East Side Games Group Inc.

Downgrade to Avoid. Management cut FY2026 guidance to C$40–44M revenue and C$4.0–4.7M Adj. EBITDA just ten weeks after reaffirming C$50–56M at the close of an insider private placement. Net debt rose to C$7.3M despite the C$2.96M raise, going-concern language is now explicit, and RBC has moved the account to Special Loans. Three of five thesis pillars are broken, and at 4.3x reduced guidance on adjusted EV the shares price in a refinancing that has not closed.

Q1 2026 confirms the turnaround thesis is structurally intact — Adj. EBITDA margin expanded 330 bps YoY to 14% despite a deliberate 32% revenue cut driven by UA discipline. Management publicly committed to eliminating all bank debt by year-end 2026, direct-to-consumer revenue tripled to 11% of IAP in a single quarter, and Trailer Park Boys Match launched with >40% Day-1 retention. We lower our price target to C$0.24 on revised base-case EBITDA of C$7.0M, but the risk/reward at C$0.095 — 2.6x annualised Q1 EBITDA — remains asymmetric.

Distressed pricing on a recapitalized turnaround: stock is down 78% YoY, but management has issued explicit 2026 guidance of C$50–56M revenue and C$7.5–10M Adj. EBITDA — a >9x EBITDA reset versus FY2025's C$0.79M. A May 2026 C$3.5M private placement (with a director writing a C$1M cheque at the bottom and a >50% controlling CEO supporting dilution) repays RBC and clears the covenant overhang. Pro forma EV of ~C$17M values the business at just 2.0x guided 2026E Adj. EBITDA — versus 4.7x for Western mobile peers.