TIDMEAI
RNS Number : 4567R
Entertainment AI PLC
30 June 2020
Entertainment AI plc
(the "Group" or the "Company")
Audited results for the six months ended 31 December 2019
Outlook for 2020
Entertainment AI plc, a global social media and technology
platform for sharing video moments to enable discovery, sharing and
e-commerce through the targeting and connecting of creators,
audiences and brands is pleased to present its full, audited
results for the six months ended 31 December 2019 and Outlook for
2020. The Group is also today separately announcing its technology
launch and a name change to SEEEN plc with the ticker symbol (AIM:
SEEN) better reflecting the Group's technology and social media
platform.
During 2H 2019, the Company signed a letter of intent and closed
the acquisition of three operating entities creating the Group and
completed a strong fundraising. The results reflected in the
audited results therefore reflect three months of the Company as a
cash shell (3Q) and three months of the Group (4Q).
Coincident with the formation of the Group, the Company changed
its reporting period to calendar year to reflect full-year
operations of the Group starting in 2020.
As a result of the timing of the transactions, comparisons
between the results for the twelve months to 30 June 2019
(Blockchain's fiscal year reporting as a cash shell) and the six
months to 31 December 2019 (formation of Entertainment AI plc) are
not meaningful.
Copies of the Annual Report are today being posted to
shareholders and will be made available to view on the Company's
websites at www.entertainmentai.co.uk and seeen.com.
Key Highlights 2019
Transaction
-- Formation of a technology and media platform with
acquisitions of Tagasauris, Inc, GTChannel Inc, and Entertainment
AI, Inc. together with GBP8.6 million fundraising from leading
institutional investors and strategic partners and admission to
AIM
-- Core operating assets: (i) YouTube multichannel network with
global audience, content creators and digital ad revenue ("MCN");
and (ii) intellectual property (patent, trade secrets, product
designs) enabling artificial intelligence and machine learning
applications to video
2019 Results For Operating Assets Acquired During Year
-- Calendar year 2019 views of 12.6 billion on the Group's M CN, up 47.7% (2018: 8.5 billion)
-- Average RPM (Revenue per Thousand Videos) up 11% to $1.49 (2018: $1.35)
-- Gross YouTube advertising revenue on MCN of $18.7 million, up 64% (2018: $11.4 million)
-- Net revenue (minus YouTube commission) of $10.5 million, up 58% (2018: $6.5 million)
-- Net cash of $9.5 million at 31 December 2019
1H 2020 Subsequent Events / Outlook
-- Continued significant growth in MCN views and creator channel partners despite C OVID-19
-- COVID-19 creates reduction in global digital advertising
spend among brands leading to keeping Forecasts Under Review until
general market conditions stabilise
-- Market decline in digital advertising spend creates
opportunity for the Group's technology to drive greater yield on
spend for brands
-- Pilot with Group's first external B2B customer
-- Pipeline of B2B sales opportunities
-- 30 June 2020 brand launch with name change to SEEEN plc and
new website reflecting the Group's social media and technology
platform to enable greater monetization of video, especially on
mobile devices
Dr. Patrick DeSouza, Chairman of SEEEN, commented: "With our
2019 Entertainment AI plc Accounts, we close the formative chapter
of our technology and social media platform, today re-branded as
SEEEN. During 2019 we assembled a strong set of proprietary
operating assets, strong board, execution-oriented management,
global strategic partners such as Sumitomo Corporation, and
first-tier institutional capital. 2020 execution is on track and we
are coming to market at the right time. Market demand is
accelerating for short-form video on mobile devices that can be
discovered, shared and monetized through brand ads and
e-commerce."
Todd Carter, CEO of SEEEN, commented: "I am proud of our team
and execution during 1H in navigating the COVID-19 environment in
productive ways. These are unprecedented times for SEEEN and the
world, and we are incredibly grateful for our team, and their focus
and resilience. With the support of our institutional investors, we
have turned the operating assets we acquired in 2019 into
"go-to-market" products that create new, robust and diversified
revenue channels and that leverage our MCN starting point.
Our mission - to deliver new types of adaptable video content
designed for action at the point of inspiration - has never been
more relevant. SEEEN's users can create, enrich, share and enjoy
video moments at different granularities, interlinked with each
other and other kinds of information, searchable, and accessible
everywhere and at every time on their internet-connected screens.
And because SEEEN-enriched video content is more discoverable,
connected and engaging it leads to richer opportunities for
creators, brands and fans.
We have a tight focus on delivery as we transition from our
launch on AIM during 4Q 2019 to our execution during 2020. Our
ability to leverage data analytic and behavioral insights from our
MCN continue to give us confidence that the road ahead for SEEEN
will be exciting for our audience, creator and brand ecosystem and
profitable for our shareholders."
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Enquiries:
Water Intelligence plc
Patrick DeSouza, Executive Chairman Tel: +1 203 654 5426
Todd Carter, CEO
Adrian Hargrave, CFO Tel: +44 (0)7775 701
838
WH Ireland Limited - NOMAD and Broker Tel: +44 (0)20 7220 1666
Adrian Hadden
James Sinclair-Ford
Matthew Chan
Dowgate Capital Limited - Joint Broker Tel: +44 (0)7920 599
Stephen Norcross 793
Chairman's Statement
The fourth quarter of 2019 marked the exciting launch of
Entertainment AI and its mission to attack a global market
opportunity that is rapidly unfolding and triggering the
convergence of the media, technology and telecommunications
sectors. More precisely, short-form video displayed over mobile
devices is becoming a dominant mode of expression and social
networking, as evidenced most recently by the global phenomenon of
TikTok. As discussed in these pages, with today's launch of our
brand - SEEEN - we aspire to deliver to our shareholders another
extraordinary video platform company.
As typical when markets are disrupted, opportunities emerge.
Currently, there is a scramble among various constituencies to
unlock value. Consumers demand more video content to discover,
share and act upon often as part of their online path to purchase.
Creators seek to meet growing consumer demand by producing more
content that they hope to monetize. Media companies seek to harness
creators and fresh content to drive audience engagement and
revenue. COVID-19 has only accelerated video consumption trends as
individuals shelter-in-place. Brands, meanwhile, seek to better
target and then connect with consumers by using technology and data
to offer more relevant authentic content and create higher yield
from their advertising spend, especially in a COVID-era of reduced
operating budgets.
Entertainment AI, now SEEEN, came into being during 2H 2019
because we believe that we have a proprietary technology that
enables us to organize the various constituencies - consumers,
creators, brands - into a marketplace by deconstructing or
"momentizing" video into relevant interest events. Video need not
be consumed as a simple unitary object. Rather, by breaking apart
any video into moments of interest, viewers can focus on exactly
what they desire; moreover, by linking videos the way Google links
text, our technology can stream more relevant packages of video to
consumers as an offering. Such functionality enables our platform
to drive the economics of internet-based video. Brands would pay
for such targeting and creators could extract more value for their
content. Meanwhile, consumers could search and find the parts of
videos that they want to see and act to buy products in a
frictionless way. Today, after nine months of refining our
technology products and "Go to Market" strategy, we are initiating
our brand as "SEEEN" to better communicate our ability to target
and organize video content. Our corporate mantra is that only video
that is truly "seen" may be acted upon.
We began our journey in 4Q 2019 with the following strong set of
assets: (i) a world-class technology portfolio from which to create
products; (ii) a large multichannel network with over 1,200
monetizable creators of content, an audience of over 12.6 billion
video views generating over $10 million in annual revenue and
growing; (iii) over $10 million in cash from strong, institutional
funds; (iv) brand partners including Sumitomo Corporation; (v) an
experienced, all-star board and execution-oriented management team;
and (vi) an AIM listing. During 4Q and 1H, together with our
partners, we have deployed EIS/VCT monies to put together the
technology components of today's platform launch. Our CEO and team
have navigated COVID-19 and a worldwide decline in digital ad spend
despite the increase in our MCN viewership. Ironically, this latter
reality makes the launch of our "targeting" technology during 3Q
2020 a compelling value proposition for brands as they look to
produce more yield from their ad spend.
As discussed by our CEO, despite COVID-19 we have made sure to
keep our eyes on the prize. We have focused on defining our first
set of video platform products and developing a sales pipeline for
these products. As previously announced, during 1H we have launched
CreatorSuite geared for video creators and during 3Q we will be
launching a product - BrandSuite - for brands. While executing this
technology priority, we have continued to develop our
revenue-generating multichannel network, adding viewers and also
extracting important insights about audience behavior that are
useful for our technology products. In pilot tests with brands
during 1H 2020, we have defined the highest value functionality for
prospective business customers.
In summarizing our excitement as we close the formative chapter
of 2H 2019 with these Accounts, we have assembled the right
components both organically and through acquisition and a capital
raise. We are ready to attack the market on a mission to create a
global platform. We have technology and social media market leaders
like Pinterest and Adobe to look to in calibrating our business
model. Through CreatorSuite and BrandSuite, we can extend
revenue-generating tools to everyone in the marketplace: The
"B-to-E" market - creators, consumers, brands. In this way, we can
"unleash video".
Let us underscore that while we are excited by the market
opportunity, we are launching SEEEN focused on execution and
delivery.
Dr. Patrick DeSouza
Chairman
29 June 2020
Chief Executive Officer's Statement
Today we introduce SEEEN, an open platform for experiencing,
launching & monetizing video moments. Changing a company name
is an emotional topic because it is about identity. To the outside
world, a corporate name change may appear as an abrupt, "out of the
blue" change catching customers, partners and stakeholders
off-guard. The reality of our rebrand is about aligning and
integrating, from the inside out, the why, how and what of "video
unleashed". We are excited about the road ahead.
Our mission - to deliver new types of adaptable video content
designed for action at the point of inspiration - has never been
more relevant. The COVID-19 pandemic is reshaping lives and
businesses around the world and our audiences, creatives and brand
partners are no exception. More people than ever are creating and
watching video online and brands are increasingly turning to video,
whether product tutorials or shoppable social media posts, in
search of innovative ways to boost brand identity and sales.
We are acutely aware that we are fortunate to have a service
that is even more meaningful to people confined at home. SEEEN's
users can create, enrich, share and enjoy video moments at
different granularities, interlinked with each other and other
kinds of information, searchable and accessible everywhere and at
any time on their internet-connected screens. And because
SEEEN-enriched video content is more discoverable, connected and
engaging, it leads to richer opportunities for creators, brands and
fans.
The baseline from which we are launching SEEEN is that our MCN
continues to attract both creators and audience. During 2019 the
Group's MCN achieved growth across all key metrics. Our affiliated
channels grew in number to more than 10,000, approximately 1,200 of
which are now monetized on YouTube. These 1,200 monetized channels
delivered record view counts of 12.6 billion, up 48% on 2018 (8.5
billion). These views, in turn, yielded greater revenues (2019:
$10.5m; 2018: $6.6m). Moreover, RPM (Revenue per Thousand)
increased 11% to $1.49 in 2019 (2018: $1.35). These results
underscore that our MCN's content is both more engaging and
increasingly suited to brand advertising.
These results also provide a foundation from which to launch our
technology products. These new products will allow us to diversify
revenue as we leverage our affiliated network of creators, content
and audience base. We are increasing channel partners and views,
both within our core audiences, as well as a new Spanish language
service. Like many businesses reliant on advertising income, we
have not been immune from the effects of Covid-19. Unlike other
MCNs, our technology portfolio will allow us to capture advertising
budgets through new revenue-generating products that create yield
for brands through targeting of consumers.
Operating Priorities
In designing our technology products, we have a built-in
advantage because of our MCN. Online video is a rich source of
content from which machine learning can extract people, objects,
actions, locations and narrations "in the wild". We are able to tap
into and upcycle video moments from the wealth of authentic,
high-quality, relatable video content generated by our creators
saving our brand partners time and helping them scale their
campaigns across digital touchpoints.
We have four operating priorities for 2020: (i) generating
inspiring content to expand our audience base and viewer attraction
to our platform; (ii) enabling shopping to realize monetizable
actions by consumers using our technology; (iii) diversifying our
advertising base especially through targeting relevant content and
increasing digital ad revenue yield; and (iv) expanding use cases
through audience data enabling us to have a robust product
roadmap.
Inspiring Content
Our first priority is to help information seekers by making it
easy to find or skip to precisely where they want to go to in a
video, like in a book. Google referred to this feature as "Key
Moments", in taking the user to an important part of a video clip.
In 2019 we began publishing "I-want-to-know", "I want-to-go",
"I-want-to-watch", "I-want-to-do", "I-want-to-buy" video clips to
the Google search and social media ecosystems. In 1H 2020 we
introduced an exciting new "how-to" moment type. How-to moments are
presented to the user as a series of easy to navigate process
steps.
During 1H 2020, we accelerated our work on projects that help
our creators, brands and fans publish and enjoy inspiring video
moments as they adjust to new norms. We have increased our use of
machine learning and automation to accelerate our video
momentization process and launched CreatorSuite to make it easier
for our creative and brand partners to upcycle content, publish
video moments and provide relevant feedback to our machine learning
operations. During 2Q, we built on our foundation by launching an
embedded widget that lets our creators curate and syndicate video
moments and playlists to third party websites and channels.
We will continue to enhance our SEEEN platform's on-demand user
experience. We are now launching a redesigned owned and operated
(O&O) website to help our audience better connect to interests
on our platform. Over the course of 2H, we will experiment with
options to give our audience the ability to curate video moments
from our O&O, similar to Pinterest. By enabling curation, we
expect to enrich the organization and presentation of our content
and make it more adaptable and relevant as we scale beyond our
traditional automotive focus in our existing and new audience
geographies.
