TIDMSEEN
RNS Number : 4096D
SEEEN PLC
29 June 2021
SEEEN plc
("SEEEN", the "Group" or the "Company")
Audited results for the year ended 31 December 2020
Outlook for 2021
Notice of AGM
SEEEN plc, the global media and technology platform that offers
proprietary AI products and solutions to harvest video moments
efficiently for brands, creators and publishers thus enabling
discovery, sharing, ecommerce and improved digital marketing yield
is pleased to present its audited results for the year ended 31
December 2020 and Outlook for 2021.
Full Year 2020: Results were in-line with the Group's three-year
operating plan and market expectations of financial results despite
Covid-19 headwinds.
Each of the Group's technology and media businesses performed
well. Proceeds from EIS/VCT funding were used to develop and
commercialize the Group's first two AI products. Jetstream and
CreatorSuite were released to trial customers ranging from brands
to creators. Meanwhile, the Group's Multichannel network (MCN)
business grew with views up 48.9% to 18.7bn, enabling gross YouTube
advertising revenues to still reach $18.1million, despite global ad
spending adversely affected by Covid-19.
Trading Update for the five months ending 31 May 2021: Reaching
the half-way point of its three-year plan, the Group remains
in-line with its operating plan and is shifting to prioritizing
sales. First sales of technology products have completed, including
the largest contract win for implementation of CreatorSuite, worth
up to $100,000 based on performance incentives. Go-To-Market
execution capability has been enhanced with the appointment of
William Jennings as senior sales adviser with significant
management experience in online video. The MCN continues rebound
from Covid-19 marketplace effects with revenues up 35% year-on-year
(May 2021: $4.2m versus May 2020: $3.1m) and it also provides a
valuable incubator for SEEEN's new product Dialog-To-Clip (D2C)
that was released to the Adobe (R) app store in May.
Outlook: The Group continued to evolve its team during 1H with
Akiko Mikumo promoted to Vice Chair, William Jennings appointed as
Senior Sales Advisor and Panmure Gordon appointed as Nomad and
joint broker. In 2H, the Group will continue building on initial
customer traction and adding more Go-to-Market headcount. The Group
has sufficient capital to execute its growth plan.
Copies of the Annual Report and Notice of Annual General Meeting
are today being posted to shareholders and will be made available
to view on the Company's website at seeen.com. Due to the current
Covid-19 restrictions, the Annual General Meeting will be a 'Closed
Meeting' with Shareholders unable to attend. Proxy voting is
therefore encouraged.
Highlights from the Group's 2020 Audited Results
-- 2020 views of 18.7 billion on the Group's M CN, up 48.9% (2019: 12.6 billion)
-- Average RPM (Revenue per Thousand Videos) down 37% to $0.97
(2019: $1.49), reflecting effects of COVID-19 during the year,
particularly during 1H
o 1H RPM: $0.78
o 2H RPM: $1.12, up 42% sequentially versus 1H
-- Gross YouTube advertising revenue on MCN of $18.1 million, down 4% (2019: $18.7 million)
-- Net revenue (minus YouTube commission) of $10.1 million, down 4% (2019: $10.1 million)
-- Adjusted EBITDA loss (adjusting for share based payments) of $2.1 million*
o MCN approximately breakeven after all creator payments, agency
fees and fixed costs relating to the MCN
-- Net cash of $5.3 million at 31 December 2020
1H 2021 Subsequent Events / Outlook
-- Largest technology customer win to date for revenues of up to
$100,000 from implementation of CreatorSuite
o Smaller implementations successfully completed
o Growing pipeline of opportunities for CreatorSuite and
JetStream
o Strong product KPIs across all implementations, delivering
significant ROI for customers
-- Launch of Dialog-To-Clip, a plug-in for Adobe(R) Premiere
Pro(R) , the most popular video editing program, based on SEEEN's
proprietary AI technology
-- Plans to deploy remainder of EIS/VCT funds to refine product
following initial market testing, together with sales and marketing
of products
-- Appointment of senior sales adviser, William Jennings, to accelerate commercialization
-- MCN statistics for the five months ending 31 May 2021:
o 35% increase in revenues to $4.2m (2020: $3.1m) in seasonally
weaker first half of the year
o 40% increase in RPM to $1.09 (2020: $0.75), reflecting quality
of media offering from MCN
o 7% decrease in views to 6.7 billion (2020: 7.2 billion)
o Expected loss of MCN's largest channel partner, which was not
committed to integration with the Group's technology, representing
5% of 2020 gross profits and 21% of revenues
Dr. Patrick DeSouza, Chairman of SEEEN, commented: "We are proud
of the team. In producing and releasing Jetstream and CreatorSuite
despite AI and engineering teams spread out across various
locations in the US, UK and EU, the team has navigated Covid-19 as
best as can be hoped. To be sure, sales efforts with necessary
interactions with brands and creators, including those from our
MCN, have proved more challenging given the restrictions. As we
head into 2H we will deploy our EIS/VCT and non EIS/VCT funds to
continue to the next stage of the Group's plan: commercialization.
Our initial customers have gained from strong early data. We have
evolved our team during 2021 and will continue to evolve our team
during 2H to execute Go To Market opportunities with brands,
publishers and creators, especially from our MCN. With restrictions
lessening, we look forward to delivering given our suite of
valuable AI products."
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:
SEEEN plc, seeen.com
Patrick DeSouza, Chairman Tel: +1 203 654 5426
Todd Carter, CEO
Adrian Hargrave, CFO Tel: +44 (0)7775 701
838
Panmure Gordon (Financial Adviser, Tel: +44 (0)20 7886 2500
Nominated Adviser & Joint Broker)
Alina Vaskina / Sandy Clark (Corporate
Advisory)
Erik Anderson / Rupert Dearden (Corporate
Broking)
Dowgate Capital Limited - Joint Broker Tel: +44 (0)20 3903 7721
Stephen Norcross
Chairman's Statement
When we launched our business in October 2019, we pointed to a
rapidly changing media and technology marketplace that is being
driven by a tectonic shift in consumer behavior. Consumers are
switching to a "video-first" world faster than expected. In doing
so, consumers want to allocate their shorter attention spans to
quickly obtaining select portions of video in which they are
interested rather than searching through endless streams of video
to get to the relevant fragment. The pace of this behavioral change
is remarkable, as well as its implications for e-commerce behavior.
It took two decades for the digital marketplace ecosystem to be
shaped by pioneering "text-first" companies such as Google
(searching relevant content), Amazon (turning searches into
commerce) and Facebook (organizing searches into tighter social
communities that brands targeted). The global consumer marketplace
demands that these same capabilities now be available for video:
finding relevant video content, turning select portions into
e-commerce decisions with less friction and using and recreating
such content to develop social communities that brands can access.
And the operative word is "now." The marketplace for AI-led video
technology is evolving with newly funded entrants and rapid mergers
and acquisitions to gain scale. We are one step ahead with our
video "momentizing" technology. With the experience of our board
and strong execution of management, we are well placed to navigate
the global market opportunity.
Our Mission and Three Year Plan . We communicated at launch that
our mission would be to gain market traction by automating the
harvesting of relevant video moments. We would do so by building a
"Micro-moments Factory" and license the technology to various
constituencies. Brands could use video moments to target
communities of consumers by showing features of products. Creators
could use our tools to produce relevant videos moments for
themselves so that they could sell relevant content to brands.
Ultimately, big platforms such as YouTube, Instagram and Shopify
could use our tools for video moments to enable impulse
e-commerce.
Our plan prioritizes for years one and two the development and
commercialization of a core set of proprietary tools and products
that could support efforts by brands, creators and publishers to
reach consumers and tap more readily into a "video-first" world.
Such priority maximizes the use of time-restricted $6 million of
EIS/VCT funding as part of our $10 million capital round at launch.
