will be funded from the Company’s surplus cash and cash equivalents or future cash flow generated by its Ethereum yield strategy.

 

Alta Settlement

 

On April 23, 2025, Alta Partners, LLC filed a Complaint against FaZe Holdings, Inc. and GameSquare Holdings, Inc., in the United States District Court for the Southern District of New York, alleging that in 2022, FaZe Holdings breached a warrant agreement between FaZe Holdings and Alta. On August 11, 2025, the Company entered into a Settlement and Release Agreement with Alta Partners, LLC, pursuant to which the Company agrees to issue to Alta $150,000 of the Company’s restricted common stock (“Settlement Shares”). In the event that the collective value of the Settlement Shares drops below $150,000 on the six month anniversary date following issuance of the Settlement Shares, or the next business day if the six-month anniversary date falls on a weekend or holiday (the collective value to be computed based on the Nasdaq closing price of GameSquare’s common stock on that six-month anniversary date, or the next business day if the six-month anniversary date falls on a weekend or holiday), then within three (3) business days of that date, GameSquare shall pay the difference between the collective value and $150,000 to Alta in cash (the “True-Up Payment”). Upon GameSquare’s delivery of the Settlement Shares and True Up Payment, if applicable, the public warrants that are owned and/or beneficially held by Alta at that time shall be cancelled immediately and Alta shall have no ownership, right, claim, interest or benefit in such public warrants. Moreover, within three (3) business days of Alta’s receipt of the Settlement Shares, Alta shall file the Stipulation of Voluntary Dismissal with Prejudice, dismissing all claims asserted in the Action against GameSquare with prejudice.

 

Officer Grants

 

On July 11, 2025 (the “Grant Date”), Justin Kenna, Louis Schwartz, and Michael Munoz were each granted (i) options to purchase an aggregate of 1,045,712 shares of GameSquare common stock and (ii) 464,863 restricted stock units (“RSUs”), each representing a contingent right to receive one share of GameSquare common stock. The grants were made as part of the GameSquare long-term incentive program and vest as follows: 25% on the Grant Date, 37.5% on the first anniversary of the Grant Date, and 37.5% on the second anniversary of the Grant Date.

 

On July 11, 2025, Justin Kenna was also granted a one-time grant of stock options to purchase an aggregate of 150,000 shares of GameSquare common stock, and 225,000 restricted stock units, which will convert into one share of GameSquare common stock, pursuant to Justin Kenna’s Employment Agreement, and which vest immediately.

 

Nasdaq bid price requirement

 

On October 16, 2024, we received a letter from The Nasdaq Stock Market LLC indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum closing bid price of at least $1.00 per share. On July 22, 2025, we received a letter from the NASDAQ Listing Qualifications Staff notifying us that we have regained compliance with NASDAQ’s minimum bid price requirements for continued listing on the Nasdaq Capital Market. The letter noted that as a result of the closing bid price of the Company’s common stock having been at $1.00 per share or greater for at least ten consecutive business days, from July 8, 2025 to July 21, 2025, we have regained compliance with Listing Rule 5550(a)(2)and the matter is now closed.

 

 

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

 

Unless the context otherwise requires, all references in this section to the “Company,” “GameSquare,” “we,” “us,” or “our” refer to GameSquare Holdings, Inc. and its subsidiaries and/or the management and employees of the Company.

 

The following discussion and analysis provide information which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. This discussion and analysis should be read together with our audited consolidated financial statements and related notes included in Part I of this Form 10-Q. This discussion and analysis should also be read together with our financial information for the year ended and as of December 31, 2024. In addition to historical financial information, this discussion and analysis contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks, uncertainties and assumptions. As a result of many factors, such as those set forth under the “Cautionary Statement Regarding Forward-Looking Statements” elsewhere in this Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

GameSquare is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. GameSquare’s end-to-end platform includes Gaming Community Network (“GCN”), a digital media company focused on gaming and esports audiences, Zoned, a gaming and lifestyle marketing agency, Code Red, a UK based esports talent agency, FaZe, a lifestyle and media platform rooted in gaming and youth culture whose premium brand, talent network, and large audience can be monetized across a variety of products and services, Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform.

 

GameSquare Holdings, Inc. (formerly Engine Gaming and Media, Inc.), (NASDAQ: GAME) completed its plan of arrangement (the “Arrangement”) with GameSquare Esports Inc. (“GSQ”) on April 11, 2023, resulting in the Company acquiring all the issued and outstanding securities of GSQ. At completion of the Arrangement Engine Gaming and Media, Inc. changed its name to GameSquare Holdings Inc.

 

GameSquare is also leveraging sophisticated crypto infrastructure to generate digital asset yield. GameSquare has partnered with Dialetic, a leading crypto-native asset manager, to implement an Ethereum (“ETH”) based treasury strategy. GameSquare’s ETH-focused yield generation strategy is built on top of Dialectic’s proprietary platform Medici, which applies machine learning models, automated optimization, and multi-layered risk controls to generate returns. GameSquare’s Board has approved an ETH allocation of up to $250 million, based on staged investments over time, while keeping adequate working capital for the operating business. To date, GameSquare has purchased, directly and indirectly, over $60 million ETH and NFT to support broader growth initiatives across the Company’s platform.

 

Brands

 

FaZe Esports

 

FaZe Esports a digitally native lifestyle and media brand founded and rooted in gaming and youth culture. FaZe Esports is at the forefront of the global creator economy, which is an industry centered around innovative digital content development fueled by social media influencers, creators and businesses who monetize their content online. With a leading digital content platform created for and by Generation Z and Millennials, FaZe Esports has established a highly engaged and growing global fanbase. FaZe Esports produces merchandise, consumer products, and create advertising and sponsorship programs for leading national brands. FaZe Esports has several revenue streams including brand sponsorships, consumer products, and Esports.

 

Zoned

 

Zoned Gaming is a marketing agency dedicated to bridging the gap between gaming and pop-culture. They work with endemic and non-endemic brands alike, helping them identify their lane and build equity in the constantly changing world of gaming and esports.

 

Code Red

 

Code Red is an authentic esports media agency that is passionate about esports and video games. Since 2003, Code Red has produced major esports events, sourced, and hired esports and gaming talent, developed esports related content (that has gone out to over 1 million viewers), managed major esports teams, conducted a wide range of ongoing and ad-hoc strategic consultancy projects, and managed countless marketing campaigns.

 

GCN

 

GCN is a media group dedicated to gaming and esports. GCN builds bespoke strategy solutions for reaching young gaming & esports audiences from content creation to full-scale tournaments for any endpoint be it social, broadcast TV or live stream.

 

Fourth Frame Studios

 

Rooted in gaming, youth, and popular culture, Fourth Frame Studios is a multidisciplinary creative and production studio that specializes in telling stories for a multi-dimensional audience. Fourth Frame Studios builds meaningful and diverse content systems fueled by best-in-class creatives and production resources, that truly get what gamers and youth audiences want.

 

 

Mission Supply

 

Mission Supply operates at the intersection of gaming, esports, and fashion design filling a need for fans seeking high quality merchandise that represents their favorite teams, organizations, and brands within the gaming ecosystem by providing merchandise and consumer product design, marketing, and sales consultation to brands and esports organizations seeking to reach large and growing gaming and youth demographics.

 

Sideqik

 

Sideqik, Inc. (“Sideqik”), is an influencer marketing platform that offers brands, direct marketers, and agencies tools to discover, connect and execute marketing campaigns with content creators. Sideqik’s end-to-end solutions offer marketers advanced capabilities to discover influencers with demographic and content filtering; connect and message influencers; share marketing collateral such as campaign briefs, photos, logos, videos; measure reach, sentiment, and engagement across all major social media platforms; and evaluate earned media value and return on investment across the entire campaign.

 

Stream Hatchet

 

Stream Hatchet is the leading provider of data analytics for the live streaming industry. With a suite of services, encompassing a user-friendly SaaS platform, custom reports, and strategic consulting, Stream Hatcher is a trusted guide for those navigating the dynamic landscape of live streaming. With up to seven years of historical data with minute-level granularity from 20 platforms, Stream Hatchet provides stakeholders in the live-streaming industry with powerful insights to drive innovation and growth. Stream Hatchet partners with a diverse clientele - from video game publishers and marketing agencies to esports organizers and teams - who rely on the company’s cutting-edge data analytics to optimize their marketing strategies, secure lucrative sponsorships, enhance esports performance, and build successful tournaments.

 

Frankly Media

 

Frankly Media provides comprehensive advertising products and services, including direct sales and programmatic ad support.

