TIDMGFIN
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 GBP2.0m
(2021: GBP2.7m), building on reductions of 50% in 2021 and 36% in
2020.
-- Revenue of GBP5.3m (2021: GBP5.7m), a decrease of 8%, but
including a 33% increase in revenue attached to Gfinity's owned
audience, technology and esports properties.
-- Gross profit of GBP2.7m (2021: GBP2.6m), a 4% increase,
despite the reduction in revenue, reflecting the higher margins
attached to Gfinity owned properties.
-- Adjusted administrative expenses of GBP4.7m (2021: GBP5.4m) down 13% year on year.
-- Closing year-end cash of GBP2.1m, with a further GBP2.7m 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
-- GBP0.7m 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.
S
Enquiries :
Gfinity plc www.gfinityplc.com
John Clarke, CEO ir@gfinity.net
Canaccord Genuity Limited (AIM Nominated Tel: +44 (0)207
Adviser & Broker) 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 GBP5.3m, 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
GBP2m). 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 GBP2.8m, 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
GBP2.0m, 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 GBP5.3m 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 GBP2.7m (2021: GBP2.6m), while
Adjusted Administrative Expenses actually reduced by 13% to GBP4.7m
(2021: GBP5.4m), again reflecting a third consecutive annual
reduction.
Revenue and Cost of Sales:
Gfinity Digital Media:
GDM revenue for the year of GBP2.8m represented an increase of
75% year on year (2021: GBP1.6m). 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 GBP0.5m of revenue and
GBP0.4m 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 GBP1.6m, 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 GBP0.7m to GBP0.2m. The programme required a net investment of
GBP0.1m (2021: GBP0.1m). 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 GBP2.1m (2021: GBP3.8m). 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 GBP0.4m (2021: GBP0.2m).
This delivered a gross profit of GBP0.2m (2021: GBP0.0m).
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 GBP0.5m, (2021: GBP0.3m)
-- Amortisation of intangibles and adjustments to goodwill and
intangible carrying values of GBP1.6m (2021: GBP1.5m)
-- Depreciation of owned assets of GBP0.1m (2021: GBP0.6m)
In the year to June 2022, Adjusted Administrative Expenses were
GBP4.7m (2021: GBP5.4m), 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 GBP2.0m (2021:
GBP2.7m). 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
GBP1.9m (2021: GBP2.3m).
Cash and Cash Equivalents:
As at 30 June 2022, Gfinity had cash of GBP2.1m (2021: GBP1.4m).
Further to this, there were GBP2.7m 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 GBP2.5m in cash
o GBP2.5m 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 GBP1.8m.
-- 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 GBP396k
o An earn out of 30% of revenue in each of the first 2 years
post acquisition, capped at a maximum value of GBP1.5m.
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 Our key audit procedures included:
goodwill and intangible assets
* obtaining the underlying purchase documents for the
At 30 June 2022, the Group had acquisitions undertaken in the year along with
goodwill of GBP4,714,399 (2021: management's accounting assessments;
GBP1,903,790) and intangible assets
of GBP4,575,141 (2021: GBP704,481)
largely arising from the acquisition * isolating and challenging key judgements applied to
of a number of businesses in recent acquisition accounting including the determination of
years including Megit Limited and contingent consideration, the valuation basis for
the trade and assets of Siege.gg newly recognised intangible assets and the basis for
which were acquired in the year. deferred taxation on newly recognised intangible
assets;
Both of these acquisitions gave
rise to the recognition of goodwill
and intangible assets during the * assessing the appropriateness of the VIU calculations
year. The recognition of these used by the management to estimate recoverable amount
intangible assets required the of CGUs;
exercise of judgement over their
valuation, and the recognition
of goodwill required judgement * reconciling key input data applied in the VIU
over the future contingent consideration calculations to reliable supporting evidence;
payable.
For the purpose of assessing impairment * challenging the reasonableness of key assumptions
on goodwill and other intangible based on our knowledge and understanding of the
assets arising from business combinations, business and industry; and
these assets were allocated to
cash generating units ('CGU') and
the recoverable amounts of the * obtaining evidence of the commercial feasibility of
CGUs were determined with reference the projects supported by the recognised intangible
to value-in-use (the 'VIU') calculations assets.
using cash flow forecasts. In carrying
out impairment assessments, significant
management judgement was used to
determine the key assumptions underlying Based on our procedures, we
the VIU calculations. noted no material misstatement
in the carrying value of goodwill
We have identified the recognition or intangible assets.
