GameSquare Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 15, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 15, 2024
GAME$2.58+3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-20.
0001493152-24-020697
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-15.
0001493152-24-032651
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 185 previous paragraphs and 251 current paragraphs.
154 unchanged; 27 reworded; 62 added; 3 removed; 1 previous and 8 current paragraphs rearranged.
Tables are not compared: 5 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (62)
Current report
Standby Equity Purchase Agreement
Current report
On July 8, 2024, the Company entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership (“Yorkville”), pursuant to which the Company has the right to sell to Yorkville up to $20.0 million of its shares of common stock, par value $0.0001 per share (“Common Stock”), subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. Sales of the shares of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below.
Current report
Each advance (each, an “Advance”) the Company requests in writing to Yorkville under the SEPA (notice of such request, an “Advance Notice”) may be for a number of shares of Common Stock up to the greater of (i) 500,000 shares or (ii) such amount as is equal to 100% of the average daily volume traded of the Common Stock during the five trading days immediately prior to the date the Company requests each Advance; The shares of Common Stock purchased pursuant to an Advance delivered by the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of Common Stock during the three consecutive trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day. The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to Yorkville. “VWAP” is defined as the daily volume weighted average price of the shares of Common Stock for such trading day on the Nasdaq Stock Market (“Nasdaq”) during regular trading hours as reported by Bloomberg L.P.
Current report
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. We have the right to terminate the SEPA at no cost or penalty upon five trading days’ prior written notice to Yorkville, provided that there are no outstanding Advance Notices for which shares of common stock need to be issued and the Company has paid all amounts owed to Yorkville pursuant to the Promissory Note. The Company and Yorkville may also agree to terminate the SEPA by mutual written consent.
Current report
Any purchase under an Advance would be subject to certain limitations, including that Yorkville shall not purchase or acquire any shares that would result in it and its affiliates beneficially owning more than 4.99% of the then outstanding voting power or number of shares of Common Stock or any shares that, aggregated with shares issued under all other earlier Advances, would exceed 19.99% of all shares of Common Stock outstanding on the date of the SEPA (the “Exchange Cap”), unless the Company obtains stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules.
Current report
In connection with the execution of the SEPA, the Company paid a diligence fee (in cash) to Yorkville in the amount of $25,000. Additionally, the Company agreed to pay a commitment fee of $200,000 to Yorkville, payable as follows: (i) $100,000 payable within three days of the date of the SEPA, in the form of the issuance of 80,000 shares of Common Stock, representing $100,000 divided by the closing price as of the trading day immediately prior to the date of the SEPA, and (ii) $100,000 payable on the three-month anniversary of the date of the SEPA, payable in either cash or in the form of an Advance.
Current report
Additionally, Yorkville agreed to advance to the Company, in exchange for a convertible promissory note (the “Promissory Note”), an aggregate principal amount of up to $6.5 million (the “Pre-Paid Advance”), which was funded on July 8, 2024. The purchase price for the Pre-Paid Advance is 93.0% of the principal amount of the Pre-Paid Advance. Interest shall accrue on the outstanding balance of the Pre-Paid Advance at an annual rate equal to 0%, subject to an increase to 18% upon an event of default as described in the Promissory Note. The maturity date of the Promissory Note issued in connection with the Pre-Paid Advance will be 12 months after the issuance date of such Promissory Note. Yorkville may convert the Promissory Note into shares of Common Stock at any time at a conversion price equal to the lower of (i) $1.375 (the “Fixed Price”) or (ii) a price per share equal to 93% of the lowest daily VWAP during the seven consecutive trading days immediately prior to the conversion date of the Promissory Note (the “Variable Price”), but which Variable Price shall not be lower than the Floor Price then in effect. The “Floor Price” will be the lower of (i) $0.25 per share or (ii) 20% of the average VWAP of the Common Stock for the five trading days immediately prior to the date of effectiveness of the Resale Registration Statement. Additionally, the Company, at its option, shall have the right, but not the obligation, to redeem early a portion or all amounts outstanding under the Promissory Notes at a redemption amount equal to the outstanding principal balance being repaid or redeemed, plus a 7% prepayment premium, plus all accrued and unpaid interest; provided that (i) the Company provides Yorkville with no less than ten trading days’ prior written notice thereof and (ii) on the date such notice is issued, the VWAP of the Common Stock is less than the Fixed Price.
