35 New Bridge Street L O N D O N E C 4 V 6 B W G F I N I T Y P L C . C O M Annual Report & Financial Statements 3 0 J U N E 2 0 1 8 G F I N I T Y P L C Gfinity - FinancialReport_muk.indd 2-4 22/11/2018 13:55 Gfinity - FinancialReport_muk.indd 5-7 22/11/2018 13:55 TABLE OF CONTENTS GOVERNANCE Directors, Secretary and Advisers Period Highlights Gfi nity At A Glance Executive Chairman’s Report Chief Financial Offi cer’s Report Principal Risks and Uncertainties Chairman’s Statement on Corporate Governance Directors’ Remuneration Report Directors’ Report Statement of Directors’ Responsibilities FINANCIAL STATEMENTS Independent Auditor’s Report Group Statement of Comprehensive Income Group Statement of Financial Position Company Statement of Financial Position Group Statement of Changes in Equity Company Statement of Changes in Equity Group Statement of Cash Flows Company Statement of Cash Flows Notes to the Financial Statements 4 5 6 7 9 10 12 16 19 20 22 27 29 30 31 32 33 34 35 GFINITY_2018_Front Section_5.indd 3 3 30/11/2018 14:47 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Directors, Secretary and Advisers The Board of Directors Garry Cook (Executive Chairman) Independent Auditors Rees Pollock Chartered Accountants 35 New Bridge Street London EC4V 6BW Legal Advisers Corporate Fladgates 16 Great Queen Street London WC2B 5DG Commercial Onside Law 642A Kings Road Fulham London SW6 2DU Registrars Link Market Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Financial Public Relations Walbrook PR Ltd 4 Lombard Street London EC3V 9HD Registered Number 08232509 Graham Wallace (Global Chief Operating Offi cer) Neville Upton (Founder) Jonathan Hall (Chief Financial Offi cer) Preeti Mardia (Non-Executive Director) Andy MacLeod (Non-Executive Director) John Clarke (Non-Executive Director) Company Secretary Jonathan Hall Registered Offi ce 35 New Bridge Street London EC4V 6BW Nominated Adviser and Broker Allenby Capital Ltd 5 St Helen’s Place, London EC3A 6AB Joint Broker Shore Capital Bond Street House 14 Clifford Street London W1S 4JU 4 GFINITY_2018_Front Section_5.indd 4 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 Period Highlights Business Highlights: ■ Partnered with Formula 1 and Codemasters to launch inaugural Formula 1 Esports Series ■ Continued to deliver esports solutions for some of the world’s largest games publishers, including EA SPORTS, Microsoft and Activision Blizzard ■ Staged the inaugural Gfi nity Elite Series in July 2017, with seasons 2 and 3 also falling during period ● 10 leading esports franchises signed up to participate ● First major content rights partnership with Facebook ● Live viewership for season 3 of 12.5 million people, with a further 4.9 million viewing ancillary content ● First blue chip commercial partner; Unilever ● License of format, brand and underlying technology to Australia in conjunction with HT&E, with season 1 broadcast in conjunction with Twitch and Channel 10, attracting 4.8 million live viewers ■ Planned investment in people, platform and product, to strengthen market leading position, providing platform for growth: ● New and experienced leadership team, including Executive Chairman Garry Cook, plus addition of Andy MacLeod and Preeti Mardia to board ● Completed two strategic acquisitions, signifi cantly building development and digital community building capability: ◆ CEVO, Inc (“CEVO”) (July 2017) ◆ Real SM Ltd (“Real Sport”) (March 2018) Financial Highlights: ■ Increase in revenue of 82% to £4.3m (2017: £2.4m), driven by growth in both Gfi nity’s managed services business and its owned and operated properties ■ Adjusted EBITDA loss increased to £12.5m, refl ecting planned investment in people, product and technology platform ■ Cash and cash equivalents at period end of £3.7m (2017: £4.5m) Post-Period Highlight: ■ Further strengthened leadership group, with appointments to the board of Graham Wallace (Global Chief Operating Offi cer) and John Clarke (Independent Non-Executive Director) ■ Announced multi-year deal with Domino’s Pizza as Presenting Partner of the Gfi nity Elite Series ■ Commenced season 2 of Formula 1 Esports Series ■ Staged Halo Championship Series and fi nals of fl agship Forza Racing Championship live from Gfi nity Arena in London ■ Announced successful completion of fundraise to raise £6.0m of new funds in October 2018 GFINITY_2018_Front Section_5.indd 5 5 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Gfi nity At A Glance ABOUT GFINITY: Gfi nity is a world-leading esports solutions provider. Its business to business platform, “Powered by Gfi nity”, delivers managed services to game publishers, sports rights holders, commercial partners and media companies. Gfi nity also connects directly with competitive gaming consumers through its owned competition platform, the “Gfi nity Elite Series”. The Series enables competitive gamers to be part of the Gfi nity community, testing themselves and developing new skills, while providing a pathway for those who aspire to a career in esports to join a leading professional team. All Gfi nity managed service solutions and owned competitions are underpinned by its proprietary technology platform. More information about Gfi nity is available at www.gfi nityplc.com. ABOUT ESPORTS: Esports or esports (electronic sports) is watching or playing competitive video games. Leading titles include League of Legends, Counter-Strike: Global Offensive, Defence of the Ancients 2 (DotA 2), Call of Duty and Rocket League. More recently sports rights holders have aggressively moved into the sector including F1, NBA and the Premier League who have created organised competitive gaming competitions. 6 GFINITY_2018_Front Section_5.indd 6 30/11/2018 13:03 GFINITY plc. | Annual Report & Financial Statements 2018 Executive Chairman’s Report Garry Cook Executive Chairman I was delighted to be appointed Executive Chairman in May this year, after serving as a non-executive director since November 2017. It has been an exciting year for the company as we have further strengthened the foundations of our business by continuing to invest in our strategic priorities to generate future revenue growth. I take it both as a signifi cant responsibility but also as an endorsement of our professionalism that we are trusted by the world’s leading publishers and rights holders to build their esports solutions and create compelling content for fans. Over the past 12 months we have connected publishers such as EA and Microsoft, rights holders such as Formula 1 and global brands and media partners with the young, engaged and fast growing esports community. We operate in one of the world’s most dynamic industry sectors. There are now more than 2 billion people gaming, the majority under the age of 35. This form of entertainment and participation is at the centre of young people’s lives. The number of esports enthusiasts; those who compete, watch, follow, consume content is currently 380 million, growing close to 15% per annum. This creates opportunity. Gfi nity has a track record for excellence in the market and this is generating additional opportunities with existing partners and signifi cant new relationships. MANAGED SERVICES SOLUTIONS: POWERED BY GFINITY We saw continued growth in our esports solution business. Gfi nity’s strong execution track record and proprietary tournament and broadcast platform remains a key differentiator in the market and key reason why we are the partner of choice for the biggest names in gaming and sports. During the year we deepened our relationship with Microsoft. We delivered two major Halo events and were appointed Tournament Operator for the Global Forza programme, with the fi nals broadcast live from the Gfi nity Arena in London. We also continued to build our partnership with EA, launching Battlefi eld V live from the Gfi nity Arena. A further highlight for the year was our partnership with one of the world’s most iconic brands, Formula 1. We launched the F1 Esports Series which included two live events - the semi-fi nals at the Gfi nity Arena and then the fi nals in Abu Dhabi in November. More than 60,000 fans entered the competition and the races were viewed in 123 countries. Based on this success we have been appointed to deliver and grow the F1 Esports Series in 2018. OWNED CONTENT: GFINITY ELITE SERIES During 2017 we delivered three Gfi nity Elite Series competitions. The Gfi nity Elite Series is a proprietary tournament format featuring 10 of the world’s leading esports team franchises playing three different games, including EA SPORTS FIFA 18, Psyonix Rocket League and Capcom and Dimps Street Fighter. Broadcast partners for Elite Series 1 and 2 included BBC3 and BT Sport. In March we signed an exclusive digital broadcast agreement with Facebook, granting it global online streaming rights for the Gfi nity Elite Series until the end of 2018, starting with Series 3. We announced at the start of the 2018/2019 fi nancial year that we had signed a multi-season agreement with Domino’s Pizza to become Presenting Partner of the Gfi nity Challenger and Elite Series UK. The strength of the Elite Series is that it has built a connection with millions of consumers and that it is adaptable to any publisher, rights holder or branded solution. We have fl exibility to mould the product into any format we believe delivers the greatest value to our Tribe, our partners and our business model. STRATEGIC ACQUISITIONS In July 2017 Gfi nity acquired CEVO, a US based specialist esports platform architecture developer. The CEVO team has an innate understanding of the technology needs for successful esports competitions, making them a respected leader in this specialised, fast growing fi eld. The CEVO team has been fully integrated into Gfi nity. In March 2018 Gfi nity acquired London based Real SM Ltd (Real Sport). Founded in January 2016, Real Sport’s platform features original content, including news documentaries, podcasts, analysis and opinions. The young and dynamic Real Sport team are experts in on-line community, based on creating searchable digital esports content and delivering a superior consumer experience. The platform attracts more than a million visitors per month. Real Sport is now fully integrated into Gfi nity. INTERNATIONAL EXPANSION In August 2017 Gfi nity announced the launch of the Gfi nity Elite Series in Australia. The Gfi nity Elite Series Australia was created through a newly formed joint venture, Gfi nity Esports Australia, in conjunction with HT&E Events Limited, itself a joint venture between HT&E Limited (’Here, There & Everywhere’) a leading, ASX-listed, media and entertainment business, and IKON Media & Entertainment. Gfi nity Elite Series Australia 1 took place in June and July 2018. CORPORATE SOCIAL RESPONSIBILITY Gaming has a positive role to play in our society, from connecting young people with like-minded gamers across the GFINITY_2018_Front Section_5.indd 7 7 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Executive Chairman’s Report (continued) globe; to building self-esteem through the mastery of new skills. There are also negative connotations associated with gaming. Gfi nity is committed to understanding these concerns and to use its platform and voice to help fi nd answers. I fi rmly believe there is a space within the education system to utilise gaming skills to teach young people through a medium they understand and have passion for. This is very much the future. OUTLOOK Gfi nity is a trusted brand in one of the most exhilarating and fast-growing industry segments. Gaming is at the heart of young people’s lives. By continuing in 2018 to focus on our strategic priorities – delivering innovative tournament series; creating and hosting partner events; building our digital community, our Tribe; and playing a positive role in society through our corporate responsibility initiatives – we have a pathway to signifi cant revenue growth. I am excited to be part of this industry and proud to lead the Gfi nity team. It is a team of dedicated and passionate professionals. I would like to take this opportunity to thank them for all that they do and to thank all our business partners for their continued trust and support. Garry Cook Executive Chairman 26 November 2018 8 GFINITY_2018_Front Section_5.indd 8 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 Chief Financial Offi cer’s Report Jonathan Hall Chief Financial Offi cer completed. Increasing value of esports content through a growing audience and stable opex is expected to drive material operational scalability. As such, the Company targets a long-term group gross margin of 30-40% and an Adjusted EBITDA margin in the range of 15-25% on a normalised basis. Jonathan Hall Chief Financial Offi cer 26 November 2018 SUMMARY The results for the year to 30 June 2018 refl ect a period of strong revenue growth for the company, coupled with planned investment in people, product and technology platform to further strengthen Gfi nity’s position as a market leader in the fast-growing esports sector. A position that is refl ected in our growing blue-chip client base. PERIOD REVIEW: Revenue across the Gfi nity group of £4.3m (2017: £2.4m) represents a year on year increase of 82%. On a like for like basis, excluding the impact of acquisitions, year on year revenue growth was 53.5%. The revenue growth came from both managed services and Gfi nity’s owned and operated properties and included the addition of two major new clients, Formula 1 and Facebook, alongside our existing strong client relations. The results are heavily impacted by our investment in the launch of the Gfi nity Elite Series in UK, the fi rst three