TIDMGFIN

RNS Number : 3079S

Gfinity PLC

15 November 2021

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

15 November 2021

Gfinity plc

("Gfinity" OR the "Company")

Final year results for the year ended 30 June 2021

"A year of strategic delivery, positioning the company for scalable growth"

Gfinity plc (AIM: GFIN), a world-leading esports and gaming solutions provider, today announces its audited final results for the year ended 30 June 2021.

Financial highlights

-- 27% increase in revenue to GBP5.7m (2020: GBP4.5m), driven by 768% increase in revenue attached to

Gfinity owned and   co-owned properties. 
   --      Significant reduction in adjusted operating loss* by 50% to GBP2.7m (2020: GBP5.5m loss). 

-- 61% reduction in adjusted EBITDA loss**, including the impact of gains and losses on Associates, to

GBP2.3m (2020:   GBP5.8m loss). 

-- Adjusted administrative expenses*** of GBP5.4m (2020: GBP8.3m), representing 35% year on year reduction,

reflecting full   year impact of business restructuring in March 2020. 

-- Cash and cash equivalents at year end of GBP1.4m (2020: GBP1.6m), supplemented by post year-end

over-subscribed   fundraise to raise GBP3.3m before costs for targeted acquisition. 

Comment from Gfinity CEO John Clarke:

"Over the past year, Gfinity has continued to embed itself into the gaming ecosystem by providing unique esports solutions and establishing a highly engaged community of gamers through the Gfinity Digital Media Group (GDM) and our proprietary technology IP.

Our strategic focus on 'what we own' has enabled us to add significant value to gaming communities, benefitting our partners and clients, as well as creating a clear growth engine for our business in the form of the GDM. By focusing on what we can control and partnering with great brands that have a shared need, we are delivering on our strategy and are well-positioned for scalable growth.

Financial performance reflects the progress of our new strategy and we have been encouraged with what we have achieved against the backdrop of the pandemic. GDM continues to expand following several strategically important acquisitions, including Stock Informer and SiegeGG post-period, and we have grown our gaming community and enhanced our ecommerce capabilities. While our Tournament Platform is driving competitions of significant scale, our sharpened focus has also allowed us to make significant savings in operating expenditure.

Looking ahead, we are now in a position to grow and monetise at scale. Despite ongoing uncertainty around Covid-19, macro trends around gaming are attractive and we remain focused on delivering against our strategy."

Operational highlights

-- Significant growth of owned and recurring revenue streams providing a strong foundation for scalable growth in future years, with GDM platform selected by leading brands to target specific gaming audiences and deliver global esports programmes.

-- Commercial agreements signed with leading brands and publishers including Activision, Manchester United, Cadburys, Formula 1, Premier League and Red Bull.

-- Bolstered strategic partnerships to drive engagement across owned websites, including the launch of new digital motorsport competition with Abu Dhabi Motorsport Management (ADMM) and expanded relationship with global advertising technology platform Venatus.

-- Added significant senior talent bringing experience with publishers and in growing digital businesses to support with delivering on strategic priorities, including two additional Non-Executive Directors.

Growth and expansion of Gfinity Digital Media Group (GDM)

   --      Strong growth of publishing platform, GDM, with revenues of GBP1.6 million. 
   --      Acquisition of leading online fantasy and sci-fi news community, Epicstream. 
   --      Partnerships launched with sites that add value to the user experience, such as MapGenie. 

-- Launch of dedicated mobile gaming website Only Mobile Gaming! (OMG!) and new virtual racing website Racinggames.gg.

Post-period highlights

-- Acquisition of Megit Limited, owner and operator of the website Stock Informer, an ecommerce referral site for gamers and their lifestyles, funded via successful fundraise.

-- Acquisition of SiegeGG, including technology behind leading statistical analysis of Rainbow Six Siege video game.

-- Selected by Nintendo and Coca Cola Hellenic Bottling Company as operational partner for respective gaming and esports tournaments.

-- Continued expansion of senior leadership team with appointment of new Head of Brands and Digital Relations.

Outlook

-- Refreshed strategy positioning the business to deliver scalable growth and drive financial performance.

-- Sharpened focus of growing what we own, further licensing of proprietary technology IP, and continued selection by major brands provides the Board with confidence in the long-term trajectory of the business.

-- Continued management focus on limiting impacts of macro-economic factors that could create headwinds.

* Adjusted operating loss is before interest, tax, depreciation, amortisation, impairment and the share-based payment expense. It does, however, include operating lease expenditure reclassified as capital spend in line with the requirements of IFRS 16 to ensure consistency with prior years.

** Adjusted EBITDA loss is the Adjusted operating loss, plus or minus the share of gain/ loss on Associate entities, including any gain/ (loss) on disposal of such entities.

*** Adjusted administrative expenses show the underlying operating expenditure of the company, adjusting for the same items as with the adjusted operating loss.

S

Notes for editors

Enquiries :

 
 Gfinity plc                          www.gfinityplc.com 
  John Clarke, CEO                     Via Teneo 
 
 Teneo (Media)                        Tel: +44 7880 715975 
 Anthony Di Natale                    Gfinity@teneo.com 
  Canaccord Genuity Limited            Tel: +44 (0)207 
   (AIM Nominated Adviser & Broker)     523 8150 
 Bobbie Hilliam / Georgina McCooke 
 

About Gfinity

Gfinity (AIM: GFIN) is a market-leading digital media publisher and technology company in the rapidly growing esports and competitive gaming sector . Created by gamers for the world's three billion gamers, Gfinity has a unique understanding of this fast-growing global community. It uses this expertise both to provide advisory services and to design, develop and deliver unparalleled experiences and winning strategies for game publishers, sports rights holders, commercial partners and media companies.

Gfinity connects its partners with the esports community in authentic and innovative ways. This consists of on--and-off-line competitions and industry--leading content production. Relationships include Activision Blizzard, EA SPORTS, F1 Esports Series Red Bull, Abu Dhabi Motorsport Management and Coca Cola.

Gfinity connects directly with tens of millions of gamers each month through its digital media group, Gfinity Digital Media. Gfinity Digital Media includes websites such as: Gfinityesports, RealSport101, Epicstream, Stock Informer, StealthOptional, RacingGames.gg, MTGRocks.com and their respective social channels.

All Gfinity services are underpinned by the Company's proprietary technology platform, delivering a level playing field for all competitors and supporting scalable multi-format leagues, ladders and knockout competitions.

Chairman's Report

I have pleasure in presenting our annual accounts for the financial year-ended 30 June 2021. The team has diligently implemented the new strategic direction that CEO John Clarke set out on his appointment in March 2020. The progress of this sharpened strategy and operational focus can now be seen in the Company's financial performance. There was a 27% increase in revenue to GBP5.7m (2020: GBP4.5m), driven by a 768% increase in revenues attached to Gfinity owned and co-owned content. We are also pleased to report a 50% reduction in adjusted operating loss to GBP2.7m (2020: GBP5.5m).

This was achieved against the backdrop of continued COVID-19 restrictions which impacted client and publisher spend. I would like to take the opportunity to thank our colleagues for their continued hard work and dedication during this period to deliver such a resilient performance.

The Market

The Board of Gfinity remains confident in the prospects and position of the Company, especially as the supportive market dynamics we saw in the previous twelve months continued into this year. The gaming market continues to expand with more than 3.2 billion players globally and the industry generating revenue of US$175.8 billion.

Historically, there has been a particular focus around the growth in professional esports; the best of the best playing against each other in on-and-offline competitions. While still important, the real growth area is now grassroots competitive gameplay. Connecting with players and fans through engagement hubs that deliver entertainment, competitive play and chat forums is essential for game publishers as they look to extend the lifecycle of their games. This is equally important for brands and sports rights holders seeking ways to broaden their reach and better collect and utilise first-person data.

The continued move towards grass roots vindicates the decision taken by the Gfinity team to focus on what it owns - the Gfinity Digital Media (GDM) group and licensing its tech IP. This places the Company at the heart of the gaming ecosystem, adding value to key stakeholders, in a scalable and monetisable way. Gfinity's growing community, aligned to its tournament and engagement tech platform is a winning proposition. It has never been so highly relevant and clearly differentiated in the marketplace.

Acquisitions

Acquisitions are key to the growth of Gfinity, especially for GDM. It is a fast growing and profitable asset for the Company and there is huge opportunity to quicken its pace of growth. The first major acquisition during the period was Epicstream.com, a US-based site focusing on Marvel and Star Wars. By combining the expertise of Gfinity and Epicstream, we have seen significant growth in monthly users and revenue, reinforced by new site ideas, such as the launch of MTGRocks.com. Following the year-end, the Company also continued to add new sites to GDM, the largest being Stock Informer. We have ambitious growth aspirations for GDM and continue to look at future acquisitions that will allow us to achieve these at pace.

Adding new Non-Executive Directors

During the year we strengthened the Board with the appointment of two new non-executive directors, both adding significant expertise and value to the team. Len Rinaldi joined in December 2021 and is a former senior leader at Apple where he was General Manager for Western Europe, a role he held for seven years. Hugo Drayton also joined in June 2021. Hugo continues to serve as an Independent Non-Executive Director on the Board of Future plc, the global media production platform - a role he has held for the last six years. In addition, he was CEO of Inskin Media until 2019 - a brand advertising company he led for 10 years, from start-up to a profitable, global media business. Both Len and Hugo have already made significant contributions towards the implementation of our strategy, and we will continue to build our leadership expertise to expand our capabilities.

People and Projects

We have always prided ourselves on the dedication, can-do spirit, and innovative thinking of our people. It is through their efforts that our tech platform has been deployed with major publishers; that leading brands like Formula 1 enjoyed record viewership numbers for its 2020 esports programme; and that relationships with organisations like Abu Dhabi Motorsport Management and Red Bull go from strength to strength. It is also encouraging that post year-end, new commercial agreements have been signed with brands such as Coca Cola.

In addition, I am particularly pleased that the team has made a commitment to identify and hire more diverse talent. Gfinity is dedicated to improving diversity in the UK gaming industry, and we are proud to be a signatory of the Audeliss and INvolve initiative to drive Black inclusion in business, as well as supporting the Association for UK Interactive Entertainment (UKIE) programme called #RaiseTheGame, also focused on improving diversity.

In closing, Gfinity has made significant progress against its strategic plan. By owning one of the world's fastest-growing gamer communities, alongside valuable tech IP to facilitate engagement, it is adding clear value to the gaming ecosystem. The leadership team has positioned the business well for further growth.

Neville Upton

Chairman

15 November 2021

Chief Executive Officer's Report

When appointed Gfinity CEO in March 2020, I set out a plan to bring the economics of our business under control and reset the strategic focus to deliver scalable growth. I am pleased to say that during the past 12 months we have made significant progress in both areas.

The Gfinity team has focused on getting 'more from less' which is reflected in the reduction of both our cost base by 35% and our adjusted operating loss by 50%. In the last quarter of 2020, we delivered the Company's first ever quarterly adjusted EBITDA profit, which was an important milestone for the business. We remain focused on delivering high-margin revenue growth and month-on-month profitability by FY23, while at the same time finding ways to capture significant growth opportunities in the market.

For Gfinity to be a leader in the gaming ecosystem we need to be fully embedded into it, owning something that is highly valued by game publishers, sports rights holders and brands looking to reach gamers. The business is achieving this in two scalable areas. The first is the Gfinity Digital Media group (GDM), a digital publishing business focused on gamer lifestyles. The second is Gfinity owned technology IP, which drives everything needed to host competitions at scale and deepen engagement with gamers. We made strong progress in further developing both these areas during the year. When combined with our world class production capabilities and range of client services, it is clear to see how we are changing the dynamics of our business and the way we partner with organisations.

The progress we have made this year is testament to the talent and dedication of our colleagues who have risen to every challenge, including unprecedented lockdowns. We continue to look for exciting new talent to bring into the team and we have set ourselves the challenge of tapping into as diverse a talent pool as possible.

Continued growth of gaming

Gaming is now mainstream and growing fast. It is driven by an important consumer behaviour - young people are moving away from passive entertainment such as traditional TV, in favour of interactive engagement, which includes gaming. When combined with high-speed internet, proliferation of smartphones and tablets, increasingly captivating games, and VR and AR offerings from some of the world's biggest brands, the momentum we see today is clearly set to continue.

Strategic focus on 'what we own'

The Gfinity Digital Media group is now the foundation on which our financial model is being built. During the period the business delivered revenues of GBP1.6m, up from roughly GBP0.3m in the previous year. The financial metric that we track most closely is the annualised value of each monthly user (MAU). By the end of the financial year this figure had grown from 4p to over 15p. The GDM team is now focused in the short-to-medium-term on driving 50 million MAUs at a target of 30p per MAU, which would generate revenue of GBP15.0m per annum. And in the medium-to-long-term, driving 100m MAUs at 40p per MAU to generate revenue of GBP40.0m per annum.

The strategy to deliver this growth is now well embedded into the business with four key pillars to deliver against:

-- the first is leverage existing sites such as Gfinityesports and Realsport101 and launch new sites at speed, such as MTG Rocks and OMG! focused on Magic the Gathering and mobile games respectively;

-- the second is to add new sites that build on our gamer lifestyle positioning through targeted acquisitions, such as Epicstream, which we acquired in December 2020 and is focused on Marvel, Star Wars and all things gamer-geek;

-- the third pillar is partner with sites that add to the user experience, like MapGenie that helps gamers track down hard to find in-game assets; and

-- the fourth pillar is to add and expand affiliate and e-commerce opportunities across all sites for products that gamers need and enjoy.