Such cash resources are being used to build upon two sets of
foundational operating assets that are synergistic. First, we came
to market with a core AI patent, trade secrets and know-how around
which to "momentize" raw video; second, we came to market owning a
YouTube multichannel network with an audience comprised of
approximately 12 billion annual video views and 10,000 creators
with content around which to test our momentizing technology. At
$10.1 million of revenues and adjusted loss before tax of $2.1
million, we are in line with our plans, despite the impacts of
Covid-19.
To be sure, like the rest of the world, we have had execution
challenges given Covid-19. However, the challenges have not been
productization in the face of Covid-19. Our developers (AI and
engineering) have handled that aspect well. Our challenge has been
to design with precision the market-facing features of our
technology products given limited interaction with brand personnel
and consumers for market feedback, especially in the face of
rapidly changing consumer behavior. However, with the help of our
experienced board, management has remained disciplined during these
exciting times for video consumption to ensure that our budget and
P&L stay in line with the three-year plan communicated at
launch. We are on track. Market feedback shows the value of
momentizing video, especially from Google SERP (Search Engine
Performance Rankings) scores. Our selling message has leveraged
this core indicator. We can show any brand how its digital
marketing efforts can become more visible on Google with our
technology.
To navigate risk factors and evaluate execution progress, our
board uses certain KPIs (Key Performance Indicators) first outlined
as part of our 2019 Strategic Report. As discussed more fully in
the CEO's Statement and our 2020 Strategic Report, we are pleased
with management's year one (ie 2020) results in terms of product
releases and customer trials. As we reach the mid-point of year two
(ie 2021) of our three-year plan, we are making a transition to a
greater emphasis on sales and marketing personnel.
Our Path Ahead. To achieve market capture, we hope to put
resources to work in the following ways. First, given the timeline
for the deployment of EIS/VCT resources, we will use the
approximately $1.3 million of EIS/VCT resources we have as at 31
May 2021 to refine our proprietary products with additional market
testing. In parallel, we have the $2.7 million of non-EIS/VCT
resources to hire additional sales personnel to close customers in
our sales pipeline for JetStream and CreatorSuite. Further, we
started marketing Dialog-To-Clip in the Adobe (R) App Store in May.
Second, given our early traction with brands and creators, as we
shift gears towards the second half of our three-year plan to
deliver a valuable company for our shareholders, we shall be
reshaping the team by adding more "Go To Market" professionals.
Finally, given the strength of our technology products, we are
being shown acquisition opportunities that can accelerate our plan.
Various market participants from publishers to web analytics
companies have customers but have missed the "now" technology
window to meet their customers' demands for momentizing video.
We have a very exciting path ahead and an experienced board that
can prudently navigate this valuable and global market
opportunity.
Dr. Patrick DeSouza
Chairman
28 June 2021
CEO Statement
2020 was our first full year of operations as a combined group,
following our successful fundraise and admission to AIM in 2019. We
have worked to execute our three-year plan to develop our
technology assets housed in our subsidiary Tagasauris and continue
to grow our video multichannel network (MCN) housed in our
subsidiary GT Channel. We have extracted synergies from the
application of our new technology products to our installed MCN
base of audience, creators and content. Moreover, despite the
obvious global challenges, we have delivered new technology
products for video asset owners such as third party brands,
creators and publisher. Our progress is a testament to the staff
within the Group and the benefits of our flexible, remote work
culture.
As noted in our Chairman's Statement, 2020 saw the acceleration
of the market-wide shift not only to online interaction, but
increasingly to video, which is becoming the dominant online
content format. Our mission therefore is highly valuable to all
video creators and consumers - we make video more relevant,
discoverable and engaging. We are confident that the technology
products we have created and tested with initial customers will be
in high demand from creators, brands and publishers. We have
already made significant steps in this direction with our largest
contract win, which will be worth up to $100,000 on an annual
basis, as well as the appointment of a sales professional, who also
has significant management experience in online video.
Our longer-term vision as we build the business is to bring
creators, brands, publishers and consumers together with a video
experience platform (VXP). However, before we can realize this
vision, we recognize that we must first execute our plan by gaining
traction for our technology releases with such customers. As
discussed below, we are gaining such traction.
Highlights of 2020
Technology : We have released three new products; two of these -
Jetstream and CreatorSuite - were released during 2020 and one -
Dialog-To-Clip - designed during 2020 but released in 2021 is
reported as a Subsequent Event.
JetStream
During 2020, we continued development of our foundational and
proprietary AI system for videos, JetStream. JetStream is a
backbone set of technologies and our key differentiator against
other video AI technology businesses. JetStream is positioned to be
licensed as a service and deployed either as a whole system or in a
la carte components based on a price book.
A key development during 2020 was the release of a "Speaker
Moments" feature leveraging JetStream, which uses our AI technology
to analyze each frame of a video and recommends key moments of
interest based on speakers, content and context. This capability is
particularly relevant for long form videos or streaming services,
which would otherwise require editors to spend multiple hours of
man time cost to manually extract and create "moments" or
"highlights". In addition to Speaker Moments, we continued to
develop new, bespoke models for logos, facial recognition, images
and object tracking. These models can also be combined with third
party AI systems to enhance efficiency.
Using JetStream, we are able to create multiple proprietary
derivative works: products, ranging from detection and video
analysis services for specific data types to analysis engines for
brands. We are in active discussions to license JetStream services
directly to customers and indirectly through resellers. We believe
that JetStream has the potential to generate significant revenue
and profits for the Group. We are targeting solutions priced to
deliver high margin revenues worth in excess of $100,000 per
implementation.
CreatorSuite
JetStream forms a key component of CreatorSuite - SEEEN's first
"stand-alone" technology product. CreatorSuite optimises videos for
Google search, segments a video into short clips of
relevant/curated key video moments and uploads the key video
moments or the video with a carousel of key video moments to a
third-party webpage. CreatorSuite is a video content management
system, based on publishing key moments, that improves both a
brand's search ranking and ability to convert viewers into
customers while also allowing for multi-platform publishing.
Brands first upload their entire video collection into
CreatorSuite and then using JetStream's analysis pipelines, a
series of key moments will be recommended. Both the videos and the
key moments can be published on a brand's website with both the
videos and the key moments ranking for video SERP, which drives an
increase in Google traffic. We allow customers to either embed
videos onto pages within their website or to automatically create a
"microsite", containing all of their videos and their key moments,
and collect all the benefits of video ranking for Google search.
Our largest customer to date, Tire America, has seen the benefits
of CreatorSuite in its initial trial and has now implemented a
microsite for its videos, using CreatorSuite.
Validating Data Testing CreatorSuite on our own GTChannel
website, we saw a 260% increase in views from Google organic
search, as well as an 8,000% lift in Google search impressions. As
we further refine CreatorSuite for Google search, we expect to see
similar results for brands, but on much larger scale.
A key part of our roadmap was completed in early 2021 with
creation of an end card editor and shoppable items within a video.
This allows customers to serve in contextually relevant offerings
during a video, a key part of our promise at the time of admission
to AIM. We have had positive results with our initial
implementations of contextual end cards for key moments and we
expect that this will drive increased conversion rates per video
view.
SEEEN's "momentizing" technology addresses the demand for
technology that enables and accelerates video e-commerce. In order
for consumers to be more likely to purchase while watching a video,
consumers need to be engaged with the video. One statistic, in
particular, illustrates the power of SEEEN's "key video moments"
technology. CreatorSuite reduces "bounce rates" - a measure of
engagement and viewer "stickiness". Bounce rate is defined as the
percentage of visitors that leave a webpage without taking an
action, such as clicking on a link, fill out a form or making a
purchase. Within our set of trial brand implementations, we have
seen bounce rates below 20% (as compared to industry "bounce rate"
standards of 40-50%). As viewers stay on the site, our brand
customers have a much greater opportunity to monetise their
viewers.
Brands are very interested both in driving more traffic to their
website through improved Google organic search and in increasing
viewer e-commerce conversion. To date, we have deployed a two-part
fee structure. Each customer pays a fixed monthly base fee and
performance fee that is tied to increased traffic or conversions.
