REG - Gfinity PLC - Final Results
22/12/2023 07:00
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RNS Number : 6956X Gfinity PLC 22 December 2023
21 December 2023
For immediate release
Gfinity PLC
("Gfinity" or the "Company")
Audited Results for the year ended 30 June 2023
The Board of Gfinity announces the audited annual results for the year ended
30 June 2023. The Annual Report and Accounts will shortly be sent to
shareholders and will be available on the Company's
website, http://www.gfinityplc.com (http://www.gfinityplc.com) together
with a copy of this announcement.
For further information please contact:
Enquiries:
Gfinity Plc Neville Upton ir@gfinity.net (mailto:ir@gfinity.net)
Beaumont Cornish Limited Roland Cornish +44 (0)207 628 3369
Nominated Adviser and Broker Michael Cornish www.beaumontcornish.co.uk (http://www.beaumontcornish.co.uk/)
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018. The person who arranged for the release
of this announcement on behalf of the Company was Neville Upton, Director.
Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated
Adviser and is authorised and regulated by the FCA. Beaumont Cornish's
responsibilities as the Company's Nominated Adviser, including a
responsibility to advise and guide the Company on its responsibilities under
the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed
solely to the London Stock Exchange. Beaumont Cornish is not acting for and
will not be responsible to any other persons for providing protections
afforded to customers of Beaumont Cornish nor for advising them in relation to
the proposed arrangements described in this announcement or any matter
referred to in it.
Chairman's Report
I have pleasure in presenting our annual accounts for the financial year ended
30 June 2023.
It has been a difficult year for the Company as we transitioned from esports
solutions and software development, to a pure play digital media company. The
new focus is on cost reduction and a quality product, targeting profitability,
with the objective to create longevity in the Company and support and
stabilise the share price for our investors.
The restructuring has led to a reduction in revenue to £2.2m, a decrease of
60% YOY, with a loss of £10.3m. Within this loss, we were able to complete
the full restructuring of the business so that we enter the new financial year
in a much stronger position.
FY 2023, we exited our esports arena in London and also decided to no longer
offer physical events in the future, as both the arena and esports events had
shown no profitability, longevity or scalability for the business.
In June 2023, we exited the majority of Athlos Game Technologies Ltd
("Athlos"), as the capital required to build a SaaS company from scratch
proved too much for our balance sheet to sustain. Athlos continued to lose
significant capital on a monthly basis with no new contracts in the pipeline
and we deemed it a prudent decision to exit the company and focus our capital
on business areas with more consistent and known opportunity.
The economics of the business has become more predictable, with the departure
of previous senior management and our old business model being stripped down.
We now run a good business, with a sensible and much smaller cost base. We
expect our salary bill for the following financial year to be reduced by over
65% and headcount by 50%.
Our operating cost base has been streamlined, with the combined operating
costs of both continued and discontinued operations for FY2023 as shown in
note 10, down 68% year-on-year when compared to our current annualised cost
base of £2.5m.
These changes by no means limit the opportunity of the Company, as we are now
operated by a leaner team, with known M&A experience in a market with many
opportunities. Our customer base of hard-to-reach gamers, is one of the most
coveted by brands and advertisers, and gaming is a sector continuing to grow
year-on-year. By focusing on one industry vertical, we have already been able
to improve our product offering including the launch of a new website in the
summer.
In summary, I would like to say thank you to the Gfinity team, who have
supported us through a challenging year of transition - They are dedicated
writers and developers, and have a clear passion for gaming. And I would also
like to thank all our clients and partners that choose to work with Gfinity
together with our shareholders. Their continued support is never taken for
granted and we can now look forward to growing together.
Neville Upton
Chairman
20 December 2023
Chief Executive Officer's Report
When appointed CEO in August 2023, I set out to quickly bring the economics of
our business under control after a long period of loss-making business
decisions trying to build long term value.
The decision to focus the Company as a pure play digital media company, was
straightforward, as we not only had some excellent sites, although they were
in need of fresh management and some fixing, but we also had a solid core team
of writers, editors and developers who are the backbone of the new look
Gfinity.
By having a singular focus and product vertical, the team can now really show
their expertise in running digital assets to rebuild our Ebitda and create a
long term, reliably profitable company. The digital asset space offers great
opportunities, including potential acquisitions, and rewards companies who
deliver great product and adapt to changes in the industry.
A significant subject in tech is obviously Artificial Intelligence ("AI") and
the impact of Large Language Models on businesses. At Gfinity, we are
embracing this opportunity by utilising tools to improve our product and
increase efficiencies, while ensuring our own team can add their unique
magical human intervention for us to be the go-to sites for gamers and esports
enthusiasts looking for compelling and engaging content .
We are also very excited about the opportunities of AI in video, and I believe
video will increasingly become part of the future product offering of the
company, thus adapting to the needs of a new generation of gamers.
We are building our own engagement tools in our sites where our community will
be entertained through playing games and watching unique content.
We have emerged from a difficult year for GDM. At the end of the June
monthly sessions across all sites were 9 million and combined with our social
media channels we reach more than 20 million gamers each month.
We have now built a stronger foundation for future growth and will work
opportunistically through the next year to find additive transactions to grow
the network and company.
Financial Highlights:
The company operated in FY 2023 with 3 loss-making business divisions.
While all 3 presented opportunities to create shareholder value, Athlos and
Gfinity Esports Solutions were more risky ventures and required more capital.
Athlos is a ground breaking product but needed significant funding. Gfinity
sold 72.5% of Athlos and removed liabilities for 6 months to relieve the
balance sheet. This division was significantly loss-making each month as it
invested in further feature development and started to invest heavily in the
go-to-market plan. Up to the date of disposal of 5 June 2023, the Group
recorded revenue from Athlos of £323,873 and a loss of £715,616.
Gfinity esports solutions division was unpredictable with short term, often
one-off contracts with a large fixed cost base. The Formula 1 contract which
had been the cornerstone of the division and which contributed 60% of revenue
and 83% of gross profit of the eSports division, was not renewed. Most of the
other revenue was one-off consultancy contracts and low margin content
production. As announced in the year, The Board decided to close down the
division:
· December 2022, closed down the Gfinity Arena to
reduce exposure to Esports
· June 2023, announced the closure of the division
· Since year end the division has been sold with
Gfinity retaining a 15% stake
GDM witnessed significant headwinds with numerous changes to the google
algorithms and a well-publicised decline in the ad rates seen across all
digital media. This required a new approach to running the business. A lower
cost base, leaner management team and bigger focus on quality content and
improved User Experience was needed.
· Implemented a significant cost reduction
programme in June 2023.
· Moved advertising agency in April 2023
which saw an increase in ad rates which negated the general decline in ad
rates across the digital media sector
· We restructured the dense advertising
structure in sites to make it more favourable for search engine optimisation
· We improved site mechanics so that numbers
would increase in the fourth quarter of calendar year 2023.
Changes in Organisation
The former Chief Executive Officer John Clarke, resigned in February 2023.
With the closure of the esports division and divestment of Athlos we did not
need such a heavy central cost base and in August 2023 our former CFO, Jon
Hall, left the business and all central functions were reduced in size. I
joined the company as Chief Executive in August 2023 and have implemented a
leaner operating model with the prior Head of Operations now looking after day
to day running of the business with myself and the board overseeing long term
strategy. This new operating model has also seen a reduced number of editors
across the sites a new content production process and more resource in direct
revenue generation. Len Rinaldi left the Board in May 2023.
Growth
Having stabilised the business with a lower cost base and stronger operating
foundations, we are now embarking on a growth plan. In July 2023 we launched a
new website, starfieldportal, it is now receiving over 35k sessions a day. We
aim to release more websites in 2024, as this incurs minimal capital and can
leverage our scalable platform and extensive social media presence.
GDM's competitive advantage is technology; content and Search Engine
Optimisation (SEO) expertise; and commercial leverage.
We have;
· a strong young team who understand the future of
digital communications and media
· a technology platform that allows us to scale the
content suite
· an ad tech capability to increase our revenues
· a sales team to exploit the need for brands to
reach the difficult to reach Gen Z community
· a continuing relationship with Athlos and esports
solutions team where we can provide some compelling gaming
solutions by amalgamating skill sets.