Since the end of the financial year, Gfinity has added two new sites to the GDM portfolio. Stock Informer, a highly-profitable affiliate and ecommerce site for gamers and their lifestyles; and Siege.gg, a leading website for statistics, analysis and news around the Rainbow Six Siege video game. Both add significant value to our fast-growing community of gamers.

In January 2021 we also launched Manifold, a custom-built content management system (CMS) which is key to the growth and success of GDM. It allows us to scale our existing sites quicker, integrate the sites we acquire onto a single CMS system and optimise all our sites both commercially and for Google search.

Throughout the year GDM continued to grow and gain momentum, and we are excited to bring to life ideas for new sites to create and acquire, whilst increasing the annualised value per monthly user.

GDM provides multiple revenue levers and importantly provides Gfinity first-person data that can be used to create better, more targeted products and experiences for gamers. This data also facilitates more informed conversations with brands keen to connect with gamers.

Gfinity's owned tech IP

Our technology IP is a significant asset to the business. Traditionally it has been utilised for one-off bespoke projects for clients such as the Premier League, Formula 1 and Activision. This financial year, we changed this approach and created a scalable, licensed-based model around four distinct yet complimentary products: a turnkey Competition Platform, flexible for any game, any platform and any competitive format; Game Control which enables real-time competition adjudication used by the likes of Formula 1; Community, facilitating greater interaction through forums, chat, rewards and achievements, currently used by Nvidea; and Virtual Production which allows remote multiplayer participation and low-cost broadcast solutions.

For the Competition Platform we have three distinct products. Each has significant total addressable markets and the opportunity for recurring license fees. For each we already have strong proof of concepts, practical experience with several of the world's leading brands and game publishers and playbooks to deliver them. The team has made significant progress in productising our owned tech IP and in 2022 will be ready to roll out at scale.

Client Service and partnerships

During the period we also completed commercial agreements with leading brands and publishers including Activision, Manchester United, Cadburys, Formula 1, Premier League and Red Bull. These agreements are based on our ability to enable businesses to navigate the sector and provide the full range of gaming services, from operations to production.

In addition, we also delivered two seasons of V10 R-League, the first product under the Global Racing Series partnership between Gfinity and Abu Dhabi Motorsport Management. It attracted several of the world's leading motorsport virtual teams and introduced new racing formats that captured the imagination of fans across the globe. The foundation has been built and we are expecting the 2022 season to attract even more interest. We are looking for more opportunities to expand this business model across other industry sectors - specifically where Gfinity is paid for ideation, delivery, and share in the commercial upside that is generated.

Diversity and inclusion

We continue to take positive action towards creating a more diverse and inclusive work environment and are committed to participating in initiatives - large and small - that will help us achieve this goal. Some examples for this year include: modifying language used in our job posts in order to ensure we attract people from all backgrounds, and becoming a signatory of If Not Now, When? and #RaiseTheGame, initiatives focusing on improving diversity across UK business and gaming respectively. We have also created an internship program open to talent from BAME backgrounds.

We have actively advertised in more platforms and locations, reaching out to more diverse applicants than ever before and investment has been made into an ATS system which will allow us to implement anonymised hiring tactics moving forward.

The Company has also made a commitment to include unconscious bias training as part of our induction programme by the end of the FY 21/22. As part of a wider review of our inclusion practices we have enhanced our maternity and paternity policies, to allow for parents to spend more time with their family.

Outlook

The sharpened operational focus, combined with the significant reduction in our cost base, has given Gfinity the impetus to win and deliver on the major opportunity we see ahead of us. Gfinity's continued success also remains dependent upon positive business and consumer sentiment. The timing of new advertising campaigns and programmes are determined by a range of factors, including our customers. There are risks associated with these timings and therefore it is important that we remain agile, flexible and entrepreneurial, continually adding to an already strong pipeline of opportunities.

Conclusion

Gaming is here to stay and will continue to grow. Macro trends are working in our favour. Gfinity is now embedded into the gaming ecosystem and is adding value to it through the strategic focus on 'what we own'. We are staying focused on what we can control, building the GDM and our tech IP licensing business, partnering with organisations who have mutual interests and working with great brands that value our expertise. We are on an exciting journey and I would like to thank the Gfinity team, our business partners and our clients for their continued hard work and support.

John Clarke

Chief Executive Officer

15 November 2021

Chief Financial and Operations Officer's Report

Summary

The year to 30 June 2021 was one of significant financial progress for the business.

In March 2020, we announced a review of the business positioning, sharpening its strategic focus around owned properties in areas which we believe we hold a competitive advantage and can scale profitably. The results for the year to 30 June 2021 reflect the first full year impact of these changes.

In that context, I am pleased to be able to report on full year revenue growth of 27% to GBP5.7m. I am also particularly encouraged that this has been largely driven by revenue relating to Gfinity owned and co-owned content, which increased by 768% to GBP2.3m (FY20: GBP0.3m). Of this, GBP1.6m of revenue related to the Gfinity Digital Media Network (FY20: GBP0.3m), while GBP0.7m related to jointly owned esports properties, including the Global Racing Series in conjunction with Abu Dhabi Motorsports Management (FY20: GBPnil). The growth of these owned and recurring revenue streams provides a strong platform for scalable growth in future years.

The sharpening of focus also allowed us to make significant savings in operating expenditure. Adjusted administrative expenses of GBP5.4m represented a 35% year on year reduction (FY20: GBP8.3m), which followed a 13% reduction delivered during FY20.

The overall impact of these changes was a 50% reduction in the Adjusted Operating Loss for the year to GBP2.7m (FY20: GBP5.5m). Again, this built on a 36% reduction in the year to 30 June 2020.

In December 2020, Gfinity disposed of its 33% minority holding in Esports Awards for GBP0.5m. With the investment held at zero carrying value this resulted in a GBP0.5m gain on disposal of an associate entity. As a result, the Adjusted EBITDA loss, which includes the impact of all gains and losses on associates, reduced to GBP2.3m.This represented a year-on-year reduction of 61% (FY20: GBP5.8m).

In December 2020, we were delighted to announce the acquisition of the trade and assets of the Epicstream business. This was supplemented following the year-end by the acquisitions of the trade and assets of the SiegeGG business and of Megit Limited, the company that owns and operates the highly profitable Stock Informer brand.

These acquisitions are in line with our strategy to build a large and highly engaged digital media publishing business based around gamers and their lifestyles. The Gfinity Digital Media group will consist of a network of sites, each featuring its own unique properties of content, which add value to the experience of a particular segment of gamers. This network will benefit from the economies of scale of delivery of high-quality supporting technology and infrastructure across a larger number of sites. It will also build the scale to fully capitalise on the revenue opportunity, allowing for premium advertising rates to be earned through the direct sale of campaigns to brands and other organisations wanting to connect with gamers. This will form part of a diversified revenue model, with eCommerce and affiliate revenues also playing a growing importance in driving increases in the revenue per user across the network.

Revenue and cost of sales

Revenue of GBP5.7m reflects an increase of 27% year on year (FY20: GBP4.5m). Of this, GBP2.3m related to Gfinity owned and co-owned content, comprising of GBP1.6m in respect of Gfinity Digital Media group and GBP0.7m in respect of global racing series.

Across the full year to June 2021, Gfinity Digital Media averaged 10.7m monthly active unique users, delivering average annualised revenue of 15.2p per user. As the business scales, we believe that it should be possible to significantly scale both the number of users and revenue per user through:

 
                          User Numbers                                                        Revenue per User 
 
       *    Continued development of content and SEO strategy to               *    Increased proportion of direct campaigns, at premium 
            drive growth in existing sites.                                         rates as brands look to directly target Gfinity's 
                                                                                    owned audience. 
 
       *    Launch of new sites, powered by custom built content 
            management system (CMS), e.g. RacingGames.GG                       *    Growth of eCommerce and affiliate revenues. 
            (eRacing), Stealth Optional (gamer tech) and MTGRock 
      s 
            (Magic the Gathering).                                             *    Deployment of additional technology and content, to 
                                                                                    drive more visits per user and increase time on site, 
                                                                                    creating more monetisation opportunities. 
       *    Acquisition of targeted sites e.g. Epicstream, 
            StockInformer and SiegeGG. 
                                                                  ----------------------------------------------------------------------- 
 

In the short to medium term, we are targeting growth to 50 million monthly active users (MAU) at 30p revenue per MAU, rising to 100m MAUs at 40p per MAU in the medium to longer-term.

Revenue relating to the provision of esports services, technology and content on behalf of clients was GBP3.4m, which represented a reduction of 20% year on year (FY20: GBP4.2m). This partly reflected a reduction in the number of live esports events taking place as a result of COVID-19, which only had a part year impact on the FY20 results. It also represents our shift in strategic focus, with a greater focus being placed on Gfinity's higher-margin owned properties.

Gross profit reduced slightly year-on-year to GBP2.6m (FY20: GBP2.8m). This primarily reflected a move to a more variable cost model, in line with the significant reduction in administrative expenses, with more staff brought in to support as required on a programme-by-programme basis, rather than forming part of the ongoing overhead of the business. It also reflected an investment of GBP0.2m in the launch and first two seasons of the Global Racing Series in conjunction with Abu Dhabi Motorsports Management.

Administrative expenses

As a Board, we monitor ourselves against Adjusted Administrative Expenses, as the measure which most closely reflects the cash costs to the business. This measure adjusts for the impact of non-cash items, including amortisation or other adjustments to the carrying value of goodwill and intangible assets, depreciation on owned assets and the share option charge. For consistency with prior years and to most closely align to cash costs, operating lease payments which are capitalised under IFRS 16 are still included within Adjusted Administrative Expenses.

Unadjusted administrative expenses include:

-- Share option charge of GBP0.3m, which represents a significant reduction of the figure for FY20 of GBP1.5m, which featured an accelerated charge in respect of certain former board members

   --      Amortisation of intangibles and adjustments to goodwill of GBP0.5m (2020: GBP0.5m) 
   --      Depreciation of owned assets of GBP0.6m (2020: GBP0.4m) 

-- Impairment of the goodwill held in respect of the acquisition of CEVO, Inc of GBP0.9m (2020: GBPnil).

CEVO, Inc was acquired by Gfinity in July 2017. Since then, the CEVO business has provided significant value to the overall Group. CEVO's esports platform continues to form the basis of the current Gfinity Esports Platform, which is used to support esports programmes for multiple clients and is central to the productisation of Gfinity's esports technology suite. CEVO also continues to deliver services to a key client under its own brand in the USA. Intangible assets identified on acquisition continue to be held in respect of both of these items. Over time, however, the operations of CEVO have become increasingly intertwined with those of Gfinity. Former CEVO directors hold senior positions within the Gfinity business, including Head of Product and Head of Technology. As a result, it has become increasingly difficult to separately quantify the value of future cash flows relating to the CEVO brand. On this basis, directors have taken the decision to write the value of goodwill down to zero. This has no impact on the underlying adjusted operating profit of the business.

Adjusted Administrative Expenses for the year to June 2021 totaled GBP5.4m, which represented a year on year decrease of 35% (FY20: GBP8.3m). Adjusted for GBP0.1m of Other Income received under the furlough scheme, the net overhead cost of the business reduced to GBP5.3m in the year to June 2021.

The reduction was principally driven by significant headcount reductions applied during a restructuring of activities in March 2020. It also included release of the company's office in April 2021, with staff now working primarily from home and from the Gfinity Arena as required.

Operating loss

The cumulative impact of the factors outlined above is that the Operating Loss for the year reduced by 50% to GBP2.7m (2020: GBP5.5m). This followed a 36% year on year reduction in FY20, as the company continues to progress towards profitability.

Share of gain/ loss in associates

In December 2020, Gfinity disposed of its 33% minority holding in Esports Awards for GBP500,000. This represented a strong return on an initial investment of GBP138,000. With the investment having been written down in line with losses in the associate, at the time of disposal, the investment was held at zero carrying value in both the Company and Consolidated Balance Sheets. Net of a debtor balance of GBP40,294, which was waived as part of the transaction, this disposal resulted in a gain of GBP459,706.

With no activity in the Gfinity Esports Australia business, which is in the process of being wound down, in the year, this meant an overall gain on associates of GBP459,706 (2020: loss of GBP308,214).

As a result, the Adjusted EBITDA loss, which includes the impact of all gains and losses on associates reduced to GBP2.3m. This represented a year-on-year reduction of 61% (FY20: GBP5.8m).

Cash and Cash Equivalents

Year-end cash of GBP1.4m (2020: GBP1.6m) was slightly ahead of expectations. At the year end, GBP0.2m of warrants in respect of shares acquired during the April 2020 fundraise remained outstanding, which have now expired.

Following the year end, Gfinity successfully completed an oversubscribed fundraise at market price, reflecting continued strong investor support for the business. This placing raised a further GBP3.3m gross (GBP3.1m net). Of this sum, GBP2.5m was used to acquire Megit Limited, owner of the Stock Informer brand, which is expected to have a strong cash positive impact on Gfinity's future performance.