Whilst our customer base for CreatorSuite is still small, we have
been methodical about choosing partners that were able to assist us
in further refining the product. We have now reached a point where
CreatorSuite is ready for wider commercialization and, as discussed
above, we have begun to build our sales pipeline more
aggressively.
Dialog-to-Clip
Dialog-to-Clip (D2C) was designed during 2020 and launched in
May 2021. D2C is another derivative product based on JetStream
features. D2C is an AI powered plug-in video editing tool that
enables Adobe (R) Premiere Pro (R) users (the world's leading video
editing brand) to more efficiently search, navigate, annotate and
cut clips, using AI to extract relevant moments from interactive
speaker-segmented transcripts. D2C offers the Adobe (R) Premiere
Pro (R) user a significant return on investment by reducing or in
some cases eliminating frame by frame video editing. After an
introductory period in the Adobe (R) App Store to build market
awareness and demand, SEEEN plans to make D2C available for paid
subscription during 2H 2021 as an added module for
CreatorSuite.
MCN: During 2020, our MCN business continued to grow its viewer
base and hit a new record of 18.7 billion views (up 48% versus
2019). Despite this growth in audience, the headwinds of COVID-19,
especially during the first half, resulted in 2020 revenues of
$10.1 million, similar to that of 2019. Brands significantly
reduced spending on advertising, reducing our MCN's yield from the
increased views. However, this year over year outcome masks a
strong rebound during H2 after the initial shock of Covid, where
sequential half year revenues were up 78% on 1H.
Profit margins within the MCN business during 2020 remained
modest, with a gross profit margin of approximately 10.7%. An
allocation of administrative overhead from our executive director
who manages the MCN resulted in the MCN being approximately
breakeven. Despite the lack of contribution margin, the MCN remains
a useful incubator for our business, with several of our trial
CreatorSuite customers being sourced from the MCN and creators
providing us valuable feedback on D2C prior to its launch in May
2021.
As a subsequent event, during 2021 digital advertising revenues
have rebounded significantly, increasing more than 30%, even though
views have been slightly below those for 2020. Such improved yield
from views due to the pick-up in brand advertising on YouTube have
propelled MCN gross revenue.
We expect to lose some channels during 2021. In some cases,
operationally they do not align with our strategy of advancing
technology synergies and, in other cases, creators are seeking to
change the method and timing of payments made to them by the MCN.
With respect to a combination of both of these points, we have been
given notice that one international creator partner, which operates
6 channels, will leave the MCN at the end of June 2021. This
partner represented 21% of MCN revenues in 2020 but represented
only 5% of gross profits. This partner's RPM (revenue yield from
views) during 2020 was $0.52, substantially below our average RPM
for the year of $0.97. Board and management's risk management
perspective is that this channel has limited contribution for our
technology brand development and the additional work required to
maintain these channels will be better served by focusing on
working with current and existing creator partners who are
committed to improving their video monetization by using SEEEN's
technology.
2H 2021 and Focus on Go to Market
In terms of subsequent events, these Accounts are published as
we approach the end of 1H 2021 which is the halfway mark of our
three-year growth plan. At the half-way mark, we have delivered
three technology products and have traction with trial customers.
Looking ahead to 2H 2021, we have prioritized wider
commercialization of our technology products with a focus on
ecommerce customers and commercial synergies with our MCN creator
network. As planned, we have shifted the focus of our spending from
technology development to increased sales and marketing, both with
direct sales hires and programmatic marketing for our more turnkey
products. That said, our remaining EIS/VCT resources enable us to
continue to meet marketplace demands for continued technology
investment.
Our initial customers have enabled us to collate data
demonstrating the return on investment for customers subscribing to
or licensing our technology products. We will expand the case
studies from our sales pipeline, quantifying our value proposition
in momentizing video through the growth of organic traffic, the
reduction of bounce rates and strong e-commerce conversion rates.
With respect to e-commerce, in particular, we are applying
CreatorSuite to videos for American Leak Detection (ALD), a
subsidiary of Water Intelligence plc (one of our strategic
investors), to both increase search traffic and to drive ancillary
e-commerce product sales. ALD provides SEEEN a critical mass of
third party customers to upsell products via e-commerce. ALD
services approximately 200,000 homeowners in the US and those
customers pay over $100 million in gross sales related to fixing
water leaks. Follow-through spending is likely given the demand for
"smart home" products. In addition, ALD has relationships with
dominant retailer brands, such as Home Depot, and leading insurance
companies all which use video to promote the purchase of products
to monitor water leaks. ALD is interested in momentizing video
based on a "How To" channel for home services. The objective of ALD
is to resell products that help home owners monitor and remediate
water flows in houses and buildings. Through this trial brand, we
are gathering statistics on e-commerce conversion rates - a
statistic valuable to every brand.
We are grateful for the support of all our shareholders, both
for the funds they have provided and their ongoing support. For the
remainder of 2021, it remains our priority to commercialize the
strong set of products that we have developed during 2020 and the
first part of 2021. We are in a strong position to do this given
our cash position, but we will remain opportunistic in our
corporate development through acquisition. We see that customers
are now highly motivated to maximise their ability to monetize
videos. By offering our technology solutions to video asset owners,
we are well positioned to grow rapidly.
Todd Carter
Chief Executive Officer
28 June 2021
Business Review and Key Performance Indicators
The Chairman's Statement, on page 3, and CEO's Statement,
starting on page 5, provide two core components of the overview of
the year and the outlook for the SEEEN plc and its subsidiaries
(together the "Group"). 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 the Group's execution in transforming vision into
reality through a competitive advantage in the marketplace. This
Strategic Report outlines the business indicators to help the Board
evaluate both the Group's current performance and the progress
being made by the Group in applying its technology assets to its
own and third-party media assets to create a leading video
technology platform business.
Results for the year ended 31 December 2020 reflect the first
full year of the Group, as the Company completed the acquisition of
all its operating subsidiaries in September 2019. As a result,
comparisons between the results for the six months to 31 December
2019 (the shortened fiscal year after completion of the
transactions) and the year to 31 December 2020 are not meaningful.
Where possible, references to 2019 figures below represent numbers
for the pro forma full calendar year to make a comparison more
meaningful.
Company's Business
SEEEN is organized into two principal businesses - technology
and media - that work together synergistically, benefiting from
SEEEN's product roadmap and value proposition to all owners of
video assets. 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
The Group owns 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. 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.
During 2020, the Group released CreatorSuite to the market with
initial customers. In addition, the Group offers its AI-backbone
Jetstream to select customers who either have bespoke analytic
requirements for their video assets or an in-built publishing
workflow and the need for higher yield from video assets. Since the
year end, the Group has also released Dialog-To-Clip, a plug-in for
users of Adobe (R) Premiere Pro (R) video editing product. This
tool achieves efficiencies by replacing the traditional timeline
editing processes, which are labor intensive, with fast, accurate,
and AI-driven in-video search driven from technology components of
the Group's Jetstream and CreatorSuite products. The Group expects
to launch additional products, both as plug-ins and for defined
vertical markets based on the Group's existing pipeline.
The Group has built a sales pipeline based on its trial
customers. The Group plans to license its video moment technology
products to brands, creators and publishers.
Media Business
The Group's MCN aggregates creators of short form video content
and publishes such content on YouTube. This forms the basis for the
Group's media business, although the Group also produces
proprietary content and publishes that content to its owned and
operated web site, www.gtchannel.com, which was republished during
2020 as a website led by micro-moments. 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.
In addition to the above, the Group also offers production
services to third party clients, where they require additional
content for their own websites or social media channels. These
services are provided on an arm's length basis, but the Board does
not consider these a core metric and has not created a KPI against
this.
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 both an audience and content creators for
the Company's to test and subsequently productize its micro-moments
technology. Example of such are the launch in 2020 of the new,
micro-moment led GTChannel website ( www.gtchannel.com) and the
launch of Dialog-To-Clip, the Adobe (R) Premiere Pro (R) plug-in,
which was tested with several MCN associates prior to launch in May
2021. The MCN provides a source of early-adopters for its
technology products.
