REG - Gfinity PLC - Final Results
15/11/2021 07:05
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RNS Number : 3079S Gfinity PLC 15 November 2021
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15 November 2021
Gfinity plc
("Gfinity" OR the "Company")
Final year results for the year ended 30 June 2021
"A year of strategic delivery, positioning the company for scalable growth"
Gfinity plc (AIM: GFIN), a world-leading esports and gaming solutions
provider, today announces its audited final results for the year ended 30 June
2021.
Financial highlights
· 27% increase in revenue to £5.7m (2020: £4.5m), driven by 768%
increase in revenue attached to Gfinity owned and co-owned properties.
· Significant reduction in adjusted operating loss* by 50% to
£2.7m (2020: £5.5m loss).
· 61% reduction in adjusted EBITDA loss**, including the impact of
gains and losses on Associates, to £2.3m (2020: £5.8m loss).
· Adjusted administrative expenses*** of £5.4m (2020: £8.3m),
representing 35% year on year reduction, reflecting full year impact of
business restructuring in March 2020.
· Cash and cash equivalents at year end of £1.4m (2020: £1.6m),
supplemented by post year-end over-subscribed fundraise to raise £3.3m
before costs for targeted acquisition.
Comment from Gfinity CEO John Clarke:
"Over the past year, Gfinity has continued to embed itself into the gaming
ecosystem by providing unique esports solutions and establishing a highly
engaged community of gamers through the Gfinity Digital Media Group (GDM) and
our proprietary technology IP.
Our strategic focus on 'what we own' has enabled us to add significant value
to gaming communities, benefitting our partners and clients, as well as
creating a clear growth engine for our business in the form of the GDM. By
focusing on what we can control and partnering with great brands that have a
shared need, we are delivering on our strategy and are well-positioned for
scalable growth.
Financial performance reflects the progress of our new strategy and we have
been encouraged with what we have achieved against the backdrop of the
pandemic. GDM continues to expand following several strategically important
acquisitions, including Stock Informer and SiegeGG post-period, and we have
grown our gaming community and enhanced our ecommerce capabilities. While our
Tournament Platform is driving competitions of significant scale, our
sharpened focus has also allowed us to make significant savings in operating
expenditure.
Looking ahead, we are now in a position to grow and monetise at scale. Despite
ongoing uncertainty around Covid-19, macro trends around gaming are attractive
and we remain focused on delivering against our strategy."
Operational highlights
· Significant growth of owned and recurring revenue streams
providing a strong foundation for scalable growth in future years, with GDM
platform selected by leading brands to target specific gaming audiences and
deliver global esports programmes.
· Commercial agreements signed with leading brands and publishers
including Activision, Manchester United, Cadburys, Formula 1, Premier League
and Red Bull.
· Bolstered strategic partnerships to drive engagement across
owned websites, including the launch of new digital motorsport
competition with Abu Dhabi Motorsport Management (ADMM) and expanded
relationship with global advertising technology platform Venatus.
· Added significant senior talent bringing experience with
publishers and in growing digital businesses to support with delivering on
strategic priorities, including two additional Non-Executive Directors.
Growth and expansion of Gfinity Digital Media Group (GDM)
· Strong growth of publishing platform, GDM, with revenues of £1.6
million.
· Acquisition of leading online fantasy and sci-fi news community,
Epicstream.
· Partnerships launched with sites that add value to the user
experience, such as MapGenie.
· Launch of dedicated mobile gaming website Only Mobile Gaming!
(OMG!) and new virtual racing website Racinggames.gg.
Post-period highlights
· Acquisition of Megit Limited, owner and operator of the website
Stock Informer, an ecommerce referral site for gamers and their lifestyles,
funded via successful fundraise.
· Acquisition of SiegeGG, including technology behind leading
statistical analysis of Rainbow Six Siege video game.
· Selected by Nintendo and Coca Cola Hellenic Bottling Company as
operational partner for respective gaming and esports tournaments.
· Continued expansion of senior leadership team with appointment of
new Head of Brands and Digital Relations.
Outlook
· Refreshed strategy positioning the business to deliver scalable
growth and drive financial performance.
· Sharpened focus of growing what we own, further licensing of
proprietary technology IP, and continued selection by major brands provides
the Board with confidence in the long-term trajectory of the business.
· Continued management focus on limiting impacts of macro-economic
factors that could create headwinds.
*Adjusted operating loss is before interest, tax, depreciation, amortisation,
impairment and the share-based payment expense. It does, however, include
operating lease expenditure reclassified as capital spend in line with the
requirements of IFRS 16 to ensure consistency with prior years.
**Adjusted EBITDA loss is the Adjusted operating loss, plus or minus the share
of gain/ loss on Associate entities, including any gain/ (loss) on disposal of
such entities.
***Adjusted administrative expenses show the underlying operating expenditure
of the company, adjusting for the same items as with the adjusted operating
loss.
ENDS
Notes for editors
Enquiries:
Gfinity plc www.gfinityplc.com (http://www.gfinityplc.com)
John Clarke, CEO Via Teneo
Teneo (Media) Tel: +44 7880 715975
Anthony Di Natale Gfinity@teneo.com
Canaccord Genuity Limited Tel: +44 (0)207 523 8150
(AIM Nominated Adviser & Broker)
Bobbie Hilliam / Georgina McCooke
About Gfinity
Gfinity (AIM: GFIN) is a market-leading digital media publisher and technology
company in the rapidly growing esports and competitive gaming sector. Created
by gamers for the world's three billion gamers, Gfinity has a unique
understanding of this fast-growing global community. It uses this expertise
both to provide advisory services and to design, develop and deliver
unparalleled experiences and winning strategies for game publishers, sports
rights holders, commercial partners and media companies.
Gfinity connects its partners with the esports community in authentic and
innovative ways. This consists of on‑and-off-line competitions and
industry‑leading content production. Relationships include Activision
Blizzard, EA SPORTS, F1 Esports Series Red Bull, Abu Dhabi Motorsport
Management and Coca Cola.
Gfinity connects directly with tens of millions of gamers each month through
its digital media group, Gfinity Digital Media. Gfinity Digital Media includes
websites such as: Gfinityesports, RealSport101, Epicstream, Stock Informer,
StealthOptional, RacingGames.gg, MTGRocks.com and their respective social
channels.
All Gfinity services are underpinned by the Company's proprietary technology
platform, delivering a level playing field for all competitors and supporting
scalable multi-format leagues, ladders and knockout competitions.
Chairman's Report
I have pleasure in presenting our annual accounts for the financial year-ended
30 June 2021. The team has diligently implemented the new strategic direction
that CEO John Clarke set out on his appointment in March 2020. The progress of
this sharpened strategy and operational focus can now be seen in the Company's
financial performance. There was a 27% increase in revenue to £5.7m (2020:
£4.5m), driven by a 768% increase in revenues attached to Gfinity owned and
co-owned content. We are also pleased to report a 50% reduction in adjusted
operating loss to £2.7m (2020: £5.5m).
This was achieved against the backdrop of continued COVID-19 restrictions
which impacted client and publisher spend. I would like to take the
opportunity to thank our colleagues for their continued hard work and
dedication during this period to deliver such a resilient performance.
The Market
The Board of Gfinity remains confident in the prospects and position of the
Company, especially as the supportive market dynamics we saw in the previous
twelve months continued into this year. The gaming market continues to expand
with more than 3.2 billion players globally and the industry generating
revenue of US$175.8 billion.
Historically, there has been a particular focus around the growth in
professional esports; the best of the best playing against each other in
on-and-offline competitions. While still important, the real growth area is
now grassroots competitive gameplay. Connecting with players and fans through
engagement hubs that deliver entertainment, competitive play and chat forums
is essential for game publishers as they look to extend the lifecycle of their
games. This is equally important for brands and sports rights holders seeking
ways to broaden their reach and better collect and utilise first-person data.
The continued move towards grass roots vindicates the decision taken by the
Gfinity team to focus on what it owns - the Gfinity Digital Media (GDM) group
and licensing its tech IP. This places the Company at the heart of the gaming
ecosystem, adding value to key stakeholders, in a scalable and monetisable
way. Gfinity's growing community, aligned to its tournament and engagement
tech platform is a winning proposition. It has never been so highly relevant
and clearly differentiated in the marketplace.
Acquisitions
Acquisitions are key to the growth of Gfinity, especially for GDM. It is a
fast growing and profitable asset for the Company and there is huge
opportunity to quicken its pace of growth. The first major acquisition during
the period was Epicstream.com, a US-based site focusing on Marvel and Star
Wars. By combining the expertise of Gfinity and Epicstream, we have seen
significant growth in monthly users and revenue, reinforced by new site ideas,
such as the launch of MTGRocks.com. Following the year-end, the Company also
continued to add new sites to GDM, the largest being Stock Informer. We have
ambitious growth aspirations for GDM and continue to look at future
acquisitions that will allow us to achieve these at pace.
Adding new Non-Executive Directors
During the year we strengthened the Board with the appointment of two new
non-executive directors, both adding significant expertise and value to the
team. Len Rinaldi joined in December 2021 and is a former senior leader at
Apple where he was General Manager for Western Europe, a role he held for
seven years. Hugo Drayton also joined in June 2021. Hugo continues to serve
as an Independent Non-Executive Director on the Board of Future plc, the
global media production platform - a role he has held for the last six years.
In addition, he was CEO of Inskin Media until 2019 - a brand advertising
company he led for 10 years, from start-up to a profitable, global media
business. Both Len and Hugo have already made significant contributions
towards the implementation of our strategy, and we will continue to build our
leadership expertise to expand our capabilities.
People and Projects
We have always prided ourselves on the dedication, can-do spirit, and
innovative thinking of our people. It is through their efforts that our tech
platform has been deployed with major publishers; that leading brands like
Formula 1 enjoyed record viewership numbers for its 2020 esports programme;
and that relationships with organisations like Abu Dhabi Motorsport Management
and Red Bull go from strength to strength. It is also encouraging that post
year-end, new commercial agreements have been signed with brands such as Coca
Cola.
In addition, I am particularly pleased that the team has made a commitment to
identify and hire more diverse talent. Gfinity is dedicated to improving
diversity in the UK gaming industry, and we are proud to be a signatory of the
Audeliss and INvolve initiative to drive Black inclusion in business, as well
as supporting the Association for UK Interactive Entertainment (UKIE)
programme called #RaiseTheGame, also focused on improving diversity.
In closing, Gfinity has made significant progress against its strategic plan.
By owning one of the world's fastest-growing gamer communities, alongside
valuable tech IP to facilitate engagement, it is adding clear value to the
gaming ecosystem. The leadership team has positioned the business well for
further growth.
Neville Upton
Chairman
15 November 2021
Chief Executive Officer's Report
When appointed Gfinity CEO in March 2020, I set out a plan to bring the
economics of our business under control and reset the strategic focus to
deliver scalable growth. I am pleased to say that during the past 12 months we
have made significant progress in both areas.
The Gfinity team has focused on getting 'more from less' which is reflected in
the reduction of both our cost base by 35% and our adjusted operating loss by
50%. In the last quarter of 2020, we delivered the Company's first ever
quarterly adjusted EBITDA profit, which was an important milestone for the
business. We remain focused on delivering high-margin revenue growth and
month-on-month profitability by FY23, while at the same time finding ways to
capture significant growth opportunities in the market.
For Gfinity to be a leader in the gaming ecosystem we need to be fully
embedded into it, owning something that is highly valued by game publishers,
sports rights holders and brands looking to reach gamers. The business is
achieving this in two scalable areas. The first is the Gfinity Digital Media
group (GDM), a digital publishing business focused on gamer lifestyles. The
second is Gfinity owned technology IP, which drives everything needed to host
competitions at scale and deepen engagement with gamers. We made strong
progress in further developing both these areas during the year. When combined
with our world class production capabilities and range of client services, it
is clear to see how we are changing the dynamics of our business and the way
we partner with organisations.
The progress we have made this year is testament to the talent and dedication
of our colleagues who have risen to every challenge, including unprecedented
lockdowns. We continue to look for exciting new talent to bring into the team
and we have set ourselves the challenge of tapping into as diverse a talent
pool as possible.
Continued growth of gaming
Gaming is now mainstream and growing fast. It is driven by an important
consumer behaviour - young people are moving away from passive entertainment
such as traditional TV, in favour of interactive engagement, which includes
gaming. When combined with high-speed internet, proliferation of smartphones
and tablets, increasingly captivating games, and VR and AR offerings from some
of the world's biggest brands, the momentum we see today is clearly set to
continue.
