35 New Bridge Street
London
EC4V 6BW
GFINITY plc
Annual Report & Financial Statements
30 June 2017
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TABLE OF
CONTENTS
STRATEGIC REPORT
Directors, Secretary and Advisers
Period Highlights
Chairman’s Statement
Chief Executive’s Report
Finance Director’s Report
GOVERNANCE
Directors’ Biographies
Directors’ Report
Corporate Governance Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditor’s Report
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
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5
6
7
9
10
12
13
15
18
20
23
24
25
26
27
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GFINITY plc. | Annual Report & Financial Statements 2017
OVERVIEW
Directors, Secretary and Advisers
The Board of
Directors
Tony Collyer
(Non-Executive Chairman)
Neville Upton
(Chief Executive Offi cer)
Jonathan Hall
(Chief Financial Offi cer)
Paul Kent
(Technology and eSports Director)
Philip Shuldham-Legh
(Marketing Director)
David Yarnton
(Non-Executive Director)
Jonathan Varney
(Non-Executive Director)
Company Secretary
Jonathan Hall
Registered Offi ce
35 New Bridge Street
London EC4V 6BW
Nominated Adviser
and Broker
Allenby Capital Ltd
3 St Helen’s Place,
London EC3A 6AB
Independent
Auditors
Rees Pollock
Chartered Accountants
35 New Bridge Street
London EC4V 6BW
Legal Advisers –
Corporate
Fladgates
16 Great Queen Street
London WC2B 5DG
Legal Advisers –
Commercial
Onside Law
23 Elysium Gate
126-128 New Kings Road
London SW6 4LZ
Registrars
Capita Registrars Ltd
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial Public
Relations
Walbrook PR Ltd
4 Lombard Street
London EC3V 9HD
Registered Number
08232509
4
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GFINITY plc. | Annual Report & Financial Statements 2017
Period Highlights
Financial highlights:
■ Revenue increased 64% to £2.37m (2016: £1.45m)
■ Planned investment in people, technology and product development, resulted in a loss before
tax of £5.3m (2016: £3.1m)
■ Loss per share reduced 25% to 3p (2016: 4p)
■ Cash and cash equivalents at year end of £4.5m (2016: £0.83m)
■ £9.95m of new funds raised during the year through two oversubscribed placings of new shares;
£3.7m in July 2016 and £6.25m in May 2017
Operational highlights:
■ Signifi cant growth in partner events business, delivering esports programmes on an increasingly
global basis for major clients including Microsoft and Activision Blizzard
■ Strengthening of the Executive team with specialists bringing years of experience from relevant
industries
■ Launch of the Gfi nity Challenger Series, a pioneering bedroom to podium format for esports,
building towards the start of the fi rst professional season of the Gfi nity Elite Series in July 2017
Post period highlights:
■ Launched Gfi nity Elite Series, featuring 8 major esports teams, broadcast via a number of major
broadcast partners, including BT Sport, BBC, Eleven Sports and Twitch.tv
■ Announced as esports partner for inaugural series of Formula One Esports
■ Acquired the entire issued share capital of CEVO, Inc. in the USA, bringing further esports
expertise, cutting edge technology and new revenue streams to the Group
■ Licensed the Gfi nity Elite Series brand, format and technology to a newly formed joint venture in
Australia in partnership with HT&E Ltd
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GFINITY plc. | Annual Report & Financial Statements 2017
BUSINESS REVIEW & STRATEGIC REPORT
Chairman’s Review
Tony Collyer Chairman
I am delighted to present the
Company’s full year fi nancial results for
the year-ended 30 June 2017.
It has been a transformational year and
one of signifi cant progress for Gfi nity.
During the period, Gfi nity strengthened
its position as the partner of choice
to deliver managed service solutions
to major game publishers and other
partners looking to reach a deeply
engaged esports audience. We also laid
the groundwork for the highly successful
launch of Gfi nity’s Elite Series in July
2017, as outlined in more detail in the
Chief Executive’s Report.
The growth of the eSports sector is clear
to see. Newzoo’s 2017 Global Esports
Market Report, stated that the global
eSports audience is estimated to be 385
million worldwide with 1 billion hours of
eSports coverage watched in 2016. On
top of that, there was 41% annual growth
in the global eSports market 2016/17 with
a further $1.5 billion projected esports
market value by 2020.
In 2017 we have seen commercial activity
increasing apace with investment in new
esport leagues, esports teams, broadcast
rights and commercial sponsorship, both
from brands endemic to the industry and
those from outside the industry eager to
access the valuable fanbase that esports
enjoys.
Against this backdrop, it is our
strengthening belief that the strategy
of investment to establish Gfi nity as the
leading content, format and technology
owners in the esports sector is the right
way to deliver long-term value for our
shareholders.
Following the year-end, Gfi nity was
delighted to announce its fi rst major
move into the American market through
the acquisition of CEVO, Inc, an
American based, global provider of
technology and services to the esports
market for a total consideration of up to
$2.7 million payable in cash and shares.
CEVO has an outstanding reputation
in the sector which will further enable
Gfi nity to grow revenue and enhance the
Company’s delivery capability.
I am also excited by the partnership
between Gfi nity and HT&E, a major
media company in Australia, for the
maiden licensing agreement for Gfi nity’s
Elite Series format, brand and underlying
technology outside the United Kingdom.
This exciting development validates
the value of the Gfi nity brand, structure
and format. Gfi nity will seek to expand
this model globally, with the right local
partners.
During the year to 30 June 2017, we were
delighted to have added to our executive
team with a number of high profi le
appointments, each a proven leader in
their own sector. The decision of each of
these individuals to join Gfi nity, over other
opportunities is a further endorsement of
the potential of the esports sector of the
position that Gfi nity has established within
it. Following on from these appointments,
we will also now explore opportunities to
restructure the composition of the board
of Gfi nity, strengthening the level of non-
executive oversight and governance as
we progress with the next phase of our
development.
Overall the outlook is excellent and Gfi nity
is very well positioned to move into 2018
with confi dence. I would fi nally like to
take this opportunity to thank commercial
partners, management, staff and
shareholders for their outstanding efforts
during the period as we look forward to
the next phase of our accelerated growth
plans with optimism.
.
Tony Collyer
Chairman
21 November 2017
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GFINITY plc. | Annual Report & Financial Statements 2017
Chief Executive’s Review
Neville Upton Chief Executive Offi cer
SUMMARY
2016/17 has been a pivotal year
for Gfi nity in terms of delivering
on its strategy of becoming
a leading esports brand.
Results for the period are in line with our
expectations and refl ect the signifi cant
investment we have made in a number
of key strategic areas of the business.
We have further strengthened our
leadership team by employing some
of the best executives in the industry;
high calibre recruits with years of
highly relevant business experience.
We have laid fi rm foundations for the
launch of the Gfi nity Elite Series esports
tournament, the fi rst professional season
of which commenced in July 2017,
post year-end. Several months prior we
launched the Gfi nity Challenger Series
for amateur gamers, leveraging Gfi nity’s
market leading technology to provide
the pathway from bedroom to podium.
During the period, we also signed eight
leading esports franchises and invested
in the Gfi nity Esports Arena to create a
state-of-the-art esports arena, which we
believe is the best of its kind in Europe.
Our expertise and capability in esports
is demonstrated by the growing number
of Game Publishers, esports promoters
and commercial partners selecting us to
deliver esports events around the globe.
SECTOR
The esports sector continues to grow
and develop at a rapid rate. Ongoing
growth in the global esports audience
has driven recognition from traditional
sporting bodies and media sources
looking to address challenges in their
own sectors and take advantage of the
burgeoning esports market. The scale
of participation has prompted esports
to be included, as a demonstration
event, in the 2018 Asian Games, prior
to becoming a full medal event in 2022.
Even now discussions are taking place
on the possibility of including esports
in the 2024 Olympic programme.
strategy the licensing of the Gfi nity
Elite Series in Australia is validation
of our exciting format and we look
forward to announcing additional
geographies in due course.
During the period under review we have
seen increased commercial activity
among broadcasters, sponsors and
teams alike. We have also seen a
number of major sports rights holders
entering the esports market, with a
number of traditional sports teams
investing in esports organisations
and, shortly after the year end, the
decision of Formula 1 to appoint
Gfi nity to create its pioneering
Formula 1 esports programme.