Shopping
We have arrived at a critical moment for e-commerce innovation
in the marketplace. We can align our vision with the needs of
consumers to easily discover and buy products from merchants they
trust. There are two aspects to that strategy: (i) catalog-side
inventory development; and (ii) offer-side user experience
experimentation. We will make significant additional strides
platforming these capabilities over the course of 2H.
The first aspect of our strategy is to build catalog-side
inventory by launching a platform to enable merchants to upload
catalog feeds to get distribution on high-intent shopping moments
as well as access to a new analytics insight tool that lets them
measure the sales impact of both paid and organic moments on the
SEEEN platform. Evasive Motorsport is an example of an early
adopter to the program but we expect to begin signing up more
merchants to the program in 2H. While we believe that the program
will gain significant traction over the long term (particularly as
the pace of digital transformation accelerates the shift to
shopping online), it is still early days.
At the same time, on the offer-side, we are making it easier for
our audience to pivot from curiosity to commerce. During 1H we made
significant strides towards designing better shopping experiences
both on and off our platform starting with user journeys through
discovery. Today's shoppers are in control of their path to
purchase and Google Search is often the entry point for that unique
user journey. Empirically, the next step is video viewed on mobile
devices. We provide explicit information about our videos and the
video moments that we publish to help our content appear and rank
in Google Search results.
SEEEN video moments include markup that relates to the specific
concepts depicted or associated with a video moment. In this way,
SEEEN video moments are discoverable directly from user queries in
search engine results. We have also updated the design of our media
player and the presentation of video moments on our O&O. All
video moments related to a particular concept are connected within
SEEEN and across the Web presenting our users with even more
related content. A high degree of confidence in content
understanding allows users to purchase products associated with
different parts of a video directly from within the SEEEN
application.
Supporting and Diversifying our Advertiser Base
In the current environment, marketers are looking for
transparent returns on their ad spend, and we have the opportunity
now through our technology to demonstrate our value for advertisers
seeking conversion events. Our vision is to deliver measurable
value by making it easier for marketers to use our services and
scale on our platform. In doing so, we can diversify our advertiser
base and aggregate more relevant commercial offerings
Expansion of User Cases
Video streaming is a novel application area. We are discovering
new use cases, as well as deepening existing ones, and we are
testing new foundational features to support both of these
outcomes. First, we have launched playlisting capabilities during
2Q. Second, we are introducing a curation feature that lets our
audience group video moments on similar topics into auto-organized
channels. Finally, we are exploring ways to make a video more
adaptable to the user's goals, preferences and knowledge. For
example, using computer vision and machine learning, we plan to
launch a feature that lets our audience make a "SEEEN," which can
be about any topic whether it is baking delicious bread at home,
cross country ski racing or researching collector cars. SEEEN then
lets you curate the content you love, share your channel with
others and find new content based on what you have saved.
Advertisers pay for additional promoted moments to appear in their
desired audiences channels or in search results.
Additionally, we will partner with e-commerce platform providers
to help get smaller merchants onto SEEEN. Partner merchants should
be able to upload their product catalogs to SEEEN and create SEEEN
ad campaigns with just a few clicks. We are excited to welcome more
merchants to SEEEN.
Outlook for 2020
During 1H 2020, we made progress on our two most significant
revenue product priorities. Our first priority is our CreatorSuite
product, which we delivered to seeded creators during 2Q.
CreatorSuite is an important bridge for our strategy to build upon
our MCN base and diversify our revenue. We expect CreatorSuite's
cloud-based, microservice architecture will result in new revenue
opportunities, more efficient operations, faster innovation, and
better ability to experiment. We are pleased that some of our
creator and brand partners are already running live video
moment-based campaigns from CreatorSuite.
Our second revenue priority is promoted video moments, beginning
with our owned and operated website and our next-generation video
moment advertising format. We recently began pilots, testing
portions of our improved offering with a few digital marketers. We
plan to expand testing over several phases. We see a path to
driving more direct response advertising on our owned and operated
platform in 2020 and beyond through this work on video moments and
creating a more personalized experience. Our improved video
moments, together with our SEEEN-powered syndication widgets,
should increase our market capture enabling us to be more resilient
than most as businesses cope with the effects of COVID-19. Current
consumer behavior illustrates the increasingly unique ways people
shop even within the same categories of products. Today's shoppers
are in control of their path to purchase and can explore thousands
of categories, brands, and products at any moment. SEEEN supports
these unique user journeys with discoverable, relevant, inspiring
and connected video content.
These personalised paths to purchase have three broad
implications for brands around which SEEEN's video moments deliver
value. Marketers need to be there, wherever users are, be useful,
with relevant and timely information, and be quick to deliver
experiences that are fast and frictionless. SEEEN can help brands
understand and respond to intent "in the moment" in ways that
simply were not possible before.
The market backdrop makes this a very exciting time for the
Group and we are fully committed to exploiting this window of
opportunity and executing quickly and aggressively. Our suite of
innovative technology products is now ready for the market and we
continue to develop against our product roadmap. Our patented
machine learning technology and deep knowledge in this space will
enable us to continue to create leading-edge products for viewers,
consumers and brands.
During 3Q, we have an exciting set of product launches and
feature releases, starting with CreatorSuite and our Syndication
Widgets. These products will complement our MCN. We have a strong
balance sheet, but we remain mindful of investing prudently to
capture the market opportunity.
In closing, we believe video moments are the currency of
tomorrow. But to achieve this outcome, video content needs to be
both intelligent and connected. Through our vision of "video
unleashed", we will unlock a new generation of visual-first
discovery, learning and exploration and open completely new
application areas for audio-visual information on the Web.
Todd Carter
Chief Executive Officer
29 June 2020
Strategic Report
Business Review and Key Performance Indicators
Entertainment AI plc and its subsidiaries ("Group") is a global
social media and technology platform for sharing video moments to
enable discovery, sharing and e-commerce through the targeting and
connecting of creators, audiences and brands.
The Chairman's Statement and CEO's Statement provide two core
dimensions to the Group's presentation of its progress during the
year as a technology and media business, together with the outlook
for the Group's future developments. The Chairman's Statement
presents the Group's strategy to create significant shareholder
value driven by the Group's technology roadmap. The CEO's Statement
provides an evaluation of our execution highlights and challenges
that transform vision into reality and create a competitive
advantage in the marketplace.
For the 2019 Accounts, Blockchain Worldwide plc (the "Company")
is closing one chapter of its corporate history and beginning
another. During 1H the Company was a cash shell. During 2H 2019 the
Company was substantially transformed through a series of
acquisitions and an accompanying capital raise at the end of
September 2019. Post-closing of the transactions, the Group is
fully funded for its business plan, owning a set of fast-growing
operating assets and cutting-edge artificial intelligence
technologies. During 4Q the Company began its new journey and
established a calendar year reporting period to underscore the
launch of its new business plan with accompanying key performance
indicators (KPIs). The 2019 Strategic Report prepares the way with
an overview of the Group's business plan and an initial set of KPIs
around which the business will be shaped in 2020 and beyond. This
Strategic Report will evolve as the Group executes its business
plan fully in 2020.
Results for the six months ended 31 December 2019 reflect three
months of the standalone Company as a cash shell and three months
of figures for the enlarged Group as required under IFRS accounting
standards. As a result, comparisons between the results for the
twelve months to 30 June 2019 (Blockchain's fiscal year reporting)
and the six months to 31 December 2019 (combined as Entertainment
AI plc) are not meaningful.
Corporate History
Prior to 30 June, Blockchain Worldwide plc had the status of a
cash shell with certain liabilities. On 23 May 2019, the Company
announced that it was in discussions to acquire certain operating
businesses. On 11 September 2019 the Company announced that it had
entered into agreements to acquire Tagasauris, Inc., ("Tag"), GT
Channel Inc.("GTC") and Entertainment AI, Inc. ("EAI Inc."). On 30
September 2019, these acquisitions were completed. The operating
assets and business plan of these three companies allow the Company
to compete in a fast-growing global market for short-form video
content and e-commerce. In this emerging market, consumers seek to
discover, share and create short-form video content either through
YouTube or proprietary websites. Moreover, using mobile devices,
consumers seek to take actions in a frictionless way upon seeing
videos and being inspired by them. The principal action sought by
consumers is to be able to purchase goods and services seen in the
video. Moreover, brands seek to tap into such consumer demand
creating new marketplaces connecting consumers to brands. As a
result of this multi-billion dollar opportunity, there is rapid
convergence of the media (content), technology (e-commerce) and
telecommunications (mobile) sectors taking place. Such convergence
provides opportunities for the Group and its products. On 30
September 2019, related to the acquisition of the operating assets,
the Company announced the completion of a successful capital raise.
To fund its business plan, the Company raised GBP8.6 million from
institutions and private investors. The Group was admitted to AIM
on 30 September 2019 following these transactions.
Company's Business Upon Admission to AIM
Coincident with the transactions that formed the new business of
the Group, the Company changed its name to Entertainment AI plc
(EAI). EAI is organized into two principal businesses - technology
and media - that work together synergistically to create EAI's
product roadmap and value proposition to the market. The
synergistic nature of these business lines means that the Board and
management consider the Group and its progress as one business as
opposed to separate reporting entities.
Technology Business
Tag and EAI Inc. own various intangible assets - patents, trade
secrets, licenses and product designs - that underlie a proprietary
product roadmap focused on the production of video "micromoments"
that enable consumers to access the most relevant features of
videos for themselves. During 4Q the Company began to deploy
capital to transform the Company's proprietary assets via a
"Go-to-Market" plan that would capture market demand during 2H
2020. Because the Company is a technology company exploiting
various media assets, one KPI used by the Board to monitor the
advancement of its business plan is the pace of product releases to
the market and robustness of its product roadmap.
Media Business
GTC is a multichannel network ("MCN") that aggregates creators
of short form video content and publishes such content on YouTube.
The Company also produces proprietary content and publishes that
content to its owned and operated web site. Published content
attracts viewers and digital ad revenue on YouTube producing gross
revenues. After YouTube deducts its commission, the Company
receives net revenue from YouTube. The economics of the
multichannel network creates various KPIs which help the Board to
monitor the business plan of its media business. These KPIs measure
critical attributes: (i) number of creator channel producing
monetizable content; (ii) number of views/audience attracted to
such content; (iii) digital ad yield from such content and
accompanying audience expressed as Revenue Per Thousand. From these
KPIs, the Company can create its forecasts on net revenues and
profit before taxes.
Synergies from the Technology and Media Businesses
Shareholder value is extracted from the synergies that the
technology business and the media business unlock by working
together, requiring the Group to operate as one unified business
rather than as separate subsidiaries. In addition to digital ad
revenue, the MCN provides an audience and content creators upon
which the Company's micro-moments technology may be tested and
productized in through various offerings. Business-to-business
customers, such as brands and advertising agencies, seek to
purchase insight and data with respect to audiences and content.
Moreover, they seek to license technologies that enable them to
target and match content to audience, including content generated
through the Group's MCN. The Company's micro-moment technology
provides business-to-business customers both data analytics and
targeted reach. One KPI that provides the Board an understanding of
the traction from synergies between its technology and media
businesses is the number of business-to-business transactions.
Non-Core Costs
As noted during 2H, the Company engaged in a series of
transactions ranging from acquisitions to capital raising in order
form its go-forward business. Such transactions costs, especially
legal and financial advisory, were significant. While organic
growth will be the focus of execution, because of the marketplace
convergence of media, technology and telecommunications sectors,
acquisitions may be part of the Company. Understanding non-core
costs, as distinct from continuing operating costs, enables the
Board to evaluate capital allocation choices.
Capital
The Board is mindful that it raised GBP8.6 million in its IPO
(GBP6.8 million net of costs) and that such financial resources
need to be applied prudently. Of the total capital raise,
approximately, GBP5 million was categorized as EIS/VCT approved.
Such funding, by regulation, is targeted for the Group's technology
development. The regulations require that the Company use such
investment by 30 September 2021. Cash net of borrowings is a KPI
that enables the Board to manage to its budget. As part of its Net
Cash KPI, the Board plans to track its deployment of EIS/VCT
investment.
KPIs
Given the timing of the launch of the Company's business plan in
the fourth quarter of 2019, after its admission to AIM, there are
no relevant comparators. However, as a baseline for evaluation of
2020 performance, the Board will consider the following KPIs for
the Group:
(i) Technology Products. The Board notes that the Group has a
strong product roadmap based on its "micromoments" insight. The
Group plans to file additional intellectual property in 2020. The
Group spent $227,000 in 4Q on technology development of which
$94,000 was capitalized.
(ii) MCN Creator Channels. At year-end 2019, the MCN had
approximately 10,000 creator channels, of which 1,200 were
monetized.
(iii) MCN Audience. At year-end 2019, the MCN had approximately 12.6 billion views.
(iv) MCN Average RPM. At year-end 2019, the MCN had an average RPM of $1.49.
(v) Business-to-Business Traction. At 31 December 2019, the
Group initiated a pilot with Sumitomo Corporation to deploy its
technology in extending e-commerce during the Rugby World Cup in
Tokyo.
(vi) Non-Core Costs. During the six months to 31 December 2019,
non-core costs amounted to $601,595, reflecting acquisition and
listing costs. An additional $1.6 million was capitalized into the
Group's Share Premium and Retained Earnings account reflecting
transaction costs.
(vii) Net Cash. At the end of 2019, the Group, after transaction
costs, had $9.5 million in cash. The Company invested $227,000 of
EIS/VCT money in technology development.
Principal Risks and Uncertainties
The Group's objectives, policies and processes for measuring and
managing risk are described in note 18. The principal risks and
uncertainties to which the Group is exposed include:
Technological advances within the industry
The technology industry as a whole evolves rapidly with new
entrants and ideas continuously changing the market. There is a
risk that competitors react to opportunities faster, rendering the
Group's technology uncompetitive which could have a material
adverse impact on the prospects of the Group.