Mergers and Acquisitions

In December 2020, Gfinity announced the acquisition of the trade and assets of the Epicstream business, which consisted of the Epicstream.com website and related content, together with an engaged Facebook network featuring over 6 million likes. Consideration for this consisted of 10 million shares, with a fair value at the date of acquisition of 3.6p, together with an earn out of 30% of revenue in each of the first 2 years.

Following the year-end Gfinity announced two further acquisitions:

-- Megit Ltd, the parent company of the Stock Informer brand, which operates the StockInformer.co.uk and StockInformer.com sites in UK and USA respectively. Stock Informer holds a position of authority on the availability of hard to get items of stock, of particular relevance to gamers. Its proprietary technology ensures an up to date record of when such items become available allowing it to earn revenue through affiliate commissions. In the year to 31 March 2021, Megit Ltd earned revenue of GBP2.3m and profit before tax of GBP2.2m, demonstrating a highly profitable, scalable model. While the launch of next generation PlayStation and Xbox consoles means this year won't necessarily represent a benchmark for recurring income, directors believe that stock shortages will be an ongoing issue and the market leading position that Stock Informer has established with regards to this will represent a valuable addition to the GDM network.

o Consideration for the acquisition of Megit Limited comprised of:

-- GBP2.5m in cash

-- GBP2.5m in Gfinity equity settled via the issuance of 62.5m new ordinary shares at the placing price of 4p in September 2021; and

-- An earn out of 30% of revenue in each of the first 3 years post acquisition, capped at a maximum value of GBP1.8m.

-- The trade and assets of the SiegeGG business. SiegeGG has acquired a leading position as the authority on all news and statistics relating to the competitive scene around the Rainbow Six Siege game published by Ubisoft. The business generates revenues through the licensing of its database of statistical information relating to Rainbow Six Siege esports and onsite advertising. In the year to 31 December 2020, SiegeGG reported unaudited revenues of $0.1 million and profit before tax of $40k.

o Consideration for the acquisition of SiegeGG comprised of:

-- 9 million ordinary shares, with a fair value on the date of acquisition of 4.4p

-- An earn out of 30% of revenue in each of the first 2 years post acquisition, capped at a maximum value of GBP1.5m.

As the earliest of these acquisitions, Epicstream has provided an excellent case study for other sites to follow. The site benefits from having been migrated to Gfinity's proprietary Content Management System "Manifold", which powers other large sites in the network and the deployment of Gfinity's content and SEO strategy. Having delivered 600,000 monthly active users in its first month under Gfinity in December 2020, the site has grown to reach around 3 million users a month and is now benefitting from being jointly commercialised through Gfinity's preferential partnerships.

While both the Stock Informer and SiegeGG acquisitions have been much more recent, initial indications are positive. Both have now been integrated into Gfinity's commercial and advertising partnerships, creating new advertising revenue streams. In the case of Stock Informer, this supplements ongoing affiliate revenues, which continue to benefit from a global chip shortage, resulting in demand outstripping supply for in-demand gaming products.

SiegeGG continues to be seen as the authority on statistics and news in relation to the Rainbow Six Siege competitive scene, which alongside advertising revenues, results in ongoing revenue streams from the licensing of this data to event organisers and broadcasters in the Rainbow Six Siege scene.

Outlook

Overall, the results outlined in this Annual Report represent a year of significant progress for the business. Directors expect revenue to continue to grow, driven largely by Gfinity owned content and technology. It is also expected that organic growth will be supplemented by further mergers and acquisitions, as Gfinity seeks to rapidly grow both the scale and the profitability of its Digital Media network.

This growth will be supplemented by an investment in the productisation of Gfinity's owned esports technology, in the expectation that the licensing of this technology will create a further scalable, repeatable and profitable revenue stream for the business.

This will enable Gfinity to fully deliver value to shareholders from the leading position it has created within the valuable esports and video gaming market.

Jonathan Hall

Chief Financial and Operations Officer 15 November 2021

Group Statement of Profit or Loss

 
 
                                        Notes   1 July 2020    1 July 2019 
                                                 to 30 June     to 30 June 
                                                       2021           2020 
                                                                       GBP 
                                                        GBP 
 CONTINUING OPERATIONS 
 
 Revenue                                          5,693,385      4,485,565 
 
 Cost of sales                                  (3,085,409)    (1,714,740) 
 
 
 Gross profit/(loss)                              2,607,976      2,770,825 
 
 Other Income                             6          54,354         73,041 
 
 Administrative expenses                  7     (7,179,327)   (10,681,476) 
 
 
 Operating loss                                 (4,516,997)    (7,837,610) 
 
 Disposal of Associate Gain / (Loss)      17        459,706              0 
 
 Share of Associate Profit / (Loss)       17              0      (308,214) 
 
 Finance income                           9               4          2,622 
 
 Finance Costs                            9        (10,236)       (39,768) 
 
 
 Loss on ordinary activities before 
  tax                                           (4,067,524)    (8,182,970) 
 
 Taxation                                10         221,929        457,663 
                                               ------------  ------------- 
 
 Retained loss for the year                     (3,845,595)    (7,725,307) 
 
 
 
 Loss and total comprehensive income 
  for the period                                (3,845,595)    (7,725,307) 
 
 
 Earnings per Share                      11        -GBP0.00       -GBP0.01 
 
 

Group Statement of Comprehensive Income

 
 
                                           Notes    1 July 2020   1 July 2019 
                                                     to 30 June    to 30 June 
                                                           2021          2020 
 
                                                            GBP           GBP 
 
 
   Loss for the Period                              (3,845,595)   (7,725,307) 
 
 Other Comprehensive Income 
 
 
 Items that will not be reclassified 
  to profit or loss 
 
 Foreign exchange profit / (loss) on 
  retranslation of foreign Subsidiaries                (12,887)       (6,117) 
                                                   ------------  ------------ 
 
 Other Comprehensive Income for the 
  period                                               (12,887)       (6,117) 
 
 
 Loss and total comprehensive income 
  for the period                                    (3,858,482)   (7,731,424) 
 
 

Group Statement of Financial Position

 
                                     Notes            30 June        30 June 
                                                         2021           2020 
 
                                                          GBP            GBP 
 
   NON-CURRENT ASSETS 
 Property, plant and equipment         12             187,366        213,288 
 Right of use assets                   13                   -        428,305 
 Goodwill                              14           1,903,790      2,544,526 
 Intangible fixed assets               15             704,481        613,164 
 Investments in Joint Ventures         17                   -              - 
  and Associates 
 
 
 
                                                    2,795,637      3,799,283 
 CURRENT ASSETS 
 Trade and other receivables           18           1,586,850      1,391,332 
 Cash and cash equivalents             19           1,375,873      1,600,597 
 
 
                                                    2,962,723      2,991,929 
 
 
 TOTAL ASSETS                                       5,758,360      6,791,212 
 
 
 EQUITY AND LIABILITIES 
 Equity 
 Ordinary shares                       21             930,513        725,868 
 Share premium account                             46,511,089     44,405,085 
 Other reserves                                     3,384,914      3,132,220 
 Retained earnings                               (47,302,697)   (43,457,102) 
 
 
 Total equity                                       3,523,819      4,806,071 
 
 Non-current liabilities 
 Other Payables                             22        254,986              - 
 Deferred Tax Liabilities              20             127,835         92,059 
 
 Current liabilities 
 Trade and other payables              22           1,851,720      1,893,081 
 
 
 Total liabilities                                  2,234,541      1,985,141 
 
 
 TOTAL EQUITY AND LIABILITIES                       5,758,360      6,791,212 
 
 

The following notes form an integral part of these financial statements.

Signed on behalf of the board on 12 November 2021:

   Neville Upton                                                    Jonathan Hall 

Chairman Chief Financial and Operations Officer

Company Statement of Financial Position

 
                                   Notes        30-Jun-21      30-Jun-20 
 
                                                      GBP            GBP 
 NON-CURRENT ASSETS 
 Property, plant and equipment       12           179,727        187,176 
 Right of use assets                 13                 -        428,305 
 Investment in Subsidiaries          16                 -      4,466,133 
 Goodwill                            14         2,568,417              - 
 Investments in Joint Ventures          17              -              - 
  & Associates 
 Intangible fixed assets             15           530,336         57,724 
 
 
   TOTAL NON-CURRENT ASSETS                     3,278,479      5,139,338 
 
 
 CURRENT ASSETS 
 Trade and other receivables         18         2,051,596      2,843,800 
 Cash and cash equivalents           19         1,329,815      1,531,360 
 
 
 TOTAL CURRENT ASSETS                           3,381,410      4,375,160 
 
 
 TOTAL ASSETS                                   6,659,890      9,514,498 
 
 
 EQUITY AND LIABILITIES 
 
 
 Equity 
 Ordinary shares                     21           930,513        725,868 
 Share premium account                         46,511,089     44,405,085 
 Other reserves                                 3,403,414      3,137,832 
 Retained earnings                           (46,340,461)   (40,601,156) 
 
 
 Total equity                                   4,504,555      7,667,629 
 
 
 Non-current liabilities 
 Other creditors                       22         254,986              - 
 Deferred tax liabilities              20          94,748              - 
 
 
 Current liabilities 
 Trade and other payables            22         1,805,601      1,846,869 
 
 
 Total liabilities                              2,155,334      1,846,869 
 
 
 TOTAL EQUITY AND LIABILITIES                   6,659,890      9,514,498 
 
 

The following notes form an integral part of these financial statements.

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The parent Company's loss for the year amounts to

GBP5,739,305 (2020: loss of GBP7,493,221).

Signed on behalf of the board on 12 November 2021:

   Neville Upton                                                         Jonathan Hall 

Chairman Chief Financial and Operations Officer

Group Statement of Changes in Equity

 
                             Ordinary        Share       Share        Retained       Forex          Total 
                               shares      premium      option        earnings                     equity 
                                                       reserve 
                                  GBP          GBP         GBP             GBP         GBP            GBP 
 
 At 30 June 2019              362,897   37,455,839   1,637,258    (35,731,795)         504      3,724,704 
 
 
 Loss for the period                -            -           -     (7,725,307)           -    (7,725,307) 
 Other Comprehensive 
  Income                            -            -           -               -     (6,117)        (6,117) 
 
 Total comprehensive 
  income                            -            -           -     (7,725,307)     (6,117)    (7,731,424) 
                            ---------  -----------  ----------  --------------  ----------  ------------- 
 
 Proceeds of shares 
  issued                      362,971    7,372,852           -               -           -      7,735,823 
 Share Issue Costs                  -    (423,605)           -               -           -      (423,605) 
 Share options expensed             -            -   1,500,573               -           -      1,500,573 
 
 Total transactions 
  with owners, recognised 
  directly in equity          362,971    6,949,247   1,500,573               -           -      8,812,791 
 
 
 At 30 June 2020              725,868   44,405,085   3,137,831    (43,457,102)     (5,613)      4,806,070 
 
 
 Loss for the period                -            -           -     (3,845,595)           -    (3,845,595) 
 Other comprehensive 
  income                            -            -           -               -    (12,887)       (12,887) 
 
 Total comprehensive 
  income                            -            -           -     (3,845,595)    (12,887)    (3,858,482) 
                            ---------  -----------  ----------  --------------  ----------  ------------- 
 
 Proceeds of shares 
  issued                      204,645    2,110,793           -               -           -      2,315,438 
 Share Issue Costs                  -      (4,789)           -               -           -        (4,789) 
 Share options expensed             -            -     265,583               -           -        265,583 
 
 Total transactions 
  with owners, recognised 
  directly in equity          204,645    2,106,004     265,583               -           -      2,576,232 
 
 
 At 30 June 2021              930,513   46,511,089   3,403,414    (47,302,697)    (18,500)      3,523,819 
 
 

Company Statement of Changes in Equity

 
                             Ordinary         Share premium       Share option              Retained          Total equity 
                               shares                                  reserve              earnings 
                                  GBP                   GBP                GBP                   GBP                   GBP 
 
 At 30 June 
  2019                        362,897            37,455,838          1,637,258          (33,107,935)             6,348,058 
 
 
 Loss for the 
  period                            -                     -                  -           (7,493,221)           (7,493,221) 
 Other                              -                     -                  -                     -                     - 
 Comprehensive 
 Income 
 
 
 Total 
  comprehensive 
  income                            -                     -                  -           (7,493,221)           (7,493,221) 
 
 
 Proceeds of 
  Shares 
  Issued                      362,971             7,372,852                  -                     -             7,735,823 
 Share issue 
  costs                             -             (423,605)                  -                     -             (423,605) 
 Share options 
  expensed                          -                     -          1,500,573                     -          1,500,573.00 
 Shares as                          -                     -                  -                     -                     - 
 deferred 
 consideration 
 
 
 Total 
  transactions 
  with owners, 
  recognised 
  directly in 
  equity                      362,971             6,949,247          1,500,573                     -             8,812,791 
 
 
 At 30 June 
  2020                        725,868            44,405,085          3,137,831          (40,601,156)             7,667,628 
 
 
 
 Loss for the 
  period                            -                     -                  -           (5,739,305)           (5,739,305) 
 Other                              -                     -                  -                     -                     - 
 Comprehensive 
 Income 
 
 
 Total 
  comprehensive 
  income                            -                     -                  -           (5,739,305)           (5,739,305) 
 