As well as utilising the technology within the MCN, the Group
has worked with several Business-to-business customers, such as
brands and advertising agencies, who 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
During 2020, the Group focused on executing its business plan
productizing its technology with funding from EIS/VCT proceeds
raised in the fundraising in September 2019. As such, during 2020,
the Group did not investigate acquisition opportunities or require
spending on other non-core activities, resulting in a nil spend for
this line item.
Capital
The Board is mindful that it needs to apply its financial
prudently to position the Group to succeed through building both a
leading technology stack and sales and marketing function. At 31
December 2020, the Group had $5.3m in gross cash and net cash of
$5.1m. The Group had a loan of $198,000 relating to a Paycheck
Protection Program (PPP) loan. Since year end, this PPP loan has
been forgiven (as described in the subsequent events section of the
Directors' Report on Page 12.
Of the $5.3m in gross cash, $2.4m was categorized as EIS/VCT
approved. Such funding, by regulation, is targeted for the Group's
technology development and is required to be used by 30 September
2021. The Board tracks its deployment of EIS/VCT investment and
retains a clear plan to use this funding prior to the deadline of
30 September 2021 to further develop the Group's technology stack
and its "Go-To-Market" sales and marketing function.
KPIs
As identified in the Group's previous annual report, the Board
considered certain KPIs for the Group. As the Group evolves, it is
expected that the KPIs for the business will evolve also and the
Company expects to update these at the time of its interim report.
KPIs were identified in the last annual report and the Board has
started looking at additional KPIs against which it monitors the
Group's progress. These KPIs are as follows:
(i) Technology Products. The Board notes that the Group has a
strong product roadmap based on its "micromoments" insight. The
Group has filed additional intellectual property in 2021. The Group
spent $2.5m in 2020 on technology development of which $2.0m was
capitalized.
(ii) Number of videos/moments published through CreatorSuite,
which the Board will be monitoring from 2021 onwards now that
CreatorSuite has been implemented with customers.
(iii) Business-to-Business Traction. The Group launched initial pilots during 2020 with Business-to-Business customers. Since year end, the Group has converted some of these pilots into paying customers for CreatorSuite and ancillary services.
(iv) MCN Creator Channels. At year-end 2020, the MCN had
approximately 11,000 creator channels, of which approximately 1,200
were monetized. This is an increase from the approximately 10,000
channels as at 31 December 2019. The channel growth has extended
views across YouTube and other social media platforms, including
TikTok and Facebook.
(v) MCN Audience. At year-end 2020, the MCN had approximately
18.7 billion views, up 48.9 per cent (Pro forma 2019: 12.6
billion).
(vi) MCN Average RPM. At year-end 2020, the MCN had an average
RPM of $0.97, a 35 per cent. fall from 2019, which reflected the
impact of COVID-19 on the advertising market (Pro forma 2019:
$1.49).
(vii) Adjusted EBITDA. EBITDA adjusted for share-based payments
was a loss of $2.1 million, in line with market expectations for
2020 (2019: not comparable).
(viii) Non-Core Costs. During the year to 31 December 2020,
there were no non-core costs (2019: $601,595).
(ix) Net Cash. At the end of 2020, the Group, after transaction
costs, had $5.3 million in gross cash with a PPP loan of $0.2m,
resulting in $5.1m of net cash (31 December 2019: $9.8m). The PPP
loan was forgiven in May 2021. At year end, the Group had $2.5
million of EIS/VCT money outstanding, which is required to be spent
by 30 September 2021.
Principal Risks and Uncertainties
The Group's objectives, policies and processes for measuring and
managing risk are described in note 17. 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.
YouTube / Google changes
The Group's revenues have predominantly been sourced from
YouTube advertising revenue. Should YouTube alter its terms of
business for creators and MCNs, this could have a significant
impact on the operations of the Group's MCN business
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.
Money-laundering and Anti-Corruption Regulations
As the Group has to make payments to its network of creators, it
is responsible for ensuring that all payments made to creators
comply with all money-laundering and anticorruption regulations of
the jurisdictions in which it operates. Historically, the Group has
outsourced payments or made them through recognised payment wallet
providers, however as the Group may be required to make direct
transfers to creators, the Group monitors the increased risks
associated with these direct payments.
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 may 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 on page 22 in the
Statement on Corporate Governance. The Strategic Report
incorporates actions taken by the Group to ensure compliance with
s172.
Consolidated Statement of Comprehensive Income for the period
ended 31 December 2020
Year ended Six Months
31 December Ended 31
2020 December
2019
--------------------------------------- ------ ----------------- ------------------
Notes $ $
--------------------------------------- ------ ----------------- ------------------
Audited Audited
Revenue 10,135,053 4,288,004
Cost of sales (9,040,727) (3,851,924)
---------------------------------------- ------ ----------------- ------------------
Gross profit 1,094,326 436,080
Administrative expenses
- Share-based payments 5 (618,192) (156,650)
- Amortisation of intangibles 9 (1,214,564) (297,562)
- Acquisition/listing costs - (601,595)
- Other administrative costs 3 (3,215,463) (1,173,342)
---------------------------------------- ------ ----------------- ------------------
Total administrative expenses (5,048,219) (2,229,149)
---------------------------------------- ------ ----------------- ------------------
Operating Loss (3,953,893) (1,793,069)
Finance expense 6 (6,562) (3,257)
---------------------------------------- ------ ----------------- ------------------
Loss before tax (3,960,455) (1,796,325)
Taxation expense 7 340,740 58,188
---------------------------------------- ------ ----------------- ------------------
Loss after tax (3,619,715) (1,738,137)
Other Comprehensive Income
Exchange differences arising
on translation of foreign operations (317,805) 578,502
---------------------------------------- ------ ----------------- ------------------
Total comprehensive loss for
the year (3,943,876) (1,159,636)
---------------------------------------- ------ ----------------- ------------------
Loss per share attributable to Cents Cents
equity holders of Parent
--------------------------------------- ------ ----------------- ------------------
Basic 8 (7.25) (6.53)
Diluted 8 (7.25) (6.53)
---------------------------------------- ------ ----------------- ------------------
The results reflected above relate to continuing activities.