Our dedicated team
The progress we are making across the business is a direct consequence of the
passion and spirit shown by the team. Every day team members are stepping up,
innovating, selling ideas, building networks, impressing partners with the
quality of their work, and making things happen in a challenging economic
environment. Gfinity is benefiting from having leaders across the business
driven by their desire to build something special.
Outlook
The strategic focus on GDM gives us greater control over our destiny. It
allows us to become a leader in one discipline while also navigating the
economic headwinds. We have seen a nervousness from publishers to commit
investment and advertising rates have been impacted across the whole of
digital media. It is crucial that we continue to manage our cost base
zealously while being innovative and adopting to the new technological
opportunities. The team will remain agile, flexible, and entrepreneurial,
continually adopting to new opportunities and providing compelling engagement
to the gaming community.
Conclusion
The transformation of Gfinity' s business model is now well underway; we are
developing expertise to be leading force in digital media across the gaming
community. I would like to thank the Gfinity team, our business partners and
our clients for their continued hard work and support.
David Halley
Chief Executive Officer
20 December 2023
Group Statement of Profit or Loss
For the ended 30 June 2023
Notes Year to 30 June 2023 Year to 30 June 2022
Continuing Operations £ £
Revenue 2,190,216 2,695,388
Cost of Sales (953,905) (1,247,317)
Gross profit 1,236,311 1,448,071
Administration expenses 6 (3,788,329) (2,870,623)
Operating Loss from trading activities * (2,552,018) (1,422,552)
Impairment charge (5,984,171) (76,989)
Re-assessment of Deferred Consideration 931,311 -
Loss arising on loss of control of a subsidiary 5 (548,761) -
Net finance costs 8 (25,976) 77
Loss on ordinary activities before taxation (8,179,615) (1,499,464)
Taxation 9 974,876 209,968
Loss from continuing operations (7,204,739) (1,289,496)
Loss on discontinued operations, net of tax 10 (3,050,097) (2,521,464)
Loss for the year (10,254,836) (3,810,960)
11 (0.13)
Earnings per share - Continuing operations (0.42)
(Pence - Basic and Diluted)
* Operating Loss from trading activities is the Operating Loss for the year
before impairment, movements on deferred consideration, and loss on the loss
of control of a subsidiary.
Group Statement of Comprehensive Income
Year to 30 June 2023 Year to 30 June 2022
£ £
Loss for the Period (10,254,836) (3,810,960)
Items that may subsequently be reclassified to profit or loss
Foreign exchange profit / (loss) on retranslation of foreign subsidiaries - (3,458)
Other Comprehensive Income for the period - (3,458)
Loss and total comprehensive income for the period (10,254,836) (3,814,418)
Group Statement of Financial Position
As at June 2023
Notes 30-Jun-23 30-Jun-22
£ £
NON-CURRENT ASSETS
Property, plant and equipment 12 14,757 148,510
Goodwill 13 495,288 4,714,399
Intangible fixed assets 14 415,155 4,575,141
925,200 9,438,050
CURRENT ASSETS
Trade and other receivables 16 644,540 1,968,893
Cash and cash equivalents 17 270,476 2,141,361
915,016 4,110,254
TOTAL ASSETS 1,840,216 13,548,304
EQUITY AND LIABILITIES
Equity
Ordinary share capital 19 2,649,030 1,315,697
Share premium account 55,367,959 54,858,008
Other reserves 423,613 3,706,664
Retained earnings (57,989,529) (51,113,657)
Non controlling interest 3 3
Total equity 451,076 8,766,715
NON-CURRENT LIABILITIES
Other Payables 20 17,669 840,742
Deferred Tax Liabilities 18 72,390 897,575
CURRENT LIABILITIES
Trade and other payables 20 1,060,794 3,043,272
Provisions 27 238,287 -
Total liabilities 1,389,140 4,718,589
TOTAL EQUITY AND LIABILITIES 1,840,216 13,548,304
The notes form an integral part of these financial statements.
Registered number: 08232509
Signed on behalf of the board on 20 December 2023:
David Halley Neville Upton
Chief Executive Officer Non-Executive Chairman
Company Statement of Financial Position
As at 30 June 2023
Restated
Notes 30-Jun-23 30-Jun-22
£ £
NON-CURRENT ASSETS
Property, plant and equipment 12 13,162 145,079
Goodwill 13 495,289 2,274,565
Intangible fixed assets 14 125,594 1,059,549
Investment in subsidiaries 15 139,146 6,069,716
Investment in associate 5 5 -
TOTAL NON-CURRENT ASSETS 773,196 9,548,909
CURRENT ASSETS
Trade and other receivables 16 531,365 1,880,830
Cash and cash equivalents 17 71,255 1,361,279
TOTAL CURRENT ASSETS 602,620 3,242,109
TOTAL ASSETS 1,375,816 12,791,018
EQUITY AND LIABILITIES
Equity
Ordinary share capital 19 2,649,030 1,315,697
Share premium account 55,367,959 54,858,008
Other reserves 423,613 3,728,622
Retained earnings (58,779,718) (50,588,868)
Total equity (339,116) 9,313,459
NON-CURRENT LIABILITIES
Other payables 20 17,669 840,751
Deferred tax liabilities 18 - 84,924
CURRENT LIABILITIES
Trade and other payables 20 1,459,026 2,551,884
Provisions 27 238,237 -
Total liabilities 1,714,932 3,477,559
TOTAL EQUITY AND LIABILITIES 1,375,816 12,791,018
The 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 £11,569,814 (2022: loss of
£4,248,407).
Registered number: 08232509
Signed on behalf of the board on 20 December 2023:
David Halley Neville Upton
Chief Executive Officer Non-Executive Chairman
Group Statement of Changes in Equity
As at 30 June 2023
Ordinary shares Share premium Share option reserve Retained earnings NCI Forex Total equity
£ £ £ £ £ £ £
At 30 June 2021 930,513 46,511,089 3,403,414 (47,302,697) - (18,500) 3,523,819
Loss for the period - - - (3,810,960) - -
(3,810,960)
Other comprehensive income - - - - - (3,458) (3,458)
Total comprehensive income - - - -
(3,810,960) (3,458) (3,814,418)
Proceeds of shares issued 385,184 8,667,150 - - - - 9,052,334
Share Issue Costs - (320,231) - - - - (320,231)
Share options expensed - - 325,208 - - - 495,220
Addition of NCI - - - - 3 - 3
Total transactions with owners, recognised directly in equity 385,184 8,346,919 325,208 - 3 - 9,227,326
At June 2022 - Restated 3,728,622 (51,113,657)
1,315,697 54,858,008 3 (21,958) 8,766,715
Loss for the period - - - (10,254,836) - -
(10,254,836)
Other comprehensive income - - - - - - -
Total comprehensive income - - -
(10,254,836) - - (10,254,836)
Proceeds of shares issued 1,333,333 666,667 - - - - 2,000,000
Share Issue Costs - (156,716) 44,010 - - - (112,706)
Share options expensed - - 51,903 - - - 51,903
Release to Retained Earnings - - (3,400,992) 3,400,992 - - -
Total transactions with owners, recognised directly in equity 1,333,333 509,951 (3,305,079) (6,853,914) - - 1,939,197
At 30 June 2023 2,649,030 55,367,959 423,543 (57,967,501) 3 (21,958) 451,076
"Ordinary shares" represents the nominal value of issued share capital.
"Share premium" represents the proceeds on issue of shares in excess of
nominal value, less directly attributable issue costs.
"Share option reserve" represents the fair value of share based payments that
are in issue at the reporting date.
"Retained earnings" represents the cumulative profits and losses of the
business.
