UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(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 | ||
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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.
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).
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 | ☐ | |
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☒ | Smaller reporting company |
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| Emerging growth company |
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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 November 11, 2025 | |||||
| Common Stock - $ par value | ||||||
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.
We routinely post important information for investors in the “Investors” section of our website, gamesquare.com. We may use our website as a distribution channel of material information about the Company. Accordingly, investors should monitor the “Investors” section of our website, in addition to following our press releases, filings with the SEC, public conference calls, presentations, and webcasts. The information contained on, or that may be accessed through, our website, is not incorporated by reference into, and is not a part of, this Quarterly Report on Form 10-Q.
GAMESQUARE HOLDINGS, INC.
INDEX
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GAMESQUARE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
|
September 30
2025 |
December 31,
2024 |
|||||||
| Assets | ||||||||
| Cash | $ |
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$ |
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| Restricted cash |
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| Accounts receivable, net |
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| Digital assets |
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| Government remittances |
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| Promissory note receivable, current |
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| Prepaid expenses and other current assets |
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| Total current assets |
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| Investment |
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| Investment in ETH fund |
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| Promissory note receivable, non-current |
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| Property and equipment, net |
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| Goodwill |
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| Intangible assets, definite lived, net |
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| Intangible assets, indefinite lived |
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| Right-of-use assets |
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| Total assets | $ |
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$ |
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| Liabilities and Shareholders’ Equity | ||||||||
| Accounts payable | $ |
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$ |
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| Accrued expenses and other current liabilities |
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| Players liability account |
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| Deferred revenue |
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| Current portion of operating lease liability |
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| Line of credit |
(
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) |
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| Convertible debt carried at fair value, current |
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| Warrant liability |
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| Deferred purchase consideration |
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| Arbitration reserve |
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| Total current liabilities |
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| Convertible debt carried at fair value, non-current |
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| Contingent purchase consideration, non-current |
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| Operating lease liability |
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| Total liabilities |
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| Commitments and contingencies (Note 16) | ||||||||
| Preferred stock ($ par value, authorized, and shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively) |
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| Common stock ($ par value, shares authorized, and shares issued and outstanding as of September 30, 2025 and December31, 2024, respectively) |
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| Additional paid-in capital |
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| Accumulated other comprehensive loss |
(
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) |
(
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) | ||||
| Non-controlling interest |
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| Accumulated deficit |
(
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) |
(
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) | ||||
| Total shareholders’ equity |
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| Total liabilities and shareholders’ equity | $ |
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$ |
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||||
See accompanying notes to Condensed Consolidated Financial Statements.
| 1 |
GAMESQUARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ |
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$ |
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$ |
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$ |
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||||||||
| Cost of revenue |
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| Gross profit |
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| Operating expenses: | ||||||||||||||||
| General and administrative |
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| Selling and marketing |
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| Research and development |
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| Depreciation and amortization |
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| Restructuring charges |
(
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) |
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(
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) |
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| Other operating expenses |
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| Total operating expenses |
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| Loss from continuing operations |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest income (expense) |
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(
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) | |||||||||||
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Loss on debt extinguishment |
(
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) |
(
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) | ||||||||||||
| Change in fair value of convertible debt carried at fair value |
(
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) |
(
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) |
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| Change in fair value of warrant liability |
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| Arbitration settlement reserve |
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| Other income (expense), net |
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(
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) | |||||||||||
| Total other income (expense), net |
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(
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) |
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(
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) | ||||||||||
| Loss from continuing operations before income taxes |
|
(
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) |
(
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) |
(
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) | |||||||||
| Income tax benefit | ||||||||||||||||
| Net income (loss) from continuing operations |
|
(
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) |
(
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) |
(
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) | |||||||||
| Net income (loss) from discontinued operations |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Net loss |
(
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) |
(
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) |
(
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) |
(
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) | ||||||||
| Net loss attributable to non-controlling interest |
|
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|
|||||||||||||
| Net loss attributable to attributable to GameSquare Holdings, Inc. | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
(
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) | ||||
| Comprehensive loss, net of tax: | ||||||||||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||
| Change in foreign currency translation adjustment |
|
|
(
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) |
|
|||||||||||
| Comprehensive loss |
(
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) |
(
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) |
(
|
) |
(
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) | ||||||||
| Comprehensive loss attributable to non-controlling interest |
|
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|
|||||||||||||
| Comprehensive loss | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||
| Income (loss) per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution: | ||||||||||||||||
| From continuing operations | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||||
| From discontinued operations |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Loss per common share attributable to GameSquare Holdings, Inc. - basic and assuming dilution | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
| 2 |
GAMESQUARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
| Common stock | Preferred stock | Additional | Accumulated other | Non- | ||||||||||||||||||||||||||||||||
| Shares | Par value | Shares | Amount |
paid-
in capital |
comprehensive (loss) income | Accumulated deficit | controlling interest |
Shareholders’
equity |
||||||||||||||||||||||||||||
| Balance, January 1, 2025 |
|
$ |
|
$ | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
$ |
|
||||||||||||||||||||
| Disposal of Faze Media Inc. | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||
| Registered offerings, net of issuance costs |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Issuance of Preferred | - |
|
|
|
||||||||||||||||||||||||||||||||
| Conversion of convertible debt |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Shares issued to settle outstanding amounts payable |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Restricted share units exercised |
|
|
- |
(
|
) | |||||||||||||||||||||||||||||||
| Share-based compensation - options and RSUs | - | - |
|
|
||||||||||||||||||||||||||||||||
| Warrants issued for services | - | - |
|
|
||||||||||||||||||||||||||||||||
| Cancellation of common shares |
(
|
) |
(
|
) | - |
|
||||||||||||||||||||||||||||||
| Other comprehensive income | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||||
| Net loss | - | - |
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||
| Balance, September 30, 2025 |
|
$ |
|
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ | $ |
|
|||||||||||||||||||
| Balance, January 1, 2024 |
|
$ |
|
$ | $ |
|
$ |
(
|
) | $ |
(
|
) | $ | $ |
|
|||||||||||||||||||||
| Acquisition of Faze Clan |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Private placements, net of issuance costs |
|
|
- |
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|
|||||||||||||||||||||||||||||||
| Conversion of convertible debt |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Shares issued to settle outstanding amounts payable |
|
|
- |
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|
|||||||||||||||||||||||||||||||
| Restricted share units exercised |
|
|
- |
|
|
|||||||||||||||||||||||||||||||
| Minority interest in Faze Media, Inc. | - | - |
|
|
||||||||||||||||||||||||||||||||
| Share-based compensation - options and RSUs | - | - |
|
|
||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - |
|
|
||||||||||||||||||||||||||||||||
| Net loss | - | - |
(
|
) |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||
| Balance, September 30, 2024 |
|
$ |
|
$ | $ |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
|
|||||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
| 3 |
GAMESQUARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization and depreciation |
|
|
||||||
| Amortization of operating lease right-of-use assets |
|
|
||||||
| Gain on disposition of subsidiary |
(
|
) |
(
|
) | ||||
| Loss on disposition of assets |
|
|
||||||
| Loss on extinguishment of debt |
|
|||||||
| Unrealized (gain) loss on investment in ETH fund |
(
|
) | ||||||
| Unrealized (gain) loss on digital assets |
|
|||||||
| Realized (gain) loss on digital assets |
(
|
) | ||||||
| Yield on investment in ETH fund |
(
|
) | ||||||
| Impairment expense |
|
|||||||
| Accretion of promissory note receivable |
(
|
) |
(
|
) | ||||
| Change in fair value of contingent consideration |
(
|
) | ||||||
| Change in fair value of warrant liability |
(
|
) |
(
|
) | ||||
| Change in fair value of arbitration reserve |
(
|
) |
(
|
) | ||||
| Change in fair value of convertible debt carried at fair value |
(
|
) |
(
|
) | ||||
| Share-based compensation |
|
|
||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net |
|
(
|
) | |||||
| Government remittances |
(
|
) |
|
|||||
| Prepaid expenses and other current assets |
|
(
|
) | |||||
| Accounts payable, accrued expenses and other current liabilities |
(
|
) |
|
|||||
| Deferred revenue |
(
|
) |
(
|
) | ||||
| Operating lease liability |
(
|
) |
(
|
) | ||||
| Net cash used in operating activities |
(
|
) |
(
|
) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment |
(
|
) |
(
|
) | ||||
| Purchase of intangible assets |
(
|
) |
(
|
) | ||||
| Purchase of digital assets |
(
|
) | ||||||
| Proceeds from sale of digital assets |
|
|||||||
| Cash used in acquisition of Click, net of cash acquired |
(
|
) | ||||||
| Cash acquired in Faze Clan acquisition |
|
|||||||
| Disposal of Frankly Media assets |
|
|||||||
| Disposal of Complexity, net of cash disposed |
|
|||||||
| Disposal of Faze Media, net of cash disposed |
(
|
) | ||||||
| Net cash provided by investing activities |
(
|
) |
|
|||||
| Cash flows from financings activities: | ||||||||
| Proceeds from registered offerings, net of issuance costs |
|
|||||||
| Proceeds from private placements, net of issuance costs |
|
|||||||
| Non-controlling interest in Faze Media, Inc. |
|
|||||||
| Proceeds from payments on promissory notes receivable, net |
|
|||||||
| Proceeds from issuance of promissory notes payable |
|
|||||||
| Repayment of promissory notes payable |
(
|
) | ||||||
| Proceeds from issuance of convertible debt |
|
|||||||
| Repayment of principal on convertible debt |
(
|
) | ||||||
| Proceeds (repayments) on line of credit, net |
(
|
) |
(
|
) | ||||
| Net cash provided by financing activities |
|
|
||||||
| Effect of exchange rate changes on cash and restricted cash |
(
|
) |
|
|||||
| Net increase (decrease) in cash and restricted cash |
(
|
) |
|
|||||
| Cash and restricted cash, beginning of period |
|
|
||||||
| Cash and restricted cash, end of period | $ |
|
$ |
|
||||
See accompanying notes to Condensed Consolidated Financial Statements.
| 4 |
GAMESQUARE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited)
| Nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Supplemental disclosure with respect to cash flows: | ||||||||
| Cash paid for interest expense | $ |
|
$ |
|
||||
| Cash paid for income taxes | ||||||||
| Operating lease payments in operating cash flows |
|
|
||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Issuance of preferred stock to acquire NFT | $ |
|
$ | |||||
| Purchase of NFTs with digital assets - ETH |
|
|||||||
| Acquisition of digital asssets for services - Anime and Rekt |
|
|||||||
| Contribution of digital assets - ETH into ETH fund |
|
|||||||
| Redemption of digital assets - ETH from ETH fund |
|
|||||||
| Disposal of Faze Media in exchange for conversion of convertible debt |
|
|||||||
| Disposal of Frankly assets in exchange for promissory note receivable |
|
|||||||
| Disposal of Complexity in exchange for promissory note receivable |
|
|||||||
| Shares, options, and warrants issued for acquisition of FaZe |
|
|||||||
| Conversion of convertible debt |
|
|||||||
| Shares issued to settle legal and other amounts payable |
|
|||||||
Reconciliation of cash and restricted cash:
|
September 30
2025 |
December 31,
2024 |
|||||||
| Cash | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
|
Cash and restricted cash shown in the consolidated statements of
cash flows |
$ |
|
$ |
|
||||
| 5 |
GAMESQUARE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Corporate information and going concern
(a) Corporate information
GameSquare Holdings, Inc. (NASDAQ: GAME)(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, completed its acquisition of Click Management Pty Ltd, an Australian proprietary limited company (“Click”) on September 11, 2025, resulting in the Company acquiring all the issued and outstanding securities of Click (see Note 4).