Consolidated Statement of Financial Position as at 31 December
2020
31 December 31 December
2020 2019
Notes $ $
----------------------------------------- ------ ------------- --------------
ASSETS
Non-current assets
Goodwill and indefinite life intangible
assets 9 9,762,158 9,762,158
Other intangible assets, net 9 5,320,876 4,558,226
Trade and other receivables 11 1,800 1,800
----------------------------------------- ------ ------------- --------------
15,084,834 14,322,184
----------------------------------------- ------ ------------- --------------
Current assets
Trade and other receivables 11 1,790,074 1,814,257
Cash and cash equivalents 12 5,336,502 9,760,905
----------------------------------------- ------
7,126,576 11,575,162
----------------------------------------- ------ ------------- --------------
TOTAL ASSETS 22,211,410 25,897,346
----------------------------------------- ------ ------------- --------------
EQUITY AND LIABILITIES
Equity attributable to holders of the
parent
Share capital 15 7,400,732 7,400,732
Share premium 15 7,677,993 7,677,993
Merger relief reserve 8,989,501 8,989,501
Share based payment reserve 774,842 156,650
Foreign exchange reserve 199,735 517,540
Retained earnings (6,130,556) (2,510,841)
----------------------------------------- ------ ------------- --------------
Total Shareholders' Equity 18,912,247 22,231,575
----------------------------------------- ------ ------------- --------------
Non-current liabilities
Deferred tax liability 14 893,220 1,233,960
----------------------------------------- ------ ------------- --------------
893,220 1,233,960
----------------------------------------- ------ ------------- --------------
Current liabilities
Trade and other payables 13 2,207,943 2,431,811
Borrowing 20 198,000 -
----------------------------------------- ------ --------------
Total Current Liabilities 2,405,943 3,665,771
----------------------------------------- ------ ------------- --------------
TOTAL EQUITY AND LIABILITIES 22,211,410 25,897,346
----------------------------------------- ------ ------------- --------------
Company Statement of Financial Position as at 31 December
2020
Notes
31 December 31 December
2020 2019
$ $
ASSETS
Non-current assets
Investment in Subsidiaries 10 15,166,851 12,984,835
15,166,851 12,984,835
-------------------------------- ------ -------------- --------------
Current assets
Trade and other receivables 11 2,969,903 2,969,903
Cash and cash equivalents 12 4,399,957 7,838,650
7,369,860 10,808,553
-------------------------------- ------ -------------- --------------
TOTAL ASSETS 22,536,711 23,793,388
-------------------------------- ------ -------------- --------------
EQUITY AND LIABILITIES
Equity attributable to holders
of the parent
Share capital 15 7,400,732 7,400,732
Share premium 15 7,677,993 7,677,993
Merger reserve 8,989,501 8,989,501
Share based payment reserve 774,842 156,650
Foreign exchange reserve 427,684 554,970
Retained earnings (3,073,206) (1,752,943)
-------------------------------- ------ -------------- --------------
Total Shareholders' Equity 22,197,546 23,026,903
-------------------------------- ------ -------------- --------------
Current liabilities
Trade and other payables 13 339,165 767,485
Total Liabilities 339,165 767,485
-------------------------------- ------ -------------- --------------
TOTAL EQUITY AND LIABILITIES 22,536,711 23,793,388
-------------------------------- ------ -------------- --------------
Consolidated Statement of Changed in Equity as at 31 December
2020
Share Share Premium Merger Share Foreign exchange Retained Total
Capital Reserve based reserve (Losses)
payment /Earnings
reserve
---------------
$ $ $ $ $ $ $
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- -----------
As at 30 June
2019 482,092 1,438,523 0 0 -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 7,677,993 8,989,501 156,650 517,540 -2,510,841 22,231,575
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- -----------
Share-based
payment
expense - - - 618,192 - - 618,192
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- -----------
Loss for the
year - - - - - -3,619,715 -3,619,715
------------------- -------------------- -------------------- ---------------- ----------------- ----------------- -----------
Other
comprehensive
gain / (loss) - - - - -317,805 - -324,071
--------------- ------------------- -------------------- -------------------- ---------------- ----------------- ----------------- -----------
As at 31
December 2020 7,400,732 7,677,993 8,989,501 774,842 199,735 -6,130,556 18,912,247
--------------- =================== ==================== ==================== ================ ================= ================= ===========
Company Statement of Changed in Equity as at 31 December
2020
Share Capital Share Merger Share Foreign Retained Total
Premium Reserve based exchange (Losses)
payment reserve /Earnings
reserve
---------------
$ $ $ $ $ $ $
--------------- ------------------- -------------------- -------------------- -------------------- -------------------- ------------------- -----------
As at 30 June
2019 482,092 1,438,523 - - -60,962 -598,775 1,260,878
--------------- ------------------- -------------------- -------------------- -------------------- -------------------- ------------------- -----------
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 - - - - - -981,239 -981,239
Other
comprehensive
gain / (loss) - - - - 615,932 - 615,932
--------------- ------------------- -------------------- -------------------- -------------------- -------------------- ------------------- -----------
As at 31
December 2019 7,400,732 7,677,993 8,989,501 156,650 554,970 -1,752,943 23,026,903
--------------- ------------------- -------------------- -------------------- -------------------- -------------------- ------------------- -----------
Share-based
payment
expense - - - 618,192 - - 618,192
Loss for the
year - - - - - -1,320,263 -1,320,263
Other
comprehensive
gain / (loss) - - - - -127,284 - -127,284
---------------
As at 31
December 2020 7,400,732 7,677,993 8,989,501 774,842 427,685 -3,073,206 22,197,546
--------------- =================== ==================== ==================== ==================== ==================== =================== ===========
Consolidated Statement of Cash Flows for the period ended 31
December 2020
Six months
ended 31 December
2019
Year ended
31 December
2020 $ $
----------------------------------------------------- ---------------- --------------------
Cash flows from operating activities
Loss before tax (3,947,618) (1,796,325)
Adjustments for non-cash/non-operating items:
Amortisation of intangible assets 1,214,564 297,562
Share based payments 618,192 156,650
Interest paid 6,562 3,257
Operating cash flows before movements in working
capital (2,108,300) (1,338,856)
----------------------------------------------------- ---------------- ------------------
Decrease/(Increase) in trade and other receivables 24,179 (717,311)
(Decrease)/Increase in trade and other payables (223,865) 967,602
----------------------------------------------------- ---------------- ------------------
(199,686) 250,291
----------------------------------------------------- ---------------- ------------------
Cash used by operations (2,307,986) (1,088,565)
----------------------------------------------------- ---------------- ------------------
Income taxes paid - -
Net cash used by operating activities (2,307,986) (1,088,565)
Cash flows from investing activities
Purchase of intangible assets (1,977,211) (94,794)
Cash on acquisition - 83,587
----------------------------------------------------- ---------------- ------------------
Net cash used in investing activities (1,927,211) (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 cost set against share premium
and retained earnings - (1,588,519)
Proceed from loan 198,000 -
Interest income/(paid) (6,562) (3,257)
Net cash generated from /(used by) financing
activities 191,438 8,986,590
----------------------------------------------------- ---------------- --------------------
Net increase/(decrease) in cash and cash equivalents (4,043,759) 7,886,817
----------------------------------------------------- ---------------- --------------------
Effect of exchange rates on cash (380,644) 581,210
----------------------------------------------------- ---------------- --------------------
Cash and cash equivalents at the beginning
of year 9,760,905 1,292,878
----------------------------------------------------- ---------------- --------------------
Cash and cash equivalents at end of year 5,336,502 9,760,905
----------------------------------------------------- ---------------- --------------------
There have been no changes in liabilities arising from financing
activities.
Company Statement of Cash Flows for the period ended 31 December
2020
Year ended 6 months ended
31 December 31 December
2020 2019
$ $
-------------------------------------------------- ------------- ---------------
Cash flows from operating activities
Loss before tax (1,320,263) (979,896)
Adjustments for non-cash/non-operating
items:
Share based payment expense 618,192 156,060
Interest paid - -
Interest received - -
-------------------------------------------------- ------------- ---------------
Operating cash flows before movements
in working capital (702,071) (832,246)
-------------------------------------------------- ------------- ---------------
Decrease (Increase) in trade and other
receivables - (306,356)
(Decrease) Increase in trade and other
payables (428,319) 709,741
-------------------------------------------------- ------------- ---------------
Cash used by operations (1,130,390) (419,861)
-------------------------------------------------- ------------- ---------------
Income taxes - -
-------------------------------------------------- ------------- ---------------
Net cash used by operating activities (1,130,390) (419,861)
-------------------------------------------------- ------------- ---------------
Cash flows from investing activities - -
-------------------------------------------------- ------------- ---------------
Loans to subsidiaries (2,182,016) (2,637,727)
-------------------------------------------------- ------------- ---------------
Net cash used in investing activities (2,182,016) (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 cost set against share
premium and retained earnings - (1,588,519)
Interest received - -
-------------------------------------------------- ------------- ---------------
Net cash generated from financing activities - 8,989,847
-------------------------------------------------- ------------- ---------------
(Decrease)/Increase in cash and cash equivalents (3,312,406) 5,932,259
-------------------------------------------------- ------------- ---------------
Effect of exchange rates on cash (126,287) 613,513
-------------------------------------------------- ------------- ---------------
Cash and cash equivalents at the beginning
of period 7,838,650 1,292,878
-------------------------------------------------- ------------- ---------------
Cash and cash equivalents at end of period 4,399,957 7,838,650
-------------------------------------------------- ------------- ---------------
There have been no changes in liabilities arising from financing
activities.