seasons of which all took place in the year to 30 June 2018. As a result of this investment, in March 2018 we were delighted to welcome Facebook as a content partner from season 3 onwards, with only one season’s worth of income from this partnership falling into the period. Following the year end we were also very pleased to announce that Domino’s Pizza would be joining the Gfi nity Elite Series as Presenting Partner from Season 4 onwards. None of the income from this partnership therefore forms part of these results. Overall, the net investment in the launch of Gfi nity Elite Series in the period amounted to £4.7m, with a positive contribution of £1.3m from other activities. Administrative expenses include £1.3m of non-cash items; depreciation £0.4m (2017: £0.2m), amortisation £0.4m (2017: £0.0m) and share option charge £0.4m (2017: £0.1m). Excluding these items, Administrative Expenses amount to £8.7m (2017: £4.6m). This year on year increase has been driven by an increase in staff costs, both through targeted recruitment of high calibre individuals and through the acquisitions of CEVO and Real Sport (CEVO’s post-acquisition admin expenses in the year were £0.7m and Real Sport’s £0.1m). On the same basis, excluding the non- cash items, the adjusted EBITDA loss for the full year was £12.5m, representing an improvement of £2.0m in the second half of the year, with £7.4m loss for the fi rst half of the year reducing to £5.0m for the second half of the year. Year-end cash of £3.7m (2017: £4.5m) was supplemented by an oversubscribed fundraise completed in November 2018, comprising of both new and existing holders, leaving the business well capitalised as we move into 2019. FINANCIAL OUTLOOK The Company targets Adjusted EBITDA break-even operating results within the next few years. Revenue is expected to be driven by signifi cant increased activity in managed services, both service fees and content revenue from esports solutions for sports rights holders and commercial brands in collaboration with publishers and distribution partners. The Company also expects signifi cant contribution from its owned and operated properties, hereunder the Gfi nity Elite Series and its digital “Tribe” community under development. Annual administrative expenditure, adjusted for non-cash items, is expected to reach and remain relatively stable around £10-12 million in the medium term, as the majority of investment in the esports solutions platform, commercial delivery and content production is GFINITY_2018_Front Section_5.indd 9 9 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 STRATEGIC REPORT Principal Risks and Uncertainties: INTRODUCTION: The long-term success of Gfi nity in delivering on its strategy will depend in a large part on its ability to manage the key risks affecting the business. Gfi nity is a pioneering company in a new and rapidly growing sector, with multiple stakeholders. In that context, the risks facing Gfi nity can change quickly and the board recognises the importance of identifying key risks and ensuring that the right mitigation strategies are in place for managing these. Ultimate responsibility for managing risk lies with the board. Executive responsibility for retaining the register of risks and reporting on these to the board lies with the Chief Financial Offi cer and Company Secretary. Responsibility for the management of risks lies with different members of the Executive leadership team depending on the nature of the risk. Gfi nity distinguishes between strategic risks and operating risks. Strategic risks represent macro level matters, which may impact on the strategy of the company. Operating risks refl ect the ongoing challenges that the business may face in delivering on that strategy. On a day to day basis, responsibility for managing strategic risks lies with the Executive Chairman. Mitigation strategies and the emergence of new strategic risks are considered through the weekly strategic leadership team meetings, which he chairs. Operational risks are the responsibility of the Global Chief Operating Offi cer and are considered at the weekly Operational Leadership team meeting, including the Chief Financial Offi cer and heads of respective operational and commercial departments. In assessing its attitude to risk, directors aim to strike a balance between ensuring comprehensive processes and monitoring framework in place, as would be expected of a publicly listed company, while retaining the dynamism and innovation required to grow quickly within a rapidly developing and changing sector. The directors believe the principal risks currently affecting the business are as outlined below: Description Mitigating Actions Esports involve the use of intellectual property, typically owned by the publishers of the respective game titles. Gfi nity must consider the risk of changes in strategy of the intellectual property owners, resulting in certain games not being available for use by Gfi nity in its esports properties, or fees being required for the use of intellectual property, which may present a challenge to Gfi nity’s business model. Some people view video gaming in a negative fashion, promoting an unhealthy lifestyle and lack of social interaction. There is a risk that this perception will provide a barrier to entry to commercial partners and broadcasters, presenting a risk to Gfi nity’s business model. Gfi nity brand and technology platform has been developed across multiple titles, ensuring there is no dependence on any single title. Gfi nity maintains strong relationships with multiple game publishers and has demonstrated the value it can bring to them in building communities and driving engagement around their games, which in turn drives revenues for the publishers through sales of the games themselves and in-game content. As a result, a number of the major game publishers have become key clients of Gfi nity. Gfi nity seeks to educate partners and the wider industry on the positive impact of gaming. Esports provides a social platform for people to play and interact, in a highly accessible way. Even at a top level, where teams and players are practicing for multiple hours per day, this will frequently be supplemented by fi tness and nutrition programmes to keep players healthy. STRATEGIC RISKS Risks: Intellectual property risk Perception of video gaming 10 GFINITY_2018_Front Section_5.indd 10 30/11/2018 08:03 Risks: Competition risk Speed of revenue growth STRATEGIC RISKS Risks: Liquidity risk Access to key skills Data security risk GFINITY plc. | Annual Report & Financial Statements 2018 Description Mitigating Actions There are currently very few companies globally that can deliver full end to end esports solutions and Gfi nity has established a fi rst mover advantage. As the market develops, however, there is a risk of new entrants coming into the market, or game publishers looking to bring the capability in house. Gfi nity’s unique capability comes from a combination of its proprietary platform, the cumulative knowledge and breadth of relationships of its experienced team and the investment in its esports studio. Gfi nity continues to invest in these capabilities to retain a lead in the market place and to position itself such that any major new entrant to the esports market, or any major publisher looking to expand their esports offering, would be able to move more quickly by acquiring Gfi nity than by trying to replicate these capabilities in house. Gfi nity operates in a pioneering sector. Directors believe, supported by market research, that the value of that sector is signifi cantly below the level it should reach, given the size and level of engagement of the audience and the attractiveness of that demographic to broadcasters and commercial partners. Nonetheless, that growth may not be linear and that may present a risk to the speed of revenue growth. The directors of Gfi nity fi rmly believe that establishing a market leading position in the fast-growing esports sector to be the best route to delivering signifi cant long term value to shareholders. Nonetheless, in setting budgets and fi nancial commitments, the board considers the short to medium term pipeline of work available and also continues to liaise with key shareholders on an ongoing basis to ensure the availability of further funding if required. Description Mitigating Actions Gfi nity is currently a loss-making company and as such, must ensure that it has suffi cient capital available to deliver on its strategy. Esports is a new sector and as such, the number of people with deep experience in developing and delivering esports solutions is limited. Without access to this expertise, Gfi nity would not be able to provide the depth of solutions to its client base, or build its own Gfi nity “tribe”. Gfi nity has built a large community of esports fans playing, watching and socialising through its own platform and those of CEVO and Real Sport. Increasing levels of data protection regulation, including the recently introduced GDPR legislation make it imperative that any data gathered through these platforms is collected, handled and protected in accordance with all relevant regulations. Any failure to do so would signifi cantly erode trust, both among the esports community and prospective commercial partners. Gfi nity maintains strong core group of investors but has also sought over recent fundraises to broaden this shareholder base, expanding its investment roadshows to new geographies and investigating opportunities with strategic investors as well as fi nancial institutions and private individuals. Gfi nity places high importance on succession planning within the business, ensuring that skills are not vested in a single individual. This is built through development of existing staff, recruitment of certain key personnel and where appropriate through targeted acquisitions. Senior individuals are also incentivised through an employee option scheme, driving loyalty to the business. Gfi nity has undertaken an in-depth review of its data policies and procedures, in conjunction with lawyers and data protection experts in response to recent data protection legislation. All user data held is in a secure and encrypted manner and is only used in compliance with all relevant legislation. This report was approved by the board and signed on its behalf. Garry Cook Executive Chairman, 26 November 2018 GFINITY_2018_Front Section_5.indd 11 11 30/11/2018 13:01 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Corporate Governance Report: CHAIR’S STATEMENT ON CORPORATE GOVERNANCE: “The Directors recognise the fundamental importance of good corporate governance in providing an effi cient, effective and dynamic management framework to ensure that the company is managed in the right way for the benefi t of all shareholders over the medium to long-term. In view of this, the board of Gfi nity plc has chosen to apply the QCA Corporate Governance Code (the ‘QCA Code’) published by Quoted Companies Alliance. The QCA Code is a pragmatic and practical tool, which adopts a principles-based approach to corporate governance, which the directors of Gfi nity believe is correct for Gfi nity in its current stage of growth. This section of the report, provides further details on how Gfi nity complies with these principles of good corporate governance. Further information can also be found on our investor website www.gfi nityplc.com.” Garry Cook, Executive Chairman BOARD OF DIRECTORS: BOARD OF DIRECTORS: The Gfi nity plc board is responsible for: – Setting the strategy across all Gfi nity group companies – Defi ning business model and the fi nancial framework within the business must operate – Setting and ensuring the implementation of the culture to deliver success – Designing and implementation of controls and risk management framework – Ensure communication with key stakeholders, including; staff, shareholders, suppliers and customers – Appointing a senior Executive Team, capable of delivering on defi ned strategy – Monitoring performance against the above areas and taking remedial actions as appropriate – Ensuring availability of capital to deliver on chosen strategy The board retains overall responsibility for ensuring strong corporate governance and is supported by the Audit, Nominations and Remuneration Committees. This section provides further detail on the composition and conduct of business of the board and its respective committees together with information on how they discharge their responsibilities. GARRY COOK, EXECUTIVE CHAIRMAN Appointed: 23 November 2017 A leading sports executive, Garry has worked in a number of high-profi le roles as CEO for Manchester City Football Club, President of Nike’s “Brand Jordan” and most recently as Head of Global Brand and International Market Development for the mixed martial arts organisation the Ultimate Fighting Championship (‘UFC’). In July 2016 it was announced that UFC had been sold to a consortium led by WME-IMG for a reported $4 billion. Garry joined the board in November 2017 and became the executive chairman in May 2018. GRAHAM WALLACE, GLOBAL CHIEF OPERATING OFFICER Appointed: 12 July 2018 Graham, a Chartered Accountant, has held senior executive positions with leading sports and entertainment companies including Viacom Inc, MTV Networks Europe and IMG Media. He was Chief Financial Offi cer and latterly Chief Operating Offi cer at Manchester City FC where he led the business transformation programme between 2009 and 2013. He joined Rangers FC as Chief Executive where he helped to lead the rebuilding of the club following its exit from administration. Recently Graham has worked with several leading investment groups advising on strategic, operational and fi nancial matters in a range of sports and media properties. Graham joined the board in July 2018. NEVILLE UPTON, FOUNDER Appointed: 15 January 2014 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. 