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GFINITY plc | Annual Report & Financial Statements 2021 Contents
GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Directors, Secretary and Advisers
Period Highlights
Gfinity At A Glance
Chairman’s Statement
Chief Executive Officer’s Statement
Chief Finance and Operating Officer’s Report
Principal Risks and Uncertainties
06
07
08
10
12
14
18
GOVERNANCE
26
Chairman’s Statement on Corporate Governance
27
Board of Directors
28
30
Board Composition and Performance
Directors’ Remuneration Report
32
Audit information
33
Directors’ Report
35
Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
Independent Auditor’s Report
Group Statement of Profit and Loss
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
38
44
45
46
47
48
49
50
51
52
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Annual Report & Financial Statements 2021
STRATEGIC REPORT
GFINITY plc | Annual Report & Financial Statements 2021
GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Directors, Secretary and Advisors
Legal Advisers
Corporate
Fladgate LLP
16 Great Queen Street
London WC2B 5DG
Commercial
Onside Law LLP
642A Kings Road
Fulham
London SW6 2DU
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Financial Public Relations
Teneo Strategy Limited
5th Floor, 6 More London Place
London SE1 2DA
Registered Number
08232509
The Board of Directors
Neville Upton
(Chairman)
John Clarke
(Chief Executive Officer)
Jonathan Hall
(Chief Financial and Operations Officer)
Leonard Rinaldi
(Non-Executive Director)
Hugo Drayton
(Non-Executive Director)
Andy MacLeod
(Non-Executive Director)
Company Secretary
Jonathan Hall
Registered Office
16 Great Queen Street
London WC2B 5AH
Nominated Adviser
and Broker
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
Independent Auditors
Blick Rothenberg Audit LLP
16 Great Queen Street
London WC2B 5AH
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GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Period Highlights
“A year of transition, with a new
management team and a clear
targeted operational focus”
Higher
margin
revenue
streams
Financial highlights
■ 27% increase in revenue to £5.7m (2020: £4.5m), driven by
768% increase in revenue attached to Gfinity owned and
co-owned properties
■ Significant reduction in adjusted operating loss1 by 50% to
£2.7m (2020: £5.5m loss)
■ 61% reduction in adjusted EBITDA loss2, including the
impact of gains and losses on Associates, to £2.3m (2020:
£5.8m loss)
■ Adjusted administrative expenses3 of £5.4m (2020: £8.3m),
representing 35% year on year reduction, reflecting full
year impact of business restructuring in March 2020
■ Cash and cash equivalents at year end of £1.4m (2020:
£1.6m), supplemented by post year-end over-subscribed
fundraise to raise £3.3m before costs for targeted
acquisition.
Operational Highlights
■ Significant growth of owned and recurring revenue
streams providing a strong foundation for scalable growth
in future years, with GDM platform selected by leading
brands to target specific gaming audiences and deliver
global esports programmes
■ Commercial agreements signed with leading brands
and publishers including Activision, Manchester United,
Cadburys, Formula 1, Premier League and Red Bull
■ Bolstered strategic partnerships to drive engagement
across owned websites, including the launch of new digital
motorsport competition with Abu Dhabi Motorsport
Management (ADMM) and expanded relationship with
global advertising technology platform Venatus
■ Added significant senior talent bringing experience with
publishers and in growing digital businesses to support
with delivering on strategic priorities, including two
additional Non-Executive Directors
Growth and expansion of Gfinity Digital Media
Group (GDM)
■ Strong growth of publishing platform, GDM, with revenues
of £1.6 million
■ Acquisition of leading online fantasy and sci-fi news
community, EpicStream
■ Partnerships launched with sites that add value to the user
experience, such as MapGenie
■ Launch of dedicated mobile gaming website Only
Mobile Gaming! (OMG!) and new virtual racing website
Racinggames.gg
£2.6m
Gross Profit
768%
increase in
revenues
50%
reduction
in adjusted
operating loss
Post-Period Highlights
■ Acquisition of Megit Limited, owner and operator of the
website Stock Informer, an ecommerce referral site for
gamers and their lifestyles, funded via successful fundraise
■ Acquisition of SiegeGG, including technology behind
leading statistical analysis of Rainbow Six Siege video
game
■ Selected by Nintendo and Coca Cola Hellenic Bottling
Company as operational partner for respective gaming
and esports tournaments
■ Continued expansion of senior leadership team with
appointment of new Head of Brands and Digital Relations
Outlook
■ Refreshed strategy positioning the business to deliver
scalable growth and drive financial performance
■ Sharpened focus of growing what we own, further
licensing of proprietary technology IP, and continued
selection by major brands provides the board with
confidence in the long-term trajectory of the business
■ Continued management focus on limiting impacts of
macro-economic factors that could create headwinds
1
2
3
Adjusted Operating Loss is the operating loss before depreciation of property, plant and equipment, amortization, impairment of goodwill and or/ intangible assets and the share-based payment charge. For
consistency with prior years, the figure does include depreciation charged on right of use assets that were previously recognised as operating leases in the year ended 30 June 2019.
Adjusted EBITDA is the Adjusted operating loss, plus the gain or loss on associates.