GameSquare, 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, Click Management Pty Ltd, a Australia based gaming and 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, Stream Hatchet, live streaming data and analytics platform, 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
$
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.
| 6 |
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 September 30, 2025, are as follows:
| Name of Subsidiary | Country of Incorporation | Ownership Percentage | Functional Currency | |||||
| Stream Hatchet S.L. |
|
|
% |
|
||||
| Code Red Esports Ltd. |
|
|
% |
|
||||
| Click Management Pty Ltd |
|
|
% |
|
||||
| GameSquare Esports (USA) Inc. (dba as Fourth Frame Studios) |
|
|
% |
|
||||
| GCN Inc. |
|
|
% |
|
||||
| Faze Clan Inc. |
|
|
% |
|
||||
| Swingman LLC (dba as Zoned) |
|
|
% |
|
||||
| Mission Supply LLC |
|
|
% |
|
||||
| SideQik, Inc. |
|
|
% |
|
||||
(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.
| 7 |
(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 no customers whose revenue accounted for more than
No
customers individually accounted for more than
(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 September 30, 2025, the Company is organized into the four operating segments, which also represent its four reportable segments: Owned and Operated IP, Agency, SaaS and managed services and Yield.
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.
(f) Digital assets
Crypto assets within the scope of ASC 350-60 are measured at fair value each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. Fair value is determined using Level 1 inputs from principal market cryptocurrency exchanges or widely recognized pricing indices. These assets are presented separately on the condensed consolidated balance sheets. Upon sale or transfer, crypto assets are derecognized at fair value. The Company applies an average cost methodology to assign costs for purposes of determining digital assets held and realized gains and losses.
Digital assets outside the scope of ASC 350-60, such as non-fungible tokens (“NFTs”), are accounted for as indefinite-lived intangible assets under ASC 350-30.
(g) Investments – equity securities
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
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 ASC 321 without a readily determinable fair value are accounted for using the net asset value (“NAV”) practical expedient in accordance with ASC 820 where applicable and when elected by the Company. The NAV is calculated by the general partner in a manner consistent with ASC 946, Financial Services — Investment Companies.
| 8 |
Equity securities accounted for under ASC 321 without a readily determinable fair value and for which the NAV practical expedient has not been elected are 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.
3. Recent accounting pronouncements
(a) Adopted
Effective January 1, 2025, the Company adopted ASU 2023-08, Accounting for Crypto Assets (ASC 350-60), which requires certain crypto assets to be measured at fair value with changes recognized in net income and presented separately on the balance sheet. The Company applied the provisions of ASU 2023-08 to its initial crypto asset purchases during the three months ended September 30, 2025. There were no prior-period crypto asset holdings and no cumulative-effect adjustment was required.
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) Acquisition of Click
On September 10, 2025, GameSquare entered into an equity purchase agreement pursuant to acquire all of the outstanding equity interests in Click Management Pty Ltd (“Click”), an Australian proprietary limited company, subject to the terms and conditions in the Purchase Agreement. The acquisition of Click closed on September 11, 2025.
Under
the terms of the purchase agreement, the Company paid a base purchase price of $
The acquisition of Click 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.
| 9 |
The following preliminary table summarizes the consideration for the acquisition:
| Purchase consideration | Amount | |||
| Cash at closing | $ |
|
||
| Deferred purchase consideration |
|
|||
| Contingent purchase consideration, non-current |
|
|||
| Total purchase price | $ |
|
||
The preliminary purchase price allocation is as follows:
| Purchase price allocation | Amount | |||
| Cash | $ |
|
||
| Accounts receivable, net |
|
|||
| Government remittances |
|
|||
| Prepaid expenses and other current assets |
|
|||
| Investment |
|
|||
| Property and equipment |
|
|||
| Goodwill |
|
|||
| Intangible assets |
|
|||
| Total assets acquired |
|
|||
| Accounts payable |
|
|||
| Accrued liabilities |
|
|||
| Total liabilities assumed |
|
|||
| Net assets acquired | $ |
|
||
Measurement period adjustments
Where provisional values are used in accounting for a business combination, they may be adjusted in subsequent periods, not to exceed twelve months. The primary areas that are subject to change relate to the fair value of the purchase consideration transferred and purchase price allocations related to the fair values of certain tangible assets, the valuation of intangible assets acquired, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired during the measurement periods.
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 $
The goodwill recorded represents the following:
| ● | Cost savings and operating synergies expected to result from combining the operations of Click with those of the Company. | |
| ● | Intangible assets that do not qualify for separate recognition such as the assembled workforce. |
Goodwill arising from the acquisition is expected to be deductible for tax purposes.
(b) 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.
| 10 |
The Company acquired all issued and outstanding FaZe common shares in exchange for 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:
| Purchase consideration | Amount | |||||||
| Common shares |
|
$ |
|
|||||
| Warrants - Equity |
|
|
||||||
| Options - Vested |
|
|
||||||
| RSUs / RSAs - Vested |
|
|
||||||
| Total purchase price |
|
$ |
|
|||||
The purchase price allocation is as follows:
| Purchase price allocation | Amount | |||
| Cash | $ |
|
||
| Restricted cash |
|
|||
| Accounts receivable, net |
|
|||
| Prepaid expenses and other current assets |
|
|||
| Property and equipment |
|
|||
| Goodwill |
|
|||
| Intangible assets |
|
|||
| Total assets acquired |
|
|||
| Accounts payable |
|
|||
| Accrued liabilities |
|
|||
| Deferred revenue |
|
|||
| Total liabilities assumed |
|
|||
| Net assets acquired | $ |
|
||
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 $
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.
| 11 |
(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 $
As
a result of the Transaction, during the three and nine months ended September 30, 2025 and 2024, Complexity met the requirements to be
reported as discontinued operations (see Note 19). The Company recognized a gain of $
The
Note has a principal amount of $
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 September 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 $
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 $
The
UNIV Note had a principal amount of $
The
XPR Note has a principal amount of $
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 May 31, 2024. During the second quarter of 2025, the Company recorded a full reserve on the UNIV Note of $
During the third quarter of 2025, the Company executed a plan to discontinue the operations of Frankly, following a strategic decision to focus the Company’s resources on its full-service creative agency, SaaS and newly launched digital asset treasury. Subsequent to the Frankly asset disposal discussed above, the business of Frankly that remained was its legacy programmatic advertising operation. Given its single digit-gross margins and operating losses, management deemed it in the best interest of the Company to discontinue operations of Frankly. During the three and nine months ended September 30, 2025, Frankly met the requirements to be reported as discontinued operations (see Note 19).
| 12 |
( 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 $
On
June 17, 2024, the Company entered into an agreement to sell
of its
shares of Series A-1 Preferred Stock of Faze
Media to M40A3 LLC (“M4”) in exchange for $
Contemporaneous with the execution of the June 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 $
(e) Disposal of Faze Media
Subsequently, on
April 1, 2025, 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 $
As
a result of the Exchange Agreement, during the three and nine months ended September 30, 2025 and 2024, Faze Media met the requirements
to be reported as discontinued operations (see Note 19). The Company recognized a gain of $
5. Digital assets
The Company holds Ethereum (“ETH”), Animecoin (“ANIME”), and REKT, all of which are within the scope of ASC 350-60.
The following table presents a roll forward of digital assets held directly by the Company:
| ETH | ANIME | REKT | SAND | Total | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | - | $ | ||||||||||||||
| Purchases |
|
|
- |
|
||||||||||||||||
| Other receipts - non-cash |
|
|
250,000 |
|
||||||||||||||||
| Contributions in exchange for Dialectic investment (see Note 6) |
(
|
) | - |
(
|
) | |||||||||||||||
| Redemptions in Dialectic investment (see Note 6) |
|
- |
|
|||||||||||||||||
| Sales |
(
|
) |
(
|
) | (98,912 | ) |
(
|
) | ||||||||||||
| Exchange of ETH for NFTs (see Note 7) |
(
|
) | - |
(
|
) | |||||||||||||||
| Unrealized gain (loss) on digital assets |
(
|
) |
(
|
) |
(
|
) | - |
(
|
) | |||||||||||
| Realized gain (loss) on digital assets |
|
|
(150,925 | ) |
|
|||||||||||||||
| Fees and other |
|
(
|
) | (163 | ) |
(
|
) | |||||||||||||
| Balance, September 30, 2025 | $ |
|
$ |
|
$ |
|
$ | - | $ |
|
||||||||||
Unrealized and realized gains (losses) on digital assets are included in Other income (expense), net in the condensed consolidated statements of operations.
| 13 |
Digital asset holdings as of September 30, 2025, were as follows:
| Asset | Units Held | Fair Value | Cost Basis | Unrealized Gain (Loss) | ||||||||||||
| ETH |
|
$ |
|
$ |
|
$ |
(
|
) | ||||||||
| ANIME |
|
|
|
(
|
) | |||||||||||
| REKT |
|
|
|
(
|
) | |||||||||||
| Total | $ |
|
$ |
|
$ |
(
|
) | |||||||||
In
August and September 2025, the Company received
In
August 2025, the Company received
6. Investment in ETH fund
During
the nine months ended September 30, 2025, the Company contributed an aggregate of
The investment in Dialectic is subject to the provisions of ASC 321 and, because the investment in Dialectic does not have a readily determinable fair value, the Company elected to use the NAV practical expedient and, therefore, the investment is not included in the fair value hierarchy.