12 GFINITY_2018_Front Section_5.indd 12 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 JONATHAN HALL, CHIEF FINANCIAL OFFICER Appointed: 1 September 2014 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. PREETI MARDIA, INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed: 23 November 2017 Preeti Mardia has diverse end-to-end operational management and commercial expertise across Electronics, Telecoms, Aerospace and FMCG sectors. Preeti Mardia is a Board Director with ThinFilm Electronics ASA, a global leader in printed electronics technology, and a non-executive director of Maistro plc. Prior to the position of Senior Vice President Operations held at IDEX ASA, she was Vice President Operations for Axxcss Wireless UK and Operations Director at Filtronic Plc. She has FMCG experience in operations with Cadbury Schweppes Plc. Preeti Mardia has a Masters degree in Management from Ashridge. Preeti joined the board in November 2017. ANDY MACLEOD, INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed: 23 November 2017 Andy has extensive communications industry experience from a variety of senior roles with major carriers and technology vendors. For the last ten years he has been at Vodafone Group, fi rstly as Group Chief Networks Offi cer responsible for the operation of Vodafone’s networks world-wide, then Chief Technology Offi cer for Verizon Wireless in the USA and latterly the Regional CTO for the thirteen Vodafone Operating Companies outside Europe. Andy has served on the boards of Verizon Wireless Inc, Vodafone Italy Spa and Indus Towers Ltd and is Deputy Chair of Idex asa. He holds a degree in Materials Science from Oxford University, an MBA and is a Fellow of the Royal Academy of Engineering. Andy joined the board in November 2017. JOHN CLARKE, INDEPENDENT NON-EXECUTIVE DIRECTOR Appointed: 18 September 2018 John Clarke is a business professional with more than 25 years of international experience gained working in and with leading global companies. John has worked for HEINEKEN N.V. where he held the position of Head of Global Communications and, most recently, as a senior commercial director within Lagunitas Brewing Company, a 100% owned subsidiary of HEINEKEN N.V. Previously he held senior leadership, corporate affairs and marketing positions within The American Express Company and Burson-Marsteller Public Relations. John joined the board in September 2018. BOARD COMPOSITION AND PERFORMANCE: The composition of the Gfi nity board is structured to contain the range of skills and personal qualities as required to effectively discharge its duties. The board recognises that as Gfi nity develops with a rapidly growing sector the precise composition required shall change from time to time.Responsibility for reviewing the composition of the board and making recommendations for appointment and removal of directors rests with Nominations Committee, further details in respect of this are provided below. Any such recommendations are subject to formal approval of the full board. The board recognises the importance of diversity of skills and approach in effectively conducting its duties and as such, has sought to appoint high calibre individuals from a wide- range of backgrounds and sectors. Role of Chair: The primary responsibility of the Chair is to lead the board effectively and to oversee the adoption, delivery and communication of the company’s corporate governance model. As an Executive Chairman, Garry Cook, also retains responsibility for the development and delivery of the Company’s strategy, supported by the other Executive Directors. The Chair ensures that the board considers the key issues affecting the Group, both operationally and fi nancially and together with the Company Secretary ensures the correct information fl ows between the board, its respect committees and between the Independent Directors and senior management. GFINITY_2018_Front Section_5.indd 13 13 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Corporate Governance Report (continued) Role of Company Secretary: The company secretary acts as a trusted adviser to the chair and the board and plays a vital role in relation to both legal and regulatory compliance. The company secretary supports the work of the respective board committees and also acts as a confi dential sounding board to the chairs of those committees. Board Conduct of Business: Full board meetings were previously monthly, but are now held on a quarterly basis, with a minimum of 4 meetings per annum to conduct the regular business of the board. Further full board meetings shall be held as required to provide approval on specifi c matters. In months in which there is no full formal board meeting, a board call still takes place, in order to keep all directors informed on the progress of the business. The quorum for a board meeting to be considered valid is 2. ATTENDANCE RECORD: Director Tony Collyer Neville Upton Garry Cook Jonathan Hall Paul Kent Philip Shuldham-Legh David Yarnton Jonathan Varney Preeti Mardia Andy MacLeod Number of Meetings Attended Total Meetings in Period in Offi ce 11 13 8 13 1 3 3 3 9 6 11 13 9 13 4 4 4 4 9 8 Board Review and Performance The board monitors its performance and composition on an ongoing basis and recognises that as the company grows in a rapidly developing sector, the mix of skills required to best discharge its duties may change from time to time. It was in that context, that during the year, the Board appointed three new directors; each a leader in their respective sector and subsequently invited Garry Cook to assume the role of Executive Chair. It was also in that context that following the year end the board was strengthened further, with the appointment of Graham Wallace and John Clarke. Following the restructuring of the board, a new formalised process has been introduced, for the assessment of board performance, on an annual basis. This process will be reviewed and led by the Chair of the Nominations Committee, supported by Company Secretary and will assess the board’s performance against its stated terms of reference, both in terms of the process by which business is conducted and the results achieved. Audit Committee: The role of the Audit Committee is to provide confi dence to shareholders on the integrity of the fi nancial results of the company expressed in this annual report and accounts and other relevant public announcements of the company. The Audit Committee also has a key role in the oversight of the effectiveness of the risk management and internal control systems of the company and to make recommendations to the board for improvements in this regard. The Audit Committee comprises: Preeti Mardia (Chair) Andy MacLeod Graham Wallace The Chief Financial Offi cer is invited to attend Audit Committee meetings but does not formally form part of the Committee. 14 GFINITY_2018_Front Section_5.indd 14 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 Director Tony Collyer David Yarnton Jonathan Varney Preeti Mardia Andy MacLeod Number of Meetings Attended Total Meetings in Period in Offi ce 3 1 1 1 1 3 1 1 1 1 Nominations Committee: The nomination committee ensures there is a robust process for the appointment of new board directors. The committee works closely with the board and the chair to identify the skills, experience, personal qualities and capabilities required for the next stage in the company’s development, linking the company’s strategy to future changes on the board. Only the nominations committee is able to formally submit a recommendation to the board for the appointment of a new director. All such recommendations are still subject to the approval of the board. A separate Gfi nity plc Nominations Committee was constituted following the appointment of an Executive Chairman in May 2018. Prior to this appointment, the role of the nominations committee was undertaken by the full board, under the guidance of a Non-Executive Chairman. The Nominations Committee comprises of: Andy MacLeod (Chair) Preeti Mardia Graham Wallace Director Preeti Mardia Andy MacLeod Number of Meetings Attended Total Meetings in Period in Offi ce 1 1 1 1 Remuneration Committee: The Remuneration Committee is responsible for outlining the principles of remuneration strategy to be applied across the Gfi nity Group. It also directly approves the remuneration of all Directors, together with the grant of any option over shares in Gfi nity plc. Compensation is based on an expectation that the director will spend a minimum of 30 days a year on work for the Company. This will include attendance at a minimum of 6 Board meetings p.a., each general meeting, plus other activities as agreed with the Executive team from time to time, including membership of board committees. Non-Executive Directors may support additional projects over and above their role as Non-Executive Directors and may be remunerated at or below market rate for those services. The extent of such services must not, however, compromise their status as Non-Executives, independent of the Executive team. The remuneration committee consists of Andy MacLeod and Preeti Mardia. Director Tony Collyer Garry Cook David Yarnton Jonathan Varney Preeti Mardia Andy MacLeod Number of Meetings Attended Total Meetings in Period in Offi ce 1 0 1 1 2 2 1 0 1 1 2 2 Full disclosure of director remuneration is provided within the Directors Remuneration Report. GFINITY_2018_Front Section_5.indd 15 15 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Directors’ Remuneration Report all employees. These amounts are inline with the Government’s auto enrolment scheme. No other benefi ts, such as health insurance, were made in the year. into comprehensive director service contracts at the time or, or immediately in advance of commencing their roles. 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 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. ANNUAL BONUSES Bonuses awarded to executive directors are included in the Directors’ Emoluments table on page 18. 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. The board of Gfi nity believe it to be an essential part of attracting high calibre individuals to the board of directors, while preserving cash, in the interests of all shareholders, that Non-Executive Directors are offered options in the company at a price and level that aligns them with the interests of the wider shareholder base. SERVICE CONTRACTS All existing directors at the time of the Company’s admission to AIM entered into new service contracts on 16 December 2014, immediately prior to that admission. All new directors since this date have entered 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. Executive Directors are eligible for pension contributions at the same rate as 16 GFINITY_2018_Front Section_5.indd 16 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 Directors’ Remuneration Report (continued) AUDITED INFORMATION Directors’ interests in shares The interests of the Directors at 30 June 2018 in the shares of the Company were: Neville Upton Garry Cook Jonathan Hall Preeti Mardia Andrew MacLeod Number of Ordinary Shares Percentage of issued share capital 14,877,245 740,741 – – 78,704 15,696,790 5.20 0.27 – – 0.03 5.50 Share Options Directors’ interests in options over the ordinary shares in the company were as follows: Neville Upton Jonathan Hall Garry Cook Andrew MacLeod Preeti Mardia Directors at Year End Tony Collyer Paul Kent Philip Shuldham-Legh Jon Varney David Yarnton As at 30 June 2017 7,870,670 1,548,571 – – – Options Granted – – 1,000,000 1,000,000 1,000,000 9,429,241 3,000,000 323,000 200,000 643,000 200,000 199,000 – – – – – Share Options Held by Directors in Year 10,984,241 3,000,000 Options Lapsed – – – – – – – – – – – – As at 30 June 2018 7,870,670 1,548,571 1,000,000 1,000,000 1,000,000 12,429,241 323,000 200,000 643,000 200,000 199,000 13,994,241 GFINITY_2018_Front Section_5.indd 17 17 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 STRATEGIC REPORT Directors’ Remuneration Report (continued) Directors’ emoluments Emoluments of the directors for the year ended 30 June 2018 are shown below. Year ended 30 June 2018 Salary and Fees (£) (£) Year ended June 2017 Total Total Benefi ts Remuneration Remuneration (£) (£) Garry Cook Neville Upton Jonathan Hall Preeti Mardia Andrew MacLeod 80,000 150,000 120,000 15,278 15,278 – – 5,000 – – 80,000 150,000 125,000 15,278 15,278 – 100,000 115,000 – – Directors at Year End 380,556 5,000 385,556 215,000 Paul Kent Philip Shuldam-Legh David Yarnton Tony Collyer Jon Varney Directors in Year 43,417 6,250 18,281 27,000 48,000 – – – – – 43,417 6,250 18,281 27,000 48,000 83,500 20,000 33,425 24,000 – 523,504 5,000 528,504 375,925 1 – In addition to the amounts stated above Paul Kent earned £43,417 up to his resignation as director on 23 November 2017, Phillip Shuldam Leigh earned £6,250 up to 23 November 2017 when he resigned as director, David Yarnton earned £18,281 up to 23 November 2017 when he resigned as director, Jonathan Varney earned £48,000 up to 23 November 2017 when he resigned as director and Tony Collyer earned £27,000 up to 18 May 2018 when he resigned as director 2 – Fees in respect of David Yarnton fees invoiced via Equinox Talent Ltd. Garry Cook invoiced via i2 Global Consulting On 12 July 2018 Garry Cook and Graham Wallace were each granted 8,590,446 share options. This report was approved by the board and signed on its behalf. Garry Cook Executive Chairman 26 November 2018 18 GFINITY_2018_Front Section_5.indd 18 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 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 2018. PRINCIPAL ACTIVITIES Gfi nity plc is a world-leading esports solutions provider, serving the rapidly growing community of competitive gamers worldwide, both through its owned and operated properties, including the Gfi nity Elite Series and through its “powered by Gfi nity” managed services business. An overview of Gfi nity’s strategy and business model is provided within the Gfi nity At A Glance section of this report. FUTURE DEVELOPMENT Our development objectives for 2018–19 are disclosed in the Strategic Report. CAPITAL STRUCTURE The capital structure is intended to ensure and maintain strong credit ratings and healthy capital ratios to support the Company’s business and maximise shareholder value. It includes the monitoring of cash balances, available bank facilities and cash fl ows. No changes were made to these objectives, policies or processes during the year ended 30 June 2018. RESULTS AND DIVIDENDS The consolidated income statement is set out on page 36. The Company’s loss after taxation amounted to £13.57m (2017: £5.23m). The directors do not recommend the payment of a dividend for the year ended 30 June 2018. EVENTS SINCE THE BALANCE SHEET DATE On 11 October 2018 Gfi nity plc announced its intention to raise up to £6m by way of a placing to new and existing holders. On 8 November 2018 this placing was approved at an Extraordinary General Meeting of the Company and the new shares were admitted to AIM on 9 November 2018. 