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 GBP203,000
--------------------------------------------------
How we determined 5% of Loss on ordinary activities before
it tax
--------------------------------------------------
Rationale for benchmark We deem "Loss on ordinary activities
applied 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 GBP10,150 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 Year to
30 June 2022 30 June 2021
GBP GBP
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 Year to
30 June 2022 30 June 2021
GBP GBP
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
GBP GBP
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
GBP GBP
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 GBP4,198,665 (2021: loss of GBP5,739,305).
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 Share Share Retained Forex Total
shares premium option earnings NCI equity
reserve
GBP GBP GBP GBP GBP GBP
GBP
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 (51,283,669) 3 (21,958) 8,766,715
Company Statement of Changes in Equity
Ordinary Share Share Accumulated Total
shares premium option Deficit equity
reserve
GBP GBP GBP GBP GBP
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 Year to 30
June 2022 June 2021
GBP GBP
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 received 8 77 4
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 3 -
controlling
interest
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 Year to
June 2022 30 June 2021
GBP GBP
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 received 8 1 4
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 GBP 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 3 years straight line
combination
----------------------
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
GBP0.6m and a Goodwill value of GBP0.25m.
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 GBP4.1m 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 GBP2.9m 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 GBP155,989. A full projection of expected future cash
flows from Siege has been undertaken which indicated the 4-year NPV
of GBP100,215, in comparison to the carrying value of GBP113,965.
On that basis an impairment charge of GBP13,750 is proposed.
The present value of these future cash flows has been estimated
at GBP554k. As a result, no impairment is proposed to the goodwill
value of GBP0.4m 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 GBP0.2m included in the
contract liability balance at the beginning of the period (2021:
GBP0.36m). The Group's revenue disaggregated by primary
geographical market is as follows:
Year to 30 June 2022
Gfinity Cevo Megit Total
GBP GBP GBP GBP
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
GBP GBP GBP GBP
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
GBP GBP GBP GBP
Services transferred
at
a point in time 2,913,332 108,485 541,755 3,563,572
Services transferred
over time 1,695,405 - - 1,695,405
Total 4,608,737 108,485 541,755 5,258,977
================== ================ ================ ==================
Year to 30 June 2021
Gfinity Cevo Megit Total
GBP GBP GBP GBP
Services transferred
at
a point in time 3,432,959 322,741 - 3,755,700
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 Year to 30 June
2022 2021
GBP GBP
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 GBP0.15m 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: GBP1.4m. 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 Year to 30
June 2022 June 2021
GBP GBP
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 Year to 30 Year to 30 Year to 30
June 2022 June 2021 June 2022 June 2021
44 38 39 35
=========== =========== =========== ===========
The aggregate payroll costs of staff (including directors)
were:
Group
Year to 30 June Year to 30 June
2022 2021
GBP GBP
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 GBP520,141
(2021: GBP444,428).
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 Year to 30 June
2022 2021
GBP GBP
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 Year to 30
2022 June 2021
GBP GBP
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 Year to
June 2022 30 June 2021
GBP GBP
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 differences (333,272) (356,940)
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 GBP8,663,001 (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 Year to Year
Year to 30 June 30 June to 30
30 June 2022 2021 2022 June 2021
GBP GBP GBP GBP
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 Leasehold Total
& production Improvement
equipment
GBP GBP GBP GBP
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 Leasehold Total
& production Improvement
equipment
GBP GBP GBP GBP
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 Computer Leasehold Total
equipment & production Improvement
equipment
GBP GBP GBP GBP
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
GBP
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
GBP
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 GBP2,439,834 has been recognised in the Group
financial statements following the acquisition of Megit Ltd Inc, on
14th September 2021 (note 26).
Goodwill of GBP370,775 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 RealSport Cevo Assets Web Total
Relationships Platform Gaming Under Construction Platforms
Platform
GBP GBP GBP GBP GBP GBP
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
Customer RealSport Cevo Assets Web Engage Total
Relationships Platform Gaming Under Platforms
Platform Construction
GBP GBP GBP GBP GBP GBP GBP
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
Company
Assets Under Web Platforms Total
Construction
GBP GBP GBP
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 Web Platforms Proprietary Total
Under Construction Esports Platform
GBP GBP GBP GBP
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
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 Year to 30
June 2022 June 2021
GBP GBP
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 GBP7,100,288 for 100% of the share
capital of Megit Ltd. The remaining GBP9 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 Nature of business
undertaking incorporation rights
and capital held
CEVO Inc. USA Ordinary 100% IT Development
shares and Tournament
and event operator
RealSM Limited England Ordinary 100% Online media
Shares
Megit Limited England Ordinary 100% eCommerce and affiliate
Shares revenues
Athlos Game England Ordinary 100%
Technologies Shares Software as a service
Ltd
England Ordinary 72%
AFG-Games Ltd Shares 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 Year to Year Year to
30 June 2022 30 June to 30 30 June
2021 June 2022 2021
GBP GBP GBP GBP
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 GBP82,856 are considered
to be due in more than one year (2021: GBP533,480).