Adjusted Administrative Expense is administrative expenses, adjusted for the same items as in the Adjusted Operating Loss.
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GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Gfinity At A Glance
About Gfinity
Gfinity is a market-leading digital media publisher and technology company in the rapidly growing esports and competitive gaming
entertainment industry sector.
The Company is trusted and consistently chosen by global brands to design and deliver programmes as a result of its deep expertise,
strong relationships, technological IP and its proven ability to connect directly with a global community of over 3 billion gamers, which
have created a gaming market worth an estimated $175.8 billion.
Within this market, Gfinity specialises in building digital highly engaged communities of gamers, both for its own brands and on behalf
of others, that can be scaled and monetised. This is delivered in three ways:
1. Gfinity Digital Media Group: the digital home for gamer lifestyles. A network of Gfinity owned and operated websites, driving up to
15 million visitors per month to Gfinity owned and operated sites. Creating monetisation opportunities through advertising, brand
partnerships and eCommerce activities. Including related social platforms, these allow Gfinity to reach more than 50m gamers per
month.
2.
Jointly owned properties: long-term commercial partnerships with organisations that have a strategic need to connect with gamers.
This includes the Global Racing Series, in conjunction with Abu Dhabi Motorsports Management, in which Gfinity is paid for the
delivery of services, including broadcast production and shares equally in the commercial and content rights of the series.
3. Delivering esports technology and services for third parties: deploying Gfinity’s esports technology, production and operations
services for a network of blue-chip clients, which include leading game publishers, sports rights holders, media companies and
commercial brands. Monetised via license income and service delivery fees.
Growth of esports
KEY DEVELOPMENTS IN SECTOR
Young consumers have said no to passive entertainment, traditional television. And a big yes to interactive entertainment,
which is gaming. Gaming is now fully mainstream and it is massive.
3.0bn
Global gamers
$175.8bn
Global gaming
market
8.7%
YoY growth
474m
Global esports
audience
$1.1bn
Global esports
market
14.5%
YoY growth
■ Gaming activity significantly increased during lockdown period
■ Move away from major in person events to online activity and virtually produced content
■ Entering into peak period for gaming related spend with new console launches and related release of new titles
■ Significant growth in traffic to gamer centric/hobbyist websites
Source: Newzoo, 2020
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GFINITY plc | Annual Report & Financial Statements 2021
GFINITY DIGITAL MEDIA
STRATEGIC PARTNERSHIPS
OWNED ESPORTS TECHNOLOGY
■ >10m MAUs on owned websites
■
Reaching 50m gamers per month
including social channels
■ Monetised via advertising, brand
partnerships and Ecommerce
■
■
■
Shared ownership of esports
programmes
■
‘Industrialise’ existing proprietary tech
products
Partners with strategic business need
■ Deploy in GDM
Shared monetisation of commercial and
content rights
■
Build engaged communities for others -
drive lifetime value
■ Multiple revenue streams
WORLD CLASS PRODUCTION; SECTOR EXPERTISE
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GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Chairman’s Report
Neville Upton
Chairman
12 November 2021
10
“The continued move towards grass
roots vindicates the decision taken
by the Gfinity team to focus on what
it owns... This places the Company at
the heart of the gaming ecosystem,
adding value to key stakeholders, in
a scalable and monetisable way”
I have pleasure in presenting our annual
accounts for the financial year-ended
30 June 2021. The team has diligently
implemented the new strategic direction
that CEO John Clarke set out on his
appointment in March 2020. The progress
of this sharpened strategy and operational
focus can now be seen in the Company’s
financial performance. There was a 27%
increase in revenue to £5.7m (2020:
£4.5m), driven by a 768% increase in
revenues attached to Gfinity owned and
co-owned content. We are also pleased
to report a 50% reduction in adjusted
operating loss to £2.7m (2020: £5.5m).
This was achieved against the backdrop
of continued COVID-19 restrictions which
impacted client and publisher spend. I
would like to take the opportunity to thank
our colleagues for their continued hard
work and dedication during this period to
deliver such a resilient performance.
The Market
The Board of Gfinity remains confident
in the prospects and position of the
Company, especially as the supportive
market dynamics we saw in the previous
twelve months continued into this year.
The gaming market continues to expand
with more than 3.2 billion players globally
and the industry generating revenue of
US$175.8 billion.
Historically, there has been a particular
focus around the growth in professional
esports; the best of the best playing
against each other in on and offline
competitions. While still important, the real
growth area is now grassroots competitive
gameplay. Connecting with players and
fans through engagement hubs that deliver
entertainment, competitive play and chat
forums is essential for game publishers as
they look to extend the lifecycle of their
games. This is equally important for brands
and sports rights holders seeking ways to
broaden their reach and better collect and
utilise first person data.
The continued move towards grass roots
vindicates the decision taken by the Gfinity
team to focus on what it owns – the Gfinity
Digital Media (GDM) group and licensing
its tech IP. This places the Company at the
heart of the gaming ecosystem, adding
value to key stakeholders, in a scalable
and monetisable way. Gfinity’s growing
community, aligned to its tournament and
engagement tech platform is a winning
proposition. It has never been so highly
relevant and clearly differentiated in the
marketplace.
