REG - Gfinity PLC - Final year results for the year ended 30 June 2022
23/12/2022 07:16
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RNS Number : 7083K Gfinity PLC 23 December 2022
23 December 2022
Gfinity plc
("Gfinity" or the "Company")
Final year results for the year ended 30 June 2022
Continued progress on path to profitability
Gfinity plc (AIM: GFIN), a world-leading esports technology and media
business, today announces its audited final results for the year ended 30 June
2022.
Financial highlights
· Reduction of 28% in Adjusted Operating Loss 1 to £2.0m (2021:
£2.7m), building on reductions of 50% in 2021 and 36% in 2020.
· Revenue of £5.3m (2021: £5.7m), a decrease of 8%, but including
a 33% increase in revenue attached to Gfinity's owned audience, technology and
esports properties.
· Gross profit of £2.7m (2021: £2.6m), a 4% increase, despite the
reduction in revenue, reflecting the higher margins attached to Gfinity owned
properties.
· Adjusted administrative expenses of £4.7m (2021: £5.4m) down
13% year on year.
· Closing year-end cash of £2.1m, with a further £2.7m of
unexercised warrants.
Gfinity CEO, John Clarke, commented:
"The transformation of Gfinity's business model is now well underway. It is
delivering improved financial performance and we continue on a pathway towards
profitable growth. We are building shareholder value through Athlos, our owned
tech IP licensing business. The plug and play nature of what the team has
built is gaining momentum, being adopted by game publishers large and small.
Our owned community of hard to reach gamers, GDM, is driving value by
deepening engagement with users. And our excellence in the digital racing and
football space makes Gfinity a partner of choice with leading sports rights
holders and brands. Competitive gaming is a growth sector and Gfinity has
carved a niche for itself in the evolving ecosystem in the past year. This
will serve us well in the years ahead."
Operational highlights
Gfinity Digital Media
· Average monthly active users of 14.5m, a 36% year on year
increase
· Revenue per monthly active user 20p (2021: 15p), an increase of
29%
· Acquisition of Stock Informer brand, opening up ecommerce revenue
stream
· Development of proprietary Content Management System facilitating
efficient content publishing at scale
Technology
· 63% increase in revenue from licensing and implementation of
technology, outside of managed esports services
· Renewed contract to deploy Gfinity's competitive platform into
three of the largest mobile games in the world
· £0.7m investment in development of Athlos product to facilitate
easy to integrate competitive platform, enabling deployment at scale under
Software as a Service licensing model. MVP launching in Q2 of FY23, creating
significant long-term revenue opportunity.
Esports Solutions
· Completed delivery of record breaking fourth season of F1 Esports
Series, achieving 23 million views across digital platforms, a 103% year on
year increase
· Renewed contract and commenced delivery of fifth season in 2022
· Delivered third season of co-owned esports property V10 R League,
under Global Racing Series partnership with Abu Dhabi Motorsports Management
· Continued to be selected to deliver esports solutions by blue
chip client base including: Coca Cola, Nintendo and Manchester United.
Post-period highlights
· Appointed as esports strategy development partner of Saudi Pro
League
· Chosen as delivery partner for Red Bull Home Ground Tournament
· Launched MVP of Athlos Game Technology platform.
Outlook:
· The esports and gaming sectors continue to grow, forming part of
a systematic change in the media industry towards digital, streamed and gaming
related content
· The strategy of building growth around what we own is already
delivering improved financial performance. Directors continue to believe
that this is the right approach to deliver long term value for shareholders
· In particular the investment made into productisation of
Gfinity's proprietary esports technology, will start to drive revenue growth
from 2023 onwards, becoming a significant part of the Group's future success
· While short-term success will still be impacted by overarching
economic climate, in particular with reference to advertising rates within GDM
network, the long term growth potential remains very strong
· The Company are engaged with a number of strategic partners to
identify the best way to support the business to deliver on that long term
growth potential.
ENDS
Enquiries:
Gfinity plc www.gfinityplc.com (http://www.gfinityplc.com)
John Clarke, CEO ir@gfinity.net
Canaccord Genuity Limited (AIM Nominated Adviser & Broker) Tel: +44 (0)207 523 8150
Bobbie Hilliam / Patrick Dolaghan
About Gfinity
Gfinity is a leading media and technology company in the fast growing esports
and gaming sector. Founded in late 2012, Gfinity established itself as
esports and community engagement experts. More recently, the company's
business model has evolved to reflect the rapidly developing gaming market,
sharpening its strategic focus, based on 3 distinct areas:
Gfinity Digital Media is made up of 11 sites that reach up to 15 million
monthly unique active users, and delivers 75 million impressions per month
across its social network of over 7,000,000 followers.
The Gfinity Engagement Platform (Athlos) is a fully configurable, white-label,
bespoke solution, designed to maximise community engagement through
competitive play, and is already trusted by some of the world's biggest gaming
and esports organisations.
Our JVs and Partnerships - Esports Solutions - allow the Company to benefit
from co-owned ideas, working with partners who value and benefit from
Gfinity's expertise, to create products such as the Global Racing Series with
Abu Dhabi Motorsport Management, and esports activities for Manchester United
FC, and Formula 1.
Chairman's Report
I have pleasure in presenting our annual accounts for the financial year-ended
30 June 2022.
It has been another year of progress in the delivery of the Company's
strategic plan. The focus on "what we own" continues to guide the team and
prioritise where resources are best allocated. This contributed to third
consecutive reduction in Adjusted Operating Loss.
By owning a fast-growing community of hard-to-reach gamers, and proven
technology that facilitates both competitive game play and deepens engagement,
the business now has a more predictable and reliable revenue flow. This is
scalable, and delivers strong margins.
The team has continued to strengthen its position in virtual motorsport,
delivering the Formula 1 esports programme for a 5th year and Season 3 of the
co-owned V10 R-League. The success of these events is due to a combination of
an experienced delivery team and Race Control, the owned tech IP that provides
industry leading real time adjudication support.
During the year the leadership team has been strengthened, adding expertise
and accountability to take the business to the next level. Managing Directors
were appointed with responsibility for GDM, Athlos and Esports Solutions.
The GDM team continues to grow our owned community of hard-to-reach gamers
through web and social channels. Gfinity now touches the lives of close to
100m young people each month. Several our sites have seen significant growth
but none more so than EpicStream which grew monthly users and page views by
356% and 512% respectively. Athlos is making significant progress. Its
mission, to help game studios harness the power of competitive play to grow
their communities at scale, increase player engagement, and drive increased
revenue has struck a chord in the marketplace. Game publishers are
increasingly looking at live services in addition to game sales as a primary
source of revenue. Athlos creates a meta-game around any existing video game
which makes for a significant potential customer base.
The market demographics continue to work in favour of gaming. Young people
continue to enjoy interactive over traditional forms of entertainment. New
blockbuster game launches are dwarfing the time and money spent on movie and
music releases. And countries such as KSA are spending heavily on gaming
infrastructure projects. New opportunities are being created across the
industry.
Gaming is not a fad, it is a way of life for younger generations. This is not
lost on brands who are looking to connect authentically with consumers under
the age of 30 or on sports rights holders who see a digital equivalent as a
key to stay relevant. While game publishers who operate in a highly
competitive marketplace are increasingly focused on ways to drive up the
Average Revenue Per User (ARPU). Offering increased competitive game play is a
part of their playbook. Gfinity can add value in each of these areas and is
well positioned for growth.
In summary, I would like to say thank you to the Gfinity team that continues
to show all the qualities needed to succeed. They are tenacious, passionate,
innovative and demonstrates a can-do attitude that is infectious. And I would
also like to thank all our clients and partners that choose to work with
Gfinity. Their continued support is never taken for granted and we look
forward to continuing to grow together.
Neville Upton
Chairman
22 December 2022
Chief Executive Officer's Report
When appointed CEO in March 2020, I set out a bold plan to bring the economics
of our business under control and to reset the strategic focus on 'what we
own' to deliver scalable and profitable growth. We are now at the end of the
second full year of this plan, and we are making progress in each area.
To win in the world of competitive gaming and esports you need to make a
positive contribution to the overall gaming ecosystem. You must bring
something to the table for partners and clients that adds value. To do this
effectively you need to own something. This is at the core of the 'what we
own' strategy.
For Gfinity this means owing a fast-growing community of hard-to-reach gamers
and owning proven technology that facilitates competitive game play that helps
deepen engagement. Monetise them independently and then utilise each one in a
way that helps grow business in areas where we already have a competitive
advantage, such as virtual motorsport.
The decision to prioritise the 'what we own' strategy over the delivery of
multiple fee based one-off client service programmes has had an adverse
short-term impact on top line revenue in 2022, which was £5.3m, a decrease of
8% YOY. However, we saw a 33% increase in revenue attached to Gfinity's owned
audience, owned tech IP and the V10 R-League esports programme which is a
co-owned partnership with Abu Dhabi Motorsport Management. We have driven 107%
increase in gross profit from these areas.
During the year we turned down several one-off assignments which would have
driven more revenue but would not have helped us deliver on our strategic
plan. We have had the confidence to say no. The numbers show that it is the
right thing to do.
The economics of our business has become more predictable, and we are driving
better gross margin performance with gross profit up 4% despite the reduction
in revenue. At the same time the operating cost base has been streamlined,
with adjusted opex down 13% YoY.
Throughout the year the team has been focused on transforming the business
into one that is scalable. This is our pathway to profitability.
Balanced revenue dispersion
In March 2020 more than 90% of our revenue was coming from client services or
esports solutions - delivering events for game publishers, sports rights
holders and brands for a fee. This business was difficult to predict and to
scale.
Today we are starting to see a more balanced revenue dispersion, reflecting
the 'what we own' strategy. This is going to continue.
At the end of 2022 financial year our profitable owned community of gamers,
Gfinity Digital Media (GDM), delivered 54% of revenue up from 29% in the
previous year. Revenue derived directly from Gfinity's proprietary esports
technology, which is driving some of the world's largest in-app mobile esports
programmes, delivered 7%. While our focus on esports solutions has been in
areas where we have a competitive advantage and this has delivered revenue of
39% from a blue-chip client base including Formula 1, Manchester United, Abu
Dhabi Motorsport Management and Red Bull.
This is driving better financial performance, characterised by a reduction in
the adjusted operating loss in FY22 of 28% (down to £2m). This builds on
reductions of 36% and 50% in FY20 and FY21.
Growth of Gfinity Digital Media (GDM)
2022 was another successful year for GDM. At the end of the June monthly users
across all sites were 14.5m, up 36% on FY21. Revenue reached £2.8m, up 75%.
While the annualised revenue per user was up 29% to 20p. Combined with our
social channels we are now reaching more than 100 million gamers each month.
We have a strong platform for further growth in the number of users and the
revenue per user. We will continue to do this organically and through
strategic acquisitions.
GDM's competitive advantage is based on technology; content and Search Engine
Optimisation (SEO) expertise; and commercial leverage. We continue to invest
in our proprietary Manifold CMS system which allows for efficient content
publishing at scale and is now in a plug and play format for all new
acquisitions that we make. In addition, Stock Infomer price and stock
availability technology is being adapted to allow relevant price comparison
links to be offered to anyone viewing content across the network. Our team of
editors and SEO specialists have built a high performing and growing network
of websites with strong domain authority, supported by a bank of evergreen
content across multiple genres. It is our scale that is driving improved
commercial rates on advertising and affiliate partnerships, ensuring a greater
proportion of higher CPM direct traffic.