Data Protection and General Data Protection Regulation
("GDPR")
Data protection, driven in Europe by GDPR, is becoming
increasingly relevant in the handling of consumer data. Any
failures to follow relevant data protection rules could result in
significant monetary penalties.
Foreign exchange risk
The Group has employees and contractors based overseas paid in
foreign currencies and may enter into contracts priced in foreign
currencies. It is therefore exposed to adverse exchange rate
movements which could cause its costs to increase (relative to its
reporting currency) resulting in reduced profitability for the
Group.
Credit Risk
The Group's credit risk is primarily attributable to its cash
and cash equivalents and trade receivables. The credit risk on
other classes of financial assets is considered insignificant.
Liquidity Risk
The Group manages its liquidity risk primarily through the
monitoring of forecasts and actual cash flows.
Organisational Risk
As a small Group, there is a reliance on a high proportion of
key staff; the loss of any of these staff would be detrimental to
the Group.
New Product Risk
The Group is creating products based on its proprietary
technology, but until the products are released there is no
guarantee that there will be significant uptake from customers.
Advertising Revenue Risk
The Group has historically been dependent on revenue from its
YouTube MCN to generate profitability and changes to the either
market conditions or regulations and the terms of advertising on
YouTube could affect the Group's ability to generate revenues and
profits.
Covid-19 Risk
COVID-19 could impact on the Group's ability to generate
advertising income due to lower customer spending as well as reduce
customers' desire to spend money on the new technologies produced
by the Group given increased budgetary constraints.
Corporate Governance Statement s172 of the Companies Act
Each director must act in a way that, in good faith, would most
likely promote the success of the Group for the benefit of its
stakeholders. A discussion of s172 is presented in the Statement on
Corporate Governance. The Strategic Report incorporates actions
taken by the Group to ensure compliance with s172.
By order of the Board
Patrick DeSouza
Non-Executive Chairman
29 June 2020
Directors' Report
The Directors present their report on the affairs of
Entertainment AI plc (the "Company") and its subsidiaries, referred
to as the Group, together with the audited Financial Statements and
Independent Auditors' report for the year ended 31 December
2019.
Principal Activities
The Group is a global social media and technology platform for
sharing video micro-moments to enable discovery, sharing and
e-commerce through the targeting and connecting of creators,
audiences and brands.
Results
The financial performance in this report relates to the six
months ended 31 December 2019 following the Board's decision to
amend the Company's year end from 30 June to 31 December to reflect
the formation of the Entertainment AI plc group during 4Q 2019. The
Group's Statement of Comprehensive Income and the Group's financial
position at the end of the year, is shown in the Financial
Statements.
During this six month period, the Company was transformed by the
acquisition of its three US subsidiaries; Tagasauris, GTChannel and
EAI Inc. Alongside these acquisitions, the Company: (i)
successfully raised GBP8.6 million through a placing and
subscription; (ii) admitted its shares to AIM; (iii) renamed the
Group from Blockchain Worldwide plc to Entertainment AI plc to
reflect the transformation of the business from a cash shell to an
operating business; and (iv) changed its Board to reflect the new
ownership structure. As a result of these acquisitions, these
results reflect the results for only the Company to 29 September
2019 and the results for the enlarged Group from the period to 30
September 2019 to 31 December 2019, rendering comparisons between
this reporting period and prior financial reporting periods less
relevant.
Future Developments
The Company has chosen in accordance with section 414C(11) of
the Companies Act 2006 to include the disclosure of likely future
developments in the Strategic Report.
Going Concern
At the time of approving the financial statements, the Directors
have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future. In reaching this conclusion the Directors have
considered the financial position of the Group, taking into
consideration the recent fundraising, together with its forecasts
and projections for two years from the reporting date that take
into account reasonably possible changes in trading performance
including those that the Coronavirus may cause. The going concern
basis of accounting has therefore been adopted in preparing the
financial statements.
Dividends
The Directors do not recommend the payment of a dividend (30
June 2019: nil).
Share Price
On 31 December 2019, the closing market price of Entertainment
AI plc ordinary shares was 42.5 pence. The highest and lowest
prices of these shares during the year to 31 December 2019 were
52.5 pence and 38.5 pence respectively.
Capital Structure
Details of the authorised and issued share capital are shown in
Note 18. No person has any special rights of control over the
Company's share capital and all issued shares are fully paid.
Treasury Operations & Financial Instruments
The Group operates a centralised treasury function which is
responsible for managing liquidity, interest and foreign currency
risks associated with the Group's activities.
The Group's principal financial instrument is cash, the main
purpose of which is to fund the Group's operations.
The Group has various other financial assets and liabilities
such as trade receivables and trade payables naturally arising
through from its operations.
The Group's exposure and approach to capital and financial risk,
and approach to managing these is set out in note 18 to the
consolidated financial statements.
Subsequent Events
On 29 June 2020, the Board approved that the Company change its
name from Entertainment AI plc to SEEEN plc to better communicate
to the marketplace the Company's suite of products and target
markets. This name change will become effective as soon as it is
registered by Companies House in the UK. Upon such registration,
the Company's website shall be seeen.com. All documents of the
Company shall be located at the new website in accordance with AIM
regulations.
In April 2020, the US subsidiaries of the Group received loan
(Loan) proceeds in the amount of approximately $198,000 under the
Paycheck Protection Program ("PPP"). The PPP, established as part
of the Coronavirus Aid, Relief and Economic Security Act ("CARES
Act"), provides for loans to qualifying businesses to maintain
workforce stability. Under the terms of the PPP, certain amounts of
the Loan may be forgiven if they are used for qualifying expenses
as described in the CARES Act. Any unforgiven portion of the PPP
loan is payable over two years at an interest rate of 1%, with a
deferral of payments for the first six months.
Directors
The Directors who served the Company during the year and up to
the date of this report were as follows:
Executive Directors
Todd Carter (Appointed 30 September 2019)
Scott Schlichter (Appointed 30 September 2019)
Non-Executive Directors
Patrick DeSouza (Appointed 30 September 2019)
Akiko Mikumo (Appointed 30 September 2019)
Mike Kelly (Appointed 30 September 2019)
David Anton (Appointed 30 September 2019)
Rodger Sargent (Resigned 30 September 2019)
Jon Hale (Resigned 30 September 2019)
The biographical details of the Directors of the Company are set
out on the Company's website www.entertainmentai.co.uk . Upon
registration of the Company's new name of SEEEN, the website shall
be seen.com .
Directors' Indemnity
The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company. Appropriate directors' and
officers' liability insurance cover is in place in respect of all
the Directors.
Directors' Conflicts of Interest
In the event that a Director becomes aware that they, or their
connected parties, have an interest in an existing or proposed
transaction involving the Group, they will notify the Board in
writing or at the next Board meeting.
Political Donations
The Group did not make any political donations during the six
months to 31 December 2019 (12 months to 30 June 2019: GBPNil).
Directors' emoluments
6 months to 31 December 2019 Salary, Fees
& Bonus Benefits Total
------------------------------
$ $ $
------------------------------ ------------- --------- -------
Executive Directors
T Carter 50,000 - 50,000
S Schlichter 50,000 - 50,000
Non-Executive Directors
P DeSouza 12,500 - 12,500
A Mikumo 12,500 - 12,500
M Kelly 12,500 - 12,500
D Anton 12,500 - 12,500
R Sargent - - -
J Hale - - -
- - -
------------------------------ ------------- --------- -------
12 months to 30 June 2019 Salary, Fees
& Bonus Benefits Total
------------------------------
$ $ $
------------------------------ ------------- --------- -------
Non-Executive Directors
R Sargent - - -
J Hale - - -
------------------------------ ------------- --------- -------
- - -
------------------------------ ------------- --------- -------
Directors' interests
The Directors who held office at 31 December 2019 and subsequent
to year end had the following direct interest in the ordinary
shares of the Company at 31 December 2019 and at the date of this
report:
Number of shares % held at
at 31 December 31 December Number of shares % held at
2019 2019 at 29 June 2020 26 Jun 2020
S Schlichter 5,870,406 11.8% 5,870,406 11.8%
P DeSouza 5,426,165 10.9% 5,426,165 10.9%
T Carter 2,813,309 5.6% 2,813,309 5.6%
--------------- ---------- ------------- ----------------- -------------
In addition to the above, the following directors were granted
options with no vesting period over Ordinary Shares on 30 September
2019 as part of the completion of the Group's Admission to AIM.
These options were issued as part of the transactions, including
the Company's admission to AIM and are not designed as options for
Employee Incentivization. The Group expects to issue options for
Employee Incentivization during 2020.
Name Number of options Exercise Price First exercise
date
-------------- ------------------ --------------- ------------------
Todd Carter 1,977,083 45p 30 September 2020
Akiko Mikumo 152,083 45p 30 September 2020
Mike Kelly 152,083 45p 30 September 2020
David Anton 152,083 45p 30 September 2020
Substantial Shareholders
As well as the Directors' interests reported above, the
following interests of 3.0% and above as at the date of this report
were as follows:
Number of shares % held
------------------------------- ---------------- ------
Gresham House Asset Management
Limited 6,666,666 13.3%
Canaccord Genuity Group Inc. 4,444,444 8.9%
Water Intelligence plc 3,855,032 7.7%
Taro Koki 3,601,436 7.2%
Sumitomo Corporation 2,314,815 4.6%
Rathbone Investment Management
Limited 1,732,540 3.5%
------------------------------- ---------------- ------
Employees
The Group has established employment policies which are
compliant with current legislation and codes of practice. The Group
is an equal opportunities employer.
Independent Auditors
Crowe U.K. LLP has expressed their willingness to continue in
office. In accordance with section 489 of the Companies Act 2006,
resolutions for their re-appointment and to authorise the Directors
to determine the Independent Auditors' remuneration will be
proposed at the forthcoming Annual General Meeting.
Statement of disclosure to the Independent Auditor
Each of the persons who are directors at the time when this
Directors' report is approved has confirmed that:
-- so far as that director is aware, there is no relevant audit
information of which the Company and the Group's auditor is
unaware; and
-- that director has taken all the steps that ought to have been
taken as a director in order to be aware of any relevant audit
information and to establish that the Company and the Group's
auditor is aware of that information.
By order of the Board
Patrick DeSouza
Non-Executive Chairman
29 June 2020
Corporate Governance Statement
As a Board, we believe that practising good Corporate Governance
is essential for building a successful and sustainable business in
the long-term interests of all stakeholders. Entertainment AI's
shares are listed on AIM, a market operated by the London Stock
Exchange.
Upon Admission to AIM on 30 September 2019, Entertainment AI has
adopted the QCA Corporate Governance Code. The Company has adopted
a share dealing code for the Board and employees of the Company
which is in conformity with the requirements of Rule 21 of the AIM
Rules for Companies. The Company takes steps to ensure compliance
by the Board and applicable employees with the terms of such
code.
The following sections outline the structures, processes and
procedures by which the Board ensures that high standards of
corporate governance are maintained throughout the Group.
Further details can be found on our website at
www.entertainmentai.co.uk/corporate-governance.
Takeovers and Mergers
The Company is subject to The City Code on Takeovers and
Mergers.
Board
The Board, chaired by Dr. Patrick DeSouza, comprises two
executive and three non-executive directors. The Board oversees and
implements the Company's corporate governance programme. As
Chairman, Dr. DeSouza is responsible for the Company's approach to
corporate governance and the application of the principles of the
QCA Code. Akiko Mikumo, Mike Kelly and David Anton are the
Company's independent directors, with Akiko Mikumo being the Senior
Independent Director. The Board is supported by four committees:
Audit, Remuneration, Personnel and Strategy. The Audit and
Remuneration Committees are the principal committees for Corporate
Governance.
Each Board member commits sufficient time to fulfill their
duties and obligations to the Board and the Company. They are
required to attend at least 4 Board meetings annually and join
Board calls that take place between formal meetings and offer
availability for consultation when needed.
Board papers are sent out to all directors in advance of each
Board meeting including management accounts and accompanying
reports from those responsible.
Meetings held during the period between 1 July 2019 and 31
December 2019 and the attendance of directors is summarised below.
Given the timing of the transactions and admission to AIM during
4Q, certain committees did not meet between completion of the
transactions on 30 September 2019 and the period end.
Board meetings Audit committee Remuneration committee
Possible (attended) Possible (attended) Possible (attended)
------------------ -------------------- -------------------- -----------------------
Todd Carter 2/2
Scott Schlichter 2/2
Patrick DeSouza 2/2
Akiko Mikumo 2/2
Mike Kelly 2/2
David Anton 2/2
Rodger Sargent 2/2 1/1
Jon Hale 2/2 1/1
------------------ -------------------- -------------------- -----------------------
Board Committees
The Board has established an Audit Committee, Remuneration
Committee, Nominations Committee and Strategy Committee with
delegated duties and responsibilities.
(a) Audit Committee
The Audit Committee has the primary responsibility for
monitoring the quality of internal control, ensuring that the
financial performance of the Company is properly measured and
reported on and for reviewing reports from the Company's auditors.
The Audit Committee will meet at least twice a year at appropriate
times in the reporting and audit cycle and otherwise when required.
The Audit Committee will also meet with the Company's auditors at
least once a year.
The Audit Committee comprises Mike Kelly, David Anton and Akiko
Mikumo and is chaired by Patrick DeSouza.