 

Recent Developments

 

At-The-Market Sales Agreement

 

On June 27, 2025, the Company entered into an At-The-Market Sales Agreement with ThinkEquity LLC (the “Agent”), pursuant to which GameSquare may offer and sell, from time to time, through or to the Agent, as sales agent, shares of Common Stock, par value $0.0001 per share (the “Shares”). On June 27, 2025, the Company filed a prospectus supplement relating to the offer and sale of the Shares from time to time pursuant to the At-The-Market Sales Agreement up to an aggregate amount of $9,250,000. However, on July 7, 2025, the Company delivered notice to the Agent that it was suspending and terminating the prospectus supplement, dated June 27, 2025, related to the Company’s common stock, $0.0001 par value per share, issuable pursuant to the terms of the At-The-Market Sales Agreement. The Company will not make any sales of its common stock pursuant to the At-The-Market Sales Agreement, unless and until a new prospectus or prospectus supplement is filed with the Securities and Exchange Commission.

 

July 9, 2025 Offering

 

On July 8, 2025, the Company entered into an underwriting agreement with Lucid Capital Markets, LLC (the “Underwriter”) pursuant to which the Company issued and sold to the Underwriter pursuant to the Underwriting Agreement 4,692,866 shares of common stock, par value $0.0001 per share and 3,728,188 pre-funded warrants (each representing the right to purchase one Share of Common Stock at an exercise price of $0.0001, the “Pre-Funded Warrant”) to purchase shares of Common Stock, at an offering price of $0.95 per Share (or $0.9499 per Pre-Funded Warrant), and grant to the Underwriter an option for the issuance and sales of up to 1,263,157 additional Shares or Pre-Funded Warrants (the “Option”) to be sold by the Company (the “Offering”). The Offering closed on July 9, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $8.56 million, after deducting an underwriting discount of 7% of the price to the public, but before deducting expenses payable by the Company in connection with the Offering. Pursuant to the Underwriting Agreement we also agreed to issue the Underwriter’s common stock purchase warrants (the “Representative’s Warrant”) to purchase up to 10% of the securities sold in the Offering at an exercise price of $1.14.

 

On July 9, 2025, the Underwriter fully exercised its Option pursuant to the Underwriting Agreement and purchased and exercised 1,263,157 Pre-Funded Warrants at a price of $0.9499 per Pre-Funded Warrant and at an exercise price of $0.0001 per Pre-Funded Warrant. The Underwriter’s exercise of its Option resulted in additional gross proceeds to the Company of $1,199,872.83 after deducing the underwriting discount of 7% of the price to the public.

 

 

July 18, 2025 Offering

 

On July 17, 2025, the Company entered into an underwriting agreement with Lucid Capital Markets, LLC (the “Underwriter”) pursuant to which the Company issued and sold to the Underwriter pursuant to the Underwriting Agreement 46,666,667 shares of common stock, par value $0.0001 per share , at an offering price of $1.50 per Share, and granted to the Underwriter an option for the issuance and sales of up to 7,000,000 additional Shares (the “Option”) to be sold by the Company (the “Offering”). The Offering closed on July 18, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $61.5 million, after deducting an underwriting discount of 7% of the price to the public, but before deducting expenses payable by the Company in connection with the Offering. Pursuant to the Underwriting Agreement we also agreed to issue the Underwriter’s common stock purchase warrants (the “Representative’s Warrant”) to purchase up to 10% of the securities sold in the Offering at an exercise price of $1.80.

 

On July 18, 2025, the Underwriter partially exercised its Option pursuant to the Underwriting Agreement and purchased 3,500,000 Shares at a price of $1.50 per Share. The Underwriter’s partial exercise of its Option resulted in additional gross proceeds to the Company of $4,882,500 after deducting the underwriting discount of 7% of the price to the public.

 

Series A-1 Preferred Stock

 

On July 23, 2025, the board of directors of the Company approved a Certificate of Designation of Series A-1 Convertible Preferred Stock of the Company (the “Certificate of Designation”) establishing the rights, preferences, powers, restrictions and limitations of the Company’s newly authorized 3,433.33 shares of the Series A-1 Preferred Stock. The Certificate of Designation was filed with the Secretary of State of the State of Delaware on July 24, 2025, and became effective upon filing.

 

The Series A-1 Preferred Stock ranks senior to all junior securities, including Common Stock, and carries a $1.50 per share liquidation preference on an as-converted basis, with such preference subject to the Shareholder Vote Condition. After satisfying this preference, holders participate pro rata with junior securities. The Series A-1 Preferred Stock has no voting rights, and upon satisfaction of the Shareholder Vote Condition, each share of Series A-1 Preferred Stock will automatically convert into 1,000 shares of the Common Stock.

 

Subscription

 

On July 24, 2025, the Company entered into a Subscription Agreement with Robert Leshner (“Subscriber”), pursuant to which Subscriber purchased from the Company 3,433.33 shares of Series A-1 Convertible Preferred Stock of the Company, par value $0.0001 per share (the “Series A-1 Preferred Stock”), in consideration for that certain Crypto Punk 5577 non-fungible token, which has been deemed to have a fair market value of $5,149,995.00 (the “Issuance”). Each share of Series A-1 Preferred Stock was issued at a price of $1,500 per share and automatically converts, at a fixed ratio to 1,000 shares of common stock of the Company, par value $0.0001 per share, resulting in an effective conversion price of $1.50 per share.

 

Repurchase Program

 

On August 1, 2025, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company may purchase shares of common stock, par value $0.0001 per share up to $5,000,000 worth of Common Stock. Under the repurchase program, GameSquare may purchase shares of its Common Stock on a discretionary basis from time to time through open market repurchases, in privately negotiated transactions, or other means, including through Rule 10b5-1 trading plans. The timing and actual number of shares repurchased will be determined by management depending on a variety of factors, including, among other factors, stock price, trading volume, market conditions and other general business considerations. The repurchase program has no expiration date and may be modified, suspended, or terminated at any time. Repurchases under this program will be funded from the Company’s surplus cash and cash equivalents or future cash flow generated by its Ethereum yield strategy.

 

Alta Settlement

 

On April 23, 2025, Alta Partners, LLC filed a Complaint against FaZe Holdings, Inc. and GameSquare Holdings, Inc., in the United States District Court for the Southern District of New York, alleging that in 2022, FaZe Holdings breached a warrant agreement between FaZe Holdings and Alta. On August 11, 2025, the Company entered into a Settlement and Release Agreement with Alta Partners, LLC, pursuant to which the Company agrees to issue to Alta $150,000 of the Company’s restricted common stock (“Settlement Shares”). In the event that the collective value of the Settlement Shares drops below $150,000 on the six month anniversary date following issuance of the Settlement Shares, or the next business day if the six-month anniversary date falls on a weekend or holiday (the collective value to be computed based on the Nasdaq closing price of GameSquare’s common stock on that six-month anniversary date, or the next business day if the six-month anniversary date falls on a weekend or holiday), then within three (3) business days of that date, GameSquare shall pay the difference between the collective value and $150,000 to Alta in cash (the “True-Up Payment”). Upon GameSquare’s delivery of the Settlement Shares and True Up Payment, if applicable, the public warrants that are owned and/or beneficially held by Alta at that time shall be cancelled immediately and Alta shall have no ownership, right, claim, interest or benefit in such public warrants. Moreover, within three (3) business days of Alta’s receipt of the Settlement Shares, Alta shall file the Stipulation of Voluntary Dismissal with Prejudice, dismissing all claims asserted in the Action against GameSquare with prejudice.

 

 

Officer Grants

 

On July 11, 2025 (the “Grant Date”), Justin Kenna, Louis Schwartz, and Michael Munoz were each granted (i) options to purchase an aggregate of 1,045,712 shares of GameSquare common stock and (ii) 464,863 restricted stock units (“RSUs”), each representing a contingent right to receive one share of GameSquare common stock. The grants were made as part of the GameSquare long-term incentive program and vest as follows: 25% on the Grant Date, 37.5% on the first anniversary of the Grant Date, and 37.5% on the second anniversary of the Grant Date.

 

On July 11, 2025, Justin Kenna was also granted a one-time grant of stock options to purchase an aggregate of 150,000 shares of GameSquare common stock, and 225,000 restricted stock units, which will convert into one share of GameSquare common stock, pursuant to Justin Kenna’s Employment Agreement, and which vest immediately.