It is important that we continue to innovate and stay agile in how we manage
GDM. There continues to be downward pressure on overall advertising spend with
platforms such as Meta and Google announcing post period reductions in ad
revenues. While Google is prone to make algorithm changes with little or no
warning which can impact user numbers. The team is constantly looking at ways
to minimise the impact of marketplace changes and to ensure GDM continues to
grow.
Licencing our competitive gaming engagement platform
One of the highlights of the year was the decision by one of the world's
largest mobile game companies to extend its contract to license a white
labelled version of Gfinity's competitive gaming platform. It is being used,
in-App, for the second year running, to power its global esports programme.
Tens of thousands of players from multiple countries competing seamlessly
within the game.
This contributed to 63% growth in license revenues from our owned competition
and engagement platform, outside of programmes where Gfinity also manages the
overall tournament and programme delivery. Perhaps more importantly it also
gave us the proof of concept needed to launch Athlos.
The Gfinity tournament platform has traditionally been a bespoke integration
for our clients, such as the Premier League. Now we are making it available to
licence.
Over the past twelve months we have rebuilt the technology so that game
publishers can directly integrate it into their games in a matter of hours.
This creates a major SaaS model, where tens of 1000's of game publishers from
AAA down to small independents can offer competitive play to their users.
Deployment at scale will start in Q1 2023.
Targeted esports solutions
Our esports solutions efforts are increasingly focused on areas where we have
a strong competitive advantage and are working alongside some of the worlds
most respected brands such as Formula 1 and Manchester United.
Formula 1 renewed as a client for a 5th year with an expanded programme for
2022. It is a brand that is going through a renaissance driven in part by the
tv show 'Drive to Survive' and its focus on virtual racing which is drawing a
younger audience. The value that Gfinity brings to Formula 1 extends from
world class production right the way through to tech IP with our proprietary
Race Control product which manages all in race adjudication issues. In
addition, Gfinity's www.racinggames.gg site is one of the most visited for F1
esports news and insights which helps us bring informed opinions to the table
on ways to deepen connections with F1's virtual racing fans.
In June we launched Season 3 of the V10 R-League, our co-owned partnership
with Abu Dhabi Motorsport Management. For the first time we took the top 4
teams in the competition to take part in a live finals event at the Yas Mall
as a showcase event for Abu Dhabi Gaming Month. Mercedes won a tense final
against Max Verstappen's Redline team. The format and fastest virtual car in
the world have captured the imagination of the teams and fans alike. After
three seasons of building the product, we now have a product that has strong
commercial appeal.
Investments in gaming industry
During the year the Kingdom of Saudi Arabia's Savvy Gaming Group (SGG)
acquired two leading global esports businesses for a reported price of $1.5bn
and took financial positions in several leading game publishers. SGG announced
in September that it planned to invest a further $38bn in gaming related
companies by 2030. This reflects the ambition to make KSA the global hub for
gaming.
In July and August, the Saudi Esports Federation (SEF) delivered Gamers8, a
two-month celebration of gaming featuring many of the world's most popular
games and leading professional teams. I attended the event and was impressed
by
its scale, professionalism, and creativity. It was exciting to see young and
old, female and male, embrace a range of different games. They were playing,
competing, and watching the best pro players compete in games like Fortnite
and DOTA. Plans for a 2023 edition are already underway and it is clear it
will be on an even grander scale.
In June Gfinity hosted a KSA business delegation, organised by the Saudi
General Entertainment Authority (GEA), at the Gfinity Arena. The delegation
consisted of leaders of thirty private entertainment companies. It was an
enjoyable exchange of ideas and relationships have been built which will be
beneficial in the future.
The investment in gaming in KSA is creating new opportunities and Gfinity is
well positioned to play a positive role in future developments. It was in
this context that in November 2022 I was delighted to be able to announce
Gfinity's appointment as the esports and gaming solutions partner for the
Saudi Pro League. This represents an important first step within the region.
Our dedicated team
The progress we are making across the business is a direct consequence of the
passion and spirit shown by the team. Everyday team members are stepping up,
innovating, selling ideas, building networks, wowing 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 'what we own' gives us greater control over our
destiny. However, our success is still dependent upon positive business and
consumer sentiment. There are economic headwinds. This could impact spending,
especially on advertising campaigns across GDM. We will continue to manage our
cost base in line with both the opportunities that we can see ahead of us and
the market realities that we face. The team will remain agile, flexible, and
entrepreneurial, continually adding to an already strong pipeline of
opportunities in the strategic areas where we have chosen to focus on.
Conclusion
The transformation of Gfinity's business model is now well underway. The
strategy is embedded across the business with strong leaders in place to
ensure we deliver on what we say and move us towards profitable growth. We
remain focused on what we can control, strengthening the foundations on which
the GDM has been built; adding more customers to Athlos, our tech IP licensing
business; and partnering with organisations who share our passion for gaming
and the commercial opportunities it presents. Gfinity's best days are ahead of
us. I would like to thank the Gfinity team, our business partners and our
clients for their continued hard work and support.
John Clarke
Chief Executive Officer
22 December 2022
Chief Financial and Operations Officer's Report
Summary
The year to 30 June 2022 saw continued strong progress on Gfinity's path
towards profitability. An adjusted operating loss of £2.0m, represented an
improvement of 28% on the year to 30 June 2021; a third consecutive year of
progress, following reductions of 50% in FY21 and 36% in FY20.
This continued improvement reflects the strategic focus on areas within the
esports and gaming ecosystem that Gfinity owns, that can scale and can deliver
a strong margin as they do so.
Revenue of £5.3m actually represented a reduction of 8% year on year.
Within this, however, there was a 33% increase in revenue coming from
Gfinity's owned audience, technology and esports rights. As a result,
despite the reduction in top line revenue, gross profit actually increased to
£2.7m (2021: £2.6m), while Adjusted Administrative Expenses actually reduced
by 13% to £4.7m (2021: £5.4m), again reflecting a third consecutive annual
reduction.
Revenue and Cost of Sales:
Gfinity Digital Media:
GDM revenue for the year of £2.8m represented an increase of 75% year on year
(2021: £1.6m). This reflected growth in both the number of unique monthly
active users on Gfinity's platform, which rose 36% to 14.5m and growth in the
annualized revenue per monthly active user, which rose 29% from 15p to 20p.
This growth reflected a continued strengthening of both the quality of content
across the GDM network and the domain authority of the sites. It also
reflected a diversification of the revenue streams from the sites, with
ecommerce activities strengthened alongside the existing advertising.
In this regard, we were delighted to add the Stock Informer brand to the GDM
network in September 2021. This acquisition has strong value in itself, as a
new and highly profitable revenue stream within the GDM portfolio. In the
nine-month period post acquisition, this business contributed £0.5m of
revenue and £0.4m of net profit to the network. Over the longer term,
however, the technology used to provide the live pricing and stock
availability data for this product, will power live price comparison
information for relevant products for users across the GDM network.
Representing a potentially even greater revenue opportunity.
Gross profit across the GDM network, rose to £1.6m, an 81% year on year
increase, reflecting a 56% gross margin.
Esports Solutions:
In the year to 30 June 2022 Gfinity has continued to be trusted by major
global brands to design, develop and deliver esports solutions.
During the first half of the financial year Gfinity completed delivery of the
fourth season of the Formula 1 Esports Series. This programme continues to
grow and set new records, achieving 23 million views across the season; a 103%
year on year increase. Gfinity's contract was subsequently reviewed for a
fifth season, with delivery commencing in early 2022, building to live events
and finals taking place in the latter months of 2023.
This programme was supported by other initiatives on behalf of clients
including Coca Cola, Manchester United, Nintendo, EA Sports and Ask4.
This financial year also saw the commencement of the 3(rd) season of the V10 R
League, a part of the Global Racing Series partnership in conjunction with Abu
Dhabi Motorsports Management. This season saw the addition of Mercedes to
the roster of competing teams, joining other high-profile organisations
including: Red Bull Racing, BMW SIM Racing, Fordzilla, Williams Esports and
Aston Martin.
The period to June 2023 saw completion of around half the season, building
towards a live finals taking place in Abu Dhabi, sponsored by Miral in early
FY23.
This contrasted with FY21, which had seen both of the first two seasons of the
V10 R League programme. As a result, revenue fell from £0.7m to £0.2m.
The programme required a net investment of £0.1m (2021: £0.1m). Directors
believe, however, that this is creating a valuable owned esports property,
from which Gfinity will see significant benefit in the future.
Overall, across the esports solutions business, revenue fell 47% to £2.1m
(2021: £3.8m). This reflected the revised phasing of the V10 R League
programme, which had seen a greater concentration of activity in the prior
year, but also a increased strategic decision to prioritise revenue streams
attached to Gfinity's owned intellectual property, which directors believe
will give the business a greater chance of driving longer term, high margin
revenue growth.
Technology:
In the year to 30 June 2022 revenue attached to the licensing and
implementation of Gfinity's technology, outside of the scope of managed
esports programmes, grew 63% to £0.4m (2021: £0.2m). This delivered a
gross profit of £0.2m (2021: £0.0m).
Gfinity continued to deploy its proprietary esports platform into 3 of the
major mobile game titles. This programme has provided an important case
study as to how Gfinity's technology can be implemented directly into mobile
games. Allowing publishers to deliver competitive programmes, without users
having to leave the game to utilize other platforms.
With two-thirds of revenue in the games industry now coming from in-game
revenues, rather than one off game purchases and competitive gamers proven to
spend significantly longer and spend significantly more money in game than
casual gamers, directors believe that this presents a significant future
revenue stream.
Administrative Expenses:
As a Board, we monitor ourselves against Adjusted Administrative Expenses.
This measure adjusts for the impact of non-cash items, including amortisation
or other adjustments to the carrying value of goodwill and intangible assets,
depreciation on owned assets and the share option charge.
In the year to June 2022, unadjusted Administrative Expenses included:
· Share option charge of £0.5m, (2021: £0.3m)
· Amortisation of intangibles and adjustments to goodwill and
intangible carrying values of £1.6m (2021: £1.5m)
· Depreciation of owned assets of £0.1m (2021: £0.6m)
In the year to June 2022, Adjusted Administrative Expenses were £4.7m (2021:
£5.4m), reflected a reduction of 13%. This was principally driven by
reductions in permanent headcount, facilitated by a move to a more variable
cost model, with a smaller team retained to deliver ad hoc client esports
solutions. This also represented the first full year without a base office,
as the company adopted a fully remote working policy.
Operating Loss:
The cumulative effect of all the above items was that the adjusted operating
loss for the year reduced to £2.0m (2021: £2.7m). This represented a
reduction of 28%.
Allowing for a small gain on the winding up of the Gfinity Esports Australia
business, Adjusted EBITDA for the year was £1.9m (2021: £2.3m).
Cash and Cash Equivalents:
As at 30 June 2022, Gfinity had cash of £2.1m (2021: £1.4m). Further to
this, there were £2.7m in unexercised warrants, at an exercise price of
1.25p.