Notes to the Financial Statements
1 General information
The Group is a global media and technology platform whose
mission is to leverage its AI and machine learning technology to
more efficiently momentize video and to license such capabilities
to brands, creators and publishers to enable discovery, sharing and
e-commerce. 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 28 June 2021..
2 Significant accounting policies
Basis of preparation
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.
These financial statements consolidate those of the Company and
its subsidiaries (together referred to as the "Group"). The Parent
Company financial statements present information about the Company
as a separate entity.
Both the Company and consolidated financial statements have been
prepared and approved by the Directors in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 ("Adopted IFRSs"). On
publishing the Company financial statements here together with the
consolidated financial statements, the Company is taking advantage
of the exemption in s408 of the Companies Act 2006 not to present
its individual income statement and statement of comprehensive
income and related notes.
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements.
The Company changed its fiscal year end from June 30 to December
31 in the previous fiscal year. As such, the period ended 31
December 2019 is a shortened period, comprised of six months. The
current audited year ended 31 December 2020 is a full year.
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. The cash holdings of the
Group at 31 December 2020 and 31 December 2019 were $5.3 million
and $9.8 million, respectively.
Given the stage of development of the Group's products, the
Directors have implemented a reduction in development spend,
partially offset by an increase in sales and marketing. The
Directors have prepared detailed cash flow projections which are
based on their current expectations of trading prospects, as well
as scenarios where (i) sales fail to materialize as expected and
(ii) potential further impacts of COVID-19 pandemic on trading.
Under all these scenarios, the Group has sufficient cash resources
for at least on year from the date of these accounts and,
accordingly, the Directors have concluded that it is appropriate to
continue to adopt the going concern basis in preparing these
financial statements.
Basis of consolidation
The accompanying consolidated financial statements of SEEEN plc
include its wholly owned subsidiaries: GT Channel, Inc., Tagasauris
Inc., and Entertainment AI, 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.
Revenue recognition
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
SEEEN 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 and then pays our MCN.
YouTube provides the MCN with daily reports on its receipt of
revenue from brands against the MCN's content. Revenue to the MCN
is recognized upon receipt of such reports from YouTube.
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.
During the year to 31 December 2020, all revenue for the Group was
generated from its MCN operation. As the Group's revenue mix
evolves, the Directors expect to split out revenue by type in the
Accounts.
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 first date of exercise, based on the best
estimate of the number of shares that will eventually vest.
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.
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.
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 2020 was GBP1
= US$1.3627 (31 December 2019 was GBP1 = US$1.3118). The average
exchange rate for the year to 31 December 2020 was GBP1 = US$1.2837
(6 months to 31 December 2019 was GBP1 = US$1.2600).
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.
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.
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.
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 following are the critical judgements and estimations that
the Directors have made in the process of applying the Company's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Impairment of goodwill
Impairment of the valuation of the goodwill relating to the
acquisition of subsidiaries is considered annually for indicators
of impairment to ensure that the asset is not overstated within the
financial statements. The annual impairment assessment in respect
of goodwill requires estimates of the value in use (or fair value
less costs to sell) of subsidiaries to which goodwill has been
allocated. This requires the Directors to estimate the future cash
flows and an appropriate discount factor, in order that the net
present value of those cash flows can be determined. Discounted
cash flow forecasts give due consideration to the impact of
COVID-19 on the future cash flows, and are stress tested under a
range of scenarios. Further details are provided in note 9 to the
financial statements.
Amortisation of intangible assets
The periods of amortisation adopted to write down capitalised
intangible assets requires judgements to be made in respect of
estimating the useful lives of the intangible assets to determine
an appropriate amortisation rate. Technology and website
development costs are being amortised on a straight-line basis over
the period during which the economic benefits are expected to be
received, which has been estimated at 4 years.
Provision for bad and doubtful debts
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime
expected credit loss provision for trade receivables. To measure
expected credit losses on a collective basis, trade receivables are
grouped based on similar ageing. The expected loss rates are based
on the Group's historical credit losses experience over the twelve
month period prior to the period end. Forward looking issues have
been considered, including in relation to the ongoing impact of the
COVID-19 pandemic. This has had an immaterial effect on the
expected credit loss rate.
3 Expenses by nature
The Group's operating profit has been arrived at after
charging:
Year ended 6 months
ended
31 December 31 December
2020 2019
Note $ $
--------------------- ------ ------------ ------------
Employee costs 1,151,339 230,365
Consulting services 368,261 211,956
Agency fees 650,802 310,927
Rent 19,592 8,782
Professional fees 319,447 162,833
Listing fees 9,845 27,805
Acquisition costs - 601,595
Year ended 6 months ended
31 December 31 December
2020 2019
$ $
------------------------------------- ------------ ---------------
Auditors remuneration
Fees payable to the Group's auditor
for audit of Parent Company and
Consolidated Financial Statements 37,227 37,092
Fees payable to the Group's auditor
for non-audit services 3,902 58,976
------------------------------------- ------------ ---------------
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 (31 December 2019: $36,000) for the audit of
these companies with no payments for other services.
4 Employees and Executive Directors
The Executive Directors are considered to be the key management
of the business.
` Year ended 31 6 months ended
December 2020 31 December
2019
$ $
Staff costs for all employees, including
Executive Directors consist of:
Wages and Salaries 1,151,339 230,365
Share Based Payments Expense 618,192 156,650
1,721,138 387,015
------------------------------------------ -------------- --------------
Information regarding Executive Directors emoluments are as
follows:
Year ended 31 December 6 months ended
2020 31 December
2019
$ $
---------------------------------------- ---------------------- --------------
Short-Term employee benefits
Directors' fees, salaries and benefits 600,000 150,000
Social Security Costs 56,607 -
150,000 150,000
---------------------------------------- ---------------------- --------------
The highest paid Executive Director received emoluments of
$230,073 (31 December 2019: $50,000).
The average number of employees (including Directors) in the
Group during the year was:
Year ended 6 months ended
31 December 31 December
2020 2019
Directors (executive and non-executive) 5 2
Management 3 3
Other 3 2
11 7
---------------------------------------- ----------- --------------
Note: The Group also uses contractors for a variety of software
engineering work. These costs are represented in Consulting
Services in Note 3 above.
5 Share options
The Company grants share options at its discretion to Directors,
management and advisors. These 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
(GBp)
Number of share
options 2020 2020
--------------------------- ------------------------------- -----------------------
Outstanding at beginning
of year 4,616,481 45
Granted during the year 380,206 45
Forfeited/lapsed during - -
the year
Exercised during the year - -
--------------------------- ------------------------------- -----------------------
Outstanding at end of
the year 4,996,887 45
--------------------------- ------------------------------- -----------------------
Exercisable at end of
the year 2,308,240 45
--------------------------- ------------------------------- -----------------------
The options that have been granted and have been agreed to be
granted prior to the date of this report relate to option grants
that were issued pursuant to the transactions completed on 30
September 2019 and not as employee incentive grants. The Group has
issued employee incentivization grants during 2021 as outlined in
Note 21 below.
Fair value of share options
During the year, the Group granted 380,206 Share Options to
certain Employees and Advisers in the United Kingdom as anticipated
in the Company's admission document dated 11 September 2019, with
an exercise price of GBP0.45 ($0.554), the delay driven by seeking
approval to make these options EMI compliant.
The fair value of options granted during the prior year has been
calculated using the Black Scholes model which has given rise to a
fair value per share of 4.8p. This is based on a risk-free rate of
0.644% and volatility of 76% and that the options will be exercised
on the first date of the exercise period.
The Black Scholes calculations for the options granted during
the year resulted in a charge of $22,713 which has been expensed in
2020.
The weighted average remaining contractual life of the share
options as at 31 December 2019 was 8.75 years.