 

Nasdaq bid price requirement

 

On October 16, 2024, we received a letter from The Nasdaq Stock Market LLC indicating that we have failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a)(2) requires that companies listed on the Nasdaq Capital Market maintain a minimum closing bid price of at least $1.00 per share. On July 22, 2025, we received a letter from the NASDAQ Listing Qualifications Staff notifying us that we have regained compliance with NASDAQ’s minimum bid price requirements for continued listing on the Nasdaq Capital Market. The letter noted that as a result of the closing bid price of the Company’s common stock having been at $1.00 per share or greater for at least ten consecutive business days, from July 8, 2025 to July 21, 2025, we have regained compliance with Listing Rule 5550(a)(2)and the matter is now closed.

 

Gigamoon CD Conversion

 

As previously disclosed, on November 13, 2024, the Company and Gigamoon entered into a senior secured convertible promissory note in the principal amount of $10 million (the “Gigamoon CD”). On April 2, 2025, GameSquare and Gigamoon entered into an exchange agreement, effective April 1, 2025, pursuant to which, the parties agreed to accelerate the exercise date under the Gigamoon CD to April 1, 2025. As a result, on April 1, 2025, GameSquare transferred the 5,725,000 shares of Series A-1 Preferred Stock of Faze Media Inc. to Gigamoon.

 

Promissory Note

 

On March 25, 2025, the Company entered into a secured promissory note with Blue & Silver Ventures, Ltd. The principal amount of $2 million under the promissory note is payable on demand and no later than July 1, 2025. The promissory note bears interest at a rate of ten percent (10%) per annum, with a default interest rate of fifteen percent (15%) per annum, and is payable on demand and no later than July 1, 2025 with the principal amount. The Company, at its option, may prepay the promissory note, in whole or in part, without a prepayment penalty of any kind.

 

In connection with the promissory note, the Company entered into a security agreement, by and between the Company and Blue & Silver Ventures, Ltd. to provide a security interest in the assets of the Company to Blue & Silver Ventures, Ltd. in order to secure the obligations underlying the promissory note.

 

Subsequent to June 30, 2025, the Company paid $2.1 million, principal and accrued interest, to pay down the Blue & Silver promissory note in full.

 

Yorkville CD conversion and settlement

 

On January 2, 2025, the Company announced that it has extinguished its outstanding convertible note and standby equity purchase agreement with Yorkville Advisors Global L.P. (“Yorkville”). Under the strategic transaction, GameSquare has issued a zero-coupon, 60-day promissory note to Yorkville associated with a prepayment penalty of $0.8 million. Additionally, all shares previously owned by Yorkville, were purchased by outside investors in block transactions that occurred on January 21, 2025.

 

Gigamoon CD

 

On November 13, 2024, the Company and Gigamoon entered into a senior secured convertible promissory note in the principal amount of $10 million (the “Gigamoon CD”). On December 15, 2024, the Company received cash of $10 million from Gigamoon for issuance of the Gigamoon CD.

 

The Gigamoon CD bears an interest rate of 7.5% per annum, which automatically shall be increased to 10.0% in the event of an event of default. The Gigamoon CD has a maturity date of five years from the issuance, unless earlier accelerated upon the occurrence of an event of default upon the election of the holder. Interest shall accrue as of the issuance date and shall be payable by the Company on (i) each anniversary of such issuance date, and (ii) the earlier of (a) the maturity date and (b) the conversion or exchange of the Gigamoon CD. Interest payments under the Gigamoon CD are payable in the Company’s common stock, equal to the quotient of (a) the aggregate amount of any accrued and unpaid interest as of such payment date, and (b) the conversion price of $2.50 per common share.

 

At the option of the holder, at any time on or after December 31, 2025, or upon an event of default or certain change of control events, the Gigamoon CD can be converted into either (i) GameSquare common stock at a conversion price of $2.50 per common share or (ii) exchanged for the 5,725,000 shares of Series A-1 Preferred Stock of Faze Media Inc. held by the Company.

 

On April 2, 2025, GameSquare and Gigamoon entered into an exchange agreement, effective April 1, 2025, pursuant to which, the parties agreed to accelerate the exercise date under the Gigamoon CD to April 1, 2025. As a result, on April 1, 2025, GameSquare transferred the 5,725,000 shares of Series A-1 Preferred Stock of Faze Media Inc. to Gigamoon.

 

 

Current Market Conditions

 

GameSquare is pursuing organic growth opportunities, as well as M&A growth opportunities. From August 2020 to June 2025, the Company has completed five acquisitions and divested three non-core assets. GameSquare’s organic growth strategy focuses on growing audience and reach within its digital agencies, media network, and teams segments. GameSquare’s digital agencies, teams, and services segments serve the gaming and esports market, and more broadly sports and entertainment through content creation, audience development and growing brand relationships. The digital agency industry is highly fragmented, and these businesses are generally characterized by high revenue growth with healthy earnings before income, taxes, depreciation and amortization margins, which management believes positions the Company well for sustainable growth through organic efforts and presents significant opportunities to grow through accretive acquisitions.

 

The Company has invested in its sales organization and continues to see significant growth in the number, and the size, of requests for proposals within its agency businesses. The Company’s financial profile compares very favorably against its esports peers, as well as other companies seeking to engage with youth audiences.

 

The Company believes enterprise growth may come as a result of synergistic approaches to combining the strengths of its multiple SaaS companies that it can present as a unified offering to the market.

 

The following is a summary of the Company’s financial performance highlights for the three and six months ended June 30, 2025 and 2024. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.

 

Results of Operations

 

The following table summarizes our results of operations for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024. FaZe Media is now reported in discontinued operations, historical results of operations of FaZe Media are netted in discontinued operations within the below figures.

 

		Six months ended June 30,
		2025				2024				Variance
Revenue		$	30,583,937			$	33,406,699			$	(2,822,762	)
Cost of revenue			24,793,857				28,816,057				(4,022,200	)
Gross profit			5,790,080				4,590,642				1,199,438
Operating expenses:
General and administrative			8,350,837				9,402,195				(1,051,358	)
Selling and marketing			2,944,853				3,449,227				(504,374	)
Research and development			1,113,010				1,189,305				(76,295	)
Depreciation and amortization			558,825				1,182,368				(623,543	)
Restructuring charges			782,541				-				782,541
Other operating expenses			1,292,565				2,088,137				(795,572	)
Total operating expenses			15,042,631				17,311,232				(2,268,601	)
Loss from continuing operations			(9,252,551	)			(12,720,590	)			3,468,039
Other income (expense), net:
Interest expense			(4,968	)			(627,385	)			622,417
Change in fair value of convertible debt carried at fair value			327,916				456,759				(128,843	)
Change in fair value of warrant liability			(12,384	)			52,900				(65,284	)
Arbitration settlement reserve			(10,634	)			138,625				(149,259	)
Other income (expense), net			(1,347,992	)			(4,031,043	)			2,683,051
Total other income (expense), net			(1,048,062	)			(4,010,144	)			2,962,082
Loss from continuing operations before income taxes			(10,300,613	)			(16,730,734	)			6,430,121
Income tax benefit			-				-				-
Net loss from continuing operations			(10,300,613	)			(16,730,734	)			6,430,121
Net income (loss) from discontinued operations			108,531				(533,355	)			641,886
Net loss			(10,192,082	)			(17,264,089	)			7,072,007
Net loss attributable to non-controlling interest			2,018,132				389,590				1,628,542
Net loss attributable to attributable to GameSquare Holdings, Inc.		$	(8,173,950	)		$	(16,874,499	)		$	8,700,549

 

		Three months ended June 30,
		2025				2024				Variance
Revenue		$	15,852,706			$	17,829,175			$	(1,976,469	)
Cost of revenue			13,426,252				15,307,881				(1,881,629	)
Gross profit			2,426,454				2,521,294				(94,840	)
Operating expenses:
General and administrative			4,076,391				4,917,730				(841,339	)
Selling and marketing			1,497,096				1,636,571				(139,475	)
Research and development			557,403				585,031				(27,628	)
Depreciation and amortization			302,360				564,346				(261,986	)
Restructuring charges			165,328				-				165,328
Other operating expenses			547,188				994,717				(447,529	)
Total operating expenses			7,145,766				8,698,395				(1,552,629	)
Loss from continuing operations			(4,719,312	)			(6,177,101	)			1,457,789
Other income (expense), net:
Interest expense			44,590				(192,257	)			236,847
Change in fair value of convertible debt carried at fair value			(5,561	)			563,360				(568,921	)
Change in fair value of warrant liability			(17,731	)			15,643				(33,374	)
Arbitration settlement reserve			(66,217	)			43,500				(109,717	)
Other income (expense), net			(1,274,450	)			(3,913,773	)			2,639,323
Total other income (expense), net			(1,319,369	)			(3,483,527	)			2,164,158
Loss from continuing operations before income taxes			(6,038,681	)			(9,660,628	)			3,621,947
Income tax benefit			-				-				-
Net loss from continuing operations			(6,038,681	)			(9,660,628	)			3,621,947
Net income (loss) from discontinued operations			3,020,335				(2,342,513	)			5,362,848
Net loss			(3,018,346	)			(12,003,141	)			8,984,795
Net income attributable to non-controlling interest			-				389,590				(389,590	)
Net loss attributable to attributable to GameSquare Holdings, Inc.		$	(3,018,346	)		$	(11,613,551	)		$	8,595,205

 

 

Revenue

 

The following tables disaggregate revenue by revenue stream and geographic region for the three and six months ended June 30, 2025, and 2024. FaZe Media is now reported in discontinued operations, and therefore not included in the below figures.