(b) Remuneration Committee
The Remuneration Committee is responsible for the review and
recommendation of the scale and structure of remuneration for
executive directors and other designated senior management, taking
into account all factors which it deems necessary. The Remuneration
Committee considers all aspects of the executive directors'
remuneration including pensions, benefits and share option awards.
No director will be involved in any decision as to his or her own
remuneration. The Remuneration Committee will meet at least twice a
year and otherwise when required. In exercising this role, the
Directors shall have regard to the recommendations put forward in
the QCA Corporate Governance Code and, where appropriate, the QCA
Remuneration Committee Guide and associated guidance.
The Remuneration Committee comprises Mike Kelly and David Anton
and is chaired by Akiko Mikumo. As the Remuneration Committee will
comprise all of the Independent Non-Executive Directors, this
committee also considers related party matters as they arise.
(c) Nominations Committee
The Nominations Committee is responsible for consideration of
future succession plans for Board members as well as to whether the
New Board has the skills required effectively to manage the
Enlarged Group. The Nominations Committee will also be responsible
for, amongst other things, identifying and nominating members of
the Board, recommending Directors to be appointed to each committee
of the Board and the chair of each such committee. The Nominations
Committee also arrange for evaluation of the Board.
The Nominations Committee meets on an ad-hoc basis and comprises
Patrick DeSouza, Akiko Mikumo and is chaired by Mike Kelly.
(d) Strategy Committee
The strategy committee is responsible for reviewing and
considering the following matters: (i) control over the strategy
development and its implementation; (ii) acquisitions and business
sale transactions; (iii) major investment projects, investment
budget allocation and key financial targets.
The Strategy Committee comprises Patrick DeSouza, Akiko Mikumo
and Mike Kelly and is chaired by David Anton.
(e) Advisory Panel
The Company has an Advisory Panel, comprised of Charlie Collier,
Thomas Glocer and Chris Welty. The purpose of the Advisory Panel is
to enable the Directors to draw upon the skills of these industry
experts as well as supporting Entertainment AI in accessing growth
opportunities via the network of contacts of each member of the
Advisory Panel. The Advisory Panel meets on an ad-hoc basis and is
available for consultations with Directors as required.
Board Experience
All members of the board bring complementary skill sets to the
Board. One director is female and five are male. The board believes
that its blend of relevant experience, skills and personal
qualities and capabilities is sufficient to enable it to
successfully execute its strategy. In addition, the Board receives
regular updates from, amongst others, its nominated adviser, legal
counsel and company secretary in relation to key rule changes and
corporate governance requirements, as well as regular liaison with
audit firms both in the UK and the US in respect of key disclosure
and accounting requirements for the Group, especially as accounting
standards evolve. In addition, each new director appointment is
required to receive AIM rule training from the Company's nominated
adviser at the time of their appointment.
Patrick J. DeSouza, Chairman
Term of office: Appointed 30 September 2019.
Since 2010 Dr. DeSouza has been the Executive Chairman of Water
Intelligence plc, a rapidly growing AIM quoted business focusing on
technology transformation of the water industry. He has 25 years of
operating and financial advisory leadership experience with both
public and private companies in media and technology and asset
management industries. Over the last 15 years, Dr. DeSouza has also
invested in and incubated technology companies centered at Yale
University. Dr. DeSouza has served at the White House on the
National Security Council. He is a graduate of Columbia College,
Yale Law School and Stanford Graduate School. He is a member of the
Council on Foreign Relations.
Todd Carter, Chief Executive Officer
Term of office: Appointed 30 September 2019.
Todd is the Co-Founder & CEO of Tagasauris, which was
acquired by Entertainment AI on 30 September 2019. Prior to
Tagasauris, he was Co-founder/President of OWL Multimedia, Inc. a
music search technology company centered at Yale University and
Co-Founder/CTO of Busy Box, a publicly traded technology company.
He co-authored the AXS File Concatenation Protocol, an early
standard for image metadata representation that found broad
adoption in the printing and publishing industries including by
Reuters, Agence France Presse, and PressLink. Todd was also a
member of ISO/IEC JTC1/SC29/WG11, more commonly known as the Moving
Pictures Experts Group, a working group that develops international
standards for audio-visual information representation.
Scott Schlichter, Executive Director
Term of office: Appointed 30 September 2019.
Scott is the Co-Founder & CEO of GTChannel, which was
acquired by Entertainment AI on 30 September 2019. Prior to
GTChannel, Scott launched and managed Hysteria, Inc., Dogma
Studios, and advised several start-ups including JusCollege. He has
25 years of experience in entertainment and digital video and has
launched several media focused start-ups with clients including
major Hollywood studios, network television companies, and cable
channels.
Akiko Mikumo, Senior Independent Non-executive Director
Term of office: Appointed 30 September 2019.
Akiko is a retired partner at Weil Gotshal and Manges LLP, one
of the world's leading law firms. She has over 35 years of mergers
and acquisitions, securities and governance experience. Her clients
have included some of the leading media and technology companies
and investment firms. Akiko founded the Hong Kong office of Weil
and led the growth of its London office. She served as a member of
the firm's Management Committee. Ms. Mikumo is a director of
Cambridge Science Corporation, a biotech investment company in
Cambridge Massachusetts. Recently, she served as a fellow at
Harvard's Advanced Leadership Initiative. She is a graduate of
University of California, Berkeley and New York University School
of Law.
Mike Kelly, Independent Non-executive Director
Term of office: Appointed 30 September 2019.
Mike is the Co-Founder of Kelly Newman Ventures, LLC, an
advisory and investment firm. He was formerly Chief Executive
Officer of The Weather Channel Companies, a leading weather-focused
media and technology company owned by a consortium made up of The
Blackstone Group, Bain Capital, and NBCU. Prior to that, he served
as the President of AOL Media Networks, a division of Time Warner
where he pioneered the media network strategy through a number of
successful acquisitions such as Advertising.com and Tacoda. He
currently serves on the Board of Directors of Cars.com (NYSE:Cars),
is the non-exec Chairman of BGF backed Dianomi LTD, a UK based
marketing platform and is a member of the Board of Quantcast
Corporation, a US based technology company that specializes
real-time advertising, He is a graduate of the University of
Illinois, Champaign-Urbana.
David Anton, Independent Non-executive Director
Term of office: Appointed 30 September 2019.
David is Chief Executive Officer of Anton & Partners, a
leading advertising, branding, and marketing communication company
with a 20-year track record of creating impact for some of the
worlds most notable brands in fashion, lifestyle, financial and
automotive sectors. David is a serial entrepreneur and has founded
various successful companies. He is an investor in and advisor to
Village Roadshow Productions, leading movie production company.
David has advised, co-founded and invested in multiple companies
such as Tori Burch, Roqu Media International, Village Roadshow and
Spotify among others. He is a graduate of Columbia University.
The Group has a non-Board Chief Financial Officer, Adrian
Hargrave, who reports regularly to the Chief Executive Officer and
Non-Executive Chairman and assist in the preparation of Board
materials and in reviewing the budget and ongoing performance.
The Company Secretary is responsible for ensuring that Board
procedures are followed and that all applicable rules and
regulations are complied with. Adrian Hargrave currently performs
the role of Company Secretary, providing an advisory role to the
Board. The Company Secretary is supported and guided in this role
by the Company's legal advisors.
The Directors have access to the Company's CFO/Company
Secretary, NOMAD, lawyers and auditors as and when required and are
able to obtain advice from other external bodies when
necessary.
Board Performance and Effectiveness
The performance and effectiveness of the Board, its committees
and individual Directors is reviewed by the Chairman and the Board
an ongoing basis. Training is available should a Director request
it, or if the Chairman feels it is necessary. The performance of
the Board is measured by the Chairman and Akiko Mikumo, the Senior
Independent Non-Executive Directors, with reference to the
Company's achievement of its strategic goals.
Risk Management
The Directors recognise their responsibility for the Group's
system of internal control and have established systems to ensure
that an appropriate and reasonable level of oversight and control
is provided. The Group's systems of internal control are designed
to help the Group meet its business objectives by appropriately
managing, rather than eliminating, the risks to those objectives.
The controls can only provide reasonable, not absolute, assurance
against material misstatement or loss.
The Chief Executive Officer with the assistance of the Company
Secretary and the Chief Financial Officer manages a risk register
for the Group that identifies key risks in the areas of corporate
strategy, financial, clients, staff, environmental and the
investment community. The Governance Committee of the Board are
provided with a copy of the register. The register is reviewed
periodically and is updated as and when necessary.
Within the scope of the annual audit, specific financial risks
are also evaluated in detail, including in relation to foreign
currency, interest rates, debt covenants, taxation and
liquidity.
The annual budget is reviewed and approved by the Board.
Financial results, with comparisons to budget and latest forecasts
are reported on a monthly basis to the Board together with a report
on operational achievements, objectives and issues encountered.
Significant variances from plan are discussed at Board meetings and
actions set in place to address them.
Approval levels for authorisation of expenditure are at set
levels throughout the management structure with any expenditure in
excess of pre-defined levels requiring approval from the
Non-Executive Chairman and the Chief Financial Officer.
Measures continue to be taken to review and embed internal
controls and risk management procedures into the business processes
of the organisation and to deal with areas of improvement which
come to the management's and the Board's attention. We expect the
internal controls for the business to change as the business
expands both geographically and in terms of product
development.
The Company's auditors are encouraged to raise comments on
internal control in their management letter following their audit,
and the points raised and actions arising are monitored through to
completion by the Audit Committee.
Corporate Culture
The Group aims to operate ethically and be socially responsible
in its actions. Importantly, the Board recognises that the Group's
employees are its most important asset.
The Group is committed to achieving equal opportunities and to
complying with relevant anti-discrimination legislation. It is
established Group policy to offer employees and job applicants the
opportunity to benefit from fair employment, without regard to
their sex, sexual orientation, marital status, race, religion or
belief, age or disability. Employees are encouraged to train and
develop their careers.
The Group has continued its policy of informing all employees of
matters of concern to them as employees, both in their immediate
work situation and in the wider context of the Group's
well-being.
In addition, all directors and senior employees are required to
abide by the Group's share dealing code, which was updated at the
time of admission to AIM.
Audit Committee Annual Review
The role of the Audit Committee is to monitor the quality of
internal controls and check that the financial performance of the
Group is properly assessed and reported on. It receives and reviews
reports from the Chief Financial Officer, other members of
management and external auditors relating to the interim and annual
accounts and the accounting and internal control systems in use
throughout the Group. The members of the Audit Committee are
Patrick DeSouza (Chairman), Akiko Mikumo, Mike Kelly and David
Anton.
The Chief Executive Officer and Chief Financial Officer are
invited to attend parts of meetings. The external auditors attend
meetings to discuss the conclusions of their work and meet with the
members of the Committee. The Committee is able to call for
information from management and consults with the external auditors
directly as required.
The objectivity and independence of the external auditors is
safeguarded by reviewing the auditors' formal declarations,
monitoring relationships between key audit staff and the Company
and tracking the level of non-audit fees payable to the
auditors.
The currently constituted Audit Committee was established on 30
September 2019 after Admisson to AIM and had not met prior to 31
December 2019. Pre-Admission, the Company's Audit Committee as
previously constituted met. The Audit Committee t is expected to
meet twice during each financial year, to review the annual
accounts and the interim accounts. The Committee will review with
the independent auditor its judgements as to the acceptability of
the Company's accounting principles. The currently constituted
Audit Committee has met with the Group's external auditors since
the period end in preparation for the Board to approve the 2019
accounts.
In addition, the Committee monitors the auditor firm's
independence from Company management and the Company.
Remuneration Committee Annual Review
The Remuneration Committee was established on 30 September 2019
and prior to 31 December 2019 had not convened. The Committee
comprises Akiko Mikumo, Mike Kelly and David Anton, with Akiko
Mikumo as Chairman. The Remuneration Committee is responsible for
reviewing the performance of Executive Directors and determining
the remuneration and basis of service agreement. The Remuneration
Committee also determines the payment of any bonuses to Executive
Directors and the grant of options. Where appropriate the Committee
consults the Non-Executive Chairman regarding its proposals. No
Director plays a part in any discussion regarding his or her own
remuneration.
Relations with Shareholders
The Company is available to hold meetings with its shareholders
to discuss objectives and to keep them updated on the Company's
strategy, Board membership and management.
The board also welcome shareholders' enquiries, which may be
sent via the Company's website www.entertainmentai.co.uk . Upon
registration of the Company's new name of SEEEN, the website shall
be seeen, com.
Corporate Governance Statement s172 of the Companies Act
Each director must act in a way that, in good faith, would most
likely promote the success of the Group for the benefit of its
stakeholders. The board of directors consider, both individually
and together, that they have acted in the way they consider, in
good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole (having regard to
the stakeholders and matters indicated in S172) in the decisions
taken during the year ended 31 December 2019. Following is an
overview of how the Board performed its duties during 2019.
Shareholders
The Chairman, Chief Executive Officer and Chief Financial
Officer, members of the Board and senior executives on the
management team have regular contact with major shareholders. The
Board receives regular updates on the views of shareholders which
are taken into account when the Board makes its decisions. On 30
September 2019, the Company raised capital largely from
institutional investors to fund its business plan. The Company
received feedback during that process, as well as subsequent
meetings and calls alongside trading updates issued by the
Group.
Employees
The Group encourages an environment of openness and debate and
welcomes all feedback from within.
The Board communicates with senior management and employees. The
Group also operates internal platforms, which staff can access as
required and is a source of both discussion and sharing information
relevant to employees. Details of the Group's performance are
shared with all employees at appropriate times using these
methods.
The Group expects a high standard from its staff and provides
training to achieve this. Where possible, as new roles in the
organisation arise, the Group aims to promote from within.