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. RISK MANAGEMENT Information on Gfi nity’s approach to risk management is provided within the Principal Risks and Uncertainties section of this report. DIRECTORS The following directors held offi ce as indicated below for the year ended 30 June 2018 and up to the date of signing the consolidated fi nancial statements except where otherwise shown. Garry Cook Executive Chairman Neville Upton Founder Jonathan Hall Chief Finance Offi cer Preeti Mardia Non-executive Director Andy MacLeod Non-executive Director Tony Collyer Non-Executive Chairman* Paul Kent Technology and eSports Director* Philip Shuldham-Legh Marketing Director* David Yarnton Non-Executive Director* Jonathan Varney Non-Executive Director* *Paul Kent, Phillip Shuldham-Legh, David Yarnton and Jonathan Varney resigned their positions as directors on 23 November 2017 with Garry Cook, Preeti Mardia and Andy MacLeod being appointed. Tony Collyer resigned his position on the board on 17 May 2018 with Garry Cook assuming the position of Executive Chairman Graham Wallace was appointed to the board on 12 July 2018 and John Clarke was appointed 18 September 2018 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. GFINITY_2018_Front Section_5.indd 19 19 30/11/2018 08:03 GFINITY plc. | Annual Report & Financial Statements 2018 GOVERNANCE Statement of Directors’ responsibilities 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. 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. By order of the board: Garry Cook Executive Chairman 26 November 2018 20 GFINITY_2018_Front Section_5.indd 20 30/11/2018 08:03 Report & Financial Statements 30 June 2018 Gfinity_Financial Statements_2018-4.indd 21 21 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Independent Auditors’ Report to the shareholders of Gfinity plc for the year ended 30 June 2018 Opinion We have audited the financial statements of Gfinity PLC (‘the parent company’) and its subsidiaries (the ‘group’) for the year ended 30 June 2018 which comprise the consolidated statement of comprehensive income, the consolidated and parent company statement of financial position, the consolidated and parent company statement of changes in equity, the consolidated and parent company 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 and, as regards the parent company financial statements, as applied in accordance with the Companies Act 2006. In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 June 2018 and of the group’s loss for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. • Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the 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 group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. 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. 22 Gfinity_Financial Statements_2018-4.indd 22 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Independent Auditors’ Report to the shareholders of Gfinity plc (continued) for the year ended 30 June 2018 Key audit matter How the scope of our audit addressed the risk Going concern assessment (Group and parent company) The group has reported a post-tax loss for the year of £13.4m and at the balance sheet date had net current assets of £3.5m, including cash and cash equivalents of £3.7m, a net decrease for the year of £0.8m. 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 group’s ability to realise assets in the normal course of business. The appropriateness of applying the going concern basis has been referenced on page 47 of the financial statements. 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 subsequent to the balance sheet date but prior to the date of approval of the accounts. In particular we have assessed the impact of the share placing that took place on 9 November 2018 which resulted in a further £6.0m 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 considered 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. Furthermore, we considered 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. Business combinations (Group) During the year the company acquired two trading entities, Cevo Inc. and RealSM Limited, and therefore has applied IFRS 3: Business Combinations, as disclosed in note 25, and IFRS 10: Consolidated Financial Statements for the first time. We evaluated the directors’ application of IFRS 3 by assessing the rationale applied in assessing what constitutes a separately recognisable asset or liability, before reviewing the method and calculation applied to determine the fair value in each case. In applying IFRS 3 the directors are required to identify and measure at fair value the tangible and intangible assets and liabilities acquired, including those at were previously unrecognised in the accounts of the acquired entity. The assessment of what constitutes a separately recognisable asset or liability, as well the determination of its fair value, requires significant estimation and judgement. Accordingly, the application of IFRS 3 has been identified as a key audit risk. We challenged the significant inputs and assumptions used in the fair value calculations and considered whether the method applied was appropriate in the case of each identified asset or liability. In addition, we discussed with management as well as reviewing available financial and non-financial information that related to the respective acquisitions for indications of potentially unidentified assets or liabilities. Based on our procedures we have concluded that IFRS 3 has been applied correctly and consider the judgements made by management in identifying and measuring the acquired assets and liabilities to be reasonable. Gfinity_Financial Statements_2018-4.indd 23 23 23 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Independent Auditors’ Report to the shareholders of Gfinity plc (continued) for the year ended 30 June 2018 Key audit matter How the scope of our audit addressed the risk Goodwill impairment assessment (Group) The group had goodwill of £2.5m (note 11) with an indefinite life as at 30 June 2018, which is required to be tested for impairment on an annual basis. Management have performed a full impairment review to compare the carrying amount of goodwill to its recoverable value, being the higher of value-in-use and fair value less costs to dispose. The directors have allocated goodwill to individual cash generating units (‘CGUs’) and the determination of the recoverable amount of the CGUs requires significant estimation and judgement, as disclosed in note 3. Accordingly, the carrying value of goodwill has been identified as a key audit risk. Valuation of investments (Parent company) The group had investments in its subsidiaries of £4.5m (note 12) with an indefinite life as at 30 June 2018, which is required to be tested for impairment on an annual basis. Management assess the valuation of these investments with reference to their recoverable amount, being the higher of the assets’ fair value less costs to sell and value-in-use. The determination of the recoverable amount of the investments requires significant estimation and judgement, as disclosed in note 3. Accordingly, the valuation of investments has been identified as a key audit risk. This is not a complete list of all risks identified by our audit.. We evaluated the directors’ assessment of the carrying value of goodwill by reviewing the cash flow and profit forecasts included in the directors’ value-in-use calculations for respective CGUs. We challenged the significant inputs and assumptions used in the calculations and performed sensitivity analysis to the forecasts to ascertain the extent to which reasonable adverse changes would, either individually or in aggregate, require the impairment of goodwill and other intangible assets. Based on our procedures and the evidence available to the date of this report we have concluded that no impairment to the carrying value of goodwill is necessary. For the purposes of this assessment, the value-in-use assessment is calculated on the same basis as that applied to the assessment of goodwill referred to above, and was therefore subject to the same audit procedures. Based on our procedures and the evidence available to the date of this report we have concluded that no impairment to the carrying value of investments is necessary. 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. In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. Based on our professional judgement, we determined overall materiality for both the parent company’s and the group’s financial statements as a whole to be £600,000 (2017: £250,000). 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 4.5% (2017: 4.7%) of loss before tax, 13.9% (2017: 10.5%) of revenue and 5.2% (2017: 3.5%) of total assets. We report to the Audit Committee all identified unadjusted errors in excess of £60,000. Errors below that threshold would also be reported if, in our opinion as auditor, disclosure was required on qualitative grounds. 24 Gfinity_Financial Statements_2018-4.indd 24 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Independent Auditors’ Report to the shareholders of Gfinity plc (continued) for the year ended 30 June 2018 An overview of the scope of our audit We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group and the parent company, the accounting processes and controls, and the industry in which they operate. The group is comprised of the parent company and its two subsidiaries, one of which is based in the UK with the other operating in the US. The parent company was subject to a full scope audit based on the materiality set out above and the two subsidiaries were subject to specified audit procedures where the extent of our testing was based on our assessment of the risks of material misstatement and of the materiality of the group. All audit work to respond to the risks of material misstatement of both the group and the parent company was performed directly by the audit engagement team. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent 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 by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Gfinity_Financial Statements_2018-4.indd 25 25 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Independent Auditors’ Report to the shareholders of Gfinity plc (continued) for the year ended 30 June 2018 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 group’s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Jonathan Munday (Senior Statutory Auditor) for and on behalf of Rees Pollock, Statutory Auditor 26 November 2018 26 Gfinity_Financial Statements_2018-4.indd 26 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Group Statement of Profit or Loss for the year ended 30 June 2018 Note 1 July 2017 to 30 June 2018 £ 1 July 2016 to 30 June 2017 £ 4,317,325 (7,732,767) (3,415,442) (10,033,326) (13,448,768) 1,432 (1,333) (347,237) (13,795,906) 222,356 2,372,452 (2,775,724) (403,272) (4,932,771) (5,336,043) 4,564 – – (5,331,479) 103,315 5 7 7 8 CONTINUING OPERATIONS Revenue Cost of sales Gross loss Administrative expenses Operating loss Finance income Finance costs Share of net loss of associates Loss on ordinary activities before tax Taxation Retained loss for the year (13,573,550) (5,228,164) Loss and total comprehensive income for the period (13,573,550) (5,228,164) Earnings per share 19 (0.06) (0.03) Gfinity_Financial Statements_2018-4.indd 27 27 27 30/11/2018 08:05 Notes to the Financial Statements (continued) for the year ended 30 June 2018GFINITY plc. | Annual Report & Financial Statements 2018The notes on pages 35 to 60 form an integral part of these financial statements. GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Group Statement of Comprehensive Income for the year ended 30 June 2018 Note 1 July 2017 to 30 June 2018 £ 1 July 2016 to 30 June 2017 £ Loss for the period (13,573,550) (5,228,164) Other comprehensive income Items that will be reclassified to profit or loss Changes in the fair value of derivatives recognised at fair value 17 108,421 Items that will not be reclassified to profit or loss Foreign exchange loss on retranslation of foreign subsidiaries Other comprehensive income for the period (1,717) 106,704 – – – Total comprehensive income for the period (13,466,846) (5,228,164) The notes on pages 35 to 60 form an integral part of these financial statements. 