Strategic focus on 'what we own'
The Gfinity Digital Media group is now the foundation on which our financial
model is being built. During the period the business delivered revenues of
£1.6m, up from roughly £0.3m in the previous year. The financial metric that
we track most closely is the annualised value of each monthly user (MAU). By
the end of the financial year this figure had grown from 4p to over 15p. The
GDM team is now focused in the short-to-medium-term on driving 50 million MAUs
at a target of 30p per MAU, which would generate revenue of £15.0m per annum.
And in the medium-to-long-term, driving 100m MAUs at 40p per MAU to generate
revenue of £40.0m per annum.
The strategy to deliver this growth is now well embedded into the business
with four key pillars to deliver against:
· the first is leverage existing sites such as Gfinityesports and
Realsport101 and launch new sites at speed, such as MTG Rocks and OMG! focused
on Magic the Gathering and mobile games respectively;
· the second is to add new sites that build on our gamer lifestyle
positioning through targeted acquisitions, such as Epicstream, which we
acquired in December 2020 and is focused on Marvel, Star Wars and all things
gamer-geek;
· the third pillar is partner with sites that add to the user
experience, like MapGenie that helps gamers track down hard to find in-game
assets; and
· the fourth pillar is to add and expand affiliate and e-commerce
opportunities across all sites for products that gamers need and enjoy.
Since the end of the financial year, Gfinity has added two new sites to the
GDM portfolio. Stock Informer, a highly-profitable affiliate and ecommerce
site for gamers and their lifestyles; and Siege.gg, a leading website for
statistics, analysis and news around the Rainbow Six Siege video game. Both
add significant value to our fast-growing community of gamers.
In January 2021 we also launched Manifold, a custom-built content management
system (CMS) which is key to the growth and success of GDM. It allows us to
scale our existing sites quicker, integrate the sites we acquire onto a single
CMS system and optimise all our sites both commercially and for Google search.
Throughout the year GDM continued to grow and gain momentum, and we are
excited to bring to life ideas for new sites to create and acquire, whilst
increasing the annualised value per monthly user.
GDM provides multiple revenue levers and importantly provides Gfinity
first-person data that can be used to create better, more targeted products
and experiences for gamers. This data also facilitates more informed
conversations with brands keen to connect with gamers.
Gfinity's owned tech IP
Our technology IP is a significant asset to the business. Traditionally it has
been utilised for one-off bespoke projects for clients such as the Premier
League, Formula 1 and Activision. This financial year, we changed this
approach and created a scalable, licensed-based model around four distinct yet
complimentary products: a turnkey Competition Platform, flexible for any game,
any platform and any competitive format; Game Control which enables real-time
competition adjudication used by the likes of Formula 1; Community,
facilitating greater interaction through forums, chat, rewards and
achievements, currently used by Nvidea; and Virtual Production which allows
remote multiplayer participation and low-cost broadcast solutions.
For the Competition Platform we have three distinct products. Each has
significant total addressable markets and the opportunity for recurring
license fees. For each we already have strong proof of concepts, practical
experience with several of the world's leading brands and game publishers and
playbooks to deliver them. The team has made significant progress in
productising our owned tech IP and in 2022 will be ready to roll out at scale.
Client Service and partnerships
During the period we also completed commercial agreements with leading brands
and publishers including Activision, Manchester United, Cadburys, Formula 1,
Premier League and Red Bull. These agreements are based on our ability to
enable businesses to navigate the sector and provide the full range of gaming
services, from operations to production.
In addition, we also delivered two seasons of V10 R-League, the first product
under the Global Racing Series partnership between Gfinity and Abu Dhabi
Motorsport Management. It attracted several of the world's leading motorsport
virtual teams and introduced new racing formats that captured the imagination
of fans across the globe. The foundation has been built and we are expecting
the 2022 season to attract even more interest. We are looking for more
opportunities to expand this business model across other industry sectors -
specifically where Gfinity is paid for ideation, delivery, and share in the
commercial upside that is generated.
Diversity and inclusion
We continue to take positive action towards creating a more diverse and
inclusive work environment and are committed to participating in initiatives -
large and small - that will help us achieve this goal. Some examples for this
year include: modifying language used in our job posts in order to ensure we
attract people from all backgrounds, and becoming a signatory of If Not Now,
When? and #RaiseTheGame, initiatives focusing on improving diversity across UK
business and gaming respectively. We have also created an internship program
open to talent from BAME backgrounds.
We have actively advertised in more platforms and locations, reaching out to
more diverse applicants than ever before and investment has been made into an
ATS system which will allow us to implement anonymised hiring tactics moving
forward.
The Company has also made a commitment to include unconscious bias training as
part of our induction programme by the end of the FY 21/22. As part of a wider
review of our inclusion practices we have enhanced our maternity and paternity
policies, to allow for parents to spend more time with their family.
Outlook
The sharpened operational focus, combined with the significant reduction in
our cost base, has given Gfinity the impetus to win and deliver on the major
opportunity we see ahead of us. Gfinity's continued success also remains
dependent upon positive business and consumer sentiment. The timing of new
advertising campaigns and programmes are determined by a range of factors,
including our customers. There are risks associated with these timings and
therefore it is important that we remain agile, flexible and entrepreneurial,
continually adding to an already strong pipeline of opportunities.
Conclusion
Gaming is here to stay and will continue to grow. Macro trends are working in
our favour. Gfinity is now embedded into the gaming ecosystem and is adding
value to it through the strategic focus on 'what we own'. We are staying
focused on what we can control, building the GDM and our tech IP licensing
business, partnering with organisations who have mutual interests and working
with great brands that value our expertise. We are on an exciting journey and
I would like to thank the Gfinity team, our business partners and our clients
for their continued hard work and support.
John Clarke
Chief Executive Officer
15 November 2021
Chief Financial and Operations Officer's Report
Summary
The year to 30 June 2021 was one of significant financial progress for the
business.
In March 2020, we announced a review of the business positioning, sharpening
its strategic focus around owned properties in areas which we believe we hold
a competitive advantage and can scale profitably. The results for the year to
30 June 2021 reflect the first full year impact of these changes.
In that context, I am pleased to be able to report on full year revenue growth
of 27% to £5.7m. I am also particularly encouraged that this has been largely
driven by revenue relating to Gfinity owned and co-owned content, which
increased by 768% to £2.3m (FY20: £0.3m). Of this, £1.6m of revenue related
to the Gfinity Digital Media Network (FY20: £0.3m), while £0.7m related to
jointly owned esports properties, including the Global Racing Series in
conjunction with Abu Dhabi Motorsports Management (FY20: £nil). The growth of
these owned and recurring revenue streams provides a strong platform for
scalable growth in future years.
The sharpening of focus also allowed us to make significant savings in
operating expenditure. Adjusted administrative expenses of £5.4m represented
a 35% year on year reduction (FY20: £8.3m), which followed a 13% reduction
delivered during FY20.
The overall impact of these changes was a 50% reduction in the Adjusted
Operating Loss for the year to £2.7m (FY20: £5.5m). Again, this built on a
36% reduction in the year to 30 June 2020.
In December 2020, Gfinity disposed of its 33% minority holding in Esports
Awards for £0.5m. With the investment held at zero carrying value this
resulted in a £0.5m gain on disposal of an associate entity. As a result, the
Adjusted EBITDA loss, which includes the impact of all gains and losses on
associates, reduced to £2.3m.This represented a year-on-year reduction of 61%
(FY20: £5.8m).
In December 2020, we were delighted to announce the acquisition of the trade
and assets of the Epicstream business. This was supplemented following the
year-end by the acquisitions of the trade and assets of the SiegeGG business
and of Megit Limited, the company that owns and operates the highly profitable
Stock Informer brand.
These acquisitions are in line with our strategy to build a large and highly
engaged digital media publishing business based around gamers and their
lifestyles. The Gfinity Digital Media group will consist of a network of
sites, each featuring its own unique properties of content, which add value to
the experience of a particular segment of gamers. This network will benefit
from the economies of scale of delivery of high-quality supporting technology
and infrastructure across a larger number of sites. It will also build the
scale to fully capitalise on the revenue opportunity, allowing for premium
advertising rates to be earned through the direct sale of campaigns to brands
and other organisations wanting to connect with gamers. This will form part of
a diversified revenue model, with eCommerce and affiliate revenues also
playing a growing importance in driving increases in the revenue per user
across the network.
Revenue and cost of sales
Revenue of £5.7m reflects an increase of 27% year on year (FY20: £4.5m). Of
this, £2.3m related to Gfinity owned and co-owned content, comprising of
£1.6m in respect of Gfinity Digital Media group and £0.7m in respect of
global racing series.
Across the full year to June 2021, Gfinity Digital Media averaged 10.7m
monthly active unique users, delivering average annualised revenue of 15.2p
per user. As the business scales, we believe that it should be possible to
significantly scale both the number of users and revenue per user through:
User Numbers Revenue per User
- Continued development of content and SEO strategy to drive growth in - Increased proportion of direct campaigns, at premium rates as brands
existing sites. look to directly target Gfinity's owned audience.
- Launch of new sites, powered by custom built content management - Growth of eCommerce and affiliate revenues.
system (CMS), e.g. RacingGames.GG (eRacing), Stealth Optional (gamer tech) and
MTGRocks (Magic the Gathering). - Deployment of additional technology and content, to drive more
visits per user and increase time on site, creating more monetisation
- Acquisition of targeted sites e.g. Epicstream, StockInformer and opportunities.
SiegeGG.
In the short to medium term, we are targeting growth to 50 million monthly
active users (MAU) at 30p revenue per MAU, rising to 100m MAUs at 40p per MAU
in the medium to longer-term.
Revenue relating to the provision of esports services, technology and content
on behalf of clients was £3.4m, which represented a reduction of 20% year on
year (FY20: £4.2m). This partly reflected a reduction in the number of live
esports events taking place as a result of COVID-19, which only had a part
year impact on the FY20 results. It also represents our shift in strategic
focus, with a greater focus being placed on Gfinity's higher-margin owned
properties.
Gross profit reduced slightly year-on-year to £2.6m (FY20: £2.8m). This
primarily reflected a move to a more variable cost model, in line with the
significant reduction in administrative expenses, with more staff brought in
to support as required on a programme-by-programme basis, rather than forming
part of the ongoing overhead of the business. It also reflected an investment
of £0.2m in the launch and first two seasons of the Global Racing Series in
conjunction with Abu Dhabi Motorsports Management.
Administrative expenses
As a Board, we monitor ourselves against Adjusted Administrative Expenses, as
the measure which most closely reflects the cash costs to the business. This
measure adjusts for the impact of non-cash items, including amortisation or
other adjustments to the carrying value of goodwill and intangible assets,
depreciation on owned assets and the share option charge. For consistency with
prior years and to most closely align to cash costs, operating lease payments
which are capitalised under IFRS 16 are still included within Adjusted
Administrative Expenses.
Unadjusted administrative expenses include:
· Share option charge of £0.3m, which represents a significant
reduction of the figure for FY20 of £1.5m, which featured an accelerated
charge in respect of certain former board members
· Amortisation of intangibles and adjustments to goodwill of £0.5m
(2020: £0.5m)
· Depreciation of owned assets of £0.6m (2020: £0.4m)
· Impairment of the goodwill held in respect of the acquisition of
CEVO, Inc of £0.9m (2020: £nil).
CEVO, Inc was acquired by Gfinity in July 2017. Since then, the CEVO business
has provided significant value to the overall Group. CEVO's esports platform
continues to form the basis of the current Gfinity Esports Platform, which is
used to support esports programmes for multiple clients and is central to the
productisation of Gfinity's esports technology suite. CEVO also continues to
deliver services to a key client under its own brand in the USA. Intangible
assets identified on acquisition continue to be held in respect of both of
these items. Over time, however, the operations of CEVO have become
increasingly intertwined with those of Gfinity. Former CEVO directors hold
senior positions within the Gfinity business, including Head of Product and
Head of Technology. As a result, it has become increasingly difficult to
separately quantify the value of future cash flows relating to the CEVO brand.
On this basis, directors have taken the decision to write the value of
goodwill down to zero. This has no impact on the underlying adjusted operating
profit of the business.
Adjusted Administrative Expenses for the year to June 2021 totaled £5.4m,
which represented a year on year decrease of 35% (FY20: £8.3m). Adjusted for
£0.1m of Other Income received under the furlough scheme, the net overhead
cost of the business reduced to £5.3m in the year to June 2021.
The reduction was principally driven by significant headcount reductions
applied during a restructuring of activities in March 2020. It also included
release of the company's office in April 2021, with staff now working
primarily from home and from the Gfinity Arena as required.