OWNED CONTENT
In 2017 Gfi nity launched the Gfi nity Elite
Series, a format which creates a gamers
pathway from the bedroom to podium
and provides regular, high-quality
esports content, relevant to broadcasters
and sponsors at a national level for the
fi rst time. Season by season, the Gfi nity
Elite Series sees eight top professional
esports teams compete across three
iconic games in three independent
tournaments. The competition takes place
at The Gfi nity Esports Arena in London
and offers gamers the opportunity to
watch and support their favourite teams
in a rich, live, competitive environment.
The maiden season of Gfi nity Elite
Series was a huge success with 186
hours of high quality live content
created over the nine weeks of the
tournament. Four major broadcast
partners took part including; BT Sport,
BBC Three, Eleven Sport and Twitch
and achieved a cumulative viewership
of over three million. We gained over
200 million social media impressions
and a 477% growth in engagement
through Gfi nity owned channels.
In terms of our International roll-out
PARTNER EVENTS
Alongside Gfi nity owned events, we
also leverage our esports expertise,
technology and broadcast capability
to deliver services and esports events
for third parties that include leading
games publishers and major sporting
rights holders, driving direct revenues
to Gfi nity, but also further enhances our
reputation for excellence and builds our
profi le, reach and strong commercial
relationships within the esports industry.
During the period Gfi nity has enhanced
its position as the partner of choice
to a number of high profi le Game,
esports, Sports, broadcast and diverse
commercial sponsorship organisations.
Increasingly Gfi nity is chosen to
deliver international esports events
as well as in the United Kingdom.
The growth in size of live and online
esports programming and the
expanding range of popular Game
titles seeking to build an esports
audience provide us with confi dence
on the potential for future growth for
Gfi nity and the wider esports market.
Sports rights holders are also now looking
to esports as a way to engage with
younger fans. Evidence to support this
occurred during the post-period when
we were appointed as esports partner
to Formula One for the creation of their
inaugural Formula One Esports season,
culminating in a live fi nals event at the
last race of the season in Abu Dhabi.
INTERNATIONAL EXPANSION
The acquisition of CEVO and investment
in the Gfi nity Elite Series launch
in Australia have been important
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GFINITY plc. | Annual Report & Financial Statements 2017
BUSINESS REVIEW & STRATEGIC REPORT
Chief Executive’s Review (continued)
reputation within it. Our outstanding
people and technology continues to
generate our uptake of major games
publishers and leading sports rights
holders wanting to partner with us.
During the period we have also
strengthened our capability further with
high calibre new executive appointments
who have helped lay the foundation
for the highly successful launch of the
Gfi nity Elite Series, the fi rst season
of which commenced in July of this
year. This highly professional format
comprises a brand and underlying
technology that can be licensed around
world – the fi rst such deal was done in
Australia as recently as August - and
we plan to roll out in other geographies
around the globe in due course.
Neville Upton
Chief Executive Offi cer
21 November 2017
steps in establishing Gfi nity as a
global leader and the Company will
continue to invest in building a broad-
based global esports presence.
Founded in 2004, CEVO has built an
outstanding reputation for the operation
of its own esports competitions,
primarily in North America, and as a
provider of technology and services to
a client base of blue-chip organisations
in the esports space. CEVO has
developed proprietary technology and
a suite of esports products, including
leading anti-cheat software, used by
a number of major operators in the
industry, including Gfi nity, and a range
of esports broadcast products.
The acquisition is in line with Gfi nity’s
strategy to grow shareholder value
by establishing itself as the world’s
leading global esports business as it
continues to expand its global footprint
in the fast growing esports market.
CEVO has been a technology supplier to
Gfi nity for three years and is renowned as
one of the leading technology providers
to the esports industry. The acquisition
demonstrates Gfi nity’s global ambitions,
which have already been highlighted by
the delivery, so far this year, of events in
the UK, Mexico, France and the USA.
In acquiring CEVO, Gfi nity will be
supplementing its existing technology
and management team with some of
the most experienced operators in
the esports industry, leaving Gfi nity
well positioned to take advantage
of the growing number and scale of
esports opportunities. Furthermore,
Gfi nity’s core product suite, now
combined with CEVO’s technology,
represents one of the industry leading
suites of esports technology.
OUTLOOK
This has been pivotal year for Gfi nity. As
the esports sector goes from strength
to strength so does Gfi nity’s enviable
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GFINITY plc. | Annual Report & Financial Statements 2017
Finance Director’s Report
Jonathan Hall Finance Director
OUTLOOK
The ongoing delivery of our strategy
and the continued growth in awareness
and participation in esports leave Gfi nity
superbly positioned to deliver long term
shareholder value. The past year has
been defi ned by development of our
existing revenue streams and investment
in both the staff and asset base to deliver
our strategy.
These decisions have been validated
by the successful launch of the Elite
Series in July 2017, the licensing of the
brand, format and technology for the
fi rst overseas roll out of the Elite Series
into Australia, and the nature of the
major brands, now including Formula 1,
who continue to choose Gfi nity as their
partners of choice in the esports market.
Jonathan Hall
Chief Financial Offi cer
21 November 2017
SUMMARY
The results for the year to 30 June
2017 show a period of strong revenue
growth driven by continuing growth in
our partner events business.
The increased loss in the year in line
with expectations following the strategic
decision to invest in recruitment of high
calibre executive staff members and
the continuing investment in tournament
technology and the Gfi nity esports Arena.
The Company conducted two
oversubscribed placings during the
period, plus a further fundraise following
the year end, evidence of strong support
for Gfi nity from its investor base. In
particular, the Company was delighted to
welcome new major shareholder, Charles
Street Investment Holdings, as part of the
July 2016 Placing. This leaves Gfi nity well
capitalised to pursue growth objectives
into 2018.
INCOME STATEMENT REVIEW
In the year ending June 2017 revenue
increased 64% from £1.4m to £2.4m
continuing the growth seen in the year
ending June 2016.
Unsurprisingly given the growth in
revenue and the scope of events
delivered cost of sales increased to
£2.8m, driven in part by investments
made in the development of the Elite
Series, a Gfi nity owned property,
the Challenger element of which
commenced during the period and
the fi rst professional season of which
commenced immediately following the
year end.
To support the growth in events delivered
in the year and to build a platform for
the delivery and monetisation of the Elite
Series administrative costs grew £1.9m
to £4.9m (65%). This refl ects investment
in the website for the Challenger Series,
an increase in average headcount with
a number of senior appointments to lead
strategy, production and the commercial
elements of the business, and increased
rental and depreciation costs which
refl ect improvements in the infrastructure
and facilities at our Arena
As a result of the above investment
decisions, which were in line with our
plan, operating losses in the year
increased to £5.3m (2016, £3.2m). This
was partially offset by a tax credit in the
year of £0.1m with the overall loss for the
period being £5.2m (2016, £3.0m).
Following the issue of 105m shares
across two oversubscribed share
placings during the period, the loss per
share decreased from £0.04 to £0.03.
CASHFLOW AND FINANCIAL
POSITION REVIEW
Cashfl ow in the year was driven by the
two share placings referred to above
with gross proceeds of £10m (£9.7m
net). £5.4m of the cash was used to
fund operating activities with the working
capital requirement increasing £0.6m at
year end. This followed the delivery of
several events in Q4 and the prepayment
of a signifi cant proportion of production
costs for the launch of the Elite series in
early July 2017.
Investment in property, plant and
equipment of £0.6m further strengthened
the statement of fi nancial position and
helped increase the net book value
of the fi xed asset base to £0.9m. This
principally relates to investments in
technology at the Gfi nity Arena creating
one of the leading esports venues in the
world.
The above resulted in cash at year end of
£4.5m, an increase of £3.7m from June
2016. Following the year end the cash
position has been further strengthened
by an oversubscribed placing of £7m,
before placing costs, in October 2017.
The placing was supported by both
existing and new shareholders.
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GFINITY plc. | Annual Report & Financial Statements 2017
GOVERNANCE
Directors’ Biographies
TONY COLLYER
NON-EXECUTIVE CHAIRMAN
Tony is a Chartered Accountant with broad commercial experience and has been fi nance
director of three public companies, Allders plc and New Look Group plc, both of which listed
on the main market during his tenure, and The Corporate Services Group plc. He is also a
director of the North Devon Biosphere Foundation. Tony has sat on the Finance Committee
of King’s College London for the last six years. Additionally he has acted as transaction
director for a number of signifi cant corporate transactions including the sale of The Listening
Company Limited to Serco plc and the sale of OB10 Limited to Tungsten Corporation
Plc. Tony joined the Board in January 2014. He also chairs the Audit and Remuneration
Committees.