Current report
At any time during the Commitment Period that there is a balance outstanding under the Promissory Note, Yorkville may deliver notice (an “Investor Notice”) to the Company to cause an Advance Notice to be deemed delivered to Yorkville and the issuance and sale of shares of Common Stock to Yorkville pursuant to an Advance (an “Investor Advance”) in an amount not to exceed the balance owed under the Promissory Note outstanding on the date of delivery of such Investor Notice, and shall not exceed during any calendar month period, the greater of (i) an amount equal to 15% of the product of (A) the average of the daily traded amount on each trading day during such period and (B) the VWAP for such trading day, and (ii) $750,000. The foregoing limitation on the amount of any such Investor Advances shall not apply at any time (x) upon the occurrence and during the continuance of an Event of Default and (y) where the purchase price is greater than or equal to the Fixed Price. As a result of an Investor Advance, the amounts payable under the Promissory Note will be offset by such amount subject to each Investor Advance.
Current report
An “Amortization Event” will occur under the terms of the Promissory Note if (i) the daily VWAP is less than the Floor Price for five trading days during a period of seven consecutive trading days, or (ii) the Company has issued in excess of 99% of the shares of Common Stock available under the Exchange Cap. Within seven trading days of an Amortization Event, the Company will be obligated to make monthly cash payments in an amount equal to the sum of (i) $1.0 million of principal of the Promissory Note (or the outstanding principal if less than such amount) (the “Amortization Principal Amount”), plus (ii) a payment premium of 7% in respect of such Amortization Principal Amount, plus (iii) accrued and unpaid interest thereunder. The obligation of the Company to make monthly prepayments shall cease (with respect to any payment that has not yet come due) if any time after an Amortization Event (a) the Company reduces the Floor Price to an amount no more than 50% of the closing price of the Common Stock on the trading day immediately prior to such reset notice (and no greater than the initial Floor Price), or (b) the daily VWAP is greater than the Floor Price for a period of ten consecutive trading days, unless a subsequent Amortization Event occurs.
Current report
The Company will control the timing and amount of any sales of shares of Common Stock to Yorkville, except with respect to Investor Advances. Actual sales of shares of Common Stock to Yorkville as an Advance under the SEPA will depend on a variety of factors to be determined by the Company from time to time, which may include, among other things, market conditions, the trading price of the Company’s Common Stock and determinations by the Company as to the appropriate sources of funding for our business and operations.
Current report
The SEPA contains customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
Current report
King Street CD
Current report
On June 21, 2024, the Company received a notice of alleged event of default and a demand for payment of the full principal amount, together with premiums and interest thereon (the “Notice”), from King Street Partners LLC (“King Street”), the holder of that certain 12.75% Convertible Senior Secured Note with a principal amount of $5,800,000 dated December 29, 2023.
Current report
The Notice alleges that due to the Company’s failure to maintain its 51% economic interest in FaZe Media, Inc. and other actions, one or more events of default under the King Street CD, including with respect to the terms of that side letter and consent agreement dated May 13, 2024 between the Company and King Street (the “Consent”), have occurred. Pursuant to the Notice, King Street demanded immediate repayment of the full principal amount, premiums, and accrued interest under the King Street CD.
Current report
If it is ultimately determined that events of default exist under the King Street Note and that the Notice was properly provided on behalf of the Holder, the outstanding principal amount of the King Street Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof will be due and payable. From and after an event of default, all such amounts due and owing to King Street would bear interest at 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.
Current report
The Company strongly disagrees with the assertion that events of default have occurred under the King Street CD based on, inter alia, a plain language reading of the Consent and interpretive caselaw regarding the plain language. The Company will pursue a defense to any enforcement action taken by King Street, but the Company cannot guarantee a resolution on a timely basis, on favorable terms, or at all. If the Company is unable to resolve the alleged defaults under the King Street Note, it would have a material adverse effect on the Company’s liquidity, financial condition and results of operations.
Current report
On July 10, 2024, the Company paid down the outstanding principal and accrued interest on the King Street CD of $5.7 million.