"NCI" represents the cumulative profit and losses attributable to minority
shareholders of subsidiaries
"Forex" represents the cumulative effect of retranslating the results of
foreign operations into the presentation currency
Company Statement of Changes in Equity
As at 30 June 2023
Ordinary shares Share premium Share option reserve Accumulated Deficit Total equity
£ £ £ £ £
At 30 June 2021 930,513 46,511,089 3,403,414 (46,340,461) 4,504,555
Loss for the period - - - (4,248,407) (4,248,407)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (4,248,407) (4,248,407)
Shares Issued 385,184 8,667,150 - - 9,052,334
Share issue costs - (320,231) - - (320,231)
Share options issued - - 325,208 - 325,208
Shares as deferred consideration - - - - -
Total transactions with owners, recognised directly in equity 385,184 8,346,919 325,208 - 9,227,323
At 30 June 2022 - restated 1,315,697 54,858,008 3,728,622 (50,588,868) 9,313,459
Loss for the period - - - (11,569,814) (11,569,814)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (11,569,814) (11,569,814)
Proceeds of Shares Issued 1,333,333 666,667 - - 2,000,000
Share issue costs - (156,716) 44,010 - (112,706)
Share options expensed - - 29,945 - 29,945
Release to Retained Earnings - - (3,378,964) 3,378,964 -
Total transactions with owners, recognised directly in equity 1,333,333 509,951 (3,305,009) 3,378,964 1,917,239
At 30 June 2023 2,649,030 55,367,959 423,613 (58,779,718) (339,116)
Group Statement of Cash Flows
As at 30 June 2023
Group Restated
2023 2022
Operating £ £
Loss for the year (10,254,837) (3,810,960)
Adjustments for:
Depreciation 33,254 112,993
Amortisation 1,846,164 1,554,745
Impairment of assets 5,984,171 76,989
Gain on disposal of fixed assets (112,808) -
Gain on disposal of associate - (45,090)
Finance income (885) 77
Finance costs 77,691 -
Share based payments 29,945 325,208
Increase in credit loss provision 51,494 -
Re-evaluation of contingent consideration (931,311) -
Loss on loss of control of subsidiary 548,761 -
Increase in provisions 238,287 -
Current and deferred tax credit (974,876) (298,177)
Total (3,464,950) (2,084,215)
Decrease in receivables 1,324,353 (524,205)
Decrease in payables excluding contingent consideration (907,062) (110,916)
Tax credit recovered 109,732 142,162
Net operating outflow (2,937,927) (2,577,174)
Investing
Interest received 885 77
PPE additions (3,498) (74,137)
Intangible additions - (685,951)
Payment of deferred/contingent consideration (1,031,307) (1,774,020)
Proceeds on disposal of associate - 45,090
Net proceeds on disposal of assets 213,668 -
Total (820,252) (2,488,941)
Financing
Net proceeds on issue of shares 1,887,294 5,831,603
Total 1,887,294 5,831,603
Net decrease in cash (1,870,885) 765,488
Cash at the start of the year 2,141,361 1,375,873
Cash at the end of the year 270,476 2,141,361
Net decrease in cash (1,870,885) 765,488
There were no investing or financing cash flows for discontinued operations.
The net cash outflow on operating activities for discontinued operations was
£(2,166,061) (2022: £(2,679,157).
Company Statement of Cash Flows
As at 30 June 2023
Company Restated
2023 2022
£ £
Operating
Loss for the year (11,569,814) (4,248,407)
Adjustments for:
Depreciation 34,657 108,787
Amortisation 378,515 235,738
Impairment of assets 7,716,918 41,616
Gain on disposal of fixed assets (112,808) -
Gain on disposal of associate - (45,090)
Finance income (885) (1)
Finance costs 77,691 -
Share based payments 29,945 495,220
Increase in credit loss provision 187,815 -
Re-evaluation of contingent consideration (931,311) -
Loss on disposal of intangible 548,761 -
Increase in provisions 238,287 -
Current and deferred tax credit 234 (213,562)
Total (3,401,995) (2,925,699)
Decrease in receivables 1,349,466 28,603
Decrease in payables excluding contingent consideration (597,442) (556,176)
Tax credit recovered 109,732 142,162
Net operating outflow (2,540,239) (3,311,110)
Investing
Interest received 885 1
PPE additions (3,498) (74,149)
Intangible additions 0 (685,951)
Payment of deferred/contingent consideration (495,416) (1,774,020)
Proceeds on disposal of associate 0 45,090
Net proceeds on disposal of assets 213,668 0
Net amounts advanced to subsidiaries (352,718) 0
Total (637,079) (2,489,029)
Financing
Net proceeds on issue of shares 1,887,294 5,831,603
Total 1,887,294 5,831,603
Net decrease in cash (1,290,024) 31,464
Cash at the start of the year 1,361,279 1,329,815
Cash at the end of the year 71,255 1,361,279
Net decrease in cash (1,290,024) 31,464
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 and domiciled
in England and Wales and is AIM listed. The address of the registered office
is given on page 2. 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
UK-adopted 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 2022, 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, unless 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.
New and amended accounting standards effective during the year
The following amended standards and interpretations were effective during the
year:
• Amendments to IAS 16: Property, Plant and Equipment: proceeds before
intended use
• IAS 37: Onerous Contracts: costs of fulfilling a contract
• Annual Improvements to IFRS Standards 2018-2020
• Amendments to IFRS 3: Business Combinations: reference to conceptual
framework
The adoption of the standards and interpretations 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.
New standards, interpretations and amendments issued but not yet effective
The following new accounting standards, amendments and interpretations to
accounting standards have been issued but these are not mandatory for 30 June
2023 and they have not been adopted early by the Group:
• Amendments to IAS 1: Classification of liabilities as current and
non-current
• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
accounting policies
• Amendments to IAS 8: Definition of accounting estimates
• Amendments to IAS 12: Deferred Tax related to assets and liabilities
arising from a single transaction
The Directors anticipate that the adoption of planned standards and
interpretations in future periods will not have a material impact on the Group
Financial Statements.
Going Concern
As explained in the Chairman's Report and the Chief Executive Officer's
Report, it has been a difficult year for the Group and Company as it
transitioned away from esports solutions and software development to a pure
play Digital Media company.
At the time of issuing these Financial Statement, this restructuring is
largely complete and the Group and Company has reduced its overhead base to
support and develop its Digital Media assets and the Directors firmly believe
that the steps taken will lead to profitability in the short term.
The Directors have prepared a base case cashflow forecast through to 31
December 2024, which assumes certain growth targets are met.
The Directors believe that the growth targets are reasonable and attainable,
and in view of this, the Directors are confident that the Group and Company
has adequate resources to continue to operate for at least twelve months from
the date of approval of these Financial Statements and have, therefore,
continued to adopt the going concern basis in preparing the Directors' Report
and Financial Statements.
However, the Directors recognise that achievement of the growth targets are
subject to external factors outside of their control and so they have also
prepared a severe but plausible cashflow projection to assess cashflows in
such a scenario. Should the forecast growth of the Group and Company be not
forthcoming or be slower than anticipated, the Group and Company will need to
secure additional funding in the period to 31 December 2024.
The Group and Company continues to enjoy the support of its major
shareholders, and should further funding be necessary, the Directors believe
that this support will continue. On this basis, the Directors consider that it
is appropriate that the going concern basis is applied in the preparation of
these Financial Statements.
However, whilst the Directors are confident of continuing to raise additional
funds as needed to finance the business in accordance with its Digital Media
strategy, they nevertheless recognise that a material uncertainty exists which
might impact the Group and Company's ability to continue to realise its assets
and discharge its liabilities as they fall due in the normal course of the
business and therefore its ability to continue to operate as a going concern.
Basis of consolidation
The Group accounts consolidate the results 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 control, which is where the
Group has power over the investee, is exposed to variable returns from its
involvement with the investee and where the Group has the ability to use its
power over the investee to affect the amount of returns. 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.
Where the Group assesses that it has significant influence over an investee,
but not control, the investment is accounted for as an associate. Associates
are not consolidated but are equity accounted and the group records its share
of the associate's loss to the extent the cost less impairment of the
investment in greater than nil.
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 subsidiaries
Investments in subsidiaries are held in the Company balance sheet at cost and
reviewed annually for impairment. Where the Company acquires subsidiaries with
contingent or deferred consideration, the initial estimate of the present
value of future payments is included in the cost of the investment and any
subsequent changes recorded through profit or loss.
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:
· 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 based on the number of
sessions where ads are displayed on the website. Revenue is recognised on a
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. Such
revenue is recognised over time based on an estimate of total costs incurred.
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 upon
receipt of payment from 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 .
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.
Amortisation is charged on a straight-line basis over the estimated useful
economic life of the asset as follows:
Web Platforms 3-5 years
Engage 3-5 years
Other Intangible assets 3-5 years
Amortisation expense is included within administrative expenses in the profit
or loss account.
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 or cost savings.
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.