28 Gfinity_Financial Statements_2018-4.indd 28 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Group Statement of Financial Position for the year ended 30 June 2018 Note 30 June 2018 £ 30 June 2017 £ NON CURRENT ASSETS Property, plant and equipment Goodwill Intangible fixed assets Investment in Associate CURRENT ASSETS Trade and other receivables Cash and cash equivalents Current tax assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Ordinary shares Share premium account Other reserves Retained earnings TOTAL EQUITY NON-CURRENT LIABILITIES Deferred tax liabilities CURRENT LIABILITIES Trade and other payables Derivative Financial Instruments TOTAL LIABILITIES 9 11 10 13 14 15 26 18 26 16 17 758,861 2,544,525 2,070,156 264,464 875,892 – 73,391 50,000 5,638,006 999,283 2,159,869 3,679,288 153,000 1,660,477 4,519,024 – 5,992,157 6,179,501 11,630,163 7,178,784 286,348 31,565,734 585,539 (23,628,965) 188,664 15,254,085 154,217 (10,163,836) 8,808,656 5,433,130 366,245 366,245 – – 2,238,420 216,842 1,745,654 – 2,821,507 1,745,654 TOTAL EQUITY AND LIABILITIES 11,630,163 7,178,784 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 29 29 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Company Statement of Financial Position for the year ended 30 June 2018 Note 30 June 2018 £ 30 June 2017 £ NON CURRENT ASSETS Property, plant and equipment Investment in Subsidiaries Intangible fixed assets Investment in Associate CURRENT ASSETS Trade and other receivables Cash and cash equivalents Current tax assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Ordinary shares Share premium account Other reserves Retained earnings Total equity Current liabilities Trade and other payables Derivative financial instruments TOTAL LIABILITIES 9 12 10 13 14 15 26 18 16 17 739,855 4,466,134 23,807 264,464 875,892 – 73,391 50,000 5,494,260 999,283 2,584,689 3,563,217 153,000 1,660,477 4,519,024 – 6,300,906 6,179,501 11,795,166 7,178,784 286,348 31,565,734 587,257 (23,028,794) 188,664 15,254,085 154,217 (10,163,836) 9,410,545 5,433,130 2,167,778 216,843 1,745,654 – 2,384,621 1,745,654 TOTAL EQUITY AND LIABILITIES 11,795,166 7,178,784 As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The parent company’s loss for the year amounts to £12,864,958 (2017: loss of £5,228,164). Signed on behalf of the board on 26 November 2018: Garry Cook Chief Executive Jonathan Hall Chief Financial Director The notes on pages 35 to 60 form an integral part of these financial statements. 30 Gfinity_Financial Statements_2018-4.indd 30 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Group Statement of Changes in Equity Ordinary shares £ Share Share premium option reserve £ £ for the year ended 30 June 2018 Retained earnings £ Forex £ Total equity £ At 30 June 2016 83,414 5,640,233 55,458 (4,935,672) Loss for the period Total comprehensive income – – – – – – (5,228,164) (5,228,164) Proceeds of Shares Issued Share issue costs Share options expensed 105,250 – – 9,844,730 (230,878) – – – 98,759 Total transactions with owners, recognised directly in equity 105,250 9,613,852 98,759 – – – – At 30 June 2017 188,664 15,254,085 154,217 (10,163,836) – – – – – – – – 843,433 (5,228,164) (5,228,164) 9,949,980 (230,878) 98,759 9,817,861 5,433,130 Loss for the period Other comprehensive income Total comprehensive income Reduction in Capital Proceeds of Shares Issued Shares as Consideration Share issue costs Share options expensed Foreign exchange on retranslation of foreign subsidiaries Total transactions with owners, recognised directly in equity – – – – 81,763 15,921 – – – – – – 13,618,704 3,050,663 (357,717) – – – – – – – – 433,039 – – – 97,685 16,311,649 433,039 (13,573,550) 108,421 – (1,717) (13,573,550) 106,704 (13,465,129) (1,717) (13,466,846) – – – – – – – – – – – – – – – 13,700,466 3,066,584 (357,717) 433,039 – 16,842,372 At 30 June 2018 286,348 31,565,734 587,256 (23,628,965) (1,717) 8,808,656 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 31 31 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Company Statement of Changes in Equity for the year ended 30 June 2018 Ordinary shares £ Share premium £ Share option reserve £ Retained earnings £ Total equity £ 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) 105,250 9,613,852 98,759 (5,228,164) (5,228,164) (5,228,164) (5,228,164) – – – – 9,949,980 (230,878) 98,759 9,817,861 At 30 June 2017 188,664 15,254,085 154,217 (10,163,836) 5,433,130 Loss for the period Other comprehensive income Total comprehensive income Proceeds of Shares Issued Shares as Consideration Share issue costs Share options expensed Total transactions with owners, recognised directly in equity – – – 81,763 15,921 – – – – – 13,618,703 3,050,663 (357,717) – – – – – – – 433,039 (12,973,379) 108,421 (12,973,379) 108,421 (12,864,958) (12,864,958) – – – – 13,700,466 3,066,584 (357,717) 433,039 97,684 16,311,649 433,039 – 16,842,372 At 30 June 2018 286,348 31,565,734 587,256 (23,028,794) 9,410,544 The notes on pages 35 to 60 form an integral part of these financial statements. 32 Gfinity_Financial Statements_2018-4.indd 32 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Group Statement of Cash Flows for the year ended 30 June 2018 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 Acquisition of subsidiaries, net of cash acquired Investment in Associate Note 23 7 9 30 June 2018 £ 30 June 2017 £ (12,505,936) (5,435,353) 1,432 (312,342) (1,049,924) (315,713) 4,564 (599,692) – – Net cash used in investing activities (1,676,547) (595,128) Cash flow from/(used in) financing activities Issue of equity share capital Share Issue Costs 13,700,466 (357,717) 9,949,980 (230,878) Net cash from financing activities 13,342,749 9,719,102 Net increase in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents (839,736) 4,519,024 3,688,621 830,403 3,679,288 4,519,024 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 33 33 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Company Statement of Cash Flows for the year ended 30 June 2018 for the year ended 30 June 2017 for the year ended 30 June 2018 for the year ended 30 June 2017 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 Acquisition of subsidiaries, net of cash acquired Investment in Associate Inter-company loans Note 23 7 9 30 June 2018 £ 30 June 2017 £ (11,928,671) (5,435,353) 1,432 (298,059) (1,066,500) (315,713) (691,046) 4,564 (599,692) – – - Net cash used in investing activities (2,369,886)) (595,128) Cash flow from/(used in) financing activities Issue of equity share capital Share Issue Costs 13,700,466 (357,717) 9,949,980 (230,878) Net cash from financing activities 13,342,749 9,719,102 Net increase in cash and cash equivalents Opening cash and cash equivalents Closing cash and cash equivalents (955,808) 4,519,024 3,688,621 830,403 3,563,216 4,519,024 The notes on pages 35 to 60 form an integral part of these financial statements. 34 Gfinity_Financial Statements_2018-4.indd 34 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements for the year ended 30 June 2018 1. GENERAL INFORMATION Gfinity plc (“the Company”) is a public company limited by shares incorporated in the United Kingdom under the Companies Act 2006, registered in England and Wales and is AIM listed. The address of the registered office is given on page 2. The registered number of the company is 08232509. The principal activity of the Company and its subsidiaries (“the Group”) and the nature of the Group’s operations are set out in the Directors Report on page 26. The functional and presentational currency is £ sterling because that is the currency of the primary economic environment in which the group operates. Foreign operations are included in accordance with the policies set out in note 2. 2. ACCOUNTING POLICIES Basis of preparation The Company has prepared the accounts on the basis of all applicable International Financial Reporting Standards (IFRS), including all International Accounting Standards (IAS), Standing Interpretations Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board (IASB) with effective dates for accounting periods beginning on or after 1 July 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 Group has applied all standards and interpretations that will be effective for the accounting periods commencing on or after 1 July 2017. The following standards and interpretations have been adopted: • 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); 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: • 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); • 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); The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 35 35 35 30/11/2018 08:05 The notes on pages 35 to 60 form an integral part of these financial statements. GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 for the year ended 30 June 2017 for the year ended 30 June 2018 for the year ended 30 June 2017 2. ACCOUNTING POLICIES (continued) • 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 Group had cash and cash equivalents amounting to £3,679,288 and the Company had cash and cash equivalents amounting to £3,563,217. On 23rd October 2018 the Group announced its intention to raise a further £6.0 million (prior to deduction of expenses) via a placing of shares on AIM. This placing was approved by shareholders on 8 November 2018, with shares being admitted to AIM and funds received by the Group on 9 November and 12 November respectively. The placing leaves the Group 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. Basis of consolidation The Group accounts consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June each year. Subsidiary undertakings are those entities over which the Group has the ability to govern the financial and operating policies through the exercise of voting rights. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. All intra group balances, transactions, income and expenses and profit and losses on transactions between the Company and its subsidiaries and between subsidiaries are eliminated. Goodwill Goodwill is initially recognised and measured as set out above. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (‘CGUs’) expected to benefit from the synergies of the combination. CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Investment in associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or join control over those policies. The Group’s interests in jointly controlled entities are incorporated in the financial information using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of the individual investments. The Group’s share of the net profit or loss of the joint venture is shown as a single line item in the Consolidated Statement of Comprehensive Income. Where the Group transacts with a joint venture any profit or loss arising is eliminated to the extent of the Group’s interest in the relevant joint venture. The carrying amount of equity-accounted investments is tested for impairment at least annually. The notes on pages 35 to 60 form an integral part of these financial statements. 36 Gfinity_Financial Statements_2018-4.indd 36 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 2. ACCOUNTING POLICIES (continued) Investment in Subsidiaries Investments in subsidiaries are held in the Company balance sheet at cost and reviewed annually for impairment. Revenue Revenue comprises the fair value of the consideration received or receivable for the sale of services in the normal course of the 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.. • 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. 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. Foreign currencies Transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the year. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period. Exchange differences arising from the translation of the Group’s foreign operations are recognised in other comprehensive income. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 37 37 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 2. ACCOUNTING POLICIES (continued) 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. In instances when shares are used as consideration for goods or services the shares are valued at the fair value of the goods or services provided. The expense to the company is recognised at the point the goods or services are received. Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of tangible fixed assets to their residual values over their useful economic lives, as follows: Office equipment 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 other than goodwill are recognised where the purchase or internal development of such assets are expected to directly contribute towards the company’s ability to generate revenues over a multiple years. The notes on pages 35 to 60 form an integral part of these financial statements. 38 Gfinity_Financial Statements_2018-4.indd 38 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 2. ACCOUNTING POLICIES (continued) Intangible fixed assets are stated at historical cost less accumulated amortisation and impairment, if any. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Where the cost is not clearly identifiable discounted cash flows are utilised to estimate either the cost to develop the resource or, where there are already profits attributable the asset, to estimate future cash inflows. Historical cost includes expenditure that is directly attributable to the acquisition or development of the items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be measured reliably. Amortisation is charged on a straight-line basis over the estimated useful economic life of the asset as follows: Software development – 3 years straight line Web traffic acquired in business combination – 3 years straight line – 5 years straight line Technology Platform – 5 years Customer Relationships Research and development costs Development expenditure is capitalised as an intangible asset, only if the development costs can be measured reliably and it is anticipated that the product being built will be completed and will generate future economic benefits in the form of cash flows to the Group. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less. These are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equity Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the company becomes a party to the contractual provisions of the instrument. Financial liabilities are classified according to the substance of the contractual arrangements entered into. All interest-related charges are recognised as an expense in the income statement. Trade and other payables are not interest bearing and are recorded initially at fair value net of transactions costs and thereafter at amortised cost using the effective interest rate method. An equity instrument is any contract that evidence a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial assets Financial assets are recognised in the balance sheet when the Company becomes a party to the contractual provisions of the instrument and are recognised in the balance sheet at the lower of cost and net realisable value. Provision is made for diminution in value where appropriate. Income and expenditure arising on financial instruments is recognised on the accruals basis, and credited or charged to the statement of comprehensive income in the financial period to which it relates. Trade receivables do not carry any interest and are initially recognised at fair value, subsequently reduced by appropriate allowances for estimated irrecoverable amounts. Derivative Financial Instruments Derivative financial assets and financial liabilities are recognised on the Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. Derivatives are initially recorded at fair value and are subsequently remeasured to fair value based on mid-market prices, estimated future cash flows and forward rates as appropriate. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 39 39 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES The preparation of financial statements in conformity with IFRS requires the use of certain estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. Estimates and judgements are continually reviewed and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Revenue recognition: The Group’s revenue recognition policy is based on separating contracts into discrete performance obligations with revenue then recognised based on the percentage completion of each one. Where the value of each distinct performance obligation is not set out in a contract Management estimate the value of each performance obligation based on what are deemed to be appropriate criteria. For example if a contract did not stipulate the value by region of a broadcast agreement management would use appropriate weighting (e.g. audience size) to estimate the value of each region, with each region viewed as a separate performance obligation. Revenue would then be recognised based on the percentage completion of each performance obligation. In instances where there is no other readily available proxy Management will estimate the value of each performance obligation based on the relative cost to deliver. Revenue settled by means other than cash (e.g. via equity in a associate) is recognised based on the value stipulated in the contract for goods or services, which would be deemed to be set at fair value, with the revenue then recognised based performance obligations in the manner described above. Intangible assets recognised on business combinations: Intangible assets in business combinations are recognised when the asset is separately identifiable and based on the probable future economic benefit that arises owing to the Group’s control of the asset. Typically, the Group will utilise a discounted cash flow to establish the future economic benefits and therefore the fair value of the asset. The Group have identified three intangible assets in relation to the two acquisitions undertaken in the year: Cevo customer relationships: CEVO’s customer relationships have been valued based on the revenue less associated costs over a five year period. The cash flow has then been discounted at a rate of 13%. Discount rate has been calculated using the Capital Asset Pricing model with reference to the value of UK 10 year gilts as a proxy for a risk free rate and the volatility of Gfinity’s share price relative to that of AIM since listing. Revenues have been calculated based on the assumed number of hours of development time for each client and CEVO’s chargeable rate per hour. Costs have been derived based on the number of employees required to fulfil each contract, with salaries to support headcount growth based on market rates, along with estimates of associated technology costs. The valuation is sensitive to changes in the chargeable hour rate, which is assumed to grow at a compound annual growth rate (“CAGR”) of 15%, the number of chargeable hours and changes in salary costs for developers over the next five years. If billable rates remain flat over the next five years the value of the asset would reduce by £0.6m. Cevo gaming platform: The gaming platform has been valued based on a discounted cash flow using the same cost of capital as the customer relationship. Revenue has been based on licencing the software, tournament admission fees and subscriptions. The values have been established with reference to the 18 months prior to acquisition with the six monthly average annualised. The costs associated with the platform have been based on prize money, staff time and server costs. The value is assumed to decline by 20% per annum over a five year period with the platform assumed to then be completely replaced. If the useful economic life was reduced to 3 years then the value would reduce by £0.1m. Real Sport web traffic: Real Sport are in a pre-revenue phase therefore the intangible assets have been valued based on the estimated cost to acquire their organic traffic. The value of traffic was established based on the cost per click (“CPC”) of the key words that had driven users to the site and the web traffic in the quarter prior to acquisition. It was then assumed that any paid traffic would be subject to a 40% rate of cannibalisation of organic traffic. This was then valued over a three year period with an assumed rate of decline of 33% per annum. The rate of decline was chosen to reflect potential changes in search algorithms. The notes on pages 35 to 60 form an integral part of these financial statements. 40 Gfinity_Financial Statements_2018-4.indd 40 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 3. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES (continued) Impairment testing: The Group tests goodwill for impairment annually. The recoverable amounts of cash generating units have been determined based on value-in-use calculations which require the use of estimates. Management has prepared discounted cash flows based on the latest strategic plan. Goodwill carried in relation to Cevo: The key assumptions in evaluating whether there was any impairment of the goodwill in relation to CEVO was the discount factor (13%) which was calculated in the manner outlined above and the volume of development work to be undertaken on behalf of the group. This was then compared against the cost to fulfil this work by paying a third party with the subsequent cost savings being a key determinant in whether there was any evidence of impairment. This was then evaluated over a ten year period using a discounted cash flow. The third party cost for work was determined with reference to CEVO’s own charge out rates and the volume of work to be undertaken was based on Management’s estimates. This indicated a value of £6.1m higher than the carrying value of goodwill in relation to CEVO. Reducing development time by 10% has an impact of £0.6m. Goodwill carried in relation to Real Sport: The key assumptions in evaluating whether there was any impairment of the goodwill in relation to Real Sport was the discount factor (13%) which was calculated in the manner outlined above, the prospective growth in users (13% CAGR, per Newzoo the esports industry grew 38% from 2017 to 2018) and execution of traffic monetisation strategies. Key costs related to content creation, staff, marketing and traffic acquisition. Where possible all assumptions in relation to revenue generating activities have been benchmarked based on desk based research however given the nascent esports industry is still testing various monetisation strategies many assumptions have been based on publicly available information for other online media and entertainment forums. Based on the above the value of Real Sports was £8.1m higher than the carrying value. Reducing the CAGR for traffic growth by 5% has an impact of £7.5m, £0.6m higher than the carrying value of goodwill. Valuation of investments: Investments held in the company statement of financial position have been tested in line with the goodwill impairments described above. Deferred tax: The Company has not recognised a deferred tax asset in respect of its 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 8(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 20 on Share Based Payments. In addition the company has issued share options as partial consideration for services provided. The cost of these has been recognised based on the timing of the delivery of the service and the fair value. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 41 41 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 4 SEGMENTAL INFORMATION The Group manage the business based on two segments: Gfinity and CEVO. The two reportable segments operate as follows: Gfinity: This segment is the largest part of the business and encompasses the majority of esports related activities and broadcast and production capabilities. CEVO: The in-house development capabilities which are key to delivering both Gfinity PLC’s strategy and online esports solutions for third parties. This segment also includes several US based technology revenue streams Revenue Loss Gfinity 3,682,087 (13,420,753) 30-Jun-18 Cevo 635,238 (152,797) Group 4,317,325 30-Jun-17 Gfinity 2,372,452 (13,573,550) (5,228,164) Gfinity principally operate in the UK and CEVO principally in the US. CEVO were purchased during the year ending June 2018 and there is therefore no comparative information Segmental information for the statement of financial position has not been presented as management do not view this information on a segmental basis. Intra-group recharges are not considered when monitoring performance with central charges (such as senior management costs) retained in Gfinity PLC rather than being apportioned across segments. 5. 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 – land and buildings Expensed development costs Staff costs (see note 6) 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 Group Year ended 30 June 2018 £ Year ended 30 June 2017 £ – 442,221 418,797 609,373 190,517 4,567,202 1,308 21,000 – 1,500 8,250 (11,571) 72,909 199,338 49,583 391,376 184,414 1,723,884 9,707 16,000 – 1,500 6,000 16,006 The notes on pages 35 to 60 form an integral part of these financial statements. 42 Gfinity_Financial Statements_2018-4.indd 42 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 6. PARTICULARS OF EMPLOYEES Number of employees The average number of people (including directors) employed by the company during the financial period was: Group Company Year ended 30 June 2018 £ Year ended 30 June 2017 £ Year ended 30 June 2018 £ Year ended 30 June 2017 £ 61 31 58 31 The aggregate payroll costs of staff (including directors) were: Wages and salaries Social security costs Pensions Equity settled Group Company Year ended 30 June 2018 £ Year ended 30 June 2017 £ Year ended 30 June 2018 £ Year ended 30 June 2017 £ 3,775,231 380,569 22,769 388,633 1,469,465 155,660 – 98,759 3,400,923 351,450 21,642 388,633 1,469,465 155,660 – 98,759 4,567,202 1,723,884 4,162,648 1,723,884 Total remuneration for Directors during the year was £528,504 (2017: £375,925). Full detail on Directors earnings can be found within the Directors’ Remuneration Report, on pages 22 to 25. The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities of the Group. 