 

		Six months ended June 30, 2025
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	4,894,879			$	-			$	4,894,879
Agency			454,568				4,052,199				-				4,506,767
SaaS + Advertising			-				16,136,685				5,045,606				21,182,291
Total Revenue			454,568				25,083,763				5,045,606				30,583,937
Cost of sales
Teams			-				3,487,588				-				3,487,588
Agency			358,631				3,188,117				-				3,546,748
SaaS + Advertising			-				15,258,488				2,501,033				17,759,521
Total Cost of sales			358,631				21,934,193				2,501,033				24,793,857
Gross profit
Teams			-				1,407,291				-				1,407,291
Agency			95,937				864,082				-				960,019
SaaS + Advertising			-				878,197				2,544,573				3,422,770
Total Gross profit		$	95,937			$	3,149,570			$	2,544,573			$	5,790,080

 

		Six months ended June 30, 2024
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	2,933,101			$	-			$	2,933,101
Agency			729,584				4,250,742				-				4,980,326
SaaS + Advertising			-				23,912,430				1,580,842				25,493,272
Total Revenue			729,584				31,096,273				1,580,842				33,406,699
Cost of sales
Teams			-				2,660,741				-				2,660,741
Agency			534,098				3,698,755				-				4,232,853
SaaS + Advertising			-				21,754,515				167,948				21,922,463
Total Cost of sales			534,098				28,114,011				167,948				28,816,057
Gross profit
Teams			-				272,360				-				272,360
Agency			195,486				551,987				-				747,473
SaaS + Advertising			-				2,157,915				1,412,894				3,570,809
Total Gross profit		$	195,486			$	2,982,262			$	1,412,894			$	4,590,642

 

		Three months ended June 30, 2025
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	1,806,373			$	-			$	1,806,373
Agency			224,862				1,981,870				-				2,206,732
SaaS + Advertising			-				8,418,367				3,421,234				11,839,601
Total Revenue			224,862				12,206,610				3,421,234				15,852,706
Cost of sales
Teams			-				1,734,744				-				1,734,744
Agency			141,682				1,923,245				-				2,064,927
SaaS + Advertising			-				8,058,085				1,568,496				9,626,581
Total Cost of sales			141,682				11,716,074				1,568,496				13,426,252
Gross profit
Teams			-				71,629				-				71,629
Agency			83,180				58,625				-				141,805
SaaS + Advertising			-				360,282				1,852,738				2,213,020
Total Gross profit		$	83,180			$	490,536			$	1,852,738			$	2,426,454

 

		Three months ended June 30, 2024
Segment		United Kingdom				USA				Spain				Total
Revenue
Teams		$	-			$	2,520,848			$	-			$	2,520,848
Agency			350,935				1,686,534				-				2,037,469
SaaS + Advertising			-				12,469,920				800,938				13,270,858
Total Revenue			350,935				16,677,302				800,938				17,829,175
Cost of sales
Teams			-				1,906,062				-				1,906,062
Agency			283,466				1,538,081				-				1,821,547
SaaS + Advertising			-				11,492,930				87,342				11,580,272
Total Cost of sales			283,466				14,937,073				87,342				15,307,881
Gross profit
Teams			-				614,786				-				614,786
Agency			67,469				148,453				-				215,922
SaaS + Advertising			-				976,990				713,596				1,690,586
Total Gross profit		$	67,469			$	1,740,229			$	713,596			$	2,521,294

 

 

Key Components and Comparison of Results of Operations

 

Six months ended June 30, 2025 and 2024

 

Revenue

 

Revenues for the six months ended June 30, 2025, were $30.6 million, in comparison to $33.4 million for the same period in 2024. The decrease was primarily related to decrease in revenue at Frankly Media (SaaS + Advertising), primarily driven by decease in ad impressions as compared to prior year period. Further, Frankly Media sold its remaining SaaS assets on May 31, 2024, contributing to the decline in revenue in the 2025 period.

 

Team Revenue

 

Teams revenue for the six months ended June 30, 2025, was $4.9 million, in comparison to $2.9 million for the same period in 2024. The increase was primarily related to the acquisition of FaZe on March 7, 2024 and FaZe Esports not being a full six months in the prior year period.

 

Agency Revenue

 

Agency revenue for the six months ended June 30, 2025, was $4.5 million, in comparison to $5.0 million for the same period in 2024. The variance between the periods was not significant.

 

Software-as-a-service (“SaaS”) + Advertising revenue

 

SaaS + Advertising revenue for the six months ended June 30, 2025, was $21.2 million, in comparison to $25.5 million for the same period in 2024. The decrease was primarily related to decrease in revenue at Frankly Media (SaaS + Advertising), primarily driven by decease in ad impressions as compared to prior year period. Further, Frankly Media sold its remaining SaaS assets on May 31, 2024, contributing to the decline in revenue in the 2025 period.

 

Cost of Sales

 

Cost of sales for the six months ended June 30, 2025, was $24.8 million, in comparison to $28.8 million for the same period in 2024. The decrease was primarily related to the decrease in revenue discussed above, and varying margins of the Company product mix.

 

Operating expenses

 

General and administrative

 

General and administrative expenses for the six months ended June 30, 2025, was $8.4 million, in comparison to $9.4 million for the same period in 2024. The decrease was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead. This was partially offset by FaZe Esports being included for a full six month period in 2025 vs. 2024.

 

Selling and marketing

 

Selling and marketing expenses for the six months ended June 30, 2025, was $3.0 million, in comparison to $3.5 million for the same period in 2024. The decrease was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead. This was partially offset by FaZe Esports being included for a full six month period in 2025 vs. 2024.

 

Research and development

 

Research and development expenses for the six months ended June 30, 2025, was $1.1 million, in comparison to $1.2 million for the same period in 2024. The variance between the periods was not significant.

 

Depreciation and amortization

 

Depreciation and amortization for the six months ended June 30, 2025, was $0.6 million, in comparison to $1.2 million for the same period in 2024. The decrease was primarily related to intangible asset impairments taken at December 31, 2024, reducing the go forward amortization as compared to the same period in the prior year.

 

Restructuring charges

 

Restructuring charges for the six months ended June 30, 2025, were $0.8 million, in comparison to $0 for the same period in 2024. The increase was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead, which lead to additional restructuring costs.

 

Other operating expenses

 

Other operating expenses for the six months ended June 30, 2025, was $1.3 million, in comparison to $2.1 million for the same period in 2024. Other operating expenses between the quarters consisted primarily of transaction related expenses. The Company incurred transaction costs in the 2025 period connected to the disposal of Faze Media Inc. on April 1, 2025, in addition to a couple of M&A opportunities that were pursued during the quarter but ultimately did not sign. The 2024 period included transaction costs related to the acquisition of FaZe and disposal of Complexity and Frankly Media assets.

 

Other income and expenses

 

Interest expense, net

 

Interest expense, net for the six months ended June 30, 2025, was $5 thousand, in comparison to $0.6 million for the same period in 2024. The decrease in interest expense, net was due to interest income on the promissory notes from the disposal of Complexity on March 1, 2024 and Frankly Media assets on May 31, 2024. The 2024 period only had four months of interest income on the Complexity promissory note and one month interest on the Frankly Media promissory note. In addition, the Company’s average interest bearing debt balance has declined between the two periods.

 

Change in fair value of convertible debt carried at fair value

 

Change in fair value of convertible debt income (expense) for the six months ended June 30, 2025, was $0.3 million, in comparison to $0.4 million for the same period in 2024. The variance between the periods was not significant.

 

 

Change in fair value of warrant liability

 

Change in fair value of warrant liability income (expense) for the six months ended June 30, 2025, was $(12) thousand, in comparison to $53 thousand for the same period in 2024. The variance between the periods was not significant.

