GameSquare (US:GAME)2025-05-15 20:30PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2025 financials show revenue growth from the FaZe merger, a wider net loss, and going concern doubts due to working capital deficiency and accumulated deficit Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in USD) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash | $4,675,226 | $12,094,950 | | Total current assets | $25,806,252 | $36,472,572 | | Goodwill | $12,704,979 | $12,704,979 | | Total assets | $67,779,864 | $78,730,447 | | Liabilities & Equity | | | | Total current liabilities | $45,176,773 | $54,762,972 | | Total liabilities | $57,265,590 | $66,726,199 | | Accumulated deficit | $(127,326,660) | $(122,171,056) | | Total shareholders' equity | $10,514,274 | $12,004,248 | - The company had a working capital deficiency of $19.4 million as of March 31, 2025, an increase from the $18.3 million deficiency at year-end 202431 Condensed Consolidated Statements of Operations and Comprehensive Loss Consolidated Statement of Operations Highlights (in USD) | Metric | Three months ended Mar 31, 2025 | Three months ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenue | $21,109,659 | $17,728,224 | | Gross Profit | $3,333,054 | $3,393,157 | | Loss from continuing operations | $(7,121,943) | $(6,281,148) | | Net Loss | $(7,173,736) | $(5,260,948) | | Net Loss attributable to GameSquare | $(5,155,604) | $(5,260,948) | | Loss per share (basic and diluted) | $(0.14) | $(0.30) | Condensed Consolidated Statements of Stockholders' Equity - During Q1 2025, the company issued 5,032,233 common shares for the conversion of convertible debt and 1,094,891 shares to settle outstanding payables21 - Total shareholders' equity decreased from $12.0 million at the end of 2024 to $10.5 million as of March 31, 2025, primarily due to the net loss for the period21 Condensed Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows Highlights (in USD) | Cash Flow Activity | Three months ended Mar 31, 2025 | Three months ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,582,365) | $(8,015,620) | | Net cash (used in) provided by investing activities | $(375,410) | $2,734,338 | | Net cash provided by financing activities | $1,462,218 | $9,478,912 | | Net (decrease) increase in cash | $(7,336,019) | $4,828,643 | - Cash and restricted cash decreased to $5.8 million at March 31, 2025, from $13.1 million at December 31, 202425188 Notes to Condensed Consolidated Financial Statements Notes detail corporate events, accounting policies, and significant going concern doubts, including key mergers, divestitures, and financing - Going Concern: The company has an accumulated deficit of $127.3 million and a working capital deficiency of $19.4 million as of March 31, 2025. These conditions raise substantial doubt about its ability to continue as a going concern3132 - FaZe Merger: On March 7, 2024, the company completed its acquisition of FaZe Holdings, Inc. for a total purchase price of $14.6 million, resulting in $7.1 million of goodwill454849 - Complexity Divestiture: On March 1, 2024, the company sold its subsidiary Complexity for $7.9 million, consisting of cash and a promissory note, recognizing a gain of $3.0 million. Complexity is now reported as a discontinued operation535455 - Subsequent Event - Faze Media Disposal: On April 1, 2025, the company transferred its remaining shares in Faze Media Inc. to Gigamoon to settle a $10 million convertible note, resulting in the disposal of Faze Media. This will be reflected as a discontinued operation in Q2 2025134135 - Operating Segments: The company is organized into three reportable segments: Teams, Agency, and Software-as-a-service (SaaS) + Advertising41125 - Concentration Risk: One customer accounted for approximately 34% of total revenue for the three months ended March 31, 2025, down from 57% in the same period of 202438 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025 revenue growth to the FaZe acquisition, despite a decline in programmatic advertising, while net loss widened due to higher costs, and liquidity remains a key concern Results of Operations Comparison (in USD) | Metric | Three months ended Mar 31, 2025 | Three months ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenue | $21,109,659 | $17,728,224 | | Gross Profit | $3,333,054 | $3,393,157 | | Loss from continuing operations | $(7,121,943) | $(6,281,148) | | Net Loss | $(7,173,736) | $(5,260,948) | Revenue by Segment (in USD) | Segment | Q1 2025 Revenue | Q1 2024 Revenue | | :--- | :--- | :--- | | Teams | $9,466,934 | $2,562,953 | | Agency | $2,300,035 | $2,942,857 | | SaaS + Advertising | $9,342,690 | $12,222,414 | | Total | $21,109,659 | $17,728,224 | - The increase in total revenue was primarily driven by the acquisition of FaZe, which contributed to a significant rise in Teams revenue from $2.6 million to $9.5 million year-over-year163164 - SaaS + Advertising revenue decreased by approximately $3 million, primarily due to a decline in the programmatic advertising business166 - The company incurred $0.6 million in restructuring charges in Q1 2025 related to the ongoing operational integration following the FaZe acquisition172 Reconciliation of Net Loss to Adjusted EBITDA (Non-GAAP) | Metric | Three months ended Mar 31, 2025 | Three months ended Mar 31, 2024 | | :--- | :--- | :--- | | Net loss | $(7,173,736) | $(5,260,948) | | Adjusted EBITDA | $(3,408,111) | $(4,130,321) | - The company's liquidity is under pressure, with cash and restricted cash falling to $5.8 million at the end of Q1 2025 from $13.1 million at year-end 2024. Operations are financed primarily by issuing equity and debt188191 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, GameSquare Holdings, Inc. is not required to provide the information for this item - 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 Item232 Controls and Procedures Management concluded that disclosure controls were ineffective as of March 31, 2025, due to material weaknesses in control activities and monitoring, with remediation efforts ongoing until December 2026 - Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2024 (Note: The report text says March 31, 2024, which appears to be a typo and likely means March 31, 2025)234 - Material weaknesses were identified in Control Activities and Monitoring Activities due to insufficient resources for risk assessment and control design234235 - The company is implementing remediation measures, including engaging outside resources, with a target completion date of December 31, 2026236 PART II – OTHER INFORMATION Legal Proceedings The company is involved in several legal proceedings, including arbitration, promissory note recovery, and SPAC merger-related complaints, with management expecting no material adverse effect - Allinsports Arbitration: The company is in arbitration over a disputed acquisition, with an arbitrator directing the company to issue 241,666 common shares. The company has recognized a liability and is pursuing counterclaims240241 - SPAC Complaint: A complaint has been filed regarding the July 2022 merger between B. Riley 150 Merger Corp. and Faze Holdings, Inc. The company has indemnification obligations and is part of a proposed settlement agreement to contribute $1.05 million in cash and stock243 - Alta Partners v. FaZe Holdings, Inc.: A complaint was filed on April 23, 2025, alleging FaZe Holdings breached a warrant agreement in 2022. The company is currently investigating the matter245 Risk Factors As a smaller reporting company, GameSquare Holdings, Inc. is not required to provide the information for this item - 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 Item248 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no repurchases of shares during the period - None249 Other Information During the three months ended March 31, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the quarter252