Customers
The Group currently has one primary revenue generating customer,
which is YouTube. Through the Group's MCN, the Group provides video
inventory to YouTube. In turn YouTube sells digital adverts against
this video inventory. The Group aims to maintain strong relations
with YouTube, including the provision of suitable videos and
assisting with any queries in relation to videos provided by the
MCN.
Going forwards, the Group expects to broaden its customer base
and the Board will pay significant levels of attention to the
quality of our delivery to all customers.
Content Creators
The Group's MCN business sources a large proportion of the
content it provides from third party content creators. The Group
maintains regular contact with the creators through the MCN
management team. The Group is committed to conducting business with
content creators fairly and in an ethical fashion.
Community
The Group is aware that the dissemination of video carries with
it social responsibility to the broader community. Board and
management are committed to the highest levels of professionalism
in the aggregation and dissemination of video content and to ensure
compliance with relevant data compliance regulations.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with the Companies Act
2006 and for being satisfied that the Financial Statements give a
true and fair view. The Directors are also responsible for
preparing the Financial Statements in accordance with International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union.
Company law requires the Directors to prepare Financial
Statements for each financial period which give a true and fair
view of the state of affairs of the Company and the Group and of
the profit or loss of the Company and the Group for that period. In
preparing those Financial Statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company and the
Group will continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements. The Directors
are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions, disclose
with reasonable accuracy at any time the financial position of the
Company and the Group, and to enable them to ensure that the
Financial Statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and
Financial Statements are made available on a website.
As of this publication date, Financial Statements are published
on the Group's website ( www.entertainmentai.co.uk ) in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of Financial Statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Group's website is the responsibility of the Directors - the
work carried out by the auditors does not involve the consideration
of these matters and, accordingly, and the auditors accept no
responsibly for any changes that may have occurred in the accounts
since they were initially presented on the website. The Directors'
responsibility also extends to the ongoing integrity of the
Financial Statements contained there.
On 29 June 2020, the Company launched SEEEN, its new brand. Upon
filing with Company House, the Company's new website shall be
seeen.com.
Independent Auditors' report to the members of Entertainment AI
plc
Opinion
We have audited the financial statements of Entertainment AI plc
(the "Parent Company") and its subsidiaries (the "Group") for the
period ended 31 December 2019, which comprise:
-- the Group statement of comprehensive income for the period ended 31 December 2019;
-- the Group and parent company statements of financial position as at 31 December 2019;
-- the Group and parent company statements of cash flows for the period then ended;
-- the Group and parent company statements of changes in equity for the period then ended; and
-- the notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the parent company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
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 31
December 2019 and of the Group's loss for the period then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements 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, 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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you where:
-- The directors' use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
-- The directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group's or the parent company's ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of
materiality. An item is considered material if it could reasonably
be expected to change the economic decisions of a user of the
financial statements. We used the concept of materiality to both
focus our testing and to evaluate the impact of misstatements
identified.
Based on our professional judgement, we determined overall
materiality for the Group financial statements as a whole to be
GBP96,000 (US$120,000), based on 8% percent of normalised Group
profit/(loss) before tax.
We use a different level of materiality ('performance
materiality') to determine the extent of our testing for the audit
of the financial statements. Performance materiality is set based
on the audit materiality as adjusted for the judgements made as to
the entity risk and our evaluation of the specific risk of each
audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be
reduced to a lower level, such as, for related party transactions
and directors' remuneration.
We agreed to report to the audit committee all identified errors
in excess of GBP4,845 (US$6,000). Errors below that threshold would
also be reported to it if, in our opinion as auditor, disclosure
was required on qualitative grounds.
Overview of the scope of our audit
Entertainment AI Plc is located in London, United Kingdom where
we as group auditors conducted the audit. The operations of its
subsidiaries, Tagasuris Inc., GT Channel Inc., and EAI Inc. are in
the United States. We conducted specific audit procedures in
relation to these entities which were undertaken by component
auditors, Marcum LLP.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgement, 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) that we identified. These matters included 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.
This is not a complete list of all risks identified by our
audit.
Key audit matter How the scope of our audit addressed
the key audit matter
==================================== ===============================================
Acquisition accounting We obtained a copy of the sale and
During the period, the purchase agreements to confirm the
company acquired three initial consideration for these acquisitions,
trading companies: GT as well as assessing the accounting
Channel Inc., Entertainment for any conditional elements of the
AI Inc., and Tagasarius acquisition.
Inc. We performed audit work on the acquisition
balance sheets to confirm the opening
Accounting for business balances as at date of acquisition.
combinations is complex We reviewed the work undertaken by
and requires the recognition management in respect of the valuation
of both consideration of intangible assets identified at
paid and acquired assets date of acquisition and assessed
and liabilities at the and challenged the provisional fair
acquisition date at fair value attributed to these intangible
value, which can involve assets.
significant judgement We also assessed the disclosures
and estimates. made and application of the standard
There is a risk that inappropriate in line with IFRS.
assumptions could result
in material errors in
acquisition accounting.
==================================== ===============================================
Going concern We understand that the Board continues
The Board are responsible to monitor the economic outlook as
for ensuring it is appropriate a result of COVID-19 and considers
to prepare the Company's the cash resources of the Company
financial statements on to be sufficient to cover ongoing
the basis that it is a operational costs for the foreseeable
going concern for a period future.
of at least 12 months We have obtained and reviewed the
from the date of approving Board's going concern assessment,
the financial statements. which includes consideration of COVID-19,
and associated supporting working
capital forecasts. We challenged
the assumptions made in the forecast,
such as costs per annum and existing
cash facilities maintained by the
company.
==================================== ===============================================
Our audit procedures in relation to these matters were designed
in the context of our audit opinion as a whole. They were not
designed to enable us to express an opinion on these matters
individually and we express no such opinion.
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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our
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 light of the knowledge and understanding of the group and the
parent company and their 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
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements 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 the directors for the financial
statements
As explained more fully in the directors' responsibilities
statement, 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 and parent company'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 the parent company 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.
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
company'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 company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
John Glasby (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
29 June 2020
Consolidated Statement of Comprehensive Income for the six
months ended 31 December 2019
Six months
ended 31
December Year ended
2019 30 June 2019
Notes $ $
-------------------------------------------- ----- ------------- ------------------
Revenue 4,288,004 -
-------------------------------------------- ----- ------------- ------------------
Cost of sales (3,851,924) -
-------------------------------------------- ----- ------------- ------------------
Gross profit 436,080 -
-------------------------------------------- ----- ------------- ------------------
Administrative expenses
- Share-based payments 6 (156,650) -
- Amortisation of intangibles 12 (297,562) -
- Acquisition/listing costs (601,595) -
- Other administrative costs (1,173,342) (499,336)
-------------------------------------------- ----- ------------- ------------------
Total administrative expenses (2,229,149) (499,336)
-------------------------------------------- ----- ------------- ------------------
Operating Loss (1,793,069) (499,336)
Finance income / (expense) 7/8 (3,257) 8,198
-------------------------------------------- ----- ------------- ------------------
Loss before tax (1,796,325) (491,138)
Taxation expense 9 58,188 -
-------------------------------------------- ----- ------------- ------------------
Loss after tax (1,738,137) (491,138)
-------------------------------------------- ----- ------------- ------------------
Other Comprehensive Income
Exchange differences arising on translation
of foreign operations 578,502 (60,962)
Total comprehensive loss for the year (1,159,636) (552,100)
-------------------------------------------- ----- ------------- ------------------
Profit per share attributable to equity holders Cents Cents
of Parent
--------------------------------------------------- ------------- ----------------
Basic 10 (0.07) (0.16)
Diluted 10 (0.07) (0.16)
-------------------------------------------- ----- ------------- ----------------
The results reflected above relate to continuing activities.
Consolidated Statement of Financial Position as at 31 December
2019
Notes
31 December 30 June
2019 2019
$ $
ASSETS
Non-current assets
Goodwill and indefinite life
intangible assets 12 9,762,158 -
Other intangible assets 12 4,558,226 -
Trade and other receivables 14 1,800 -
-------------------------------- ------ -------------- ----------
14,322,184 -
-------------------------------- ------ -------------- ----------
Current assets
Trade and other receivables 14 1,814,257 -
Cash and cash equivalents 15 9,760,905 1,292,878
-------------------------------- ------ -------------- ----------
11,575,162 1,292,878
-------------------------------- ------ -------------- ----------
TOTAL ASSETS 25,897,346 1,292,878
-------------------------------- ------ -------------- ----------
EQUITY AND LIABILITIES
Equity attributable to holders
of the parent
Share capital 18 7,400,732 482,092
Share premium 19 7,677,993 1,438,523
Merger relief reserve 19 8,989,501 -
Share based payment reserve 156,650 -
Foreign exchange reserve 517,540 (60,962)
Retained earnings (2,510,841) (599,775)
-------------------------------- ------ -------------- ----------
Total Shareholders' Equity 22,231,575 1,259,878
-------------------------------- ------ -------------- ----------
Non-current liabilities
Deferred tax liability 17 1,233,960 -
1,233,960 -
-------------------------------- ------ -------------- ----------
Current liabilities
Trade and other payables 16 2,431,811 33,000
Total Liabilities 3,665,771 33,000
-------------------------------- ------ -------------- ----------
TOTAL EQUITY AND LIABILITIES 25,897,346 1,292,878
-------------------------------- ------ -------------- ----------
The financial statements of Entertainment AI plc, company number
10621059, were approved by the board of Directors and authorised
for issue on the 29 June 2020. They were signed on its behalf
by:
Patrick De Souza
Non-Executive Chairman
The accompanying notes are an integral part of these financial
statements.
Company Statement of Financial Position as at 31 December
2019
Notes
31 December
2019 30 June 2019
$ $
ASSETS
Non-current assets
Investment in Subsidiaries 13 12,984,835 -
12,984,835 -
-------------------------------- ------ -------------- -------------
Current assets
Intercompany receivables 14 2,969,903 -
Cash and cash equivalents 15 7,838,650 1,292,878
10,808,553 1,292,878
-------------------------------- ------ -------------- -------------
TOTAL ASSETS 23,793,388 1,292,878
-------------------------------- ------ -------------- -------------
EQUITY AND LIABILITIES
Equity attributable to holders
of the parent
Share capital 18 7,400,732 482,092
Share premium 19 7,677,993 1,438,523
Merger relief reserve 19 8,989,501 -
Share based payment reserve 156,650 -
Foreign exchange reserve 553,970 (60,962)
Retained earnings (1,752,943) (599,775)
-------------------------------- ------ -------------- -------------
Total Shareholders' Equity 23,026,904 1,259,878
-------------------------------- ------ -------------- -------------
Non-current liabilities
Deferred tax liability 17 - -
- -
-------------------------------- ------ -------------- -------------
Current liabilities
Trade and other payables 16 767,485 33,000
Total Liabilities 767,485 33,000
-------------------------------- ------ -------------- -------------
TOTAL EQUITY AND LIABILITIES 23,793,388 1,292,878
-------------------------------- ------ -------------- -------------
The loss for the financial year in the financial statements of
the parent Company was $981,239 (12 months to 30 June 2019: loss of
$491,138), which related entirely to Plc costs.
The financial statements of Entertainment AI plc, company number
10621059, were approved by the board of Directors and authorised
for issue on the 29 June 2020. They were signed on its behalf
by:
Patrick De Souza
Non-Executive Chairman
The accompanying notes are an integral part of these financial
statements.