Acquisitions
Acquisitions are key to the growth of
Gfinity, especially for GDM. It is a fast-
growing and profitable asset for the
Company and there is huge opportunity
to quicken its pace of growth. The first
major acquisition during the period was
Epicstream.com, a US based site focusing
on Marvel and Star Wars. By combining
the expertise of Gfinity and Epicstream, we
GFINITY plc | Annual Report & Financial Statements 2021
have seen significant growth in monthly
users and revenue, reinforced by new site
ideas, such as the launch of MTGRocks.
com. Following the year-end, the Company
also continued to add new sites to GDM,
the largest being Stock Informer. We have
ambitious growth aspirations for GDM and
continue to look at future acquisitions that
will allow us to achieve these at pace.
Adding new Non-Executive
Directors
During the year we strengthened the
Board with the appointment of two new
non-executive directors, both adding
significant expertise and value to the team.
Len Rinaldi joined in December 2021 and
is a former senior leader at Apple where he
was General Manager for Western Europe,
a role he held for seven years. Hugo
Drayton also joined in June 2021. Hugo
continues to serve as an Independent Non-
Executive Director on the Board of Future
plc, the global media production platform
- a role he has held for the last six years. In
addition, he was CEO of Inskin Media until
2019 - a brand advertising company he led
for 10 years, from start-up to a profitable,
global media business. Both Len and
Hugo have already made significant
contributions towards the implementation
of our strategy, and we will continue to
build our leadership expertise to expand
our capabilities.
People and Projects
We have always prided ourselves on the
dedication, can-do spirit, and innovative
thinking of our people. It is through
their efforts that our tech platform has
been deployed with major publishers;
that leading brands like Formula 1
enjoyed record viewership numbers for
its 2020 esports programme; and that
relationships with organisations like Abu
Dhabi Motorsport Management and Red
Bull go from strength to strength. It is
also encouraging that post year-end, new
commercial agreements have been signed
with brands such as Coca Cola.
In addition, I am particularly pleased
that the team has made a commitment
to identify and hire more diverse talent.
Gfinity is dedicated to improving diversity
in the UK gaming industry, and we are
proud to be a signatory of the Audeliss
and INvolve initiative to drive Black
inclusion in business, as well as supporting
the Association for UK Interactive
Entertainment (UKIE) programme called
#RaiseTheGame, also focused on
improving diversity.
In closing, Gfinity has made significant
progress against its strategic plan.
By owning one of the world’s fastest
growing gamer communities, alongside
valuable tech IP to facilitate engagement,
it is adding clear value to the gaming
ecosystem. The leadership team has
positioned the business well for further
growth.
“Gfinity has made
significant progress
against its strategic
plan”
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GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC REPORT
Chief Executive Officer’s Report
“Gaming is now mainstream and
growing fast. It is driven by an
important consumer behaviour –
young people are moving away
from passive entertainment such
as traditional TV, in favour of
interactive engagement, which
includes gaming”
When appointed Gfinity CEO in March
2020, I set out a plan to bring the
economics of our business under control
and reset the strategic focus to deliver
scalable growth. I am pleased to say that
during the past 12 months we have made
significant progress in both areas.
The Gfinity team has focused on getting
‘more from less’ which is reflected in the
reduction of both our adjusted operating
expenses by 35% and our adjusted
operating loss by 50%. In the last quarter
of 2020 we delivered the Company’s first
ever quarterly adjusted EBITDA profit,
which was an important milestone for the
business. We remain focused on delivering
high-margin revenue growth and month-
on-month profitability by FY23, while at
the same time finding ways to capture
significant growth opportunities in the
market.
For Gfinity to be a leader in the gaming
ecosystem we need to be fully embedded
into it, owning something that is highly
valued by game publishers, sports rights
holders and brands looking to reach
gamers. The business is achieving this in
two scalable areas. The first is the Gfinity
Digital Media group (GDM), a digital
publishing business focused on gamer
lifestyles. The second is Gfinity owned
technology IP, which drives everything
needed to host competitions at scale
and deepen engagement with gamers.
We made strong progress in further
developing both these areas during the
year. When combined with our world
class production capabilities and range of
client services, it is clear to see how we are
changing the dynamics of our business and
the way we partner with organisations.
The progress we have made this year is
testament to the talent and dedication of
our colleagues who have risen to every
challenge, including unprecedented
lockdowns. We continue to look for
exciting new talent to bring into the team
and we have set ourselves the challenge
of tapping into as diverse a talent pool as
possible.
Continued growth of gaming
Gaming is now mainstream and growing
fast. It is driven by an important consumer
behaviour – young people are moving
away from passive entertainment such
as traditional TV, in favour of interactive
engagement, which includes gaming.
When combined with high-speed internet,
proliferation of smartphones and tablets,
increasingly captivating games, and VR
and AR offerings from some of the world’s
biggest brands, the momentum we see
today is clearly set to continue.