NEVILLE UPTON
CHIEF EXECUTIVE OFFICER
After graduating at the London School of Economics, Neville joined Coopers & Lybrand
where he qualifi ed as a Chartered Accountant. Neville’s formative years were at Euromoney
where he gained experience in Finance, M&A and various commercial projects. After a brief
spell at The Decisions Group as fi nance and operations director, in 1998 he established
a call centre business, The Listening Company, which specialized in multichannel
communication applications and high quality customer service solutions. The business was
sold in 2011 to Serco for a sum in excess of £60 million at which time it had a turnover of
£82 million and employed 4,000 people. Neville co-founded the Company in 2012.
JONATHAN HALL
CHIEF FINANCE OFFICER
Jon qualifi ed as a Chartered Accountant with Arthur Andersen followed by a period of
6 years specialising in organisation and business process design with PA Consulting, a
leading London based management consultancy fi rm. He subsequently spent 5 years as
a fi nance director of Saracens Ltd and the wider Premier Team Holdings Group, before
joining Gfi nity in August 2014. As Chief Financial Offi cer Jon has responsibility for all
aspects of fi nance and accounting, including fi nancial planning, reporting and accessing
capital to fund growth.
PAUL KENT
TECHNOLOGY AND ESPORTS
DIRECTOR
Paul has been involved in eSports since 1996, as both a top-level gamer and team owner.
He established the Warped Gaming League in 2009, which grew within 3 years to be the
Europe’s largest Xbox Live on-line league with over 13 million page visits. Prior to joining
Gfi nity, Paul spent 10 years as a software engineer with Creative Labs, focused primarily on
chip design and ARM architecture. In addition, Paul spent his later years working extensively
on the video codec library. He has responsibility for web and production technology and for
setting the rules and tournament structures for all Gfi nity competitions.
10
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GFINITY plc. | Annual Report & Financial Statements 2017
PHILIP SHULDHAM-LEGH
MARKETING DIRECTOR
DAVID YARNTON
NON-EXECUTIVE DIRECTOR
JONATHAN VARNEY
NON-EXECUTIVE DIRECTOR
Philip has held a number of Sales & Marketing positions for large BPO businesses and
Direct Marketing agencies including SITEL (1993-1998) and WWAV Rapp Collins (1998-
2004) until joining Neville Upton at The Listening Company as Managing Director of
Consulting in 2004. Over the next few years, he took over responsibility for new business,
marketing and product development and was Group Sales and Marketing Director when
Serco acquired the business in March 2011. He was retained by Serco and moved to
Business Development Director until he joined Gfi nity as Marketing Director in January 2013.
Phillip divides his time between this role and being Strategy Director at Voice Marketing Ltd,
which has recently been acquired by Capita plc (April 2015). In all his roles, Philip has had
responsibility for brand, marketing comms and revenue growth.
David has over 30 years’ experience in the Games industry; fi rst in Australia followed by 9
years as Managing Director of Nintendo UK & Ireland. He has spent many years developing
business in Asia and the Pacifi c Rim and has strong experience working with Chinese
business partners.
Currently he is a Director of Equinox Talent and Eyes on Athletes both companies involved
with sport in the digital space and is Co-Chairman of the eSports Sub Group of the UK
Interactive Entertainment Association an organisation on which he was a Board Member
and Vice Chairman for 7 years.
In addition to that he has been a Board Member of GfK Charttrack, the Edinburgh
Interactive Festival of which he was also Chairman for 2 years. He is Founder and Chairman
of the British Inspiration Awards which celebrates diverse British Creative Achievements
today whilst inspiring them for tomorrow. He has lectured and spoken on a number of
occasions at the London Business School and various Conferences on Digital Technology
and its impact on Sport’s Media and Fan Engagement.
Jonathan (“Jon”) Varney is a Founder Partner of Pitch International Commercial LLP (“Pitch”)
and has been involved with the Company since Pitch were appointed to sell commercial
rights on the Company’s behalf in December 2014. As part of Pitch, Jon is responsible for
building commercial partnerships between brands and rights holders. Pitch’s portfolio of
commercial rights includes Domestic & International Football, International Cricket, Motor
Sports, International Rugby Union and Broadcast Sponsorship of all Pitch programming
and Branded Content. Prior to Pitch, Jon Varney was a commercial director of Premiership
Rugby, the umbrella organisation responsible for the development of elite professional club
rugby in England. Previous roles prior to 2003 all revolved around the sports media sector
including roles at Octagon UK, Movie and Media Sports, Coca-Cola Football and the RFU.
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GFINITY plc. | Annual Report & Financial Statements 2017
GOVERNANCE
Directors’ Report
The directors present their
annual report on the affairs of the
Company, together with the fi nancial
statements and auditor’s report,
for the year ended 30 June 2017.
PRINCIPAL ACTIVITIES
Gfi nity is the leading UK-based
esports company serving the rapidly-
growing community of competitive
gamers worldwide. Gfi nity has built
a reputation as one of the world’s
leading providers and broadcasters of
eSports competitions; both on behalf
of partners including major games
publishers and sports rights holders and
Gfi nity owned events including the Elite
Series which launched in July 2017.
Activities are monetised through
fees from partners for creation and
delivery of esports programmes and
from exploitation of commercial rights
attached to Gfi nity’s own events.
FUTURE DEVELOPMENT
Our development objectives for 2017–18
are disclosed in the Strategic Report.
CAPITAL STRUCTURE
The capital structure is monitored
by the board and intended to
ensure appropriate access to
capital to fund the Company’s
growth objectives and maximise
shareholder value in the long term.
No changes were made to these
objectives, policies or processes
during the year ended 30 June 2017.
RESULTS AND DIVIDENDS
The comprehensive income
statement is set out on page 23.
The Company’s loss after taxation
amounted to £5.23m (2016: £3.04m).
The directors do not recommend
the payment of a dividend for the
year ended 30 June 2017.
12
EVENTS SINCE THE
BALANCE SHEET DATE
Following the year end, the Company
successfully completed an equity placing
raising a further £7.0m prior to deduction
of expenses. On 7 July 2017 Gfi nity
commenced the fi rst professional season
of the Elite Series, a new framework for
competitive video gaming in the UK. On
24 July 2017 the Company purchased
100% of the share capital of CEVO, Inc,
a US based provider of technology and
services to the esports industry. On 7
August 2017 Gfi nity signed an agreement
with HT&E Limited, an ASX-listed leading
media and entertainment business to
launch Gfi nity Elite Series in Australia
via a newly created joint venture.
Further detail on these transactions
and their impact for the business is
provided within the Strategic Report.
RESEARCH AND DEVELOPMENT
The Company undertakes development
activities which involve a planned
investment in the building and
enhancement of Gfi nity products.
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 benefi ts in
the form of cash fl ows to the Company.
Further information on development
activities are provided in
the Strategic Report.
CREDIT RISK
Credit risk arises from exposure to
outstanding receivables. Potential
new customers are assessed for
credit risk before credit is given, to
minimize credit exposure. Credit limits
with existing customers are regularly
reviewed, particularly with any overdue
accounts. Further information on the
Company’s credit risk is provided in
note 19 to the fi nancial statements.
CURRENCY RISK
During the period, the signifi cant majority
of the Company’s revenues and costs
were in sterling therefore currency risk
is not considered signifi cant. To the
extent that transactions are incurred in
other currencies, Gfi nity will typically
exchange to/from sterling as required,
although the Company does retain a
US dollar account for managing certain
payments. No forward exchange
or other such fi nancial instruments
have been used in the period.
Further information on the fi nancial risk
management strategy of the Company
and of the exposure of Gfi nity to currency
risk, credit risk and liquidity risk is set out
in note 19 to the fi nancial statements.
DIRECTORS
The following directors held offi ce as
indicated below for the year ended
30 June 2017 and up to the date
of signing the fi nancial statements
except where otherwise shown.
Tony Collyer
Non-Executive Chairman
Neville Upton
Chief Executive Offi cer
Jonathan Hall
Chief Finance Offi cer
Paul Kent
Technology and eSports Director
Philip Shuldham-Legh
Marketing Director
David Yarnton
Non-Executive Director
Jonathan Varney
Non-Executive Director
DIRECTORS’ INDEMNITIES
The Company has made qualifying
third party indemnity provisions for
the benefi t of its Directors, which were
made during the year and remain
in force at the date of this report.