Consolidated Statement of Changes in Equity
Share
based Foreign Retained
Share Share Merger payment exchange (Losses)/ Total
Capital Premium Reserve reserve reserve Earnings $
$ $ $ $ $ $
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- ------------
As at 30 June
2018 482,092 1,438,523 - - - (108,637) 1,811,978
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- ------------
Loss for the
year - - - - - (491,138) (491,138)
Other
comprehensive
gain
/ (loss) - - - - (60,962) - (60,962)
As at 30 June
2019 482,092 1,438,523 - - (60,962) (599,775) 1,259,878
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- ------------
Issue of
Ordinary
Shares 6,918,640 7,655,061 8,989,501 - - - 23,563,202
Share issuance
costs - (1,415,591) - - - (172,929) (1,588,520)
Share-based
payment
expense - - - 156,650 - - 156,650
Loss for the
year - - - - - (1,738,137) (1,738,137)
Other
comprehensive
gain
/ (loss) - - - - 578,502 - 578,502
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- ------------
As at 31
December 2019 7,400,732 7,505,064 8,989,501 156,650 517,540 (2,337,912) 22,231,575
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- ------------
Company Statement of Changes in Equity
Share
based Foreign Retained
Share Share Merger payment Exchange (Losses)/
Capital Premium Reserve reserve Reserve Earnings Total
$ $ $ $ $ $ $
--------------- ------------------- -------------------- -------------------- ---------------- ---------------------- ------------ ------------
As at 30 June
2018 482,092 1,438,523 - - - (108,637) 1,811,978
--------------- ------------------- -------------------- -------------------- ---------------- ---------------------- ------------ ------------
Loss for the
year - - - - - (491,138) (491,138)
Other
comprehensive
gain / (loss) - - - - (60,962) - (60,962)
As at 30 June
2019 482,092 1,438,523 - - (60,962) (599,775) 1,259,878
--------------- ------------------- -------------------- -------------------- ---------------- ---------------------- ------------ ------------
Issue of
Ordinary
Shares 6,918,640 7,655,061 8,989,501 - - - 23,563,202
Share issuance
costs (1,415,591) - - - (172,929) (1,588,520)
Share-based
payment
expense - - - 156,650 - - 163,088
Loss for the
year - - - - - (981,239) (981,239)
Other
comprehensive
gain / (loss) - - - - 614,932 - 614,932
--------------- ------------------- -------------------- -------------------- ---------------- ---------------------- ------------ ------------
As at 31
December
2019 7,400,732 7,505,064 8,989,501 156,650 553,970 (1,581,014) 23,025,904
--------------- ------------------- -------------------- -------------------- ---------------- ---------------------- ------------ ------------
Consolidated Statement of Cash Flows
6 months ended
31 December
Year ended
2019 30 June 2019
$ $
----------------------------------------------------- ----------------- ------------------
Cash flows from operating activities
Loss before tax (1,796,325) (491,138)
Adjustments for non-cash/non-operating items:
Amortisation of intangible assets 297,562 -
Share based payments 156,650 -
Interest paid 3,257 -
Interest received - (8,198)
----------------------------------------------------- ----------------- ----------------
Operating cash flows before movements in working
capital (1,338,856) (499,336)
----------------------------------------------------- ----------------- ----------------
Decrease/(Increase) in inventories - -
Increase in trade and other receivables (717,311) -
(Decrease)/Increase in trade and other payables 967,602 (18,264)
----------------------------------------------------- ----------------- ----------------
250,591 (18,264)
----------------------------------------------------- ----------------- ----------------
Cash used by operations (1,088,566) (517,600)
----------------------------------------------------- ----------------- ----------------
Income taxes paid - -
Net cash generated from operating activities (1,088,566) (517,600)
Cash flows from investing activities
Purchase of intangible assets (94,794) -
Cash on acquisition 83,587 -
----------------------------------------------------- ----------------- ----------------
Net cash used in investing activities (11,207) -
----------------------------------------------------- ----------------- ----------------
Cash flows from financing activities
Issue of ordinary share capital 2,923,306 -
Premium on issue of ordinary share capital 7,655,060 -
Share issuance costs set against share premium
and retained earnings (1,588,519)
Interest income/(paid) (3,257) 8,198
Net cash generated/(used by) from financing
activities 8,986,590 8,198
----------------------------------------------------- ----------------- ----------------
Net increase/(decrease) in cash and cash equivalents 7,886,817 (509,402)
----------------------------------------------------- ----------------- ----------------
Effect of exchange rates on cash 581,210 (63,070)
----------------------------------------------------- ----------------- ----------------
Cash and cash equivalents at the beginning
of year 1,292,878 1,865,350
----------------------------------------------------- ----------------- ----------------
Cash and cash equivalents at end of year 9,760,905 1,292,878
----------------------------------------------------- ----------------- ----------------
The Group had no financing liabilities during the period.
Company Statement of Cash Flows
6 months
ended
Year ended
31 December 30 June
2019 2019
$ $
-------------------------------------------------- -------------- -----------
Cash flows from operating activities
Loss before tax (979,896) (491,138)
Adjustments for non-cash/non-operating items:
Share based payment expense 156,050 -
Interest received - (8,198)
-------------------------------------------------- -------------- ---------------
Operating cash flows before movements in working
capital (823,246) (499,336)
-------------------------------------------------- -------------- -----------
Increase in trade and other receivables (306,356) -
Increase in trade and other payables 709,741 (18,264)
-------------------------------------------------- -------------- -----------
Cash used by operations (419,861) (517,600)
-------------------------------------------------- -------------- -----------
Income taxes - -
-------------------------------------------------- -------------- -----------
Net cash used by operating activities (419,861) (517,600)
-------------------------------------------------- -------------- -----------
Cash flows from investing activities - -
-------------------------------------------------- -------------- -----------
Loans to subsidiaries (2,637,727)
-------------------------------------------------- -------------- -----------
Net cash used in investing activities (2,637,727) -
-------------------------------------------------- -------------- -----------
Cash flows from financing activities
Issue of ordinary share capital 2,923,306 -
Premium on issue of ordinary share capital 7,655,060 -
Share issuance costs set against share premium
and retained earnings (1,588,519)
Interest received - 8,198
-------------------------------------------------- -------------- -----------
Net cash (used by)/generated from financing
activities 8,989,847 8,198
-------------------------------------------------- -------------- -----------
(Decrease)/Increase in cash and cash equivalents 5,932,259 (509,402)
-------------------------------------------------- -------------- -----------
Effect of exchange rates on cash 613,513 (63,070)
-------------------------------------------------- -------------- -----------
Cash and cash equivalents at the beginning
of period 1,292,878 1,865,350
-------------------------------------------------- -------------- -----------
Cash and cash equivalents at end of period 7,838,650 1,292,878
-------------------------------------------------- -------------- -----------
The Company had no financing liabilities during the period.
The accompanying notes are an integral part of these financial
statements.
Notes to Financial Statements
1 General information
The Group is a global social media and technology platform for
sharing video micro-moments to enable discovery, sharing and
e-commerce through the targeting and connecting of creators,
audiences and brands.
The Company is a public limited company domiciled in the United
Kingdom and incorporated under registered number 10621059 in
England and Wales. The Company's registered office is 27-28
Eastcastle Street, London W1W 8DH.
The Company is listed on AIM, a market operated by the London
Stock Exchange. These Financial Statements were authorised for
issue by the Board of Directors on 29 June 2020.
2 Significant accounting policies
Basis of preparation
In previous years, the Company's accounts were presented in
British Sterling (GBP). For this financial period and for the prior
period comparative, the Group and the Company's accounts are now
being presented in US Dollars ($), reflecting the change in the
Group's dominant currency of operations.
These Financial Statements of the Group and Company are prepared
on a going concern basis, under the historical cost convention
except for certain financial instruments which are carried at fair
value as specified within the individual accounting policies.
The preparation of Financial Statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
The Company has changed its fiscal year end from June 30 to
December 31 to reflect the formation of the Entertainment AI plc
group during 4Q 2019. As such, the period ended December 31, 2019
is a shortened period, comprised of six months. The comparative
audited year ended June 30, 2019 is a full year but reflects on
Blockchain plc, a cash shell and precursor to Entertainment AI
plc.
The Financial Statements are presented in US Dollars ($),
rounded to the nearest dollar.
Going concern
The financial statements have been prepared on a going concern
basis, which assumes that the Group will be able to meet its
liabilities as they fall due for the foreseeable future. The Group
is dependent for its working capital requirements on cash generated
from operations and its cash holdings and from equity markets. The
cash holdings of the Group at 31 December 2019 were $9.8
million.
The Directors have prepared detailed cash flow projections which
are based on their current expectations of trading prospects, and
accordingly the Directors have concluded that it is appropriate to
continue to adopt the going concern basis in preparing these
financial statements.
The Directors have looked at the potential impact of the
COVID-19 pandemic and have prepared scenario plans. Given the
Group's cash position and anticipated spending rates, regardless of
the impact of COVID-19 on revenue generation, the Group has
sufficient cash resources for a period of at least one year from
the date of these accounts.
Accordingly the going concern basis of accounting has been
adopted in preparing these consolidated financial statements.
Basis of consolidation
The accompanying consolidated financial statements of
Entertainment AI plc include its wholly owned subsidiaries: GT
Channel, Inc., Tagasauris Inc., and EAI, Inc.
The Consolidated Statement of Comprehensive Income includes the
results of all subsidiary undertakings for the period from the date
on which control passes. Control is achieved where the Company (or
one of its subsidiary undertakings) obtains the power to govern the
financial and operating policies of an investee entity so as to
derive benefits from its activities.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Company. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued, and liabilities incurred or assumed at
the date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the
Company's share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognized directly in the income statement.
All Inter-company transactions and balances and unrealized gains
or losses on transactions between Group companies are eliminated in
full.
Taxation
Income tax expense represents the sum of the current tax and
deferred tax charge for the year.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Group's and Company's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the year end.
Deferred tax
Deferred income taxes are provided in full, using the liability
method, for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the
Financial Statements. Deferred income taxes are determined using
tax rates that have been enacted or substantially enacted and are
expected to apply when the related deferred income tax asset is
realised or the related deferred income tax liability is
settled.
The principal temporary differences arise from depreciation or
amortisation charged on assets and tax losses carried forward.
Deferred tax assets relating to the carry forward of unused tax
losses and are recognised to the extent that it is probable that
future taxable profit will be available against which the unused
tax losses can be utilised. The carrying amount of deferred tax
assets is reviewed at each reporting date and reduced to the extent
that it is probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Foreign currencies
(i) Functional and presentational currency
Items included in the Financial Statements are measured using
the currency of the primary economic environment in which each
entity operates ("the functional currency") which is considered by
the Directors to be Pounds Sterling (GBP) for the Parent Company
and US Dollars ($) for EAI Inc, GTChannel Inc and Tagasauris, Inc.
The Financial Statements have been presented in US Dollars which
represents the dominant economic environment in which the Group
operates. The effective exchange rate at 31 December 2019 was GBP1
= US$1.3118 (30 June 2019: GBP1 = US$1.2695). The average exchange
rate for the six months to 31 December 2019 were GBP1 = US$1.2600
(year to 30 June 2019: GBP1 = US$1.2943).
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the statement of
comprehensive income.
(ii) Group Companies
The results and financial position of all the Group entities
that have a functional currency different from the presentational
currency are translated into the presentational currency as
follows:
(a) assets and liabilities for each statement of financial
position presented are translated at closing rate at the date of
the statement;
(b) the income and expenses are translated at average exchange
rates for period where there is no significant fluctuation in
rates, otherwise a more precise rate at a transaction date is used;
and
(c) all resulting exchange differences are recognised in other
comprehensive income and accumulated in the foreign exchange
reserve.
Revenue recognition
IFRS 15 (Revenue from Contracts with Customers) came into effect
1 January 2018. Under IFRS 15, revenue is recognized when a
customer obtains control of a good or a service and thus has the
ability to direct the use of and obtain the benefits from the good
or service.
Nature of MCN
Entertainment AI owns 100% of GT Channel, Inc, which operates a
multichannel network ("MCN"). The MCN aggregates content from
creators and provides such content to YouTube who is the customer.
YouTube then directs the use of such content to gain the benefit of
digital ad revenue from brands. YouTube takes forty-five percent of
the gross amount of digital ad revenue ("YT Commission") and then
pays our MCN. YouTube provides the MCN with daily reports on its
receipt of revenue from brands against the MCN's content. MCN
revenue (being the digital advertising revenue received by YouTube,
less the YT Commission) is earned when YouTube sells an advert
against MCN content. This revenue is recognized by the MCN upon
receipt of the reports from YouTube.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Loans and receivables
Trade receivables, loans, and other receivables held with the
objective to collect the contractual cash flows are classified as
subsequently measured at amortised cost. These are initially
measured at fair value plus transaction costs. At each period end,
there is an assessment of the expected credit loss in accordance
with IFRS 9; with any increase or reduction in the credit loss
provision charged or released to other selling and administrative
expenses in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held
at call with banks, and other short term highly liquid investments
with original maturities of three months or less.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
("ECLs") for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms.
The Group also recognises lifetime ECLs for trade receivables
and contract assets. The ECLs on these financial assets are
estimated using a provision matrix based on the Group's historical
credit loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment of both
the current as well as the forecast conditions at the reporting
date, including time value of money where appropriate.
For all other financial instruments, the Group recognises
lifetime ECL when there has been a significant increase in credit
risk since initial recognition. However, if the credit risk on the
financial instrument has not increased significantly since initial
recognition, the Group measures the loss allowance for that
financial instrument at an amount equal to 12 -- month ECL.
Financial liabilities
Financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs and are
subsequently measured at amortised cost using the effective
interest method.
Equity instruments
An equity instrument is any instrument with a residual interest
in the assets of the Company after deducting all of its
liabilities. Equity instruments (ordinary shares) are recorded at
the proceeds received, net of direct issue costs.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
Property, plant and equipment
All property, plant and equipment is stated at cost less
accumulated depreciation.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows:
Equipment and displays: 5 to 7 years
Motor vehicles: 5 years
Leasehold improvements: 7 years or lease term, whichever is shorter
The asset's residual values and economic lives are reviewed, and
adjusted if appropriate, at each reporting date. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Assets that are no longer of economic use to
the business are retired.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within other
(losses) or gains in the income statement.
Goodwill
Goodwill represents the excess of the fair value of the
consideration over the fair values of the identifiable net assets
acquired.
Goodwill arising on acquisitions is not subject to amortisation
but is subject to annual impairment testing. Any impairment is
recognised immediately in the Consolidated Statement of
Comprehensive Income and not subsequently reversed.
Other intangible assets
Intangible assets are recorded as separately identifiable assets
and recognised at historical cost less any accumulated
amortisation. These assets are amortised over their definite useful
economic lives on the straight-line method.
Amortisation is computed using the straight-line method over the
definite estimated useful lives of the assets as follows:
Years
Customer lists 4
Product development 4
Any amortisation is included within administrative expenses in
the statement of comprehensive income.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment
of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change in
useful life from indefinite to finite is made on a prospective
basis.
The asset's residual values and economic lives are reviewed, and
adjusted if appropriate, at each reporting date. An asset's
carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within other
(losses) or gains in the Statement of Comprehensive Income.
Research and development
Research expenditure is recognised as an expense when incurred.
Costs incurred on development projects (relating to the design and
testing of new or improved products) are recognised as intangible
assets when the following criteria are fulfilled.
-- It is technically feasible to complete the intangible asset
so that it will be available for use or resale;
-- Management intends to complete the intangible asset and use or sell it;
-- There is an ability to use or sell the intangible;
-- It can be demonstrated how the intangible asset will generate
possible future economic benefits;
-- Adequate technical, financial and other resource to complete
the development and to use or sell the intangible asset are
available; and
-- The expenditure attributable to the intangible asset during
its development can be reliably measured.