7. FINANCE INCOME/COSTS Interest income on bank deposits Interest cost Group Year ended 30 June 2018 £ Year ended 30 June 2017 £ 1,432 (1,333) 99 4,564 – 4,564 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 43 43 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 8. TAXATION (a) (a) Major components of taxation expense for the period ended 30 June 2018 are: Group Year ended 30 June 2018 £ Year ended 30 June 2017 £ Income statement Current tax Corporation tax charge / (credit) (153,000) (103,315) Total current tax Deferred tax (153,000) (103,315) Relating to origination and reversal of temporary differences (69,356) – Taxation charge / (credit) reported in the income statement (222,356) (103,315) (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% (2017: 19.75%), to taxation expense at the Company’s effective tax rate for the period is as follows: Group Year ended 30 June 2018 £ Year ended 30 June 2017 Loss on ordinary activities before taxation (13,795,906) (5,331,479 At UK corporation tax rate of 19% (2017: 19.75%) 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 (2,621,222) 103,345 (1,066,296) 29,928 10,644 (153,000) 2,437,877 (2,620) (103,315) 1,038,988 Current tax charge/ (credit) for the period (222,356) (103,315) (c) Unrecognised deferred tax asset The Company has an unrecognised deferred tax asset arising from trading losses carried forward of £4,666,946 (2017: £2,449,025) calculated at the substantively enacted Corporation tax rate at the balance sheet date of 19% (2017: 19%). These trading losses will reverse against future taxable trading profits and no asset has been recognised due to uncertainties over the timing and nature of such gains in accordance with IAS 12. The notes on pages 35 to 60 form an integral part of these financial statements. 44 Gfinity_Financial Statements_2018-4.indd 44 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 9. PROPERTY PLANT AND EQUIPMENT Group Property Plant and Equipment Office equipment £ Computer & production equipment £ Leasehold Improvement £ 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 Cost At 1 July 2017 Additions Disposals At 30 June 2018 Depreciation At 1 July 2017 Charge for the period Disposals At 30 June 2018 Net book value At 30 June 2018 At 30 June 2017 Total £ 483,160 853,921 (199,270) 304,515 441,898 – 174,166 408,555 (199,270) 746,413 383,451 1,137,811 100,618 137,490 – 83,844 61,725 (126,361) 188,941 199,338 (126,361) 238,108 19,208 261,918 508,306 203,897 364,243 90,322 875,892 294,219 4,479 3,468 – 7,947 4,479 124 – 4,603 3,343 – Office equipment £ Computer & production equipment £ Leasehold Improvement £ Total £ 7,947 14,036 – 746,413 107,249 – 383,451 203,905 – 1,137,811 325,190 – 21,983 853,662 587,355 1,463,000 4,603 4,927 – 9,530 238,108 264,093 – 19,208 173,202 – 261,918 442,221 – 502,201 192,409 704,140 12,453 351,461 394,946 758,861 3,343 508,306 364,243 875,892 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 45 45 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 9. PROPERTY PLANT AND EQUIPMENT (continued) Company Property, Plant and Equipment Office equipment £ Computer & production equipment £ Leasehold Improvement £ 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 Cost At 1 July 2017 Additions Disposals At 30 June 2018 Depreciation At 1 July 2017 Charge for the period Disposals At 30 June 2018 Net book value At 30 June 2018 At 30 June 2017 Total £ 483,160 853,921 (199,270) 304,515 441,898 – 174,166 408,555 (199,270) 746,413 383,451 1,137,811 100,618 137,490 – 83,844 61,725 (126,361) 188,941 199,338 (126,361) 238,108 19,208 261,918 508,306 203,897 364,243 90,322 875,892 294,219 4,479 3,468 – 7,947 4,479 124 – 4,603 3,343 – Office equipment £ Computer & production equipment £ Leasehold Improvement £ Total £ 7,947 5,070 – 746,413 89,085 – 383,451 203,904 – 1,137,811 298,059 – 13,017 835,498 587,355 1,435,870 4,603 2,365 – 6,048 6,048 3,343 238,108 258,531 – 19,208 173,202 – 261,918 434,097 – 338,860 394,946 739,854 338,860 394,946 739,854 508,306 364,243 875,892 The notes on pages 35 to 60 form an integral part of these financial statements. 46 Gfinity_Financial Statements_2018-4.indd 46 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 10. INTANGIBLE FIXED ASSETS Group Intangible Fixed Assets Customer Relationship £ Real Sport Web Platform £ Gaming Platform £ Software Development £ – – – – – – – – – – – – – – – – – – – – – – – – Total £ 148,750 – 148,750 – 148,750 148,750 25,776 49,583 75,359 25,776 49,583 75,359 73,391 73,391 122,974 122,974 Customer Relationship £ Real Sport Web Platform £ Cevo Gaming Platform £ Software Development £ Total £ – 1,198,661 – 935,518 – 281,383 148,750 – 148,750 2,415,562 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 Cost At 1 July 2017 Additions At 30 June 2018 1,198,661 935,518 281,383 148,750 2,564,312 Amortisation At 1 July 2017 Charge for the period At 30 June 2018 Net book value At 30 June 2018 – 223,969 223,969 – 92,524 92,524 – 52,721 52,721 75,359 49,583 75,359 418,797 124,943 494,156 974,692 842,994 228,663 23,807 2,070,156 At 30 June 2017 – – – 73,391 73,391 The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 47 47 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 10. INTANGIBLE FIXED ASSETS (continued) Company Intangible Fixed Assets 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 Cost At 1 July 2017 Additions At 30 June 2018 Amortisation At 1 July 2017 Charge for the period At 30 June 2018 Net book value At 30 June 2018 At 30 June 2017 Software Development £ 148,750 – Total £ 148,750 – 148,750 148,750 25,776 49,583 75,359 25,776 49,583 75,359 73,391 73,391 122,974 122,974 Software Development £ 148,750 0 Total £ 148,750 0 148,750 148,750 75,359 49,583 75,359 49,583 124,943 124,943 23,807 73,391 23,807 73,391 Software development costs refer to direct costs incurred in development of the Gfinity TV Player media player. The notes on pages 35 to 60 form an integral part of these financial statements. 48 Gfinity_Financial Statements_2018-4.indd 48 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 Goodwill £ Total £ – 2,544,526 – 2,544,526 2,544,526 2,544,526 – – – – – – 2,544,526 2,544,526 – – 11. GOODWILL Group Cost At 1 July 2017 Additions At 30 June 2018 Amortisation At 1 July 2017 Charge for the period At 30 June 2018 Net book value At 30 June 2018 At 30 June 2017 The goodwill has arisen on the acquisitions of 100% of the share capital of CEVO Inc. and RealSM Ltd in the year. The net assets acquired and the consideration paid are outlined in note 25 on business combinations. The goodwill arising on the business combinations has been tested for impairment based on the methods outlined in note 3 on accounting estimates and judgements. In both instances the test indicated there was no impairment of the goodwill. 12. INVESTMENT IN SUBSIDIARIES At 1 July Investment in subsidiary At 30 June Company 30 June 2018 £ 30 June 2017 £ – 4,466,134 4,466,134 – – – The investments in subsidiaries represent the purchase of CEVO and Real Sport on 24 July 2017 and 13 March 2018 respectively. The fair value of consideration at acquisition for CEVO was £2,158,498 for 100% of the share capital and the fair value at acquisition of Real Sport was £2,307,634 for 100% of the share capital. Both investments are held in Gfinity PLC. Subsidiary undertaking Country of incorporation Holding Proportion of voting rights and capital held Cevo LLC USA Ordinary shares RealSM Ltd England Ordinary shares Excel Interactive Limited England Ordinary shares 100% 100% 100% Nature of business IT Development and Tournament and event operator Online media Sports Club The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 49 49 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 13. INVESTMENT IN ASSOCIATES Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ At 1 July Investment in associate Share of Profits/(losses) 50,000 561,701 (347,237) – 50,000 – 50,000 561,701 (347,237) At 30 June 264,464 50,000 264,464 – 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 and 30% of Gfinity Australia on its incorporation in August 2017. Both investments are held in Gfinity PLC Subsidiary undertaking Country of incorporation Holding rights and capital held Nature of business Proportion of voting Esports Industry Awards Ltd Gfinity Esports Australia PTY Limited England Australia Ordinary shares Ordinary shares 33% 30% Dormant Tournament and event operator 14. TRADE AND OTHER RECEIVABLES Trade receivables Provision for doubtful debts Other receivables Amounts due from group undertakings Amounts due from related undertakings Prepayments and accrued income Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ 1,504,006 (219,658) 1,284,348 227,165 – 128,692 519,664 702,432 (94,658) 607,774 422,266 – – 630,437 1,389,124 (219,658) 1,169,466 228,045 610,757 128,692 447,729 702,432 (94,658) 607,774 422,266 – – 630,437 2,159,869 1,660,477 2,584,689 1,660,477 Included in other receivables is £17,660 (2017: £33,800) which is due in more than one year. The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short term nature of these financial assets. The notes on pages 35 to 60 form an integral part of these financial statements. 50 Gfinity_Financial Statements_2018-4.indd 50 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 15. CASH AND CASH EQUIVALENTS Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ Cash at bank and in hand Short term deposits 3,629,182 50,106 428,998 4,090,026 3,513,111 50,106 428,998 4,090,026 3,679,288 4,519,024 3,563,217 4,519,024 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. 16. TRADE AND OTHER PAYABLES Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ Trade payables Other taxation and social security Accrued expenditure and deferred revenue 666,337 184,688 1,387,395 1,189,995 102,132 453,527 621,879 158,506 1,387,393 1,189,995 102,132 453,527 2,238,420 1,745,654 2,167,778 1,745,654 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. 17. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial liabilities Deferred shares Group & Company 30 June 2018 £ 30 June 2017 £ 216,843 – Deferred shares relate to the acquisition of CEVO Inc.. These are payable in full as the metrics for the payment of all deferred consideration have been achieved however the shares had not been issued at year end. The value of the shares at acquisition was £325,264 with the change in value between acquisition and year end (£108,421) recognised in other comprehensive income The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 51 51 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 18. 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 30 June 2016 Issued on 21st July 2016 at £0.05 per share Issued on 16th May 2017 at £0.20 per share Number 83,413,570 74,000,000 31,250,000 £ 83,414 74,000 31,250 As at 30 June 2017 188,663,570 188,664 Issued on 24 July at £0.21 Issued 11 October 2017 at £0.27 Issued 13 March 2018 at 0.1875 Issued 28 March 2018 at £0.12 3,614,049 25,925,926 12,307,382 55,837,283 3,614 25,926 12,307 55,837 As at 30 June 2018 286,348,210 286,348 19. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period. IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share, or increase the loss per share. For a loss making company with outstanding share options, net loss per share would be decreased by the exercise of options and therefore the effect of options has been disregarded in the calculation of diluted EPS. Group Company Year to 30 June 2018 £ Year to 30 June 2017 £ Year to 30 June 2018 £ Year to 30 June 2017 £ Loss attributable to shareholders (13,466,846) (5,228,164) (12,863,650) (5,228,164) Weighted average number of ordinary shares 228,815 157,211 228,815 157,211 Number 000’s Number 000’s Number 000’s Number 000’s Loss per ordinary share (0.06) (0.03) (0.06) (0.03) £ £ £ £ The notes on pages 35 to 60 form an integral part of these financial statements. 52 Gfinity_Financial Statements_2018-4.indd 52 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 20. SHARE BASED PAYMENTS Equity-settled share option plans Options The Company has a share option scheme for all employees of the Group. The tables 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 2018. A total of 14,467,440 were granted in the year with 6,967,440 being granted to employees and contractors as part of a long term incentive plan (LTIP) and 7,500,000 granted as partial consideration for services provided. No options were exercised during the year and 335,714 lapsed due to members of staff leaving. The total number of outstanding options in issue at 30 June 2018 is 36,898,437 (2017: 22,766,711). LTIP options Shares Options as at 30 June 2016 Shares Options Granted Share Options Forfeited LTIP Share Options as at 30 June 2017 Options as Consideration Non-market condition shares LTIP options Shares Options as at 30 June 2017 Shares Options Granted Share Options Forfeited LTIP Share Options as at 30 June 2018 Options for non-employee services Non-market condition shares Shares Options as at 30 June 2017 Shares Options Granted Share Options Lapsed Share Options as at 30 June 2017 Number 4,821,041 17,945,670 – 22,766,711 Number 22,766,711 6,967,440 (335,714) 29,398,437 Number – 7,500,000 – 7,500,000 Weighted average exercise price (£) 0.1345 0.1450 – 0.1428 Weighted average exercise price (£) 0.1428 0.1964 (0.1962) 0.1549 Weighted average exercise price (£) – n/a – n/a Options vest over periods defined in the respective option agreements and at the discretion of the board of directors. 8,485,327 options vested during the year. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 53 53 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 20. SHARE BASED PAYMENTS (continued) Of the options outstanding 12,429,241 (2017: 10,984,241) are held by directors. Full details of all options held by directors are contained within the Directors’ Remuneration Report. The principal assumptions input into the Black Scholes model to calculate the value of LTIP share options issued for compliance with IFRS 2 “Share Based Payments” are included below, where applicable. Weighted average exercise price Average expected life Expected volatility of options granted in year Risk free rate Expected dividend yield Year ended 30 June 2018 Year ended 30 June 2017 £0.1549 1.8 years 111.11% 1.14% 0% £0.1428 1.9 years 29.68% 1.22% 0% All options were granted at an exercise price equivalent to the market price at the date of grant. The weighted average exercise price of LTIP options outstanding at 30 June 2018 was £0.1549 (2017: £0.1428). The weighted average fair value of options issued during the period was £0.1119 (2017: £0.0300). 