Mergers and Acquisitions:
Gfinity completed two acquisitions in the year:
· Megit Ltd, the parent company of the Stock Informer brand, which
operates the StockInformer.co.uk and StockInformer.com sites in UK and USA
respectively. Stock Informer holds a position of authority on the availability
of hard to get items of stock, of particular relevance to gamers. Its
proprietary technology ensures an up to date record of when such items become
available allowing it to earn revenue through affiliate commissions.
Consideration for the acquisition of Megit Limited comprised of:
o £2.5m in cash
o £2.5m in Gfinity equity settled via the issuance of 62.5m new ordinary
shares at the placing price of 4p in September 2021; and
o An earn out of 30% of revenue in each of the first 3 years post
acquisition, capped at a maximum value of £1.8m.
· The trade and assets of the SiegeGG business. SiegeGG has
acquired a leading position as the authority on all news and statistics
relating to the competitive scene around the Rainbow Six Siege game published
by Ubisoft. The business generates revenues through the licensing of its
database of statistical information relating to Rainbow Six Siege esports and
onsite advertising. In the year to 31 December 2020, SiegeGG reported
unaudited revenues of $0.1 million and profit before tax of $40k.
Consideration for the acquisition of SiegeGG comprised of:
o 9 million ordinary shares, with a fair value on the date of acquisition of
4.4p amounting to £396k
o An earn out of 30% of revenue in each of the first 2 years post
acquisition, capped at a maximum value of £1.5m.
Outlook:
Directors believe that the continued improved financial performance of the
business, coupled with the growth in the value of Gfinity's owned IP, will
leave it well placed to deliver long-term value for shareholders.
While a sustained period of recession could have an impact on the speed of
growth in certain areas, for example the level of advertising rates in the GDM
business, directors still see significant opportunities for growth, in
particular via:
· Continuing to expand the audience within the GDM network and
introduce new technology to deepen the engagement and increase the revenue
that comes from this community
· Launching an easy to integrate and easy to use version of
Gfinity's Engage platform, which can be integrated directly into publisher
game titles, creating a new Software as a Service revenue stream.
· Building on Gfinity's expertise in sports based titles,
particularly racing games and football to capitalize on the significant
opportunity within the GCC region.
· Directors are actively engaged in discussions with potential
strategic partners to ensure that Gfinity is appropriately positioned to
capitalise on these areas of opportunity.
Jonathan Hall
Chief Financial and Operations Officer
22 December 2022
Independent Auditor's Report
Opinion
We have audited the financial statements of Gfinity plc ('Parent Company') and
its subsidiaries (together the 'Group') for the year ended 30 June 2022 which
comprise the statement of comprehensive income, the statements of financial
position, the statements of changes in equity, the statements of cash flows
and notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK-adopted International Accounting
Standards.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group's and of the
Parent Company's affairs as at 30 June 2022 and of the Group's loss for the
year then ended;
• have been properly prepared in accordance with UK-adopted
International Accounting Standards; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2 of the financial statements, which indicates that
the Board have assessed that the Group and Parent Company will require
additional external funding, which has not yet been secured, in order to meet
its ongoing commitments and therefore a material uncertainty exists over the
entity's ability to continue as a going concern. Whilst management are
confident that such funding will be achieved in the near future, there is
inherent uncertainty until such time as such funding is secured. As stated
in note 2, these events or conditions, along with other matters set out in
note 2, indicate that a material uncertainty exists that may cast significant
doubt on the Group and Parent Company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Group's ability to continue to adopt the going concern basis
of accounting included, as part of our risk assessment, review of the nature
of the business of the Group, its business model and related risks including
where relevant the impact of the COVID-19 pandemic, the requirements of the
applicable financial reporting framework and the system of internal control.
We evaluated the Directors' assessment of the Group's ability to continue as a
going concern, including challenging the underlying data and key assumptions
used to make the assessment, and evaluated the Directors' plans for future
actions in relation to their going concern assessment.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at where the Directors made subjective judgments, for example in
respect of significant accounting estimates that involved making assumptions
and considering future events that are inherently uncertain. As in all of our
audits we also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the Directors that
represented a risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to
be able to give an opinion on the financial statements as a whole, taking into
account the structure of the Group, its accounting processes, its internal
controls and the industry in which it operates.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In addition to the matter described in the material uncertainty related to
going concern section above, we have determined the matters below to be the
key audit matters to be communicated in our report.
Below is not a complete list of all risks identified by our audit.
Key Audit Matter How our audit addressed the Key Audit Matter
Recognition and Impairment of goodwill and intangible assets Our key audit procedures included:
At 30 June 2022, the Group had goodwill of £4,714,399 (2021: £1,903,790) and · obtaining the underlying purchase documents for the
intangible assets of £4,575,141 (2021: £704,481) largely arising from the acquisitions undertaken in the year along with management's accounting
acquisition of a number of businesses in recent years including Megit Limited assessments;
and the trade and assets of Siege.gg which were acquired in the year.
· isolating and challenging key judgements applied to
acquisition accounting including the determination of contingent
consideration, the valuation basis for newly recognised intangible assets and
Both of these acquisitions gave rise to the recognition of goodwill and the basis for deferred taxation on newly recognised intangible assets;
intangible assets during the year. The recognition of these intangible
assets required the exercise of judgement over their valuation, and the · assessing the appropriateness of the VIU calculations used by
recognition of goodwill required judgement over the future contingent the management to estimate recoverable amount of CGUs;
consideration payable.
· reconciling key input data applied in the VIU calculations to
reliable supporting evidence;
For the purpose of assessing impairment on goodwill and other intangible · challenging the reasonableness of key assumptions based on
assets arising from business combinations, these assets were allocated to cash our knowledge and understanding of the business and industry; and
generating units ('CGU') and the recoverable amounts of the CGUs were
determined with reference to value-in-use (the 'VIU') calculations using cash · obtaining evidence of the commercial feasibility of the
flow forecasts. In carrying out impairment assessments, significant projects supported by the recognised intangible assets.
management judgement was used to determine the key assumptions underlying the
VIU calculations.
Based on our procedures, we noted no material misstatement in the carrying
value of goodwill or intangible assets.
We have identified the recognition of goodwill and intangibles, and their
associated impairment assessment, as a key audit matter because these assets
are material to the Group and the estimation of recoverable amounts of the
relevant CGUs involves a significant degree of management judgement and
therefore is subject to an inherent risk of error.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We
set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and
the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements
as a whole.
Based on our professional judgment, we determined materiality for the
financial statements as a whole as follows:
Group and Parent Company financial statements
Overall materiality £203,000
How we determined it 5% of Loss on ordinary activities before tax
Rationale for benchmark applied We deem "Loss on ordinary activities before tax" to be an appropriate
benchmark, as the most significant Key Performance Indicator for this type of
business and operations is their profitability. The audit team has also
taken into consideration that Gfinity management monitor metrics around profit
and loss to assess business performance. The same materiality was applied to
the Parent Company as 87% of group revenue is recorded in the Parent Company.
We agreed with the Board of Directors that we would report to them
misstatements identified during our audit above £10,150 as well as
misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Group, or
returns adequate for our audit have not been received from branches not
visited by us; or
• the Group financial statements and the directors' remuneration
report to be audited are not in agreement with the accounting records and
returns; or
• certain disclosures of directors' remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out
on pages 33 and 34, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above and on the Financial Reporting Council's website, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities,
including fraud
Our approach to identifying and assessing the risks of material misstatement
in respect of irregularities, including fraud and non-compliance with laws and
regulations, was as follows:
• the senior statutory auditor ensured the engagement team
collectively had the appropriate competence, capabilities and skills to
identify or recognise non-compliance with applicable laws and regulations;
• we identified the laws and regulations applicable to the
Group through discussions with the Directors, and from our commercial
knowledge and experience of the biotech sector;
• we focused on specific laws and regulations which we
considered may have a direct material effect on the financial statements or
the operations of the group, including Companies Act 2006, taxation
legislation, data protection, anti-bribery, employment, environmental, health
and safety legislation and anti-money laundering regulations;
• we assessed the extent of compliance with the laws and
regulations identified above through making enquiries of management and
inspecting legal correspondence; and
• identified laws and regulations were communicated within the
audit team regularly and the team remained alert to instances of
non-compliance throughout the audit.
We assessed the susceptibility of the group's financial statements to material
misstatement, including obtaining an understanding of how fraud might occur,
by:
• making enquiries of management as to where they considered
there was susceptibility to fraud, their knowledge of actual, suspected and
alleged fraud;
• considering the internal controls in place to mitigate risks
of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls,
we:
• performed analytical procedures to identify any unusual or
unexpected relationships;
• tested journal entries to identify unusual transactions;
• assessed whether judgements and assumptions made in
determining the accounting estimates set out in Note 2 of the financial
statements were indicative of potential bias;
• investigated the rationale behind significant or unusual
transactions.
In response to the risk of irregularities and non-compliance with laws and
regulations, we designed procedures which included, but were not limited to:
• agreeing financial statement disclosures to underlying
supporting documentation;
• reading the minutes of meetings of those charged with
governance;
• enquiring of management as to actual and potential
litigation and claims;
• reviewing correspondence with HMRC and the group's legal
advisor.