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 Year to Year to Year to
30 June 2022 30 June 2021 30 June 2022 30 June 2021
GBP GBP GBP GBP
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 Year to 30
June 2022 June 2021
GBP GBP
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 Year to
June 2022 30 June 2021
GBP GBP
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 GBP0.001 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 GBP0.01 204,644,995 204,645
As at 30 June 2021 930,513,248 930,513
Issued on 8 September 2021 at GBP0.010 9,000,000 9,000
Issued on 13 September 2021 at GBP0.04 82,500,000 82,500
Issued on 13 September 2021 at GBP0.04 62,500,000 62,500
Issued on 13 September 2021 at GBP0.010 13,750,000 13,750
Issued on 2 December 2021 at GBP0.010 1,433,331 1,433
Issued on 18 March 2022 at GBP0.0125 104,200,000 104,200
Issued on 4 April 2022 at GBP0.0125 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
Year to 30 30 June Year to Year to
June 2022 2021 30 June 2022 30 June 2021
GBP GBP GBP GBP
Non-current liabilities
Other payables
(deferred consideration) 840,751 254,986 840,751 254,986
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 Year to
30 June 2022 30 June 2021
GBP GBP
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
GBP GBP
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 Year to 30 Year to 30 Year to 30
June 2022 June 2021 June 2022 June 2021
GBP GBP GBP GBP
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 GBP1,495,773 less a provision of GBP7,370 (20201:
GBP1,313,447 less a provision of GBP356,480). The Company's
receivables include GBP82,856 of inter-company funding (2021:
GBP533,480). The Company's trade receivables totalled GBP1,455,075
less a provision for doubtful debt of GBP243 (2021: GBP1,272,742
less a provision for doubtful debt of GBP356,480).
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 (GBP) USD ($) GBP (GBP)
Trade and other
receivables 53,048 1,446,932 57,048 1,168,426
Accrued income 41,018 444,668 39,284 216,805
Cash 98,695 2,060,264 56,248 1,335,739
Trade and other
payables 70,212 4,723,896 58,997 2,192,446
Derivative financial - - - -
instruments
Net current assets/
liabilities 262,973 8,675,760 211,577 4,913,418
Company
Year to 30 June 2022 Year to 30 June 2021
USD ($) GBP (GBP) USD ($) GBP (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 GBP0.001 each which had been
granted, and were still outstanding, as at 30 June 2022.
LTIP options Number Weighted average
exercise price
(GBP)
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
(GBP)
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 Year to 30
June 2022 June 2021
Weighted average exercise price GBP 0.0483 GBP 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 GBP0.0496
(2021: GBP0.0496). The weighted average fair value of options
issued during the period was GBP0.0404 (2021: GBP0.0404).
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 GBPnil (2021: GBPnil).
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 (GBP)
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
GBP0 (2021: GBP13,409) and a recharge from CEVO to Gfinity for
technology services of GBP234,959 (2021: GBP215,274). There were
cash advances to and expenses paid on behalf of CEVO by Gfinity of
GBP5,766 (2021: GBP0). At the balance sheet date the intercompany
loan due to Gfinity from CEVO was GBP567,084 (2021:
GBP533,480).
Real Sport: There were cash advances to and expenses paid on
behalf of Real Sport by Gfinity of GBP5,979 (2021: GBP5,734). At
the balance sheet date the intercompany loan due to Gfinity from
Real Sport was GBP5,979 (2021: GBP952,675).
Megit: There were cash advances to and expenses paid on behalf
of Megit by Gfinity of GBP109,718 (2021: GBP0) and a recharge from
Megit to Gfinity for services of GBP32,842 (2021: GBP0). At the
balance sheet date the intercompany loan due to Gfinity from Real
Sport was GBP76,876 (2021: GBP0).
During the period there was a gain of GBP459,706 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 GBP45,090.
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 GBP
Shares (62,500,000 Ordinary shares at GBP0.04) 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
GBP1,800,000 across the 3 year period. The fair value of the
contingent consideration is currently estimated to be GBP1,379,546
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:
GBP
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 GBP
Shares (9,000,000 Ordinary shares at GBP0.0445) 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 GBP108,678 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:
GBP
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] Adjusted operating loss is before interest, tax,
depreciation, amortisation, impairment and the share-based payment
expense.
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END
FR UOAORUWUUURA
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December 23, 2022 02:00 ET (07:00 GMT)
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