The
investment generated yield in August and September 2025 of $
7. Goodwill and intangible assets
(a) Goodwill
The following table presents the changes in the carrying amount of goodwill:
| Balance, December 31, 2023 | $ |
|
||
| Acquisition of FaZe |
|
|||
| Disposal of Frankly Media assets |
(
|
) | ||
| Impairment of Stream Hatchet |
(
|
) | ||
| Impairment of Sideqik |
(
|
) | ||
| Balance, December 31, 2024 | $ |
|
||
| Disposal of FaZe Media |
(
|
) | ||
| Acquisition of Click |
|
|||
| Impairment of Frankly |
(
|
) | ||
| Balance, September 30, 2025 | $ |
|
In
connection with the decision in the third quarter of 2025 to discontinue the operations of Frankly (Note 19), the remaining value of
goodwill and intangible assets of Frankly were impaired. Goodwill and intangible assets impairment charges were $
| 14 |
(b) Intangible assets, definite lived
Intangible assets, definite lived consist of the following:
| As of September 30, 2025 | ||||||||||||||||
| Original cost | Accumulated amortization | Accumulated impairment losses | Carrying value | |||||||||||||
| Customer relationships | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||
| Talent network |
|
(
|
) | $ |
|
|||||||||||
| Brand name |
|
(
|
) | $ |
(
|
) |
|
|||||||||
| Software |
|
(
|
) | $ |
(
|
) | ||||||||||
| Total intangible assets | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||
| As of December 31, 2024 | ||||||||||||||||
| Original cost | Accumulated amortization | Accumulated impairment losses | Carrying value | |||||||||||||
| Customer relationships | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||
| Talent network | $ |
|
$ |
(
|
) |
|
||||||||||
| Brand name |
|
(
|
) |
(
|
) |
|
||||||||||
| Software |
|
(
|
) |
(
|
) | |||||||||||
| Total intangible assets | $ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
||||||
The
Company recognized amortization expense for intangible assets of $
Amortization expense for definite lived intangible assets is expected to be as follows over the next five years, and thereafter:
| 2025 | $ |
|
||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| 2029 |
|
|||
| Thereafter |
|
|||
| Total estimated amortization expense | $ |
|
In
connection with the decision in the third quarter of 2025 to discontinue the operations of Frankly (Note 19), the remaining value of
goodwill and intangible assets of Frankly were impaired. Goodwill and intangible assets impairment charges were $
(c) Intangible assets, indefinite lived
On July 24, 2025, the Company entered into a subscription agreement, pursuant to which the subscriber purchased from the Company shares of Series A-1 Convertible Preferred Stock of the Company, par value $ per share (Note 11), in consideration for Crypto Punk 5577 non-fungible token (“NFT”), which was deemed to have a fair market value of $ million.
Regarding
the
In
addition to the acquisition of the Cowboy Ape NFT, the Company acquired an additional seven crypto punks using ETH valued at $
Digital assets outside the scope of ASC 350-60, such as non-fungible tokens (“NFTs”), are accounted for as indefinite-lived intangible assets under ASC 350-30.
There were no impairment charges related to indefinite-lived intangible assets incurred during the three and nine months ended September 30, 2025.
| 15 |
8. 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 19).
The components of operating lease expense are as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease expense |
|
|
|
|
||||||||||||
| Variable lease expense |
|
|
|
|
||||||||||||
| Total operating lease costs |
|
|
|
|
||||||||||||
As
of September 30, 2025, the remaining lease-term and discount rate on the Frisco, TX lease was
Maturities of the lease liability are as follows:
| 2025 |
|
|||
| 2026 |
|
|||
| 2027 |
|
|||
| 2028 |
|
|||
| 2029 |
|
|||
| Thereafter | ||||
| Total lease payments |
|
|||
| Less: Interest |
(
|
) | ||
| Total lease liability | $ |
|
9. Line of credit
On
September 14, 2023, the Company entered into an accounts receivable financing and security agreement with a maximum availability of $
During
the third quarter of 2025, in connection with the discontinued operations of Frankly, which was the primary borrower under the line of
credit, the Company paid down the balance under the LOC. As of September 30, 2025, the outstanding principal, and unpaid accrued interest,
on the LOC was $(
| 16 |
10. 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 $
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
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 $
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 $
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
| 17 |
On
January 22, 2025, Yorkville converted $
Gigamoon CD
On
November 13, 2024, the Company and Gigamoon entered into a senior secured convertible promissory note in the principal amount of $
The
Gigamoon CD bears an interest rate of
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 $
Subsequently, 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 shares of Series A-1 Preferred Stock of Faze Media Inc. to Gigamoon (See Note 4).
Outstanding as of September 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 $
The Three Curve CD matured during the quarter, and the balance due was reclassed into Accrued expenses and other current liabilities on the condensed consolidated balance sheet. The total amount due was paid subsequent to quarter end by the Company.
The change in fair values of the Company’s convertible debentures subject to recurring remeasurement at fair value were as follows:
| Three Curve CD | Yorkville CD | Gigamoon CD | Total | |||||||||||||
| Balance, December 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| Interest expense |
|
|
|
|||||||||||||
| Interest payments |
(
|
) |
(
|
) | ||||||||||||
| Transfer to promissory note payable |
(
|
) |
(
|
) | ||||||||||||
| Maturity of convertible debt |
(
|
) |
(
|
) | ||||||||||||
| Conversion of debt |
(
|
) |
(
|
) |
(
|
) | ||||||||||
| Change in fair value (1) |
|
(
|
) |
|
(
|
) | ||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| Contractual principal balances outstanding: | ||||||||||||||||
| As of December 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| As of September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| (1) |
|
| 18 |
11. Shareholders’ Equity
(a) Description of the Company’s securities
The Company is authorized to issue common shares, par value $ per share, and preferred shares, par value $ per share. Holders of common shares are entitled to one vote in respect of each common share held at shareholder meetings of the Company.
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 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 $ per share liquidation preference on an as-converted basis. After satisfying this preference, each share of Series A-1 preferred stock will automatically convert into shares of the common stock. The Series A-1 preferred stock has no voting rights and is equity classified.
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 $
per share up to $
(b) Activity for the periods presented – common shares
On
January 22, 2025, Yorkville converted $
On
March 10, 2025, the Company issued
common shares to pay an outstanding settlement due to the former CEO of Faze Clan for $
On April 1, 2025, the Company issued 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
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
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
shares of common stock,
par value $
per share and
pre-funded warrants (each representing the right to purchase one Share of Common Stock at an
exercise price of $
The
Offering closed on July 9, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $
| 19 |
On July 17, 2025, the Company entered into an underwriting agreement with the Underwriter pursuant to which the Company will issue and sell to the Underwriter pursuant to the Underwriting Agreement shares of common stock, par value $ per share, at an offering price of $ per Share. The Underwriter also exercised its option pursuant to the Underwriting Agreement and purchased additional Shares at the offering price of $ per Share.
The
Offering closed on July 18, 2025. The aggregate gross proceeds to the Company from the Offering were approximately $
On August 11, 2025, the Company issued common shares to Alta Partners as part of a legal settlement.
On August 20, 2025, the Company cancelled common shares originally issued in connection with the acquisition of Faze Clan. The common shares did not meeting vesting criteria as of the acquisition date of March 7, 2024, and were subject to cancellation on that date.
During the nine months ended September 30, 2025, the Company issued common shares from the exercise of Restricted Share Units (“RSUs”) under its equity incentive plan (see Note 13(b)).
On March 7, 2024, 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
units at a purchase price of $
per unit for aggregate
gross proceeds of $
On
August 26, 2024,
common shares were issued in connection with conversion of $
On
September 4, 2024,
common shares were issued in settlement of outstanding amounts payable of $
During the nine months ended September 30, 2024, the Company issued common shares from the exercise of Restricted Share Units (“RSUs”) under its equity incentive plan (see Note 13(b)).
(c) Activity for the periods presented – preferred shares
On
July 24, 2025, the Company entered into a subscription agreement with Robert Leshner (“Subscriber”), pursuant to which Subscriber
purchased from the Company
shares of Series A-1 preferred stock, in consideration for Crypto Punk 5577, an NFT with a fair value
of $
As the Company incurred a net loss for the three and nine months ended September 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.
| 20 |
| Three and nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Options and RSUs outstanding | ||||||||
| Warrants outstanding | ||||||||
| Shares issuable upon conversion of convertible debt | ||||||||
| Total | ||||||||
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 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 million common shares as of September 30, 2025.
(a) Options
The following is a summary of Options outstanding as of September 30, 2025 and December 31, 2024, and changes during the nine months then ended, by Option exercise currency:
| Number of shares |
Weighted-average exercise price
(CAD) |
Weighted-average remaining contractual term | Aggregate intrinsic value | |||||||||||||
| Outstanding at December 31, 2024 |
|
$ |
|
$ | ||||||||||||
| Outstanding at September 30, 2025 |
|
$ |
|
$ | ||||||||||||
| Exercisable at September 30, 2025 |
|
$ |
|
$ | ||||||||||||
| Number of shares |
Weighted-average exercise price
(USD) |
Weighted-average remaining contractual term | Aggregate intrinsic value | |||||||||||||
| Outstanding at December 31, 2024 |
|
$ |
|
$ | ||||||||||||
| Outstanding at September 30, 2025 |
|
$ |
|
$ | ||||||||||||
| Exercisable at September 30, 2025 |
|
$ |
|
$ | ||||||||||||
| 21 |
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 $ thousand and $ thousand for the nine months ended September 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 September 30, 2025, and December 31, 2024, and changes during the nine months then ended:
| Number of shares | Weighted-average grant date fair value | |||||||
| Outstanding at December 31, 2024 |
|
$ |
|
|||||
| Granted |
|
|
||||||
| Exercised |
(
|
) |
|
|||||
| Forfeited |
(
|
) |
|
|||||
| Outstanding at September 30, 2025 |
|
$ |
|
|||||
The grant-date fair values of RSUs are based on the Company’s stock price as of the grant date.