Contingent consideration arising in a business combination is held at fair
value at each reporting date. After the initial accounting for the business
combination, any changes in the estimated or actual consideration payable are
taken to profit or loss. Future expected payments are held at their present
value where the effect of discounting is material. The unwinding of
contingent consideration is recognised as a finance cost in profit or loss.
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.
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 unless recognised at
appoint in time. 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.
Stock Informer Revenue that is recognised on a monthly is based on the
transactional sales value of all transactions in month for all associate
affiliate partners. The transactional sales value represents the total
commission value due to Gfinity of all pending and approved payments coming in
for a given month across the affiliate 3rd party providers that are contracted
and based on the specific affiliate commission % with Stock Informer. In month
"Transactional Value" will specifically exclude approved payments from prior
months, as this has already been recognised as revenue in the prior months. A
credit note provision is raised monthly which is based on the value of all
pending commission transactions across all affiliates with a credit note %
assumption applied to this which is based on the average return % over the
past 6 months. The credit note provision is assessed monthly in relation to
the level of pending transactions that have either been paid resulting in
earnings, which results in a release of the provision, or declined, which
results in a credit and offset against the credit note provision, thus
utilising the provision in place
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.
Judgements and estimates: Impairment of goodwill and intangible assets, and
estimation of the fair value of contingent consideration
The Group holds goodwill and intangible assets arising from business
acquisitions or the internal generation of development assets. Judgement is
applied in determining the recoverable amount of assets.
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, a full impairment test is performed. In light of
the loss reported in the year, the Board determined that a full impairment
test should be performed on all intangible assets. Goodwill must be tested
for impairment annually. Where goodwill arises in a business combination,
management determined that each website brand is a separate cash generating
unit and so any the goodwill arising from that acquisition is associated with
the acquired brand. No goodwill is allocated across multiple Cash Generating
Units.
For the purpose of impairment testing at 30 June 2023, management have
determined that the appropriate method to apply is a fair value less costs to
dispose approach. In previous years, management have used a value in use
model and therefore this represents a change in methodology. The reason for
the change in methodology is due to the uncertainty experienced in the year
and therefore which had led to earlier forecasts not having been achieved.
Management consider that a revenue based multiple is a more accurate
estimation tool for the recoverable amount of its intangible assets.
Therefore all impairment tests have been performed using a fair value method
on the basis of a multiple of revenue achieved for the respective brand in the
year ended 30 June 2023.
Management undertook a careful assessment of the appropriate revenue multiple
and determined that 1x revenue represents their best estimate of the
recoverable amount of each brand. This fair value estimation technique is a
Level 2 valuation technique in the Fair Value Hierarchy as there is no
directly observable market valuation of each brand, but management have
identified the valuation of similar assets through the relevant trading
multiples of similar businesses in similar sectors, through the observed
implied multiples in recent transactions involving similar assets and through
industry and other benchmarks.
Further detail of the results of impairment tests of each material Cash
Generating Unit are summarised below. All of Megit, Siege.gg, RealSport and
EpicStream are within the Gfinity Digital Media operating segment. In each
case, 'costs to sell' are considered to be immaterial as there are no physical
assets in any case. Impairment expenses have been separately identified in
the statement of profit or loss. No previous impairments were reversed
during the year.
Megit
The group acquired the entire issued share capital of Megit Limited in
September 2021. Megit operates the StockInformer website which enables
gamers to locate and find the best pricing and availability of tech and other
products.
At 30 June 2022 the group held goodwill of £2,439,834 and intangible assets
of £3,505,996 in respect of Megit. These assets were tested for impairment
collectively as they form a single Cash Generating Unit.
The result of the impairment test was as a recoverable amount of £289,561 and
therefore an impairment charge of £4,198,217 was recorded. This was
allocated first to goodwill and then to intangible assets as required by IAS
36.
The factors giving rise to the impairment were the well-publicised challenges
arising from changes to the algorithms applied by Google and other traffic
sources in the period.
At 30 June 2023, management have also applied judgement in their assessment of
any remaining contingent consideration based on revenue-based earnouts in the
acquisition agreement. The range of potential payable amounts is between nil
and £1.8m. Management's estimate of the undiscounted future payment is
£223,645 based on projected cash flows of the business and this has been
reflected in liabilities on a discounted basis. Management have discounted
future cash flows using a discount rate of 20% which is based on a review of
the discount rates used by listed business with a similar risk profile.
Contingent consideration is therefore based on a Level 3 basis of the Fair
Value Hierarchy as the inputs are not directly or indirectly observable.
Due to the challenging trading environment, amounts payable under the
contingent consideration arrangements were significantly lower than initially
forecast and therefore certain contingent consideration liabilities were
released to profit or loss in the year, of a total of £855,482 in respect of
Megit.
In respect of the Company's investment in Megit Limited as a subsidiary, an
impairment was recorded to bring the investment to the directors' best
estimate of the recoverable amount by reference to the recoverable net assets
of Megit. An impairment of £5,930,565 was therefore recorded by the Company
in profit or loss.
Siege.gg
Siege.gg is the leading digital property in the competitive Rainbow 6 Siege
space. It has a strong audience and domain authority, together with
proprietary statistical database.
At 30 June 2022 the group held goodwill of £370,775 and intangible assets of
£100,215 in respect of Siege.gg. These were tested within a single Cash
Generating Unit.
The result of the impairment test was a recoverable amount of £41,541 and so
an impairment expense of £560,104 was recorded. This was allocated first to
goodwill and then to intangible assets as required by IAS 36.
The factors giving rise to the impairment were changes to Google algorithms
and changes in the underlying user base of the website.
RealSport
Realsport101.com is a leading source of news and information about competitive
sport gaming.
The carrying value of goodwill in respect of RealSport at 30 June 2022 was
£1,643,006.
The result of the impairment test was a recoverable amount of £234,505 and
therefore an impairment of £1,408,501 was recorded.
The factors giving rise to the impairment were changes to Google algorithms
and changes in the underlying user base of the website.
EpicStream
EpicStream.com is a leading online source of geek and pop culture news.
The carrying value of goodwill in respect of EpicStream was £260,783 at 30
June 2022 and intangibles were £273,382 at that date. These assts were
tested jointly as a single Cash Generating Unit.
The result of the impairment test was that no impairment was required, because
the brand generated revenue in excess of the value of assets tested. If
management had applied a revenue multiple of 0.93x or below, an impairment
would have been recorded.
Engage / Athlos
Engage is the company's proprietary gaming technology, developed in-house, and
marketed under the Athlos brand.
During the year, the associated IP was assigned to Athlos Game Technologies
Ltd and as the Group lost control of this entity in the period, the asset was
derecognised from the group balance sheet. No amounts were capitalised in
the period.
Therefore the asset was not tested for impairment. Further details are given
in Note 5, including in respect of judgements applied by management in
assessing the nature of the relationship between the Company and Athlos at
year end.
Athlos is recorded as a separate operating segment.
4. REVENUE
The Group's policy on revenue recognition is as outlined in note 2. The
Group's revenue disaggregated by primary geographical market is as follows:
Year to 30 June 2023 Total
£
United Kingdom 4,343,202
North America 265,605
ROW 814,764
Total 5,423,571
Year to 30 June 2022 Total
£
United Kingdom 2,830,620
North America 1,563,982
ROW 865,904
Total 5,260,506
Profit and loss information for each operating segment is given in note 10.
The Group's revenue disaggregated by pattern of revenue recognition and
business unit is as follows:
Year to 30 June 2023
Digital Media eSports Athlos Total
£ £ £ £
Services transferred at 2,190,216 - - 2,190,216
a point in time
- 2,909,482 323,873 3,233,355
Services transferred over time
Total 2,190,216 2,909,482 323,873 5,423,571
Year to 30 June 2022
Digital Media eSports Athlos Total
£ £ £ £
Services transferred at 2,695,388 - - 2,695,388
a point in time
Services transferred over time - 2,248,233 316,885 2,565,118
Total 2,695,388 2,248,233 316,885 5,260,506
As at 30 June 2023 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
Year to 30 June 2023 Year to 30 June 2022
£ £
Contract Assets Nil 246,428
Contract Liabilities Nil 208,715
The Group agrees payment terms with each customer at the outset of the
contract and typically agrees 30 day payment terms. All revenue streams
which are recognised over time were completed and invoiced in the year
resulting in no contract assets or liabilities at 30 June 2023. All brought
forward contract assets and liabilities were realised in the year.