There are inherent limitations in our audit procedures described above. The
more removed the laws and regulations are from financial transactions, the
less likely it is that we would become aware of non-compliance. Auditing
standards also limit the audit procedures required to identify non-compliance
with laws and regulations to enquiry of the directors and other management and
the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than
those that arise from error as they may involve deliberate concealment or
collusion.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Group's members those matters we are
required to state to them in an Auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Group and the Group's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Sanjay Parmar
(Senior statutory auditor)
For and on behalf of Jeffreys Henry Audit Limited (Statutory Auditor)
Finsgate
5-7 Cranwood Street
London EC1V 9EE
Group Statement of Profit or Loss
Notes Year to 30 June 2022 Year to 30 June 2021
£ £
CONTINUING OPERATIONS
Revenue 5,258,977 5,693,385
Cost of sales (2,546,508) (3,085,409)
Gross profit/(loss) 2,712,469 2,607,976
Other Income 1,529 54,354
Administrative expenses 6 (6,950,105) (7,179,327)
Operating loss (4,236,107) (4,516,997)
Gain on disposal of associate 25 45,090 459,706
Finance income 8 77 4
Finance Costs 8 - (10,236)
Loss on ordinary activities before tax (4,190,940) (4,067,524)
Taxation 9 209,968 221,929
Retained loss for the year (3,980,972) (3,845,595)
Loss and total comprehensive income for the period (3,980,972) (3,845,595)
Earnings per Share (Basic and Diluted) 10 0.004 0.004
Group Statement of Comprehensive Income
Year to 30 June 2022 Year to 30 June 2021
£ £
Loss for the Period (3,948,541) (3,845,595)
Other Comprehensive Income
Foreign exchange profit / (loss) on retranslation of foreign Subsidiaries (3,458) (12,887)
Other Comprehensive Income for the period (3,458) (12,887)
Loss and total comprehensive income for the period (3,984,430) (3,858,482)
Group Statement of Financial Position
Notes 30 June 2022 30 June 2021
£ £
NON-CURRENT ASSETS
Property, plant and equipment 11 148,510 187,366
Goodwill 12 4,714,399 1,903,790
Intangible fixed assets 13 4,575,141 704,481
9,438,050 2,795,637
CURRENT ASSETS
Trade and other receivables 15 1,968,893 1,586,850
Cash and cash equivalents 16 2,141,361 1,375,873
4,110,254 2,962,723
TOTAL ASSETS 13,548,304 5,758,360
EQUITY AND LIABILITIES
Equity
Ordinary shares 18 1,315,697 930,513
Share premium account 54,858,008 46,511,089
Other reserves 3,876,676 3,384,914
Retained earnings (51,283,669) (47,302,697)
Non controlling interest 3 -
Total equity 8,766,715 3,523,819
Non-current liabilities
Other Payables 19 840,742 254,986
Deferred Tax Liabilities 17 897,575 127,835
Current liabilities
Trade and other payables 19 3,043,272 1,851,720
Total liabilities 4,781,589 2,234,541
TOTAL EQUITY AND LIABILITIES 13,548,304 5,758,360
The following notes form an integral part of these financial statements
Signed on behalf of the board on 22 December 2022
Neville
Upton
Jonathan Hall
Chairman
Chief Financial and Operations Officer
Company Statement of Financial Position
Notes 30-Jun-22 30-Jun-21
£ £
NON-CURRENT ASSETS
Property, plant and equipment 11 145,079 179,727
Investment in subsidiaries 14 7,100,297 -
Goodwill 12 2,274,565 2,568,417
Intangible fixed assets 13 1,059,549 530,336
TOTAL NON-CURRENT ASSETS 10,579,490 3,278,479
CURRENT ASSETS
Trade and other receivables 15 1,880,830 2,051,596
Cash and cash equivalents 16 1,361,279 1,329,815
TOTAL CURRENT ASSETS 3,242,109 3,381,410
TOTAL ASSETS 13,821,599 6,659,890
EQUITY AND LIABILITIES
Equity
Ordinary shares 18 1,315,697 930,513
Share premium account 54,858,008 46,511,089
Other reserves 3,898,634 3,403,414
Retained earnings (50,539,126) (46,340,461)
Total equity 9,533,213 4,504,555
Non-current liabilities
Other creditors 19 840,751 254,986
Deferred tax liabilities 17 895,751 94,748
Current liabilities
Trade and other payables 19 2,551,884 1,805,601
Total liabilities 4,288,386 2,155,334
TOTAL EQUITY AND LIABILITIES 13,821,599 6,659,890
The accompanying 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 £4,198,665
(2021: loss of £5,739,305).
Registered number: 08232509
Signed on behalf of the board on 22 December 2022
Neville
Upton
Jonathan Hall
Chairman
Chief Financial and Operations Officer
Group Statement of Changes in Equity
Ordinary shares Share premium Share option reserve Retained earnings NCI Forex Total equity
£ £ £ £ £ £ £
At 30 June 2020 725,868 44,405,085 3,137,831 (43,457,102) - (5,613) 4,806,070
Loss for the period - - - (3,845,595) - - (3,845,595)
Other comprehensive income - - - - - (12,887) (12,887)
Total comprehensive income - - - (3,845,595) - (12,887) (3,858,482)
Proceeds of shares issued 204,645 2,110,793 - - - - 2,315,438
Share Issue Costs - (4,789) - - - - (4,789)
Share options expensed - - 265,583 - - - 265,583
Total transactions with owners, recognised directly in equity 204,645 2,106,004 265,583 - - - 2,576,232
At 30 June 2021 930,513 46,511,089 3,403,414 (47,302,697) - (18,500) 3,523,819
Loss for the period - - - (3,980,972) - -
(3,980,972)
Other comprehensive income - - - - - (3,458) (3,458)
Total comprehensive income - - - -
(3,980,972) (3,458) (3,984,430)
Proceeds of shares issued 385,184 8,667,150 - - - - 9,052,334
Share Issue Costs - (320,231) - - - - (320,231)
Share options expensed - - 495,220 - - - 495,220
Addition of NCI - - - - 3 - 3
Total transactions with owners, recognised directly in equity 385,184 8,346,919 495,220 - 3 - 9,227,326
At 30 June 2022 1,315,697 54,858,008 3,898,634 3 (21,958) 8,766,715
(51,283,669)
Company Statement of Changes in Equity
Ordinary shares Share premium Share option reserve Accumulated Deficit Total equity
£ £ £ £ £
At 30 June 2020 725,868 44,405,085 3,137,831 (40,601,156) 7,667,628
Loss for the period - - - (5,739,305) (5,739,305)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (5,739,305) (5,739,305)
Shares Issued 204,645 2,110,793 - - 2,315,438
Share issue costs - (4,789) - - (4,789)
Share options issued - - 265,583 - 265,583
Shares as deferred consideration - - - - -
Total transactions with owners, recognised directly in equity 204,645 2,106,004 265,583 - 2,576,232
At 30 June 2021 930,513 46,511,089 3,403,414 (46,340,461) 4,504,555
Loss for the period - - - (4,198,665) (4,198,665)
Other Comprehensive Income - - - - -
Total comprehensive income - - - (4,198,665) (4,198,665)
Shares Issued 385,184 8,667,150 - - 9,052,334
Share issue costs - (320,231) - - (320,231)
Share options issued - - 495,220 - 495,220
Shares as deferred consideration - - - - -
Total transactions with owners, recognised directly in equity 385,184 8,346,919 495,220 - 9,227,323
At 30 June 2022 1,315,697 54,858,008 3,898,634 (50,539,126) 9,533,213
Group Statement of Cash Flows
Notes Year to 30 June 2022 Year to 30 June 2021
£ £
Cash flow used in operating activities
Net cash used in operating activities 20 (2,573,719) (2,049,833)
Cash flow from/(used in) investing activities
Interest 8 77 4
received
Additions to property, plant and equipment 11 (74,137) (106,642)
Additions to intangible assets 13 (685,951) (16,030)
Net outflow on business combination 26 (1,774,020) -
Proceeds of Associate Gain / (Loss) 25 45,090 459,706
Issue of shares to non controlling interest 3 -
Net cash used in investing activities (2,488,938) 337,038
Cash flow from/(used in) financing activities
Issue of equity share capital net of issue cost 5,831,603 1,950,649
Repayment of leases - (439,621)
Bank interest payable - (10,236)
Net cash from financing activities 5,831,603 1,500,792
Net increase in cash and cash equivalents 768,946 (211,833)
Effect of currency translation on cash (3,458) (12,890)
Opening cash and cash equivalents 1,375,873 1,600,596
Closing cash and cash equivalents 2,141,361 1,375,873
Company Statement of Changes in Cash Flows
Note Year to 30 June 2022 Year to 30 June 2021
£ £
Cash flow used in operating activities
Net cash used in operating activities 20 (3,311,110) (2,040,690)
Cash flow from/(used in) investing activities
Interest 8 1 4
received
Additions to property, plant and equipment 11 (74,139) (105,327)
Additions to Intangible Assets 13 (685,951) (16,030)
Payments to acquire trade & assets on business combination 26 (1,774,029) 0
Proceeds of Associate Gain / (Loss) 25 45,090 459,706
Net cash used in investing activities (2,489,029) 338,353
Cash flow from/(used in) financing activities
Issue of equity share capital 5,831,603 1,950,650
Repayment of leases 0 (439,621)
Bank interest payable 0 (10,236)
Net cash from financing activities 5,831,603 1,500,793
Net increase in cash and cash equivalents 31,464 (201,545)
Opening cash and cash equivalents 1,329,815 1,531,360
Closing cash and cash equivalents 1,361,279 1,329,815
Notes to the Financial Statements
1. GENERAL INFORMATION
Gfinity plc ("the Company") is a public company limited by shares incorporated
in the United Kingdom under the Companies Act 2006, registered in England and
Wales and is AIM listed. The registered number of the company is 08232509.
The functional and presentational currency is £ sterling because that is the
currency of the primary economic environment in which the group operates.
Foreign operations are included in accordance with the policies set out in
note 2. Principal activities are discussed in the Strategic report.
2. ACCOUNTING POLICIES
Basis of preparation
The Company has prepared the accounts on the basis of all applicable
International Financial Reporting
Standards (IFRS), including all International Accounting Standards (IAS),
Standing Interpretations Committee (SIC) and the International Financial
Reporting Interpretations Committee (IFRIC) interpretations issued by the
International Accounting Standards Board (IASB) with effective dates for
accounting periods beginning on or after 1 July 2021, together with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The accounts have been prepared on the historical cost basis, except for
otherwise stated below. The principal accounting policies, which have been
consistently applied throughout the period presented, are set out below.
The preparation of financial statements in conformity with IFRS requires the
use of certain estimates. It also requires management to exercise its
judgement in the process of applying the company's accounting policies.
Estimates and judgements are continually reviewed and are based on historical
experience and other factors including expectations of future events that are
believed to be reasonable under the circumstances.
Standards, Interpretation and amendments to published standards effective in
the accounts
The Group has applied the following new standards and interpretations for the
first time for the annual reporting period commencing 1 July 2021:
· Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark
Reform.
· IFRS 17 Insurance Contracts.
The adoption of the standards and interpretations listed above has not led to
any changes to the Group's accounting policies or had any other material
impact on the financial position or performance of the Group.
Standards, interpretation and amendments to published standards that are not
yet effective
New standards and interpretations that are in issue but not yet effective are
listed below:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS
37)
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16).
· Reference to the Conceptual Framework (Amendments to IFRS 3)
· Amendments to IFRS 17
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement.
· Definition of Accounting Estimate (Amendments to IAS 8)
· Deferred Tax Related to Assets and Liabilities Arising from a Single
Transaction - Amendments to IAS 12 Income Taxes
· Initial Application of IFRS 17 and IFRS 9 - Comparative Information
(Amendments to IFRS 17)
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
· Non-current Liabilities with Covenants (Amendments to IAS 1)
· Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
The adoption of the above standards and interpretations is not expected to
lead to any changes to the Group's accounting policies or have any other
material impact on the financial position or performance of the Group.
Going Concern
Over the past three years, directors have refocused Gfinity's business to
build growth based around owned and scalable properties, including Gfinity's
Digital Media business and proprietary esports technology. This has
facilitated a reduction in operating expenditure, with a move towards a
variable cost model allowing the business to better manage through peaks and
troughs in demand.
This strategy has enabled the business to deliver a third consecutive
reduction in the Adjusted Operating Loss in the year to June 2022. It is
also ensuring that together with improved financial performance, Gfinity is
continuing to develop assets that provide the business with underlying value
and will provide sustainable, recurring revenue streams into the future.
Directors believe that this is the right strategy to deliver long term growth
in shareholder value. Specifically, over the coming 12 months, this will
include further investment into the proprietary Athlos technology and the
identification of further opportunities to continue to expand Gfinity's
Digital Media network.
Directors are in advanced conversations with a number of parties, as to the
potential to bring in strategic investment to support this continued growth
strategy and believe that these conversations will be successful.
In the event that such strategic investment was not forthcoming, directors
still believe that investment would be secured to allow the business to meet
its obligations as they fall due. This belief is supported by:
· The underlying value of the assets and Intellectual Property that
have been created within the business;
· Gfinity's reputation as a market leader, with a prestigious client
base, in a sector that is continuing to attract significant investment; and
· A proven ability to raise funds, even in difficult investment
markets.