Shared-based compensation expense related to the vesting of RSU’s was $ million and $ million for the nine months ended September 30, 2025 and 2024, respectively, and is included in general and administrative expense on the consolidated statements of operations and comprehensive loss.
14. 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 nine months ended September 30, 2025:
| Amount | ||||
| Balance, December 31, 2024 | $ |
|
||
| Change in fair value |
(
|
) | ||
| Foreign exchange |
|
|||
| Balance, September 30, 2025 | $ |
|
The following assumptions were used to determine the fair value of the warrant liability using the Black-Scholes option pricing model:
| September 30, 2025 | December 31, 2024 | |||||||
| Share price | CAD$ | CAD$ | ||||||
| Term, in years |
|
|
||||||
| Exercise price |
CAD$
|
CAD$
|
||||||
| Expected volatility |
|
% |
|
% | ||||
| Risk-free interest rate |
|
% |
|
% | ||||
| Expected dividend yield |
|
% |
|
% | ||||
| 22 |
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
(b) Equity-classified warrants
As discussed in Note 11, in connection with the registered offerings that closed on July 9, 2025 and July 18, 2025, the Company issued underwriter warrants as additional consideration to the underwriter.
On
July 9, 2025,
On
July 18, 2025,
On
July 1, 2025,
As
discussed in Note 4, in conjunction with the acquisition of FaZe, the Company issued
As
discussed in Note 11, in conjunction with the PIPE Financing on March 7, 2024,
The
Company had
15. 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 $
(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 $
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.
During
the third quarter of 2025, the Company paid $
| 23 |
16. Commitments and contingencies
Allinsports
- A September 2021, decision issued
by an arbitrator located in Alberta, Canada, directed the Company to issue
shares to Allinsports in connection with a dispute
whether certain closing conditions in the acquisition agreement for Allinsports had been met. The Company recognized a liability for
the arbitration ruling of $
SPAC
Complaint
– As previously disclosed, in June 2024 a complaint was filed in Delaware Chancery Court by
Alta
Partners v. FaZe Holdings, Inc. On April 23, 2025, Alta Partners, LLC (“Alta”) 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 agreed to issue to Alta $
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.
17. 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 September 30, 2025, the Company is organized into the
Revenue, cost of sales and gross profit for the Company’s operating and reportable segments, disaggregated into geographic locations, are as follows:
| Nine months ended September 30, 2025 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | $ |
|
$ | $ | $ |
|
|||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield |
|
|
||||||||||||||||||
| Total Revenue |
|
|
|
|
|
|||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Cost of sales |
|
|
|
|
|
|||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield |
|
|
||||||||||||||||||
| Total Gross profit | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Nine months ended September 30, 2024 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | $ |
|
$ | $ | $ |
|
|||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Revenue |
|
|
|
|
||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Cost of sales |
|
|
|
|
||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Gross profit | $ |
|
$ |
|
$ |
|
$ | $ |
|
|||||||||||
| 24 |
| Three months ended September 30, 2025 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | $ |
|
$ | $ | $ |
|
|||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield |
|
|
||||||||||||||||||
| Total Revenue |
|
|
|
|
|
|||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Cost of sales |
|
|
|
|
|
|||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|
||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield |
|
|
||||||||||||||||||
| Total Gross profit | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Three months ended September 30, 2024 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | $ |
|
$ | $ | $ |
|
|||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Revenue |
|
|
|
|
||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Cost of sales |
|
|
|
|
||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP |
|
|
||||||||||||||||||
| Agency |
|
|
|
|||||||||||||||||
| SaaS and managed services |
|
|
|
|||||||||||||||||
| Yield | ||||||||||||||||||||
| Total Gross profit | $ |
|
$ |
|
$ |
|
$ | $ |
|
|||||||||||
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:
|
September 30,
2025 |
December 31,
2024 |
|||||||
| USA | $ |
|
$ |
|
||||
| Australia |
|
|||||||
| United Kingdom |
|
|
||||||
| Spain |
|
|
||||||
| Total | $ |
|
$ |
|
||||
| 25 |
18. 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:
| As of September 30, 2025 | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability |
|
|
||||||||||||||
| Arbitration reserve |
|
|
||||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability |
|
|
||||||||||||||
| Arbitration reserve |
|
|
||||||||||||||
| Convertible debt |
|
|
||||||||||||||
(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 investments, 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.
Digital assets measured at fair value under ASC 350-60 are not included in the fair value hierarchy table above, in accordance with ASC 350-60.
(b) NAV practical expedient
The investment in Dialectic is measured at fair value using the NAV practical expedient under ASC 820-10 and is not categorized in the fair value hierarchy. The NAV is calculated monthly by the general partner in accordance with ASC 946 using fair value for substantially all underlying assets.
19. Discontinued operations
(a) Complexity
As
discussed in Note 4, on March 1, 2024, the Company sold Complexity and recognized a gain on disposition of $
The
Company recognized a pretax net loss of $
Complexity
had amortization and depreciation of $
| 26 |
(b) FaZe Media
As
discussed in Note 4, on April 1, 2025, the Company sold FaZe Media and recognized a gain on disposition of $
The
Company recognized a pretax net loss of $
The
Company recognized a pretax net loss of $
FaZe
Media had amortization and depreciation of $
(c) Frankly
During the third quarter of 2025, the Company executed a plan to discontinue the operations of Frankly, following a strategic decision to focus the Company’s resources on its full-service creative agency, SaaS and newly launched digital asset treasury. Subsequent to the Frankly asset disposal (Note 4), the business of Frankly that remained was its legacy programmatic advertising operation. Given its single digit-gross margins and operating losses, management deemed it in the best interest of the Company to discontinue operations of Frankly. During the three and nine months ended September 30, 2025, Frankly met the requirements to be reported as discontinued operations.
The
Company recognized a pretax net loss of $
The
Company recognized a pretax net loss of $
Frankly
had amortization and depreciation of $
20. Subsequent events
Share Buyback
On October 1 and 2, 2025, GameSquare repurchased
shares of its
common stock for $
Nasdaq bid price requirement
On September 10, 2025, GameSquare received a letter (the “Minimum Bid Price Notice”) from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying GameSquare that for the last 30 consecutive business days, the closing bid price for GameSquare’s common stock (the “Common Stock”) has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Nasdaq Minimum Bid Price Requirement”). The Minimum Bid Price Notice has no immediate effect on the listing of the Common Stock, and the Common Stock will continue to trade The Nasdaq Capital Market.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), GameSquare has been provided an initial compliance period of 180 calendar days, or until March 9, 2026, to regain compliance with the Nasdaq Minimum Bid Price Requirement, which requires that the closing bid price of the Common Stock meet or exceed $1.00 per share for a minimum of ten consecutive trading days.
If GameSquare is unable to regain compliance with the Nasdaq Minimum Bid Price Requirement, GameSquare may be eligible for an additional 180-day compliance period. To qualify, GameSquare will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Nasdaq Minimum Bid Price Requirement and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If GameSquare does not qualify for the second compliance period or fails to regain compliance during the second 180-day period, Nasdaq will notify GameSquare of its determination to delist the Common Stock, at which point GameSquare would have an opportunity to appeal the delisting determination to a hearings panel.
GameSquare will continue to monitor the bid price of the Common Stock and consider its available options to regain compliance with the Nasdaq Minimum Bid Price Requirement. However, there can be no assurance that GameSquare will be able to regain compliance with the Nasdaq Minimum Bid Price Requirement.
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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, Swingman LLC dba as Zoned, a gaming and lifestyle marketing agency, Code Red Esports Ltd. (“Code Red”), a UK based esports talent agency, Click Management Pty Ltd, a Australia based gaming and 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, Stream Hatchet, live streaming data and analytics platform, 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, completed its acquisition of Click Management Pty Ltd, an Australian proprietary limited company (“Click”) on September 11, 2025, resulting in the Company acquiring all the issued and outstanding securities of Click.
GameSquare, 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.
GameSquare is also leveraging sophisticated crypto infrastructure with the intent to generate digital asset yield. GameSquare has partnered with Dialetic, a 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 or acquired, directly and indirectly, over $70 million ETH and other digital assets 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.
Click
Click is leading talent management firm founded in Australia with a growing U.S. presence. Regularly named as one of the top digital creator agencies by Business Insider, and recently awarded “Best Talent Management Agency” by industry body AiMCO, Click closed over 545 commercial deals globally in 2024, and has assembled one of the largest English-speaking gaming rosters, with over 75 active talent.
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.
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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 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.
Recent Developments
Click Equity Purchase Agreement
On September 10, 2025, GameSquare, entered into an Equity Purchase Agreement (the “Click Purchase Agreement” ) with Click Management Pty Ltd, an Australian proprietary limited company (the “Click”) , pursuant to which, among other things, GameSquare acquire d all of the outstanding equity interests in Click, subject to the terms and conditions in the Click Purchase Agreement (the “ Click Transaction”). The Click Transaction closed on September 11, 2025.
Under the terms of the Click Purchase Agreement, the Company paid a base purchase price of $4,500,000 subject to customary adjustments for cash, net working capital, indebtedness and transaction expenses. The sellers will also receive, subject to the terms and conditions described in the Click Purchase Agreement: (i) a deferred cash payment of $4,000,000 within sixty (60) days following December 31, 2025; and (ii) up to an aggregate of $3,000,000 in cash earn-out payments based on the post-closing performance of Click and its wholly owned subsidiary, Click Media & Management LLC, a Delaware limited liability company (“Click Media”) and together with Click, collectively, the “Click Group”). Specifically, (a) up to $1,500,000 may be payable based on the Click Group’s EBITDA for the 12-month period beginning January 1, 2026, if Actual EBITDA for such period falls within specified target ranges set forth in the Purchase Agreement, and (b) up to an additional $1,500,000 may be payable based on the Click Group’s EBITDA for the 12-month period beginning January 1, 2027, if Actual EBITDA for such period falls within specified target ranges set forth in the Purchase Agreement.