Operating loss
The cumulative impact of the factors outlined above is that the Operating Loss
for the year reduced by 50% to £2.7m (2020: £5.5m). This followed a 36% year
on year reduction in FY20, as the company continues to progress towards
profitability.
Share of gain/ loss in associates
In December 2020, Gfinity disposed of its 33% minority holding in Esports
Awards for £500,000. This represented a strong return on an initial
investment of £138,000. With the investment having been written down in line
with losses in the associate, at the time of disposal, the investment was held
at zero carrying value in both the Company and Consolidated Balance Sheets.
Net of a debtor balance of £40,294, which was waived as part of the
transaction, this disposal resulted in a gain of £459,706.
With no activity in the Gfinity Esports Australia business, which is in the
process of being wound down, in the year, this meant an overall gain on
associates of £459,706 (2020: loss of £308,214).
As a result, the Adjusted EBITDA loss, which includes the impact of all gains
and losses on associates reduced to £2.3m. This represented a year-on-year
reduction of 61% (FY20: £5.8m).
Cash and Cash Equivalents
Year-end cash of £1.4m (2020: £1.6m) was slightly ahead of expectations. At
the year end, £0.2m of warrants in respect of shares acquired during the
April 2020 fundraise remained outstanding, which have now expired.
Following the year end, Gfinity successfully completed an oversubscribed
fundraise at market price, reflecting continued strong investor support for
the business. This placing raised a further £3.3m gross (£3.1m net). Of this
sum, £2.5m was used to acquire Megit Limited, owner of the Stock Informer
brand, which is expected to have a strong cash positive impact on Gfinity's
future performance.
Mergers and Acquisitions
In December 2020, Gfinity announced the acquisition of the trade and assets of
the Epicstream business, which consisted of the Epicstream.com website and
related content, together with an engaged Facebook network featuring over 6
million likes. Consideration for this consisted of 10 million shares, with a
fair value at the date of acquisition of 3.6p, together with an earn out of
30% of revenue in each of the first 2 years.
Following the year-end Gfinity announced two further acquisitions:
· Megit Ltd, the parent company of the Stock Informer brand, which
operates the StockInformer.co.uk and StockInformer.com sites in UK and USA
respectively. Stock Informer holds a position of authority on the availability
of hard to get items of stock, of particular relevance to gamers. Its
proprietary technology ensures an up to date record of when such items become
available allowing it to earn revenue through affiliate commissions. In the
year to 31 March 2021, Megit Ltd earned revenue of £2.3m and profit before
tax of £2.2m, demonstrating a highly profitable, scalable model. While the
launch of next generation PlayStation and Xbox consoles means this year won't
necessarily represent a benchmark for recurring income, directors believe that
stock shortages will be an ongoing issue and the market leading position that
Stock Informer has established with regards to this will represent a valuable
addition to the GDM network.
o Consideration for the acquisition of Megit Limited comprised of:
§ £2.5m in cash
§ £2.5m in Gfinity equity settled via the issuance of 62.5m new ordinary
shares at the placing price of 4p in September 2021; and
§ An earn out of 30% of revenue in each of the first 3 years post
acquisition, capped at a maximum value of £1.8m.
· The trade and assets of the SiegeGG business. SiegeGG has
acquired a leading position as the authority on all news and statistics
relating to the competitive scene around the Rainbow Six Siege game published
by Ubisoft. The business generates revenues through the licensing of its
database of statistical information relating to Rainbow Six Siege esports and
onsite advertising. In the year to 31 December 2020, SiegeGG reported
unaudited revenues of $0.1 million and profit before tax of $40k.
o Consideration for the acquisition of SiegeGG comprised of:
§ 9 million ordinary shares, with a fair value on the date of acquisition of
4.4p
§ An earn out of 30% of revenue in each of the first 2 years post
acquisition, capped at a maximum value of £1.5m.
As the earliest of these acquisitions, Epicstream has provided an excellent
case study for other sites to follow. The site benefits from having been
migrated to Gfinity's proprietary Content Management System "Manifold", which
powers other large sites in the network and the deployment of Gfinity's
content and SEO strategy. Having delivered 600,000 monthly active users in its
first month under Gfinity in December 2020, the site has grown to reach around
3 million users a month and is now benefitting from being jointly
commercialised through Gfinity's preferential partnerships.
While both the Stock Informer and SiegeGG acquisitions have been much more
recent, initial indications are positive. Both have now been integrated into
Gfinity's commercial and advertising partnerships, creating new advertising
revenue streams. In the case of Stock Informer, this supplements ongoing
affiliate revenues, which continue to benefit from a global chip shortage,
resulting in demand outstripping supply for in-demand gaming products.
SiegeGG continues to be seen as the authority on statistics and news in
relation to the Rainbow Six Siege competitive scene, which alongside
advertising revenues, results in ongoing revenue streams from the licensing of
this data to event organisers and broadcasters in the Rainbow Six Siege
scene.
Outlook
Overall, the results outlined in this Annual Report represent a year of
significant progress for the business. Directors expect revenue to continue to
grow, driven largely by Gfinity owned content and technology. It is also
expected that organic growth will be supplemented by further mergers and
acquisitions, as Gfinity seeks to rapidly grow both the scale and the
profitability of its Digital Media network.
This growth will be supplemented by an investment in the productisation of
Gfinity's owned esports technology, in the expectation that the licensing of
this technology will create a further scalable, repeatable and profitable
revenue stream for the business.
This will enable Gfinity to fully deliver value to shareholders from the
leading position it has created within the valuable esports and video gaming
market.
Jonathan Hall
Chief Financial and Operations Officer 15 November 2021
Group Statement of Profit or Loss
1 July 2020 to 30 June 2021 1 July 2019 to 30 June 2020
Notes
£
£
CONTINUING OPERATIONS
Revenue 5,693,385 4,485,565
Cost of sales (3,085,409) (1,714,740)
Gross profit/(loss) 2,607,976 2,770,825
Other Income 6 54,354 73,041
Administrative expenses 7 (7,179,327) (10,681,476)
Operating loss (4,516,997) (7,837,610)
Disposal of Associate Gain / (Loss) 17 459,706 0
Share of Associate Profit / (Loss) 17 0 (308,214)
Finance income 9 4 2,622
Finance Costs 9 (10,236) (39,768)
Loss on ordinary activities before tax (4,067,524) (8,182,970)
Taxation 10 221,929 457,663
Retained loss for the year (3,845,595) (7,725,307)
Loss and total comprehensive income for the period (3,845,595) (7,725,307)
Earnings per Share 11 -£0.00 -£0.01
Group Statement of Comprehensive Income
Notes 1 July 2020 to 30 June 2021 1 July 2019 to 30 June 2020
£ £
(3,845,595) (7,725,307)
Loss for the Period
Other Comprehensive Income
Items that will not be reclassified to profit or loss
Foreign exchange profit / (loss) on retranslation of foreign Subsidiaries (12,887) (6,117)
Other Comprehensive Income for the period (12,887) (6,117)
Loss and total comprehensive income for the period (3,858,482) (7,731,424)
Group Statement of Financial Position
Notes 30 June 2021 30 June 2020
£ £
NON-CURRENT ASSETS
Property, plant and equipment 12 187,366 213,288
Right of use assets 13 - 428,305
Goodwill 14 1,903,790 2,544,526
Intangible fixed assets 15 704,481 613,164
Investments in Joint Ventures and Associates 17 - -
2,795,637 3,799,283
CURRENT ASSETS
Trade and other receivables 18 1,586,850 1,391,332
Cash and cash equivalents 19 1,375,873 1,600,597
2,962,723 2,991,929
TOTAL ASSETS 5,758,360 6,791,212
EQUITY AND LIABILITIES
Equity
Ordinary shares 21 930,513 725,868
Share premium account 46,511,089 44,405,085
Other reserves 3,384,914 3,132,220
Retained earnings (47,302,697) (43,457,102)
Total equity 3,523,819 4,806,071
Non-current liabilities
Other Payables 22 254,986 -
Deferred Tax Liabilities 20 127,835 92,059
Current liabilities
Trade and other payables 22 1,851,720 1,893,081
Total liabilities 2,234,541 1,985,141
TOTAL EQUITY AND LIABILITIES 5,758,360 6,791,212
The following notes form an integral part of these financial statements.
Signed on behalf of the board on 12 November 2021:
Neville Upton
Jonathan Hall
Chairman
Chief Financial and Operations Officer
Company Statement of Financial Position
Notes 30-Jun-21 30-Jun-20
£ £
NON-CURRENT ASSETS
Property, plant and equipment 12 179,727 187,176
Right of use assets 13 - 428,305
Investment in Subsidiaries 16 - 4,466,133
Goodwill 14 2,568,417 -
Investments in Joint Ventures & Associates 17 - -
Intangible fixed assets 15 530,336 57,724
TOTAL NON-CURRENT ASSETS 3,278,479 5,139,338
CURRENT ASSETS
Trade and other receivables 18 2,051,596 2,843,800
Cash and cash equivalents 19 1,329,815 1,531,360
TOTAL CURRENT ASSETS 3,381,410 4,375,160
TOTAL ASSETS 6,659,890 9,514,498
EQUITY AND LIABILITIES
Equity
Ordinary shares 21 930,513 725,868
Share premium account 46,511,089 44,405,085
Other reserves 3,403,414 3,137,832
Retained earnings (46,340,461) (40,601,156)
Total equity 4,504,555 7,667,629
Non-current liabilities
Other creditors 22 254,986 -
Deferred tax liabilities 20 94,748 -
Current liabilities
Trade and other payables 22 1,805,601 1,846,869
Total liabilities 2,155,334 1,846,869
TOTAL EQUITY AND LIABILITIES 6,659,890 9,514,498
The following notes form an integral part of these financial statements.
As permitted by Section 408 of the Companies Act 2006, the profit and loss
account of the Company is not presented as part of these financial
statements. The parent Company's loss for the year amounts to
£5,739,305 (2020: loss of £7,493,221).
Signed on behalf of the board on 12 November 2021:
Neville Upton
Jonathan Hall
Chairman
Chief Financial and Operations Officer
Group Statement of Changes in Equity
Ordinary shares Share premium Share option reserve Retained earnings Forex Total equity
£ £ £ £ £ £
At 30 June 2019 362,897 37,455,839 1,637,258 (35,731,795) 504 3,724,704
Loss for the period - - - (7,725,307) - (7,725,307)
Other Comprehensive Income - - - - (6,117) (6,117)
Total comprehensive income - - - (7,725,307) (6,117) (7,731,424)
Proceeds of shares issued 362,971 7,372,852 - - - 7,735,823
Share Issue Costs - (423,605) - - - (423,605)
Share options expensed - - 1,500,573 - - 1,500,573
Total transactions with owners, recognised directly in equity 362,971 6,949,247 1,500,573 - - 8,812,791
At 30 June 2020 725,868 44,405,085 3,137,831 (43,457,102) (5,613) 4,806,070
Loss for the period - - - (3,845,595) - (3,845,595)
Other comprehensive income - - - - (12,887) (12,887)
Total comprehensive income - - - (3,845,595) (12,887) (3,858,482)
Proceeds of shares issued 204,645 2,110,793 - - - 2,315,438
Share Issue Costs - (4,789) - - - (4,789)
Share options expensed - - 265,583 - - 265,583
Total transactions with owners, recognised directly in equity 204,645 2,106,004 265,583 - - 2,576,232
At 30 June 2021 930,513 46,511,089 3,403,414 (47,302,697) (18,500) 3,523,819
Company Statement of Changes in Equity
Ordinary shares Share premium Share option reserve Retained earnings Total equity
£ £ £ £ £
At 30 June 2019 362,897 37,455,838 1,637,258 (33,107,935) 6,348,058
Loss for the period - - - (7,493,221) (7,493,221)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (7,493,221) (7,493,221)
Proceeds of Shares Issued 362,971 7,372,852 - - 7,735,823
Share issue costs - (423,605) - - (423,605)
Share options expensed - - 1,500,573 - 1,500,573.00
Shares as deferred consideration - - - - -
Total transactions with owners, recognised directly in equity 362,971 6,949,247 1,500,573 - 8,812,791
At 30 June 2020 725,868 44,405,085 3,137,831 (40,601,156) 7,667,628
Loss for the period - - - (5,739,305) (5,739,305)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (5,739,305) (5,739,305)
Proceeds of Shares Issued 204,645 2,110,793 - - 2,315,438
Share issue costs - (4,789) - - - 4,789
Share options expensed - - 265,583 - 265,583
Shares as deferred consideration - - - - -
Total transactions with owners, recognised directly in equity 204,645 2,106,004 265,583 - 2,576,232
930,513 46,511,089 3,403,414 46,340,461 4,504,555
At 30 June 2021
Group Statement of Cash Flows
30-Jun-21 30-Jun-20
Note
£ £
Cash flow used in operating activities
Net cash used in operating activities 23 (2,049,663) (5,290,351)
Cash flow from/(used in) investing activities
Interest 9 4 2,622
received
Additions to property, plant and equipment 12 (106,642) (100,765)
Additions to intangible assets 15 (16,030) (57,724)
Gain on disposal of associate 459,706 -
Investment in associate - (308,214)
Net cash used in investing activities 337,038 (464,081)
Cash flow from/(used in) financing activities
Issue of equity share capital 1,950,649 7,312,218
Share issue cost - -
Repayment of leases (439,621) (597,015)
Bank interest payable (10,236) (2,511)
Net cash from financing activities 1,500,792 6,712,692
Net increase in cash and cash equivalents (211,833) 958,260
Effect of currency translation on cash (12,887) (6,117)
Opening cash and cash equivalents 1,600,596 648,454
Closing cash and cash equivalents 1,375,876 1,600,596
Company Statement of Cash Flows
30-Jun-21 30-Jun-20
Note
£ £
Cash flow used in operating activities
Net cash used in operating activities 23 (2,040,690) (5,322,647)
Cash flow from/(used in) investing activities
Interest 9 4 2,622
received
Additions to property, plant and equipment 12 (105,327) (98,444)
Additions to Intangible Assets 15 (16,030) (57,724)
Disposal of Associate Gain / (Loss) 459,706 -
Investment in Associate - (308,214)
Net cash used in investing activities 338,353 (461,760)
Cash flow from/(used in) financing activities
Issue of equity share capital 1,950,650 7,312,218
Repayment of leases (439,621) (597,014)
Bank interest payable (10,236) (2,511)
Net cash from financing activities 1,500,793 6,712,692
Net increase in cash and cash equivalents (201,545) 928,285
Opening cash and cash equivalents 1,531,360 603,076
Closing cash and cash equivalents 1,329,815 1,531,360
Notes to the Financial Statements
1. GENERAL INFORMATION
Gfinity plc ("the Company") is a public company limited by shares incorporated in the United Kingdom under
the Companies Act 2006, registered in England and Wales and is AIM listed. The
registered number of the company is 08232509.