Whilst the Board acknowledge material uncertainties, the directors are
confident that the cash flow forecasts for the Group will have sufficient
working capital to settle its liabilities as they fall due for a period of not
less than twelve months from the date of the approval of these consolidated
financial statements. Consequently, the consolidated financial statements have
been prepared on a going concern basis with material uncertainty.
Basis of consolidation
The Group accounts consolidate those of the Company and all of its subsidiary
undertakings drawn up to 30 June each year. Subsidiary undertakings are those
entities over which the Group has the ability to govern the financial and
operating policies through the exercise of voting rights. The results of
subsidiaries acquired or sold are consolidated for the periods from or to the
date on which control passed. Acquisitions are accounted for under the
acquisition method.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination
over the Group's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If, after reassessment, the
Group's interest in the net fair value of the acquiree's identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
All intra group balances, transactions, income and expenses and profit and
losses on transactions between the Company and its subsidiaries and between
subsidiaries are eliminated.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least annually.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units ('CGUs') expected to benefit from the synergies
of the combination. CGUs to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the CGU is less than the
carrying amount of the unit, the impairment loss is allocated first to reduce
the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro-rata on the basis of the carrying amount of each
asset in the unit. An impairment loss recognised for goodwill is not reversed
in a subsequent period.
Investment in subsidiaries
Investments in subsidiaries are held in the Company balance sheet at cost and
reviewed annually for impairment.
Revenue
Revenue comprises the fair value of the consideration received or receivable
for the sale of services in the normal course of the Group's activities.
Revenue is shown net of value added tax.
To determine whether to recognise revenue, the Group follows a 5-step process:
· Identifying the contract with a customer.
· Identifying the performance obligations.
· Determining the transaction price.
· Allocating the transaction price to the performance obligations
· 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 each time a user clicks on
one of the ads that are displayed on the website. Revenue is recognised on a
pay-per-click, or cost per mille (CPM) basis.
• Broadcaster revenues: Rights fees are received from linear
broadcasters and online streaming platforms in return for rights to access
broadcast content. Revenue is recognised once the relevant performance
obligations are completed which is typically at the point the broadcast
occurs.
• Licensing revenues: Fees charged for the licensing of Gfinity
esports technology, outside of the scope of a broader managed esports service
provision.
• Consultancy Fees: Revenue is recognised in line with the profile
of resources dedicated to the programme across the assignment duration.
Leases and right-of-use-assets
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right- of-use asset is initially measured at cost,
which comprises the initial amount of the lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of- use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is measured at amortised cost using the effective interest
method, and is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate.
Short-term leases and leases of low-value assets:
The Group has elected not to recognise right-of-use assets and lease
liabilities for leases of low-value assets and short-term leases. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
year.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the balance sheet date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period. Exchange differences arising from
the translation of the Group's foreign operations are recognised in other
comprehensive income.
Taxation
The taxation expense represents the sum of the tax currently payable and
deferred tax.
The charge for current tax is based on the results for the period as adjusted
for items that are non-assessable or disallowed. It is calculated using tax
rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computations of taxable
profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary
differences, and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill (or any discount
on acquisition) or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that the directors do not have a high degree of
certainty that sufficient taxable profits will be available in the medium-term
to allow all or part of the asset to be recovered.
Credits in respect of Research and Development activities are recognised at
the point at which the asset becomes profitable and quantifiable. This is
typically at the point at which a claim has been prepared and submitted to
HMRC.
Share based payments
The Company provides equity-settled share-based payments in the form of share
options. Equity-settled share-based payments are measured at fair value
(excluding the effect of non-market-based vesting conditions) at the date of
grant. The fair value determined at the date of grant is expensed on a
straight line basis over the vesting period, based on the Company's estimate
of shares which will eventually vest and adjusted for the effect of non-market
based vesting conditions. The Company uses an appropriate valuation model
utilising a Black-Scholes model in order to arrive at a fair value at the date
share options are granted.
In instances when shares are used as consideration for goods or services the
shares are valued at the fair value of the goods or services provided. The
expense to the company is recognised at the point the goods or services are
received.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and impairment, if any. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. Subsequent costs are
included in the carrying amount of the asset or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the company and that the cost of the
item can be measured reliably. The carrying amount of parts that are replaced
is derecognised. The costs of the day-to-day servicing of property, plant and
equipment are recognised in profit or loss as incurred.
Depreciation is calculated using the straight-line method to allocate the cost
or revalued amounts of tangible fixed assets to their residual values over
their useful economic lives, as follows:
Office equipment 3 years straight line
Computer equipment 3 years straight line
Production equipment 3 years straight line
Leasehold improvements Over the period of the lease or, where management have reasonable grounds to
believe the property will be occupied beyond the terms of the lease, 3 years
straight line
The residual values and useful economic lives of the assets are reviewed, and
adjusted if appropriate, at each balance sheet date. The carrying amount of an
asset is written down immediately to its recoverable amount if the carrying
amount is greater than its estimated recoverable value. Gains and losses on
disposals are determined by comparing the proceeds with the carrying amount
and are recognised within other gains or losses in the income statement.
Intangible fixed assets
Intangible assets other than goodwill are recognised where the purchase or
internal development of such assets are expected to directly contribute
towards the company's ability to generate revenues .
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:
Software development 3 years straight line
Web traffic acquired in business combination 3 years straight line
Technology Platform 5 years straight line
Customer Relationships 5 years
Research and development costs
Development expenditure is capitalised as an intangible asset, only if the
development costs can be measured reliably and it is anticipated that the
product being built will be completed and will generate future economic
benefits in the form of cash flows to the Group.
Research expenditure that does not meet this criteria is recognised as an
expense as incurred.
Development costs previously recognised as an expense are not recognised as an
asset in a subsequent period.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, and other short-term highly liquid investments with original maturities
of three months or less. These are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities are obligations to pay cash or other financial
instruments and are recognised when the company becomes a party to the
contractual provisions of the instrument. Financial liabilities are classified
according to the substance of the contractual arrangements entered into. All
interest-related charges are recognised as an expense in the income statement.
Trade and other payables are not interest bearing and are recorded initially
at fair value net of transactions costs and thereafter at amortised cost using
the effective interest rate method.
An equity instrument is any contract that evidence a residual interest in the
assets of the Company after deducting all of its liabilities. Equity
instruments issued by the Company are recorded at the proceeds received, net
of direct issue costs.
Financial assets
Financial assets are recognised in the balance sheet when the Company becomes
a party to the contractual provisions of the instrument and are recognised in
the balance sheet at the lower of cost and net realisable value.
Provision is made for diminution in value where appropriate.
Income and expenditure arising on financial instruments is recognised on the
accruals basis and credited or charged to the statement of comprehensive
income in the financial period to which it relates.
Trade receivables do not carry any interest and are initially recognised at
fair value, subsequently reduced by appropriate allowances for estimated
irrecoverable amounts.
Warrants
Warrants are in respect of call options granted to investors by the group and
are classified as equity only to the extent that they do not meet the
definition of a financial liability or financial asset.
The fair value of warrants is determined at the date of grant and is
recognised in equity. When the warrants are exercised, the group transfers the
appropriate amount of shares to the investor, and the proceeds received net of
any directly attributable transaction costs are credited directly to equity.
The group uses an appropriate valuation model utilising a Black-Scholes model
in order to arrive at a fair value at the date warrants are granted.
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.
Revenue settled by means other than cash (e.g. via equity in an associate) is
recognised based on the value stipulated in the contract for goods or
services, which would be set at fair value, with the revenue then recognised
based performance obligations in the manner described above.
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
Judgement and estimation: Intangible assets recognised in business
combinations:
Intangible assets in business combinations are recognised when the asset is
separately identifiable and based on the probable future economic benefit that
arises owing to the Group's control of the asset. Typically, the Group will
utilise a discounted cash flow to establish the future economic benefits and
therefore the fair value of the asset.
The Group identified five intangible assets in relation to the two
acquisitions undertaken in the year to 30 June 2018, three intangible assets
in relation to the acquisition of EpicStream Inc. on 3 December 2020, and 2
acquisitions undertaken in the year to 30 June 2022, namely, StockInformer
(Megit Ltd) and Siege.gg. As these assets have a finite economic life, in line
with IAS 36, they are only subject to further testing for impairment when
there are either internal or external indicators of impairment. Based on a
review of updated cash flow projections it was decided that there were no
indicators of impairment in any of the intangible assets. Following further
review of updated cash flow projections relating to the intangibles, it was
determined that no impairment was required. This further testing is discussed
in the 'Impairment testing' section below.
Estimation: Impairment testing:
On an annual basis the Group reviews relevant classes of assets, including
investments, intangible assets and goodwill for indications of impairment.
Where such indications exist, full impairment testing through an analysis of
the value of future cash flows is undertaken. The recoverable amounts of cash
generating units have been determined based on value-in-use calculations which
require the use of estimates. Management has prepared discounted cash flows
based on the latest strategic plan. Discount rate has been calculated using
the Capital Asset Pricing model with reference to the value of UK 10-year
gilts as a proxy for a risk-free rate and the volatility of Gfinity's share
price relative to that of AIM since listing.
Goodwill carried in relation to CEVO in the group financial statements:
Gfinity acquired CEVO, Inc in July 2017, since which time the CEVO business
has provided significant value to the overall Group.
All goodwill in respect of the Gfinity acquisition of CEVO was fully written
down in the prior year
Goodwill carried in relation to Real Sport:
The carrying value of goodwill in relation to RealSport was assessed using the
bottom-up financial model created as part of the business planning process,
which reflects the strong growth in monetisation seen through FY22.
This model assumes a monthly average number of unique visitors to the platform
through FY23 of 3.6m from an average of 3.3m in FY22. By way of comparison the
most recent monthly total (in September 2022) was 2.8m, with growth expected
in Q4, with further game releases. Thereafter it is assumed that audience
numbers will increase at an a CAGR of 20% p.a. for the next 2 years, before
levelling off slightly with a 11% and 6% in the following 2 years
respectively.
Revenue has been calculated using a blended rate, factoring in both real time
bidding and direct sale banner advertising, video advertising and cost per
click affiliate revenues, giving an overall rate of 20p per annum in FY23 per
monthly average user.
On this basis, the net present value of future cash flows illustrates a
favorable position and a surplus to the carrying value of goodwill, with the
intangibles recognized in respect of the RealSport acquisition having been
fully amortised. On that basis, no impairment is proposed.
Goodwill and Intangible Assets carried in relation to EpicStream:
Three intangible assets were recognized in respect of the acquisition of
EpicStream:
The existing social audience and related domain authority of the main
EpicStream site (Epicstream.com)
The value of the Magic the Gathering social audience, which has been leveraged
to create a new site (MTGRocks.com); and
The remaining social audience from a Facebook community featuring over 6
million likes.
These assets, net of deferred tax, had a combined value of £0.6m and a
Goodwill value of £0.25m.
The requirement for full impairment testing was assessed through a comparison
of actual cash flows generated from the EpicStream business, against the cash
flow projections used in calculation of the original asset values. Since
acquisition, users, revenue, and profitability on EpicStream and MTG Rocks
have exceeded our original projections, and therefore detailed impairment
testing was not required, and no impairment is proposed.