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.
5. DISCONTINUED OPERATIONS AND INTEREST IN ASSOCIATE
As disclosed in Note 10, management consider that the group's activities in
the year comprise three operating segments being Gfinity Digital Media, Athlos
and eSports.
The company announced on 6 June 2023 that it had decided to close the eSports
operating segment and to dispose of 72.5% of its interest in Athlos Game
Technologies Ltd ("Athlos").
Therefore the results of the eSports and Athlos segments are reflected as
discontinued operations in the group statement of profit or loss. The
results for the year to 30 June 2022 have been represented as required by IFRS
5.
In respect of the eSports division, it was announced on 5 December 2023 that
the remaining trade and assets of the eSports segment had been sold to
Ingenuity Loop Limited for consideration of £15,000.
In respect of Athlos, on 5 June 2023 the group concluded a share purchase
agreement with Tourbillon Group UK Limited, under which Tourbillon subscribed
for new shares in Athlos resulting in Tourbillon gaining a controlling
interest. The SPA also provided for the Athlos IP, previously referred to by
Gfinity as the Engage development asset, would be assigned to Athlos at the
date of completion of the SPA. Tourbillon undertook certain funding
commitments with effect from the effective date of the transaction,
significantly reducing Gfinity's funding obligations whilst retaining a
minority interest. The SPA also provided for Gfinity to retain access to the
Engage platform IP.
In light of the SPA, the Board considered the nature of the resulting
relationship with Athlos and considered that the facts and circumstances
indicated that Athlos was, from the date of the transaction and as at 30 June
2023, an associate. This is because of the group's continuing 27.5% equity
and voting interest and the entitlement to appoint a director to the board of
Athlos. Therefore the Group was deemed to have lost control and no longer
consolidated the results of Athlos from that date. Accordingly, the group
recorded a loss on loss of control of subsidiary in the group profit and loss
account of £548,761, representing the carrying value of the Engage IP at the
date of loss of control. Management further considered the fair value of the
resulting interest in Athlos and concluded that whilst the business has
significant prospects, a value of nil was appropriate in light of the record
of losses of the Athlos business, its status as an early stage project and the
funding requirements to bring the product to profitability.
Therefore the deemed cost of the equity-accounted associate is nil and under
equity accounting, no share of associate's losses are reflected in the group
profit and loss statement.
After the balance sheet date, on 27 November 2023, the company announced the
disposal of its remaining interest in Athlos for consideration of £260,000.
See note 25 for more details.
The registered office address of Athlos is 16 Great Queen Street, London, WC2B
5AH.
At 30 June 2023, the Company's historic cost of investment in Athlos was £5.
6. OPERATING EXPENSES
Group
Year to 30 June 2023 Year to 30 June 2022
£ £
Depreciation of property, plant and equipment 33,254 112,993
Amortisation & impairment of intangible fixed assets 3,611,225 1,631,734
Goodwill impairment 4,219,110 -
Staff costs (see note 7) 3,148,791 3,406,569
Auditors' remuneration for auditing the accounts of the Company 55,000 72,000
Auditors' remuneration for other non-audit services:
- Other services related to taxation 3,240 7,229
- All other services 4,025 16,101
Net foreign exchange (gains)/ losses 21,824 (54,405)
7. PARTICULARS OF EMPLOYEES
Number of employees
The average number of people (including directors) employed by the Group and
Company during the financial period
was:
Group
Year to 30 June 2023 Year to 30 June 2022
6 6
Board
Operations 38 38
44 44
The aggregate payroll costs of staff (including directors) were:
Group
Year to 30 June 2023 Year to 30 June 2022
£ £
Wages and salaries 2,726,670 2,514,773
Social security costs 323,812 340,929
Pensions 49,714 55,648
Share based payments (Note 22) 48,595 495,220
3,148,791 3,406,570
Total remuneration for Directors during the year was £595,780 (2022:
£520,141).
The board of directors comprise the only persons having authority and
responsibility for planning, directing and controlling the activities of the
Group.
The Board consider there are no key management personnel other than the Board.
The number of directors to whom retirement benefits accrued during the period
was 3 (2022: 3).
8. FINANCE INCOME/COSTS
Group
Year to 30 June 2023 Year to 30 June 2022
£ £
Interest income on bank deposits 885 77
Notional interest on contingent consideration (77,691) 0
(76,806) 77
The net finance cost relating to continuing operations was £25,976.
9. TAXATION
Group
Year to 30 June 2023 Year to 30 June 2022
£ £
Current tax
Corporation tax charge/ (credit) (146,691) 84,600
Total current tax (149,691) 84,600
Deferred tax
Relating to origination and reversal of temporary differences (825,185) (294,568)
Taxation (credit) reported in the income statement (974,876) (209,968)
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% (2021: 19%), to taxation
expense at the Groups effective tax rate for the period is as follows:
Year to 30 June 2023 Year to 30 June 2022
£ £
Loss on ordinary activities before taxation (10,254,836) (3,810,960)
Profit/ (Loss) multiplied by effective rate of 19% (1,948,419) (724,082)
Effect of:
Expenses not deductible for tax purposes 349,574 102,803
Movement in unrecognised deferred tax asset arising from tax 1,598,845 536,679
losses
Movement in deferred tax arising from other temporary timing differences 825,184 294,568
R&D Credit received 109,732 -
Over Provision in prior years 39,960 -
Tax Credit 974,876 209,968
Split as
Current tax 149,691 84,600
Deferred tax 825,185 379,168
Taxation (credit)/charge reported in the income statement 974,876 209,968
The whole current and deferred tax credit in the consolidated profit and loss
account relates to continued operations.
The Group has estimated tax losses of £52.2m (2022: £43.75m) available for
offset against future taxable profits. A potential deferred tax asset of
£13.0m has not been recognised due to the uncertainty of future profits. The
tax losses have no expiry date.
With effect from 1 April 2023, HMRC introduced a headline UK corporation tax
of 25%.
10. OPERATING SEGMENTS
Year to 30 June 2023
Esports Athlos Digital Media Total
£ £ £ £
Revenue 2,909,482 323,873 2,190,216 5,423,571
Cost of sales (1,665,890) (172,205) (953,904) (2,791,999)
Impairment Charge - - (5,984,171) (5,987,171)
Admin expenses (3,300,378) (855,862) (3,788,329) (7,944,570)
Loss on disposal of Associate - - (548,761) (548,761)
Restructuring Cost (238,287) - - (238,287)
Re-assessment of Deferred Consideration - - 931,311 931,311
Net Finance Expenses (39,369) (11,461) (25,976) (76,806)
Tax - - 974,876 974,876
Loss (2,334,442) (715,656) (7,204,739) (10,254,837)
Year to 30 June 2022
Esports Athlos Digital Media Total
£ £ £ £
Revenue 2,248,233 316,885 2,695,388 5,260,506
Cost of sales (1,146,974) (152,217) (1,247,317) (2,546,507)
Impairment Charge - - (76,989) (76,989)
Admin expenses (3,302,189) (530,293) (2,870,623) (6,703,105)
Loss on disposal of Associate 45,090 - - 45,090
Restructuring Cost - - - -
Re-assessment of Deferred Consideration - - 0 0
Net Finance Expenses - - 77 77
Tax - - 209,968 209,968
Loss (2,155,839) (365,625) (1,289,496) (3,810,960)
Management identify operating segments through consideration of the aggregated
data reviewed by the Board in monitoring the performance of the business.
As disclosed in Note 5, during the year both the Esports and Athlos segments
were discontinued. Therefore the loss after tax from discontinued operations
was £3,050,097.
In line with IFRS 8 para 23, assets and liabilities split by segment are not
disclosed as these are not regularly reviewed by the Board in this way. All
material assets at year end relate only to Gfinity Digital Media, being the
only segment which is a continuing operation. Within continuing operations,
being only the Digital Media division, two key customers accounted for 46% and
12% of revenue. Within discontinued operations, three key customers
accounted for 67%, 14%, 13% respectively, all within the Esports segment.
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.
All EPS and DEPS figures stated below are presented in pence.