Nasdaq bid price requirement
On September 10, 2025, GameSquare received a letter (the “Minimum Bid Price Notice”) from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying GameSquare that for the last 30 consecutive business days, the closing bid price for GameSquare’s common stock (the “Common Stock”) has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Nasdaq Minimum Bid Price Requirement”). The Minimum Bid Price Notice has no immediate effect on the listing of the Common Stock, and the Common Stock will continue to trade The Nasdaq Capital Market.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), GameSquare has been provided an initial compliance period of 180 calendar days, or until March 9, 2026, to regain compliance with the Nasdaq Minimum Bid Price Requirement, which requires that the closing bid price of the Common Stock meet or exceed $1.00 per share for a minimum of ten consecutive trading days.
If GameSquare is unable to regain compliance with the Nasdaq Minimum Bid Price Requirement, GameSquare may be eligible for an additional 180-day compliance period. To qualify, GameSquare will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Nasdaq Minimum Bid Price Requirement and will need to provide written notice to Nasdaq of its intention to cure the deficiency during the second compliance period. If GameSquare does not qualify for the second compliance period or fails to regain compliance during the second 180-day period, Nasdaq will notify GameSquare of its determination to delist the Common Stock, at which point GameSquare would have an opportunity to appeal the delisting determination to a hearings panel.
GameSquare will continue to monitor the bid price of the Common Stock and consider its available options to regain compliance with the Nasdaq Minimum Bid Price Requirement. However, there can be no assurance that GameSquare will be able to regain compliance with the Nasdaq Minimum Bid Price Requirement.
July 9, 2025 Offering
On July 8, 2025, the Company entered into an underwriting agreement (the “July 8 Underwriting Agreement”) with Lucid Capital Markets, LLC (the “Underwriter”) pursuant to which the Company issued and sold to the Underwriter pursuant to the July 8 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 “July 8 Option”) to be sold by the Company (the “July 8 Offering”). The July 8 Offering closed on July 9, 2025. The aggregate gross proceeds to the Company from the July 8 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 July 8 Offering. Pursuant to the July 8 Underwriting Agreement we also agreed to issue the Underwriter’s common stock purchase warrants (the “July 8 Representative’s Warrant”) to purchase shares of Common Stock equal to up to 10% of the securities sold in the July 8 Offering at an exercise price of $1.14 per share.
On July 9, 2025, the Underwriter fully exercised its July 8 Option pursuant to the July 8 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 July 8 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.
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July 18, 2025 Offering
On July 17, 2025, the Company entered into an underwriting agreement (the “July 17 Underwriting Agreement”) with the Underwriter, pursuant to which the Company issued and sold to the Underwriter pursuant to the July 17 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 “July 17 Option”) to be sold by the Company (the “July 17 Offering”). The July 17 Offering closed on July 18, 2025. The aggregate gross proceeds to the Company from the July 17 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 July 17 Offering. Pursuant to the July 17 Underwriting Agreement we also agreed to issue the Underwriter common stock purchase warrants (the “July 17 Representative’s Warrant”) to purchase shares of Common Stock equal to up to 10% of the securities sold in the July 17 Offering at an exercise price of $1.80 per share.
On July 18, 2025, the Underwriter partially exercised its July 17 Option pursuant to the July 17 Underwriting Agreement and purchased 3,500,000 Shares at a price of $1.50 per Share. The Underwriter’s partial exercise of its July 17 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.
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 (the “ATM Shares”). On June 27, 2025, the Company filed a prospectus supplement relating to the offer and sale of the ATM 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 Common Stock 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.
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, par value $0.0001 per share (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 (the “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, 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 (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 up to $5,000,000 of shares 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. We did not make any purchases of shares under the repurchase program during the three months ended September 30, 2025.
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.
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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.
Subsequent to the foregoing approvals, the Company determined that the option components of these awards could not be validly granted under the Company’s equity incentive plan because the number of shares then authorized for issuance under the Company’s articles of incorporation was insufficient. Accordingly, no option agreements were executed, and the options were never formally issued.
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”). Subsequently, 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.
In July 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. In July 2025, the Company paid the balance due under the promissory note.
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.
Subsequently, 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.
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Current Market Conditions
GameSquare is pursuing organic growth opportunities, as well as M&A growth opportunities. From August 2020 to September 2025, the Company has completed six acquisitions and divested three non-core assets. GameSquare’s organic growth strategy focuses on growing audience and reach within its operating segments. GameSquare’s digital agencies, owned and operated IP, and SaaS 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 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 nine months ended September 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 nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. FaZe Media and Frankly are now reported in discontinued operations. Historical results of operations of FaZe Media and Frankly are netted in discontinued operations within the below figures.
| Nine months ended September 30, | ||||||||||||
| 2025 | 2024 | Variance | ||||||||||
| Revenue | $ | 26,542,646 | $ | 19,930,359 | $ | 6,612,287 | ||||||
| Cost of revenue | 15,500,495 | 12,439,479 | 3,061,016 | |||||||||
| Gross profit | 11,042,151 | 7,490,880 | 3,551,271 | |||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 13,766,667 | 11,806,277 | 1,960,390 | |||||||||
| Selling and marketing | 4,188,399 | 4,116,694 | 71,705 | |||||||||
| Research and development | 1,550,378 | 1,447,954 | 102,424 | |||||||||
| Depreciation and amortization | 727,789 | 1,025,004 | (297,215 | ) | ||||||||
| Restructuring charges | (814,377 | ) | 330,167 | (1,144,544 | ) | |||||||
| Other operating expenses | 2,387,823 | 3,417,687 | (1,029,864 | ) | ||||||||
| Total operating expenses | 21,806,679 | 22,143,783 | (337,104 | ) | ||||||||
| Loss from continuing operations | (10,764,528 | ) | (14,652,903 | ) | 3,888,375 | |||||||
| Other income (expense), net: | ||||||||||||
| Interest income (expense) | 309,733 | (17,072 | ) | 326,805 | ||||||||
| Loss on debt extinguishment | - | (1,032,070 | ) | 1,032,070 | ||||||||
| Change in fair value of convertible debt carried at fair value | 289,883 | 357,822 | (67,939 | ) | ||||||||
| Change in fair value of warrant liability | 7,275 | 79,382 | (72,107 | ) | ||||||||
| Arbitration settlement reserve | 35,283 | 252,208 | (216,925 | ) | ||||||||
| Other income (expense), net | 8,276,426 | (246,066 | ) | 8,522,492 | ||||||||
| Total other income (expense), net | 8,918,600 | (605,796 | ) | 9,524,396 | ||||||||
| Loss from continuing operations before income taxes | (1,845,928 | ) | (15,258,699 | ) | 13,412,771 | |||||||
| Income tax benefit | - | - | - | |||||||||
| Net income (loss) from continuing operations | (1,845,928 | ) | (15,258,699 | ) | 13,412,771 | |||||||
| Net income (loss) from discontinued operations | (9,154,597 | ) | (9,469,805 | ) | 315,208 | |||||||
| Net loss | (11,000,525 | ) | (24,728,504 | ) | 13,727,979 | |||||||
| Net loss attributable to non- controlling interest | 2,018,132 | 2,369,533 | (351,401 | ) | ||||||||
| Net loss attributable to attributable to GameSquare Holdings, Inc. | $ | (8,982,393 | ) | $ | (22,358,971 | ) | $ | 13,376,578 | ||||
| Three months ended September 30, | ||||||||||||
| 2025 | 2024 | Variance | ||||||||||
| Revenue | $ | 11,315,003 | $ | 9,306,777 | $ | 2,008,226 | ||||||
| Cost of revenue | 5,722,273 | 5,091,393 | 630,880 | |||||||||
| Gross profit | 5,592,730 | 4,215,384 | 1,377,346 | |||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 6,170,930 | 3,744,312 | 2,426,618 | |||||||||
| Selling and marketing | 1,464,040 | 1,196,593 | 267,447 | |||||||||
| Research and development | 519,275 | 450,637 | 68,638 | |||||||||
| Depreciation and amortization | 271,484 | 350,324 | (78,840 | ) | ||||||||
| Restructuring charges | (1,535,097 | ) | 330,167 | (1,865,264 | ) | |||||||
| Other operating expenses | 1,095,258 | 1,287,223 | (191,965 | ) | ||||||||
| Total operating expenses | 7,985,890 | 7,359,256 | 626,634 | |||||||||
| Loss from continuing operations | (2,393,160 | ) | (3,143,872 | ) | 750,712 | |||||||
| Other income (expense), net: | ||||||||||||
| Interest income (expense) | 166,831 | 178,008 | (11,177 | ) | ||||||||
| Loss on debt extinguishment | - | (1,032,070 | ) | 1,032,070 | ||||||||
| Change in fair value of convertible debt carried at fair value | (38,033 | ) | (98,937 | ) | 60,904 | |||||||
| Change in fair value of warrant liability | 19,659 | 26,482 | (6,823 | ) | ||||||||
| Arbitration settlement reserve | 45,917 | 113,583 | (67,666 | ) | ||||||||
| Other income (expense), net | 8,145,567 | 21,267 | 8,124,300 | |||||||||
| Total other income (expense), net | 8,339,941 | (791,667 | ) | 9,131,608 | ||||||||
| Loss from continuing operations before income taxes | 5,946,781 | (3,935,539 | ) | 9,882,320 | ||||||||
| Income tax benefit | - | - | - | |||||||||
| Net income (loss) from continuing operations | 5,946,781 | (3,935,539 | ) | 9,882,320 | ||||||||
| Net income (loss) from discontinued operations | (6,755,224 | ) | (3,528,876 | ) | (3,226,348 | ) | ||||||
| Net loss | (808,443 | ) | (7,464,415 | ) | 6,655,972 | |||||||
| Net income attributable to non-controlling interest | - | 1,979,943 | (1,979,943 | ) | ||||||||
| Net loss attributable to attributable to GameSquare Holdings, Inc. | $ | (808,443 | ) | $ | (5,484,472 | ) | $ | 4,676,029 | ||||
| 32 |
Revenue
The following tables disaggregate revenue by revenue stream and geographic region for the three and nine months ended September 30, 2025 and 2024. FaZe Media and Frankly are now reported in discontinued operations, and therefore not included in the below figures.