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GFINITY plc. | Annual Report & Financial Statements 2017
Corporate Governance Report
As an AIM listed company, Gfi nity
plc is not obliged to comply with
the UK Corporate Governance Code
published in April 2016 (the “Code”).
However, the Board follows, as far as
practicable, the recommendations on
corporate governance of the Quoted
Companies Alliance for companies
with shares traded on AIM.
THE BOARD
The Board normally meets at least
10 times per year in person. Its
direct responsibilities include setting
annual budgets, reviewing trading
performance, approving signifi cant
capital expenditure, ensuring adequate
funding, setting and monitoring
strategy and reporting to shareholders.
The Non-Executive Directors have
a particular responsibility to ensure
that the strategies proposed by the
Executive Directors are fully considered.
The Board has established an Audit
Committee and a Remuneration
Committee, with formally delegated duties
and responsibilities as described below.
AUDIT COMMITTEE
Throughout the period, the Company’s
Audit Committee comprised of Tony
Collyer (Chairman), David Yarnton
(non-executive director) and Jonathan
Varney (non-executive director). The
committee meets at least twice a year.
The Audit Committee is responsible
for reviewing the half-year and
annual fi nancial statements, interim
management statements, preliminary
results announcements and any other
formal announcement or presentation
relating to the Company’s fi nancial
performance. The Audit Committee
also reviews signifi cant fi nancial
returns to regulators and any fi nancial
information covered in certain other
documents such as announcements
of a price sensitive nature.
The Audit Committee advises the Board
on the appointment of external auditors
and on their remuneration (both for audit
and non-audit work) and discusses the
nature, scope and results of the audit
with the auditors. The Audit Committee
reviews the extent of the non-audit
services provided by the auditors and
reviews with them their independence
and objectivity. The Chairman of the Audit
Committee reports the outcome of Audit
Committee meetings to the Board and the
Board receives minutes of the meetings.
REMUNERATION COMMITTEE
During the period, the Company’s
Remuneration Committee currently
comprises Tony Collyer (Chairman),
David Yarnton (non-executive director)
and Jonathan Varney (non-executive
director). The committee is responsible
for making recommendations to
the Board, within agreed terms of
reference, on the Company’s framework
of executive remuneration and its
cost. The committee determines the
contract terms, remuneration and other
benefi ts for each of the Executive
Directors, including performance
related bonus schemes and pension
rights. Further details of the Company’s
policies on remuneration and service
contracts are given in the Directors’
remuneration report on page 15.
RELATIONS WITH SHAREHOLDERS
Communication with shareholders is
given high priority. There is regular
dialogue with major and institutional
shareholders including presentations
after the Group’s announcements of
the half-year and full-year results.
The Board uses both the annual report
and fi nancial statements and the Annual
General Meeting to communicate directly
with private and institutional investors
and welcomes their participation.
INTERNAL CONTROL
The Board is responsible for establishing
and maintaining the Company’s system
of internal control and for reviewing its
effectiveness. The system is designed
to manage rather than eliminate the
risk of failure to achieve the Company’s
strategic objectives and can only provide
reasonable and not absolute assurance
against material misstatement or loss. As
an AIM listed company, the Company
does not need to comply with Code
provision C2.1 regarding the Directors
giving a summary of the process
applied by the Board in reviewing the
effectiveness of the system of internal
control. Instead, the directors have set
out below some of the key aspects of the
Company’s internal control procedures.
An ongoing process has been
established for identifying, evaluating
and managing the signifi cant risks
faced by the Company. The process
has been in place for the full year under
review and up to the date of approval
of the annual report and fi nancial
statements. The Board regularly reviews
this process as part of its review of
such risks within its meetings. Where
any weaknesses are identifi ed, an
action plan is prepared to address
the issues and is then implemented.
Each year the Board approves the annual
budget. Key risk areas are identifi ed,
reviewed and monitored. Performance is
monitored against budget, relevant action
is taken throughout the year and updated
forecasts are prepared as appropriate.
Capital and development expenditure is
regulated by a budgetary process and
authorisation levels. For expenditure
beyond specifi ed levels, detailed written
proposals have to be submitted to the
Board for approval. Reviews are carried
out after the purchase is complete.
The Board requires management to
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GFINITY plc. | Annual Report & Financial Statements 2017
GOVERNANCE
Corporate Governance Report (continued)
capital to meet its present obligations.
Accordingly, they continue to adopt
the going concern basis in preparing
the Company fi nancial statements.
explain any major deviations from
authorised capital proposals and to
seek further sanction from the Board.
The Board has reviewed the need
for an internal audit function and
concluded that this is not currently
necessary in view of the small size of
the Company and the close supervision
by the senior leadership team of its
day-to-day operations. The Board will
continue to keep this under review.
GOING CONCERN
At the end of the period the Company
had cash and cash equivalents
amounting to £4.5m. On 25 September
2017 the Company announced its
intention to raise a further £7.0 million
(prior to deduction of expenses) via a
placing of shares on AIM. This placing
was approved by shareholders on
11 October 2017, with shares being
admitted to AIM and funds received by
the Company on 13 October 2017.
The placing leaves the Company with a
strong cash position from which to move
forward, it also saw the introduction
of new investors as we continue to
strengthen the shareholder base.
Furthermore, the oversubscription
of the placing, and the continued
shareholder support for the board’s
strategy, leaves the Company well
positioned to reactively exploit further
acquisition and growth opportunities
as they arise over the coming year.
The directors have prepared detailed
forecasts of the Company’s fi nancial
performance over the next 18 months. As
a result of this review, which incorporated
sensitivities and risk analysis, the
directors believe that the Company
has suffi cient resources and working
14
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GFINITY plc. | Annual Report & Financial Statements 2017
Directors’ Remuneration Report
post termination restrictive covenants
with the Company, including those
relating to non-competition and non-
solicitation of customers and staff.
No compensation is payable for
loss of offi ce and all appointments
may be terminated immediately if,
among other things, a director is
found to be in material breach of
the terms of the appointment.
As the Company is AIM listed, the
directors are not required, under
Section 420(1) of the Companies
Act 2006, to prepare a Directors’
remuneration report for each
fi nancial year of the Company and
so Gfi nity plc makes the following
disclosures voluntarily, which are
not intended to, and indeed do
not, comply with the requirements
of the Companies Act 2006.
The remuneration committee is
responsible for recommending the
remuneration and other terms of
employment for the Executive Directors of
Gfi nity plc. In determining remuneration
for the year, the committee has given
consideration to the requirements of
the UK Corporate Governance Code.
REMUNERATION POLICY
The remuneration of Executive Directors
is determined by the committee and
the remuneration of Non-Executive
Directors is approved by the full
board of directors. The remuneration
of the Chairman is determined by the
Independent Non-Executive Directors,
in conjunction with the Chief Executive
and the Chief Financial Offi cer.
The remuneration packages of
Executive Directors comprise
the following elements:
BASIC SALARY AND BENEFITS
Basic salaries for Executive Directors
are reviewed annually having regard to
individual performance, market practice
and the fi nancial position of the company.
In most cases salaries paid to Executive
Directors are currently towards the low
end of the market rate for their respective
roles. No Executive Directors received
benefi ts such as health insurance or
contributions to pension schemes
during the year. The Company’s
staging date for auto-enrolment was
1st July 2017 and the company has
commenced pension contributions for
the fi nancial year ending June 2018.
ANNUAL BONUSES
Bonuses awarded to executive directors
are included in the Directors’ Emoluments
table on page 17. In line with the
Company’s remuneration policy bonuses
paid to directors are intended to be at
or below market rate for the roles.
SHARE OPTIONS
The Company believes that share
ownership by Executive Directors and
employees strengthens the link between
their personal interests and those of
the Company and the shareholders.
The Company has an executive share
option scheme, which is designed to
promote long-term improvement in the
performance of the Company, sustained
increase in shareholder value and clear
linkage between executive reward
and the Company’s performance.
All directors hold either shares or
share options in the company.
SERVICE CONTRACTS
All directors entered into new service
contracts with the Company on
16 December 2014, prior to the
Company’s admission to AIM.
All directors’ appointments are
subject to three months’ notice on
either side, with the exception of Mr
Upton, whose appointment is subject
to 6 months’ notice on either side.