2023 2022
All Operations
(10,254,836) (3,980,972)
Earnings
Weighted Average Shares 1,735,787,903 1,122,821,000
EPS (0.59) (0.35)
DEPS (0.59) (0.35)
Continuing Operations
2023 2022
Earnings (7,204,739) (1,459,508)
Weighted Average Shares 1,735,787,903 1,122,821,000
EPS (0.42) (0.13)
DEPS (0.42) (0.13)
Discontinued Operations
2023 2022
Earnings (3,050,097) (2,251,464)
Weighted Average Shares 1,735,788,903 1,122,821,000
EPS (0.18) (0.22)
DEPS (0.18) (0.22)
12. PROPERTY, PLANT AND EQUIPMENT
Group
Office equipment Computer & Production Equipment Leasehold Improvements Total
Cost £ £ £ £
At 1 July 2021 63,143 1,096,133 1,633,942 2,793,218
Addition - 74,137 - 74,137
At 30 June 2022 63,143 1,170,270 1,633,942 2,867,355
Amortisation
At 1 July 2021 62,346 1,006,802 1,536,704 2,605,852
Charge for the period 797 106,510 5,686 112,993
At 30 June 2022 63,143 1,113,312 1,542,390 2,718,845
Net Book Value
30 June 2022 - 56,958 91,552 148,510
30 June 2021 797 89,331 97,238 187,366
Office equipment Computer & Production Equipment Leasehold Improvements Total
Cost £ £ £ £
At 1 July 2022 63,143 1,170,270 1,633,942 2,867,355
Addition - 3,498 - 3,498
Disposals (63,143) (1,145,455) (1,633,942) (2,842,540)
At 30 June 2023 - 28,313 - 28,313
Amortisation
At 1 July 2022 63,143 1,113,312 1,542,390 2,718,845
Charge for the period - 32,457 - 32,457
Disposals (63,143) (1,132,213) (1,542,390) (2,737,746)
At 30 June 2023 - 13,556 - 13,556
Net Book Value
30 June 2023 - 14,757 - 14,757
30 June 2022 - 56,958 91,552 148,510
Company
Office equipment Computer & Production Equipment Leasehold Improvements Total
Cost £ £ £ £
At 1 July 2021 51,743 1,068,236 1,633,941 2,753,920
Addition - 74,138 - 74,138
At 30 June 2022 51,743 1,142,374 1,633,941 2,828,058
Amortisation
At 1 July 2021 39,997 997,491 1,536,704 2,574,192
Charge for the period 9,546 93,555 5,686 108,787
At 30 June 2022 49,543 1,091,046 1,542,390 2,682,979
Net Book Value
30 June 2022 2,200 51,328 91,551 145,079
30 June 2021 11,746 70,745 97,237 179,728
Office equipment Computer & Production Equipment Leasehold Improvements Total
Cost £ £ £ £
At 1 July 2022 51,743 1,142,374 1,633,941 2,828,058
Addition - 3,498 - 3,498
Disposals (51,743) (1,117,559) (1,633,941) (2,803,243)
At 30 June 2023 - 28,313 - 28,313
Amortisation
At 1 July 2022 49,543 1,091,046 1,542,390 2,682,979
Charge for the period 2,200 32,457 - 34,657
Disposals (51,743) (1,108,352) (1,542,390) (2,702,485)
At 30 June 2023 - 15,151 - 15,151
Net Book Value
30 June 2023 - 13,162 - 13,162
30 June 2022 2,200 51,328 91,551 145,079
13. GOODWILL
Group
Cost
At 1 July 2021 1,903,790
Additions arising from business combinations 2,810,609
At 30 June 2022 4,714,399
Impairment
At 1 July 2021 -
Charge for the period -
At 30 June 2022 -
Net Book Value
30 June 2022 4,714,399
30 June 2021 1,903,790
Cost £
At 1 July 2022 and 30 June 2023 4,714,399
Impairment
At 1 July 2022 -
Charge for the period 4,219,111
At 30 June 2023 4,219,111
Net Book Value
30 June 2023 495,288
30 June 2022 4,714,399
Company
Cost
At 1 July 2021 2,568,417
Additions arising from business combinations 370,775
At 30 June 2022 2,939,192
Impairment
At 1 July 2021 -
Charge for the period 664,627
At 30 June 2022 664,627
Net Book Value
30 June 2022 2,274,565
30 June 2021 2,568,417
Cost £
At 1 July 2022 and 30 June 2023 2,939,192
Impairment
At 1 July 2022 664,627
Charge for the period 1,779,276
At 30 June 2023 2,443,903
Net Book Value
30 June 2023 495,289
30 June 2022 2,274,565
The Group and Company hold goodwill in respect of the acquisitions of the
trade and assets of Siege.gg, EpicStream and RealSport in earlier periods.
An impairment charge of £370,775 and £1,408,501 was recorded in respect of
Siege.gg and RealSport respectively, in both the Group and Company profit and
loss accounts.
Additionally, the Group carries goodwill in respect of the acquisition of
Megit Limited in the prior year. An impairment charge of £2,439,834 was
recorded in the group profit and loss account.
In all cases, management assigned goodwill to cash generating units, being the
group of assets associated with the acquired website and associated
infrastructure, since each online brand has separately identifiable cash
flows.
Refer to Note 3 for details of impairment tests.
14. INTANGIBLE FIXED ASSETS
Group Web Platforms Engage Other Intangibles Total
Cost £ £ £ £
At 1 July 2021 576,822 - 2,480,481 3,057,303
Addition - 685,951 - 685,951
Acquired through business combination 4,816,443 - - 4,816,443
At 30 June 2022 5,393,265 685,951 2,480,481 8,559,697
Amortisation and impairment
At 1 July 2021 104,211 - 2,248,611 2,352,822
Charge for the period 1,390,196 - 164,549 1,554,745
Impairment 19,265 - 57,724 76,989
At 30 June 2022 1,513,672 - 2,470,724 3,984,556
Net Book Value
30 June 2022 3,879,593 685,951 9,597 4,575,141
30 June 2021 472,611 - 231,870 704,481
Web Platforms Engage Other Intangibles Total
Cost
At 1 July 2022 5,393,265 685,951 2,480,481 8,559,697
Disposals - (685,951) (64,919) (750,870)
At 30 June 2023 5,393,265 - 2,415,562 7,808,827
Amortisation and impairment
At 1 July 2022 1,513,672 - 2,470,884 3,984,556
Charge for the period 1,699,377 137,190 9,597 1,846,164
Disposals - (137,190) (64,919) (202,109)
Impairment 1,765,061 - - 1,765,061
At 30 June 2023 4,978,110 - 2,415,562 7,393,672
Net Book Value
30 June 2023 415,155 - - 415,155
30 June 2022 3,879,593 685,951 9,597 4,575,141
Web platforms includes web domains and platform technology acquired in the acquisitions of Megit Limited, Siege.gg and EpicStream.
Engage is the group's proprietary software which was assigned to Athlos Game Technologies Ltd in the year and therefore disposed, since the group lost control of Athlos during the period (see Note 5).
Other intangibles includes technology platforms and customer lists arising in earlier acquisitions.
INTANGIBLE FIXED ASSETS (continued)
Company Web Platforms Engage Other Intangibles Total
Cost £ £ £ £
At 1 July 2021 576,822 - 64,919 641,741
Addition - 685,951 - 685,951
Acquired through business combination 155,989 - - 155,989
At 30 June 2022 732,811 685,951 64,919 1,483,681
Amortisation and impairment
At 1 July 2021 104,211 - 7,195 111,406
Charge for the period 235,738 - - 235,738
Impairment 19,265 - 57,724 76,989
At 30 June 2022 359,214 - 64,919 424,133
Net Book Value
30 June 2022 373,597 685,951 - 1,059,548
30 June 2021 472,611 - 57,724 530,335
Web Platforms Engage Other Intangibles Total
Cost
At 1 July 2022 713,546 685,951 7,195 1,406,692
Addition - - - -
Disposals - (685,951) - (685,951)
At 30 June 2023 713,546 - 7,195 720,741
Amortisation and impairment
At 1 July 2022 339,949 - 7,195 347,144
Charge for the period 241,325 137,190 - 378,515
Disposals - (137,190) - (137,190)
Impairment 6678 6,678
At 30 June 2023 587,952 - 7,195 595,147
Net Book Value
30 June 2023 125,594 - - 125,594
30 June 2022 373,597 685,951 - 1,059,548
15. INVESTMENT IN SUBSIDIARIES
Company
Year to 30 June 2023 Restated (Note 27)
Year to 30 June 2022
£ £
At 1 July 6,069,716 -
Additions - 6,069,716
Impairment (5,930,565) -
Loss of control of subsidiary (5) -
139,146 6,069,716
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 Limited England Ordinary Shares 100% Online media
Ordinary Shares
Megit Limited England Ordinary Shares 100% eCommerce and affiliate revenues
AFG-Games Ltd England 72% Dormant
RealSM Ltd's registered office address is The Foundry, 77 Fulham Palace Road,
London, United Kingdom, W6 8JB. CEVO's registered address is 128 Maringo Rd,
Ephrata, WA 98823. AFG-Games Limited's registered office address is 77 Fulham
Palace Road, Foundry Building, Smiths Square, London, England, W6 8AF. Megit
Limited's registered office address is 16 Great Queen Street, London, England,
WC2B 5AH
RealSM Limited, AFG-Games Limited and Megit Limited are exempt from the
requirements of the Act relating to the audit of individual accounts in
accordance with 479A of the C.A. 2006. Gfinity Plc guarantees all outstanding
liabilities to which these subsidiaries are subject at year-end, until they
are satisfied in full and the guarantee is enforceable against the parent
undertaking by any person to whom the subsidiary company is liable in respect
of those liabilities.