The functional and presentational currency is £ sterling because that is the currency of the primary economic
environment in which the group operates. Foreign operations are included in
accordance with the policies set out in note 2. Principal activities are
discussed in the Strategic report.
2. ACCOUNTING POLICIES
Basis of preparation
The Company has prepared the accounts on the basis of all applicable
International Financial Reporting
Standards (IFRS), including all International Accounting Standards (IAS),
Standing Interpretations
Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations
issued by the International Accounting Standards Board (IASB) with effective
dates for accounting periods beginning on or after 1 July 2020, together with
those parts of the Companies Act 2006 applicable to companies reporting
under IFRS.
The accounts have been prepared on the historical cost basis, except for
otherwise stated below. The
principal accounting policies, which have been consistently applied throughout the period presented, are set
out below.
The preparation of financial statements in conformity with IFRS requires the
use of certain estimates. It also
requires management to exercise its judgement in the process of applying the company's accounting policies.
Estimates and judgements are continually reviewed and are based on historical experience and other factors
including expectations of future events that are believed to be reasonable
under the circumstances.
Standards, Interpretation and amendments to published standards effective in the accounts
The Group has applied the following new standards and interpretations for the
first time for the annual reporting period commencing 1 July 2020:
• Amendments to IFRS 3 Definition of a Business.
• Amendments to IAS 1 and IAS 8 Definition of Material.
• Amendments to References to the Conceptual Framework in
IFRS Standards.
• Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
• Amendments to IFRS 16: COVID-19-Related Rent Concessions
The adoption of the standards and interpretations listed above has not led to
any changes to the
Group's accounting policies or had any other material impact on the financial position or performance of the
Group.
Standards, interpretation and amendments to published standards that are not yet effective
New standards and interpretations that are in issue but not yet effective are
listed below:
• Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
Reform
• IFRS 17 Insurance Contracts.
The adoption of the above standards and interpretations is not expected to
lead to any changes to the Group's accounting policies or have any other
material impact on the financial position or performance of the Group.
Going Concern
At the end of the period the Group had cash and cash equivalents amounting to
£1,375,673 and the Company had cash and cash equivalents amounting to
£1,329,815. Further to this at the balance sheet
date, there were 20,050,500 warrants outstanding over ordinary shares in the company at an exercise price
of 1p, to be exercised on or before 20 October 2021.
Following the balance sheet date, on 23 August 2021, the Company announced its
intention to undertake a placing to raise £3.3m before costs (£3.1m after
costs). This placing was over-subscribed and successfully completed without
a significant discount to market price having to be offered. It also saw a
significant investment from a new cornerstone institution in Canaccord
Genuity.
Of the funds raised, £2.5m were used as the initial consideration to acquire
Megit Ltd, the owner of the highly profitable Stock Informer business. This
is in addition to equity and earn-out consideration outlined in the Post
Balance Sheet Events note. In its last completed accounting period, to 31
March 2021, Megit Ltd recorded revenue of £2.3m and profit before tax of
£2.2m. While the year to March 2021 was a particularly successful year for
the company, supported by the launch of next generation consoles, the
directors expect the Stock Informer business to continue to deliver
significant levels of revenue, at a net margin of around 75%, allowing for
incremental investment to support long term growth and diversification of the
revenue model.
As outlined in the Strategic Report, over the past 18 months, the Group has
significantly restructured its underlying operations, creating a significant
new revenue stream in the Gfinity Digital Media business, while delivering a
year-on-year reduction in adjusted administrative expenses of 35%. Even
prior to the acquisition this has resulted in a significantly reduced level of
cash-burn, as the business drives towards its target of profitability on an
adjusted operating profit basis within the next 12 months.
Management have prepared forecasts to 31 December 2022, which indicate that if
the business performs in line with target, then current cash reserves,
supplemented by expected further exercise of warrants as outlined above, would
provide sufficient funding to allow the Group to continue operating for a
period of at least 12 months following the approval of these financial
statements. Forecasts have also been prepared, which show an adverse
variance to the budget scenario of 20% in Gfinity Digital Media and 25% in all
other areas. Under this scenario, there are still sufficient cash reserves
for the Group to operate for a period of at least 12 months following the
approval of these financial statements.
As a result, the directors do not believe that further cash is required in
order to deliver on current plans for the business. It should be noted,
however, that in a sector that is still rapidly developing and in a period of
ongoing economic uncertainty, there are inherent uncertainties within the
forecasts. In this regard, in a period in which a high level of revenue growth
is expected, cash flow forecasts are particularly sensitive to the delivery of
new client contracts. While the directors are confident that these contracts
will be secured,
the timing of this cannot be certain. In this context, there remains a material risk that the cash flow forecasts
are not met, which would result in additional funding being required and
therefore the directors assessment of the likelihood of being able to raise
such funding is critical to their conclusion that there is no material
uncertainty in relation to the Group and the Company's ability to continue as
a going concern.
In this context, directors' belief that further cash reserves could be secured
if required are based on:
· Strong investor support, demonstrated by an over-subscribed
placing completed in August 2021, which included a new cornerstone
institutional shareholder;
· A historic track-record of being able to raise funds, even at a
time of peak economic and political uncertainty in April 2020;
· Underlying value in owned technology and an owned community of up
to 15 million gamers per month across Gfinity's owned web platforms;
· Ongoing strong investor interest in esports and broader video
gaming sectors.
Consequently, the directors believe that it is appropriate for the accounts to
be prepared on a going concern basis.
Basis of consolidation
The Group accounts consolidate those of the Company and all of its subsidiary undertakings drawn up to 30
June each year. Subsidiary undertakings are those entities over which the
Group has the ability to govern
the financial and operating policies through the exercise of voting rights. The results of subsidiaries acquired
or sold are consolidated for the periods from or to the date on which control
passed. Acquisitions are accounted for under the acquisition method.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of
the cost of the business combination over the Group's
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value
of the acquiree's identifiable assets, liabilities and contingent liabilities
exceeds the cost of the business combination, the excess is recognised
immediately in profit or loss.
All intra group balances, transactions, income and expenses and profit and
losses on transactions between the Company and its subsidiaries and between
subsidiaries are eliminated.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units ('CGUs') expected to benefit from the synergies
of the combination. CGUs to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable
amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro-rata on the basis of the carrying amount of each
asset in the unit. An impairment loss recognised for goodwill is not reversed
in a subsequent period.
Investment in associates
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or join control over those
policies.
The Group's interests in jointly controlled entities are incorporated in the financial information using the equity
method of accounting. Investments in joint ventures are carried in the balance
sheet at cost as adjusted by
post acquisition changes in the Group's share of the net assets of the associate, less any impairment in the
value of the individual investments. The Group's share of the net profit or
loss of the joint venture is shown as a single line item in the Consolidated
Statement of Comprehensive Income.
Where the Group transacts with a joint venture any profit or loss arising is
eliminated to the extent of the Group's interest in the relevant joint
venture.
The carrying amount of equity-accounted investments is tested for impairment
at least annually.
Investment in subsidiaries
Investments in subsidiaries are held in the Company balance sheet at cost and
reviewed annually for impairment.
Revenue
Revenue comprises the fair value of the consideration received or receivable
for the sale of services in the normal course of the Group's activities.
Revenue is shown net of value added tax.
To determine whether to recognise revenue, the Group follows a 5-step process:
1 Identifying the contract with a customer
2 Identifying the performance obligations 3 Determining the transaction price
4 Allocating the transaction price to the performance obligations
5 Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is recognised either at a point in time or over time, when (or as) the
Group satisfies performance obligations by transferring the promised goods or
services to its customers. The Group bases its estimates on historical
results, taking into consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue comprises of:
•
Partner programme delivery fees: Revenue recognised in line with the date at which work is
performed.
• Sponsorship revenues: Revenue is recognised on the date the
relevant sponsored event takes place.
In the event of long-term sponsorship contracts, the revenue is released on a straight-line basis across
the term of the contract, except in instances where a significant proportion
of the revenue relates to specific activation activities, in which case the
revenue is released in line with when that work is performed.
• Advertising revenues: Fees are earned each time a user clicks on
one of the ads that are displayed on the website. Revenue is recognised on a
pay-per-click, or cost per mille (CPM) basis.
• Broadcaster revenues: Rights fees are received from linear
broadcasters and online streaming platforms in return for rights to access
broadcast content. Revenue is recognised once the relevant performance
obligations are completed which is typically at the point the
broadcast occurs.
• Licensing revenues: Fees charged for the licensing of Gfinity
esports technology, outside of the scope of a broader managed esports service
provision.
• Consultancy Fees: Revenue is recognised in line with the profile
of resources dedicated to the programme across the assignment duration.
Leases and right-of-use-assets
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of- use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortised cost using the effective interest method, and is initially measured
at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group's incremental
borrowing rate.
Short-term leases and leases of low-value assets:
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets
and short-term leases. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease term.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
year.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period. Exchange differences arising from
the translation of the Group's foreign operations are recognised in other
comprehensive income.
Taxation
The taxation expense represents the sum of the tax currently payable and
deferred tax.
The charge for current tax is based on the results for the period as adjusted for items that are non-assessable
or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax bases used in the computations
of taxable profit and is accounted for using the balance sheet
liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary
difference arises from goodwill (or any discount on acquisition) or from the initial recognition (other than in a
business combination)
of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that the directors do not have a high degree of certainty that sufficient
taxable profits will be available in the medium-term to allow all or part of
the asset to be recovered.
Credits in respect of Research and Development activities are recognised at
the point at which the asset becomes profitable and quantifiable. This is
typically at the point at which a claim has been prepared and submitted to
HMRC.
Share based payments
The Company provides equity-settled share-based payments in the form of share
options. Equity-settled share-based payments are measured at fair value
(excluding the effect of non-market-based vesting conditions) at the date of
grant. The fair value determined at the date of grant is expensed on a
straight line basis over the vesting period, based on the Company's estimate
of shares which will eventually vest and adjusted for the effect of non-market
based vesting conditions. The Company uses an appropriate valuation model
utilising a Black-Scholes model in order to arrive at a fair value at the date
share options are granted.