Current report
Frankly Media asset disposal
Current report
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”).
Current report
Pursuant to the UNIV APA, UNIV paid the Company aggregate purchase consideration with a transaction closing date fair value of $1.2 million in exchange for the CMS Assets, including $25 thousand paid in cash upon closing of the transaction and issuance of a secured subordinated promissory note (the “UNIV Note”) with a transaction closing date fair value of $1.2 million. The UNIV Note was valued using a discount rate of 13.7% (Level 3).
Current report
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”).
Current report
Pursuant to the XPR APA, XPR paid the Company aggregate purchase consideration with a transaction closing date fair value of $0.6 million in exchange for the PR Assets, including $10.5 thousand paid in cash upon closing of the transaction and issuance of a secured subordinated promissory note (the “XPR Note”) with a transaction closing date fair value of $0.5 million. The XPR Note was valued using a discount rate of 13.7% (Level 3).
Current report
As a result of the Frankly Asset Sales during the three and six months ended June 30, 2024, the Company recognized a loss of $3.8 million in Other income (expense), net in the consolidated statements of operations and comprehensive loss after offsetting the consideration received with the carrying value of the disposed assets.
Current report
The UNIV Note has a principal amount of $1.5 million, inclusive of the $25 thousand paid in cash upon closing. The principal amount of the UNIV Note will be repaid in monthly installments, beginning August 2024. Monthly principal payments will be $25 thousand from August 2024 to June 2025, $45 thousand from July 2025 to June 2026, and $55 thousand from July 2026 to final maturity on June 30, 2027. The UNIV Note is secured by assets of the UNIV pursuant to a Security Agreement executed in conjunction with the UNIV APA between the Company and UNIV.
Current report
The XPR Note has a principal amount of $0.7 million, inclusive of the $10.5 thousand paid in cash upon closing. The principal amount of the XPR Note will be repaid in monthly installments, beginning August 2024. Monthly principal payments will be $12.5 thousand from August 2024 to June 2025, $20 thousand from July 2025 to June 2026, and $26 thousand from July 2026 to final maturity on June 30, 2027. The XPR Note is secured by all rights of XPR to customer agreements and publisher agreements pursuant to a Security Agreement executed in conjunction with the XPR APA between the Company and XPR.
Current report
Faze Media, Inc. asset contribution
Current report
On May 2, 2024, the Company created FaZe Media, Inc. (“Faze Media”). On May 15, 2024, the Company entered into a business venture with Gigamoon Media, LLC (“Gigamoon”). As part of this venture, the Company contributed certain media assets of Faze Clan, Inc. to Faze Media and Gigamoon invested $11.0 million in Faze Media in exchange for 11,000,000 shares of Series A-2 Preferred Stock of Faze Media, 49% of Faze Media’s voting equity interests, pursuant to a Securities Purchase Agreement (the “SPA”). The Company was issued 11,450,0000 shares of Series A-1 Preferred Stock of Faze Media, 51% of Faze Media’s voting equity interests.
Current report
On June 17, 2024, the Company entered into an agreement to sell 5,725,000 of its 11,450,000 shares of Series A-1 Preferred Stock of Faze Media to M40A3 LLC (“M4”) in exchange for $9.5 million (the “Secondary SPA”). The first 2,862,500 share tranche was issued on June 17, 2024 for consideration of $4.75 million and the remaining 2,862,500 will be issued on August 15, 2024.
Current report
Contemporaneous with the execution of the Secondary SPA, the Company and M4 entered into a Limited Proxy and Power of Attorney with respect to all of the shares of Series A-1 Preferred Stock of Faze Media held by M4 (the “Faze Media Voting Proxy”).
Current report
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 June 30, 2024. The Preferred Stock of Faze Media held by M4 and Gigamoon represent a non-controlling interest of the Company. Upon termination of the Faze Media Voting Proxy, the Company will reassess whether it continues to have a controlling financial interest in Faze Media.
Current report
As a result of the above transactions, the Company recorded a non-controlling interest in Faze Media, Inc. of $15,750,000, the sum of cash consideration received, within the consolidated statements of stockholders’ equity.