Strategic focus on ‘what we own’
The Gfinity Digital Media group is now the
foundation on which our financial model is
being built. During the period the business
delivered revenues of £1.6m, up from
roughly £0.3m in the previous year. The
financial metric that we track most closely
is the annualised value of each monthly
user (MAU). By the end of the financial year
this figure had grown from 4p to 16p. The
John Clarke
Chief Executive Officer
12 November 2021
12
GDM team is now focused in the short-to-
medium-term on driving 50 million MAUs
at a target of 30p per MAU, which would
generate revenue of £15.0m per annum.
And in the medium-to-long-term, driving
100m MAUs at 40p per MAU to generate
revenue of £40.0m per annum.
The strategy to deliver this growth is now
well embedded into the business with four
key pillars to deliver against:
■
■
■
■
the first is leverage existing sites such
as Gfinityesports and Realsport101
and launch new sites at speed, such
as MTG Rocks and OMG! focused
on Magic the Gathering and mobile
games respectively;
the second is to add new sites
that build on our gamer lifestyle
positioning through targeted
acquisitions, such as Epicstream,
which we acquired in December 2020
and is focused on Marvel, Star Wars
and all things gamer geek;
the third pillar is partner with sites
that add to the user experience, like
MapGenie that helps gamers track
down hard to find in-game assets; and
the fourth pillar is to add and
expand affiliate and e-commerce
opportunities across all sites for
products that gamers need and enjoy.
Since the end of the financial year
Gfinity has added two new sites to the
GDM portfolio. Stock Informer, a highly
profitable affiliate and ecommerce site for
gamers and their lifestyles and Siege.gg, a
leading website for statistics, analysis and
news around the Rainbow Six Siege video
game. Both add significant value to our
fast-growing community of gamers.
In January 2021 we also launched
Manifold, a custom-built content
management system (CMS) which is key
to the growth and success of GDM. It
allows us to scale our existing sites quicker,
integrate the sites we acquire onto a single
CMS system and optimise all our sites both
commercially and for Google search.
Throughout the year GDM continued to
grow and gain momentum, and we are
excited to bring to life ideas for new sites
to create and acquire, whilst increasing the
annualised value per monthly user.
GDM provides multiple revenue levers and
importantly provides Gfinity first-person
data that can be used to create better,
more targeted products and experiences
for gamers. This data also facilitates more
informed conversations with brands keen
to connect with gamers.
Gfinity’s owned tech IP
Our technology IP is a significant asset
to the business. Traditionally it has been
utilised for one-off bespoke projects
for clients such as the Premier League,
Formula 1 and Activision. This financial
year, we changed this approach and
created a scalable, licensed-based model
around four distinct yet complimentary
products: a turnkey Competition Platform,
flexible for any game, any platform and any
competitive format; Game Control which
enables real-time competition adjudication
used by the likes of Formula 1; Community,
facilitating greater interaction through
forums, chat, rewards and achievements,
currently used by Nvidea; and Virtual
Production which allows remote
multiplayer participation and low-cost
broadcast solutions.
For the Competition Platform we have
three distinct products. Each has significant
total addressable markets and the
opportunity for recurring license fees.
For each we already have strong proof of
concepts, practical experience with several
of the world’s leading brands and game
publishers and playbooks to deliver them.
The team has made significant progress
in productising our owned tech IP and in
2022 will be ready to roll out at scale.
Client Service and Partnerships
During the period we also completed
commercial agreements with leading
brands and publishers including Activision,
Manchester United, Cadburys, Formula
1, Premier League and Red Bull. These
agreements are based on our ability to
enable businesses to navigate the sector
and provide the full range of gaming
services, from operations to production.
In addition we also delivered two seasons
of V10 R-League, the first product under
the Global Racing Series partnership
between Gfinity and Abu Dhabi
Motorsport Management. It attracted
several of the world’s leading motorsport
virtual teams and introduced new racing
formats that captured the imagination
of fans across the globe. The foundation
has been built and we are expecting the
2022 season to attract even more interest.
We are looking for more opportunities to
expand this business model across other
industry sectors – specifically where Gfinity
is paid for ideation, delivery, and share in
the commercial upside that is generated.
Diversity and inclusion
We continue to take positive action
towards creating a more diverse and
GFINITY plc | Annual Report & Financial Statements 2021
inclusive work environment and are
committed to participating in initiatives
- large and small - that will help us
achieve this goal. Some examples for
this year include: modifying language
used in our job posts in order to ensure
we attract people from all backgrounds,
and becoming a signatory of If Not Now,
When? and #RaiseTheGame, initiatives
focusing on improving diversity across UK
business and gaming respectively. We have
also created an internship program open
to talent from BAME backgrounds.
We have actively advertised in more
platforms and locations, reaching out to
more diverse applicants than ever before
and investment has been made into an ATS
system which will allow us to implement
anonymised hiring tactics moving forward.
The Company has also made a
commitment to include unconscious
bias training as part of our induction
programme by the end of the FY 21/22.
As part of a wider review of our inclusion
practices we have enhanced our maternity
and paternity policies, to allow for parents
to spend more time with their family.
