Filing summary
Issuer and period: The supplied filing is Engine Gaming and Media, Inc.’s Form 20-F for the fiscal year ended August 31, 2022, not a filing by Gamesquare Holdings, Inc. It includes the quarter ended August 31, 2022. Financial amounts are in U.S. dollars unless noted. The company reported under IFRS.
Business context and reporting period
Engine operated media and gaming businesses, principally Frankly (publisher content, streaming and advertising), SideQik (influencer marketing) and Stream Hatchet (gaming-streaming analytics). Its continuing revenue came from SaaS and advertising. During fiscal 2022, Engine sold its 96% interest in Eden Games, sold UMG assets, and decided to discontinue WinView; those businesses are presented as discontinued operations.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue from continuing operations | $41.88 million | $33.35 million |
| SaaS revenue | $9.22 million | $7.95 million |
| Advertising revenue | $32.66 million | $25.39 million |
| Continuing-operations net loss | $16.47 million | $24.48 million |
| Net loss attributable to Engine shareholders | $14.48 million | $40.72 million |
| Cash used in operating activities | $20.33 million | $30.34 million |
| Cash at year-end | $8.60 million | $15.31 million |
- Revenue grew $8.54 million, or about 25.6%. Management attributed SaaS growth mainly to a full year of SideQik and higher Stream Hatchet revenue, partly offset by lower Frankly SaaS revenue. Advertising growth was primarily associated with increased traffic at Frankly’s largest client.
- Revenue sharing expense was $30.09 million, up from $22.85 million. The filing does not provide a standard gross-margin measure.
- FY2022 included a $14.93 million reported gain on disposal of a subsidiary, principally from the Eden Games sale, and $1.99 million net income from discontinued operations. The company nevertheless reported a $14.41 million consolidated net loss, or $14.48 million attributable to owners.
- Cash decreased $6.70 million over the year. Investing activities provided $13.45 million, largely reflecting Eden sale proceeds; financing activities used $0.33 million. Operating cash outflow remained substantial.
- At August 31, 2022, current assets were $22.06 million and current liabilities $21.82 million, a working-capital surplus of just $0.23 million. Shareholders’ equity was $15.89 million and accumulated deficit $127.29 million.
- Convertible debt was carried at $7.25 million ($2.27 million current and $4.98 million non-current). Promissory notes payable were $0.77 million; lease liabilities were $0.39 million. Cash and restricted cash together were approximately $8.65 million.
- For the quarter ended August 31, 2022, the filing’s quarterly table reports continuing-operations revenue of $11.46 million and a loss of $10.31 million.
Material changes, outlook and risks
- Engine recorded SideQik goodwill impairment of $2.90 million and related intangible impairment of approximately $0.97 million, citing delays in forecast revenue growth. Separately, the filing reports $5.03 million of WinView patent impairment in discontinued operations; total impairment adjustments in the cash-flow reconciliation were $9.52 million.
- The auditor issued an unmodified opinion but highlighted a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern. Management cited continuing losses, financing needs and dependence on future profitable operations or additional capital. No specific revenue or earnings guidance is provided.
- Management said it was exploring strategic alternatives beginning October 2022. On December 7, 2022, Engine agreed to combine with GameSquare Esports in an all-share arrangement, with former GameSquare shareholders expected to own about 60% of the combined company. Closing was anticipated in Q1 2023, subject to shareholder, court and regulatory approvals.
- Nasdaq notified Engine in June 2022 that its share price did not meet the $1 minimum bid requirement. The filing says Nasdaq granted a further 180-day extension on December 21, 2022; failure to regain compliance could lead to delisting.
- Other notable risks include dependence on a major advertising customer (one customer represented 72% of FY2022 revenue, versus 60% in FY2021), collection risk, competition, access to financing, cyber and privacy incidents, foreign-currency exposure, and litigation. Allinsports arbitration resulted in a direction to issue 966,667 shares; the recorded arbitration reserve was $0.69 million at year-end. DraftKings and FanDuel patent cases remained pending, with motions to dismiss and patent-review proceedings noted.
- After year-end, $0.50 million of convertible principal and $91,781 of interest were offset against notes receivable, while a further $0.25 million was extended to February 28, 2023. A separate director-held $1.25 million debenture was extended to August 2025 at 7% interest and a $1.10 conversion price.
Most important facts to verify
- Confirm the issuer identity: this is Engine Gaming and Media, Inc.’s filing, despite the request metadata naming Gamesquare Holdings, Inc.
- Review the audited statements and subsequent filings for cash runway, financing completed or required, and developments affecting the going-concern uncertainty.
- Check the status and final terms of the GameSquare arrangement, including approvals, closing, ownership split and any dilution.
- Assess the largest advertising customer’s renewal, revenue contribution and receivable collection; verify the reported 72% concentration.
- Reconcile impairment amounts and discontinued-operation results to the audited notes, especially the SideQik charges and WinView patent impairment.
- Check Nasdaq listing compliance and current convertible-debt balances, maturities, conversion terms and related-party disclosures.