 

Arbitration settlement reserve

 

Arbitration settlement reserve income (expense) for the six months ended June 30, 2025, was $(10) thousand, in comparison to $0.1 million for the same period in 2024. The variance between the periods was not significant.

 

Other income (expense), net

 

Other income (expense) for the six months ended June 30, 2025, was $(1.3) million, in comparison to $(4.0) million for the same period in 2024. The decrease is primarily due to loss on disposal of Franky Media assets in the 2025 period of $1.5 million, in comparison to $3.8 million in the prior year period.

 

Net income (loss) from discontinued operations

 

Net income (loss) from discontinued operations for the six months June 30, 2025, was $0.1 million, in comparison to $(0.5) million for the same period in 2024. The increase in income was primarily related a larger loss from discontinued operations in the 2024 period as compared to the 2025 period. Both periods included a large gain on disposal of subsidiary of approximately $3 million (Complexity disposal in 2024 and FaZe Media disposal in 2025).

 

Three months ended June 30, 2025 and 2024

 

Revenue

 

Revenues for the three months ended June 30, 2025, were $15.9 million, in comparison to $17.9 million for the same period in 2024. The decrease was primarily related to decrease in revenue at Frankly Media (SaaS + Advertising), primarily driven by decease in ad impressions as compared to prior year period. Further, Frankly Media sold its remaining SaaS assets on May 31, 2024, contributing to the decline in revenue in the 2025 period.

 

Team Revenue

 

Teams revenue for the three months ended June 30, 2025, was $1.8 million, in comparison to $2.5 million for the same period in 2024. The decrease was due to no specific tournament prizes in the 2025 period as compared to the 2024 period.

 

Agency Revenue

 

Agency revenue for the three months ended June 30, 2025, was $2.2 million, in comparison to $2.0 million for the same period in 2024. The variance between the periods was not significant.

 

Software-as-a-service (“SaaS”) + Advertising revenue

 

SaaS + Advertising revenue for the three months ended June 30, 2025, was $11.8 million, in comparison to $13.3 million for the same period in 2024. The decrease was primarily related to decrease in revenue at Frankly Media (SaaS + Advertising), primarily driven by decease in ad impressions as compared to prior year period. Further, Frankly Media sold its remaining SaaS assets on May 31, 2024, contributing to the decline in revenue in the 2025 period.

 

Cost of Sales

 

Cost of sales for the three months ended June 30, 2025, was $13.4 million, in comparison to $15.3 million for the same period in 2024. The decrease was primarily related to the decrease in revenue discussed above, and varying margins of the Company product mix.

 

Operating expenses

 

General and administrative

 

General and administrative expenses for the three months ended June 30, 2025, was $4.1 million, in comparison to $4.9 million for the same period in 2024. The decrease was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead.

 

Selling and marketing

 

Selling and marketing expenses for the three months ended June 30, 2025, was $1.5 million, in comparison to $1.6 million for the same period in 2024. The decrease was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead.

 

Research and development

 

Research and development expenses for the three months ended June 30, 2025, was $0.6 million, in comparison to $0.6 million for the same period in 2024. The variance between the periods was not significant.

 

Depreciation and amortization

 

Depreciation and amortization for the three months ended June 30, 2025, was $0.3 million, in comparison to $0.6 million for the same period in 2024. The decrease was primarily related to intangible asset impairments taken at December 31, 2024, reducing the go forward amortization as compared to the same period in the prior year.

 

Restructuring charges

 

Restructuring charges for the three months ended June 30, 2025, were $0.2 million, in comparison to $0 for the same period in 2024. The increase was primarily related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and first half of 2025, primarily through reductions in headcount, technology expenses and other overhead, which lead to additional restructuring costs.

 

Other operating expenses

 

Other operating expenses for the three months ended June 30, 2025, was $0.5 million, in comparison to $1.0 million for the same period in 2024. Other operating expenses between the quarters consisted primarily of transaction related expenses. The Company incurred transaction costs in the 2025 period connected to the disposal of Faze Media Inc. on April 1, 2025, in addition to a couple of M&A opportunities that were pursued during the quarter but ultimately did not sign. The 2024 period included transaction costs related to the acquisition of FaZe and disposal of Complexity and Frankly Media assets.

 

Other income and expenses

 

Interest expense, net

 

Interest expense income (expense), net for the three months ended June 30, 2025, was $45 thousand, in comparison to $(0.2) million for the same period in 2024. The decrease in interest expense, net was due to interest income on the promissory notes from the disposal of Complexity on March 1, 2024 and Frankly Media assets on May 31, 2024. The 2024 period only had one month interest income on the Frankly Media promissory note. In addition, the Company’s average interest bearing debt balance has declined between the two periods.

 

Change in fair value of convertible debt carried at fair value

 

Change in fair value of convertible debt income (expense) for the three months ended June 30, 2025, was $(6) thousand, in comparison to $0.6 million for the same period in 2024. The income in the 2024 period was due to additional decline in our share price, reducing the fair value of the conversion feature on the convertible debt outstanding.

 

 

Change in fair value of warrant liability

 

Change in fair value of warrant liability income (expense) for the three months ended June 30, 2025, was $(18) thousand, in comparison to $16 thousand for the same period in 2024. The variance between the periods was not significant.

 

Arbitration settlement reserve

 

Arbitration settlement reserve income (expense) for the three months ended June 30, 2025, was $(66) thousand, in comparison to $44 thousand for the same period in 2024. The variance between the periods was not significant.

 

Other income (expense), net

 

Other income (expense) for the three months ended June 30, 2025, was $(1.3) million, in comparison to $(3.9) million for the same period in 2024. The decrease is primarily due to loss on disposal of Franky Media assets in the 2025 period of $1.5 million, in comparison to $3.8 million in the prior year period.

 

Net income (loss) from discontinued operations

 

Net income (loss) from discontinued operations for the three months June 30, 2025, was $3.0 million, in comparison to $(2.3) million for the same period in 2024. The increase in income was primarily related to a larger loss from discontinued operations in the 2024 period as compared to the 2025 period. As FaZe Media was disposed on April 1, 2025, there are no losses in the 2025 period, while the prior year period includes loss of $2.6 million, primarily coming from FaZe Media. In addition, the 2025 period includes a $3.0 million gain on disposal of FaZe Media.

 

Management’s use of Non-GAAP Measures

 

This MD&A contains certain financial performance measures, including “EBITDA” and “Adjusted EBITDA,” that are not recognized under accounting principles generally accepted in the United States of America (“GAAP”) and do not have a standardized meaning prescribed by GAAP. As a result, these measures may not be comparable to similar measures presented by other companies. For a reconciliation of these measures to the most directly comparable financial information presented in the Financial Statements in accordance with GAAP, see the section entitled “Reconciliation of Non-GAAP Measures” below.

 

We believe EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define “EBITDA” as net income (loss) before (i) depreciation and amortization; (ii) income taxes; and (iii) interest expense.

 

Adjusted EBITDA

 

We believe Adjusted EBITDA is a useful measure to assess the performance of the Company as it provides more meaningful operating results by excluding the effects of expenses that are not reflective of our underlying business performance and other one-time or non-recurring expenses. We define “Adjusted EBITDA” as EBITDA adjusted to exclude extraordinary items, non-recurring items and other non-cash items, including, but not limited to (i) share based compensation expense, (ii) transaction costs related to merger and acquisition activities, (iii) arbitration settlement reserves and other non-recurring legal settlement expenses, (iv) restructuring costs, primarily comprised of employee severance resulting from integration of acquired businesses, (v) impairment of goodwill and intangible assets, (vi) gains and losses on extinguishment of debt, (vii) change in fair value of assets and liabilities adjusted to fair value on a quarterly basis, (viii) gains and losses from discontinued operations, and (ix) Net income (loss) attributable to non-controlling interest.

 

Reconciliation of Non-GAAP Measures

 

A reconciliation of Adjusted EBITDA to the most directly comparable measure determined under US GAAP is set out below.