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. The fair value of the non-employee services options has been based on the fair value of the services provided at the date the services were provided. This equates to a fair value of options issued in the year £0.0111 (2017: n/a). All options are held in Gfinity PLC with no options held over any of the subsidiaries 21. 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 20. Transactions with Group subsidiaries in the year were inter-company loans from Gfinity to CEVO (£236,274), Real Sport (£347,843) and Excel Interactive Limited (£80,289). The loan to Excel Interactive Limited was written off in full in the year. In addition, CEVO and Gfinity undertook transactions with a value of £18,989. Transactions with associates in the year were £90,000 of revenue from the Esports Industry Awards and £269,893 with Gfinity Australia. These were billable activities based on market rates for delivering the services. At year end £90,000 remained outstanding from the Esports Industry Awards and £20,034 was outstanding from Gfinity Australia. £246,550 of the revenue from Gfinity Australia was settled via equity. 22. COMMITMENTS UNDER NON-CANCELLABLE OPERATING LEASES The Group and Company have the following total commitments under non-cancellable operating leases expiring as follows: Land and buildings Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ Less than one year 372,600 279,150 372,600 279,150 Total 372,600 279,150 372,600 279,150 The notes on pages 35 to 60 form an integral part of these financial statements. 54 Gfinity_Financial Statements_2018-4.indd 54 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 23. 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 Share of Associate Losses Revenue Settled Via Equity Bad Debt Charge 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 Group Company 30 June 2018 30 June 2017 30 June 2018 30 June 2017 (13,795,906) (5,331,479) (13,126,379) (5,331,479) 442,221 – 418,797 (1,432) 433,039 347,237 (246,550) 125,191 – (624,724) 243,191 153,000 199,338 72,910 49,583 (4,564) 98,759 – – 9,707 (1,221,207) 588,285 103,315 434,097 – 49,583 (1,432) 433,039 347,237 (246,550) 207,198 – (543,679) 365,215 153,000 199,338 72,910 49,583 (4,564) 98,759 – – 9,707 (1,221,207) 588,285 103,315 (5,435,353) – Cash used by operating activities Interest paid (12,505,936) – (5,435,353) – (11,928,671) – Net cash used by operating activities (12,505,936) (5,435,353) (11,928,671) (5,435,353) *Note: The movement in trade and other payables for the period ending June 2017 excludes £254,229 of capital creditors and a fair value adjustment on deferred consideration of £7,786. 24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company uses a limited number of financial instruments, comprising cash, short-term deposits, and various items such as trade receivables and payables, which arise directly from operations. The Company does not trade in financial instruments. All of the Company’s financial instruments are measured at amortised cost The Company’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Credit risk The Company’s principal financial assets are bank balances and cash, trade and other receivables. Bank balances and cash are held by banks with high credit ratings assigned by independent credit rating agencies. Management is of the opinion that cash balances do not represent a significant credit risk. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 55 55 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) As the Group does not hold security against trade and other receivables, its credit risk exposure is as follows: Group Company 30 June 2018 £ 30 June 2017 £ 30 June 2018 £ 30 June 2017 £ 1,292,320 635,824 1,788,425 635,824 The trade receivables balance represents amounts due from third parties. At the balance sheet date, the Group’s trade receivables totalled £1,504,006 less a provision of £219,658 (2017: £702,342 less of a provision of £94,658). The Company’s trade receivables include £610,757 of inter-company funding (2017: £nil). The Company’s trade receivables totalled £1,389,124 less a provision for doubtful debt of £219,658 (2017: £702,342 less of a provision of £94,658). There are no significant overdue but not impaired trade receivables at the balance sheet date. The Company balance sheet includes inter-company receivables which are not considered to be at risk as the Company retains control over the debtor however it is not anticipated that the Group companies will repay these amounts in the next 12 months. At the balance sheet date amounts of £891,172 were due from two customers representing a concentration of credit risk. All amounts have been recovered since the balance sheet date. Liquidity risk All trade and other payables are due for settlement within one year of the balance sheet date. The use of instant access deposits ensures sufficient working capital is available at all times. Foreign exchange risk The Company operates in overseas markets by selling directly from the UK, owns an overseas subsidiary and reports in GBP. It is therefore subject to currency exposures on transactions while the Group is subject to currency exposures on consolidation of the overseas subsidiary. Derivative Financial Instruments The Group holds derivative financial instruments at their value with the gain or loss on remeasurement of fair value immediately in the statement of comprehensive income as outlined in Note 2. The only financial instruments held on the balance sheet related to deferred consideration for the purchase of CEVO with the liability to be settled via shares in Gfinity. Financial instruments held by the Company and their carrying values were as follows: Group 30 June 2018 30 June 2017 USD ($) AUSD ($) GBP (£) USD ($) EUR (€) GBP (£) Trade and other receivables 901,508 35,393 1,262,719 1,151 1,316 1,027,573 Cash 377,085 – 3,380,358 87,937 – 4,431,687 Trade and other payables (101,644) (1,164) (2,160,794) (38,004) (106,314) (1,610,335) Derivative Financial Instruments – – (216,843) – – – Net Current Assets/ Liabilities 1,176,949 34,229 2,265,440 51,084 (104,998) 3,848,925 The notes on pages 35 to 60 form an integral part of these financial statements. 56 Gfinity_Financial Statements_2018-4.indd 56 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) Company 30 June 2018 30 June 2017 USD ($) AUSD ($) GBP (£) USD ($) EUR (€) GBP (£) Trade and other receivables 780,150 35,393 1,168,665 1,151 1,316 1,027,573 Cash 321,783 – 3,319,590 87,937 – 4,431,687 Trade and other payables (68,424) (1,164) (2,115,304) (38,004) (106,314) (1,610,335) Derivative Financial Instruments – – (216,843) – – – Net Current Assets/ Liabilities 1,033,509 34,229 2,156,108 51,084 (104,998) 3,848,925 Financial liabilities included in the balance sheet relate to the IAS 39 category of other financial liabilities held at amortised cost. Assets relate to loans and receivables with the exception of other receivables and prepayments which are classified as non-financial assets. Fair value estimation The aggregate fair values of all financial assets and liabilities are consistent with their carrying values due to the relatively short- term maturity of these financial instruments. As cash is held at floating interest rates, its carrying value approximates to fair value. Capital management The Company is funded entirely through shareholders’ funds. If financing is required, the Board will consider whether debt or equity financing is more appropriate and proceed accordingly. The Company is not subject to any externally imposed capital requirements. 25. BUSINESS COMBINATION 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 £2,158,498. CEVO’s reputation as a provider of its own esports competitions and leading-edge technology further strengthens the Group’s position as a leader in the esports sector while creating a platform for further expansion into the US market. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 57 57 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 25. BUSINESS COMBINATION (continued) 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 £ 751,999 758,950 1,510,949 322,285 325,264 647,549 Maximum Consideration Payable at Fair Value 2,158,498 Contingent consideration Contingent consideration is payable based on CEVO’s revenue exceeding $800,000 in their 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. CEVO achieved the targeted revenue and the cash consideration has been paid out in full with the shares being issued post year end. Acquisition related costs Acquisition related costs of £43,802 are included in administrative costs in the income statement for the year ending June 2018. The fair values of the assets and liabilities of CEVO as at the date of acquisition are as follows: Cash and cash equivalents Receivables Payables Borrowings Intangible assets: Customer Relationship Intangible assets: Web Platform Deferred tax liability Net identifiable assets acquired Add: Goodwill $USD GBP 31,211 96,341 (29,664) (45,000) 1,558,139 365,795 (342,868) 1,633,954 1,172,093 24,018 74,139 (22,828) (34,630) 1,198,661 281,383 (263,765) 1,256,978 901,520 Net assets acquired 2,806,047 2,158,498 The notes on pages 35 to 60 form an integral part of these financial statements. 58 58 Gfinity_Financial Statements_2018-4.indd 58 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes to the Financial Statements (continued) for the year ended 30 June 2018 25. BUSINESS COMBINATION (continued) The goodwill that arises from the business combination reflects the profitability at acquisition of CEVO and the enhanced growth prospects and forecast future profitability of the Group. None of the goodwill is expected to be deductible for tax purposes. In addition to the goodwill acquired there have been intangible assets recognised in relation to CEVO’s gaming platform and customer relationships. Neither item was held on the balance sheet at acquisition with the costs of development had expensed to the income statement. Based on a three year discounted cash flow the platform has been valued at £281,383 with a discount rate of 12.7% being applied. The customer relationships have been valued at £1,198,661 based on a five year discounted cash flow. CEVO’s revenue post acquisition revenue was £635,238 with losses of £152,797. Acquisition of Real Sport 101 On 13 March 2018 Gfinity PLC acquired 100% of the share capital of Real SM Ltd (“Real Sport”), the owner of the fan oriented digital media platform RealSport (realsport101.com). The driver of the acquisition was Real Sport’s large and engaged community and content creation capabilities and their synergies with Gfinity’s tournament operations and online gaming platform. Purchase Consideration Purchase consideration was 12,307,382 ordinary shares in the company. Based on the share price on the date of acquisition (£0.1875) the fair value of the consideration was £2,307,634. Acquisition Related Costs Acquisition related costs of £39,188 are included in administrative costs for both the Group and Company. The fair value of the assets acquired as at 13 March was: Cash and cash equivalents Receivables Payables Fixed Assets Intangible assets: Web traffic Deferred Tax Liability Net identifiable assets acquired Add: Goodwill Net assets acquired GBP (2,448) 9,000 (118,453) 12,847 935,518 (171,836) 664,628 1,643,006 2,307,634 The goodwill that arises from the business combination reflects the future profitability of Real Sport and the enhanced growth prospects of the Group. None of the goodwill is expected to be deductible for tax purposes. In addition to the goodwill acquired there has been an intangible asset recognised in relation to Real Sport’s online traffic at a value of £935,518. This has been based on the estimated costs for Gfinity to acquire Real Sport’s organic traffic. Real Sport’s post acquisition revenue was £5,700 and the losses were £193,827. The revenue of the Group if both subsidiaries had been owned from the 1 July 2018 would be £4,399,671 and the losses would have been £13,903,487. The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 59 59 59 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes to the Financial Statements (continued) for the year ended 30 June 2018 26. DEFERRED TAX At 1 July Acquisition of subsidiary Credited to profit or loss At 30 June The provision for deferred taxation is made up as follows: Group 2018 £ – (435,601) 69,356 (366,245) 2018 £ Temporary timing differences on intangible assets 366,245 2017 £ – – – – 2017 £ – The notes on pages 35 to 60 form an integral part of these financial statements. 60 Gfinity_Financial Statements_2018-4.indd 60 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Notes The notes on pages 35 to 60 form an integral part of these financial statements. Gfinity_Financial Statements_2018-4.indd 61 61 30/11/2018 08:05 GFINITY plc. | Annual Report & Financial Statements 2018 Financial Statements Notes The notes on pages 35 to 60 form an integral part of these financial statements. 62 Gfinity_Financial Statements_2018-4.indd 62 30/11/2018 08:05 Gfinity - FinancialReport_muk.indd 5-7 22/11/2018 13:55 35 New Bridge Street L O N D O N E C 4 V 6 B W G F I N I T Y P L C . C O M Annual Report & Financial Statements 3 0 J U N E 2 0 1 8 G F I N I T Y P L C Gfinity - FinancialReport_muk.indd 2-4 22/11/2018 13:55