Current report
Six months ended June 30, 2024 and 2023
Current report
SaaS + Advertising revenue for the six months ended June 30, 2024, was $25.5 million, in comparison to $8.4 million for the same period in 2023. The increase was related to our acquisition of Engine on April 11, 2023. As such, there is only one quarter of SaaS + Advertising revenue for this operating segment in the prior year period. The large increase in revenue is also due to significant growth derived primarily from programmatic advertising year over year.
Current report
General and administrative expenses for the six months ended June 30, 2024, was $12.1 million, in comparison to $6.9 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above. Faze was not part of the prior year comparable results and Engine was included from April 11, 2023 forward.
Current report
Selling and marketing expenses for the six months ended June 30, 2024, was $4.7 million, in comparison to $2.5 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above. Faze was not part of the prior year comparable results and Engine was included from April 11, 2023 forward.
Current report
Change in fair value of warrant liability gain (loss) for the six months ended June 30, 2024, was $53 thousand, in comparison to $1.7 million for the same period in 2023. Prior to the Engine acquisition, we did not have any liability measured warrants. The gain represents adjusting the liability measured warrants to fair value at the end of the reporting period, primarily driven by changes in our share price. The large reduction in gain is primarily driven by the expiration of the majority of the liability measured warrants, and therefore the change in fair value from period to period is not significant in the current period.
Current report
Other income (expense), net
Current report
Other income (expense) for the six months ended June 30, 2024, was $(4.1) million, in comparison to $38 thousand for the same period in 2023. Other expense in the current period is primarily related to loss incurred of $3.8 million on the disposal of Frankly Media remaining SaaS assets which closed on May 31, 2024. No such loss was incurred in the prior period.
Current report
Revenues for the three months ended June 30, 2024, were $28.6 million, in comparison to $11.4 millionfor the same period in 2023. The increase was primarily related to the acquisition of FaZe on March 7, 2024 along with the large increase in programmatic advertising revenue at Frankly.
Showing the first 40 of 62 passages. Open the source sections for the rest.
Removed paragraphs (3)
Previous report
Revenue
Previous report
Revenue
Previous report
Net cash used in investing activities was $120 thousand for the three months ended March 31, 2023.
Reworded paragraphs (27)
Previous wording
GameSquare is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. Our end-to-end platform includes GCN, a digital media company focused on gaming and esports audiences, Swingman LLC dba as Cut+Sew, a gaming and lifestyle marketing agency, Code Red Esports Ltd. (“Code Red”), a UK based esports talent agency, GameSquare Esports Inc. dba as Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform.
Current wording
GameSquare is a vertically integrated, digital media, entertainment and technology company that connects global brands with gaming and youth culture audiences. GameSquare’s end-to-end platform includes Gaming Community Network (“GCN”), a digital media company focused on gaming and esports audiences, Zoned, a gaming and lifestyle marketing agency, Code Red, a UK based esports talent agency, FaZe, a lifestyle and media platform rooted in gaming and youth culture whose premium brand, talent network, and large audience can be monetized across a variety of products and services, Fourth Frame Studios, a creative production studio, Mission Supply, a merchandise and consumer products business, Frankly Media, programmatic advertising, Stream Hatchet, live streaming analytics, and Sideqik a social influencer marketing platform.
Previous wording
The following is a summary of the Company’s financial performance highlights for the three months ended March 31, 2024 and 2023. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.
Current wording
The following is a summary of the Company’s financial performance highlights for the three and six months ended June 30, 2024 and 2023. This summary should be considered in the context of the additional disclosures in this MD&A which further highlight Company results by segment.
Previous wording
The following table summarizes our results of operations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023:
Current wording
The following table summarizes our results of operations for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023:
Previous wording
The following table disaggregates revenue by revenue stream and geographic region for the three months ended March 31, 2024, and 2023.
Current wording
The following tables disaggregate revenue by revenue stream and geographic region for the three and six months ended June 30, 2024, and 2023.
Previous wording
Revenues for the three months ended March 31, 2024, were $17.7 million, in comparison to $2.8 millionfor the same period in 2023. The increase was primarily related to the acquisition of Engine on April 11, 2023 and the acquisition of FaZe on March 7, 2024.