 

		Three months ended June 30,								Six months ended June 30,
		2025				2024				2025				2024
Net loss		$	(3,018,346	)		$	(12,003,141	)		$	(10,192,082	)		$	(17,264,089	)
Interest expense			(44,590	)			192,257				4,968				627,385
Income tax benefit			-				-				-				-
Amortization and depreciation			302,360				564,346				558,825				1,182,368
Share-based payments			5,616				602,139				34,614				1,021,367
Transaction costs			547,188				1,037,044				1,292,565				2,130,464
Arbitration settlement reserve			66,217				(43,500	)			10,634				(138,625	)
Restructuring costs			165,328				-				782,541				-
Change in fair value of contingent consideration			-				(42,327	)			-				(42,327	)
Change in fair value of warrant liability			17,731				(15,643	)			12,384				(52,900	)
Change in fair value of convertible debt carried at fair value			5,561				(563,360	)			(327,916	)			(456,759	)
Gain on disposition of subsidiary			(3,020,335	)			-				(2,721,953	)			(3,009,891	)
Loss on disposition of assets			1,477,619				3,764,474				1,477,619				3,764,474
Loss from discontinued operations			-				2,342,513				2,613,422				3,543,246
Adjusted EBITDA		$	(3,495,651	)		$	(4,165,198	)		$	(6,454,379	)		$	(8,695,287	)

 

Liquidity and Capital Resources

 

Overview

 

The financial statements have been prepared on a going-concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of business. Continuing operations, as intended, are dependent on management’s ability to raise required funding through future equity issuances, its ability to acquire business interests and develop profitable operations or a combination thereof, which is not assured, given today’s volatile and uncertain financial markets. We may revise programs depending on our working capital position.

 

Our approach to managing liquidity risk is to ensure that we will have sufficient liquidity to meet liabilities when due. Our liquidity and operating results may be adversely affected if our access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or as a result of conditions specific to the Company.

 

We regularly evaluate our cash position to ensure preservation and security of capital as well as maintenance of liquidity. As we do not presently generate sufficient revenue to cover costs, managing liquidity risk is dependent upon the ability to reduce monthly operating cash outflow and secure additional financing. The recoverability of the carrying value of the assets and our continued existence is dependent upon our ability to raise financing in the near term, and ultimately the achievement of profitable operations.

 

The Company has not yet realized profitable operations and has incurred significant losses to date resulting in an accumulated deficit of $130.3 million as of June 30, 2025 ($122.2 million as of December 31, 2024). The recoverability of the carrying value of the assets and the Company’s continued existence is dependent upon the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary. While management has been historically successful in raising the necessary capital, it cannot provide assurance that it will be able to execute its business strategy or be successful in future financing activities. As of June 30, 2025, the Company had a working capital deficiency of $27.6 million (as of December 31, 2024, a working capital deficiency of $18.3 million) which is comprised of current assets less current liabilities.

 

These conditions indicate the existence of a material uncertainty that raises substantial doubt about the Company’s ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.

 

As of June 30, 2025, cash and restricted cash totaled $6.5 million, compared to $13.1 million as of December 31, 2024.

 

 

While management has been historically successful in raising the necessary capital, it cannot provide assurance that it will be able to execute its business strategy or be successful in future financing activities.

 

As discussed in recent developments above, in July 2025, we raised gross proceeds of $89.6 million over three offerings. We raised $9.2 million on July 9, 2025 through a registered equity offering of our common shares, $75.3 million on July 18, 2025 through a registered equity offering of our common shares and $5.15 million on July 24, 2025 through a private placement of our Series A-1 convertible preferred shares.

 

Our ability to maintain sufficient liquidity could be affected by various risks and uncertainties including, but not limited to, our ability to raise additional funds through financing, those related to consumer demand and acceptance of our products and services, our ability to collect payments as they become due, achieving our internal forecasts and objectives, the economic conditions of the United States and abroad.

 

Sources and Uses of Cash

 

Since inception, we have financed our operations primarily by issuing equity and debt. As of June 30, 2025, our principal sources of liquidity were our cash and accounts receivable in the amount of $4.7 million and $13.0 million, respectively, and available borrowings under our line of credit as well as new debt and/or equity issuances.

 

Operating Activities

 

Net cash used in operating activities was $6.9 million during the six months ended June 30, 2025, compared with $17.6 million used in operating activities in the comparative prior year period. The use of funds in operating activities is described in the Results of Operations section above.

 

Investing Activities

 

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2025.

 

Net cash provided by investing activities was $2.8 million for the six months ended June 30, 2024.

 

Financing Activities

 

Net cash provided by financing activities was $2.0 million for the six months ended June 30, 2025, which was primarily due $2 million promissory note issued on March 25, 2025, as discussed in the recent developments section. Net cash provided by financing activities was $26.3 million for the six months ended June 30, 2024, which was primarily due to the PIPE Financing on March 7, 2024 of $10 million and the spinoff of FaZe Media on May 15, 2024 and minority interest investments into FaZe Media of $15.75 million during the second quarter of 2024.

 

Crypto Treasury and Digital Assets

 

GameSquare has purchased, directly and indirectly, over $60 million ETH and NFT to support broader growth initiatives across the Company’s platform, however, GameSquare’s Board has approved an ETH allocation of up to $250 million.

 

Commitments and Contingencies

 

Management commitments

 

The Company is party to certain management contracts. These contracts require payments of approximately $0.6 million to be made upon the occurrence of a change in control and termination without cause to certain officers of the Company. The Company is also committed to payments upon termination without cause of approximately $1.1 million 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 $0.3 million to be remote, the outcome of any such contingent matters is inherently uncertain.

 

Litigation and arbitration

 

We are subject to various claims, lawsuits and other complaints arising in the ordinary course of business. We record provisions for losses when claims become probable, and the amounts are estimable. Although the outcome of such matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on our financial condition, operations, or liquidity.

 

 

Critical Accounting Policies

 

Revenue recognition

 

Revenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it transfers control of its services to a customer.

 

The following provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms and related revenue recognition policies:

 

Brand Sponsorships

 

The Company offers advertisers a full range of promotional vehicles, including but not limited to online advertising, livestream announcements, event content generation, social media posts, logo placement on the Company’s official merchandise, and special appearances of members of the Company’s talent roster. The Company’s brand sponsorship agreements may include multiple services that are capable of being individually distinct; however the intended benefit is an association with the Company’s brand, and the services are not distinct within the context of the contracts. Revenues from brand sponsorship agreements are recognized ratably over the contract term. Payment terms and conditions vary, but payments are generally due periodically throughout the term of the contract. In instances where the timing of revenue recognition differs from the timing of billing, management has determined the brand sponsorship agreements generally do not include a significant financing component.

 

Content

 

The Company and its talent roster generate and produce original content which the Company monetizes through Google’s AdSense service. Revenue is variable and is earned when the visitor views or “clicks through” on the advertisement. The amount of revenue earned is reported to the Company monthly and is recognized upon receipt of the report of viewership activity. Payment terms and conditions vary, but payments are generally due within 30 to 45 days after the end of each month.

 

The Company grants exclusive licenses to customers for certain content produced by the Company’s talent. The Company grants the customer a license to the intellectual property, which is the content and its use in generating advertising revenues, for a pre-determined period, for an amount paid by the customer, in most instances, upon execution of the contract. The Company’s only performance obligation is to license the content for use in generating advertising revenues, and the Company recognizes the full contract amount at the point at which the Company provides the customer access to the content, which is at the execution of the contract. The Company has no further performance obligations under these types of contracts and does not anticipate generating any additional revenue from these arrangements apart from the contract amount.

 

Consumer Products

 

The Company earns consumer products revenue from sales of the Company’s consumer products on the Company’s website or at live or virtual events. Revenues are recognized at a point in time, as control is transferred to the customer upon shipment. The Company offers customer returns and discounts through a third-party distributor and accounts for this as a reduction to revenue. The Company does not offer loyalty programs or other sales incentive programs that are material to revenue recognition. Payment is due at the time of sale. The Company has outsourced the design, manufacturing, fulfillment, distribution, and sale of the Company’s consumer products to a third party in exchange for royalties based on the amount of revenue generated. Management evaluated the terms of the agreement to determine whether the Company’s consumer products revenues should be reported gross or net of royalties paid. Key indicators that management evaluated in determining whether the Company is the principal in the sale (gross reporting) or an agent (net reporting) include, but are not limited to:

 

	●	the Company is the party that is primarily responsible for fulfilling the promise to provide the specified good or service,
	●	the Company has inventory risk before the good is transferred to the customer, and
	●	the Company is the party that has discretion in establishing pricing for the specified good or service.

 

Based on management’s evaluation of the above indicators, the Company reports consumer products revenues on a gross basis.

 

 

Esports

 

League Participation: Generally, The Company has one performance obligation—to participate in the overall Esport event—because the underlying activities do not have standalone value absent the Company’s participation in the tournament or event. Revenue from prize winnings and profit-share agreements is variable and is highly uncertain. The Company recognizes revenue at the point in time when the uncertainty is resolved.

 

Player Transfer Fees: Player transfer agreements include a fixed fee and may include a variable fee component. The Company recognizes the fixed portion of revenue from transfer fees upon satisfaction of the Company’s performance obligation, which coincides with the execution of the related agreement. The variable portion of revenue is considered highly uncertain and is recognized at the point in time when the uncertainty is resolved.