 
 Proceeds of 
  Shares 
  Issued                      204,645             2,110,793                  -                     -             2,315,438 
 Share issue 
  costs                             -               (4,789)                  -                     -               - 4,789 
 Share options 
  expensed                          -                     -            265,583                     -               265,583 
 Shares as                          -                     -                  -                     -                     - 
 deferred 
 consideration 
 
 
 Total 
  transactions 
  with owners, 
  recognised 
  directly in 
  equity                      204,645             2,106,004            265,583                     -             2,576,232 
 
 
 
 
 
 
 
   At 30 June 
   2021                       930,513            46,511,089          3,403,414            46,340,461             4,504,555 
 
 

Group Statement of Cash Flows

 
 
                                                    30-Jun-21               30-Jun-20 
                                           Note 
                                                          GBP                     GBP 
 
 Cash flow used in operating activities 
 Net cash used in operating activities      23    (2,049,663)             (5,290,351) 
 
 
 Cash flow from/(used in) investing 
  activities 
 Interest received                          9               4                   2,622 
 Additions to property, plant 
  and equipment                             12      (106,642)               (100,765) 
 Additions to intangible assets             15       (16,030)                (57,724) 
 Gain on disposal of associate                        459,706                       - 
 Investment in associate                                    -               (308,214) 
 
 
 Net cash used in investing activities                337,038               (464,081) 
 
 Cash flow from/(used in) financing 
  activities 
 Issue of equity share capital                      1,950,649               7,312,218 
 Share issue cost                                           -                       - 
 Repayment of leases                                (439,621)               (597,015) 
 Bank interest payable                               (10,236)                 (2,511) 
 
 
 Net cash from financing activities                 1,500,792               6,712,692 
 
 Net increase in cash and cash 
  equivalents                                       (211,833)                 958,260 
 Effect of currency translation 
  on cash                                            (12,887)                 (6,117) 
 Opening cash and cash equivalents                  1,600,596                 648,454 
 
 
 Closing cash and cash equivalents                  1,375,876               1,600,596 
 
 

Company Statement of Cash Flows

 
                                                    30-Jun-21     30-Jun-20 
                                           Note 
                                                          GBP           GBP 
 
 Cash flow used in operating activities 
 Net cash used in operating activities      23    (2,040,690)   (5,322,647) 
 
 
 Cash flow from/(used in) investing 
  activities 
 Interest received                          9               4         2,622 
 Additions to property, plant 
  and equipment                             12      (105,327)      (98,444) 
 Additions to Intangible Assets             15       (16,030)      (57,724) 
 Disposal of Associate Gain /                         459,706             - 
  (Loss) 
 Investment in Associate                                    -     (308,214) 
 
 Net cash used in investing activities                338,353     (461,760) 
 
 Cash flow from/(used in) financing 
  activities 
 Issue of equity share capital                      1,950,650     7,312,218 
 Repayment of leases                                (439,621)     (597,014) 
 Bank interest payable                               (10,236)       (2,511) 
 
 
 Net cash from financing activities                 1,500,793     6,712,692 
 
 Net increase in cash and cash 
  equivalents                                       (201,545)       928,285 
 Opening cash and cash equivalents                  1,531,360       603,076 
 
 
 Closing cash and cash equivalents                  1,329,815     1,531,360 
 
 

Notes to the Financial Statements

   1.       GENERAL INFORMATION 

Gfinity plc ("the Company") is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006, registered in England and Wales and is AIM listed. The registered number of the company is 08232509.

The functional and presentational currency is GBP sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2. Principal activities are discussed in the Strategic report.

   2.       ACCOUNTING POLICIES 

Basis of preparation

The Company has prepared the accounts on the basis of all applicable International Financial Reporting

Standards (IFRS), including all International Accounting Standards (IAS), Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board (IASB) with effective dates for accounting periods beginning on or after 1 July 2020, together with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounts have been prepared on the historical cost basis, except for otherwise stated below. The principal accounting policies, which have been consistently applied throughout the period presented, are set out below.

The preparation of financial statements in conformity with IFRS requires the use of certain estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgements are continually reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

Standards, Interpretation and amendments to published standards effective in the accounts

The Group has applied the following new standards and interpretations for the first time for the annual reporting period commencing 1 July 2020:

   --     Amendments to IFRS 3 Definition of a Business. 
   --     Amendments to IAS 1 and IAS 8 Definition of Material. 
   --     Amendments to References to the Conceptual Framework in IFRS Standards. 

-- Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

   --     Amendments to IFRS 16: COVID-19-Related Rent Concessions 

The adoption of the standards and interpretations listed above has not led to any changes to the Group's accounting policies or had any other material impact on the financial position or performance of the Group.

Standards, interpretation and amendments to published standards that are not yet effective

New standards and interpretations that are in issue but not yet effective are listed below:

   --     Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform 
   --     IFRS 17 Insurance Contracts. 

The adoption of the above standards and interpretations is not expected to lead to any changes to the Group's accounting policies or have any other material impact on the financial position or performance of the Group.

Going Concern

At the end of the period the Group had cash and cash equivalents amounting to GBP1,375,673 and the Company had cash and cash equivalents amounting to GBP1,329,815. Further to this at the balance sheet date, there were 20,050,500 warrants outstanding over ordinary shares in the company at an exercise price of 1p, to be exercised on or before 20 October 2021.

Following the balance sheet date, on 23 August 2021, the Company announced its intention to undertake a placing to raise GBP3.3m before costs (GBP3.1m after costs). This placing was over-subscribed and successfully completed without a significant discount to market price having to be offered. It also saw a significant investment from a new cornerstone institution in Canaccord Genuity.

Of the funds raised, GBP2.5m were used as the initial consideration to acquire Megit Ltd, the owner of the highly profitable Stock Informer business. This is in addition to equity and earn-out consideration outlined in the Post Balance Sheet Events note. In its last completed accounting period, to 31 March 2021, Megit Ltd recorded revenue of GBP2.3m and profit before tax of GBP2.2m. While the year to March 2021 was a particularly successful year for the company, supported by the launch of next generation consoles, the directors expect the Stock Informer business to continue to deliver significant levels of revenue, at a net margin of around 75%, allowing for incremental investment to support long term growth and diversification of the revenue model.

As outlined in the Strategic Report, over the past 18 months, the Group has significantly restructured its underlying operations, creating a significant new revenue stream in the Gfinity Digital Media business, while delivering a year-on-year reduction in adjusted administrative expenses of 35%. Even prior to the acquisition this has resulted in a significantly reduced level of cash-burn, as the business drives towards its target of profitability on an adjusted operating profit basis within the next 12 months.

Management have prepared forecasts to 31 December 2022, which indicate that if the business performs in line with target, then current cash reserves, supplemented by expected further exercise of warrants as outlined above, would provide sufficient funding to allow the Group to continue operating for a period of at least 12 months following the approval of these financial statements. Forecasts have also been prepared, which show an adverse variance to the budget scenario of 20% in Gfinity Digital Media and 25% in all other areas. Under this scenario, there are still sufficient cash reserves for the Group to operate for a period of at least 12 months following the approval of these financial statements.

As a result, the directors do not believe that further cash is required in order to deliver on current plans for the business. It should be noted, however, that in a sector that is still rapidly developing and in a period of ongoing economic uncertainty, there are inherent uncertainties within the forecasts. In this regard, in a period in which a high level of revenue growth is expected, cash flow forecasts are particularly sensitive to the delivery of new client contracts. While the directors are confident that these contracts will be secured, the timing of this cannot be certain. In this context, there remains a material risk that the cash flow forecasts are not met, which would result in additional funding being required and therefore the directors assessment of the likelihood of being able to raise such funding is critical to their conclusion that there is no material uncertainty in relation to the Group and the Company's ability to continue as a going concern.

In this context, directors' belief that further cash reserves could be secured if required are based on:

-- Strong investor support, demonstrated by an over-subscribed placing completed in August 2021, which included a new cornerstone institutional shareholder;

-- A historic track-record of being able to raise funds, even at a time of peak economic and political uncertainty in April 2020;

-- Underlying value in owned technology and an owned community of up to 15 million gamers per month across Gfinity's owned web platforms;

   --      Ongoing strong investor interest in esports and broader video gaming sectors. 

Consequently, the directors believe that it is appropriate for the accounts to be prepared on a going concern basis.

Basis of consolidation

The Group accounts consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June each year. Subsidiary undertakings are those entities over which the Group has the ability to govern the financial and operating policies through the exercise of voting rights. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

All intra group balances, transactions, income and expenses and profit and losses on transactions between the Company and its subsidiaries and between subsidiaries are eliminated.

Goodwill

Goodwill is initially recognised and measured as set out above.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units ('CGUs') expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Investment in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or join control over those policies.

The Group's interests in jointly controlled entities are incorporated in the financial information using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of the individual investments. The Group's share of the net profit or loss of the joint venture is shown as a single line item in the Consolidated Statement of Comprehensive Income.

Where the Group transacts with a joint venture any profit or loss arising is eliminated to the extent of the Group's interest in the relevant joint venture.

The carrying amount of equity-accounted investments is tested for impairment at least annually.

Investment in subsidiaries

Investments in subsidiaries are held in the Company balance sheet at cost and reviewed annually for impairment.

Revenue

Revenue comprises the fair value of the consideration received or receivable for the sale of services in the normal course of the Group's activities. Revenue is shown net of value added tax.

To determine whether to recognise revenue, the Group follows a 5-step process: 1 Identifying the contract with a customer

2 Identifying the performance obligations 3 Determining the transaction price

4 Allocating the transaction price to the performance obligations

5 Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue comprises of:

-- Partner programme delivery fees: Revenue recognised in line with the date at which work is performed.

-- Sponsorship revenues: Revenue is recognised on the date the relevant sponsored event takes place. In the event of long-term sponsorship contracts, the revenue is released on a straight-line basis across the term of the contract, except in instances where a significant proportion of the revenue relates to specific activation activities, in which case the revenue is released in line with when that work is performed.

-- Advertising revenues: Fees are earned each time a user clicks on one of the ads that are displayed on the website. Revenue is recognised on a pay-per-click, or cost per mille (CPM) basis.

-- Broadcaster revenues: Rights fees are received from linear broadcasters and online streaming platforms in return for rights to access broadcast content. Revenue is recognised once the relevant performance obligations are completed which is typically at the point the broadcast occurs.

-- Licensing revenues: Fees charged for the licensing of Gfinity esports technology, outside of the scope of a broader managed esports service provision.

-- Consultancy Fees: Revenue is recognised in line with the profile of resources dedicated to the programme across the assignment duration.

Leases and right-of-use-assets

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right- of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of- use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortised cost using the effective interest method, and is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate.

Short-term leases and leases of low-value assets:

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Foreign currencies

Transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the year.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period. Exchange differences arising from the translation of the Group's foreign operations are recognised in other comprehensive income.

Taxation

The taxation expense represents the sum of the tax currently payable and deferred tax.

The charge for current tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computations of taxable profit and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or any discount on acquisition) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that the directors do not have a high degree of certainty that sufficient taxable profits will be available in the medium-term to allow all or part of the asset to be recovered.

Credits in respect of Research and Development activities are recognised at the point at which the asset becomes profitable and quantifiable. This is typically at the point at which a claim has been prepared and submitted to HMRC.

Share based payments

The Company provides equity-settled share-based payments in the form of share options. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the date of grant is expensed on a straight line basis over the vesting period, based on the Company's estimate of shares which will eventually vest and adjusted for the effect of non-market based vesting conditions. The Company uses an appropriate valuation model utilising a Black-Scholes model in order to arrive at a fair value at the date share options are granted.

In instances when shares are used as consideration for goods or services the shares are valued at the fair value of the goods or services provided. The expense to the company is recognised at the point the goods or services are received.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of tangible fixed assets to their residual values over their useful economic lives, as follows:

 
   Office equipment                           3 years straight line 
   Computer equipment                         3 years straight line 
   Production equipment                       3 years straight line 
   Leasehold improvements                     Over the period of the lease or, where 
                                               management have reasonable grounds 
                                               to 
                                               believe the property will be occupied 
                                               beyond the terms of the lease, 3 years 
                                               straight line 
 

The residual values and useful economic lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable value. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other gains or losses in the income statement.

Intangible fixed assets

Intangible assets other than goodwill are recognised where the purchase or internal development of such assets are expected to directly contribute towards the company's ability to generate revenues over a multiple years.

Intangible fixed assets are stated at historical cost less accumulated amortisation and impairment, if any. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Where the cost is not clearly identifiable discounted cash flows are utilised to estimate either the cost to develop the resource or, where there are already profits attributable the asset, to estimate future cash inflows. Historical cost includes expenditure that is directly attributable to the acquisition or development of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably.

 
   Software development                  3 years straight 
                                          line 
   Web traffic acquired in business      3 years straight 
    combination                           line 
   Technology Platform                   5 years straight 
                                          line 
   Customer Relationships                5 years 
 

Amortisation is charged on a straight-line basis over the estimated useful economic life of the asset as follows

Research and development costs

Development expenditure is capitalised as an intangible asset, only if the development costs can be measured reliably and it is anticipated that the product being built will be completed and will generate future economic benefits in the form of cash flows to the Group.

Research expenditure that does not meet this criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. These are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities and equity

Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the company becomes a party to the contractual provisions of the instrument. Financial liabilities are classified according to the substance of the contractual arrangements entered into. All interest-related charges are recognised as an expense in the income statement.