Options arrangements that exist over the Company's shares at
year end are detailed below:
31 December 31 December Date of Exercise Exercise period
Grant 2020 2019 Grant price From To
-------------------- ----------- ----------- --------- -------- -----------------------------
AIM Admission Grant
Options 4,996,887 4,616,481 30/9/2019 45p 30/9/2020 30/9/2029
Total 4,996,887 4,616,481
-------------------- ----------- ----------- --------- -------- -------------- -------------
All share options are equity settled on exercise.
Further options have been granted since 31 December 2020 and
information on these can be found in Note 21 to these Accounts.
6 Finance expense
6 months
Year ended ended
31 December 31 December
2020 2019
$ $
Interest expense 6,562 3,257
------------------------ -------------- --------------
7 Taxation
The major components of income tax expense for the periods
ending 31 December 2020 and December 2019 are as follows:
Year ended 6 months
ended
31 December 31 December
2020 2019
Group $ $
---------------------------------- ------------ ------------
Current tax: - -
Current tax (benefit) on profits
in the year 0 4,300
Prior year over provision - -
Total Tax charge (benefit) 0 4,300
---------------------------------- ------------ ------------
Deferred tax current year (340,740) (62,488)
Deferred - -
Total Tax charge (benefit) (340,740) (58,188)
---------------------------------- ------------ ------------
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:
Year ended 6 months
ended
31 December 31 December
2020 2019
$ $
-------------------------------------- ------------ ------------
Total loss on ordinary activities
before tax (3,947,618) (1,796,325)
Loss on ordinary activities at
the standard rate of corporation
tax in the US of 21% (30 June
2019: UK 19%) (829,000) (377,228)
Non-deductible expenses
eductible expenses 118,989 165,945
State taxes net of federal benefit (227,980) (178,142)
Adjustment in respect of prior (144) -
year
Deferred tax not recognised 585,022 -
Changes in rates 15,069 -
Losses not utilised - -
-------------------------------------- ------------ ------------
Total Tax charge (338,044) (58,188)
-------------------------------------- ------------ ------------
At the balance sheet date, the Group had unused tax losses (as
reported on the Group's tax returns) of $7,656,882 available for
offset against future profits. $1,182,501 represents unrecognized
deferred tax assets thereon. The deferred tax asset has not been
recognized due to uncertainty over timing of utilization.
8 Earnings per share
The loss per share has been calculated using the profit for the
year and the weighted average number of ordinary shares outstanding
during the year, as follows:
6 months
Year ended ended
31 December 31 December
2020 2019
-------------------------------------------- ------------------- ---------------
Loss for the year attributable to equity
holders of the Parent ($) (3,609,574) (1,738,137)
Weighted average number of ordinary shares 49,957,876 26,627,958
-------------------------------------------- ------------------- ---------------
Diluted weighted average number of ordinary
shares 49,957,876 26,627,958
-------------------------------------------- ------------------- ---------------
Loss per share (cents) (7.25) (6.53)
-------------------------------------------- ------------------- ---------------
Diluted loss per share (cents) (7.25) (6.53)
-------------------------------------------- ------------------- ---------------
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 2019.
9 Intangible assets
Group Goodwill Arising Other Intangible Development
on Consolidation Assets Costs Totals
----------------
$ $ $ $
---------------- ------------------------------- ----------------- ------------ ------------
Cost
At 1 July 2019 - - - -
Additions 9,762,158 4,760,994 94,794 14,617,946
Amortisation - (297,562) - (297,562)
---------------- ------------------------------- ----------------- ------------ ------------
At 31 December
2019 9,762,158 4,463,432 94,794 14,320,384
---------------- ------------------------------- ----------------- ------------ ------------
Additions - - 1,977,213 1,977,213
---------------- ------------------------------- ----------------- ------------ ------------
Amortisation - (1,190,249) (24,315) (1,214,564)
---------------- ------------------------------- ----------------- ------------ ------------
At 31 December
2020 9,762,158 3,273,183 2,047,692 15,083,033
---------------- ------------------------------- ----------------- ------------ ------------
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
was as follows:
31 December
31 December 2020 2019
----------------------- ----------------- ------------
GTChannel, Inc 3,165,023 3,165,023
Tagasauris, Inc 3,643,678 3,643,678
Entertainment AI, Inc 2,953,457 2,953,457
----------------------- ----------------- ------------
Total 9,672,158 9,672,158
----------------------- ----------------- ------------
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 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 synergistically leverages the Group's
technology, current customer base and wider business plan and
strategic partners. 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
through to the end of 2024. 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 1% has been assumed.
The discount rate was based on the Company's cost of capital as
estimated by management. Management has also made assumptions
around the growth / customer acquisition in relation to its new
products, which equate to approximately doubling the number of
customers each year from launch. If this assumption was to reduce
by 50%, i.e. if the Group was only able to obtain half of the
expected customer numbers across categories, this would reduce the
carrying value of the goodwill by $5.1 million. No other reasonable
change in the other assumptions made by management would presently
result in an impairment.
10 Investment in subsidiary undertakings
Loan to group
Cost of investment undertaking Total
Company $ $ $
---------------------- ------------------- -------------- -----------
Cost
At 31 December, 2019 12,984,835 - 12,984,835
Additions - 2,182,106 2,182,106
At 31 December 2020 12,984,835 2,182,106 15,166,851
---------------------- ------------------- -------------- -----------
Impairment
At 31 December 2019 - - -
At 31 December 2020 - - -
---------------------- ------------------- -------------- -----------
Carrying amount
At 31 December 2019 12,984,835 - 12,984835
At 31 December 2020 12,984,835 2,182,106 15,166,851
---------------------- ------------------- -------------- -----------
The Directors annually assess the carrying value of the
investment in the subsidiaries and in their opinion no impairment
provision is currently necessary.
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.
11 Trade and other receivables
Group Company
-------------------------- --------------------------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
$ $ $ $
Trade and other receivables 1,790,074 1,814,257 - -
----------------------------------- ------------ ------------ ------------------- -------------------
Intercompany receivables - - 2,969,903 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.
12 Cash and cash equivalents
Group Company
Year ended Year ended Year ended
31 December 31 December 31 December Year ended
2020 2019 2020 31 December
$ $ $ 2019
Cash at bank and in hand 5,336,502 9,760,905 4,399,957 7,838,650
--------------------------- -------------- -------------- -------------- --------------
13 Trade and other payables
Group Company
---------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended
31 December 31 December 31 December 31 December
2020 2019 2020 2019
$ $ $ $
----------------------------- ------------- ------------- ------------- -------------
Trade payables 521,044 1,066,027 164,173 564,309
Accruals and other payables 1,686,899 1,365,784 174,991 126,546
Due to Group undertakings - - - 77,839
----------------------------- ------------- ------------- ------------- -------------
2,207,943 2,431,811 339,164 767,485
----------------------------- ------------- ------------- ------------- -------------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs and are payable
within 3 months.
14 Deferred Tax
Total
$
--------------------------------------------- ------------
Balance as at 1 January 2020 (1,233,960)
Deferred tax on acquisition of subsidiaries -
Deferred tax charge for the year (340,740)
Balance At 31 December 2020 (893,220)
--------------------------------------------- ------------
The deferred tax provision comprises:
31 December
31 December 2020 2019
$ $
--------------------------- ----------------- ------------
Deferred tax liability
arising from acquisition
of intangible assets 895,916 1,233,960
--------------------------- ----------------- ------------
Total 895,916 1,233,960
--------------------------- ----------------- ------------
At the balance sheet date, the Group had unused tax losses (as
reported on the Group's tax returns) of $7,656,882 available for
offset against future profits. $1,182,501 represents unrecognized
deferred tax assets thereon. The deferred tax asset has not been
recognized due to uncertainty over timing of utilization.
15 Share capital
The issued share capital in the year was as follows:
Group & Company
Shares held
Ordinary Shares in treasury
Number Number Total Number
At 31 December 2019 49,957,876 - 49,957,876
At 31 December 2020 49,957,876 - 49,957,876
--------------------- ---------------- ------------- ---------------
.