All directors are subject to pre and
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GFINITY plc. | Annual Report & Financial Statements 2017
GOVERNANCE
Directors’ Remuneration Report (continued)
AUDITED INFORMATION
Directors’ interests in shares
The interests of the Directors at 30 June 2017 in the shares of the Company were:
Number of Ordinary Shares
Percentage of issued share capital
Neville Upton
Paul Kent
Tony Collyer
Philip Shuldham-Legh
Jonathan Hall
David Yarnton
Jonathan Varney
14,710,579
1,622,000
1,034,579
278,000
0
0
0
7.80
0.86
0.55
0.15
0.00
0.00
0.00
Share Options
Directors’ interests in options over the ordinary shares in the company were as follows:
As at
30 June
2016
323,000
–
1,048,571
100,000
543,000
199,000
200,000
Options
Granted
–
7,870,670
500,000
100,000
100,000
–
–
2,413,571
8,570,670
Options
Lapsed
–
–
–
–
–
–
–
–
As at
30 June
2017
323,000
7,870,670
1,548,571
200,000
643,000
199,000
200,000
10,984,241
Anthony Collyer
Neville Upton
Jonathan Hall
Paul Kent
Philip Shuldham-Legh
David Yarnton
Jonathan Varney
16
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GFINITY plc. | Annual Report & Financial Statements 2017
Directors’ emoluments
Emoluments of the Directors for the year ended 30 June 2017 are shown below.
Anthony Collyer
Neville Upton
Jonathan Hall
Paul Kent
Philip Shuldham-Legh
David Yarnton
Jonathan Varney
Total
Year ended June 2016
Year ended 30 June 2017
Total
Remuneration
(£)
Salary and
Fees
(£)
Benefi ts
(£)
Total
Remuneration
(£)
24,000
100,000
105,000
57,500
15,000
27,404
–
24,000
100,000
115,000
83,500
20,000
33,425
–
£328,904
£375,925
–
–
–
–
–
–
–
–
24,000
100,000
115,000
83,500
20,000
33,425
–
£375,925
1 – In addition to the amounts stated above Ginette Jarman earned remuneration of £41,667 in her role as a director in the year ending June 2016. She resigned
from this position in May 2016
2 – Fees in respect of David Yarnton fees invoiced via Equinox Talent Ltd
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GFINITY plc. | Annual Report & Financial Statements 2017
GOVERNANCE
Statement of Directors’ responsibilities
This confi rmation is given and
should be interpreted in accordance
with the provisions of Section 418
of the Companies Act 2006.
Rees Pollock have expressed their
willingness to continue in offi ce as
auditors and a resolution to reappoint
them will be proposed at the
forthcoming Annual General Meeting.
The Directors are responsible for
preparing the annual report and the
fi nancial statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare fi nancial statements for
each fi nancial year. Under that law
the Directors have elected to prepare
Company fi nancial statements in
accordance with International Financial
Reporting Standards (“IFRSs”) as
adopted by the European Union.
Under Company law the Directors must
not approve the fi nancial statements
unless they are satisfi ed that they give
a true and fair view of the state of affairs
of the Company and of the profi t or
loss of the Company for the period. The
Directors are also required to prepare
fi nancial statements in accordance with
the rules of the London Stock Exchange
for companies trading securities on
the AIM. In preparing these fi nancial
statements, the Directors are required to:
■ present fairly the fi nancial position,
fi nancial performance and
cashfl ows of the Company;
■ select suitable accounting policies in
accordance with IAS 8 Accounting
Policies, Changes in Accounting
Estimates and Errors and then
apply them consistently;
■ make judgements and estimates
that are reasonable and prudent;
■ state whether applicable IFRSs have
been followed, subject to any material
departures disclosed and explained
in the fi nancial statements; and
■ prepare the fi nancial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for
keeping adequate accounting records
that are suffi cient to show and explain
the Company’s transactions and
disclose with reasonable accuracy at
any time the fi nancial position of the
Company and enable them to ensure
that the fi nancial statements comply
with the Companies Act 2006.
They are also responsible for
safeguarding the assets of the Company
and hence for taking reasonable
steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for ensuring
the annual report and the fi nancial
statements are made available on the
corporate website. Financial statements
are published on the Company’s
website in accordance with legislation
in the United Kingdom governing
the preparation and dissemination of
fi nancial statements, which may vary
from legislation in other jurisdictions.
The Directors are responsible for
the maintenance and integrity of the
corporate and fi nancial information
included on the Company’s website.
AUDITORS
Each of the persons who is a
Director at the date of approval of
this annual report confi rms that:
■ so far as the Director is aware,
there is no relevant audit
information of which the Company’s
auditors are unaware; and
■ the Director has taken all the steps
that he/she ought to have taken as a
Director in order to make himself/herself
aware of any relevant audit information
and to establish that the Company’s
auditors are aware of that information.
18
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GFINITY plc. | Annual Report & Financial Statements 2017
Report & Financial Statements 30 June 2017
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Independent Auditors’ Report to the shareholders of Gfinity plc
for the year ended 30 June 2017
Opinion
We have audited the financial statements of Gfinity PLC (the ‘company’) for the year ended 30 June 2017 which comprise the statement of
comprehensive income, the statement of financial position, the statement of changes in equity and the statement of cash flows and notes to
the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the company’s affairs as at 30 June 2017 and of its loss for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to SME listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
•
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
20
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GFINITY plc. | Annual Report & Financial Statements 2017
GFINITY plc. | Annual Report & Financial Statements 2016
Independent Auditors’ Report to the shareholders of Gfinity plc (continued)
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
for the year ended 30 June 2017
Key audit matter
How the scope of our audit addressed the risk
Appropriateness of applying the going concern basis as
referenced on page 28 of the financial statements
While the company has reported a net increase in cash and
cash equivalents for the year of £3.7m and at the balance sheet
date had net current assets of £4.4m, including cash and cash
equivalents of £4.5m, it reported a post-tax loss for the year
of £5.2m. Continued losses of this magnitude would rapidly
reduce net current assets and cash reserves. Accordingly, the
going concern assumption has been identified as a key audit
risk. If the going concern assumption were not appropriate
this would have a pervasive effect which could impact on the
company’s ability to realise assets in the normal course of
business.
We evaluated the directors’ assessment of going concern by
reviewing cash flow forecasts prepared by management and
considering the impact of events that had taken place sub-
sequent to the balance sheet date but prior to the date of ap-
proval of the accounts. In particular we have assessed the impact
of the share placing that took place on 11 October 2017 which
resulted in a further £6.8m of funding (net of placing costs).
We challenged the significant inputs and assumptions used in
the forecast model, and considered what options are available
to management in the event that the projected cash flows fall
below forecast figures.
We consider the judgements made by management in applying
the going concern assumption to be reasonable in light of the
evidence available to the date of this report.
We consider the disclosure in note 2 to the financial statements
to be appropriate having given specific regard to this being an
area of critical accounting estimate and judgement.
This is not a complete list of all risks identified by our audit.
Our application of materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected
to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and
evaluate the impact of misstatements identified.
Based on our professional judgement, we determined overall materiality for the company’s financial statements as a whole to be £250,000
(2016: £170,000). In determining this, we considered a range of benchmarks with specific focus on the loss for the year, total revenue for
the year and total assets as at the balance sheet date. This materiality level represents 4.7% (2016: 5.4%) of loss before tax, 10.5% (2016:
11.8%) of revenue and 3.5% (2016: 10.0%) of total assets. Therefore, while it has increased in absolute terms, it has fallen relative to the
company’s increased economic activity.
We report to the Audit Committee all identified unadjusted errors in excess of £25,000. Errors below that threshold would also be reported
if, in our opinion as auditor, disclosure was required on qualitative grounds.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the company and its environment, including controls, and assessing the risks of
material misstatement.
The company operates as a standalone entity with all activities taking place in the UK and accordingly we carried out a full scope audit of
the company, with all of its net assets, revenue and the loss for the year being potentially selected for detailed audit testing. All audit work
to respond to the risks of material misstatement was performed directly by the audit engagement team.