In instances when shares are used as consideration for goods or services the
shares are valued at the fair value of the goods or services provided. The
expense to the company is recognised at the point the goods or services are
received.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if
any. Historical cost includes expenditure that is directly attributable to the
acquisition of the items. Subsequent costs are included in the carrying amount
of the asset or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow
to the company and that the cost of the item can be measured reliably. The
carrying amount of parts that are replaced is derecognised. The costs of the
day-to-day servicing of property, plant and equipment are recognised in profit
or loss as incurred.
Depreciation is calculated using the straight-line method to allocate the cost
or revalued amounts of tangible fixed assets to their residual values over
their useful economic lives, as follows:
Office equipment 3 years straight line
Computer equipment 3 years straight line
Production equipment 3 years straight line
Leasehold improvements Over the period of the lease or, where management have reasonable grounds to
believe the property will be occupied beyond the terms of the lease, 3 years
straight line
The residual values and useful economic lives of the assets are reviewed, and
adjusted if appropriate, at each balance sheet date. The carrying amount of an
asset is written down immediately to its recoverable
amount if the carrying amount is greater than its estimated recoverable value. Gains and losses on disposals
are determined by comparing the proceeds with the carrying amount and are
recognised within other gains or losses in the income statement.
Intangible fixed assets
Intangible assets other than goodwill are recognised where the purchase or
internal development of such
assets are expected to directly contribute towards the company's ability to generate revenues over a multiple
years.
Intangible fixed assets are stated at historical cost less accumulated
amortisation and impairment, if any. The cost of intangible assets acquired in
a business combination is their fair value as at the date of
acquisition. Where the cost is not clearly identifiable discounted cash flows are utilised to estimate either the
cost to develop the resource or, where there are already profits attributable the asset, to estimate future cash
inflows. Historical cost includes expenditure that is directly attributable to
the acquisition or development of the items. Subsequent costs are included in
the carrying amount of the asset or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated
with the item will flow to the company and that the cost of the item can be
measured reliably.
Software development 3 years straight line
Web traffic acquired in business combination 3 years straight line
Technology Platform 5 years straight line
Customer Relationships 5 years
Amortisation is charged on a straight-line basis over the estimated useful
economic life of the asset as follows
Research and development costs
Development expenditure is capitalised as an intangible asset, only if the
development costs can be
measured reliably and it is anticipated that the product being built will be completed and will generate future
economic benefits in the form of cash flows to the Group.
Research expenditure that does not meet this criteria is recognised as an expense as incurred. Development
costs previously recognised as an expense are not recognised as an asset in a
subsequent period.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly
liquid investments with original maturities of three months or less. These are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities are obligations to pay cash or other financial
instruments and are recognised when the company becomes a party to the
contractual provisions of the instrument. Financial liabilities are classified
according to the substance of the contractual arrangements entered into. All
interest-related charges are recognised as an expense in the income statement.
Trade and other payables are not interest bearing and are recorded initially
at fair value net of transactions costs and thereafter at amortised cost using
the effective interest rate method.
An equity instrument is any contract that evidence a residual interest in the
assets of the Company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds received, net
of direct issue costs.
Financial assets
Financial assets are recognised in the balance sheet when the Company becomes a party to the contractual
provisions of the instrument and are recognised in the balance sheet at the
lower of cost and net realisable value.
Provision is made for diminution in value where appropriate.
Income and expenditure arising on financial instruments is recognised on the accruals basis and credited or
charged to the statement of comprehensive income in the financial period to
which it relates.
Trade receivables do not carry any interest and are initially recognised at
fair value, subsequently reduced by appropriate allowances for estimated
irrecoverable amounts.
Warrants
Warrants are in respect of call options granted to investors by the group and
are classified as equity only to the extent that they do not meet the
definition of a financial liability or financial asset.
The fair value of warrants is determined at the date of grant and is
recognised in equity. When the warrants are exercised, the group transfers
the appropriate amount of shares to the investor, and the proceeds received
net of any directly attributable transaction costs are credited directly
to equity.
The group uses an appropriate valuation model utilising a Black-Scholes model
in order to arrive at a fair value at the date warrants are granted.
Government Grants Policy
Grants that compensate the group for expenses incurred are recognised in
profit or loss as other income in
the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after
the related expenses have been recognised. In this case, the grant is
recognised when it becomes receivable.
3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRS requires the
use of certain estimates. It also
requires management to exercise its judgement in the process of applying the company's accounting policies.
Estimates and judgements are continually reviewed and are based on historical experience and other factors
including expectations of future events that are believed to be reasonable
under the circumstances.
Judgement: Revenue recognition:
The Group's revenue recognition policy is based on separating contracts into discrete performance obligations
with revenue then recognised based on the percentage completion of each
performance obligation. Where the value of each distinct performance
obligation is not set out in a contract Management estimate the value of each
performance obligation based on the level of resource required to complete the
performance
obligation in comparison to the overall level of resource required to fulfil the contract. For example, if a contract
did not stipulate the value by region of a broadcast agreement management would use appropriate weighting
(e.g. audience size) to estimate the value of each region, with each region viewed as a separate performance
obligation. Revenue would then be recognised based on the percentage
completion of each performance
obligation. In instances where there is no other readily available proxy Management will estimate the value of
each performance obligation based on the relative cost to deliver.
Revenue settled by means other than cash (e.g. via equity in a associate) is
recognised based on the value stipulated in the contract for goods or
services, which would be set at fair value, with the revenue then recognised
based performance obligations in the manner described above.
There were no revenue contracts requiring judgement that impact on the
reported revenue for the financial year, or contract assets or liabilities at
the balance sheet date for either the current or the prior year
Judgement and estimation: Intangible assets recognised on business
combinations:
Intangible assets in business combinations are recognised when the asset is separately identifiable and based
on the probable future economic benefit that arises owing to the Group's
control of the asset. Typically, the
Group will utilise a discounted cash flow to establish the future economic benefits and therefore the fair value
of the asset.
The Group identified three intangible assets in relation to the two
acquisitions undertaken in the year to 30 June 2018 and three intangible
assets in relation to the acquisition of EpicStream Inc. on 3 December 2020
which is mentioned in Note 28. As these assets have a finite economic life, in
line with IAS 36, they are only subject to further testing for impairment when
there are either internal or external indicators of impairment. Based on a
review of updated cash flow projections it was decided that there were
no indicators of impairment in any of the intangible assets. Following
further review of updated cash flow projections relating to the relationship,
it was determined that no impairment was required. This further testing is
discussed in the 'Impairment testing' section below.
Estimation: Impairment testing:
On an annual basis the Group reviews relevant classes of assets, including
investments, intangible assets and goodwill for indications of impairment.
Where such indications exist, full impairment testing through an analysis of
the value of future cash flows is undertaken. The recoverable amounts of cash
generating units have been determined based on value-in-use calculations which
require the use of estimates. Management has prepared discounted cash flows
based on the latest strategic plan. Discount rate has been calculated using
the Capital Asset Pricing model with reference to the value of UK 10 year
gilts as a proxy for a risk free rate and the volatility of Gfinity's share
price relative to that of AIM since listing.
Goodwill carried in relation to CEVO in the group financial statements:
Gfinity acquired CEVO, Inc in July 2017, since which time the Cevo business
has provided significant value to the overall Group. Intangible assets
continue to be recognized in respect of:
- CEVO's proprietary esports platform, which forms the basis of the
current Gfinity Esports platform, which continues to be used to support
multiple esports programmes for high-profile clients.
- CEVO's ongoing commercial relationship with Nvidia, from which it
continues to derive revenue.
Over time, however, the operations of CEVO have become increasingly
interlinked with those of Gfinity, with former directors of CEVO now holding
senior roles within the Gfinity business, including Head of Technology and
Head of Product. As a result, it has become increasingly difficult, outside
of the specific intangibles, to quantify the value of future cash flows
relating specifically to the CEVO brand. On that basis, directors have taken
the decision in this year to impair the value of goodwill in respect of CEVO
to zero. This resulted in an impairment charge of £0.9m.
Goodwill carried in relation to Real Sport:
The carrying value of goodwill in relation to RealSport was assessed using the
bottom-up financial model created as part of the business planning process,
which reflects the strong growth in monetisation seen through FY21.
This model assumes a monthly average number of unique visitors to the platform
through FY22 of 5.3m. By way of comparison the most recent monthly total (in
September 2021) was 4.9m, with growth expected in Q4, with further game
releases. Thereafter it is assumed that audience numbers will increase at an a
CAGR of 30% p.a. for the first 2 years, before levelling off slightly with a
5% increase thereafter.
Revenue has been calculated using a blended rate, factoring in both real time bidding and direct sale banner
advertising, video advertising and cost per click affiliate revenues, giving an overall rate of 10p per annum per
monthly average user.
On this basis, the net present value of future cash flows has been calculated
at £5.5m. This represents a surplus of £4.1m over the carrying value of
goodwill, with the intangibles recognized in respect of the RealSport
acquisition having been fully amortised. On that basis, no impairment is
proposed.
CEVO customer relationships:
The remaining value of CEVO customer relationship was assessed by way of an
analysis of likely revenue and costs relating to the customer in question over
the final year of the original intangible asset life.
These were assessed on the basis of current open purchase orders, expected
renewal of purchase orders based on work that it is anticipated will renew,
together with a smaller allowance for new work, based on levels secured in
previous years. Cash flows were discounted using a cost of capital of 13%.
The result of the above analysis gave an NPV of £0.1m, in line with the
carrying value of the intangible. No impairment is therefore proposed.
Goodwill and Intangible Assets carried in relation to Epicstream:
Three intangible assets were recognized in respect of the acquisition of
Epicstream:
- The existing social audience and related domain authority of the
main Epicstream site (Epicstream.com)
- The value of the Magic the Gathering social audience, which has been
leveraged to create a new site (MTGRocks.com); and
- The remaining social audience from a Facebook community featuring
over 6 million likes.
These assets, net of deferred tax, had a combined value of £0.5m. With the
fair value of consideration estimated at £0.7m, this resulted in Goodwill of
£0.3m.
The requirement for full impairment testing was assessed through a comparison
of actual cash flows generated from the Epicstream business, against the cash
flow projections used in calculation of the original asset values. With
actual cash flows showing a positive variance to the original projections, it
was considered that there was no indication of impairment and hence full,
detailed impairment testing was not required.
Valuation of investment in RealSport:
The activities of the RealSport brand are now undertaken within the Gfinity
Ltd entity, with Real SM Ltd not actively trading. As a result, while the
goodwill relating to the RealSport brand remains, directors considered that it
would not be appropriate to continue to carry a value of investment in the
RealSport entity on the Gfinity company balance sheet.
The value of this investment has therefore been reclassified as goodwill,
reflecting the absorption of the value of the RealSport brand within the
Gfinity Ltd entity.
This has no impact on the consolidated income statement.
Valuation of investment in CEVO, Inc in the parent company financial
statements:
The value of the investment held in CEVO, Inc has been reviewed in line with
the calculation of the value of the goodwill and related intangible. This
value has been reduced by £0.9m in the year, in line with the reduction to
the carrying value of goodwill.
Judgement: Transfer of trade and assets within the group:
The transfer of trade and assets between entities under common control falls
outside the scope of IFRS 3 and therefore requires judgement to develop an
accounting policy that provides relevant and reliable information in
accordance with IAS 8. Management have elected to account for this transaction
as a 'hive-up' of trade and assets to the parent company. Accordingly, the net
assets transferred to the parent company have been recorded in line with the
amortised cost recognised on a consolidated basis for the corresponding net
assets. The excess of the previously recognised investment value over the net
assets transferred is recognised as goodwill.
4. Revenue
The Group's policy on revenue recognition is as outlined in note 2. The year
ending 30 June 2021 included
£0.36m included in the contract liability balance at the beginning of the
period (2020:£0.7m). The Group's revenue disaggregated by primary
geographical markets is as follows:
30 June 2021 30 June 2020
Cevo Total Gfinity Cevo Total
Gfinity
£ £ £ £ £
£
United Kingdom 4,144,440 - 4,144,440 3,431,492 - 3,431,492
North America 902,408 322,741 1,225,150 27,206 157,829 185,035
ROW 539,069 - 539,069 869,039 - 869,038
Total 5,585,918 322,741 5,908,659 4,327,737 157,829 4,485,565
The Group's revenue disaggregated by pattern of revenue recognition is as follows:
30 June 2021 30 June 2020
Gfinity Cevo Total Gfinity Cevo Total
£ £ £ £ £
£
3,432,959 322,741 3,755,700 2,582,447 - 2,582,447
Services transferred at
a point in time
Services transferred over time 2,152,959 - 2,152,959 1,745,289 157,829 1,903,118
Total 5,585,918 322,741 5,908,659 4,327,736 157,829 4,485,565
As at 30 June 2021 the Group had the amounts shown below held on the consolidated statement of financial
position in relation to contracts either performed in full during the year or
ongoing as at the year end. All amounts were either due within one year or, in
the case of contract liabilities, the work was to be performed within one
year of the balance sheet date
30 June 2021 30 June 2020
£
£
1,024,696 608,189
Trade Receivables
Contract Assets 244,835 154,287
Contract Liabilities 364,024 358,246
Trade receivables are non-interest bearing and are generally on 30-day terms.