Current wording
Revenues for the six months ended June 30, 2024, were $46.3 million, in comparison to $14.2 millionfor the same period in 2023. The increase was primarily related to the acquisition of Engine on April 11, 2023 and the acquisition of FaZe on March 7, 2024.
Previous wording
Team revenue for the three months ended March 31, 2024, was $2.6 million, in comparison to $0 for the same period in 2023. The increase was related to our acquisition of FaZe on March 7, 2024. As such, there is no revenue is this operating segment in the prior year period.
Current wording
Teams revenue for the six months ended June 30, 2024, was $15.8 million, in comparison to $0 for the same period in 2023. The increase was related to our acquisition of FaZe on March 7, 2024. As such, there is no revenue is this operating segment in the prior year period.
Previous wording
Agency revenue for the three months ended March 31, 2024, was $3.0 million, in comparison to $2.8 million for the same period in 2023. The variance was not significant.
Current wording
Agency revenue for the six months ended June 30, 2024, was $5.0 million, in comparison to $5.7 million for the same period in 2023. The variance was not significant.
Previous wording
Cost of sales for the three months ended March 31, 2024, was $14.3 million, in comparison to $1.5 million for the same period in 2023. The increase was primarily related to an increase in revenue associated with the acquisitions of FaZe and Engine discussed above.
Current wording
Cost of sales for the six months ended June 30, 2024, was $38.7 million, in comparison to $10.1 million for the same period in 2023. The increase was primarily related to an increase in revenue associated with the acquisitions of FaZe and Engine discussed above, and varying margins of the Company product mix.
Previous wording
Research and development expenses for the three months ended March 31, 2024, was $0.7 million, in comparison to $0 for the same period in 2023. The increase was the result of an increase in expenses from the operations of Engine that did not impact the comparative period.
Current wording
Research and development expenses for the six months ended June 30, 2024, was $1.6 million, in comparison to $0.7 million for the same period in 2023. The increase was the result of an increase in expenses from the operations of Engine that were included in the 2023 period from April 11, 2023 forward.
Previous wording
Depreciation and amortization for the three months ended March 31, 2024, was $0.8 million, in comparison to $0.1 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above that did not impact the prior period.
Current wording
Depreciation and amortization for the six months ended June 30, 2024, was $1.7 million, in comparison to $0.7 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above and the related long-lived assets and intangible assets acquired in connection with these acquisitions.
Previous wording
There were no restructuring charges for the three months ended March 31, 2024, in comparison to $0.3 million for the same period in 2023. The decrease was primarily related to acquisition of Engine and associated restructuring activities at GameSquare in advance of closing of the acquisition. Various restructuring activities at FaZe occurred prior to the closing of the acquisition on March 7, 2024, and therefore, the associated expenses are not included in the Company’s financial results for the quarter.
Current wording
Restructuring charges for the six months ended June 30, 2024, were $0.1 million, in comparison to $0.3 million for the same period in 2023. The decrease was primarily related to acquisition of Engine and associated restructuring activities at GameSquare in advance of closing of the acquisition. Various restructuring activities at FaZe occurred prior to the closing of the acquisition on March 7, 2024, and therefore, the associated expenses are not included in the Company’s financial results for the period.
Previous wording
Other operating expenses for the three months ended March 31, 2024, was $1.1 million, in comparison to $0.5 million for the same period in 2023. Other operating expenses between the quarters consisted solely of transaction related expenses. The increase was primarily related to additional transaction activities in the 2024 period. The 2024 period included transaction costs associated with the acquisition of FaZe and the disposal of Complexity, while the 2023 period only included transaction costs associated with the acquisition of Engine.
Current wording
Other operating expenses for the six months ended June 30, 2024, was $2.1 million, in comparison to $1.5 million for the same period in 2023. Other operating expenses between the quarters consisted solely of transaction related expenses. The increase was primarily related to additional transaction activities in the 2024 period. The 2024 period included transaction costs associated with the acquisition of FaZe, the disposal of Complexity, the Faze Media Inc. asset contribution and the Franky Media asset disposal, while the 2023 period only included transaction costs associated with the acquisition of Engine.