| Nine months ended September 30, 2025 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | - | $ | 8,608,361 | $ | - | $ | - | $ | 8,608,361 | ||||||||||
| Agency | 839,523 | 8,460,830 | - | 591,601 | 9,891,954 | |||||||||||||||
| SaaS and managed services | - | 1,136,049 | 6,318,040 | - | 7,454,089 | |||||||||||||||
| Yield | - | 588,242 | - | - | 588,242 | |||||||||||||||
| Total Revenue | 839,523 | 18,793,482 | 6,318,040 | 591,601 | 26,542,646 | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP | - | 5,220,172 | - | - | 5,220,172 | |||||||||||||||
| Agency | 637,963 | 5,530,672 | - | 368,059 | 6,536,694 | |||||||||||||||
| SaaS and managed services | - | 350,853 | 3,392,776 | - | 3,743,629 | |||||||||||||||
| Yield | - | - | - | - | ||||||||||||||||
| Total Cost of sales | 637,963 | 11,101,697 | 3,392,776 | 368,059 | 15,500,495 | |||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP | - | 3,388,189 | - | - | 3,388,189 | |||||||||||||||
| Agency | 201,560 | 2,930,158 | - | 223,542 | 3,355,260 | |||||||||||||||
| SaaS and managed services | - | 785,196 | 2,925,264 | - | 3,710,460 | |||||||||||||||
| Yield | - | 588,242 | - | - | 588,242 | |||||||||||||||
| Total Gross profit | $ | 201,560 | $ | 7,691,785 | $ | 2,925,264 | $ | 223,542 | $ | 11,042,151 | ||||||||||
| Nine months ended September 30, 2024 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | - | $ | 7,698,941 | $ | - | $ | - | $ | 7,698,941 | ||||||||||
| Agency | 1,127,737 | 7,163,052 | - | - | 8,290,789 | |||||||||||||||
| SaaS and managed services | - | 1,620,021 | 2,320,608 | - | 3,940,629 | |||||||||||||||
| Yield | - | - | - | - | - | |||||||||||||||
| Total Revenue | 1,127,737 | 16,482,014 | 2,320,608 | - | 19,930,359 | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP | - | 5,996,363 | - | - | 5,996,363 | |||||||||||||||
| Agency | 866,543 | 4,875,642 | - | - | 5,742,185 | |||||||||||||||
| SaaS and managed services | - | 433,613 | 267,318 | - | 700,931 | |||||||||||||||
| Yield | - | - | - | - | - | |||||||||||||||
| Total Cost of sales | 866,543 | 11,305,618 | 267,318 | - | 12,439,479 | |||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP | - | 1,702,578 | - | - | 1,702,578 | |||||||||||||||
| Agency | 261,194 | 2,287,410 | - | - | 2,548,604 | |||||||||||||||
| SaaS and managed services | - | 1,186,408 | 2,053,290 | - | 3,239,698 | |||||||||||||||
| Yield | - | - | - | - | - | |||||||||||||||
| Total Gross profit | $ | 261,194 | $ | 5,176,396 | $ | 2,053,290 | $ | - | $ | 7,490,880 | ||||||||||
| 33 |
| Three months ended September 30, 2025 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | - | $ | 3,713,482 | $ | - | $ | - | $ | 3,713,482 | ||||||||||
| Agency | 384,955 | 4,408,631 | - | 591,601 | 5,385,187 | |||||||||||||||
| SaaS and managed services | - | 355,658 | 1,272,434 | - | 1,628,092 | |||||||||||||||
| Yield | - | 588,242 | - | - | 588,242 | |||||||||||||||
| Total Revenue | 384,955 | 9,066,013 | 1,272,434 | 591,601 | 11,315,003 | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP | - | 1,732,584 | - | - | 1,732,584 | |||||||||||||||
| Agency | 279,332 | 2,342,555 | - | 368,059 | 2,989,946 | |||||||||||||||
| SaaS and managed services | - | 108,000 | 891,743 | - | 999,743 | |||||||||||||||
| Yield | - | - | - | - | - | |||||||||||||||
| Total Cost of sales | 279,332 | 4,183,139 | 891,743 | 368,059 | 5,722,273 | |||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP | - | 1,980,898 | - | - | 1,980,898 | |||||||||||||||
| Agency | 105,623 | 2,066,076 | - | 223,542 | 2,395,241 | |||||||||||||||
| SaaS and managed services | - | 247,658 | 380,691 | - | 628,349 | |||||||||||||||
| Yield | - | 588,242 | - | - | 588,242 | |||||||||||||||
| Total Gross profit | $ | 105,623 | $ | 4,882,874 | $ | 380,691 | $ | 223,542 | $ | 5,592,730 | ||||||||||
| Three months ended September 30, 2024 | ||||||||||||||||||||
| Segment | United Kingdom | USA | Spain | Australia | Total | |||||||||||||||
| Revenue | ||||||||||||||||||||
| Owned and Operated IP | $ | - | $ | 4,765,840 | $ | - | $ | - | $ | 4,765,840 | ||||||||||
| Agency | 398,153 | 2,912,310 | - | - | 3,310,463 | |||||||||||||||
| SaaS and managed services | - | 490,708 | 739,766 | - | 1,230,474 | |||||||||||||||
| Yield | - | - | - | - | - | |||||||||||||||
| Total Revenue | 398,153 | 8,168,858 | 739,766 | - | 9,306,777 | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Owned and Operated IP | - | 3,335,622 | - | - | 3,335,622 | |||||||||||||||
| Agency | 332,445 | 1,176,887 | - | - | 1,509,332 | |||||||||||||||
| SaaS and managed services | - | 147,069 | 99,370 | - | 246,439 | |||||||||||||||
| Yield | - | - | - | - | ||||||||||||||||
| Total Cost of sales | 332,445 | 4,659,578 | 99,370 | - | 5,091,393 | |||||||||||||||
| Gross profit | ||||||||||||||||||||
| Owned and Operated IP | - | 1,430,218 | - | - | 1,430,218 | |||||||||||||||
| Agency | 65,708 | 1,735,423 | - | - | 1,801,131 | |||||||||||||||
| SaaS and managed services | - | 343,639 | 640,396 | - | 984,035 | |||||||||||||||
| Yield | - | - | - | - | ||||||||||||||||
| Total Gross profit | $ | 65,708 | $ | 3,509,280 | $ | 640,396 | $ | - | $ | 4,215,384 | ||||||||||
| 34 |
Key Components and Comparison of Results of Operations
Nine months ended September 30, 2025 and 2024
Revenue
Revenues for the nine months ended September 30, 2025, were $26.5 million, in comparison to $19.9 million for the same period in 2024. The increase was primarily related to increases in our SaaS and managed services segment for launch of management services offering and increase in agency services primarily driven by new web3 deals, initiated as the result of the launch of our digital asset treasury, that closed in the third quarter. Lastly, there was yield income from our DAT in the third quarter of 2025 that contributed to the increase.
Owned and operated IP Revenue
Owned and operated IP revenue for the nine months ended September 30, 2025, was $8.6 million, in comparison to $7.7 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 nine months in the prior year period.
Agency Revenue
Agency revenue for the nine months ended September 30, 2025, was $9.9 million, in comparison to $8.3 million for the same period in 2024. The increase was primarily due new web3 deals, initiated as the result of the launch of our digital asset treasury, that closed in the third quarter of the current period combined with revenue from the acquisition of Click that contributed 19 days of operating results post close in the current period.
SaaS and managed services
SaaS and management services revenue for the nine months ended September 30, 2025, was $7.5 million, in comparison to $3.9 million for the same period in 2024. The increase was primarily due to launch of a management services offering within the SaaS segment.
Yield
DAT yield revenue for the nine months ended September 30, 2025, was $0.6 million, in comparison to $0 for the same period in 2024. The Company launched its DAT in the third quarter of 2025.
Cost of Revenue
Cost of revenue for the nine months ended September 30, 2025, was $15.5 million, in comparison to $12.4 million for the same period in 2024. The increase was primarily related to the increase in revenue discussed above, and varying margins of the Company product mix.
Operating expenses
General and administrative
General and administrative expenses for the nine months ended September 30, 2025, was $13.8 million, in comparison to $11.8 million for the same period in 2024. The increase was due to $1.9 million in stock based compensation recorded during the current period from new RSU grants to employees and warrant grant to a service provider, in addition to the operations of Click that contributed 19 days of operating results post close in the current period.
Selling and marketing
Selling and marketing expenses for the nine months ended September 30, 2025, was $4.2 million, in comparison to $4.1 million for the same period in 2024. The variance between the periods was not significant.
| 35 |
Research and development
Research and development expenses for the nine months ended September 30, 2025, was $1.5 million, in comparison to $1.4 million for the same period in 2024. The variance between the periods was not significant.
Depreciation and amortization
Depreciation and amortization for the nine months ended September 30, 2025, was $0.7 million, in comparison to $1.0 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 prior year period.
Restructuring charges
Restructuring charges for the nine months ended September 30, 2025, were $(0.8) million, in comparison to $0.3 million for the same period in 2024. The decrease was due to initiative the Company started in the third quarter of 2025 to write off significantly aged AP (three + years) relating to discontinued operations and services, wherein the local statute of limitations has expired for legal recourse by the vendor. This was partially offset by increases related to continued efforts made by the Company to reduce operating expenses during the second half of 2024 and 2025, primarily through reductions in headcount, technology expenses and other overhead.
Other operating expenses
Other operating expenses for the nine months ended September 30, 2025, was $2.4 million, in comparison to $3.4 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 and acquisition of Click on September 11, 2025, in addition to a couple of M&A opportunities that were pursued during the current period 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 income (expense), net
Interest (income) expense, net for the nine months ended September 30, 2025, was $0.3 million, in comparison to $(17) thousand for the same period in 2024. The decrease in expense, net was due to interest income on the promissory notes from the disposal of Complexity on March 1, 2024. The 2024 period only had seven months of interest income on the Complexity promissory note. In addition, the Company’s average interest bearing debt balance has declined between the two periods.