Contract assets are initially recognised for revenue earned while the services
are delivered over time or when billing is subject to final agreement on
completion of the milestone. Once the amounts are billed the contract asset is
transferred to trade receivables.
Contract liabilities arise when amounts are paid in advance of the delivery of
the service. These are then transferred to the statement of comprehensive
income as either milestones are completed or work is
completed overtime. Revenue of £0.36m was recognised in the year ending 30 June 2021 that was held as a
contract liability as 30 June 2020. All these amounts were held in Gfinity.
5. SEGMENTAL INFORMATION
The management consider the group to operate as a single segment following the
integration of Cevo's activities into that of the group (included in Chief
Financial and Operations Officer's Report in Strategic Report) and therefore
no segmental analysis is required.
The Group has two single external customers which have revenue equal to or
greater than 10% of the group's revenue. The revenue from each of these
customers is: £0.94 and £0.69m. The customers are major sports rights
holders, financial services and media companies. These revenues are attributed
to the Gfinity segment.
6. OTHER INCOME
There are no unfulfilled conditions or other contingencies attaching to these
grants. Other income reflects government grant income received in the year in
respect of the furlough scheme.
Group
30 June 2021 30 June 2020
£
£
54,354 73,041
Government grant income
7. OPERATING EXPENSES
Operating loss is stated after charging:
Group
30 June 2020
30 June 2021
£
£
132,478 370,589
Depreciation of property, plant and equipment
Depreciation on Right of Use assets 428,305 571,074
Amortisation & impairment of intangible fixed assets 492,700 478,553
Goodwill impairment 901,519 -
Rentals under short-term leases 439,621 514,106
Expensed development costs 150,058 185,376
Staff costs (see note Particulars of employees) 2,844,335 5,781,866
Costs of inventories expensed - -
Auditors' remuneration for auditing the accounts of the Company 66,500 45,000
Auditors' remuneration for other non-audit services:
- Other services related to taxation 8,408 2,500
- All other services 21,836 8,975
Net foreign exchange (gains)/ losses 34,027 (3,453)
8. PARTICULARS OF EMPLOYEES
Number of employees
The average number of people (including directors) employed by the Company
during the financial period
was:
Group Company
30 June 2020 30 June 2021 30 June 2020
30 June 2021
38 54 35 48
The aggregate payroll costs of staff (including directors) were:
Group Company
30 June 2020 30 June 2021 30 June 2020
30 June 2021
£ £ £
£
2,253,444 3,762,138 2,087,944 3,723,272
Wages and salaries
Social security costs 271,347 449,154 255,310 445,557
Pensions 53,962 70,000 53,962 41,744
Equity settled 265,583 1,500,573 265,583 1,500,573
2,844,335 5,781,865 2,662,798 5,711,146
Total remuneration for Directors during the year was £444,428 (2020:
£806,608).
The board of directors comprise the only persons having authority and
responsibility for planning, directing and controlling the activities of the
Group.
9. FINANCIE INCOME/COSTS
Group
30 June 2020
30 June 2021
£
£
4 2,622
Interest income on bank deposits
Finance lease interest (9,228) (37,257)
Other interest cost (1,009) 0
(10,232) (34,635)
10. TAXATION
(a) Major components of taxation expense for the period ended 30
June 2021 are:
Group
30 June 2020
30 June 2021
£
£
Income Statement
Current tax
Corporation tax charge/ (credit) (162,957) (227,004)
Total current tax (162,957) (227,004)
Deferred tax
Relating to origination and reversal of temporary differences (58,972) (230,659)
Taxation charge/ (credit) reported in the income statement (221,929) (457,663)
(b) Factors affecting tax charge for the period
A reconciliation of taxation expense applicable to accounting profit before taxation at the statutory tax rate of
19% (2020: 19%), to taxation expense at the Company's effective tax rate for
the period is as follows:
Group
30 June 2020
30 June 2021
£
£
(3,845,796) (8,182,970)
Loss on ordinary activities before taxation
Profit/ (Loss) multiplied by tax (730,701) (1,554,764)
Effect of:
Expenses not deductible for tax purposes 318,906 349,439
Movment in unrecognised deferred tax arising from tax losses 709,763 1,135,046
Movment in unrecognised deferred tax arising from other temporart timing (356,940) (160,379)
differences
Adjustment in respect of R&D tax credits (162,957) (227,004)
Taxation charge/ (credit) reported in the income statement (221,929) (457,662)
(c) Unrecognised deferred tax asset
The Group has an unrecognised deferred tax asset arising from trading losses
carried forward of £10,508,932 (2020: £7,277,026) calculated at the
substantively enacted Corporation tax rate at the balance sheet date of 25%
(2019: 19%). These trading losses will reverse against future taxable
trading profits and no asset has been recognised due to uncertainties over the
timing and nature of such gains in accordance with IAS 12.
11. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss attributable to
shareholders by the weighted average number of ordinary shares in issue during
the period.
IAS 33 requires presentation of diluted EPS when a Company could be called upon to issue shares that would
decrease earnings per share or increase the loss per share. For a loss making
Company with outstanding share options, net loss per share would be decreased
by the exercise of options and therefore the effect of options has been
disregarded in the calculation of diluted EPS.
Group Company
30 June 2020 30 June 2021 30 June 2020
30 June 2021
£ £ £
£
Loss attributable to shareholders from continuing operations (3,858,482) (7,731,424) (5,739,305) (7,493,221)
Number Number Number Number
000's 000's 000's 000's
Weighted average number of ordinary shares 809,795 518,172 809,795 518,172
Loss per ordinary share for continuing operations (0.00) (0.01) (0.01) (0.01)
12. PROPERTY PLANT AND EQUIPMENT
Group Property Plant and Equipment
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2019 62,292 902,216 621,862 1,586,370
Additions 849 87,362 12,701 100,912
Disposals - - - -
At 30 June 2020 63,141 989,578 634,563 1,687,282
Depreciation
At 1 July 2019 15,066 740,843 347,350 1,103,259
Charge for the period 14,776 177,229 178,731 370,736
Disposals - - - -
At 30 June 2020 29,842 918,072 526,081 1,473,995
Net book value
At 30 June 2020 33,301 71,505 108,482 213,288
At 30 June 2019 47,228 161,373 274,512 483,113
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2020 63,141 989,578 634,563 1,687,282
Additions - 106,642 - 106,642
Disposals - (85) - (85)
At 31 June 2021 63,141 1,096,135 634,563 1,793,839
Depreciation
At 1 July 2020 29,842 918,072 526,081 1,473,995
Charge for the period 32,504 88,729 11,244 132,478
Disposals - - - -
At 31 June 2021 62,346 1,006,801 537,325 1,606,473
Net book value
At 31 June 2021 795 89,333 97,238 187,366
At 30 June 2020 33,301 71,505 108,482 213,288
Company Property Plant and Equipment
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2019 50,894 878,100 621,861 1,550,855
Additions 849 84,894 12,701 98,444
Disposals - - - -
At 30 June 2020 51,743 962,994 634,562 1,649,299
Depreciation
At 1 July 2019 12,504 731,898 347,350 1,091,752
Charge for the period 14,776 176,864 178,731 370,371
Disposals - - - -
At 30 June 2020 27,280 908,762 526,081 1,462,123
Net book value
At 30 June 2020 24,463 54,232 108,481 187,176
At 30 June 2019 38,390 146,202 274,511 459,103
Cost
At 1 July 2020 51,743 962,994 634,562 1,649,299
Additions - 105,327 - 105,327
Disposals - (85) - (85)
At 30 June 2021 51,743 1,068,236 634,562 1,754,541
Depreciation
At 1 July 2020 27,280 908,762 1,097,155 1,462,123
Charge for the period 12,717 88,729 11,244 112,691
Disposals - - - -
At 30 June 2021 39,997 997,491 537,326 1,574,814
Net book value
At 30 June 2021 11,746 70,745 97,237 179,727
At 30 June 2020 24,463 54,232 108,481 187,176
13. RIGHT OF USE ASSETS
The carrying value of right-of-use assets by class is:
Group and Company Premises
£
Cost
At 30 June 2019 -
On adoption of IFRS 16 999,379
At 30 June 2020 999,379
Accumulated depreciation
At 30 June 2019 -
Charge for the year 571,074
At 30 June 2020 571,074
Net carrying amount
At 30 June 2019 428,305
At 30 June 2020 -
Cost
At 30 June 2020 999,379
At 30 June 2021 -
Accumulated depreciation
At 30 June 2020 571,074
Charge for the year 428,305
At 30 June 2021 999,379
Net carrying amount
At 30 June 2021 -
At 30 June 2020 428,305
14. GOODWILL
Group
£
Cost
At 1 July 2020 2,544,526
Acquisition of business 260,783
At 30 June 2021 2,805,309
Impairment
At 1 July 2020 0
Charge for the period 901,519
At 30 June 2021 901,519
Net book value
At 30 June 2021 1,903,790
At 30 June 2020 2,544,526
Company
£
Cost
At 1 July 2020 -
Acquisition of business 260,783
Recognised on hive-up of subsidiary trade and assets 2,307,634
At 30 June 2021 2,568,417
Impairment
At 1 July 2020 -
Charge for the period -
At 30 June 2021 -
Net book value
At 30 June 2021 2,568,417
At 30 June 2020 -
Goodwill at 1 July 2020 recognised in the Group financial statements is in
respect of the acquisitions of CEVO Inc. and RealSM Ltd that took place in the
year ended 30 June 2018.
Goodwill of £260,783 has been recognised in the Group and the Company
financial statements following the acquisition of trade and assets of
EpicStream Inc, on 3 December 2020 (note 28).
Goodwill of £2,307,634 has been recognised in the Company financial
statements following the hive-up of the trade and assets of RealSM Ltd that
concluded during the year. This amount has been reclassified from investment
in subsidiaries (note 16).