Goodwill and Intangibles carried in relation to StockInformer (Megit Ltd):
Two separate intangible assets were identified within the Stock Informer
acquisition:
Value of domain authority (affiliate and advertising income): relating to
monetization on Stock Informers sites, based on their reputation and domain
authority; and
Value of technology to be leveraged across other Gfin properties: reflecting
the ability to utilize Stock Informers price and stock availability checking
technology and deploy it across the rest of the Gfinity Digital Media network,
providing live price comparison information to people reading relevant
content.
Future values of both intangible assets were assessed based on expected future
cash flow values of £4.1m over a 4-year period, with both exceeding the
carrying values of the intangible assets at year-end, and thus no impairment
was required.
The Directors expect continued high margin profit from the Stock Informer
business, boosted by growth in the value of the technology across the wider
Gfinity Digital Media Group. On this basis Directors have assessed that no
impairment charge to the goodwill value at year-end of £2.9m is therefore
proposed.
Goodwill and intangibles carried in relation to Siege.gg:
Siege.gg is the leading digital property in the competitive Rainbow 6 Siege
space. They have a strong audience and domain authority, together with
proprietary a statistical database utilized by leading teams, for which a new
licensing structure has recently been introduced and is currently being
trialed with teams. Directors believe that these assets will help drive the
Siege.gg business into profitability in the year to June 24, with larger gains
following from that point.
Deferred Consideration:
On acquisition the value of Siege.gg's domain authority was estimated at
£155,989. A full projection of expected future cash flows from Siege has
been undertaken which indicated the 4-year NPV of £100,215, in comparison to
the carrying value of £113,965. On that basis an impairment charge of
£13,750 is proposed.
The present value of these future cash flows has been estimated at £554k.
As a result, no impairment is proposed to the goodwill value of £0.4m at
year-end.
4. Revenue
The Group's policy on revenue recognition is as outlined in note 2. The year
ending 30 June 2022 included £0.2m included in the contract liability balance
at the beginning of the period (2021: £0.36m). The Group's revenue
disaggregated by primary geographical market is as follows:
Year to 30 June 2022
Gfinity Cevo Megit Total
£ £ £ £
United Kingdom 2,287,335 - 541,755 2,829,090
North America 1,455,497 108,485 - 1,563,982
ROW 865,904 - - 865,904
Total 4,608,737 108,485 541,755 5,258,977
Year to 30 June 2021
Gfinity Cevo Megit Total
£ £ £ £
United Kingdom 4,144,440 - - 4,144,440
North America 902,408 322,741 - 1,225,150
ROW 539,069 - - 539,069
Total 5,585,918 322,741 - 5,908,659
The Group's revenue disaggregated by pattern of revenue recognition and
business unit is as follows:
Year to 30 June 2022
Gfinity Cevo Megit Total
£ £ £ £
Services transferred at 2,913,332 108,485 541,755 3,563,572
a point in time
1,695,405 - - 1,695,405
Services transferred over time
Total 4,608,737 108,485 541,755 5,258,977
Year to 30 June 2021
Gfinity Cevo Megit Total
£ £ £ £
Services transferred at 3,432,959 322,741 - 3,755,700
a point in time
Services transferred over time 2,152,959 - - 2,152,959
Total 5,585,918 322,741 - 5,908,659
As at 30 June 2022 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 2022 Year to 30 June 2021
£ £
Trade Receivables 928,446 984,996
Contract Assets 246,428 244,835
Contract Liabilities 208,715 364,024
Trade receivables are non-interest bearing and are generally on 30-day terms.
Contract assets are initially recognised for revenue earned while the services
are delivered over time or when billing is subject to final agreement on
completion of the milestone. Once the amounts are billed the contract asset is
transferred to trade receivables.
Contract liabilities arise when amounts are paid in advance of the delivery of
the service. These are then transferred to the statement of comprehensive
income as either milestones are completed or work is completed overtime.
Revenue of £0.15m was recognised in the year ending 30 June 2022 that was
held as a contract liability as 30 June 2021. All these amounts were held in
Gfinity.
5. SEGMENTAL INFORMATION
The management consider the group to operate as a single segment following the
integration of Cevo's activities into that of the group (included in Chief
Financial and Operations Officer's Report in Strategic Report) and therefore
no segmental analysis is required.
The Group has one single external customer which have revenue equal to or
greater than 10% of the group's revenue. The revenue from the customer is:
£1.4m. The customer is a major sports rights holder, financial services and
media company.
6. OPERATING EXPENSES
Operating loss is stated after charging:
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Depreciation of property, plant and equipment 112,993 132,478
Depreciation on Right of Use assets - 428,305
Amortisation & impairment of intangible fixed assets 1,631,734 492,700
Goodwill impairment - 901,519
Rentals under short-term leases - 439,621
Staff costs (see note 7) 3,406,569 2,844,336
Costs of inventories expensed - -
Auditors' remuneration for auditing the accounts of the Company 72,000 66,500
Auditors' remuneration for other non-audit services:
- Other services related to taxation 7,229 8,408
- All other services 16,101 21,836
Net foreign exchange (gains)/ losses (54,405) 34,027
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 Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
44 38 39 35
The aggregate payroll costs of staff (including directors) were:
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Wages and salaries 2,514,773 2,253,444
Social security costs 340,929 271,347
Pensions 55,648 53,962
Share based payment s (Note 22) 495,220 265,583
3,406,569 2,844,336
Total remuneration for Directors during the year was £520,141 (2021:
£444,428).
The board of directors comprise the only persons having authority and
responsibility for planning, directing and controlling the activities of the
Group.
8. FINANCE INCOME/COSTS
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Interest income on bank deposits 77 4
Finance lease interest 0 (9,227)
Other interest cost 0 (1,009)
77 (10,232)
9. TAXATION
Major components of taxation expense for the period ended 30 June 2022 are:
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Income Statement
Current tax
Corporation tax charge/ (credit) 84,600 (162,957)
Total current tax 84,600 (162,957)
Deferred tax
Relating to origination and reversal of temporary differences (294,568) (58,972)
Taxation charge/ (credit) reported in the income statement (209,968) (221,929)
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 Company's effective tax rate for the period is as follows:
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Loss on ordinary activities before taxation (3,896,372) (3,845,796)
Profit/ (Loss) multiplied by tax (740,311) (730,701)
Effect of:
Expenses not deductible for tax purposes 102,803 318,906
Movment in unrecognised deferred tax arising from tax losses 676,212 709,763
Movment in unrecognised deferred tax arising from other temporart timing (333,272) (356,940)
differences
Corporation tax charge/ (credit) 84,600 (162,957)
Taxation charge/ (credit) reported in the income statement (209,968) (221,929)
Unrecognised deferred tax asset
The Group has an unrecognised deferred tax asset arising from trading losses
carried forward of £8,663,001 (2021: 10,508,932) calculated at the
substantively enacted Corporation tax rate at the balance sheet date of 19%
(2021: 25%). These trading losses will reverse against future taxable
trading profits and no asset has been recognised due to uncertainties over the
timing and nature of such gains in accordance with IAS 12.
10. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss attributable to
shareholders by the weighted average number of ordinary shares in issue during
the period.
IAS 33 requires presentation of diluted EPS when a Company could be called
upon to issue shares that would decrease earnings per share or increase the
loss per share. For a loss making Company with outstanding share options, net
loss per share would be decreased by the exercise of options and therefore the
effect of options has been disregarded in the calculation of diluted EPS.
Group Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
£ £ £ £
Loss attributable to shareholders from continuing operations (3,984,430) (3,858,482) (4,198,665) (5,739,305)
Number Number Number Number
000's 000's 000's 000's
Weighted average number of ordinary shares 1,122,821 809,795 1,122,821 809,795
Loss per ordinary share for continuing operations (0.00) (0.00) (0.00) (0.01)
11. PROPERTY PLANT AND EQUIPMENT
Group Property Plant and Equipment
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2020 63,143 989,576 1,633,942 2,686,661
Additions - 106,642 - 106,642
Disposals - (85) - (85)
At 30 June 2021 63,143 1,096,133 1,633,942 2,793,218
Depreciation
At 1 July 2020 29,842 918,072 1,097,155 2,045,069
Charge for the period 32,504 88,729 439,549 560,783
At 30 June 2021 62,346 1,006,801 1,536,704 2,605,852
Net book value
At 30 June 2021 797 89,331 97,238 187,366
At 30 June 2020 33,301 71,505 536,787 641,594
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2021 63,143 1,096,133 1,633,942 2,793,218
Additions - 74,137 - 74,137
At 30 June 2022 63,143 1,170,270 1,633,942 2,867,355
Depreciation
At 1 July 2021 62,346 1,006,801 1,536,704 2,605,852
Charge for the period 797 106,510 5,686 112,993
At 30 June 2022 63,143 1,113,331 1,542,390 2,718,845
Net book value
At 30 June 2022 - 56,958 91,552 148,510
At 30 June 2021 797 89,331 97,238 187,366
Company Property Plant and Equipment
Office equipment Computer & production equipment Leasehold Improvement Total
£ £ £ £
Cost
At 1 July 2020 51,743 962,994 1,633,941 2,648,678
Additions - 105,327 - 105,327
Disposals - (85) - (85)
At 30 June 2021 51,743 1,068,236 1,633,941 2,753,920
Depreciation
At 1 July 2020 27,280 908,762 1,097,155 2,033,197
Charge for the period 12,717 88,729 439,549 540,996
Disposals - - - -
At 30 June 2021 39,997 997,491 1,536,704 2,574,193
Net book value
At 30 June 2021 11,746 70,745 97,237 179,727
At 30 June 2020 24,463 54,232 536,786 615,481
Cost
At 1 July 2021 51,743 1,068,236 1,633,941 2,753,920
Additions - 74,138 - 74,138
At 30 June 2022 51,743 1,142,374 1,633,941 2,828,058
Depreciation
At 1 July 2021 39,997 997,491 1,536,704 2,574,193
Charge for the period 9,546 93,555 5,686 108,787
Disposals - - - -
At 30 June 2022 49,543 1,091,046 1,542,390 2,682,980
Net book value
At 30 June 2022 2,200 51,328 91,551 145,079
At 30 June 2021 11,746 70,745 97,237 179,727
12. 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
At 30 June 2022 4,714,399
At 30 June 2021 1,903,790
Company
£
Cost
At 1 July 2021 2,568,417
Additions 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
At 30 June 2022 2,274,565
At 30 June 2021 2,568,417
Goodwill of £2,439,834 has been recognised in the Group financial statements
following the acquisition of Megit Ltd Inc, on 14th September 2021 (note 26).
Goodwill of £370,775 has been recognised in the Company financial statements
following the acquisition of trade and assets of Siege Inc, on 8(th) September
2021 (note 26).
Refer to Note 3 for details of impairment tests.
13. INTANGIBLE FIXED ASSETS
Group
Customer Relationships RealSport Platform Cevo Gaming Platform Assets Under Construction Web Platforms Total
£ £ £ £ £ £
Cost
At 1 July 2020 1,198,661 935,518 281,383 57,724 - 2,473,286
Additions - - - - 7,195 7,195
Acquisitions through business combination - - - - 576,822 576,822
Disposals - - - - - -
Exchange differences - - - - - -
1.