 

Licensing of Intellectual Property: The Company’s licenses of intellectual property generate royalties that are recognized in accordance with the royalty recognition constraint. That is, royalty revenue is recognized at the time when the sale occurs.

 

Talent representation service revenues

 

Talent representation service revenue is recorded on completion of the event in which the talent management service has been provided.

 

Influencer promotional fees

 

Influencer marketing and promotional fees are recognized over the period during which the services are performed. Revenue and income from custom service contracts are determined on the percentage of completion method, based on the ratio of contract timepassed in the reporting period over estimated total length of the contract.

 

Consulting fees and other revenues

 

Consulting fees and other revenues are recognized when the services have been performed.

 

Software-as-a-service

 

The Company enters into license agreements with customers for its content management system, video software, and mobile applications (Frankly), e-sports data platform (Stream Hatchet) and an influencer marketing platform (SideQik). These license agreements, generally non-cancellable, without paying a termination penalty, and multiyear, provide the customer with the right to use the Company’s application solely on a Company-hosted platform or, in certain instances, on purchased encoders. The license agreements also entitle the customer to technical support.

 

Revenue from these license agreements is recognized ratably over the license term. Early termination fees are recognized when a customer ceases use of agreed upon services prior to the expiration of their contract. These fees are recognized in full on the date the customer has completed their migration of the Company’s solutions and there is no continuing service obligation to the customer.

 

The Company charges its customers for the optional use of its content delivery network to stream and store videos. The revenue is recognized as earned based on the actual usage because it has stand-alone value and delivery is in control of the customer. The Company also charges its customers for the use of its ad serving platform to serve ads under local advertising campaigns. The Company reports revenue as earned based on the actual usage.

 

 

Advertising

 

Under national advertising agreements with advertisers, the Company sources, creates, and places advertising campaigns that run across the Company’s network of publisher sites. National advertising revenue, net of third-party costs, is shared with publishers based on their respective contractual agreements. The Company invoices national advertising amounts due from advertisers and remits payments to publishers for their share. Depending on the agreement with the publisher, the obligation to remit payment to the publisher is based on either billing to the advertiser or the collection of cash from the advertiser.

 

National advertising revenue is recognized in the period during which the ad impressions are delivered. The Company reports revenue earned through national advertising agreements either on a net or gross basis. The Company applies judgement in recognizing revenue earned through national advertising agreements on a net or gross basis based on the criteria as disclosed below.

 

Under national advertising agreements wherein the Company does not bear inventory risk and only has credit risk on its portion of the revenue, national advertising revenues are accounted for on a net basis and the publisher is identified as the customer. In select national advertising agreements with its publishers, the Company takes on inventory risk and additional credit risk. Under these agreements, the Company either a) provides the publisher with a guaranteed minimum gross selling price per advertising unit delivered, wherein the greater of the actual selling price or guaranteed minimum selling price is used in determining the publisher’s share or b) provides the publisher with a fixed rate per advertising unit delivered, wherein the publisher is paid the fixed rate per advertising unit delivered irrespective of the actual selling price. Under these national advertising agreements, national advertising revenues are accounted for on a gross basis with the advertiser identified as the customer and the publisher identified as a supplier, with amounts billed to the advertiser reported as revenue and amounts due to the publisher reported as a revenue sharing expense, within expenses.

 

Also included in advertising revenue is advertising revenue generated by the Company’s various owned and operated properties.

 

The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. When the Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the net amount of commission made by the Company.

 

Deferred revenue consists of customer advances for Company services to be rendered that will be recognized as income in future periods.

 

Income taxes

 

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

 

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.

 

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit; and differences relating to investments in subsidiaries, associates, and jointly controlled entities to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date applicable to the period of expected realization or settlement.

 

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA includes a broad range of tax reform provisions that may affect the Company’s financial results. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently evaluating the impact of these provisions which could affect the Company’s income tax expense and deferred tax assets; however, it is not expected to have a material impact to our unaudited Condensed Consolidated Financial Statements.

 

 

Investments

 

Investments in and advances to entities or joint ventures in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method. Significant influence is generally presumed to exist when the Company owns an interest between 20% and 50% and exercises significant influence.

 

In accordance with ASC 321 “Investments—Equity Securities” (“ASC 321”), equity securities which the Company has no significant influence (generally less than a 20% ownership interest) with readily determinable fair values are accounted for at fair value based on quoted market prices. Equity securities without readily determinable fair values are accounted for either at fair value or using the measurement alternative which is at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. All gains and losses on investments in equity securities are recognized in the consolidated statements of operations and comprehensive loss.

 

Equity securities accounted for under the measurement alternative, the Company assesses the securities for impairment indicators, at least annually, or more frequently if there are any indicators of impairment. If the assessment indicates that the fair value of the investment is less than its carrying value, the investment is impaired and an impairment charge equal to the excess of the carrying value over the related fair value of the investment will be recorded.

 

Business combinations

 

The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of the acquisition. The Company uses the acquisition method of accounting and allocates the purchase price to the identifiable assets and liabilities of the relevant acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. The allocation of the purchase price in a business combination requires the Company to perform valuations with significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates and selection of comparable companies. The Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in a business combination. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Transaction costs associated with business combinations are expensed as incurred and are included in selling, general and administrative expense in the consolidated statements of operations.

 

Impairment of long-lived assets and goodwill

 

Long-lived assets consist of property and equipment, right-of-use assets and intangible assets. The Company assesses for impairment of asset groups, including intangible assets, at least annually, or more frequently if there are any indicators for impairment.

 

Goodwill and indefinite life intangible assets are tested for impairment annually or when there is an indication that the asset may be impaired.

 

When a triggering event that occurred during the reporting period is identified, or when the annual impairment test is required, the Company may first assess qualitative factors to determine whether it is more likely than not that goodwill is impaired. If the Company determines it is more likely than not that goodwill is not impaired, an impairment test is not necessary. If an impairment test is necessary, management estimates the fair value of the Company. If the carrying value of the Company exceeds its fair value, goodwill is determined to be impaired, and an impairment charge equal to the excess of the carrying value over the related fair value of the Company will be recorded. If the qualitative assessment indicates that it is more likely than not that goodwill is not impaired, further testing is unnecessary.

 

 

Fair value option for convertible debt

 

The Company elected the Fair Value Option (“FVO”) for recognition of its convertible debt as permitted under ASC 825, Financial Instruments. Under the FVO, the Company recognizes the convertible debt at fair value with changes in fair value recognized in earnings. The FVO may be applied instrument by instrument, but it is irrevocable. As a result of applying the FVO, any direct costs and fees related to the convertible debt is recognized in operating expense in the consolidated statements of operations and comprehensive loss as incurred and not deferred. Changes in fair value of the convertible debt is recognized as a separate line in the consolidated statements of operations and comprehensive loss.

 

Contingencies

 

The Company estimates loss contingencies in accordance with ASC 450-20, Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (i) information available before the consolidated financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (ii) the amount of loss can be reasonably estimated. Management regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the results of operations or financial condition of the Company including, without limitation, such considerations as liquidity and capital resources.

 

Critical Accounting Policies and Estimates

 

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions, and judgments as of the balance sheet date that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Our actual results may differ from these estimates under different assumptions and conditions. The accounting estimates described in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024 are those we consider critical in preparing our unaudited Condensed Consolidated Financial Statements. There were no changes to the Company’s critical accounting policies or estimates during the six months ended June 30, 2025.

 

Recent Accounting Pronouncements

 

See Note 3 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted, the timing of their adoptions and our assessment, to the extent we have made one, of their potential impact on our financial condition and results of operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision of our Chief Executive Officer and our Chief Financial Officer and concluded that our disclosure controls and procedures were not effective as of June 30, 2025. Material weaknesses relating to the Design and Implementation of Control Activities and Monitoring Activities were identified. The Company did not have sufficient resources with the relevant expertise to perform an effective risk assessment process, design and implement controls supported by documentation and provide evidence that such controls designed was based on the COSO Framework.