Outlook
The sharpened operational focus,
combined with the significant reduction
in our cost base, has given Gfinity the
impetus to win and deliver on the major
opportunity we see ahead of us. Gfinity’s
continued success also remains dependent
upon positive business and consumer
sentiment. The timing of new advertising
campaigns and programmes are
determined by a range of factors, including
our customers. There are risks associated
with these timings and therefore it is
important that we remain agile, flexible
and entrepreneurial, continually adding to
an already strong pipeline of opportunities.
Conclusion
Gaming is here to stay and will continue
to grow. Macro trends are working in our
favour. Gfinity is now embedded into the
gaming ecosystem and is adding value to
it through the strategic focus on ‘what we
own’. We are staying focused on what we
can control, building the GDM and our
tech IP licensing business, partnering with
organisations who have mutual interests
and working with great brands that value
our expertise. We are on an exciting
journey and I would like to thank the
Gfinity team, our business partners and our
clients for their continued hard work and
support.
13
STRATEGIC REPORT
Chief Financial and Operating Officer’s Report
“I am pleased to be able to report
on full year revenue growth of 27%
to £5.7m. I am also particularly
encouraged that this has been
largely driven by revenue relating
to Gfinity owned and co-owned
content, which increased by 768%”
Summary
The year to 30 June 2021 was one of
significant financial progress for the
business.
In March 2020, we announced a review of
the business positioning, sharpening its
strategic focus around owned properties
in areas which we believe we hold a
competitive advantage and can scale
profitably. The results for the year to 30
June 2021 reflect the first full year impact
of these changes.
In that context, I am pleased to be able to
report on full year revenue growth of 27%
to £5.7m. I am also particularly encouraged
that this has been largely driven by
revenue relating to Gfinity owned and co-
owned content, which increased by 768%
to £2.3m (FY20: £0.3m). Of this £1.6m
of revenue related to the Gfinity Digital
Media Network (FY20: £0.3m), while £0.7m
related to jointly owned esports properties,
including the Global Racing Series in
conjunction with Abu Dhabi Motorsports
Management (FY20: £nil). The growth
of these owned and recurring revenue
streams provides a strong platform for
scalable growth in future years.
The sharpening of focus also allowed us
to make significant savings in operating
expenditure. Adjusted administrative
expenses of £5.4m represented a 35% year
on year reduction (FY20: £8.3m), which
followed a 13% reduction delivered during
FY20.
The overall impact of these changes was a
50% reduction in the Adjusted Operating
Loss for the year to £2.7m (FY20: £5.5m).
Again, this built on a 36% reduction in the
year to 30 June 2020.
In December 2020, Gfinity disposed of its
33% minority holding in Esports Awards
for £0.5m. With the investment held at
zero carrying value this resulted in a £0.5m
gain on disposal of an associate entity. As
a result, the Adjusted EBITDA loss, which
includes the impact of all gains and losses
on associates reduced to £2.3m. This
represented a year-on-year reduction of
61% (FY20: £5.8m).
In December 2020, we were delighted to
announce the acquisition of the trade and
assets of the Epicstream business. This
was supplemented following the year-end
through the acquisitions of the trade and
assets of the SiegeGG business and of
Megit Limited, the company that owns
and operates the highly profitable Stock
Informer brand.
These acquisitions are in line with our
strategy to build a large and highly
engaged digital media publishing
business based around gamers and their
lifestyles. The Gfinity Digital Media group
will consist of a network of sites, each
featuring its own unique properties of
content, which add value to the experience
of a particular segment of gamers. This
network will benefit from the economies
of scale of delivery of high-quality
supporting technology and infrastructure
across a larger number of sites. It will
also build the scale to fully capitalise on
Jonathan Hall
Chief Financial and Operations Officer
12 November 2021
14
GFINITY plc | Annual Report & Financial Statements 2020 the revenue opportunity, allowing for
premium advertising rates to be earned
through the direct sale of campaigns to
brands and other organisations wanting
to connect with gamers. This will form
part of a diversified revenue model, with
eCommerce and affiliate revenues also
playing a growing importance in driving
increases in the revenue per user across
the network
Revenue and cost of sales
Revenue of £5.7m reflects an increase of
27% year on year (FY20: £4.5m). Of this,
£2.3m related to Gfinity owned and co-
owned content, comprising of £1.6m in
respect of Gfinity Digital Media group and
£0.7m in respect of global racing series.
Across the full year to June 2021, Gfinity
Digital Media averaged 10.7m monthly
active unique users, delivering average
annualised revenue of 15.2p per user. As
the business scales, we believe that it
should be possible to significantly scale
both the number of users and revenue per
user through:
User Numbers
■ Continued development of content
and SEO strategy to drive growth in
existing sites
■ Launch of new sites, powered by
custom built content management
system (CMS), e.g. RacingGames.GG
(eRacing), Stealth Optional (gamer
tech) and MTGRocks (Magic the
Gathering)
■ Acquisition of targeted sites e.g.
Epicstream, StockInformer and
SiegeGG.
Revenue per User
■ Increased proportion of direct
campaigns, at premium rates as brands
look to directly target Gfinity’s owned
audience
■ Growth of eCommerce and affiliate
revenues
■ Deployment of additional technology
and content, to drive more visits per
user and increase time on site, creating
more monetisation opportunities.