At 30 June 2021 1,198,661 935,518 281,383 57,724 584,017 3,057,303
-
Amortisation -
At 1 July 2020 975,611 718,773 165,738 - - 1,860,122
Charge for the period 108,118 216,745 56,431 - 111,406 492,700
Disposals - - - - - -
Impairment - - - - - -
At 30 June 2021 1,083,729 935,518 222,169 - 111,406 2,352,822
Net book value
At 30 June 2021 114,932 - 59,214 57,724 472,612 704,482
At 30 June 2020 223,050 216,745 115,645 57,724 - 613,164
At 30 June 2021
1,198,661
935,518
281,383
57,724
584,017
3,057,303
-
Amortisation
-
At 1 July 2020
975,611
718,773
165,738
-
-
1,860,122
Charge for the period
108,118
216,745
56,431
-
111,406
492,700
Disposals
-
-
-
-
-
-
Impairment
-
-
-
-
-
-
At 30 June 2021
1,083,729
935,518
222,169
-
111,406
2,352,822
Net book value
At 30 June 2021
114,932
-
59,214
57,724
472,612
704,482
At 30 June 2020
223,050
216,745
115,645
57,724
-
613,164
Customer Relationships RealSport Platform Cevo Gaming Platform Assets Under Construction Web Platforms Engage Total
£ £ £ £ £ £ £
Cost
At 1 July 2021 1,198,661 935,518 281,383 57,724 584,017 - 3,057,303
Additions - - - - 685,951 685,951
Acquisitions through business combination (Note 26) - - - - 4,816,443 4,816,443
Disposals - - - - - - -
Exchange differences - - - - - - -
At 30 June 2022 1,198,661 935,518 281,383 57,724 5,400,460 685,951 8,559,697
Amortisation -
At 1 July 2021 1,083,729 935,518 222,169 - 111,406 - 2,352,822
Charge for the period 108,118 - 56,431 - 1,390,196 1,554,745
Disposals - - - - - - -
Impairment - - - 57,724 19,265 - 76,989
At 30 June 2022 1,191,847 935,518 278,600 57,724 1,520,867 - 3,984,556
Net book value
At 30 June 2022 6,814 - 2,783 - 3,879,593 685,951 4,575,141
At 30 June 2021 114,932 - 59,214 57,724 472,612 - 704,481
1,198,661
935,518
281,383
57,724
5,400,460
685,951
8,559,697
Amortisation
-
At 1 July 2021
1,083,729
935,518
222,169
-
111,406
-
2,352,822
Charge for the period
108,118
-
56,431
-
1,390,196
1,554,745
Disposals
-
-
-
-
-
-
-
Impairment
-
-
-
57,724
19,265
-
76,989
At 30 June 2022
1,191,847
935,518
278,600
57,724
1,520,867
-
3,984,556
Net book value
At 30 June 2022
6,814
-
2,783
-
3,879,593
685,951
4,575,141
At 30 June 2021
114,932
-
59,214
57,724
472,612
-
704,481
Company
Assets Under Construction Web Platforms Total
£ £ £
Cost
At 1 July 2020 57,724 - 57,724
Additions - 7,195 7,195
Acquisitions through business combination - 576,822 576,822
Disposals - - -
At 30 June 2021 57,724 584,017 641,741
Amortisation
At 1 July 2020 - - -
Charge for the period - 111,406 111,406
Disposals - - -
At 30 June 2021 - 111,406 111,406
Net book value
At 30 June 2021 57,724 472,611 530,336
At 30 June 2020 57,724 - 57,724
£
£
£
Cost
At 1 July 2020
57,724
-
57,724
Additions
-
7,195
7,195
Acquisitions through business combination
-
576,822
576,822
Disposals
-
-
-
At 30 June 2021
57,724
584,017
641,741
Amortisation
At 1 July 2020
-
-
-
Charge for the period
-
111,406
111,406
Disposals
-
-
-
At 30 June 2021
-
111,406
111,406
Net book value
At 30 June 2021
57,724
472,611
530,336
At 30 June 2020
57,724
-
57,724
Assets Under Construction Web Platforms Proprietary Esports Platform Total
£ £ £ £
Cost
At 1 July 2021 57,724 584,017 - 641,741
Additions - - 685,951 685,951
Acquisitions through business combination - 155,989 - 155,989
Disposals - - - -
At 30 June 2022 57,724 740,006 685,951 1,483,681
Amortisation
At 1 July 2021 - 111,406 - 111,406
Charge for the period - 235,738 - 235,738
Disposals - - - -
Impairment 57,724 19,265 - 76,989
At 30 June 2022 57,724 366,409 - 424,133
Net book value
At 30 June 2022 - 373,597 685,951 1,059,549
At 30 June 2021 57,724 - - 57,724
At 30 June 2022
57,724
740,006
685,951
1,483,681
Amortisation
At 1 July 2021
-
111,406
-
111,406
Charge for the period
-
235,738
-
235,738
Disposals
-
-
-
-
Impairment
57,724
19,265
-
76,989
At 30 June 2022
57,724
366,409
-
424,133
Net book value
At 30 June 2022
-
373,597
685,951
1,059,549
At 30 June 2021
57,724
-
-
57,724
The investment shown in the Proprietary Esports Platform reflects the costs of
staff and contractors dedicated to the adaptation of Gfniity's underlying
esports platform, in a licensable SaaS based product, which can be deployed at
scale to multiple clients. Directors expect this product to form a
significant component of the Group's future financial success.
14. INVESTMENT IN SUBSIDIARIES
Company
Year to 30 June 2022 Year to 30 June 2021
£ £
At 1 July - 4,466,133
Reclassifying investment in subsidiary to goodwill - (2,307,634)
Impairment - (2,158,499)
Additions 7,100,297 -
At 30 June 7,100,297 -
The addition to investments in subsidiaries represented the purchase of Megit
Ltd on 14th September 2021. The fair value of consideration at acquisition was
£7,100,288 for 100% of the share capital of Megit Ltd. The remaining £9
represents ownership of 100% and 72% of the share capital in Athlos Game
Technologies Ltd and AFG-Games Ltd respectively.
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
Athlos Game Technologies Ltd England Ordinary Shares 100% Software as a service
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. Athlos Game Technologies Ltd registered office address is
16 Great Queen Street, London, England, WC2B 5AH. AFG-Games Ltd registered
office address is 77 Fulham Palace Road, Foundry Building, Smiths Square,
London, England, W6 8AF.
RealSM, Athlos Games Technologies and AFG-Games 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 guarantee is enforceable against the parent
undertaking by any person to whom the subsidiary company is liable in respect
of those liabilities.
15. TRADE AND OTHER RECEIVABLES
Group Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
£ £ £ £
Trade receivables 1,495,773 1,313,447 1,445,075 1,272,742
Provision for expected credit loss (7,370) (356,480) (243) (356,480)
1,488,403 956,967 1,444,832 916,262
Other receivables - 151,150 - 151,150
Prepayments and accrued income 478,372 478,734 351,028 450,704
Amounts due in less than one year 1,966,775 1,586,850 1,795,860 1,518,116
Amounts due from group undertakings - - 82,856 533,480
Other receivables 2,118 - 2,114 -
Total 1,968,893 1,586,850 1,880,830 2,051,596
Amounts due from group undertakings of £82,856 are considered to be due in
more than one year (2021: £533,480).
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.
16. CASH AND CASH EQUIVALENTS
Group Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
£ £ £ £
Cash at bank and in hand 2,141,361 1,375,873 1,361,279 1,329,815
Total 2,141,361 1,375,873 1,361,279 1,329,815
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.
17. DEFERRED TAX LIABILITIES
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
At 1 July 127,835 92,059
Arising on business combination (Note 26) 1,064,308 94,748
Credited to profit or loss (294,568) (58,972)
At 30 June 897,574 127,835
The provision for deferred taxation is made up as follows:
Temporary timing differences on intangible assets 897,574 127,835
Company
Year to 30 June 2022 Year to 30 June 2021
£ £
At 1 July 94,748 -
Arising on business combination (Note 26) 1,064,308 115,543
Credited to profit or loss (263,304) (20,795)
At 30 June 895,751 94,748
Temporary timing differences on intangible assets 895,751 94,748
18. ISSUED CAPITAL
The Company has a single class of ordinary share with nominal value of £0.001
each. Movements in the issued share capital of the Company can be summarised
as follows:
As at 30 June 2020 725,868,253 725,868
Issued between 6 July 2020 and 04 June 2021 at £0.01 204,644,995 204,645
As at 30 June 2021 930,513,248 930,513
Issued on 8 September 2021 at £0.010 9,000,000 9,000
Issued on 13 September 2021 at £0.04 82,500,000 82,500
Issued on 13 September 2021 at £0.04 62,500,000 62,500
Issued on 13 September 2021 at £0.010 13,750,000 13,750
Issued on 2 December 2021 at £0.010 1,433,331 1,433
Issued on 18 March 2022 at £0.0125 104,200,000 104,200
Issued on 4 April 2022 at £0.0125 111,800,000 111,800
As at 30 June 2022 1,315,696,579 1,315,697
19. TRADE AND OTHER PAYABLES
Group Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
£ £ £ £
Non-current liabilities
Other payables (deferred consideration) 840,751 254,986 254,986
840,751
Deferred tax liabilities 897,575 - 895,751 -
1,738,326 254,986 1,736,502 254,986
Current liabilities
Trade payables 571,389 680,419 533,395 634,299
Other taxation and social security 145,021 65,776 144,300 65,776
Accrued expenditure and deferred revenue 1,033,303 1,105,526 896,299 1,105,526
Amounts owed to group undertakings - - - -
Other payables 1,293,550 - 977,890 -
3,043,263 1,851,720 2,551,884 1,805,601
Total 4,781,589 2,106,706 4,288,386 2,060,587
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.
20. NOTES TO THE CASH FLOW STATEMENT
Group
Year to 30 June 2022 Year to 30 June 2021
£ £
Cash flows from operating activities
Loss for the financial year (3,980,972) (3,845,595)
Depreciation of property, plant and equipment 112,993 132,478
Depreciation on right of use assets - 428,305
Amortisation of intangible fixed assets 1,554,745 492,700
Impairment of intangible fixed assets 76,989 -
Goodwill impairment - 901,519
Interest Received (77) (4)
Interest Payable - 10,236
Share based payments 495,220 265,583
(Increase) in Inventories - -
(Increase)/ decrease in trade and other receivables (524,205) (280,359)
Increase/ (decrease) in trade and other payables (110,916) 300,020
Disposal of fixed assets - (85)
Gain on disposal of Associate (45,090) (459,706)
Corporation tax charge (294,568) 227,004
Corporation tax (paid)/ R&D credits received 142,162 (221,929)
Cash used by operating activities (2,573,719) (2,049,833)
Net cash used by operating activities (2,573,719) (2,049,833)
Company
30-Jun-22 30-Jun-21
£ £
Cash flows from operating activities
Loss for the financial year (4,198,665) (5,739,305)
Depreciation of property, plant and equipment 108,787 112,691
Depreciation on Right of Use assets - 428,305
Amortisation of intangible fixed assets 235,738 111,406
Impairment of intangible fixed assets 76,989 -
Investment impairment - 2,158,499
Interest Received (1) (4)
Interest Payable - 10,236
Good impairment 664,627 -
Gain on disposal of Associate (45,090) (459,706)
Share based payments 495,220 265,583
(Increase)/ decrease in trade and other receivables 28,603 707,362
Increase/ (decrease) in trade and other payables (556,176) 300,112
Loss on disposal of fixed assets - 85
Taxation charge (263,304) (162,957)
Corporation tax (paid)/ R&D credits received 142,162 227,004
Net Operating Cashflow (3,311,110) (2,040,690)
Net cash used by operating activities (3,311,110) (2,040,690)
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company uses a limited number of financial instruments, comprising cash,
short-term deposits, and various items such as trade receivables and payables,
which arise directly from operations. The Company does not trade in financial
instruments. All of the Company's financial instruments are measured at
amortised cost.
