v3.26.1
Convertible debt
 12 Months Ended
Dec. 31, 2025
Debt Disclosure [Abstract]  
Convertible debt

13. Convertible debt

 

Yorkville CD and SEPA

 

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

 

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

 

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

 

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

 

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

 

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

 

On January 22, 2025, Yorkville converted $3.7 million of its then outstanding $4.1 million convertible debt balance for 5,032,233 common shares of the Company. The Company terminated the remaining outstanding balance on the Yorkville CD of $0.4 million and the SEPA with Yorkville Advisors Global L.P. (“Yorkville”). Under the strategic transaction, GameSquare issued a zero-coupon, 60-day promissory note to Yorkville associated with remaining unconverted principal of $0.4 million and a prepayment penalty of $0.4 million. The prepayment penalty was recorded within Other operating expenses on the consolidated statements of operations and comprehensive loss. In July 2025, the Company paid the balance due under the promissory note.

 

 

Gigamoon CD

 

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

 

Three Curve CD

 

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

 

The Three Curve CD matured on August 31, 2025, and the balance was paid in full.

 

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   King Street CD   Gigamoon CD   Total 
Balance, December 31, 2023  $1,507,236   $-   $6,669,692   $-   $8,176,928 
Interest expense   87,739    -    387,429    32,877    508,045 
Interest payments   -    -    (391,481)   -    (391,481)
Principal payments   -    (1,775,701)   (5,800,000)   -    (7,575,701)
Early redemption premium   -    -    (200,000)   -    (200,000)
Issuance of convertible debt   -    6,045,000    -    10,000,000    16,045,000 
Gain on extinguishment of debt   -    -    (329,703)   -    (329,703)
Day one loss on issuance of debt   -    1,361,773    -    -    1,361,773 
Conversion of debt   -    (645,161)   -    -    (645,161)
Change in fair value(1)   34,473    (133,655)   (335,937)   (124,093)   (559,212)
Balance, December 31, 2024  $1,629,448   $4,852,256   $-   $9,908,784   $16,390,488 
Interest expense   58,253    -    -    184,932    243,185 
Interest payments   -    -    -    (217,808)   (217,808)
Transfer to promissory note payable   -    (411,518)   -    -    (411,518)
Maturity of convertible debt   (1,722,226)   -    -    -    (1,722,226)
Conversion of debt   -    (3,992,238)   -    (10,000,000)   (13,992,238)
Change in fair value(1)   34,525    (448,500)   -    124,092    (289,883)
Balance, December 31, 2025  $-   $-   $-   $-   $- 
                          
Contractual principal balances outstanding:                         
As of December 31, 2024  $1,250,000   $4,124,299   $-   $10,000,000   $15,374,299 
As of December 31, 2025  $-   $-   $-   $-   $- 

 

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