Loss on extinguishment of debt
Loss on extinguishment of debt for the nine months ended September 30, 2025, was $0, in comparison to $1.0 million for the same period in 2024. The Company recognized a day one loss on issuance of debt of $1.4 million on July 8, 2024 in connection with the issuance of the Yorkville CD. The loss is presented net of the $0.3 million gain on extinguishment of the King Street CD which was paid down in full on July 10, 2024.
Change in fair value of convertible debt carried at fair value
Change in fair value of convertible debt income (expense) for the nine months ended September 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.
| 36 |
Change in fair value of warrant liability
Change in fair value of warrant liability income (expense) for the nine months ended September 30, 2025, was $7 thousand, in comparison to $79 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 nine months ended September 30, 2025, was $35 thousand, in comparison to $252 thousand for the same period in 2024. The variance between the periods was not significant.
Other income (expense), net
Other income (expense), net for the nine months ended September 30, 2025, was $8.3 million, in comparison to $(0.2) million for the same period in 2024. The increase in income was due to the launch of our digital asset treasury in the third quarter of 2025. The line item is comprised of realized and change in unrealized gains (losses) on all of our crypto holdings, including our investment in ETH fund. The gain is primarily driven by the change in unrealized gain of $9.6 million from our investment in ETH fund. This was partially offset by change in unrealized losses on digital assets, Anime and Rekt token holdings during the period.
Net income (loss) from discontinued operations
Net income (loss) from discontinued operations for the nine months ended September 30, 2025, was $(9.2) million, in comparison to $(9.5) million for the same period in 2024. The historical results of Frankly, FaZe Media and Complexity are included in discontinued operations.
Three months ended September 30, 2025 and 2024
Revenue
Revenues for the three months ended September 30, 2025, were $11.3 million, in comparison to $9.3 million for the same period in 2024. The increase was primarily related to increases in our SaaS and managed services segment for launch of management services offering and increase in agency services primarily driven by new web3 deals, initiated as the result of the launch of our digital asset treasury, that closed in the third quarter. Lastly, there was yield income from our DAT in the third quarter of 2025 that contributed to the increase.
Owned and operated IP Revenue
Owned and operated IP revenue for the three months ended September 30, 2025, was $3.7 million, in comparison to $4.7 million for the same period in 2024. The decrease was driven by changes in prize winnings between the two periods, which was primarily driven by the Esports World Cup.
Agency Revenue
Agency revenue for the three months ended September 30, 2025, was $5.4 million, in comparison to $3.3 million for the same period in 2024. The increase was primarily due new web3 deals, initiated as the result of the launch of our digital asset treasury, that closed in the third quarter of the current period combined with revenue from the acquisition of Click that contributed 19 days of operating results post close in the current period.
SaaS and managed services
SaaS and management services revenue for the three months ended September 30, 2025, was $1.6 million, in comparison to $1.2 million for the same period in 2024. The increase was primarily due to launch of a management services offering within the SaaS segment.
Yield
DAT yield revenue for the three months ended September 30, 2025, was $0.6 million, in comparison to $0 for the same period in 2024. The Company launched its DAT in the third quarter of 2025.
| 37 |
Cost of Revenue
Cost of revenue for the three months ended September 30, 2025, was $5.7 million, in comparison to $5.1 million for the same period in 2024. The increase was primarily related to the increase 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 September 30, 2025, was $6.2 million, in comparison to $3.7 million for the same period in 2024. The increase was primarily due to $1.9 million in stock based compensation recorded during the current period from new RSU grants to employees and warrant grant to a service provider, in addition to the operations of Click that contributed 19 days of operating results post close in the current period.
Selling and marketing
Selling and marketing expenses for the three months ended September 30, 2025, was $1.5 million, in comparison to $1.2 million for the same period in 2024. The variance between the periods was not significant.
Research and development
Research and development expenses for the three months ended September 30, 2025, was $0.5 million, in comparison to $0.5 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 September 30, 2025, was $0.3 million, in comparison to $0.4 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 September 30, 2025, were $(1.5) million, in comparison to $0.3 million for the same period in 2024. The decrease was due to initiative the Company started in the third quarter of 2025 to write off significantly aged AP (three + years) relating to discontinued operations and services, wherein the local statute of limitations has expired for legal recourse by the vendor.
Other operating expenses
Other operating expenses for the three months ended September 30, 2025, was $1.1 million, in comparison to $1.3 million for the same period in 2024. Other operating expenses between the quarters consisted primarily of transaction related expenses. The variance between the periods was not significant.
Other income and expenses
Interest income (expense), net
Interest (income) expense, net for the three months ended September 30, 2025, was $0.2 million, in comparison to $0.2 million for the same period in 2024. The variance between the periods was not significant.
Loss on extinguishment of debt
Loss on extinguishment of debt for the three months ended September 30, 2025, was $0, in comparison to $1.0 million for the same period in 2024. The Company recognized a day one loss on issuance of debt of $1.4 million on July 8, 2024 in connection with the issuance of the Yorkville CD. The loss is presented net of the $0.3 million gain on extinguishment of the King Street CD which was paid down in full on July 10, 2024.
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 September 30, 2025, was $(38) thousand, in comparison to $(99) thousand for the same period in 2024. The variance between the periods was not significant.
| 38 |
Change in fair value of warrant liability
Change in fair value of warrant liability income (expense) for the three months ended September 30, 2025, was $20 thousand, in comparison to $26 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 September 30, 2025, was $46 thousand, in comparison to $114 thousand for the same period in 2024. The variance between the periods was not significant.
Other income (expense), net
Other income (expense), net for the three months ended September 30, 2025, was $8.1 million, in comparison to $21 thousand for the same period in 2024. The increase in income was due to the launch of our digital asset treasury in the third quarter of 2025. The line item is comprised of realized and change in unrealized gains (losses) on all of our crypto holdings, including our investment in ETH fund. The gain is primarily driven by the change in unrealized gain of $9.6 million from our investment in ETH fund. This was partially offset by change in unrealized losses on digital assets, Anime and Rekt token holdings during the period.
Net income (loss) from discontinued operations
Net income (loss) from discontinued operations for the three months ended September 30, 2025, was $(6.8) million, in comparison to $(3.5) million for the same period in 2024. The historical results of Frankly, FaZe Media and Complexity are included in discontinued operations.
Management’s use of Non-GAAP Measures
This Report 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.
| 39 |
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 September 30, | Nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net loss | $ | (808,443 | ) | $ | (7,464,415 | ) | $ | (11,000,525 | ) | $ | (24,728,504 | ) | ||||
| Interest expense | (166,831 | ) | (178,008 | ) | (309,733 | ) | 17,072 | |||||||||
| Income tax benefit | - | - | - | - | ||||||||||||
| Amortization and depreciation | 271,484 | 350,324 | 727,789 | 1,025,004 | ||||||||||||
| Share-based payments | 1,871,720 | 267,117 | 1,906,334 | 1,288,484 | ||||||||||||
| (Gain) loss on digital assets | (8,060,149 | ) | - | (8,060,149 | ) | - | ||||||||||
| Transaction costs | 1,095,258 | 1,287,223 | 2,387,823 | 3,417,687 | ||||||||||||
| Arbitration settlement reserve | (45,917 | ) | (113,583 | ) | (35,283 | ) | (252,208 | ) | ||||||||
| Restructuring costs | (1,535,097 | ) | 330,167 | (814,377 | ) | 330,167 | ||||||||||
| Loss on extinguishment of debt | - | 1,032,070 | - | 1,032,070 | ||||||||||||
| Change in fair value of warrant liability | (19,659 | ) | (26,482 | ) | (7,275 | ) | (79,382 | ) | ||||||||
| Change in fair value of convertible debt carried at fair value | 38,033 | 98,937 | (289,883 | ) | (357,822 | ) | ||||||||||
| Gain on disposition of subsidiary | - | - | (2,721,953 | ) | (3,009,891 | ) | ||||||||||
| Loss from discontinued operations | 6,755,224 | 3,528,876 | 11,876,550 | 12,479,696 | ||||||||||||
| Adjusted EBITDA | $ | (604,377 | ) | $ | (887,774 | ) | $ | (6,340,682 | ) | $ | (8,837,627 | ) | ||||
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 $131.2 million as of September 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 September 30, 2025, the Company had a working capital deficiency of $14.1 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 September 30, 2025, cash and restricted cash totaled $7.5 million, compared to $13.1 million as of December 31, 2024.
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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 September 30, 2025, our principal sources of liquidity were our cash, accounts receivable and digital assets in the amount of $6.0 million, $13.3 and $4.0 million, respectively. Although the Company has approximately $65 million of ETH value held within our investment in ETH fund, which can redeemed and subsequently sold at our election (subject to the ETH fund’s redemption provisions), we currently intend to be long term holders of ETH.
Operating Activities
Net cash used in operating activities was $17.3 million during the nine months ended September 30, 2025, compared with $25.4 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 $61.8 million for the nine months ended September 30, 2025 primarily due to $57.1 million of digital asset purchases and $4.6 being used in the acquisition of Click.
Net cash provided by investing activities was $2.8 million for the nine months ended September 30, 2024.
Financing Activities
Net cash provided by financing activities was $74.0 million for the nine months ended September 30, 2025, which was primarily due to $77.9 million raised from the July 2025 registered offerings, as discussed in the recent developments section. Net cash provided by financing activities was $30.4 million for the nine months ended September 30, 2024, which was primarily due to the PIPE Financing on March 7, 2024 of $9.9 million and the spinoff of FaZe Media on May 15, 2024 and minority interest investments into FaZe Media of $20.5 million during the second and third quarter of 2024.
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.
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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.
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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.
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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.
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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 ASC 321 without a readily determinable fair value are accounted for using the net asset value (“NAV”) practical expedient in accordance with ASC 820 where applicable and when elected by the Company. The NAV is calculated by the general partner in a manner consistent with ASC 946, Financial Services — Investment Companies.
Equity securities accounted for under ASC 321 without a readily determinable fair value and for which the NAV practical expedient has not been elected are 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.