Trade and other payables are not interest bearing and are recorded initially at fair value net of transactions costs and thereafter at amortised cost using the effective interest rate method.

An equity instrument is any contract that evidence a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial assets

Financial assets are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the instrument and are recognised in the balance sheet at the lower of cost and net realisable value.

Provision is made for diminution in value where appropriate.

Income and expenditure arising on financial instruments is recognised on the accruals basis and credited or charged to the statement of comprehensive income in the financial period to which it relates.

Trade receivables do not carry any interest and are initially recognised at fair value, subsequently reduced by appropriate allowances for estimated irrecoverable amounts.

Warrants

Warrants are in respect of call options granted to investors by the group and are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The fair value of warrants is determined at the date of grant and is recognised in equity. When the warrants are exercised, the group transfers the appropriate amount of shares to the investor, and the proceeds received net of any directly attributable transaction costs are credited directly to equity.

The group uses an appropriate valuation model utilising a Black-Scholes model in order to arrive at a fair value at the date warrants are granted.

Government Grants Policy

Grants that compensate the group for expenses incurred are recognised in profit or loss as other income in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable.

   3.       CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES 

The preparation of financial statements in conformity with IFRS requires the use of certain estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. Estimates and judgements are continually reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances.

Judgement: Revenue recognition:

The Group's revenue recognition policy is based on separating contracts into discrete performance obligations with revenue then recognised based on the percentage completion of each performance obligation. Where the value of each distinct performance obligation is not set out in a contract Management estimate the value of each performance obligation based on the level of resource required to complete the performance obligation in comparison to the overall level of resource required to fulfil the contract. For example, if a contract did not stipulate the value by region of a broadcast agreement management would use appropriate weighting (e.g. audience size) to estimate the value of each region, with each region viewed as a separate performance obligation. Revenue would then be recognised based on the percentage completion of each performance obligation. In instances where there is no other readily available proxy Management will estimate the value of each performance obligation based on the relative cost to deliver.

Revenue settled by means other than cash (e.g. via equity in a associate) is recognised based on the value stipulated in the contract for goods or services, which would be set at fair value, with the revenue then recognised based performance obligations in the manner described above.

There were no revenue contracts requiring judgement that impact on the reported revenue for the financial year, or contract assets or liabilities at the balance sheet date for either the current or the prior year

Judgement and estimation: Intangible assets recognised on business combinations:

Intangible assets in business combinations are recognised when the asset is separately identifiable and based on the probable future economic benefit that arises owing to the Group's control of the asset. Typically, the Group will utilise a discounted cash flow to establish the future economic benefits and therefore the fair value of the asset.

The Group identified three intangible assets in relation to the two acquisitions undertaken in the year to 30 June 2018 and three intangible assets in relation to the acquisition of EpicStream Inc. on 3 December 2020 which is mentioned in Note 28. As these assets have a finite economic life, in line with IAS 36, they are only subject to further testing for impairment when there are either internal or external indicators of impairment. Based on a review of updated cash flow projections it was decided that there were no indicators of impairment in any of the intangible assets. Following further review of updated cash flow projections relating to the relationship, it was determined that no impairment was required. This further testing is discussed in the 'Impairment testing' section below.

Estimation: Impairment testing:

On an annual basis the Group reviews relevant classes of assets, including investments, intangible assets and goodwill for indications of impairment. Where such indications exist, full impairment testing through an analysis of the value of future cash flows is undertaken. The recoverable amounts of cash generating units have been determined based on value-in-use calculations which require the use of estimates. Management has prepared discounted cash flows based on the latest strategic plan. Discount rate has been calculated using the Capital Asset Pricing model with reference to the value of UK 10 year gilts as a proxy for a risk free rate and the volatility of Gfinity's share price relative to that of AIM since listing.

Goodwill carried in relation to CEVO in the group financial statements:

Gfinity acquired CEVO, Inc in July 2017, since which time the Cevo business has provided significant value to the overall Group. Intangible assets continue to be recognized in respect of:

- CEVO's proprietary esports platform, which forms the basis of the current Gfinity Esports platform, which continues to be used to support multiple esports programmes for high-profile clients.

- CEVO's ongoing commercial relationship with Nvidia, from which it continues to derive revenue.

Over time, however, the operations of CEVO have become increasingly interlinked with those of Gfinity, with former directors of CEVO now holding senior roles within the Gfinity business, including Head of Technology and Head of Product. As a result, it has become increasingly difficult, outside of the specific intangibles, to quantify the value of future cash flows relating specifically to the CEVO brand. On that basis, directors have taken the decision in this year to impair the value of goodwill in respect of CEVO to zero. This resulted in an impairment charge of GBP0.9m.

Goodwill carried in relation to Real Sport:

The carrying value of goodwill in relation to RealSport was assessed using the bottom-up financial model created as part of the business planning process, which reflects the strong growth in monetisation seen through FY21.

This model assumes a monthly average number of unique visitors to the platform through FY22 of 5.3m. By way of comparison the most recent monthly total (in September 2021) was 4.9m, with growth expected in Q4, with further game releases. Thereafter it is assumed that audience numbers will increase at an a CAGR of 30% p.a. for the first 2 years, before levelling off slightly with a 5% increase thereafter.

Revenue has been calculated using a blended rate, factoring in both real time bidding and direct sale banner advertising, video advertising and cost per click affiliate revenues, giving an overall rate of 10p per annum per monthly average user.

On this basis, the net present value of future cash flows has been calculated at GBP5.5m. This represents a surplus of GBP4.1m over the carrying value of goodwill, with the intangibles recognized in respect of the RealSport acquisition having been fully amortised. On that basis, no impairment is proposed.

CEVO customer relationships:

The remaining value of CEVO customer relationship was assessed by way of an analysis of likely revenue and costs relating to the customer in question over the final year of the original intangible asset life.

These were assessed on the basis of current open purchase orders, expected renewal of purchase orders based on work that it is anticipated will renew, together with a smaller allowance for new work, based on levels secured in previous years. Cash flows were discounted using a cost of capital of 13%.

The result of the above analysis gave an NPV of GBP0.1m, in line with the carrying value of the intangible. No impairment is therefore proposed.

Goodwill and Intangible Assets carried in relation to Epicstream:

Three intangible assets were recognized in respect of the acquisition of Epicstream:

- The existing social audience and related domain authority of the main Epicstream site (Epicstream.com)

- The value of the Magic the Gathering social audience, which has been leveraged to create a new site (MTGRocks.com); and

   -     The remaining social audience from a Facebook community featuring over 6 million likes. 

These assets, net of deferred tax, had a combined value of GBP0.5m. With the fair value of consideration estimated at GBP0.7m, this resulted in Goodwill of GBP0.3m.

The requirement for full impairment testing was assessed through a comparison of actual cash flows generated from the Epicstream business, against the cash flow projections used in calculation of the original asset values. With actual cash flows showing a positive variance to the original projections, it was considered that there was no indication of impairment and hence full, detailed impairment testing was not required.

Valuation of investment in RealSport:

The activities of the RealSport brand are now undertaken within the Gfinity Ltd entity, with Real SM Ltd not actively trading. As a result, while the goodwill relating to the RealSport brand remains, directors considered that it would not be appropriate to continue to carry a value of investment in the RealSport entity on the Gfinity company balance sheet.

The value of this investment has therefore been reclassified as goodwill, reflecting the absorption of the value of the RealSport brand within the Gfinity Ltd entity.

This has no impact on the consolidated income statement.

Valuation of investment in CEVO, Inc in the parent company financial statements:

The value of the investment held in CEVO, Inc has been reviewed in line with the calculation of the value of the goodwill and related intangible. This value has been reduced by GBP0.9m in the year, in line with the reduction to the carrying value of goodwill.

Judgement: Transfer of trade and assets within the group:

The transfer of trade and assets between entities under common control falls outside the scope of IFRS 3 and therefore requires judgement to develop an accounting policy that provides relevant and reliable information in accordance with IAS 8. Management have elected to account for this transaction as a 'hive-up' of trade and assets to the parent company. Accordingly, the net assets transferred to the parent company have been recorded in line with the amortised cost recognised on a consolidated basis for the corresponding net assets. The excess of the previously recognised investment value over the net assets transferred is recognised as goodwill.

   4.   Revenue 

The Group's policy on revenue recognition is as outlined in note 2. The year ending 30 June 2021 included

GBP0.36m included in the contract liability balance at the beginning of the period (2020:GBP0.7m). The Group's revenue disaggregated by primary geographical markets is as follows:

 
                                   30 June 2021                30 June 2020 
 
                            Gfinity      Cevo       Total     Gfinity      Cevo       Total 
 
                                GBP       GBP         GBP         GBP       GBP         GBP 
       United Kingdom     4,144,440         -   4,144,440   3,431,492         -   3,431,492 
       North America        902,408   322,741   1,225,150      27,206   157,829     185,035 
       ROW                  539,069         -     539,069     869,039         -     869,038 
 
       Total              5,585,918   322,741   5,908,659   4,327,737   157,829   4,485,565 
                         ==========  ========  ==========  ==========  ========  ========== 
 
 

The Group's revenue disaggregated by pattern of revenue recognition is as follows:

 
                            30 June 2021                      30 June 2020 
 
                     Gfinity      Cevo       Total     Gfinity      Cevo       Total 
 
                         GBP       GBP         GBP         GBP       GBP         GBP 
 
   Services 
   transferred 
   at 
   a point 
   in time         3,432,959   322,741   3,755,700   2,582,447         -   2,582,447 
 Services 
  transferred 
  over time        2,152,959         -   2,152,959   1,745,289   157,829   1,903,118 
 
 Total             5,585,918   322,741   5,908,659   4,327,736   157,829   4,485,565 
                  ==========  ========  ==========  ==========  ========  ========== 
 

As at 30 June 2021 the Group had the amounts shown below held on the consolidated statement of financial position in relation to contracts either performed in full during the year or ongoing as at the year end. All amounts were either due within one year or, in the case of contract liabilities, the work was to be performed within one year of the balance sheet date

 
                          30 June 2021   30 June 2020 
 
                                   GBP            GBP 
 
   Trade Receivables         1,024,696        608,189 
 Contract Assets               244,835        154,287 
 Contract Liabilities          364,024        358,246 
 

Trade receivables are non-interest bearing and are generally on 30-day terms.

Contract assets are initially recognised for revenue earned while the services are delivered over time or when billing is subject to final agreement on completion of the milestone. Once the amounts are billed the contract asset is transferred to trade receivables.

Contract liabilities arise when amounts are paid in advance of the delivery of the service. These are then transferred to the statement of comprehensive income as either milestones are completed or work is completed overtime. Revenue of GBP0.36m was recognised in the year ending 30 June 2021 that was held as a contract liability as 30 June 2020. All these amounts were held in Gfinity.

   5.   SEGMENTAL INFORMATION 

The management consider the group to operate as a single segment following the integration of Cevo's activities into that of the group (included in Chief Financial and Operations Officer's Report in Strategic Report) and therefore no segmental analysis is required.

The Group has two single external customers which have revenue equal to or greater than 10% of the group's revenue. The revenue from each of these customers is: GBP0.94 and GBP0.69m. The customers are major sports rights holders, financial services and media companies. These revenues are attributed to the Gfinity segment.

   6.   OTHER INCOME 

There are no unfulfilled conditions or other contingencies attaching to these grants. Other income reflects government grant income received in the year in respect of the furlough scheme.

 
                                               Group 
                                    30 June 2021   30 June 2020 
 
                                             GBP            GBP 
 
         Government grant income          54,354         73,041 
 
   7.   OPERATING EXPENSES 

Operating loss is stated after charging:

 
                                                                   Group 
 
                                                         30 June 2021   30 June 2020 
 
                                                                  GBP            GBP 
 
      Depreciation of property, plant and equipment           132,478        370,589 
    Depreciation on Right of Use assets                       428,305        571,074 
    Amortisation & impairment of intangible 
     fixed assets                                             492,700        478,553 
    Goodwill impairment                                       901,519              - 
    Rentals under short-term leases                           439,621        514,106 
    Expensed development costs                                150,058        185,376 
    Staff costs (see note Particulars of employees)         2,844,335      5,781,866 
    Costs of inventories expensed                                   -              - 
    Auditors' remuneration for auditing the 
     accounts of the Company                                   66,500         45,000 
    Auditors' remuneration for other non-audit 
     services: 
     - Other services related to taxation                       8,408          2,500 
 
     - All other services                                      21,836          8,975 
    Net foreign exchange (gains)/ losses                       34,027        (3,453) 
 
   8.   PARTICULARS OF EMPLOYEES 

Number of employees

The average number of people (including directors) employed by the Company during the financial period

was:

 
              Group                             Company 
 
   30 June 2021     30 June 2020     30 June 2021     30 June 2020 
 
             38               54               35               48 
===============    =============    =============    ============= 
 

The aggregate payroll costs of staff (including directors) were:

 
                                                Group                                    Company 
 
                                          30 June              30 June              30 June              30 June 
                                             2021                 2020                 2021                 2020 
 
                                              GBP                  GBP                  GBP                  GBP 
 
           Wages and 
           salaries                     2,253,444            3,762,138            2,087,944            3,723,272 
         Social security 
          costs                           271,347              449,154              255,310              445,557 
         Pensions                          53,962               70,000               53,962               41,744 
         Equity settled                   265,583            1,500,573              265,583            1,500,573 
                                        2,844,335            5,781,865            2,662,798            5,711,146 
                              ===================  ===================  ===================  =================== 
 

Total remuneration for Directors during the year was GBP444,428 (2020: GBP806,608).