During the year, additional ordinary shares were issued in Athlos Game
Technologies Ltd such that the company considered the relationship with Athlos
to be an associate rather than a subsidiary at the year end. Further details
are given in Note 5.
16. TRADE AND OTHER RECEIVABLES
Group Company
Year to 30 June 2023 Year to 30 June 2022 Year to 30 June 2023 Year to 30 June 2022
£ £ £ £
Trade receivables 524,690 1,495,773 487,490 1,445,075
Provision for expected credit loss (58,864) (7,370) (58,864) (243)
465,826 1,488,403 428,626 1,444,832
Prepayments and accrued income 178,714 478,372 102,739 351,028
Amounts due in less than one year 644,540 1,966,775 531,365 1,795,860
Amounts due from group undertakings - - - 82,856
Other receivables - 2,118 - 2,114
Total 644,540 1,968,893 531,365 1,880,830
Amounts due from group undertakings of £nil are considered to be due in more
than one year (2022: £82,856).
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.
17. CASH AND CASH EQUIVALENTS
Group Company
Year to 30 June 2023 Year to 30 June 2022 Year to 30 June 2023 Year to 30 June 2022
£ £ £ £
Cash at bank and in hand 270,476 2,141,361 71,255 1,361,279
Total 270,476 2,141,361 71,255 1,361,279
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.
18. DEFERRED TAX LIABILITIES
Group
Year to 30 June 2023 Year to 30 June 2022
£ £
At 1 July 897.575 127,835
Arising on business combination - 1,064,308
Credited to profit or loss (825,185) (294,568)
At 30 June 72,390 897,574
Company
Year to 30 June 2023 Year to 30 June 2022
£ £
At 1 July 94,748 94,748
Credited to profit or loss (94,748) -
At 30 June 0 94,748
The deferred tax liability relates entirely to temporary differences on
intangible assets arising on business combinations.
19. ISSUED SHARE 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:
Ordinary Shares
Number Share Capital £
As at 30 June 2021 930,513,248 930,513
Issued during the financial year 385,183,331 385,184
September to April 2022 at between £0.001 and £0.004 per share
As at 30 June 2022 1,315,696,579 1,315,697
Issued during the financial year March 2023 at £0.0015 per share 1,333,333,334 1,333,333
As at 30 June 2023 2,649,029,913 2,649,030
Ordinary shares entitle the holder to full voting, dividend and rights on
winding up.
Subsequent to the year end, 750,000,000 shares were issued at £0.0006 per
share, generating proceeds
of £450,000 before expenses.
In respect of the issue of 1,333,333,334 shares in the period, the company issued 39,720,000 warrants exercisable between 6 and 18 months from the issue date at 0.1325p. A fair value of £44,010, derived using the Black Scholes model, was credited to share premium as a directly attributed cost of issue.
20. TRADE AND OTHER PAYABLES
Group Company
Year to 30 June 2023 Year to 30 June 2022 Year to 30 June 2023 Year to 30 June 2022
£ £ £ £
Non-current liabilities
Other payables (deferred consideration) 17,669 840,751 17,669 840,751
Deferred tax liabilities 72,390 897,575 - 895,751
90,059 1,738,326 17,669 1,736,502
Current liabilities
Trade payables 412,395 571,389 383,737 533,395
Other taxation and social security 201,745 145,021 201,745 144,300
Accrued expenditure and deferred revenue 226,181 1,033,303 226,188 896,299
Other payables 220,473 1,293,550 220,473 977,890
Amounts owed to group undertakings - 426,883 -
1,060,794 3,043,263 1,459,026 2,551,884
Total 1,150,853 4,781,589 1,476,695 4,288,386
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.
Contingent consideration arising from business combinations is held at fair
value at each reporting date. During the year, payments of £1,075,416 were
paid and the fair value of remaining contingent consideration at 30 June 2023
was assessed as £202,455, of which £17,669 is expected to be payable in more
than 1 year.
20. 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 other than contingent consideration arising on business
combinations which is held at fair value at each reporting date.
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
Year to 30 June 2023 Year to 30 June 2022 Year to 30 June 2023 Year to 30 June 2022
£ £ £ £
465,826 1,968,893 428,626 1,880,830
The Group trade receivables balance represents amounts due from third parties.
At the balance sheet date, the Group's trade receivables totalled £524,690
against which an expected credit loss provision of £58,864 had been raised
(2022: £1,495,773 less a provision of £7,370).
The Company's receivables include £575,177 of inter-company funding (2022:
£652,054) and this receivable is provided against in full due to uncertainty
of the timing over which the respective subsidiaries will be in a position to
reimburse these amounts.
The Company's trade receivables totalled £487,490 less a provision for
doubtful debt of £58,864 (2022: £1,445,075 less a provision for expected
credit losses of £243).
The Group's policy is to raise expected credit loss provisions where payments
have been not received within the contractual due date. The Group continues
to seek to collect all debts until such time as a debt it written off. The
Group writes off debt when it considers that there is no prospect of recovery,
for example when a debtor enters into administration or the Group is aware of
other factors indicative of this outcome.
At the balance sheet date, one customer represented 59% of gross Group trade
receivables. This amount was collected in full after the balance sheet date.
There were no contract assets at 30 June 2023.
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
Year to 30 June 2023 Year to 30 June 2022
USD ($) EUR (€) GBP (£) USD ($) EUR (€) GBP (£)
Trade and other receivables 622,988 3,000 150,148 53,048 - 1,446,932
Accrued income - - - 41,018 - 444,668
Cash 74,259 211,779 98,695 - 2,060,264
Trade and other payables 125,643 8,413 971,990 70,212 - 4,723,896
Net current assets/ liabilities 822,890 11,413 1,333,917 262,973 0 8,675,760
Company
Year to 30 June 2023
Year to 30 June 2022
USD ($) EUR (€) GBP (£) USD ($) EUR (€) GBP (£)
Trade and other receivables 506,015 3,000 129,740 896,172 - 708,454
Amounts due from Group Undertakings - - - - - 82,856
Accrued income - - - - - 351,028
Cash 42,520 37,728 71,416 - 1,302,597
Trade and other payables 89,505 8,413 971,990 99,960 - 4,206,250
Amounts due to Group Undertakings - - 426,883 - - -
Net current assets/ liabilities 638,040 11,413 1,566,341 1,067,548 - 6,651,185
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.
21. SHARE BASED PAYMENTS
Equity-settled share option plans
The Company has a share option scheme for employees of the Group. All share
options are equity-settled.
The table below summarises movements in the number of share options in issue
in the year:
Share options Number Weighted average exercise price (£)
Shares options as at 30 June 2021 96,176,363 0.0556
Shares options granted 13,300,000 0.0125
Share options forfeited (14,870,408) 0.0257
Share options exercised (1,433,331) 0.0100
LTIP share options as at 30 June 2022 93,172,624 0.0483
Shares options as at 30 June 2022 93,172,624 0.0483
Shares options granted - -
Share options forfeited (62,322,624) 0.0578
Share options exercised - -
LTIP share options as at 30 June 2023 34,850,000 0.0257
Options vest over periods defined in the respective option agreements and at
the discretion of the board of directors.