Digital assets
Crypto assets within the scope of ASC 350-60 are measured at fair value each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. Fair value is determined using Level 1 inputs from principal market cryptocurrency exchanges or widely recognized pricing indices. These assets are presented separately on the condensed consolidated balance sheets. Upon sale or transfer, crypto assets are derecognized at fair value.
Digital assets outside the scope of ASC 350-60, such as non-fungible tokens (“NFTs”), are accounted for as indefinite-lived intangible assets under ASC 350-30.
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.
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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 nine months ended September 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.
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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 September 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 nine months ended September 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 nine months ended September 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 nine months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Allinsports - A September 2021, decision issued by an arbitrator located in Alberta, Canada, directed the Company to issue 241,666 shares to Allinsports in connection with a dispute whether certain closing conditions in the acquisition agreement for Allinsports had been met. 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 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.
SPAC Complaint – As previously disclosed, in June 2024 a complaint was filed in Delaware Chancery Court by Nathan Carter (“Plaintiff” ), a purported stockholder of B. Riley Principal 150 Merger Corp. (“BRPM”), against several former directors of BRPM, Faze Holdings, Inc.’s predecessor, and several other BRPM affiliated entities, challenging the disclosures made in connection with the July 2022 merger between BRPM and Faze Holdings, The Company is required to indemnify certain of the defendants due to its subsequent acquisition of FaZe Holdings, Inc. As previously reported, the Company, the Plaintiff and the defendants entered into a settlement agreement in February 2025 (the “Settlement Agreement”) pursuant to which the parties agreed to tentative terms resolving the matter, subject to approval from the Court of Chancery. On September 22, 2025, the Court of Chancery granted final approval of the Settlement Agreement, pursuant to which the Company and BRPM agreed to pay to Plaintiff a total of $3.25 million in cash, $2.15 million of which the Company had the option to in the form of shares of its Common Stock in lieu of cash. As of the date of this Report, the Company and BRPM have made the required settlement payment amounts in cash in full. As a result the litigation has been resolved.
Alta Partners v. FaZe Holdings, Inc. On April 23, 2025, Alta Partners, LLC (“Alta”) 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 agreed 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 the Company’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 business days of that date, the Company shall pay the difference between the collective value and $150,000 to Alta in cash (the “True-Up Payment”). Upon the Company’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 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 the Company 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.
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ITEM 1A. RISK FACTORS
The risks and uncertainties described in our 2024 Annual Report on Form 10-K, as supplemented by this Form 10-Q, are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, or results of operations.
Risks Relating to Cryptocurrencies and Digital Assets
Ethereum and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty.
Ethereum and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of Ethereum.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Ethereum or the ability of individuals or institutions such as us to own or transfer Ethereum. For example, the U.S. executive branch, SEC, the European Union’s Markets in Crypto Assets Regulation, among others have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023, or FSMA 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, Commodity Futures Trading Commission (“CFTC”), or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and Ethereum specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of Ethereum and in turn adversely affect the market price of our common stock.
Moreover, the risks of engaging in a Ethereum treasury strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of Ethereum in particular, may also impact the price of Ethereum and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of Ethereum may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to Ethereum, institutional demand for Ethereum as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for Ethereum as a means of payment, and the availability and popularity of alternatives to Ethereum. Even if growth in Ethereum adoption occurs in the near or medium-term, there is no assurance that Ethereum usage will continue to grow over the long-term.
Because Ethereum has no physical existence beyond the record of transactions on the Ethereum blockchain, a variety of technical factors related to the Ethereum blockchain could also impact the price of Ethereum. For example, malicious attacks by miners, inadequate mining fees to incentivize validating of Ethereum transactions, hard “forks” of the Ethereum blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Ethereum blockchain and negatively affect the price of Ethereum. The liquidity of Ethereum may also be reduced and damage to the public perception of Ethereum may occur, if financial institutions were to deny or limit banking services to businesses that hold Ethereum, provide Ethereum-related services or accept Ethereum as payment, which could also decrease the price of Ethereum. Similarly, the open-source nature of the Ethereum blockchain means the contributors and developers of the Ethereum blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the Ethereum blockchain could adversely affect the Ethereum blockchain and negatively affect the price of Ethereum.
The liquidity of Ethereum may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for Ethereum and other digital assets.
There is no assurance that a market for Ethereum will continue to exist, and liquidity in the Ethereum market may be severely limited at times.
Ethereum is traded on unregulated exchanges that may be subject to outages, manipulation, or loss of access. In periods of market stress or regulatory disruption, we may be unable to sell Ethereum at favorable prices, or at all, which could impact our liquidity and financial flexibility.
We may not achieve the expected benefits from purchasing cryptocurrencies, and such strategy may not align with investor expectations.
While we may pursue the purchase of cryptocurrency, such as Ethereum, by way of direct or indirect ownership, for strategic, treasury, or investment purposes, there is no assurance that this strategy will generate positive returns or provide a long-term benefit. Investors may not support our allocation of corporate funds to a highly speculative asset, and such use of proceeds could adversely affect investor perception and our stock price.
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Regulatory change reclassifying Ethereum as a security could lead to our classification as an “investment company” under the Investment Company Act of 1940, as amended, or the 1940 Act, and could adversely affect the market price of Ethereum and the market price of our common stock.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in the 1940 Act, and are not registered as an “investment company” under the 1940 Act as of the date of this prospectus.
While senior SEC officials have stated their view that Ethereum is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead to our classification as an “investment company” under the 1940 Act, if the portion of our assets consists of investments in Ethereum exceeds 40% safe harbor limits prescribed in the 1940 Act, which would subject us to significant additional regulatory controls that could have a material adverse effect on our business and operations and may also require us to change the manner in which we conduct our business.
We monitor our assets and income for compliance under the 1940 Act and seek to conduct our business activities in a manner such that we do not fall within its definitions of “investment company” or that we qualify under one of the exemptions or exclusions provided by the 1940 Act and corresponding SEC regulations. If Ethereum is determined to constitute a security for purposes of the federal securities laws, we would take steps to reduce the percentage of Ethereum that constitute investment assets under the 1940 Act. These steps may include, among others, selling Ethereum that we might otherwise hold for the long term and deploying our cash in non-investment assets, and we may be forced to sell our Ethereum at unattractive prices. We may also seek to acquire additional non-investment assets to maintain compliance with the 1940 Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe harbor. If we were unsuccessful, and if Ethereum and/or indirect ownership interests in ETH funds which hold Ethereum is determined to constitute a security for purposes of the federal securities laws, then we would have to register as an investment company, and the additional regulatory restrictions imposed by 1940 Act could adversely affect the market price of Ethereum and in turn adversely affect the market price of our common stock.
We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As Ethereum and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of Ethereum. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Ethereum or the ability of individuals or institutions such as us to own or transfer Ethereum.
Changes in the accounting treatment of cryptocurrency holdings could have significant accounting impacts, including increasing the volatility of our results.
In December 2023, the FASB issued ASU 2023-08, which upon our adoption will require us to measure in-scope cryptocurrency assets at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our cryptocurrency in net income each reporting period. ASU 2023-08 will also require us to provide certain interim and annual disclosures with respect to our cryptocurrency holdings. The standard is effective for our interim and annual periods beginning January 1, 2025, with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which we adopt the guidance. We adopted ASU 2023-08 for the fiscal year beginning January 1, 2025 and the adoption did not have any impact to our consolidated financial statements as we did not have any cryptocurrency holdings at adoption. Due in particular to the volatility in the price of cryptocurrencies, we expect the adoption of ASU 2023-08 to have a material impact on our financial results in future periods, increase the volatility of our financial results, and affect the carrying value of our cryptocurrency on our balance sheet, and it could also have adverse tax consequences, which in turn could have a material adverse effect on our financial results and the market price of our Common Stock. Additionally, as a result of ASU 2023-08 requiring a cumulative-effect adjustment to our opening balance of retained earnings as of the beginning of the annual period in which we adopt the guidance and not permitting retrospective restatement of our historical financial statements, our future results will not be comparable to results from periods prior to our adoption of the guidance.
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The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict.
Changes in our ownership of cryptocurrency could have accounting, regulatory and other impacts, as well. For example, our indirect ownership of Ethereum through ownership interests in a fund that owns such cryptocurrencies and deemed ownership via ownership of cryptocurrency derivative assets may impact the accounting treatment for our cryptocurrencies, our ability to use our cryptocurrencies as collateral for additional borrowings, and the regulatory requirements to which we are subject, may correspondingly change. For example, the volatile nature of cryptocurrencies may force us to liquidate our holdings to use it as collateral, which could be negatively impacted by any disruptions in the cryptocurrency market, and if liquidated, the value of the collateral would not reflect potential gains in market value of our cryptocurrency.
The U.S. federal income tax treatment of transactions in digital assets is unclear.
Due to the new and evolving nature of digital assets and the absence of comprehensive guidance with respect to digital assets, many significant aspects of the U.S. federal income tax treatment of digital assets are uncertain. Our operations and dealings, in or in connection with digital assets, as well as transactions in digital assets generally, could be subject to adverse tax consequences in the United States, including as a result of development of the legal regimes surrounding digital assets, and our operating results, as well as the price of digital assets, could be adversely affected thereby.
It is also unclear what additional guidance on the treatment of digital assets for U.S. federal income tax purposes may be issued in the future. Any such alteration of the current IRS positions or additional guidance could result in adverse tax consequences for us and could have an adverse effect on the value of digital assets. Because of the evolving nature of digital assets, it is not possible to predict potential future developments that may arise with respect to digital assets. Such developments may increase the uncertainty with respect to the treatment of digital assets for U.S. federal income tax purposes.
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 September 30, 2025, no director or officer of the Company
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ITEM 6. EXHIBITS
The exhibits to this Form 10-Q are listed in the following Exhibit Index:
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| * | Filed herewith. |
| ** | Furnished, not filed. |
| ^ | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant will furnish copies of such schedules and exhibits to the Securities and Exchange Commission upon request. |
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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: | November 14, 2025 | By: | /s/ JUSTIN KENNA |
| Justin Kenna | |||
| Chief Executive Officer | |||
| (Principal Executive Officer) | |||
| Dated: | November 14, 2025 | By: | /s/ MICHAEL MUNOZ |
| Michael Munoz | |||
| Chief Financial Officer | |||
| (Principal Financial Officer) | |||
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