The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.

   9.   FINANCIE INCOME/COSTS 
 
                                                            Group 
 
                                                  30 June 2021   30 June 2020 
 
                                                           GBP            GBP 
 
            Interest income on bank deposits                 4          2,622 
          Finance lease interest                       (9,228)       (37,257) 
          Other interest cost                          (1,009)              0 
                                                      (10,232)       (34,635) 
                                               ===============  ============= 
 

10. TAXATION

   (a)      Major components of taxation expense for the period ended 30 June 2021 are: 
 
                                                           Group 
 
                                                 30 June 2021   30 June 2020 
 
                                                          GBP            GBP 
       Income Statement 
       Current tax 
       Corporation tax charge/ (credit)             (162,957)      (227,004) 
       Total current tax                            (162,957)      (227,004) 
 
       Deferred tax 
       Relating to origination and reversal 
        of temporary differences                     (58,972)      (230,659) 
       Taxation charge/ (credit) reported 
        in the income statement                     (221,929)      (457,663) 
                                              ===============  ============= 
 
   (b)      Factors affecting tax charge for the period 

A reconciliation of taxation expense applicable to accounting profit before taxation at the statutory tax rate of 19% (2020: 19%), to taxation expense at the Company's effective tax rate for the period is as follows:

 
                                                                    Group 
 
                                                          30 June 2021   30 June 2020 
 
                                                                   GBP            GBP 
 
         Loss on ordinary activities before taxation       (3,845,796)    (8,182,970) 
                                                       ---------------  ------------- 
       Profit/ (Loss) multiplied by tax                      (730,701)    (1,554,764) 
 
       Effect of: 
       Expenses not deductible for tax purposes                318,906        349,439 
       Movment in unrecognised deferred tax 
        arising from tax losses                                709,763      1,135,046 
       Movment in unrecognised deferred tax 
        arising from other temporart timing 
        differences                                          (356,940)      (160,379) 
       Adjustment in respect of R&D tax credits              (162,957)      (227,004) 
       Taxation charge/ (credit) reported in 
        the income statement                                 (221,929)      (457,662) 
                                                       ===============  ============= 
 
   (c)      Unrecognised deferred tax asset 

The Group has an unrecognised deferred tax asset arising from trading losses carried forward of GBP10,508,932 (2020: GBP7,277,026) calculated at the substantively enacted Corporation tax rate at the balance sheet date of 25% (2019: 19%). These trading losses will reverse against future taxable trading profits and no asset has been recognised due to uncertainties over the timing and nature of such gains in accordance with IAS 12.

11. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

IAS 33 requires presentation of diluted EPS when a Company could be called upon to issue shares that would decrease earnings per share or increase the loss per share. For a loss making Company with outstanding share options, net loss per share would be decreased by the exercise of options and therefore the effect of options has been disregarded in the calculation of diluted EPS.

 
                                                        Group                      Company 
 
                                                  30 June       30 June       30 June       30 June 
                                                     2021          2020          2021          2020 
 
                                                      GBP           GBP           GBP           GBP 
         Loss attributable to shareholders 
          from continuing operations          (3,858,482)   (7,731,424)   (5,739,305)   (7,493,221) 
 
                                                   Number        Number        Number        Number 
                                                    000's         000's         000's         000's 
         Weighted average number 
          of ordinary shares                      809,795       518,172       809,795       518,172 
 
         Loss per ordinary share 
          for continuing operations                (0.00)        (0.01)        (0.01)        (0.01) 
 

12. PROPERTY PLANT AND EQUIPMENT

Group Property Plant and Equipment

 
                                   Office equipment    Computer &      Leasehold       Total 
                                                       production    Improvement 
                                                        equipment 
                                                GBP           GBP            GBP         GBP 
          Cost 
          At 1 July 2019                     62,292       902,216        621,862   1,586,370 
          Additions                             849        87,362         12,701     100,912 
          Disposals                               -             -              -           - 
 
 
          At 30 June 2020                    63,141       989,578        634,563   1,687,282 
 
 
          Depreciation 
          At 1 July 2019                     15,066       740,843        347,350   1,103,259 
          Charge for the period              14,776       177,229        178,731     370,736 
          Disposals                               -             -              -           - 
 
 
          At 30 June 2020                    29,842       918,072        526,081   1,473,995 
 
 
          Net book value 
          At 30 June 2020                    33,301        71,505        108,482     213,288 
 
 
          At 30 June 2019                    47,228       161,373        274,512     483,113 
 
 
 
                                   Office equipment    Computer &      Leasehold       Total 
                                                       production    Improvement 
                                                        equipment 
                                                GBP           GBP            GBP         GBP 
          Cost 
          At 1 July 2020                     63,141       989,578        634,563   1,687,282 
          Additions                               -       106,642              -     106,642 
          Disposals                               -          (85)              -        (85) 
 
 
          At 31 June 2021                    63,141     1,096,135        634,563   1,793,839 
 
 
          Depreciation 
          At 1 July 2020                     29,842       918,072        526,081   1,473,995 
          Charge for the period              32,504        88,729         11,244     132,478 
          Disposals                               -             -              -           - 
 
 
          At 31 June 2021                    62,346     1,006,801        537,325   1,606,473 
 
 
          Net book value 
          At 31 June 2021                       795        89,333         97,238     187,366 
 
 
          At 30 June 2020                    33,301        71,505        108,482     213,288 
 
 

Company Property Plant and Equipment

 
                                    Office        Computer      Leasehold       Total 
                                 equipment    & production    Improvement 
                                                 equipment 
                                       GBP             GBP            GBP         GBP 
       Cost 
       At 1 July 2019               50,894         878,100        621,861   1,550,855 
       Additions                       849          84,894         12,701      98,444 
       Disposals                         -               -              -           - 
 
 
       At 30 June 2020              51,743         962,994        634,562   1,649,299 
 
 
       Depreciation 
       At 1 July 2019               12,504         731,898        347,350   1,091,752 
       Charge for the period        14,776         176,864        178,731     370,371 
       Disposals                         -               -              -           - 
 
 
       At 30 June 2020              27,280         908,762        526,081   1,462,123 
 
 
       Net book value 
       At 30 June 2020              24,463          54,232        108,481     187,176 
 
 
       At 30 June 2019              38,390         146,202        274,511     459,103 
 
 
       Cost 
       At 1 July 2020               51,743         962,994        634,562   1,649,299 
       Additions                         -         105,327              -     105,327 
       Disposals                         -            (85)              -        (85) 
 
 
       At 30 June 2021              51,743       1,068,236        634,562   1,754,541 
 
 
       Depreciation 
       At 1 July 2020               27,280         908,762      1,097,155   1,462,123 
       Charge for the period        12,717          88,729         11,244     112,691 
       Disposals                         -               -              -           - 
 
 
       At 30 June 2021              39,997         997,491        537,326   1,574,814 
 
 
       Net book value 
       At 30 June 2021              11,746          70,745         97,237     179,727 
 
 
       At 30 June 2020              24,463          54,232        108,481     187,176 
 
 

13. RIGHT OF USE ASSETS

The carrying value of right-of-use assets by class is:

 
  Group and Company           Premises 
 
                                   GBP 
 
   Cost 
   At 30 June 2019                   - 
   On adoption of IFRS 16      999,379 
    At 30 June 2020            999,379 
   Accumulated depreciation 
   At 30 June 2019                   - 
   Charge for the year         571,074 
   At 30 June 2020             571,074 
   Net carrying amount 
   At 30 June 2019             428,305 
   At 30 June 2020                   - 
 
     Cost 
   At 30 June 2020             999,379 
   At 30 June 2021                   - 
   Accumulated depreciation 
   At 30 June 2020             571,074 
   Charge for the year         428,305 
   At 30 June 2021             999,379 
   Net carrying amount 
   At 30 June 2021                   - 
   At 30 June 2020             428,305 
 

14. GOODWILL

Group

 
                                           GBP 
          Cost 
          At 1 July 2020              2,544,526 
          Acquisition of business       260,783 
          At 30 June 2021             2,805,309 
                                     ========== 
 
          Impairment 
          At 1 July 2020                      0 
          Charge for the period         901,519 
          At 30 June 2021               901,519 
                                     ========== 
 
          Net book value 
          At 30 June 2021             1,903,790 
                                     ========== 
 
          At 30 June 2020             2,544,526 
                                     ========== 
 
 

Company

 
 
                                                                        GBP 
          Cost 
          At 1 July 2020                                                  - 
          Acquisition of business                                   260,783 
          Recognised on hive-up of subsidiary trade and assets    2,307,634 
          At 30 June 2021                                         2,568,417 
                                                                 ========== 
 
          Impairment 
          At 1 July 2020                                                  - 
          Charge for the period                                           - 
          At 30 June 2021                                                 - 
                                                                 ========== 
 
          Net book value 
          At 30 June 2021                                         2,568,417 
                                                                 ========== 
 
          At 30 June 2020                                                 - 
                                                                 ========== 
 

Goodwill at 1 July 2020 recognised in the Group financial statements is in respect of the acquisitions of CEVO Inc. and RealSM Ltd that took place in the year ended 30 June 2018.

Goodwill of GBP260,783 has been recognised in the Group and the Company financial statements following the acquisition of trade and assets of EpicStream Inc, on 3 December 2020 (note 28).

Goodwill of GBP2,307,634 has been recognised in the Company financial statements following the hive-up of the trade and assets of RealSM Ltd that concluded during the year. This amount has been reclassified from investment in subsidiaries (note 16).

15. INTANGIBLE FIXED ASSETS

Group

 
                                Customer   RealSport   Cevo Gaming    Assets Under       Total 
                           Relationships    Platform      Platform    Construction 
                                     GBP         GBP           GBP             GBP         GBP 
       Cost 
       At 1 July 2019          1,198,661     935,518       281,383          57,724   2,473,286 
       Additions                       -           -             -               -           - 
       Disposals                       -           -             -               -           - 
 
 
       At 30 June 2020         1,198,661     935,518       281,383          57,724   2,473,286 
 
 
       Amortisation 
       At 1 July 2019            867,197     405,220       109,152               -   1,530,319 
 
 
       Charge for the 
        period                   108,414     313,553        56,586               -     478,553 
 
 
       At 30 June 2020           975,611     718,773       165,738               -   1,860,122 
 
 
       Net book value 
       At 30 June 2020           223,050     216,745       115,645          57,724     613,164 
 
 
       At 30 June 2019           331,464     530,298       172,231               -   1,033,993 
 
 
 
                            Customer   RealSport        Cevo    Assets Under   Web Platforms       Total 
                       Relationships    Platform      Gaming    Construction 
                                                    Platform 
                                 GBP         GBP         GBP             GBP             GBP         GBP 
 Cost 
 At 1 July 2020            1,198,661     935,518     281,383          57,724               -   2,473,286 
 Additions                         -           -           -               -           7,195       7,195 
 Acquisitions 
  through business 
  combination                      -           -           -               -         576,822     576,822 
 Disposals                         -           -           -               -               -           - 
 
 
  At 31 June 
    2021                   1,198,661     935,518     281,383          57,724         584,017   3,057,303 
 
                                                                                                       - 
 Amortisation                                                                                          - 
 At 1 July 2020              975,611     718,773     165,738               -               -   1,860,122 
 Charge for 
  the period                 108,118     216,745      56,431               -         111,406     492,700 
 
 
 At 31 June 
  2021                     1,083,729     935,518     222,169               -         111,406   2,352,822 
 
 
 Net book value 
 At 31 June 
  2021                       114,932           -      59,214          57,724         472,612     704,481 
 
 
 At 30 June 
  2020                       223,050     216,745     115,645          57,724               -     613,164 
 
 

Company

 
                                 Assets Under       Software   Web Platforms     Total 
                                 Construction    Development 
                                          GBP            GBP             GBP       GBP 
       Cost 
 
 
       At 1 July 2019                       -        148,750               -   148,750 
       Additions                       57,724              -               -    57,724 
       Disposals                            -              -               -         - 
 
 
       At 30 June 2020                 57,724        148,750               -   206,474 
 
 
       Amortisation 
 
 
       At 1 July 2019                       -        148,750               -   148,750 
       Charge for the                       -              -               -         - 
        period 
       Disposals                            -              -               -         - 
 
 
       At 30 June 2020                      -        148,750               -   148,750 
 
 
       Net book value 
       At 30 June 2020                 57,724              -               -    57,724 
 
 
       At 30 June 2019                      -              -               -         - 
 
 
       Cost 
       At 1 July 2020                  57,724              -               -    57,724 
       Additions                            -              -           7,195     7,195 
       Acquisitions through 
        business combination                -              -         576,822   576,822 
       Disposals                            -              -               -         - 
 
 
       At 30 June 2021                 57,724              -         584,017   641,741 
 
 
       Amortisation 
       At 1 July 2020                       -              -               -         - 
       Charge for the 
        period                              -              -         111,406   111,406 
       Disposals                            -              -               -         - 
 
 
       At 30 June 2021                      -              -         111,406   111,406 
 
 
       Net book value 
       At 30 June 2021                 57,724              -         472,612   530,336 
 
 
       At 30 June 2020                 57,724              -               -    57,724 
 
 

Assets under construction relate to costs incurred in the implementation of a new ERP system for the company. Implementation work in respect of this asset was paused in the year to focus resources on key growth activities, however, it remains the intention to complete and utilize the investment made to date in the future.