Other development expenditures that do not meet these criteria
are recognised as an expense in the period incurred. Development
costs previously recognised as an expense are not recognised as an
asset in a subsequent period. Capitalised development costs are
recorded as intangible assets and are amortised from the point at
which they are ready for use on a straight-line basis over the
asset's estimated useful life.
Segment reporting
A business segment is a group of assets and operations engaged
in providing products or services that is subject to risks and
returns that are different from those of other business
segments.
Impairment reviews
Assets that are subject to amortisation and depreciation are
reviewed for impairment when events or changes in circumstances
indicate that the carrying amount may not be fully recoverable.
Assets that are not subject to amortisation and depreciation are
reviewed on an annual basis at each year end and, if there is any
indication that an asset may be impaired, its recoverable amount is
estimated. The recoverable amount is the higher of its net selling
price and its value in use. Any impairment loss arising from the
review is charged to the Statement of Comprehensive Income whenever
the carrying amount of the asset exceeds its recoverable
amount.
Share based payments
The Group has made share-based payments to certain Directors,
employees and advisers by way of issue of share options. The fair
value of these payments is calculated either using the Black
Scholes option pricing model or by reference to the fair value of
any fees or remuneration settled by way of granting of options. The
expense is recognised on a straight-line basis over the period from
the date of award to the date of vesting, based on the best
estimate of the number of shares that will eventually vest.
Critical accounting estimates and judgements
The preparation of Financial Statements in conformity with
International Financial Reporting Standards requires the use of
judgements together with accounting estimates and assumptions that
affect the reported amounts of assets and liabilities and the
reported amounts of income and expenses during the reporting
period. Although these judgements and estimates are based on
management's best knowledge of current events and actions, the
resulting accounting treatment estimates will, by definition,
seldom equal the related actual results.
The key judgements in respect of the preparation of the
financial statements are in respect of the accounting for
acquisitions, determination of separately identifiable assets on
acquisition, the determination of cash generating units, the
evaluation of segmental information, the evaluation of whether
there is any indication of any impairment in investments,
intangibles, goodwill or receivables and whether deferred tax
assets should be recognized for tax losses.
The estimates and assumptions that have a risk of causing
material adjustment to the carrying amounts of assets and
liabilities within the next financial year for the consolidated
group are the fair value of assets arising on acquisition, carrying
value of the goodwill, the carrying value of the other intangibles
(see note 10 for all of these) and the carrying value of the
investments at the parent company level (see note 12). Please see
relevant notes for these areas.
When the Group makes an acquisition, it recognizes the
identifiable assets and liabilities, including intangible assets,
at fair value with the difference between the fair value of net
assets acquired and the fair value of consideration paid comprising
goodwill. The key assumptions and estimates used to determine the
valuation of intangible assets acquired are typically the forecast
cash flows, based on discount rate and customer attrition or
replacement cost.
3 Segmental Analysis
The Group generated all of its revenue in the period from one
customer, YouTube, a wholly owned subsidiary of Google. All
revenues are generated in the USA.
No additional disaggregated segmental information is provided on
the basis that the business is managed as one operation by the
determination of the Chief Operating Decision Maker.
4 Expenses by nature
The Group's operating loss has been arrived at after
charging:
6 months 12 months
ended ended
31 December 30 June
2019 2019
Note $ $
---------------------------------- ------ ------------ ----------
Employee costs 230,365 -
Software Engineering Consultants 211,956 -
Agency fees 310,927 -
Rent 8,782 21,588
Amortization charge 297,562
Professional fees 170,136 276,742
Acquisition / listing costs 601,595 -
6 months ended Year ended
31 December 30 June
2019 2019
$ $
------------------------------------- --------------- -----------
Auditors remuneration
Fees payable to the Group's auditor
for audit of Parent Company and
Consolidated Financial Statements 37,092 19,005
Fees payable to the Group's auditor
for non-audit services 58,976 60,816
------------------------------------- --------------- -----------
The Group auditors are not the auditors of the US subsidiary
companies. The fees paid to the auditor of the US subsidiary
companies were $36,000 (30 June 2019: nil) for the audit of these
companies with no payments for other services.
5 Employees and Directors
The Directors are considered to be the key management of the
business.
6 months ended Year ended
31 December 2019 30 June 2019
$ $
Staff costs for all employees, including
Directors consist of:
Wages and Salaries 387,015 -
Social Security Costs - -
387,015 -
------------------------------------------ ----------------- -------------
Information regarding Directors emoluments are as follows:
6 months ended 31 Year ended 30
December 2019 June 2019
$ $
---------------------------------------- ----------------- -------------
Short-Term employee benefits
Directors' fees, salaries and benefits 150,000 -
Social Security Costs - -
150,000 -
---------------------------------------- ----------------- -------------
The highest paid Director received emoluments of $50,000 (30
June 2019: Nil).
The average number of full-time employees (including Directors)
in the Group during the year was:
6 months ended Year ended
31 December 30 June
2019 2019
Directors 2 2
Management 3 -
Other 2 -
7 2
----------- -------------- ----------
Note: The Group also uses contractors for a variety of software
engineering work. These costs are represented in Software
Engineering Consultants in Note 3 above to 7 consultants.
6 Share options
4,616,481 options were granted at the time of the acquisition to
certain directors, employees and advisers as part of the completion
of the series of transactions completed on 30 September 2019.
In addition, the Company plans to grant share options at its
discretion to incentivize Directors, management and advisors.
The options recorded below are accounted for as equity settled
options. Should the options remain unexercised after a period of
ten years from the date of grant the options will expire unless an
extension is agreed to by the board. Options are exercisable at a
price equal to an exercise price determined by the board.
Details for the share options and warrants granted, exercised,
lapsed and outstanding at the year-end are as follows:
Weighted
average exercise
price ($)
Number of share
options 2019 2019
--------------------------- ------------------------------- ------------------------
Outstanding at beginning - -
of year
Granted during the year 4,616,481 0.554
Forfeited/lapsed during - -
the year
Exercised during the year - -
--------------------------- ------------------------------- ------------------------
Outstanding at end of
the year 4,616,481 0.554
--------------------------- ------------------------------- ------------------------
Exercisable at end of - -
the year
--------------------------- ------------------------------- ------------------------
Fair value of share options
During the year, the Group granted 4,616,481 Share Options to
certain Directors, Employees and Advisers in the United States of
America, with an exercise price of GBP0.45 ($0.554). In addition,
the Group agreed to grant 380,206 Share Options to certain
Directors, Employees and Advisers in the United Kingdom, pending
HMRC approval of valuation of the pricing to make the Options EMI
compliant. It is expected that these Options will be granted during
2020.
The fair value of options granted during the prior year has been
calculated using the Black Scholes model which has given rise to
fair values per share ranging from 13.4p to 18.6p. This is based on
a risk-free rate of 0.365% and volatility of 76%.
The Black Scholes calculations for the options granted during
the year resulted in a charge of $156,650 which has been expensed
in the year.
The weighted average remaining contractual life of the share
options as at 31 December 2019 was 9.75 years.
Options arrangements that exist over the Company's shares at
year end are detailed below:
31 December 30 June Date of Exercise Exercise period
Grant 2019 2019 Grant price From To
-------------------- ----------- ------- --------- -------- -----------------------------
AIM Admission Grant
Options 4,616,481 - 30/9/2019 $0.594 30/9/2020 30/9/2029
Total 4,616,481 -
-------------------- ----------- ------- --------- -------- -------------- -------------
All share options are equity settled on exercise.
(1) On 30 September 2019, concurrent with the Group's admission
to AIM, the Group granted 4,616,481 Share Options to certain
Directors, employees and advisers, all with an exercise price of 45
pence ($0.594), These options all vested immediately. Half of the
Share Options are exercisable on the first anniversary of grant and
the other half are exercisable on the second anniversary of grant,
In addition, the Group agreed to issue a further 380,206 Share
Options to UK employees and advisers, which will be issued upon
approval for an EMI Scheme during 2020.
7 Finance income
6 months
ended
31 December
12 months
ended 30
2019 June 2019
$ $
Interest income - 8,198
----------------------- -------------- -----------
8 Finance expense
6 months
ended
31 December
12 months
ended 30
2019 June 2019
$ $
Interest expense 3,257 -
----------------- --- -------------- -----------
9 Taxation
The major components of income tax expense for the periods
ending 31 December 2019 and 30 June 2019 are as follows:
6 months 12 months
ended ended
31 December 30 June
2019 2019
Group $ $
---------------------------------- ------------ ----------
Current tax: -
Current corporation tax (benefit) 4,300 -
in the year
Prior year over provision - -
Total Tax charge (benefit) 4,300 -
---------------------------------- ------------ ----------
The tax on the Company's loss before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits and losses as follows:
6 months 12 months
ended ended
31 December 30 June
2019 2019
$ $
-------------------------------------- ------------ ----------
Total loss on ordinary activities
before tax (1,796,325) (491,138)
Loss on ordinary activities at
the standard rate of corporation
tax in the US of 21% (30 June
2019: UK 19%) (377,228) (93,316)
Non-deductible expenses 165,945 -
eductible expenses
State taxes net of federal benefit (178,142) -
Losses not utilised 331,237 93,316
-------------------------------------- ------------ ----------
Total Tax charge / (benefit) (58,188) -
-------------------------------------- ------------ ----------
No deferred tax asset has been recognised due to the uncertainty
surrounding future profits.
10 Earnings per share
The loss per share / diluted loss per share has been calculated
using the loss for the year and the weighted average number of
ordinary shares outstanding during the year , as follows:
6 months ended
31 December 12 months ended
2019 30 June 2019
-------------------------------------------- --------------------- ------------------
Loss for the year attributable to equity
holders of the Parent ($) (1,738,137) (491,138)
Weighted average number of ordinary shares 26,627,958 3,041,667
-------------------------------------------- --------------------- ------------------
Diluted weighted average number of ordinary
shares 26,627,958 3,041,667
-------------------------------------------- --------------------- ------------------
Loss per share (cents) (0.07) (0.16)
-------------------------------------------- --------------------- ------------------
Diluted loss per share (cents) (0.07) (0.16)
-------------------------------------------- --------------------- ------------------
All figures in the calculation above have been prepared as if
the 12 for 1 share capital consolidation effected on 30 September
2019 had occurred prior to 1 July 2018.
11 Acquisitions
On September 30, 2019, the Company acquired 100% of the issued
share capital of GT Channel, Inc., Tagasauris Inc., and EAI, Inc
for an aggregate consideration of 27,092,886 shares with a fair
value of $12,984,835, which was satisfied in full on the date of
acquisition. Acquisition expenses of approximately $196,820 are
included within the consolidated statement of comprehensive income.
Details of the purchase consideration, the net assets acquired, and
provisional assessment of goodwill are as follows:
TAG GTC EAI Total
Purchase Price $ $ $ $
------------------ ------------------------- --------------------- ------------
Cash paid - - - -
Ordinary shares issued 5,248,017 5,112,808 2,624,009 12,984,835
Total purchase
consideration 5,248,017 5,112,808 2,624,009 12,984,835
================== ========================= ===================== ============
Net Assets Acquired
TAG GTC EAI Total
------------------ ------------------------- --------------------- ------------
Cash 28,699 54,889 - 83,587
Accounts receivable - 897,372 - 897,372
Security deposits - 1,800 - 1,800
Other receivables 199,573 - - 199,573
Intangible assets 1,939,263 2,821,371 - 4,760,994
Deferred tax
liabilities (506,826) (789,622) - (1,296,448)
Accrued expenses (42,796) (930,797) - (973,594)
Accounts payable (237,123) (213,485) - (450,608)
------------------ ------------------------- --------------------- ------------
1,604,340 1,242,055 - 2,660,261
Add: Goodwill 3,867,228 3,270,921 2,624,009 9,762,158
Net Assets Acquired 5,248,017 5,112,808 2,624,009 12,984,835
================== ========================= ===================== ============
Goodwill of $9,762,158 recognized on these acquisitions
represents the amount paid for future sales growth from both new
customers and new products, operating cost synergies and employee
know-how.
From the date of acquisition to 31 December 2019, the newly
acquired businesses contributed $4,288,004 to revenue and $515,610
to operating losses.
Had these acquisitions been completed at the beginning of the
period Group revenue would have been $5,661,114 and operating
losses would have been $2,248,963.
12 Intangible assets
Group Goodwill Arising Other Intangible Development
on Consolidation Assets Costs Totals
--------------------------
$ $ $ $
-------------------------- ------------------ ----------------- --------------------- -----------
Cost
At 1 July 2018 - - - -
Additions - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
At 30 June 2019 - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
Additions (see
note 12) 9,762,158 4,760,994 94,794 14,617,946
-------------------------- ------------------ ----------------- --------------------- -----------
At 31 December
2019 9,762,158 4,760,994 94,794 14,617,946
-------------------------- ------------------ ----------------- --------------------- -----------
Accumulated amortisation
-------------------------- ------------------ ----------------- --------------------- -----------
At 1 July 2018 - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
At 30 June 2019 - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
Amortisation - 297,562 - 297,562
-------------------------- ------------------ ----------------- --------------------- -----------
Impairment - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
At 31 December
2019 - 297,562 - 297,562
-------------------------- ------------------ ----------------- --------------------- -----------
Net Book Value
-------------------------- ------------------ ----------------- --------------------- -----------
At 31 December
2019 9,762,158 4,463,432 94,794 14,320,384
-------------------------- ------------------ ----------------- --------------------- -----------
At 30 June 2019 - - - -
-------------------------- ------------------ ----------------- --------------------- -----------
The cost of other intangible assets comprises customer lists and
technology development acquired at the date of acquisition. The
other intangible assets are being amortised over a period of 4
years. Amortisation is charged to administrative costs in the
Statement of Comprehensive Income.