The exercise prices of options outstanding at 30 June 2023 range from 1p to
6.25p.
All share options outstanding at 30 June 2023 were exercisable.
The weighted average remaining exercise period of options at 30 June 2023 was
7.5 years.
Of the options outstanding at the year end, 18,000,000 (2022: 36,000,000) were
held by directors. Details of all options and warrants held by directors are
contained within the Directors' Remuneration Report.
No share options were granted in the period. The inputs into option pricing
models are available in earlier annual reports. All share options were
valued using Black Scholes models.
All share options were granted at an exercise price equivalent to the market
price at the date of grant.
All options are held in Gfinity plc with no options held over any of the
group's subsidiaries.
Subsequent to the year end, the CEO David Halley was granted 271,922,393 share
options; see Note 25 for more details.
22. WARRANTS
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 2021 20,050,500 0.010
Warrants granted 216,000,000 0.013
Warrants exercised (13,750,000) 0.010
Warrants lapsed/forfeited (6,300,500) 0.010
Warrants as at 30 June 2022 216,000,000 0.0125
Warrants as at 30 June 2022 216,000,000 0.0125
Warrants granted 1,373,053,333 0.0022
Warrants exercised - -
Warrants lapsed/forfeited (216,000,000) 0.0125
Warrants as at 30 June 2023 1,373,053,333 0.0022
1,373,053,333 warrants were granted in the period. The warrants exercised were
granted prior to the year ended June 2021 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.
23. RELATED PARTY TRANSACTIONS
The Directors' Report provides details of director remuneration and share
options and warrants held by the directors at the end of the period. No
directors were issued options during the year and no directors exercised share
options in the year. Certain directors received warrants by virtue of
participating in the fundraising in the year on the same terms as other
investors.
Transactions and balances with Group subsidiaries and associates in the year:
CEVO:
During the year, the Company advanced cash of £502,718 (2022: nil) to Cevo
and Cevo incurred costs of £477,092 (2022: £234,959) on the Company's
behalf. The year end amount repayable to the Company was £594,824 (2022:
£569,198).
RealSM:
During the year, the Company costs on RealSM's behalf of £6,595 (2022:
£5,979). The year end amount payable to the Company was £12,574 (2022:
£5,979).
Megit:
During the year, the company incurred costs of £250,355 (2022: £109,718) on
behalf of Megit. Megit advanced cash of £150,000 to the Company and
incurred costs on behalf of the Company of £604,115 (2022: £32,842). The
year end position is that the Company owed £426,883 to Megit (2022: £76,877
due from Megit).
Athlos:
Whilst Athlos was a subsidiary of the Group, the Company incurred net costs on
behalf of Athlos of £87,417 (2022: nil) which was released under the terms of
the sale agreement. Subsequent to the disposal, the Company incurred costs
of £63,717 on behalf of Athlos and the amount receivable at the year end was
£63,717 (2022: nil).
Subsequent to the year end, the Company disposed of its remaining interest in
Athlos to Tourbillon Group UK Limited of which David Halley is a Director and
shareholder.
24. EVENTS AFTER THE REPORTING PERIOD
In August 2023 the company raised £450,000 before expenses through the issue
of 750,000,000 shares at 0.06p each. At the same time, the company's
ordinary shares were reorganised such that each ordinary share of 0.1p nominal
value was split into one share of 0.01p nominal value and one deferred share
of 0.09p. Ordinary shares retain the same rights and deferred shares have no
substantive rights.
Also in August 2023, David Halley joined the Board as CEO and Jonathan Hall
resigned as a director. David Halley will receive no cash remuneration and
instead will be issued 271,922,393 share options exercisable at 0.06p for 7
years from issue, vesting 50% on grant and 50% after one year.
In September 2023, Neville Upton and Hugo Drayton, Directors, were issued
91,773,808 and 44,187,389 share options respectively. The options vest 50%
immediately and 50% after one year, at an exercise price of 0.06p. The
exercise period is 7 years from grant. A further 33,990,300 new share options
were issued to certain employees on the same terms. In addition, 75,990,299
new warrants were issued to certain advisers on the same terms.
In November 2023, the Group disposed of its remaining interest in Athlos for
cash proceeds of £260,000.
In December 2023, the Group sold the remaining trade and assets of its Esports
division for cash proceeds of £15,000. The eSports division was closed in
June 2023. Gfinity also received a 15% equity interest in Ingenuity Loop
Limited which the majority shareholder has the option to buy out for £200,000
in cash at any time for the first 12 months post transaction. Neville Upton,
director of Gfinity, joined the board of Ingenuity Loop as CEO and indirectly
holds approximately 41% equity interest in Ingenuity Loop.
25. RESTATEMENT
The Directors noted that certain adjustments had been incorrectly reflected in
the prior year annual report and financial statements. These related to the
following areas:
1) In the Company financial statements only, deferred tax arising on the
business combination with Megit had incorrectly been reflected as part of the
cost of investment in subsidiary in Megit. Therefore the cost of investment
has been reduced by £1,030,581 with a corresponding reduction in deferred tax
liability within the Company balance sheet.
2) In the Company financial statements only, movement on deferred tax
liabilities in respect of Megit, arising from the above error, had been posted
to profit or loss. As the initial recognition of a deferred tax liability as
incorrect, the movements were incorrect. Therefore £219,347 has been
reversed in profit or loss and has been removed from deferred tax liabilities.
3) In the Group and Company financial statements, the directors noted that the
vesting period of certain share options used for accounting purposes did not
align with the contractual vesting conditions of option issues. The result
was excess of share option charges in the prior year of £170,012, with a
corresponding adjustment to the share based payment reserve.
The summarised impact of the restatements is presented below:
Group
As previously reported Restatement Corrected position
at 30 June 2022 at 30 June 2022
£ £ £
Revenue 5,693,385 - 5,693,385
Cost of sales (2,546,508) - (2,546,508)
Gross profit 3,146,877 - 3,146,877
Admin expenses (6,950,105) 170,012 (6,780,093)
Other profit and loss items (177,744) - (177,744)
Loss for the year (3,980,972) 170,012 (3,810,960)
Non-current assets 9,438,050 - 9,438,050
Current assets 4,110,254 - 4,110,254
Current liabilities (3,043,272) - (3,043,272)
Non-current liabilities (1,738,317) - (1,738,317)
Net assets 8,766,715 - 8,766,715
Other reserves 3,876,676 (170,012) 3,706,664
Retained earnings (51,283,669) 170,012 (51,113,657)
Other equity items 56,173,708 - 56,173,708
Total equity 8,766,715 - 8,766,715
The impact of the above adjustment to profit or loss was to reduce the
reported loss per share from 0.35p to 0.34p.
Note that as a result of the decision to discontinue Athlos and Esports in the
year, the group profit and loss account has otherwise been represented to
separate the results from discontinued operations and so the above analysis is
not directly comparable to the comparatives as they are presented this year.
The represented Operating Segments note provides a profit and loss analysis by
segment in the current and comparative year.
Company
As previously reported Restatement Corrected position
at 30 June 2022 at 30 June 2022
£ £ £
Loss for the year (4,198,665) (49,742) (4,248,407)
Investment in subsidiary 7,100,297 (1,030,581) 6,069,716
Other non-current assets 3,479,193 - 3,479,193
Current assets 3,242,109 - 3,242,109
Current liabilities (2,551,884) - (2,551,884)
Deferred tax liability (895,751) 810,827 (84,924)
Other non-current liabilities (840,751) - (840,751)
Net assets 9,533,213 (219,754) 9,313,459
Other reserves 3,898,634 (170,012) 3,728,622
Retained earnings (50,539,126) (49,742) (50,588,868)
Other equity items 56,173,705 - 56,173,705
Total equity 9,533,213 (219,754) 9,313,459
26. PROVISIONS
As announced during the year under review, the company closed its eSports
division. Some of the costs of closure were incurred and expensed during the
year. However, some costs remained unsettled as at 30 June 2023, and the
company has a provision of £238,287 to meet these costs, post year end.
There were no provisions at 30 June 2022; the provision of £238,237 was
created during the year and there was no release or utilisation of the
provision, therefore the closing provision was £238,237. The provision is
not discounted as amounts are expected to be utilised within a year.
END
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