16. INVESTMENT IN SUBSIDIARIES

 
                                                              Company 
                                                    30 June 2021   30 June 2020 
 
                                                             GBP            GBP 
 
            At 1 July                                  4,466,133      4,466,133 
          Reclassifying investment in subsidiary     (2,307,634)              - 
           to goodwill 
          Impairment                                 (2,158,499)              - 
          At 30 June                                           -      4,466,133 
                                                   =============  ============= 
 

The investments in subsidiaries represented the purchase of CEVO and Real Sport on 24 July 2017 and 13 March 2018 respectively. The fair value of consideration at acquisition for CEVO was GBP2,158,498 for 100% of the share capital and this has been fully impaired in year ended 30 June 2021 following an impairment review (note 3). The fair value at acquisition of RealSM Ltd was GBP2,307,634 for 100% of the share capital and this has been reclassified to Goodwill following the hive-up of the trade and assets of the subsidiary company (Note 16).

 
   Subsidiary             Country of         Holding       Proportion of voting   Nature of business 
    undertaking            incorporation                    rights 
                                                            and capital held 
   CEVO Inc.              USA                Ordinary      100%                   IT Development 
                                              shares                               and Tournament 
                                                                                   and event operator 
 
     RealSM Ltd             England            Ordinary      100%                   Online media 
                                               Shares 
 

RealSM Ltd registered offices are The Foundliabry, 77 Fulham Palace Road, London, United Kingdom, W6 8JB. CEVO's registered address is 128 Maringo Rd, Ephrata, WA 98823

RealSM is exempt from the requirements of the Act relating to the audit of individual accounts in accordance with 479A of the C.A. 2006.

17. INVESTMENT IN ASSOCIATES

 
                                       Group                   Company 
 
                                 30 June      30 June     30 June     30 June 
                                    2021         2020        2021        2020 
 
                                     GBP          GBP         GBP         GBP 
                                       -            -           -           - 
            At 1 July 
          Investment                    -     308,214           -     308,214 
          Shares of Losses              -   (308,214)           -   (308,214) 
          Impairment                    -           -           -           - 
          At 30 June                    -           -           -           - 
                             ============  ==========  ==========  ========== 
 

In the year ended 30 June 2020, the investment in associate relates to the acquisition of 33% of the Esports Awards Limited on its incorporation in February 2017 and 30% of Gfinity Esports Australia on its incorporation in August 2017. During the year end 30 June 2020, Gfinity Esports Australia ceased trading. As a result the carrying value of all investment into the entity has been written off in full. Both investments are held in Gfinity plc.

 
                                                                              Proportion of 
                                                                               voting rights 
                                                                               and capital held 
           Associate undertaking    Country of incorporation    Holding       2021       2022       Nature of business 
 
             Esports Industry                                     Ordinary 
             Awards Ltd               England                     shares        33%        33%        Dormant 
           Gfinity Esports 
            Australia PTY                                       Ordinary                            Tournament and 
            Limited                 Australia                    shares       0%         30%         event operator 
 

On 18 December 2020 Gfinity disposed of its 33% holding in Esports Awards Ltd, recognised under the equity method. The investment had a carrying value at the point of disposal of GBPnil. Net proceeds from the transaction were GBP459,706, resulting in a corresponding gain on disposal of GBP459,706.

Esports Awards LTD's registered offices are Belfry House, Champions Way, Hendon, London, England, NW4 1PX. The registered office of Gfinity Esports Australia is Suite 5, Level 1, 100 William Street, Sydney, NSW 2011.

18. TRADE AND OTHER RECIEVABLES

 
                                             Group                  Company 
 
                                       30 June     30 June     30 June     30 June 
                                          2021        2020        2021        2020 
 
                                           GBP         GBP         GBP         GBP 
 
           Trade receivables         1,313,447     831,580   1,272,742     831,580 
         Provision for doubtful 
          debts                      (356,480)   (250,110)   (356,480)   (250,110) 
                                       956,967     581,470     916,262     581,470 
 
         Other receivables             151,150     308,214     151,149     308,495 
         Amounts due from group              -           -           -           - 
          undertakings 
         Amounts due from related            -           -           -           - 
          undertakings 
         Prepayments and accrued 
          income                       479,398     501,367     450,704     448,095 
         Amounts due in less than 
          one year                   1,586,850   1,391,051   1,518,116   1,338,060 
         Amounts due from group 
          undertakings                       -           -     533,480   1,505,740 
         Prepayments and accrued             -           -           -           - 
          income 
         Total                       1,586,850   1,391,051   2,051,596   2,843,800 
                                    ==========  ==========  ==========  ========== 
 

Amount due from group undertakings of GBP533,480 are considered to be due in more than one year (2020:

GBP1,505,740) while prepayments include a rental deposit of GBP101,015 that was recovered in July 2021.

The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short-term nature of these financial assets.

19. CASH AND CASH EQUIVALENTS

 
                                               Group                  Company 
 
                                         30 June     30 June     30 June     30 June 
                                            2021        2020        2021        2020 
 
                                             GBP         GBP         GBP         GBP 
 
           Cash at bank and in hand    1,375,873   1,600,597   1,329,815   1,531,360 
         Total                         1,375,873   1,600,597   1,329,815   1,531,360 
                                      ==========  ==========  ==========  ========== 
 

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents does not differ from the carrying value.

20. DEFERRED TAX LIABILITIES

Group

 
 
 
                                              30 June 2021   30 June 2020 
 
                                                       GBP            GBP 
 
           At 1 July                                92,059        322,718 
         Arising on business combination            94,748              - 
         Credited to profit or loss               (58,972)      (230,659) 
                                           ---------------  ------------- 
         At 30 June                                127,835         92,059 
                                           ===============  ============= 
 

The provision for deferred taxation is made up as follows:

 
        Temporary timing differences on intangible 
         assets                                       127,835   92,059 
                                                     ========  ======= 
 

Company

 
                                                       30 June 2021     30 June 2020 
 
                                                                GBP              GBP 
                                                                  -                - 
            At 1 July 
          Arising on business combination                   115,543                - 
          Credited to profit or loss                       (20,795)                - 
          At 30 June                                         94,748                - 
                                                      =============    ============= 
 
          Temporary timing differences on intangible         94,748                - 
           assets 
 

21. ISSUED CAPITAL

The Company has a single class of ordinary share with nominal value of GBP0.001 each. Movements in the issued share capital of the Company can be summarised as follows:

 
                                                  Number       GBP 
 
   As at 30 June 2019                        362,897,087   362,897 
 
 Issued on 31 July 2019 at GBP0.045          116,666,666   116,667 
 Issued on 2 April 2020 at GBP0.01            56,839,167    56,839 
 Issued on 21 April 2020 at GBP0.01          168,160,833   168,161 
 Issued between 22 April and 30 June 2020 
  at GBP0.01                                  21,304,500    21,305 
 
 As at 30 June 2020                          725,868,253   725,868 
                                            ============  ======== 
 
 Issued between 6 July 2020 and 04 June 
  2021 at GBP0.01                            204,644,995   204,645 
 
 As at 30 June 2021                          930,513,248   930,513 
                                            ============  ======== 
 

22. TRADE AND OTHER PAYABLES

 
                                                 Group                     Company 
 
                                         30 June 2021     30 June     30 June     30 June 
                                                             2020        2021        2020 
 
                                                  GBP         GBP         GBP         GBP 
          Non-current liabilities 
          Other Payables (Deferred 
           consideration)                     254,986           -     254,986           - 
                                              254,986           -     254,986           - 
 
          Current liabilities 
          Trade payables                      680,419     450,264     634,299     416,865 
          Other taxation and social 
           security                            65,776     103,930      65,776      91,117 
          Accrued expenditure and 
           deferred revenue                 1,105,526     910,582   1,105,526     910,582 
          Lease Liabilities                         -     428,305           -     428,305 
                                            1,851,720   1,893,081   1,805,601   1,846,869 
 
          Total                             2,106,706   1,893,081   2,060,587   1,846,869 
                                      ===============  ==========  ==========  ========== 
 

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that the carrying amount of trade payables approximates to their fair value due to their short-term nature.

23. NOTES TO THE CASH FLOW STATEMENT

Group

 
 
                                                             30-Jun-21     30-Jun-20 
 
                                                                   GBP           GBP 
          Cash flows from operating activities 
          Loss for the financial year                      (3,845,595)   (7,725,307) 
          Depreciation of property, plant and equipment        132,478       370,589 
          Depreciation on right of use assets                  428,305       571,074 
          Amortisation of intangible fixed assets              492,700       478,553 
          Goodwill impairment                                  901,519             - 
          Interest Received                                        (4)       (2,622) 
          Interest Payable                                      10,236        39,768 
          Share based payments                                 265,583     1,500,573 
          (Increase)/ decrease in trade and other 
           receivables                                       (280,359)       931,047 
          Increase in trade and other payables                 300,020   (1,531,582) 
          Share of Associate Losses                                  -       308,214 
          Disposal of fixed assets                                  85             - 
          Gain on disposal of Associate                      (459,706)             - 
          Corporation tax charge                               227,004     (457,663) 
          Corporation tax (paid)/ R&D credits received       (221,929)       227,004 
                                                          ------------  ------------ 
 
          Cash used by operating activities                (2,049,663)   (5,290,351) 
 
 
          Net cash used by operating activities            (2,049,663)   (5,290,351) 
 
 

Company

 
                                                             30-Jun-21     30-Jun-20 
                                                                   GBP           GBP 
          Cash flows from operating activities 
          Loss for the financial year                      (5,739,305)   (7,720,225) 
          Depreciation of property, plant and equipment        112,691       370,371 
          Depreciation on Right of Use assets                  428,305       571,074 
          Amortisation of intangible fixed assets              111,406             0 
          Investment impairment                              2,158,499             0 
          Interest Received                                        (4)       (2,622) 
          Interest Payable                                      10,236        39,768 
          Share of Associate Losses                                  0       308,214 
          Gain on disposal of Associate                      (459,706)             0 
          Share based payments                                 265,583     1,500,573 
          (Increase)/ decrease in trade and other 
           receivables                                         707,362       916,564 
          Increase/ (decrease) in trade and other 
           payables                                            300,112   (1,533,368) 
          Loss on disposal of fixed assets                          85             0 
 
          Taxation charge                                    (162,957)             0 
          Corporation tax (paid)/ R&D credits received         227,004       227,004 
                                                          ------------  ------------ 
 
          Net Operating Cashflow                           (2,040,690)   (5,322,647) 
 
 
          Net cash used by operating activities            (2,040,690)   (5,322,647) 
 
 

24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company uses a limited number of financial instruments, comprising cash, short-term deposits, and various items such as trade receivables and payables, which arise directly from operations. The Company does not trade in financial instruments. All of the Company's financial instruments are measured at amortised cost.

The Company's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

Credit risk

The Company's principal financial assets are bank balances and cash, trade and other receivables.

Bank balances and cash are held by banks with high credit ratings assigned by independent credit rating agencies. Management is of the opinion that cash balances do not represent a significant credit risk.

As the Group does not hold security against trade and other receivables, its credit risk exposure is as follows:

 
              Group                             Company 
 
   30 June 2021     30 June 2020     30 June 2021     30 June 2020 
 
            GBP              GBP              GBP              GBP 
 
      1,586,850        1,146,912        2,051,596        2,599,380 
 

The trade receivables balance represents amounts due from third parties. At the balance sheet date, the Group's trade receivables totaled GBP1,313,447 less a provision of GBP356,480 (2020: GBP831,580 less a provision of GBP250,110). The Company's receivables include GBP533,480 of inter-company funding (2020: GBP1,505,740). The Company's trade receivables totaled GBP1,272,742 less a provision for doubtful debt of GBP356,480 (2020: GBP831,580 less a provision for doubtful debt of GBP250,110).

There are no significant overdue but not impaired trade receivables at the balance sheet date. The Company balance sheet includes inter-company receivables which are not considered to be at risk as the Company retains control over the debtor however it is not anticipated that the Group companies will repay these amounts in the next 12 months.

At the balance sheet date an amount of GBP316,699 was due from one customer representing a concentration of credit risk. This amount has not been recovered in full since the balance sheet date, however is fully provided against in the year-end balance sheet.

Liquidity risk

All trade and other payables are due for settlement within one year of the balance sheet date. The use of instant access deposits ensures sufficient working capital is available at all times.

Foreign exchange risk

The Company operates in overseas markets by selling directly from the UK, owns an overseas subsidiary and reports in GBP. It is therefore subject to currency exposures on transactions while the Group is subject to currency exposures on consolidation of the overseas subsidiary.