In particular, the extent of our audit procedures in respect of assessing the appropriateness of applying the going concern basis has been
addressed under key audit matters.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Independent Auditors’ Report to the shareholders of Gfinity plc (continued)
for the year ended 30 June 2017
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
•
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not
visited by us; or
• the financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 18, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
Auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Jonathan Munday (Senior statutory auditor)
for and on behalf of
Rees Pollock, Statutory Auditor
21 November 2017
22
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GFINITY plc. | Annual Report & Financial Statements 2017
Statement of Comprehensive Income
for the year ended 30 June 2017
Note
1 July 2016 to
30 June 2017
£
1 July 2015 to
30 June 2016
£
2,372,452
(2,775,724)
(403,272)
(4,932,771)
(5,336,043)
4,564
(5,331,479)
103,315
1,446,519
(1,606,036)
(159,517)
(2,992,427)
(3,151,944)
15,193
(3,136,751)
97,180
3
5
6
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Operating loss
Finance income
Loss on ordinary activities before tax
Taxation
Retained loss for the year
(5,228,164)
(3,039,571)
Loss and total comprehensive income for the period
(5,228,164)
(3,039,571)
Earnings per share
14
(0.03)
(0.04)
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Statement of Financial Position
for the year ended 30 June 2017
NON CURRENT ASSETS
Property, plant and equipment
Intangible fixed assets
Investment in Associate
CURRENT ASSETS
Inventories
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Ordinary shares
Share premium account
Other reserves
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total liabilities
Note
30 June 2017
£
30 June 2016
£
7
8
9
10
11
13
15
12
875,892
73,391
50,000
294,219
122,974
–
999,283
417,193
–
1,660,477
4,519,024
9,707
439,270
830,403
6,179,501
1,279,380
7,178,784
1,696,573
188,664
15,254,085
154,217
(10,163,836)
83,414
5,640,233
55,458
(4,935,672)
5,433,130
843,433
1,745,654
1,745,654
853,140
853,140
TOTAL EQUITY AND LIABILITIES
7,178,784
1,696,573
Signed on behalf of the board on 21 November 2017:
Neville Upton
Chief Executive
Jonathan Hall
Chief Financial Director
The notes on pages 27 to 43 form an integral part of these financial statements.
24
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GFINITY plc. | Annual Report & Financial Statements 2017
GFINITY plc. | Annual Report & Financial Statements 2017
Statement of Changes in Equity
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
for the year ended 30 June 2017
Ordinary
shares
£
Share
premium
£
Share
option reserve
£
Retained
earnings
£
Total
equity
£
At 30 June 2015
77,845
4,679,536
62,447
(1,896,101)
2,923,727
Loss for the period
Total comprehensive income
Proceeds of Shares Issued
Share issue costs
Share options expensed
Total transactions with owners,
recognised directly in equity
–
–
5,569
–
–
–
–
1,052,431
(91,734)
–
–
–
–
–
(6,989)
5,569
960,697
(6,989)
(3,039,571)
(3,039,571)
(3,039,571)
(3,039,571)
–
–
–
–
1,058,000
(91,734)
(6,989)
959,277
At 30 June 2016
83,414
5,640,233
55,458
(4,935,672)
843,433
Loss for the period
Total comprehensive income
Proceeds of Shares Issued
Share issue costs
Share options expensed
Total transactions with owners,
recognised directly in equity
–
–
–
–
105,250
–
–
9,844,730
(230,878)
–
–
–
–
–
98,759
(5,228,164)
(5,228,164)
(5,228,164)
(5,228,164)
–
–
–
9,949,980
(230,878)
98,759
105,250
9,613,852
98,759
–
9,817,861
At 30 June 2017
188,664
15,254,085
154,217
(10,163,836)
5,433,130
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Statement of Cash Flows
for the year ended 30 June 2017
Note
18
5
7
8
Cash flow used in operating activities
Net cash used in operating activities
Cash flow from/(used in) investing activities
Interest received
Additions to property, plant and equipment
Additions to intangible fixed assets
Net cash used in investing activities
Cash flow from/(used in) financing activities
Issue of equity share capital
Share Issue Costs
Net cash from financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
30 June 2017
£
30 June 2016
£
(5,435,353)
(2,501,250)
4,564
(599,692)
–
15,193
(233,617)
(148,750)
(595,128)
(367,174)
9,949,980
(230,878)
966,266
9,719,102
966,266
3,688,621
830,403
(1,902,158)
2,732,561
4,519,024
830,403
The Company has no borrowings so cash and cash equivalents is equal to the Company’s net debt position.
The notes on pages 27 to 43 form an integral part of these financial statements.
26
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements
for the year ended 30 June 2017
1.
2.
GENERAL INFORMATION
Gfinity plc (“the Company”) is a public company limited by shares incorporated in the United Kingdom under the Companies Act
2006. The address of the registered office is given on page 4. The nature of the Company’s operations and its principal activities are
set out in the Directors Report on page 12. The registered number of the company is 08232509. The functional and presentational
currency is £ sterling.
The Company was admitted to trading on AIM of London Stock Exchange on 22nd December 2014.
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 2017, 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 Share Based Payments which are accounted for at fair
value. 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.
Interpretations and amendments to published standards effective in the accounts
For the purposes of the preparation of the accounts, the Company has applied all standards and interpretations that will be effective
for the accounting periods commencing on or after 1 July 2016.
The following standards and interpretations have been adopted:
• Annual improvements 2014 (endorsed for annual periods on or after 1 January 2016);
• Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an interest in a joint operation (effective for accounting periods
beginning on or after 1 January 2016);
• Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’, on depreciation and amortisation (effective
for accounting periods beginning on or after 1 January 2016);
• Amendments to IAS 27, ‘Separate financial statements’ on the equity method (effective for accounting periods beginning on or
after 1 January 2016);
• Amendment to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative (effective for accounting periods beginning
on or after 1 January 2016);
Standards, interpretations and amendments to published standards that are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the
Company’s accounting periods beginning on or after 1 July 2017 or later periods but which the Company has not adopted early are
as follows:
• Annual improvements 2014–2016 (effective for accounting periods beginning on or after 1 January 2017);
• IAS Amendments to IAS 7, ‘Statement of cash flows’ on disclosure initiative (effective for accounting periods beginning on or after
1 January 2017);
• Amendments to IAS 12, ‘Income taxes’ on recognition of deferred tax assets for unrealised losses (effective for accounting
periods beginning on or after 1 January 2017);
The notes on pages 27 to 43 form an integral part of these financial statements.
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Notes to the Financial Statements (continued) for the year ended 30 June 2017GFINITY plc. | Annual Report & Financial Statements 2017
GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
2.
ACCOUNTING POLICIES (continued)
• Amendments to IFRS 2, ‘Share based payments’, on clarifying how to account for certain types of share-based payment
transactions (effective for accounting periods beginning on or after 1 January 2018);
• IFRS 9 ‘Financial instruments’ (effective for accounting periods beginning on or after 1 January 2018);
• IFRS 15 ‘Revenue from contracts with customers’ (effective for accounting periods beginning on or after 1 January 2018);
• Amendment to IFRS 15, ‘Revenue from contracts with customers’ (effective for accounting periods beginning on or after 1
January 2018);
• IFRS 16 ‘Leases’ (effective for accounting periods beginning on or after 1 January 2019);
• IFRIC 22, ‘Foreign currency transactions and advance consideration’ (effective for accounting periods beginning on or after 1
January 2018);
• IFRIC 23, ‘Uncertainty over income tax treatments’ (effective for accounting periods beginning on or after 1 January 2019)
Management continues to monitor the IASB’s on-going work on improvements to financial reporting but does not currently believe
that the amendments and interpretations listed above will have a material effect on the Company’s reported income or net assets.
Going concern
At the end of the period the Company had cash and cash equivalents amounting to £4,519,024. On 25th September 2017 the
Company announced its intention to raise a further £7.0 million (prior to deduction of expenses) via a placing of shares on AIM.
This placing was approved by shareholders on 11th October 2017, with shares being admitted to AIM and funds received by the
Company on 13th October 2017. The placing leaves the Company with a strong cash position from which to pursue its objectives.
The oversubscribed nature of recent placings and continued strong shareholder support gives the Directors confidence over future
as well as present cash reserves.
Accordingly, these accounts have been prepared on a going concern basis.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement
on a straight-line basis over the period of the lease.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of services in the normal course of the
Company’s activities. Revenue is shown net of value added tax.
The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic
benefits will flow to the entity, the stage of completion of the transaction at the balance sheet date can be measured reliably and the
costs incurred and the costs required to complete the services in respect of the revenue can be measured reliably. If the amounts
have been invoiced in advanced for services, these amounts are deferred until the service is delivered to the client at which point
the income is recognised. The Company 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 event 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 basis.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
2.
ACCOUNTING POLICIES (continued)
.
• Ticket sales: Revenue is recognised on the date the relevant event is delivered.
• Broadcaster revenues: Rights fees are received from linear broadcasters and online streaming platforms in return for rights to
access broadcast content. Revenue is recognised in line with the dates the content is created
• Website subscriptions: Revenue is invoiced in advance and deferred on a straight-line basis over the subscription period.