Group & Company
Share capital Share premium
$ $
At 31 December 2019 7,400,732 7,505,064
At 31 December 2020 7,400,732 7,505,064
--------------------- -------------- --------------
During the year to 31 December 2020, the Company issued no new
shares.
16 Financial instruments
Financial instruments
As at the dates presented, the Group 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 2020 $ $ $ $
------------------------------- -------------- ---------------- ---------------- ----------
Financial Assets
Cash 5,336,502 - - 5,320,876
Trade and Other Receivables 1,790,074 - - 1,790,074
Financial Liabilities
Trade and Other Payables - 2,207,944 - 2,207,944
Borrowings - Current 198,000 - - 198,000
The Borrowings noted above related to the PPP loan received by
the Company's US subsidiary Entertainment AI, Inc., which received
$198,000 in the year to 31 December 2020. As described in note 21
below, this loan was forgiven after the balance sheet date and is
not repayable.
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 - 2,431,811 - 2,431,811
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. Most of the Group's revenues are derived from
its MCN business. The key counterparty for this business is
YouTube. The performance obligations arise at the time that MCN
videos generate advertising or other income on YouTube. YouTube
makes a monthly payment to the Group, approximately 20 days in
arrears. In the periods to December 31, 2020 and December 31, 2019,
the Company did not experience any significant instance of
non-payment from its customers and expects this to continue to be
the case, thus a provision has not been made for potentially
uncollectable amounts.
The Company's accounts receivable aging as follows:
31 December
31 December
2020 2019
$ $
------------------------ ------------ ------------
Current 1,789,834 1,814,060
31-60 days - -
61-90 days - -
>90 days 240 197
------------------------ ------------ ------------
1,790,074 1,814,257
Allowance for doubtful
accounts - -
Total 1,790,074 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
2020, 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 equity
comprising issued capital, reserves and retained earnings. The
Group is not subject to any externally imposed capital
requirements, although certain of its equity funds raised are
required to be spent by 30 September 2021. The Group monitors this
expenditure and is on track to spend the required funds by such
date.
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
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2020 2019 2020 2019
$ $ $ $
------------- -------------- -------------- -------------- --------------
Assets
Sterling 1,766,102 7,838,650 1,766,102 7,838,650
------------- -------------- -------------- -------------- --------------
Liabilities
Sterling 284,890 768,604 284,890 768,604
------------- -------------- -------------- -------------- --------------
As shown above, at 31 December 2019 the Group had Sterling
denominated monetary net assets of $1,481,212 (31 December 2019:
$7,070,046). If Sterling weakens by 10% against the US dollar, this
would decrease net assets by $148,121 (31 December 2019: $707,005)
with a corresponding impact on reported losses. Changes in exchange
rate movements resulted in a loss from exchange differences on a
translation of foreign exchange of $350,241 in the year to 31
December 2019 (six months to 31 December 2019: gain of $578,502),
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, other than the PPP loan received in April
2020 and described in more detail in Note 20 below. Other than the
PPP loan, which was forgiven subsequent to year end (see Note 21
below), all liabilities are current and expected to be settled
within 3 months.
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.
18 Contingent liabilities
The Directors are not aware of any material contingent
liabilities.
19 Related party transactions
An amount of $20,000 was paid to Anton & Partners (A&P)
in respect of website development costs. There were no amounts
outstanding at 31 December 2020. David Anton, a Director of the
Company, is a Director of A&P.
20 Borrowing
On April 30, 2020, the Company received a loan, from the bank,
in the amount of $198,000 under the Paycheck Protection Program
(PPP) established by the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act), and is administered by the U.S. Small
Business Administration (SBA). Under the terms of the CARES Act,
the PPP loan recipients can apply for and be granted forgiveness
for all or a portion of the loan granted under the PPP, at which
time the Company will recognize the forgiven amount as income. Such
forgiveness will be determined, subject to limitations, based on
the use of loan proceeds for: payroll costs and mortgage interest,
rent or utility costs and the maintenance of employee and
compensation levels. The Company used the twenty-four-week
forgiveness period and applied for forgiveness of the PPP loan in
accordance with the terms of the PPP. No determination had been
made, as of December 31, 2020, by the SBA as to whether the Company
will be eligible for forgiveness, in whole or in part. The SBA will
have the right to audit the Company's compliance with the PPP for a
period of up to six years. The portion of the proceeds received
that is not forgiven, if any, is converted to an unsecured term
loan payable in equal monthly installments, including interest. The
PPP loan is for two years, at an interest rate of 1% beginning 7
months from the date of the loan. The loan may be repaid at any
time with no prepayment penalty. However, since the year end, and
as disclosed in note 21 below, the Company's PPP loan was forgiven
on 5 May 2021.
21 Subsequent events
The Company has performed a review of events occurring
subsequent to statement of financial position date through 26 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.
Option Grants - On 4 March 2021 and 13 May 2021, the Company
issued 3,625,000 options to employees, directors and consultants,
all at an exercise approximately 33% above the highest traded price
for the year.
The details of these awards are as follows:
On 4 March 2021, the Company issued 1,450,000 options to certain
directors of the Company, in lieu of Board fees for the next 12
months, at an exercise price of 60 pence per ordinary shares. These
options vest over a three year period (with 1/3(rd) vesting on the
first anniversary of grant, 1/3(rd) on the second anniversary of
grant and 1/3(rd) on the third anniversary of grant) with a final
exercise date of 4 March 2031. The options were awarded as
follows:
Recipient Options issued
----------------- ---------------
Patrick DeSouza 600,000
Akiko Mikumo 600,000
David Anton 200,000
Adrian Hargrave 50,000
On 4 March 2021, a further 1,550,000 options were issued to
certain directors, employees and advisers of the Company, both in
lieu of reduced compensation, as well as for incentivization, at an
exercise price of 65 pence per ordinary shares. These options vest
over a three year period (with 1/3(rd) vesting on the first
anniversary of grant, 1/3(rd) on the second anniversary of grant
and 1/3(rd) on the third anniversary of grant) with a final
exercise date of 4 March 2031. The options were awarded as
follows:
Recipient Options issued
---------------------------- ---------------
Todd Carter (Director) 250,000
Adrian Hargrave (Director) 250,000
Taro Koki (PDMR) 250,000
Other employees 800,000
On 13 May 2021, the Company issued 625,000 options to certain
employees and advisors of the Company, at an exercise price of 65
pence per ordinary shares. These options vest over a three year
period (with 1/3(rd) vesting on the first anniversary of grant,
1/3(rd) on the second anniversary of grant and 1/3(rd) on the third
anniversary of grant) with a final exercise date of 13 May
2031.
Dialog-To-Clip launch - On 13 May 2021, the Group launched
Dialog-To-Clip (D2C), bring SEEEN's "Key Video Moments" technology
to users of Adobe (R) Premiere Pro (R) video editing solution, the
most popular video editing solution globally.
PPP Loan - On 5 May 2021, Entertainment AI, Inc, a US subsidiary
of the Group, received notification that the loan proceeds provided
to the Group in the amount of approximately $198,000 under the
Paycheck Protection Program ("PPP") had been forgiven.
Loss of Creator Partner - On 24 May 2021, the Group was served
notice by its largest creator partner, who operates 6 channels,
that it was considering removing all of its channels from the
Group's MCN business unless certain payment process accommodations
are made. If no agreement is reached with this partner prior to 30
June 2021, all of these channels will be removed from the Group's
MCN business. Whilst these channels represented 21.6% of the
Group's revenues during 2020, the impact on profitability and cash
flow for the Group is much smaller. At a gross profit level, these
channels represented approximately 5% of the Group's gross profit,
owing to the greater creator share of YouTube advertising revenues
agreed with this creator partner.
22 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.
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END
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(END) Dow Jones Newswires
June 29, 2021 02:00 ET (06:00 GMT)
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