Previous wording
Interest expense for the three months ended March 31, 2024, was $0.4 million, in comparison to $23 thousand for the same period in 2023. The increase was primarily related interest expense on convertible debt acquired in connection with the acquisition of Engine and line of credit that was closed in September 2023. We did not have comparable debt instruments outstanding during the comparative period.
Current wording
Interest expense for the six months ended June 30, 2024, was $0.6 million, in comparison to $0.1 million for the same period in 2023. The increase was primarily related interest expense on convertible debt acquired in connection with the acquisition of Engine and line of credit that was closed in September 2023. We did not have comparable debt instruments outstanding during the comparative period.
Previous wording
Change in fair value of convertible debt expense for the three months ended March 31, 2024, was $0.1 million, in comparison to no change for the same period in 2023. Prior to the Engine acquisition, we did not have any convertible debt. The change represents adjusting the convertible debt to fair value at the end of the reporting period, primarily driven by changes in our share price.
Current wording
Change in fair value of convertible debt gain (loss) for the six months ended June 30, 2024, was $0.5 million, in comparison to 0.5 million for the same period in 2023. Prior to the Engine acquisition, we did not have any convertible debt. The change represents adjusting the convertible debt to fair value at the end of the reporting period, primarily driven by changes in our share price.
Previous wording
Arbitration settlement reserve for the three months ended March 31, 2024, was $0.1 million gain, in comparison to no reserve for the same period in 2023. Prior to the Engine acquisition, we did not have an arbitration settlement reserve. The change represents adjusting the arbitration settlement reserve to fair value at the end of the reporting period, primarily driven by changes in our share price.
Current wording
Arbitration settlement reserve gain (loss) for the six months ended June 30, 2024, was $0.1 million, in comparison to $0.7 million for the same period in 2023. Prior to the Engine acquisition, we did not have an arbitration settlement reserve. The change represents adjusting the arbitration settlement reserve to fair value at the end of the reporting period, primarily driven by changes in our share price.
Previous wording
There was no income tax benefit for the three months ended March 31, 2024, in comparison to $5 thousand for the same period in 2023. The change was trivial between the two periods and relates to change in deferred tax liabilities.
Current wording
There was no income tax benefit for the six months ended June 30, 2024, in comparison to $5 thousand for the same period in 2023. The change was trivial between the two periods and relates to change in deferred tax liabilities.
Previous wording
Net income from discontinued operations for the three months ended March 31, 2024, was $1.5 million, in comparison to a net loss of $1.3 million for the same period in 2023. The increase was primarily related to gain on disposal of Complexity of $3.0 million in the 2024 period partially offset by net loss from operations of Complexity of $1.4 million as compared to a net loss from operations of Complexity of $1.3 million in the 2023 period.
Current wording
Net income from discontinued operations for the six months ended June 30, 2024, was $1.3 million, in comparison to a net loss of $2.8 million for the same period in 2023. The increase was primarily related to gain on disposal of Complexity of $3.0 million in the 2024 period partially offset by net loss from operations of Complexity of $1.4 million as compared to a net loss from operations of Complexity of $2.6 million in the 2023 period.
Previous wording
General and administrative expenses for the three months ended March 31, 2024, was $4.9 million, in comparison to $2.6 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above that did not impact the prior period.
Current wording
General and administrative expenses for the three months ended June 30, 2024, was $7.1 million, in comparison to $4.2 million for the same period in 2023. The increase was primarily related to our acquisition of Faze as discussed above. Faze was not part of the prior year comparable results.
Previous wording
Selling and marketing expenses for the three months ended March 31, 2024, was $2.2 million, in comparison to $0.7 million for the same period in 2023. The increase was primarily related to our acquisitions of Faze and Engine as discussed above that did not impact the prior period.
Current wording
Selling and marketing expenses for the three months ended June 30, 2024, was $2.4 million, in comparison to $1.7 million for the same period in 2023. The increase was primarily related to our acquisition of Faze as discussed above. Faze was not part of the prior year comparable results.
Previous wording
Change in fair value of warrant liability gain for the three months ended March 31, 2024, was $37 thousand, in comparison to no change for the same period in 2023. Prior to the Engine acquisition, we did not have any liability measured warrants. The gain represents adjusting the liability measured warrants to fair value at the end of the reporting period, primarily driven by changes in our share price.