15. INTANGIBLE FIXED ASSETS
Group
Customer Relationships RealSport Platform Cevo Gaming Platform Assets Under Construction Total
£ £ £ £ £
Cost
At 1 July 2019 1,198,661 935,518 281,383 57,724 2,473,286
Additions - - - - -
Disposals - - - - -
At 30 June 2020 1,198,661 935,518 281,383 57,724 2,473,286
Amortisation
At 1 July 2019 867,197 405,220 109,152 - 1,530,319
Charge for the period 108,414 313,553 56,586 - 478,553
At 30 June 2020 975,611 718,773 165,738 - 1,860,122
Net book value
At 30 June 2020 223,050 216,745 115,645 57,724 613,164
At 30 June 2019 331,464 530,298 172,231 - 1,033,993
At 30 June 2020
1,198,661
935,518
281,383
57,724
2,473,286
Amortisation
At 1 July 2019
867,197
405,220
109,152
-
1,530,319
Charge for the period
108,414
313,553
56,586
-
478,553
At 30 June 2020
975,611
718,773
165,738
-
1,860,122
Net book value
At 30 June 2020
223,050
216,745
115,645
57,724
613,164
At 30 June 2019
331,464
530,298
172,231
-
1,033,993
Customer Relationships RealSport Platform Cevo Gaming Platform Assets Under Construction Web Platforms Total
£ £ £ £ £ £
Cost
At 1 July 2020 1,198,661 935,518 281,383 57,724 - 2,473,286
Additions - - - - 7,195 7,195
Acquisitions through business combination - - - - 576,822 576,822
Disposals - - - - - -
1,198,661 935,518 281,383 57,724 584,017 3,057,303
At 31 June 2021
-
Amortisation -
At 1 July 2020 975,611 718,773 165,738 - - 1,860,122
Charge for the period 108,118 216,745 56,431 - 111,406 492,700
At 31 June 2021 1,083,729 935,518 222,169 - 111,406 2,352,822
Net book value
At 31 June 2021 114,932 - 59,214 57,724 472,612 704,481
At 30 June 2020 223,050 216,745 115,645 57,724 - 613,164
1,198,661
935,518
281,383
57,724
584,017
3,057,303
-
Amortisation
-
At 1 July 2020
975,611
718,773
165,738
-
-
1,860,122
Charge for the period
108,118
216,745
56,431
-
111,406
492,700
At 31 June 2021
1,083,729
935,518
222,169
-
111,406
2,352,822
Net book value
At 31 June 2021
114,932
-
59,214
57,724
472,612
704,481
At 30 June 2020
223,050
216,745
115,645
57,724
-
613,164
Company
Assets Under Construction Software Development Web Platforms Total
£ £ £ £
Cost
At 1 July 2019 - 148,750 - 148,750
Additions 57,724 - - 57,724
Disposals - - - -
At 30 June 2020 57,724 148,750 - 206,474
Amortisation
At 1 July 2019 - 148,750 - 148,750
Charge for the period - - - -
Disposals - - - -
At 30 June 2020 - 148,750 - 148,750
Net book value
At 30 June 2020 57,724 - - 57,724
At 30 June 2019 - - - -
Cost
At 1 July 2020 57,724 - - 57,724
Additions - - 7,195 7,195
Acquisitions through business combination - - 576,822 576,822
Disposals - - - -
At 30 June 2021 57,724 - 584,017 641,741
Amortisation
At 1 July 2020 - - - -
Charge for the period - - 111,406 111,406
Disposals - - - -
At 30 June 2021 - - 111,406 111,406
Net book value
At 30 June 2021 57,724 - 472,612 530,336
At 30 June 2020 57,724 - - 57,724
At 30 June 2020
57,724
148,750
-
206,474
Amortisation
At 1 July 2019
-
148,750
-
148,750
Charge for the period
-
-
-
-
Disposals
-
-
-
-
At 30 June 2020
-
148,750
-
148,750
Net book value
At 30 June 2020
57,724
-
-
57,724
At 30 June 2019
-
-
-
-
Cost
At 1 July 2020
57,724
-
-
57,724
Additions
-
-
7,195
7,195
Acquisitions through business combination
-
-
576,822
576,822
Disposals
-
-
-
-
At 30 June 2021
57,724
-
584,017
641,741
Amortisation
At 1 July 2020
-
-
-
-
Charge for the period
-
-
111,406
111,406
Disposals
-
-
-
-
At 30 June 2021
-
-
111,406
111,406
Net book value
At 30 June 2021
57,724
-
472,612
530,336
At 30 June 2020
57,724
-
-
57,724
Assets under construction relate to costs incurred in the implementation of a
new ERP system for the company. Implementation work in respect of this asset
was paused in the year to focus resources on key growth activities, however,
it remains the intention to complete and utilize the investment made to date
in the future.
16. INVESTMENT IN SUBSIDIARIES
Company
30 June 2021 30 June 2020
£
£
4,466,133 4,466,133
At 1 July
Reclassifying investment in subsidiary to goodwill (2,307,634) -
Impairment (2,158,499) -
At 30 June - 4,466,133
The investments in subsidiaries represented the purchase of CEVO and Real
Sport on 24 July 2017 and 13 March 2018 respectively. The fair value of
consideration at acquisition for CEVO was £2,158,498 for 100% of the share
capital and this has been fully impaired in year ended 30 June 2021 following
an impairment review (note 3). The fair value at acquisition of RealSM Ltd was
£2,307,634 for 100% of the share capital and this has been reclassified to
Goodwill following the hive-up of the trade and assets of the subsidiary
company (Note 16).
Subsidiary Country of Holding Proportion of voting rights Nature of business
undertaking incorporation and capital held
CEVO Inc. USA Ordinary shares 100% IT Development and Tournament and event operator
RealSM Ltd England Ordinary Shares 100% Online media
RealSM Ltd registered offices are The Foundliabry, 77 Fulham Palace Road,
London, United Kingdom, W6 8JB. CEVO's registered address is 128 Maringo Rd,
Ephrata, WA 98823
RealSM is exempt from the requirements of the Act relating to the audit of
individual accounts in accordance with 479A of the C.A. 2006.
17. INVESTMENT IN ASSOCIATES
Group Company
30 June 2021 30 June 2020 30 June 2021 30 June 2020
£ £ £ £
- - - -
At 1 July
Investment - 308,214 - 308,214
Shares of Losses - (308,214) - (308,214)
Impairment - - - -
At 30 June - - - -
In the year ended 30 June 2020, the investment in associate relates to the
acquisition of 33% of the Esports Awards Limited on its incorporation in
February 2017 and 30% of Gfinity Esports Australia on its incorporation in
August 2017. During the year end 30 June 2020, Gfinity Esports Australia
ceased trading. As a result the carrying value of all investment into the
entity has been written off in full. Both investments are held in Gfinity plc.
Associate undertaking Country of incorporation Holding Proportion of voting rights and capital held Nature of business
2021 2022
Esports Industry Awards Ltd England Ordinary shares 33% 33% Dormant
Gfinity Esports Australia PTY Limited Australia Ordinary shares 0% 30% Tournament and event operator
On 18 December 2020 Gfinity disposed of its 33% holding in Esports Awards Ltd,
recognised under the equity method. The investment had a carrying value at the
point of disposal of £nil. Net proceeds from the transaction were £459,706,
resulting in a corresponding gain on disposal of £459,706.
Esports Awards LTD's registered offices are Belfry House, Champions Way,
Hendon, London, England, NW4 1PX. The registered office of Gfinity Esports
Australia is Suite 5, Level 1, 100 William Street, Sydney, NSW 2011.
18. TRADE AND OTHER RECIEVABLES
Group Company
30 June 2021 30 June 2020 30 June 2021 30 June 2020
£ £ £ £
1,313,447 831,580 1,272,742 831,580
Trade receivables
Provision for doubtful debts (356,480) (250,110) (356,480) (250,110)
956,967 581,470 916,262 581,470
Other receivables 151,150 308,214 151,149 308,495
Amounts due from group undertakings - - - -
Amounts due from related undertakings - - - -
Prepayments and accrued income 479,398 501,367 450,704 448,095
Amounts due in less than one year 1,586,850 1,391,051 1,518,116 1,338,060
Amounts due from group undertakings - - 533,480 1,505,740
Prepayments and accrued income - - - -
Total 1,586,850 1,391,051 2,051,596 2,843,800
Amount due from group undertakings of £533,480 are considered to be due in
more than one year (2020:
£1,505,740) while prepayments include a rental deposit of £101,015 that was
recovered in July 2021.
The directors consider that the carrying amount of trade and other receivables
approximates to their fair value due to the short-term nature of these
financial assets.
19. CASH AND CASH EQUIVALENTS
Group Company
30 June 2020 30 June 2021 30 June 2020
30 June 2021
£ £ £
£
1,375,873 1,600,597 1,329,815 1,531,360
Cash at bank and in hand
Total 1,375,873 1,600,597 1,329,815 1,531,360
Cash at bank and in hand earns interest at floating rates based on daily bank
deposit rates. The fair value of cash and cash equivalents does not differ
from the carrying value.
20. DEFERRED TAX LIABILITIES
Group
30 June 2020
30 June 2021
£
£
92,059 322,718
At 1 July
Arising on business combination 94,748 -
Credited to profit or loss (58,972) (230,659)
At 30 June 127,835 92,059
The provision for deferred taxation is made up as follows:
Temporary timing differences on intangible assets 127,835 92,059
Company
30 June 2021 30 June 2020
£
£
- -
At 1 July
Arising on business combination 115,543 -
Credited to profit or loss (20,795) -
At 30 June 94,748 -
Temporary timing differences on intangible assets 94,748 -
21. ISSUED CAPITAL
The Company has a single class of ordinary share with nominal value of £0.001
each. Movements in the issued share capital of the Company can be summarised
as follows:
Number £
362,897,087 362,897
As at 30 June 2019
Issued on 31 July 2019 at £0.045 116,666,666 116,667
Issued on 2 April 2020 at £0.01 56,839,167 56,839
Issued on 21 April 2020 at £0.01 168,160,833 168,161
Issued between 22 April and 30 June 2020 at £0.01 21,304,500 21,305
As at 30 June 2020 725,868,253 725,868
Issued between 6 July 2020 and 04 June 2021 at £0.01 204,644,995 204,645
As at 30 June 2021 930,513,248 930,513
22. TRADE AND OTHER PAYABLES
Group Company
30 June 2021 30 June 2020 30 June 2021 30 June 2020
£ £ £ £
Non-current liabilities
Other Payables (Deferred consideration) 254,986 - 254,986 -
254,986 - 254,986 -
Current liabilities
Trade payables 680,419 450,264 634,299 416,865
Other taxation and social security 65,776 103,930 65,776 91,117
Accrued expenditure and deferred revenue 1,105,526 910,582 1,105,526 910,582
Lease Liabilities - 428,305 - 428,305
1,851,720 1,893,081 1,805,601 1,846,869
Total 2,106,706 1,893,081 2,060,587 1,846,869
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The directors consider that the carrying amount of trade payables approximates
to their fair value due to their short-term nature.
23. NOTES TO THE CASH FLOW STATEMENT
Group
30-Jun-21 30-Jun-20
£ £
Cash flows from operating activities
Loss for the financial year (3,845,595) (7,725,307)
Depreciation of property, plant and equipment 132,478 370,589
Depreciation on right of use assets 428,305 571,074
Amortisation of intangible fixed assets 492,700 478,553
Goodwill impairment 901,519 -
Interest Received (4) (2,622)
Interest Payable 10,236 39,768
Share based payments 265,583 1,500,573
(Increase)/ decrease in trade and other receivables (280,359) 931,047
Increase in trade and other payables 300,020 (1,531,582)
Share of Associate Losses - 308,214
Disposal of fixed assets 85 -
Gain on disposal of Associate (459,706) -
Corporation tax charge 227,004 (457,663)
Corporation tax (paid)/ R&D credits received (221,929) 227,004
Cash used by operating activities (2,049,663) (5,290,351)
Net cash used by operating activities (2,049,663) (5,290,351)
Company
30-Jun-21 30-Jun-20
£ £
Cash flows from operating activities
Loss for the financial year (5,739,305) (7,720,225)
Depreciation of property, plant and equipment 112,691 370,371
Depreciation on Right of Use assets 428,305 571,074
Amortisation of intangible fixed assets 111,406 0
Investment impairment 2,158,499 0
Interest Received (4) (2,622)
Interest Payable 10,236 39,768
Share of Associate Losses 0 308,214
Gain on disposal of Associate (459,706) 0
Share based payments 265,583 1,500,573
(Increase)/ decrease in trade and other receivables 707,362 916,564
Increase/ (decrease) in trade and other payables 300,112 (1,533,368)
Loss on disposal of fixed assets 85 0
Taxation charge (162,957) 0
Corporation tax (paid)/ R&D credits received 227,004 227,004
Net Operating Cashflow (2,040,690) (5,322,647)
Net cash used by operating activities (2,040,690) (5,322,647)
24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company uses a limited number of financial instruments, comprising cash,
short-term deposits, and various items such as trade receivables and payables,
which arise directly from operations. The Company
does not trade in financial instruments. All of the Company's financial instruments are measured at amortised
cost.
The Company's activities expose it to a variety of financial risks: market
risk (including currency risk and interest rate risk), credit risk and
liquidity risk.
Credit risk
The Company's principal financial assets are bank balances and cash, trade and
other receivables.
Bank balances and cash are held by banks with high credit ratings assigned by
independent credit rating agencies. Management is of the opinion that cash
balances do not represent a significant credit risk.
As the Group does not hold security against trade and other receivables, its credit risk exposure is as follows:
Group Company
30 June 2020 30 June 2021 30 June 2020
30 June 2021
£ £ £
£
1,146,912 2,051,596 2,599,380
1,586,850
The trade receivables balance represents amounts due from third parties. At
the balance sheet date, the Group's trade receivables totaled £1,313,447 less
a provision of £356,480 (2020: £831,580 less a provision of £250,110). The
Company's receivables include £533,480 of inter-company funding (2020:
£1,505,740). The Company's trade receivables totaled £1,272,742 less
a provision for doubtful debt of £356,480 (2020: £831,580 less
a provision for doubtful debt of £250,110).
There are no significant overdue but not impaired trade receivables at the balance sheet date. The Company
balance sheet includes inter-company receivables which are not considered to
be at risk as the Company retains control over the debtor however it is not
anticipated that the Group companies will repay these amounts in the next
12 months.
At the balance sheet date an amount of £316,699 was due from one customer
representing a concentration of credit risk. This amount has not been
recovered in full since the balance sheet date, however is fully provided
against in the year-end balance sheet.