In the short to medium term, we are
targeting growth to 50 million monthly
active users (MAU) at 30p revenue per
MAU, rising to 100m MAUs at 40p per
MAU in the medium to longer-term.
Revenue relating to the provision
of esports services, technology and
content on behalf of clients was £3.4m,
which represented a reduction of 20%
year on year (FY20: £4.2m). This partly
reflected a reduction in the number of
live esports events taking place as a
result of COVID-19, which only had a part
year impact on the FY20 results. It also
represents our shift in strategic focus, with
a greater focus being placed on Gfinity’s
higher-margin owned properties.
Gross profit reduced slightly year-on-year
to £2.6m (FY20: £2.8m). This primarily
reflected a move to a more variable cost
model, in line with the significant reduction
in administrative expenses, with more staff
brought in to support as required on a
programme-by-programme basis, rather
than forming part of the ongoing overhead
of the business. It also reflected an
investment of £0.2m in the launch and first
two seasons of the Global Racing Series in
conjunction with Abu Dhabi Motorsports
Management.
Administrative Expenses
As a Board, we monitor ourselves against
Adjusted Administrative Expenses,
as the measure which most closely
reflects the cash costs to the business.
This measure adjusts for the impact of
non-cash items, including amortisation
or other adjustments to the carrying
value of goodwill and intangible assets,
depreciation on owned assets and the
share option charge. For consistency with
prior years and to most closely align to
cash costs, operating lease payments
which are capitalised under IFRS 16 are still
included within Adjusted Administrative
Expenses.
Unadjusted administrative expenses
include:
■ Share option charge of £0.3m, which
represents a significant reduction of
the figure for FY20 of £1.5m, which
featured an accelerated charge in
respect of certain former board
members
■ Amortisation of intangibles and
adjustments to goodwill of £0.5m
(2020: £0.5m)
■ Depreciation of owned assets of £0.6m
(2020: £0.4m)
■ Impairment of the goodwill held in
respect of acquisition of CEVO, Inc of
£0.9m (2020: £nil)
CEVO, Inc was acquired by Gfinity in July
2017, since which time the CEVO business
has provided significant value to the
overall Group. CEVO’s esports platform
continues to form the basis of the current
Gfinity Esports Platform, which is used to
support esports programmes for multiple
clients and is central to the productization
of Gfinity’s esports technology suite.
CEVO also continues to deliver services
to a key client under its own brand in
USA. Intangible assets identified on
acquisition continue to be held in respect
of both of these items. Over time,
however, the operations of CEVO have
become increasingly intertwined with
those of Gfinity. Former CEVO directors
hold senior positions within the Gfinity
business, including Head of Product and
Head of Technology. As a result, it has
become increasingly difficult to separately
quantify the value of future cash flows
relating to the CEVO brand. On this basis,
directors have taken the decision to write
the value of goodwill down to zero. This
has no impact on the underlying adjusted
operating profit of the business.
Adjusted Administrative Expenses for the
year to June 2021 totaled £5.4m, which
represented a year on year decrease of
35% (FY20: £8.3m). Adjusted for £0.1m of
Other Income received under the furlough
scheme, the net overhead cost of the
business reduced to £5.3m in the year to
June 2021.
The reduction was principally driven by
significant headcount reductions applied
during a restructuring of activities in March
2020. It also included release of the
company’s office in April 2021, with staff
now working primarily from home and from
the Gfinity Arena as required.
Operating loss
The cumulative impact of the factors
outlined above is that the Operating Loss
for the year reduced by 50% to £2.7m
(2020: £5.5m). This followed a 36% year
on year reduction in FY20, as the company
continues to progress towards profitability.
Share of gain/loss in associates
In December 2020, Gfinity disposed of its
33% minority holding in Esports Awards for
£500,000. This represented a strong return
on an initial investment of £138,000. With
the investment having been written down
in line with losses in the associate, at the
time of disposal, the investment was held
at zero carrying value in both the Company
and Consolidated Balance Sheets. Net
of a debtor balance of £40,294, which
was waived as part of the transaction, this
disposal resulted in a gain of £459,706.
With no activity in the Gfinity Esports
Australia business, which is in the process
of being wound down, in the year, this
meant an overall gain on associates of
15
GFINITY plc | Annual Report & Financial Statements 2020 revenues, which continue to benefit from a
global chip shortage, resulting in demand
outstripping supply for in-demand gaming
products.
SiegeGG continues to be seen as the
authority on statistics and news in relation
to the Rainbow Six Siege competitive
scene, which alongside advertising
revenues, results in ongoing revenue
streams from the licensing of this data to
event organisers and broadcasters in the
Rainbow Six Siege scene.
Outlook
Overall, the results outlined in this Annual
Report represent a year of significant
progress for the business. Directors expect
revenue to continue to grow, driven largely
by Gfinity owned content and technology.
It is also expected that organic growth will
be supplemented by further mergers and
acquisitions, as Gfinity seeks to rapidly
grow both the scale and the profitability of
its Digital Media network.