Current wording
Change in fair value of warrant liability gain (loss) for the three months ended June 30, 2024, was $16 thousand, in comparison to $1.7 million for the same period in 2023. Prior to the Engine acquisition, we did not have any liability measured warrants. The gain represents adjusting the liability measured warrants to fair value at the end of the reporting period, primarily driven by changes in our share price. The large reduction in gain is primarily driven by the expiration of the majority of the liability measured warrants, and therefore the change in fair value from period to period is not significant in the current period.
Previous wording
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, and (viii) gains and losses from discontinued operations.
Current wording
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.
Previous wording
As of March 31, 2024, cash and restricted cash totaled $7.8 million, compared to $3.0 million as of December 31, 2023.
Current wording
As of June 30, 2024, cash and restricted cash totaled $14.5 million, compared to $3.0 million as of December 31, 2023.
Previous wording
We have plans to raise additional funds. 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.
Current wording
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.
Previous wording
Since inception, we have financed our operations primarily by issuing equity and debt, including the proceeds of the acquisition of Engine. As of March 31, 2024, our principal sources of liquidity were our cash in the amount of $7.2 million, available borrowings under our line of credit as well as new debt and/or equity issuances.
Current wording
Since inception, we have financed our operations primarily by issuing equity and debt. As of June 30, 2024, our principal sources of liquidity were our cash in the amount of $13.9 million, available borrowings under our line of credit as well as new debt and/or equity issuances.
Previous wording
Net cash used in operating activities was $8.0 million during the three months ended March 31, 2024, compared with $0.7 million used in operating activities in the comparative period. The use of funds in operating activities is described in the Results of Operations section above.
Current wording
Net cash used in operating activities was $17.6 million during the six months ended June 30, 2024, compared with $6.9 million used in operating activities in the comparative period. The use of funds in operating activities is described in the Results of Operations section above.
Previous wording
Net cash provided by investing activities was$2.7 million for the three months ended March 31, 2024.
Current wording
Net cash provided by investing activities was $2.8 million for the six months ended June 30, 2024.
Previous wording
Net cash provided by financing activities was $9.5 million for the three months ended March 31, 2024, which was primarily due to PIPE Financing on March 7, 2024. There was no cash provided by (used in) financing activities for the three months ended March 31, 2023.
Current wording
Net cash provided by financing activities was $26.3 million for the six months ended June 30, 2024, which was primarily due to PIPE Financing on March 7, 2024 of $10 million and cash investments by non-controlling interests of Faze Media, Inc. of $15.75 million. Net cash used in financing activities was $0.8 million for the six months ended June 30, 2023.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Three months ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
Software-as-a-service (“SaaS”) + Advertising revenue
Current report — wording carried from elsewhere
Other operating expenses for the three months ended June 30, 2024, was $1.0 million, in comparison to $1.0 million for the same period in 2023. Other operating expenses between the quarters consisted solely of transaction related expenses. The variance between the periods was not significant.
Current report — wording carried from elsewhere
Interest expense for the three months ended June 30, 2024, was $0.2 million, in comparison to $0.1 million for the same period in 2023. The increase was primarily related to a line of credit that was closed in September 2023. We did not have comparable debt instruments outstanding during the comparative period.
Current report — wording carried from elsewhere
Change in fair value of convertible debt carried at fair value
Current report — wording carried from elsewhere
Change in fair value of warrant liability
Current report — wording carried from elsewhere
Net income (loss) from discontinued operations
Current report — wording carried from elsewhere
Net loss from discontinued operations for the three months ended June 30, 2024, was $0.2 million, in comparison to a net loss of $1.5 million for the same period in 2023. The decrease in net loss was due to net loss from operations of Complexity of $0 in the current period (disposed of on March 1, 2024) as compared to a net loss from operations of Complexity of $1.3 million in the 2023 period.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
SaaS + Advertising revenue for the three months ended March 31, 2024, was $12.2 million, in comparison to $0 for the same period in 2023. The increase was related to our acquisition of Engine on April 11, 2023. As such, there is no revenue is this operating segment in the prior year period.