Goodwill and Impairment
The carrying value of goodwill in respect of each acquisition is
as follows:
31 December 2019 30 June 2019
---------------------- ----------------- ---------------------
GTChannel, Inc 3,270,921 -
Tagasauris, Inc 3,867,228 -
Entertainment AI, Inc 2,624,009 -
---------------------- ----------------- ---------------------
Total 9,762,158 -
---------------------- ----------------- ---------------------
The Group tests goodwill annually for impairment, or more
frequently if there are indications that goodwill might be
impaired. In order to perform this test, management is required to
compare the carrying value of the relevant cash generating unit
("CGU") including the goodwill with its recoverable amount. The
recoverable amount of the CGU is determined from a value in use
calculation. Management has provisionally assessed that there is
one CGU encompassing all of the Group's subsidiaries. This is based
on the Group's business plan as stated in its admission document as
well as considering how the Group is managed and directed. The
subsidiary entities offer a combination of cross-supplied
technology and services that will enable the Group to create a
Multi Platform Network. This leverages the Group's technology,
current customer base and wider business plan and strategic
partners synergistically. These features are each supplied by the
different acquisitions made in the period and as such, the
Directors consider provisionally that it is most appropriate that
the CGU consist of all three subsidiaries.
The recoverable amount of the CGU has been determined from a
review of the current and anticipated performance of this unit. In
preparing this projection, a discount rate of 10% has been used
based on the weighted average cost of capital and a perpetual
growth rate of 3% has been assumed. It has been assumed investment
in capital equipment will equate to depreciation over the year. The
discount rate was based on the Company's cost of capital as
estimated by management.
13 Investment in subsidiary undertakings
Subsidiary
Undertakings
Company $
--------------------- --------------
Cost
At 30 June 2019 -
Additions 12,984,835
At 31 December 2019 12,984,835
--------------------- --------------
Impairment
At 30 June 2019 -
At 31 December 2019 -
--------------------- --------------
Carrying amount
At 30 June 2019 -
At 31 December 2019 12,984,835
--------------------- --------------
The Directors annually assess the carrying value of the
investment in the subsidiary and in their opinion no impairment
provision is currently necessary
The net carrying amounts noted above relate to the US
incorporated subsidiaries.
The subsidiary undertakings during the year were as follows:
Interest held
Country %
Registered office address of incorporation
199 Whitney Avenue, New
Haven, Connecticut 06511
GTChannel, Inc. U.S. US 100%
199 Whitney Avenue, New
Haven, Connecticut 06511
Tagasauris, Inc. U.S. US 100%
199 Whitney Avenue, New
Entertainment AI, Haven, Connecticut 06511
Inc. U.S. US 100%
------------------- ----------------------------- ------------------- --------------
All subsidiaries are owned directly by the Parent Company.
14 Trade and other receivables
Group Company
6 months
ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2019 2018 2019 2018
$ $ $ $
Trade and other receivables 1,814,257 - - -
---------------------------- --- -------------- -------------- ---------------- -------------------
Intercompany receivables - - 2,969,903 -
---------------------------- --- -------------- -------------- ---------------- -------------------
In determining the recoverability of accounts receivable, the
Company considers any changes in the credit quality of the accounts
receivable from the date credit was initially granted up to the
reporting date. The accounts receivable that are neither past due
nor impaired relate to customers that the Company has assessed to
be creditworthy based on the credit evaluation process performed by
management which considers both customers' overall credit profile
and its payment history with the Company. Any loss allowance is
determined in accordance with IFRS 9.
15 Cash and cash equivalents
Group Company
6 months 6 months
ended ended
31 December 31 December
12 months 12 months
ended 30 ended 30
2019 June 2019 2019 June 2019
$ $ $ $
Cash at bank and in hand 9,760,905 1,292,878 7,838,650 1,292,878
--------------------------- -------------- ----------- -------------- -----------
16 Trade and other payables
Group Company
6 months 6 months
ended ended
31 December 31 December
12 months 12 months
ended 30 ended 30
2019 June 2019 2019 June 2019
$ $ $ $
----------------------------- -------------- ----------- -------------- -----------
Trade payables 1,066,027 33,000 564,309 33,000
Accruals and other payables 1,365,784 - 126,546 -
Due to Group undertakings - - 77,839 -
----------------------------- -------------- ----------- -------------- -----------
2,431,811 33,000 768,604 33,000
----------------------------- -------------- ----------- -------------- -----------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs and are payable
within 3 months.
17 Deferred Tax
Total
$
--------------------------------------------- ------------
Balance as at 1 July 2019 -
Deferred tax on acquisition of subsidiaries (1,296,448)
Deferred tax credit for the period 62,488
Balance At 31 December 2019 (1,233,960)
--------------------------------------------- ------------
The deferred tax provision comprises:
31 December 2019 30 June 2019
$ $
--------------------------- ----------------- -------------
Deferred tax on intangible
assets (1,233,960) -
--------------------------- ----------------- -------------
Total (1,233,960) -
--------------------------- ----------------- -------------
18 Share capital
For purposes of this footnote, all references to number of
shares will be treated as if the 12 for 1 share consolidation had
occurred prior to 1 July 2018. The share consolidation took place
on 30 September 2019. The issued share capital in the year was as
follows:
Group & Company
Shares held
Ordinary Shares in treasury
Number Number Total Number
At 30 June 2019 3,041,666 - 3,041,666
At 31 December 2019 49,957,876 - 49,957,876
--------------------- ---------------- ------------- ---------------
.
At 30 June 2019, the actual number of ordinary shares of 1 penny
each in the Company was 36,500,000, as the share consolidation had
not yet occurred.
Group & Company
Share capital Share premium
$ $
At 30 June 2019 482,092 1,438,523
At 31 December 2019 7,400,732 16,494,565
--------------------- -------------- --------------
During the 6 months to 31 December 2019, the Company issued the
following shares:
Date Description No of shares Price per Gross share Cash received
issued share ($) value ($) ($)
----------- --------------- ------------- ----------- ------------ --------------
Issue of 12 p
30/9/2019 shares 27,092,886 0.48 12,984,835 -
Issue of 12 p
30/9/2019 shares 3,472,222 0.44 1,536,125 1,536,125
Issue of 12 p
30/9/2019 shares 16,351,102 0.55 9,042,241 9,042,241
On 30 September 2019, the Company issued 46,916,210 ordinary
shares of 12 pence each. These were all issued pursuant to separate
agreements and, therefore, at different prices per ordinary share.
27,092,886 ordinary shares were issued in relation to the
acquisition of the Company's three subsidiaries and the price per
share was the last mid-market price of the Company's prior to the
Company's suspension of trading, being 39 pence. 3,472,222 ordinary
shares were issued pursuant to a subscription for ordinary shares
at a price of 36 pence per ordinary share in cash. 16,351,102
ordinary shares were issued pursuant to a placing at a price of 45
pence per ordinary share in cash.
19 Reserves
The share premium account represents the amount received on the
issue of ordinary shares by the Company, other than those
recognized in the merger reserve described below, in excess of
their nominal value and is non-distributable.
The share-based payment reserve arises from the requirement to
value share options in existence at the fair value at the date they
are granted, it is the recognition of the fair value over the
vesting period.
The foreign exchange reserve represents the exchange differences
on retranslation of foreign operations.
The merger relief reserve represents the amount received on the
issue of ordinary shares by the Company in excess of their nominal
value on acquisition of subsidiaries where merger relief under
section 612 of the Companies Act 2006 applies. The merger reserve
consists of the merger relief on the issue of shares to acquire
GTChannel, Inc., Tagasauris, Inc. and Entertainment AI, Inc., all
on 30 September 2019.
20 Financial instruments
Financial instruments
As at the dates presented, the Company has classified its
financial instruments as follows:
Loans and Other Financial
Receivables Liabilities Fair Value
at Amortized at Amortized through Profit
Cost Cost or Loss Total
At 31 December 2019 $ $ $ $
------------------------------- -------------- ---------------- ---------------- ----------
Financial Assets
Cash 9,760,905 - - 9,760,905
Trade and Other Receivables 1,814,257 - - 1,814,257
Financial Liabilities
Trade and Other Payables - 2,431,812 - 2,431,812
Loans and Other Financial
Receivables Liabilities Fair Value
at Amortized at Amortized through Profit
Cost Cost or Loss Total
At 30 June 2019 $ $ $ $
------------------------------- -------------- ---------------- ---------------- ----------
Financial Assets
Cash 1,290,332 - - 1,290,332
Trade and Other Receivables - - - -
Financial Liabilities
Trade and Other Payables - 32,999 - 32,999
Credit risk management
The Company is exposed to credit risk associated with its
accounts receivable. Credit risk is minimized substantially by
ensuring the credit worthiness of the entities with which it
carries on business. Credit terms are provided on a case by case
basis. In the periods to December 31, 2019 and June 30, 2019, the
Company did not experience any significant instance of non-payment
from its customers, thus a provision has not been made for
potentially uncollectable amounts.
The Company's accounts receivable aging as follows:
31 December 2019 30 June 2019
----------------------- ----------------- ---------------------
Current 1,814,060 -
31-60 days -
61-90 days - -
>90 days 197 -
----------------------- ----------------- ---------------------
1,814,257 -
Allowance for doubtful
accounts - -
Total 1,814,257 -
----------------------- ----------------- ---------------------
Interest rate risk management
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market rates. The Company's exposure to interest rate
risk is based on short-term fixed interest rates. At 31 December
2019, the Company's exposure to interest rate risk was determined
to be nominal.
Capital risk management
In managing its capital, the Group's primary objective is to
maintain a sufficient funding base to enable working capital,
research and development commitments and strategic investment needs
to be met and therefore to safeguard the Group's ability to
continue as a going concern in order to provide returns to
shareholders and benefits to other stakeholders. In making
decisions to adjust its capital structure to achieve these aims,
including through new share issues, the Group considers not only
its short-term position but also its long term operational and
strategic objectives.
The capital structure of the Group currently consists of cash
and equity comprising issued capital, reserves and retained
earnings. The Group is not subject to any externally imposed
capital requirements.
Foreign currency risk management
Foreign exchange transaction risk arises when individual Group
operations enter into transactions denominated in a currency other
than the dominant economic currency of the Group. The principal
risk arises from the Group's holding company and payments made in
relation to the holding company's activities in the United
Kingdom.
The carrying amount of the Group's foreign currency denominated
monetary assets and monetary liabilities were:
Group Company
6 months ended 6 months ended
31 December 31 December Year ended
30 June
2019 Year ended 2019 2019
30 June
$ 2019 $ $ $
------------- --------------- ----------- --------------- -----------
Assets
Sterling 7,838,650 1,292,878 7,838,650 1,292,878
------------- --------------- ----------- --------------- -----------
Liabilities
Sterling 768,604 32,999 768,604 32,999
------------- --------------- ----------- --------------- -----------
As shown above, at 31 December 2019 the Group had Sterling
denominated monetary net assets of $7,070,046 (30 June 2019:
$1,259,879). If Sterling weakens by 10% against the US dollar, this
would decrease net assets by $707,005 (30 June 2019: $125,988) with
a corresponding impact on reported losses. Changes in exchange rate
movements resulted in a gain from exchange differences on a
translation of foreign exchange of $578,502 in the six months to 31
December 2019 (year to 30 June 2019: loss of $60,962), resulting
primarily from the holding of cash in sterling.
Liquidity risk management
Ultimate responsibility for liquidity management rests with
management. The Group's policy is to ensure that it will have
sufficient cash to allow it to meet its liabilities when they
become due and so cash holdings may be high during certain periods
throughout the period. The Group currently has no bank borrowing or
overdraft facilities.
The Group's policy in respect of cash and cash equivalents is to
limit its exposure by reducing cash holding in the operating units
and investing amounts that are not immediately required in funds
that have low risk and are placed with a reputable bank.
20 Contingent liabilities
The Directors are not aware of any material contingent
liabilities.
21 Related party transactions
During 2019, Water Intelligence plc, a related party by virtue
of a common Director, paid for some of the costs of the transaction
prior to the Group receiving the fundraising proceeds. The total
outstanding balance payable by the Group as at 31 December 2019 was
$52,019. This balance has since been repaid in full by the
Group.
22 Subsequent events
The Company has performed a review of events occurring
subsequent to statement of financial position date through 29 June
2020, the date which the financial statements were available to be
issued. Other than what has been discussed below, no other
significant events have been identified, that would require
disclosure in the notes to the financial statements.
On 29 June 2020, the Board approved that the Company change its
name from Entertainment AI plc to SEEEN plc to better communicate
to the marketplace the Company's suite of products and target
markets. This name change will become effective as soon as it is
registered by Companies House in the UK. Upon such registration,
the Company's website shall be seeen.com. All documents of the
Company shall be located at the new website in accordance with AIM
regulations.
In April 2020, the US subsidiaries of the Group received loan
(Loan) proceeds in the amount of approximately $198,000 under the
Paycheck Protection Program ("PPP"). The PPP, established as part
of the Coronavirus Aid, Relief and Economic Security Act ("CARES
Act"), provides for loans to qualifying businesses. Under the terms
of the PPP, certain amounts of the Loan may be forgiven if they are
used for qualifying expenses as described in the CARES Act. Any
unforgiven portion of the PPP loan is payable over two years at an
interest rate of 1%, with a deferral of payments for the first six
months.
23 Control
The Company is under the control of its shareholders and not any
one party. The shareholdings of the directors and entities in which
they are related are as outlined within the Director's Report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FIFFIRRIIVII
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June 30, 2020 02:00 ET (06:00 GMT)
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