This growth will be supplemented by
an investment in the productisation of
Gfinity’s owned esports technology, in
the expectation that the licensing of this
technology will create a further scalable,
repeatable and profitable revenue stream
for the business.
This will enable Gfinity to fully deliver value
to shareholders from the leading position it
has created within the valuable esports and
video gaming market.
£459,706 (2020: loss of £308,214).
As a result, the Adjusted EBITDA loss,
which includes the impact of all gains and
losses on associates reduced to £2.3m.
This represented a year-on-year reduction
of 61% (FY20: £5.8m).
Cash and cash equivalents
Year-end cash of £1.4m (2020: £1.6m) was
slightly ahead of expectations. At the year
end, £0.2m of warrants in respect of shares
acquired during the April 2020 fundraise
remained outstanding, which have now
expired.
Following the year end, Gfinity successfully
completed an oversubscribed fundraise at
market price, reflecting continued strong
investor support for the business. This
placing raised a further £3.3m gross (£3.1m
net). Of this sum, £2.5m was used to
acquire Megit Limited, owner of the Stock
Informer brand, which is expected to have
a strong cash positive impact on Gfinity’s
future performance.
Mergers and Acquisitions
In December 2020 Gfinity announced the
acquisition of the trade and assets of the
Epicstream business, which consisted of
the Epicstream.com website and related
content, together with an engaged
Facebook network featuring over 6 million
likes. Consideration for this consisted of 10
million shares, with a fair value at the date
of acquisition of 3.6p, together with an
earn out of 30% of revenue in each of the
first 2 years.
Following the year-end Gfinity announced
two further acquisitions:
■ Megit Ltd, the parent company of
the Stock Informer brand, which
operates the StockInformer.co.uk and
StockInformer.com sites in UK and USA
respectively. Stock Informer holds a
position of authority on the availability
of hard to get items of stock, of
particular relevance to gamers. Its
proprietary technology ensures an
up to date record of when such items
become available allowing it to earn
revenue through affiliate commissions.
In the year to 31 March 2021 Megit Ltd
earned revenue of £2.3m and profit
before tax of £2.2m, demonstrating
a highly profitable, scalable model.
While the launch of next generation
PlayStation and Xbox consoles
means this year won’t necessarily
represent a benchmark for recurring
income, directors believe that stock
shortages will be an ongoing issue
and the market leading position that
16
Stock Informer has established with
regards to this will represent a valuable
addition to the GDM network.
o Consideration for the acquisition
of Megit Limited comprised of:
• £2.5m in cash
• £2.5m in Gfinity equity settled via
the issuance of 62.5m new ordinary
shares at the placing price of 4p in
September 2021; and
• An earn out of 30% of revenue
in each of the first 3 years post
acquisition, capped at a maximum
value of £1.8m.
■ The trade and assets of the SiegeGG
business. SiegeGG has acquired a
leading position as the authority on
all news and statistics relating to
the competitive scene around the
Rainbow Six Siege game published
by Ubisoft. The business generates
revenues through the licensing of its
database of statistical information
relating to Rainbow Six Siege esports
and onsite advertising. In the year to
31 December 2020, SiegeGG reported
unaudited revenues of $0.1 million and
profit before tax of $40k.
o Consideration for the acquisition
of SiegeGG comprised of:
• 9 million ordinary shares, with a fair
value on the date of acquisition of
4.4p
• An earn out of 30% of revenue
in each of the first 2 years post
acquisition, capped at a maximum
value of £1.5m.
As the earliest of these acquisitions,
Epicstream has provided an excellent case
study for other sites to follow. The site
benefits from having been migrated to
Gfinity’s proprietary Content Management
System “Manifold”, which powers
other large sites in the network and the
deployment of Gfinity’s content and
SEO strategy. Having delivered 600,000
monthly active users in its first month
under Gfinity in December 2020, the site
has grown to reach around 3 million users
a month and is now benefitting from being
jointly commercialised through Gfinity’s
preferential partnerships.
While both the Stock Informer and
SiegeGG acquisitions have been much
more recent, initial indications are positive.
Both have now been integrated into
Gfinity’s commercial and advertising
partnerships, creating new advertising
revenue streams. In the case of Stock
Informer, this supplements ongoing affiliate
GFINITY plc | Annual Report & Financial Statements 2020 17
GFINITY plc | Annual Report & Financial Statements 2020 STRATEGIC REPORT
Principal Risks and Uncertainties
Introduction
Gfinity’s long-term success will depend
in large part on its ability to manage the
key risks affecting the Company. Gfinity
is an innovative business in a rapidly
developing sector. In that context, the
risks facing Gfinity 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 them.
“Gfinity is an
innovative business
in a rapidly
developing sector”
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 and Operations Officer.
Responsibility for the management of
risks lies with different members of the
Executive leadership team depending on
the nature of the risk.
Gfinity distinguishes between strategic
risks and operating risks. Strategic risks
represent macro level matters, which may
impact on the strategy of the Company.
Operating risks reflect 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
Chief Executive. Mitigation strategies and
the emergence of new strategic risks are
considered through the weekly senior
leadership team meetings, which he chairs.