Financial instruments held by the Company and their carrying values were as follows:

 
                                                                 Group 
                                                                               30 June 2020 
                                                      30 June 2021 
 
                                               USD ($)   GBP (GBP)    USD ($)     GBP (GBP) 
 
           Trade and other receivables          57,048   1,524,796          0       990,979 
         Accrued income                         39,284     216,805     65,890       102,661 
         Cash                                   56,248   1,335,540     92,689     1,525,657 
         Trade and other payables               58,997   2,350,781   (39,588)   (1,861,075) 
         Derivative financial instruments            0           0          0             0 
         Net current assets/ liabilities       211,577   5,427,923    118,991       758,222 
 
 
                                                                   Company 
                                                                                 30 June 2020 
                                                         30 June 2021 
 
                                                  USD ($)   GBP (GBP)   USD ($)     GBP (GBP) 
 
           Trade and other receivables            460,599     943,989         0       990,979 
         Amounts due from Group Undertakings      747,680     952,675         0     1,505,740 
         Accrued income                                 0     216,805         0       102,661 
         Cash                                     122,703   1,242,264    31,645     1,505,775 
         Trade and other payables                       0   2,346,757         0   (1,846,869) 
         Derivative financial instruments               0           0         0             0 
         Net current assets/ liabilities        1,330,982   5,702,490    31,645     2,258,286 
 

Financial liabilities included in the balance sheet relate to the IAS 39 category of other financial liabilities held at amortised cost.

Assets relate to loans and receivables with the exception of other receivables and prepayments which are classified as non-financial assets.

Fair value estimation

The aggregate fair values of all financial assets and liabilities are consistent with their carrying values due to the relatively short-term maturity of these financial instruments.

As cash is held at floating interest rates, its carrying value approximates to fair value.

Capital management

The Company is funded entirely through shareholders' funds.

If financing is required, the Board will consider whether debt or equity financing is more appropriate and proceed accordingly. The Company is not subject to any externally imposed capital requirements.

25. SHARE BASED PAYMENTS

Equity-settled share option plans

Options

The Company has a share option scheme for employees of the Group.

The tables below summarises the exercise terms of the various options over Ordinary shares of GBP0.001 each which had been granted, and were still outstanding, as at 30 June 2021.

 
         LTIP options                                   Number   Weighted average 
                                                                   exercise price 
                                                                            (GBP) 
 
         Shares options as at 30 June 2019          46,859,795             0.1382 
         Shares options granted                     47,075,621             0.0125 
         Share options replaced                   (28,344,836)           (0.1267) 
         Share options forfeited                   (3,879,553)           (0.1323) 
         LTIP share options as at 30 June 2020      61,693,027             0.0486 
                                                 =============  ================= 
 
 
         Shares options as at 30 June 2020          61,693,027             0.0486 
         Shares options granted                     49,400,000             0.0409 
         Share options forfeited                   (4,050,001)             0.0100 
         Share options exercised                  (10,866,663)             0.0110 
         LTIP share options as at 30 June 2021      96,176,363             0.0556 
                                                 =============  ================= 
 

Options for non-employee services

 
         Non-market condition shares               Number   Weighted average 
                                                              exercise price 
                                                                       (GBP) 
 
         Shares options as at 30 June 2019      7,500,000               0.20 
         Shares options granted                         0                  0 
         Share options lapsed                           0                  0 
         Share options as at 30 June 2020       7,500,000               0.20 
                                             ============  ================= 
 
 
         Shares options as at 30 June 2020      7,500,000               0.20 
         Shares options granted                         0                  0 
         Share options lapsed                 (3,500,000)               0.20 
         Share options as at 30 June 2021       4,000,000               0.20 
                                             ============  ================= 
 

Options vest over periods defined in the respective option agreements and at the discretion of the board of directors. 37,750,016 options vested during the year (2020: 28,837,544).

Of the options outstanding 38,000,000 (2020: 20,000,000) are held by directors. Full details of all options held by directors are contained within the Directors' Remuneration Report.

The principal assumptions input into the Black Scholes model to calculate the value of LTIP share options issued for compliance with IFRS 2 "Share Based Payments" are included below, where applicable.

 
                                              30 June 2021   30 June 2020 
                                                               GBP 0.0125 
           Weighted average exercise price          0.0556 
         Average expected life                   1.0 years      1.0 years 
         Expected volatility                        86.62%         81.01% 
         Risk free rate                                 0%             0% 
         Expected dividend yield                        0%             0% 
 

All options were granted at an exercise price equivalent to the market price at the date of grant. The weighted average exercise price of LTIP options outstanding at 30 June 2021 was GBP0.0496 (2020: GBP0.0486). The weighted average fair value of options issued during the period was GBP0.0404 (2020: GBP0.0125).

The average expected life is based on directors' best estimate taking into account the vesting conditions of the options.

Expected volatility has been calculated with reference to the actual volatility of the share price since over the year prior to the date of grant.

The fair value of the non-employee services options has been based on the fair value of the services provided at the date the services were provided. This equates to a fair value of options issued in the year GBPnil (2020:

GBPnil).

All options are held in Gfinity plc with no options held over any of the subsidiaries

26. WARRNATS

The Company has granted warrants over Ordinary Shares as outlined in the table below.

 
                                               Number   Weighted average 
                                                          exercise price 
                                                                   (GBP) 
         Warrants 
 
         Warrants as at 30 June 2019                0              0.000 
         Warrants granted                 225,000,000              0.010 
         Warrants exercised              (21,304,500)              0.010 
         Warrants lapsed/forfeited                  0              0.000 
         Warrants as at 30 June 2020      203,695,500             0.0100 
 
         Warrants as at 30 June 2020      203,695,500              0.010 
         Warrants granted                           0              0.000 
         Warrants exercised             (183,645,000)              0.010 
         Warrants lapsed/forfeited                  0              0.000 
         Warrants as at 30 June 2021       20,050,500             0.0100 
 

No warrants were granted in the period. The warrants exercised were granted in year ended June 2020 and this figure represented one warrant per ordinary share acquired as part of the fundraise at an exercise price equal to that at which shares were acquired in the fundraise. All warrants are non-transferrable and have an exercise period of 18 months from the date of issue.

The fair value of warrants was calculated according to the Black Scholes model, however, no adjustment has been recognised in respect of the warrants, as directors consider this amount to be immaterial.

27. RELATED PARTY TRANSACTIONS

The Directors Remuneration Report provides details of share options issued to certain directors in the period. Further information on share options are provided in Note 24. In addition to the share options granted in the year, the directors also participated in share placings as outlined in the table below. All shares subscribed for by directors were at the same price and under the same conditions as all other participants in the placings:

 
                          June 2021, exercise 
                            of warrants at 1p 
                                    per share 
 
           John Clarke                500,000 
         Jonathan Hall                500,000 
 

Transactions with Group subsidiaries in the year:

CEVO: There was a management recharge from Gfinity to CEVO of GBP13,409 (2020: GBP95,767) and a recharge from CEVO to Gfinity for technology services of GBP215,274 (2020: GBP719,953). There were no cash advances to and expenses paid on behalf of CEVO by Gfinity (2020: GBP440,200). At the balance sheet date the intercompany loan due to Gfinity from CEVO was GBP533,480 (2020: GBP528,481).

Real Sport: There were cash advances to and expenses paid on behalf of Real Sport by Gfinity of GBP5,734 (2020: GBP157,677). At the balance sheet date the intercompany loan due to Gfinity from Real Sport was

GBP952,675 (2020: GBP977,260).

There was no revenue from transactions with associates in the year (2020: GBP0 from the Esports Awards Ltd and GBP0 with Gfinity Australia). During the period there was a gain of GBP459,706 from disposal of Esports Awards Ltd as mentioned in Note 17.

28. BUSINESS COMBINATIONS

Acquisition of EpicStream

On 3 December 2020 Gfinity PLC acquired the trade and assets of EpicStream Inc, an online news community for fantasy and sci-fi movies, television, video games, collectible cards and comic books. EpicStream generates revenue through programmatic ads, sponsored content, ecommerce and content creation. Gfinity will also monetise all EpicStream's social channels. The acquisition means that Gfinity will assume ownership of the EpicStream.com website, its extensive social media network and their respective historic content. The continued growth of the platform will be supported by its founders joining the Gfinity team.

Purchase consideration

 
          Initial consideration                                 GBP 
          Shares (10,000,000 Ordinary shares at GBP0.36)    360,000 
          Total initial consideration                       360,000 
 
          Deferred consideration 
          Contingent consideration at fair value            353,227 
          Total deferred consideration                      353,227 
 
          Total consideration payable                       713,227 
                                                           ======== 
 

Contingent consideration

Contingent consideration is payable based on revenue generated from the acquired assets. The amount payable is calculated at 30% of relevant revenues received in the first and second 12 month periods after the acquisition date, up to a maximum of GBP900,000 in each 12 month period. The fair value of the contingent consideration is currently estimated to be GBP353,227 based on forecast revenues at the date of the acquisition. The maximum contingent consideration payable is GBP1,800,000.

Net assets acquired

The fair values of the assets and liabilities of the acquired assets of EpicStream as at the date of acquisition are as follows:

 
                                           GBP 
 Intangible assets: web traffic        567,987 
 Deferred tax liability              (115,543) 
 Net identifiable assets acquired      452,445 
 
 Add: Goodwill                         260,783 
 
 Net assets acquired                   713,227 
                                    ========== 
 
 

The goodwill that arises from the business combination reflects the profitability of the acquired trade and assets and the enhanced growth prospects for the combined business. None of the goodwill is expected to be deductible for tax purposes.

EpicStream's post acquisition revenue was GBP57,800 with a gross profit of GBP23,005. If the business had been controlled for the full year, the revenue and gross profit would have been as below:

 
                           GBP 
       Revenue          99,086 
       Cost of sales    59,649 
                       ------- 
       Gross profit     39,437 
 

29. EVENTS OCCURING AFTER THE REPORTING PERIOD

Acquisition of Megit Limited and Placing

On 23 August 2021, Gfinity announced its intention and agreement, subject to completion of a successful placing and settlement of the initial consideration, to acquire Megit Limited. Megit Limited , was the private company which owns and operates the website Stock Informer, in both the UK and US. The Stock Informer brand has become an established authority on the availability of hard to find items of stock, with a particular emphasis on products of relevance to gamers, enabling it to drive profitable revenue through affiliate commissions.

On 24 August it was announced that an oversubscribed placing had been successfully completed, subject to shareholder approval, raising GBP3.3m prior to expenses at the prevailing market price of 4p per ordinary share. This transaction was approved by shareholders at an Extraordinary General Meeting of the company on 10 September. The transaction formally completed on 14 September 2021.

Consideration for the transaction was as outlined below:

Purchase Consideration:

 
                                                           GBP 
 Initial Consideration: 
 Initial Cash Consideration                          2,500,000 
 Shares (62,500,000 shares at GBP0.04)               2,500,000 
                                                    ---------- 
 Total Initial Consideration                         5,000,000 
 
 Contingent Consideration: 
 30% revenue earn out on revenue earned by Stock 
  Informer brand in the 3 years post acquisition, 
  capped at GBP1,800,000:                            1,260,000 
                                                    ---------- 
 Contingent Consideration                            1,260,000 
 
 Estimated Total Consideration                       6,260,000 
                                                    ========== 
 

The provisionally determined fair value of assets and liabilities of Megit Limited as at the date of acquisition are as follows:

 
 Cash and cash equivalents             50,000 
 Receivables                          347,196 
                                   ---------- 
 Payables (incl Corporation tax)    (397,196) 
                                   ---------- 
 Add: goodwill and intangibles      6,260,000 
                                   ---------- 
 Net Assets Acquired:               6,260,000 
                                   ---------- 
 

Contingent Consideration:

Contingent consideration is due amounting to 30% of revenue, net of sales taxes, earned in the 3 calendar years following acquisition. This consideration is capped at GBP1,800,000, being 30% of GBP6,000,000. The fair value of this consideration has been assessed at GBP1,260,000, being 30% of GBP4,200,000.

Information not disclosed as not yet available:

At the time the financial statements were authorized for issue, the group had not yet fully completed the accounting for the acquisition of Megit Limited. In particular the fair value of assets and liabilities disclosed above have only been determined provisionally. Full analysis of the categorization between goodwill and other separately identifiable assets is also still to be calculated and as a result, any deferred tax on such assets is yet to be calculated.

Acquisition of trade and assets of Siege GG

On 8 September 2021 Gfinity announced the acquisition of the trade and assets of SiegeGG. This included the website, related social platforms, statistical database and supporting technology and methodology that has helped SiegeGG become the authority on the competitive scene around the Rainbow Six Siege game.

Consideration in respect of this transaction was as follows:

 
                                                                     GBP 
 Initial Consideration: 
 Shares (9,000,000 shares at GBP0.044)                         396,000 
                                                    -------------------- 
 Total Initial Consideration                                   396,000 
 
 Contingent Consideration: 
 30% revenue earn out on revenue earned by Stock 
  Informer brand in the 2 years post acquisition, 
  capped at GBP1,500,000:                                      180,000 
                                                    -------------------- 
 Contingent Consideration                                      180,000 
 
 Estimated Total Consideration                                 576,000 
                                                    ==================== 
 

Contingent Consideration:

Contingent consideration is due amounting to 30% of revenue, net of sales taxes, earned in the 2 calendar years following acquisition. This consideration is capped at GBP1,500,000. The fair value of this consideration has been assessed at GBP180,000, being 30% of GBP600,000.

No value has been ascribed to tangible fixed assets acquired under this transaction, hence the full value of the opening balance sheet will represent goodwill and intangibles. Full analysis of the categorization between goodwill and other separately identifiable assets is also still to be calculated and as a result, any deferred tax on such assets is yet to be calculated.

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(END) Dow Jones Newswires

November 15, 2021 02:00 ET (07:00 GMT)

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