Segmental information
The company considers all operations to be part of a single operating segment and accordingly has elected not to disclose
segmental information.
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.
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.
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.
Investment in associates
Associates are all entities over which the Company has significant influence but not control or joint control. This is generally the
case where the Company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the
equity method of accounting, after initially being recognised at cost.
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
2.
ACCOUNTING POLICIES (continued)
Company’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Company’s share of movements
in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates
are recognised as a reduction in the carrying amount of the investment.
When the Company’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any
other unsecured long-term receivables, the Company does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the other entity.
The carrying amount of equity-accounted investments is tested for impairment.
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
Computer equipment
Production equipment
Leasehold improvements
– 3 years straight line
– 3 years straight line
– 3 years straight line
– 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 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. Historical cost includes
expenditure that is directly attributable to the acquisition or development of the items. Subsequent costs are included in the
carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the company and that the cost of the item can be measured reliably.
Amortisation is charged on a straight-line basis over the estimated useful economic life of the asset as follows:
Software development
– 3 years straight line
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.
.
The notes on pages 27 to 43 form an integral part of these financial statements.
30
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
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.
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
Company.
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.
Critical accounting judgments and estimates
Deferred tax:
The Company has not recognised a deferred tax asset in respect of their losses given that there is no track record of taxable profits
at this time. Deferred tax assets will be recognised when the Company has established a track record of expected future taxable
profit. Detail of the unrecognised asset as at the period end are provided in note 6(c).
Share based payments:
The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value at the date of grant. This fair value is measured by use of a Black-Scholes model.
The key assumptions used as inputs into this model are outlined in note 15 on Share Based Payments
The notes on pages 27 to 43 form an integral part of these financial statements.
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Notes to the Financial Statements (continued) for the year ended 30 June 2017GFINITY plc. | Annual Report & Financial Statements 2017
GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
3.
OPERATING EXPENSES
Operating loss is stated after charging:
Loss on disposal of property, plant and equipment
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Rentals under operating leases
Expensed development costs
Staff costs (see note 4)
Costs of inventories expensed
Auditors’ remuneration for auditing the accounts of the company
Auditors’ remuneration for other non-audit services:
– Other services supplied pursuant to such legislation
– Other services related to taxation
– All other services
Net foreign exchange (gains)/ losses
Year ended
30 June 2017
£
Year ended
30 June 2016
£
72,909
199,338
49,583
391,376
184,414
1,723,884
9,707
16,000
–
1,500
6,000
16,006
–
150,191
25,776
464,621
121,743
1,211,754
6,671
14,500
2,500
1,500
6,000
1,620
In addition to amounts stated above the Auditors also received remuneration of £nil (2016: £10,000) in respect of services provided
in connection with the Company’s placement of shares. In accordance with IAS 32 (paragraph 37) this amount has been written off
against the share premium account and hence does not form part of the operating expenses figures within these financial statements.
4. PARTICULARS OF EMPLOYEES
Number of employees
The average number of people (including directors) employed by the company during the financial period was:
The aggregate payroll costs of staff (including directors) were:
Wages and salaries
Social security costs
Equity settled transactions
Year ended
30 June 2017
£
Year ended
30 June 2016
£
31
26
Year ended
30 June 2017
£
Year ended
30 June 2016
£
1,469,465
155,660
98,759
1,108,594
110,149
(6,989)
1,723,884
1,211,754
Total remuneration for Directors during the year was £375,925 (2016: £370,571). Full detail on Directors earnings can be found
within the Directors’ Remuneration Report, on pages 15 to 17.
The Company do not believe that there are any key management personnel other than directors requiring disclosure.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
for the year ended 30 June 2017
5. FINANCE INCOME
Year ended
30 June 2017
£
Year ended
30 June 2016
£
Interest income on bank deposits
4,564
15,193
6.
TAXATION
(a) Major components of taxation expense for the period ended 30 June 2017 are:
Income statement
Current tax
Corporation tax charge / (credit)
Total current tax
Deferred tax
Relating to origination and reversal of temporary differences
Year ended
30 June 2017
£
Year ended
30 June 2016
£
(103,315)
(103,315)
(97,180)
(97,180)
–
–
Taxation (charge)/ (credit) reported in the income statement
(103,315)
(97,180)
(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 19.75% (2016: 20%),
to taxation expense at the Company’s effective tax rate for the period is as follows:
Year ended
30 June 2017
£
Year ended
30 June 2016
£
Loss on ordinary activities before taxation
(5,331,479)
(3,136,751)
At UK corporation tax rate of 20% (2015: 20%)
Expenses not deductible for tax purposes
Capital allowances for period in excess of depreciation
Adjustment in respect of previous periods
Unrelieved tax losses carried forward
(1,066,296)
29,928
(2,620)
(103,315)
1,038,988
(627,350)
6,135
(22,943)
(97,180)
644,158
Current tax charge/ (credit) for the period
(103,315)
(97,180)
(c) Unrecognised deferred tax asset
The Company has an unrecognised deferred tax asset arising from trading losses carried forward of £2,449,025 (2016: £1,597,529)
calculated at the substantively enacted Corporation tax rate at the balance sheet date of 19% (2016: 20%). 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.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
7. PROPERTY PLANT AND EQUIPMENT
Office
equipment
£
Computer &
production
equipment
£
Leasehold
Improvement
£
Cost
At 1 July 2015
Additions
Disposals
At 30 June 2016
Depreciation
At 1 July 2015
Charge for the period
Disposals
At 30 June 2016
Net book value
At 30 June 2016
Cost
At 1 July 2016
Additions
Disposals
At 30 June 2017
Depreciation
At 1 July 2016
Charge for the period
Disposals
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
4,479
0
0
4,479
4,318
161
0
4,479
4,479
3,468
0
7,947
4,479
123
0
4,603
Total
£
263,110
233,617
(13,567)
148,141
169,941
(13,567)
110,490
63,676
0
304,515
174,166
483,160
24,023
81,107
(4,512)
14,921
68,923
0
43,262
150,191
(4,512)
100,618
83,844
188,941
(0)
203,897
90,322
294,219
Office
equipment
£
Computer &
production
equipment
£
Leasehold
Improvement
£
Total
£
483,160
853,921
(199,270)
304,515
441,898
0
174,166
408,555
(199,270)
746,413
383,451
1,137,811
100,618
137,490
0
83,844
61,725
(126,361)
188,941
199,337
(126,361)
238,108
19,208
261,918
3,342
508,306
364,243
875,892
(0)
203,897
90,322
294,219
The notes on pages 27 to 43 form an integral part of these financial statements.
34
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
8.
INTANGIBLE FIXED ASSETS
Cost
At 1 July 2015
Additions
At 30 June 2016
Amortisation
At 1 July 2015
Charge for the period
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
Cost
At 1 July 2016
Additions
At 30 June 2017
Amortisation
At 1 July 2016
Charge for the period
At 30 June 2017
Net book value
At 30 June 2017
At 30 June 2016
Software
Development
£
0
148,750
148,750
0
25,776
25,776
Total
£
0
148,750
148,750
0
25,776
25,776
122,974
122,974
–
Software
Development
£
148,750
–
148,750
25,776
49,583
73,359
75,359
122,974
–
Total
£
148,750
–
148,750
25,776
49,583
73,359
75,391
122,974
Software development costs refer to direct costs incurred in development of the Gfinity TV Player media player.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
9.
INVESTMENTS
Associates
At 1 July
Investment in associate
At 30 June
30 June 2017
£
30 June 2016
£
_
50,000
50,000
–
–
–
The investment in associate relates to the acquisition of 33% of the eSports Industry Award Limited on its incorporation in February
2017
Subsidiary undertaking
Country of incorporation
Holding
Proportion of voting
rights and capital held
Nature of business
Esports Industry Awards Ltd
England
Ordinary shares
33%
Dormant
Capital and Reserves
Results for the year
31 March 2017
£
31 March 2016
£
31 March 2017
£
31 March 2016
£
Esports Industry Awards Ltd
50,000
–
–
–
10. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments and accrued income
Included in other receivables is £nil (2016: £33,800) which is due in more than one year.
11. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term deposits
30 June 2017
£
30 June 2016
£
607,774
422,266
630,437
1,660,477
272,123
87,536
79,611
439,270
30 June 2017
£
30 June 2016
£
428,998
4,090,026
4,519,024
80,403
750,000
830,403
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.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
12. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accrued expenditure and deferred revenue
30 June 2017
£
30 June 2016
£
1,189,995
102,132
453,527
1,745,654
149,679
38,628
664,833
853,140
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.