 

The material weaknesses in risk assessment, control activities and monitoring activities contributed to the following material weaknesses: (i) the Company did not complete a documented risk assessment, and (ii) the Company did not identify all risks and design relevant controls related to system of internal controls. As a consequence of the aggregation of the foregoing deficiencies in the Company’s DC&P and ICFR design, the Company did not have effective control activities related to the design of process-level and management review control activities. Aside from these deficiencies, management believes that the Company’s condensed consolidated financial statements for three and six months ended June 30, 2025, present fairly in all material respects, the Company’s financial position, results of operations, changes in shareholders’ equity and cash flows in accordance with U.S GAAP. The Company does not believe and is not aware of any circumstance in which the potential weaknesses have impacted the Company’s financial reporting and as a result, there were no material adjustments to the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2025. In addition, there were no changes to previously released financial results. However, if the collective deficiencies were deemed to create a material weakness, a material misstatement to our consolidated financial statements might not be prevented or detected on a timely basis.

 

Management’s Remediation Measures

 

To address the deficiencies identified, management, with oversight of the Audit Committee, has implemented, or will implement, remediation measures to further address the deficiencies in the design of its DC&P and ICFR. The Company intends to complete such remedial measures by December 31, 2026. Management has also performed an initial risk assessment using a top-down, risk-based approach with respect to the risks of material misstatement of the consolidated financial statements. In addition, compensating controls have been applied to a number of areas where the risks of material misstatement are considered moderate to high. The Company is engaging outside resources to strengthen the business process documentation and help with management’s self-assessment and testing of internal controls. Although the Company can give no assurance that these actions will remediate these deficiencies or that additional deficiencies or a material weaknesses will not be identified in the future, management believes the foregoing efforts will, when implemented, strengthen our DC&P and ICFR. Management will take additional remedial actions as necessary as they continue to evaluate and work to improve the Company’s control environment.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the six months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

Allinsports - In April 2020, Engine announced its renegotiation of the acquisition of Allinsports. The revised purchase agreement provided for the acquisition of 100% of Allinsports in exchange for the issuance of 241,666 common shares of the Engine and other considerations, including payments of $1,200,000 as a portion of the purchase consideration. In September 2020, Engine advised the shareholders of Allinsports that closing conditions of the transaction, including the requirement to provide audited financial statements, had not been satisfied.

 

In response, in November 2020, the shareholders of Allinsports commenced arbitration in Alberta, Canada seeking, among other things, to compel Engine to complete the acquisition of Allinsports without the audited financial statements, and to issue 241,666 common shares of Engine to those shareholders. As alternative relief, the shareholders of Allinsports sought up to $20.0 million in damages. A hearing in this matter was held in May of 2021, and by a decision dated September 30, 2021, the Arbitrator determined that the closing of the transaction had previously occurred and directed Engine to issue 241,666 common shares. In conjunction with completion of the Arrangement, the Company assumed this obligation to issue 241,666 common shares. The Company has not yet issued the shares and is pursuing relief against Allinsports shareholders for various alleged breaches of the share purchase agreement. The Company recognized a liability for the arbitration ruling of $1.5 million, which represented the fair value of the common shares directed to be delivered as of April 11, 2023, the closing date of the Arrangement. The liability is recorded as arbitration reserve on the Company’s consolidated balance sheets. This liability will be adjusted to fair value at the end of each reporting period.

 

Promissory Note Recovery - By Order to Continue dated May 5, 2022, Engine was substituted in as the plaintiff in a matter pending in the Ontario Superior Court of Justice, seeking recovery of $2.1 million (€1.9 million) of principal and additional amounts of accrued interest under promissory notes acquired by Engine. The matter is in the discovery stage.

 

SPAC Complaint - A complaint has been filed in Delaware Chancery Court against several former directors of Faze Holdings, Inc.’s predecessor, B Riley 150 Merger Corp., and several other B Riley affiliated entities, challenging the disclosures made in connection with the July 2022 merger between B. Riley 150 Merger Corp. and Faze Holdings, Inc. The Company has indemnification obligations to the former B. Riley 150 Merger Corp. directors. Under the terms of a proposed settlement agreement, B. Riley and the Company will each contribute a total of $1,050,000 of cash and Company common stock to resolve the matter. The terms of the proposed settlement of this matter are currently being reviewed by the Delaware Chancery Court.

 

Villanueva v. Faze Clan, Inc. - On June 20, 2024, Plaintiff Harold Villanueva (“Plaintiff”) filed a Complaint in the California Superior Court for the County of Los Angeles, seeking damages against FaZe Clan, Inc. and other parties. Plaintiff asserts causes of action for (1) Negligence, (2) Negligent Hiring, Retention, and Supervision, and (3) Premises Liability in connection with injuries alleged incurred on FaZe Clan’s premises. FaZe Clan has denied liability for the alleged injuries and this matter is in the discovery stage. FaZe Clan’s insurer is providing defense of these claims pursuant to a reservation of rights letter.

 

Alta Partners v. FaZe Holdings, Inc. – On April 23, 2025, Alta Partners, LLC filed a Complaint against FaZe Holdings, Inc. and GameSquare Holdings, Inc., in the United States District Court for the Southern District of New York, alleging that in 2022, FaZe Holdings breached a warrant agreement between FaZe Holdings and Alta. On August 11, 2025, the Company entered into a Settlement and Release Agreement with Alta Partners, LLC, pursuant to which the Company agrees to issue to Alta $150,000 of the Company’s restricted common stock (“Settlement Shares”). In the event that the collective value of the Settlement Shares drops below $150,000 on the six month anniversary date following issuance of the Settlement Shares, or the next business day if the six-month anniversary date falls on a weekend or holiday (the collective value to be computed based on the Nasdaq closing price of GameSquare’s common stock on that six-month anniversary date, or the next business day if the six-month anniversary date falls on a weekend or holiday), then within three (3) business days of that date, GameSquare shall pay the difference between the collective value and $150,000 to Alta in cash (the “True-Up Payment”). Upon GameSquare’s delivery of the Settlement Shares and True Up Payment, if applicable, the public warrants that are owned and/or beneficially held by Alta at that time shall be cancelled immediately and Alta shall have no ownership, right, claim, interest or benefit in such public warrants. Moreover, within three (3) business days of Alta’s receipt of the Settlement Shares, Alta shall file the Stipulation of Voluntary Dismissal with Prejudice, dismissing all claims asserted in the Action against GameSquare with prejudice.

 

The outcomes of pending litigations in which the Company is involved are necessarily uncertain as are the Company’s expenses in prosecuting and defending these actions. From time to time the Company may modify litigation strategy and/or the terms on which it retains counsel and other professionals in connection with such actions, which may affect the outcomes of and/or the expenses incurred in connection with such actions.

 

The Company is subject to various other claims, lawsuits and other complaints arising in the ordinary course of business. The Company records provisions for losses when claims become probable, and the amounts are estimable. Although the outcome of such matters cannot be determined, it is the opinion of management that the final resolution of these matters will not have a material adverse effect on the Company’s financial condition, operations, or liquidity.

 

 

ITEM 1A. RISK FACTORS

 

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this Item.

 

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

 

Repurchases of Shares

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

During the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

 

ITEM 6. EXHIBITS

 

GAMESQUARE HOLDINGS, INC.

FORM 10-Q

 

EXHIBIT INDEX

 

The exhibits to this Form 10-Q are listed in the following Exhibit Index:

 

Exhibit No.		Description
3.1		Certificate of Designation of Series A-1 Convertible Preferred Stock of GameSquare Holdings, Inc., dated as of July 24, 2025 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 29, 2025).
4.1		Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 9, 2025).
4.2		Form of Representative’s Warrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 9, 2025).
4.3		Form of Representative Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 18, 2025).
10.1		Exchange Agreement by and among GameSquare Holdings, Inc., FaZe Media Holdings, LLC, and Gigamoon Media, LLC (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 8, 2025).
10.2		Subscription Agreement between GameSquare Holdings, Inc. and Robert Leshner dated as of July 24, 2025 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 29, 2025).
10.3		Consent and Waiver of Series A-1 Preferred Stock Equity Issuance by Lucid Capital Markets, LLC, dated as of July 23, 2025 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed with the SEC on July 29, 2025).
10.4*		Settlement Agreement and Release dated as of August 11, 2025.
31.1*		Certification of Principal Executive Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1**		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following materials from GameSquare Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 are filed herewith, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023, (ii) the Condensed Consolidated Statements of Other Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2024 and 2023, and (vi) Notes to Condensed Consolidated Financial Statements.
101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*Filed herewith.

** Furnished, not filed.

 

 

SIGNATURES

 

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

 

		GAMESQUARE HOLDINGS, INC.
		(Registrant)
Dated:	August 14, 2025	By:	/s/ JUSTIN KENNA
			Justin Kenna
			Chief Executive Officer
			(Principal Executive Officer)
Dated:	August 14, 2025	By:	/s/ MICHAEL MUNOZ
			Michael Munoz
			Chief Financial Officer
			(Principal Financial Officer)