The Company's activities expose it to a variety of financial risks: market
risk (including currency risk and interest rate risk), credit risk and
liquidity risk.
Credit risk
The Company's principal financial assets are bank balances and cash, trade and
other receivables.
Bank balances and cash are held by banks with high credit ratings assigned by
independent credit rating agencies. Management is of the opinion that cash
balances do not represent a significant credit risk.
As the Group does not hold security against trade and other receivables, its
credit risk exposure is as follows:
Group Company
Year to 30 June 2022 Year to 30 June 2021 Year to 30 June 2022 Year to 30 June 2021
£ £ £ £
1,968,893 1,586,850 1,880,830 2,051,596
The trade receivables balance represents amounts due from third parties. At
the balance sheet date, the Group's trade receivables totalled £1,495,773
less a provision of £7,370 (20201: £1,313,447 less a provision of
£356,480). The Company's receivables include £82,856 of inter-company
funding (2021: £533,480). The Company's trade receivables totalled
£1,455,075 less a provision for doubtful debt of £243 (2021:
£1,272,742 less a provision for doubtful debt of £356,480).
There are no significant overdue but not impaired trade receivables at the
balance sheet date. The Company balance sheet includes inter-company
receivables which are not considered to be at risk as the Company retains
control over the debtor however it is not anticipated that the Group companies
will repay these amounts in the next 12 months.
At the balance sheet date there were no receivables due from any customer
representing a concentration of credit risk.
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 2022 Year to 30 June 2021
USD ($) GBP (£) USD ($) GBP (£)
Trade and other receivables 53,048 1,446,932 57,048 1,168,426
Accrued income 41,018 444,668 39,284 216,805
Cash 98,695 2,060,264 56,248 1,335,739
Trade and other payables 70,212 4,723,896 58,997 2,192,446
Derivative financial instruments - - - -
Net current assets/ liabilities 262,973 8,675,760 211,577 4,913,418
Company
Year to 30 June 2022 Year to 30 June 2021
USD ($) GBP (£) USD ($) GBP (£)
Trade and other receivables 896,172 708,454 460,599 587,619
Amounts due from Group Undertakings - 82,856 747,680 -
Accrued income - 351,028 - 216,805
Cash 71,416 1,302,597 122,703 1,242,264
Trade and other payables 99,960 4,206,250 - 2,155,334
Derivative financial instruments - - - -
Net current assets/ liabilities 1,067,548 6,651,185 1,330,982 4,202,023
Financial liabilities included in the balance sheet relate to the IAS 39
category of other financial liabilities held at amortised cost.
Assets relate to loans and receivables with the exception of other receivables
and prepayments which are classified as non-financial assets.
Fair value estimation
The aggregate fair values of all financial assets and liabilities are
consistent with their carrying values due to the relatively short-term
maturity of these financial instruments.
As cash is held at floating interest rates, its carrying value approximates to
fair value.
Capital management
The Company is funded entirely through shareholders' funds.
If financing is required, the Board will consider whether debt or equity
financing is more appropriate and proceed accordingly. The Company is not
subject to any externally imposed capital requirements.
22. SHARE BASED PAYMENTS
Equity-settled share option plans
Options
The Company has a share option scheme for employees of the Group.
The tables below summarises the exercise terms of the various options over
Ordinary shares of £0.001 each which had been granted, and were still
outstanding, as at 30 June 2022.
LTIP options Number Weighted average exercise price (£)
Shares options as at 30 June 2020 61,693,027 0.0486
Shares options granted 49,400,000 0.0409
Share options forfeited (4,050,001) 0.0100
Share options exercised (10,866,663) 0.0110
LTIP share options as at 30 June 2021 96,176,363 0.0556
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
Options for non-employee services
Non-market condition shares Number Weighted average exercise price (£)
Shares options as at 30 June 2020 7,500,000 0.20
Shares options granted 0 0
Share options lapsed (3,500,000) 0.20
Share options as at 30 June 2021 4,000,000 0.20
Shares options as at 30 June 2021 4,000,000 0.20
Shares options granted 0 0
Share options lapsed 0 0.00
Share options as at 30 June 2022 4,000,000 0.20
Options vest over periods defined in the respective option agreements and at
the discretion of the board of directors. 37,750,016 options vested during the
year (2021: 37,750,016).
Of the options outstanding 36,000,000 (2021: 38,000,000) are held by
directors. Full details of all options held by directors are contained within
the Directors' Remuneration Report.
The principal assumptions input into the Black Scholes model to calculate the
value of LTIP share options issued for compliance with IFRS 2 "Share Based
Payments" are included below, where applicable.
Year to 30 June 2022 Year to 30 June 2021
Weighted average exercise price £ 0.0483 £ 0.0556
Average expected life 1.0 years 1.0 years
Expected volatility 234.00% 86.62%
Risk free rate 1.53% 0%
Expected dividend yield 0% 0%
All options were granted at an exercise price equivalent to the market price
at the date of grant. The weighted average exercise price of LTIP options
outstanding at 30 June 2022 was £0.0496 (2021: £0.0496). The weighted
average fair value of options issued during the period was £0.0404 (2021:
£0.0404).
The average expected life is based on directors' best estimate taking into
account the vesting conditions of the options.
Expected volatility has been calculated with reference to the actual
volatility of the share price since over the year prior to the date of grant.
The fair value of the non-employee services options has been based on the fair
value of the services provided at the date the services were provided. This
equates to a fair value of options issued in the year £nil (2021: £nil).
All options are held in Gfinity plc with no options held over any of the
subsidiaries
23. 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 2020 203,695,500 0.010
Warrants granted 0 0.000
Warrants exercised (183,645,000) 0.010
Warrants lapsed/forfeited 0 0.000
Warrants as at 30 June 2021 20,050,500 0.0100
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
216,000,000 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.
24. RELATED PARTY TRANSACTIONS
The Directors Remuneration Report provides details of share options issued to
certain directors in the period. In addition to the share options granted in
the year, no warrants were exercised by the directors.
CEVO: There was a management recharge from Gfinity to CEVO of £0 (2021:
£13,409) and a recharge from CEVO to Gfinity for technology services of
£234,959 (2021: £215,274). There were cash advances to and expenses paid on
behalf of CEVO by Gfinity of £5,766 (2021: £0). At the balance sheet date
the intercompany loan due to Gfinity from CEVO was £567,084 (2021:
£533,480).
Real Sport: There were cash advances to and expenses paid on behalf of Real
Sport by Gfinity of £5,979 (2021: £5,734). At the balance sheet date the
intercompany loan due to Gfinity from Real Sport was £5,979 (2021:
£952,675).
Megit: There were cash advances to and expenses paid on behalf of Megit by
Gfinity of £109,718 (2021: £0) and a recharge from Megit to Gfinity for
services of £32,842 (2021: £0). At the balance sheet date the intercompany
loan due to Gfinity from Real Sport was £76,876 (2021: £0).
During the period there was a gain of £459,706 from disposal of Gfinity
Esports Australia as mentioned in Note 24.
25. GAIN ON DISPOSAL OF ASSOCIATE
During the six month period to 31 December 2021, the process of winding up
Gfinity Esports Australia (PTY), in which Gfinity held a 30% shareholding, was
completed. On completion of this process, funds remaining in the business were
re-distributed to shareholders. With all amounts invested in this venture
having previously been expensed, his resulted in a one-off gain on cessation
of the business of £45,090.
26. BUSINESS COMBINATIONS
Megit Ltd
Acquisition of Megit Ltd
On 14 September 2021 Gfinity PLC acquired 100% shares of Megit Ltd, owner of
the Stock Informer brand. Stock Informer has built up a market leading
position as an authority on hard-to-find items, with a particular focus to
products of relevance to gamers. Its proprietary technology enables real-time
updates on availability and pricing of items, from which consumers can click
through to the relevant retailers to make purchases, allowing the business to
drive revenue through affiliate commissions.
Purchase consideration
Initial consideration £
Shares (62,500,000 Ordinary shares at £0.04) 2,500,000
Cash 2,500,000
Acquisition cost 51,250
Total initial consideration 5,051,250
Deferred consideration
Contingent consideration at fair value 1,018,865
Total deferred consideration 1,018,865
Total consideration payable 6,070,115
Contingent consideration
Contingent consideration is payable based on revenue generated from the
acquired entity. The amount payable is calculated at 30% of relevant revenues
received in the first, second and third 12 month periods after the acquisition
date, up to a maximum of £1,800,000 across the 3 year period. The fair value
of the contingent consideration is currently estimated to be £1,379,546 based
on forecast revenues at the date of the acquisition.
Net assets acquired
The fair values of the assets and liabilities of the acquired of Megit Ltd as
at the date of acquisition are as follows:
£
Intangible assets: domain authority 3,944,713
Intangible assets: technology 715,741
Deferred tax liability (1,030,174)
Net identifiable assets acquired 3,630,280
Add: Goodwill 2,439,834
Net assets acquired 6,070,114
The goodwill that arises from the business combination reflects the
profitability of the acquired trade and assets and the enhanced growth
prospects for the combined business. None of the goodwill is expected to be
deductible for tax purposes.
Siege.gg
Acquisition of Siege.gg
On 8 September 2021 Gfinity PLC acquired trade and assets of Siege.gg, a
highly-engaged community for the Rainbow Six Siege game and owner of the
leading proprietary statistical dataset in respect of the competitive scene
around that game.
Purchase consideration
Initial consideration £
Shares (9,000,000 Ordinary shares at £0.0445) 400,500
Acquisition cost 4,380
Total initial consideration 404,880
Deferred consideration
Contingent consideration at fair value 87,750
Total deferred consideration 87,750
Total consideration payable 513,558
Contingent consideration
Contingent consideration is payable based on revenue generated from the
acquired assets. The amount payable is calculated at 30% of relevant revenues
received in the first and second 12 month periods after the acquisition date,
up to a maximum of 1,500,000 across the two-year period. The fair value of the
contingent consideration is currently estimated to be £108,678 based on
forecast revenues at the date of the acquisition.
Net assets acquired
The fair values of the assets and liabilities of the acquired of Megit Ltd as
at the date of acquisition are as follows:
£
Intangible assets: statistical data and domain authority 155,989
Deferred tax liability (34,134)
Net identifiable assets acquired 121,855
Add: Goodwill 370,775
Net assets acquired 492,630
The goodwill that arises from the business combination reflects the
profitability of the acquired trade and assets and the enhanced growth
prospects for the combined business. None of the goodwill is expected to be
deductible for tax purposes.
1 (#_ftnref1) Adjusted operating loss is before interest, tax, depreciation,
amortisation, impairment and the share-based payment expense.
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