Liquidity risk
All trade and other payables are due for settlement within one year of the
balance sheet date. The use of instant access deposits ensures sufficient
working capital is available at all times.
Foreign exchange risk
The Company operates in overseas markets by selling directly from the UK, owns
an overseas subsidiary and reports in GBP. It is therefore subject to currency
exposures on transactions while the Group is subject to currency exposures on
consolidation of the overseas subsidiary.
Financial instruments held by the Company and their carrying values were as
follows:
Group
30 June 2020
30 June 2021
GBP (£) USD ($) GBP (£)
USD ($)
57,048 1,524,796 0 990,979
Trade and other receivables
Accrued income 39,284 216,805 65,890 102,661
Cash 56,248 1,335,540 92,689 1,525,657
Trade and other payables 58,997 2,350,781 (39,588) (1,861,075)
Derivative financial instruments 0 0 0 0
Net current assets/ liabilities 211,577 5,427,923 118,991 758,222
Company
30 June 2020
30 June 2021
GBP (£) USD ($) GBP (£)
USD ($)
460,599 943,989 0 990,979
Trade and other receivables
Amounts due from Group Undertakings 747,680 952,675 0 1,505,740
Accrued income 0 216,805 0 102,661
Cash 122,703 1,242,264 31,645 1,505,775
Trade and other payables 0 2,346,757 0 (1,846,869)
Derivative financial instruments 0 0 0 0
Net current assets/ liabilities 1,330,982 5,702,490 31,645 2,258,286
Financial liabilities included in the balance sheet relate to the IAS 39
category of other financial liabilities held at amortised cost.
Assets relate to loans and receivables with the exception of other receivables
and prepayments which are classified as non-financial assets.
Fair value estimation
The aggregate fair values of all financial assets and liabilities are
consistent with their carrying values due to the relatively short-term
maturity of these financial instruments.
As cash is held at floating interest rates, its carrying value approximates to
fair value.
Capital management
The Company is funded entirely through shareholders' funds.
If financing is required, the Board will consider whether debt or equity
financing is more appropriate and proceed accordingly. The Company is not
subject to any externally imposed capital requirements.
25. SHARE BASED PAYMENTS
Equity-settled share option plans
Options
The Company has a share option scheme for employees of the Group.
The tables below summarises the exercise terms of the various options over Ordinary shares of £0.001 each
which had been granted, and were still outstanding, as at 30 June 2021.
LTIP options Number Weighted average exercise price (£)
Shares options as at 30 June 2019 46,859,795 0.1382
Shares options granted 47,075,621 0.0125
Share options replaced (28,344,836) (0.1267)
Share options forfeited (3,879,553) (0.1323)
LTIP share options as at 30 June 2020 61,693,027 0.0486
Shares options as at 30 June 2020 61,693,027 0.0486
Shares options granted 49,400,000 0.0409
Share options forfeited (4,050,001) 0.0100
Share options exercised (10,866,663) 0.0110
LTIP share options as at 30 June 2021 96,176,363 0.0556
Options for non-employee services
Non-market condition shares Number Weighted average exercise price (£)
Shares options as at 30 June 2019 7,500,000 0.20
Shares options granted 0 0
Share options lapsed 0 0
Share options as at 30 June 2020 7,500,000 0.20
Shares options as at 30 June 2020 7,500,000 0.20
Shares options granted 0 0
Share options lapsed (3,500,000) 0.20
Share options as at 30 June 2021 4,000,000 0.20
Options vest over periods defined in the respective option agreements and at
the discretion of the board of directors. 37,750,016 options vested during the
year (2020: 28,837,544).
Of the options outstanding 38,000,000 (2020: 20,000,000) are held by directors. Full details of all options held
by directors are contained within the Directors' Remuneration Report.
The principal assumptions input into the Black Scholes model to calculate the
value of LTIP share options issued for compliance with IFRS 2 "Share Based
Payments" are included below, where applicable.
30 June 2021 30 June 2020
0.0556 £ 0.0125
Weighted average exercise price
Average expected life 1.0 years 1.0 years
Expected volatility 86.62% 81.01%
Risk free rate 0% 0%
Expected dividend yield 0% 0%
All options were granted at an exercise price equivalent to the market price at the date of grant. The weighted
average exercise price of LTIP options outstanding at 30 June 2021 was
£0.0496 (2020: £0.0486). The weighted average fair value of options issued
during the period was £0.0404 (2020: £0.0125).
The average expected life is based on directors' best estimate taking into
account the vesting conditions of the options.
Expected volatility has been calculated with reference to the actual
volatility of the share price since over the year prior to the date
of grant.
The fair value of the non-employee services options has been based on the fair value of the services provided
at the date the services were provided. This equates to a fair value of options issued in the year £nil (2020:
£nil).
All options are held in Gfinity plc with no options held over any of the
subsidiaries
26. WARRNATS
The Company has granted warrants over Ordinary Shares as outlined in the table
below.
Number Weighted average exercise price (£)
Warrants
Warrants as at 30 June 2019 0 0.000
Warrants granted 225,000,000 0.010
Warrants exercised (21,304,500) 0.010
Warrants lapsed/forfeited 0 0.000
Warrants as at 30 June 2020 203,695,500 0.0100
Warrants as at 30 June 2020 203,695,500 0.010
Warrants granted 0 0.000
Warrants exercised (183,645,000) 0.010
Warrants lapsed/forfeited 0 0.000
Warrants as at 30 June 2021 20,050,500 0.0100
No warrants were granted in the period. The warrants exercised were granted
in year ended June 2020 and this figure represented one warrant per ordinary
share acquired as part of the fundraise at an exercise price equal to that at
which shares were acquired in the fundraise. All warrants are
non-transferrable and have an exercise period of 18 months from the date
of issue.
The fair value of warrants was calculated according to the Black Scholes model, however, no adjustment has
been recognised in respect of the warrants, as directors consider this amount
to be immaterial.
27. RELATED PARTY TRANSACTIONS
The Directors Remuneration Report provides details of share options issued to certain directors in the period.
Further information on share options are provided in Note 24. In addition to
the share options granted in the year, the directors also participated in
share placings as outlined in the table below. All shares subscribed
for by directors were at the same price and under the same conditions as all other participants in the placings:
June 2021, exercise of warrants at 1p per share
500,000
John Clarke
Jonathan Hall 500,000
Transactions with Group subsidiaries in the year:
CEVO: There was a management recharge from Gfinity to CEVO of £13,409 (2020:
£95,767) and a recharge from CEVO to Gfinity for technology services of
£215,274 (2020: £719,953). There were no cash advances to and expenses paid
on behalf of CEVO by Gfinity (2020: £440,200). At the balance sheet date the
intercompany loan due to Gfinity from CEVO was £533,480 (2020: £528,481).
Real Sport: There were cash advances to and expenses paid on behalf of Real
Sport by Gfinity of £5,734 (2020: £157,677). At the balance sheet date the
intercompany loan due to Gfinity from Real Sport was
£952,675 (2020: £977,260).
There was no revenue from transactions with associates in the year (2020: £0 from the Esports Awards
Ltd and £0 with Gfinity Australia). During the period there was a gain
of £459,706 from disposal of Esports Awards Ltd as mentioned in Note 17.
28. BUSINESS COMBINATIONS
Acquisition of EpicStream
On 3 December 2020 Gfinity PLC acquired the trade and assets of EpicStream
Inc, an online news community for fantasy and sci-fi movies, television, video
games, collectible cards and comic books. EpicStream generates revenue through
programmatic ads, sponsored content, ecommerce and content creation. Gfinity
will also monetise all EpicStream's social channels. The acquisition means
that Gfinity will assume ownership of the EpicStream.com website, its
extensive social media network and their respective historic content. The
continued growth of the platform will be supported by its founders joining the
Gfinity team.
Purchase consideration
Initial consideration £
Shares (10,000,000 Ordinary shares at £0.36) 360,000
Total initial consideration 360,000
Deferred consideration
Contingent consideration at fair value 353,227
Total deferred consideration 353,227
Total consideration payable 713,227
Contingent consideration
Contingent consideration is payable based on revenue generated from the
acquired assets. The amount payable is calculated at 30% of relevant revenues
received in the first and second 12 month periods after the acquisition date,
up to a maximum of £900,000 in each 12 month period. The fair value of the
contingent consideration is currently estimated to be £353,227 based on
forecast revenues at the date of the acquisition. The maximum contingent
consideration payable is £1,800,000.
Net assets acquired
The fair values of the assets and liabilities of the acquired assets of
EpicStream as at the date of acquisition are as follows:
£
Intangible assets: web traffic 567,987
Deferred tax liability (115,543)
Net identifiable assets acquired 452,445
Add: Goodwill 260,783
Net assets acquired 713,227
The goodwill that arises from the business combination reflects the
profitability of the acquired trade and assets and the enhanced growth
prospects for the combined business. None of the goodwill is expected to be
deductible for tax purposes.
EpicStream's post acquisition revenue was £57,800 with a gross profit of
£23,005. If the business had been controlled for the full year, the revenue
and gross profit would have been as below:
£
Revenue 99,086
Cost of sales 59,649
Gross profit 39,437
29. EVENTS OCCURING AFTER THE REPORTING PERIOD
Acquisition of Megit Limited and Placing
On 23 August 2021, Gfinity announced its intention and agreement, subject to
completion of a successful placing and settlement of the initial
consideration, to acquire Megit Limited. Megit Limited, was the private
company which owns and operates the website Stock Informer, in both
the UK and US. The Stock Informer brand has become an established authority
on the availability of hard to find items of stock, with a particular emphasis
on products of relevance to gamers, enabling it to drive profitable revenue
through affiliate commissions.
On 24 August it was announced that an oversubscribed placing had been
successfully completed, subject to shareholder approval, raising £3.3m prior
to expenses at the prevailing market price of 4p per ordinary share. This
transaction was approved by shareholders at an Extraordinary General Meeting
of the company on 10 September. The transaction formally completed on 14
September 2021.
Consideration for the transaction was as outlined below:
Purchase Consideration:
£
Initial Consideration:
Initial Cash Consideration 2,500,000
Shares (62,500,000 shares at £0.04) 2,500,000
Total Initial Consideration 5,000,000
Contingent Consideration:
30% revenue earn out on revenue earned by Stock Informer brand in the 3 years 1,260,000
post acquisition, capped at £1,800,000:
Contingent Consideration 1,260,000
Estimated Total Consideration 6,260,000
The provisionally determined fair value of assets and liabilities of Megit
Limited as at the date of acquisition are as follows:
Cash and cash equivalents 50,000
Receivables 347,196
Payables (incl Corporation tax) (397,196)
Add: goodwill and intangibles 6,260,000
Net Assets Acquired: 6,260,000
Contingent Consideration:
Contingent consideration is due amounting to 30% of revenue, net of sales
taxes, earned in the 3 calendar years following acquisition. This
consideration is capped at £1,800,000, being 30% of £6,000,000. The fair
value of this consideration has been assessed at £1,260,000, being 30% of
£4,200,000.
Information not disclosed as not yet available:
At the time the financial statements were authorized for issue, the group had
not yet fully completed the accounting for the acquisition of Megit Limited.
In particular the fair value of assets and liabilities disclosed above have
only been determined provisionally. Full analysis of the categorization
between goodwill and other separately identifiable assets is also still to be
calculated and as a result, any deferred tax on such assets is yet to be
calculated.
Acquisition of trade and assets of Siege GG
On 8 September 2021 Gfinity announced the acquisition of the trade and assets
of SiegeGG. This included the website, related social platforms, statistical
database and supporting technology and methodology that has helped SiegeGG
become the authority on the competitive scene around the Rainbow Six Siege
game.
Consideration in respect of this transaction was as follows:
£
Initial Consideration:
Shares (9,000,000 shares at £0.044) 396,000
Total Initial Consideration 396,000
Contingent Consideration:
30% revenue earn out on revenue earned by Stock Informer brand in the 2 years 180,000
post acquisition, capped at £1,500,000:
Contingent Consideration 180,000
Estimated Total Consideration 576,000
Contingent Consideration:
Contingent consideration is due amounting to 30% of revenue, net of sales
taxes, earned in the 2 calendar years following acquisition. This
consideration is capped at £1,500,000. The fair value of this consideration
has been assessed at £180,000, being 30% of £600,000.
No value has been ascribed to tangible fixed assets acquired under this
transaction, hence the full value of the opening balance sheet will represent
goodwill and intangibles. Full analysis of the categorization between goodwill
and other separately identifiable assets is also still to be calculated and as
a result, any deferred tax on such assets is yet to be calculated.
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