13.
ISSUED CAPITAL
The Company has a single class of ordinary share with nominal value of £0.001 each. Movements in the issued share capital of the
Company can be summarised as follows:
Issued and fully paid
As at 1 July 2015
Issued on 2nd November 2015 at £0.19 per share
Issued on 23rd November 2015 at £0.19 per share
As at 30 June 2016
Issued on 21st July 2016 at £0.05 per share
Issued on 16th May 2017 at £0.20 per share
Number
77,845,150
5,263,157
305,263
83,413,570
74,000,000
31,250,000
£
77,845
5,263
305
83,414
74,000
31,250
As at 30 June 2017
188,663,570
188,664
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
14. 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.
.
Year to
30 June 2017
£
Year to
30 June 2016
£
Loss attributable to shareholders
(5,228,164)
(3,039,571)
Weighted average number of ordinary shares
Loss per ordinary share
Number
000’s
157,211
£
(0.03)
Number
000’s
81,504
£
(0.04)
On 4 December 2014, the Company’s shareholders passed a special resolution to subdivide each ordinary share of £1 into 1,000
ordinary shares of £0.001 each. Prior period comparative figures have been adjusted to reflect this subdivision.
15. SHARE BASED PAYMENTS
Equity-settled share option plans
Options
The table below summarises the exercise terms of the various options over Ordinary shares of £0.001 each which had been granted,
and were still outstanding, as at 30 June 2017. 17,945,670 new options were granted in the year. No options were exercised during
the year and no options lapsed due to members of staff leaving. The total number of outstanding options in issue at 30 June 2017
is 22,766,711 (2016: 4,821,041).
Shares Options as at 30 June 2016
Shares Options Granted
Share Options Lapsed
Share Options as at 30 June 2017
Number
4,821,041
17,945,670
–
22,766,711
Weighted average
exercise price (£)
0.1345
0.1450
–
0.1428
Options vest over periods defined in the respective option agreements and at the discretion of the board of directors. No options
have vested during the year.
Of the options outstanding 10,984,241 (2016: 2,413,571) 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 options issued for compliance with IFRS 2
“Share Based Payments” are included below, where applicable.
.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
15. SHARE BASED PAYMENTS (continued)
.
Weighted average exercise price
Average expected life
Expected volatility
Risk free rate
Expected dividend yield
Year ended
30 June 2017
Year ended
30 June 2016
£0.1428
1.9 years
29.68%
1.22%
0%
£0.1345
2.0 years
17.95%
0.87%
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 options outstanding at 30 June 2017 was £0.1428 (2016:£0.1345). The weighted average fair value of options issued during the period
was £0.0300 (2016: £0.0295).
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 the company’s admission to AIM
in December 2014.
16. 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 15.
17. COMMITMENTS UNDER NON-CANCELLABLE OPERATING LEASES
The company has the following total commitments under non-cancellable operating leases expiring as follows:
Less than one year
1-2 years
2-5 years
Total
Land and buildings
30 June 2017
£
30 June 2016
£
279,150
–
–
279,150
134,333
–
–
134,333
The notes on pages 27 to 43 form an integral part of these financial statements.
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Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
18. NOTES TO THE CASH FLOW STATEMENT
Cash flows from operating activities
Loss before taxation
Adjustments for:
Depreciation of property, plant and equipment
Disposal of fixed assets
Amortisation of intangible fixed assets
Interest Received
Share based payments
Changes in working capital:
Decrease/(Increase) in Inventories
(Increase)/ decrease in trade and other receivables
Increase in trade and other payables*
Corporation tax (paid)/ received
Cash used by operating activities
Interest paid
30 June 2017
£
30 June 2016
£
(5,331,479)
(3,136,751)
199,338
72,910
49,583
(4,564)
98,759
9,707
(1,221,207)
588,285
103,315
(5,435,353)
–
150,191
9,055
25,776
(15,193)
(6,989)
(6,489)
131,080
250,890
97,180
(2,501,250)
–
Net cash used by operating activities
(5,435,353)
(2,501,250)
*Note: The movement in trade and other payables excludes £254,229 of capital creditors
19. 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 Company does not hold security against trade and other receivables, its credit risk exposure is as follows:
30 June 2016
£
30 June 2016
£
635,824
310,030
The trade receivables balance represents amounts due from third parties. At the balance sheet date, the Company’s trade
receivables totalled £702,432 less a provision of £94,658 (2016: £272,123).
There are no significant overdue but not impaired trade receivables at the balance sheet date.
At the balance sheet date amounts of £603,696 were due from a single customer which represents a concentration of credit risk.
All amounts have been recovered since the balance sheet date.
.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
for the year ended 30 June 2017
19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
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. It is therefore subject to currency exposures on
transactions.
Financial instruments held by the Company and their carrying values were as follows:
Trade and other receivables
Cash
Trade and other payables
As at 30 June
2017
USD
$
EUR
€
1,151
87,937
(38,004)
1,316
0
(106,314)
As at 30 June
2016
USD
$
20,000
20,833
(6,515)
EUR
€
9,000
–
(3,300)
Net Current Assets/ Liabilities
51,084
(104,998)
(34,318)
5,700
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.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Financial Statements
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
20. EVENTS OCCURRING AFTER THE REPORTING PERIOD
Acquisition of CEVO Inc
On 24 July 2017 Gfinity PLC acquired 100% of the issued shares of CEVO Inc (CEVO), a provider of technology and services to the
global esports market for consideration of up to £2,158,499. CEVO’s reputation as a provider of its own esports competitions and
leading-edge technology further strengthens the Company’s position as a leader in the esports sector while creating a platform for
further expansion into the US market.
Purchase Consideration
Initial Consideration
Cash in GBP ($977,200 converted at $1.30 to £1)
Shares (3,614,049 shares at £0.21)
Total Initial Consideration
Deferred Consideration
Cash in GBP ($418,800 converted at $1.30 to £1)
Shares (1,548,877 at £0.21)
Total Deferred Consideration
Maximum Consideration Payable
£
751,999
758,950
1,510,949
322,285
325,264
647,549
2,158,498
The provisionally determined fair values of the assets and liabilities of CEVO, Inc as at the date of acquisition are as follows:
Cash and cash equivalents
Receivables
Payables
Borrowings
Add: goodwill and other intangibles
$USD
GBP
31,596
94,047
(35,257)
(45,000)
2,760,662
24,305
72,344
(27,121)
(34,615)
2,123,586
Net assets acquired
2,806,048
2,158,499
The goodwill that arises from the business combination reflects the profitability of CEVO and the enhanced growth prospects for
both businesses. None of the goodwill is expected to be deductible for tax purposes.
Contingent consideration
Contingent consideration is payable based on CEVO’s revenue exceeding $800,000 in the financial year ending 31 December 2017.
The amount payable is flexed based on amounts between $800,000 and $1,000,000 with contingent consideration payable in full
if revenue exceeds $1,000,000. The fair value of the contingent consideration is currently estimated to be £647,549 based on the
assumption that CEVO will achieve its revenue targets.
Acquisition related costs
Acquisition related costs of £43,802 will be included in administrative costs in the income statement for the year ending June 2018.
The notes on pages 27 to 43 form an integral part of these financial statements.
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GFINITY plc. | Annual Report & Financial Statements 2017
Notes to the Financial Statements (continued)
Notes to the Financial Statements (continued)
for the year ended 30 June 2017
for the year ended 30 June 2017
20. EVENTS OCCURRING AFTER THE REPORTING PERIOD (continued)
Information not disclosed as not yet available
At the time of the financial statements were authorised for issue, the group had not yet completed the
accounting for the acquisition of CEVO. In particular, the fair values of the assets and liabilities disclosed above have only been
determined provisionally as the independent valuations have not been finalised. It is also not yet possible to provide detailed
information about each class of acquired receivables and any contingent liabilities of the acquired entity. Full analysis of the
categorisation between goodwill and other separately identifiable assets is also still to be undertaken and as a consequence, any
deferred tax on such assets is yet to be calculated.
Other Events
In addition to the acquisition of CEVO the Company entered into an arrangement with HT&E, an Australian media company, to
launch the Challenger and Elite Series in Australia. This has been launched via a special purpose vehicle with Gfinity owning 30%
of the share capital.
The notes on pages 27 to 43 form an integral part of these financial statements.
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35 New Bridge Street
London
EC4V 6BW
GFINITY plc
Annual Report & Financial Statements
30 June 2017
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