Operational risks are the responsibility
of the Chief Financial and Operations
Officer and are considered both at the
senior leadership team meetings and
through weekly one to one meetings with
the 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
frameworks are 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:
18
GFINITY plc | Annual Report & Financial Statements 2021 STRATEGIC RISKS
Risk
COVID-19 risk
Economic and political uncertainty
Intellectual property risk
Perception of video gaming
Description
Mitigating Actions
The COVID-19 pandemic drove an
unparalleled level of uncertainty within the
global economy.
This has resulted in many organisations
holding back from making long term
spending commitments.
It has also seen a movement away from
spend on live, in- person events.
The potential for further outbreaks and
related lockdown measures also has
implications for financial markets, which
could have implications both for Gfinity’s
share price and the availability of future
capital.
The United Kingdom’s exit from European
Union has created a level of economic and
political uncertainty, which provides risks at
both a strategic and operational level for
Gfinity. At a strategic level, the uncertainty
could create challenges with regards to
capital availability and the desire of global
publishers, rights holders and brands to
deliver programmes in the UK.
Esports involves the use of intellectual
property, typically owned by the publishers
of the respective game titles.
Gfinity must consider the risk of changes
in strategy of the intellectual property
owners, resulting in certain games not being
available for use by Gfinity in its esports
properties, or fees being required for the
use of intellectual property, which may
present a challenge to Gfinity’s business
model.
Some people view video gaming negatively,
as something that promotes 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 Gfinity’s
business model.
Gfinity acted quickly in the spring of 2020
to reduce the cost base of the business and
focus activities on areas where directors
believe they can both be successful in
the long term, but also in which they can
continue to win in the short term.
This was reflected in the speed with which
esports programmes for clients including
Formula 1 and Premier League, with
participants competing remotely were
brought to market following the initial
outbreak of the disease.
At a strategic level, the building of
Gfinity’s own audience on its Digital Media
platforms has made the company much less
susceptible to fluctuations related to the
staging of live events.
The structural changes to the cost base of
the company and the additional security
over funding, resulting from the fundraise
undertaken in April 2020, ensures that the
company will have the resources to ride out
any short term economic uncertainty.
The move towards an increased level of
digital engagement, with participants
competing remotely also decreases Gfinity’s
dependence on live events and cross border
travel.
Gfinity’s brand and technology platform,
together with the audience consuming
Gfinity content, has been developed
across multiple titles, ensuring there is no
dependence on any single title.
Gfinity 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 Gfinity.
Gfinity 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 the top level,
where teams and players are practicing
for many hours per day, this will frequently
be supplemented by fitness and nutrition
programmes to keep players healthy.
19
GFINITY plc | Annual Report & Financial Statements 2020 Gfinity continues to invest both in its
own market leading technology and
development of a large community of
fans who come directly to Gfinity for their
own esports and video gaming news and
content.
This owned technology and owned audience
ensures that Gfinity continues to retain a
competitive advantage over new entrants to
the market.
While Gfinity will continue to provide
services to key partners in addition to these
owned areas, it will only do so where the
economic terms make commercial sense for
the business to do so.
The directors of Gfinity firmly believe that
establishing a market leading position in the
fast-growing esports sector is the best route
to delivering significant long-term value to
shareholders.
Nonetheless, in view of the fact that revenue
progression may be non- linear, as noted
in the current year results, the board has
adopted a strategy of sharpening the
focus of the business onto areas in which
the company enjoys a distinct competitive
advantage, which can grow profitably and
while can recur year after year. These
include advertising income relating to its
owned audience, licensing of its esports
technology and long term commercial
partnerships, such as that with ADMM.
GFINITY plc | Annual Report & Financial Statements 2021
STRATEGIC RISKS (continued)
Risk
Competition risk
Description
Mitigating Actions
There are currently very few companies
globally that can deliver full end to end
esports solutions and Gfinity has established
a first 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.
Speed of revenue growth
Gfinity operates in a pioneering sector.
Directors believe, supported by market
research, that the value of that sector is
significantly 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.
20
GFINITY plc | Annual Report & Financial Statements 2021
Description
Mitigating Actions
OPERATIONAL RISKS
Risk
COVID-19 risk
Alongside the strategic risks, the COVID-19
outbreak has presented multiple operational
risks to the business, including:
■ Key staff availability; in the event that
multiple people needed to be absent at
a single point in time
■ Facility availability; ensuring we remain
able to generate competitive gaming
content for our own programmes and for
clients without breaching government
regulations
■ Maintaining efficient and effective ways
of working, including ensuring that staff
are able to do their jobs even if they
can’t come to the office
■ Maintaining appropriate communication,
so the company’s activities remain
focused and aligned.
Department leaders have been targeted
with ensuring that there is appropriate
knowledge sharing within the teams and
in building a broader network of people
who understand our processes and ways of
working, who can come in at short notice to
support our activities.
Staff have successfully worked remotely
throughout the past 18 month period,
however, weekly all staff meetings and
quarterly in-person all staff meetings ensure
continued strong communication across the
business.
The company engaged a team of specialist
consultants to reconfigure the arena and
develop new ways of working that, as far
as possible adhered to social distancing
guidelines and continues to monitor the
effectiveness of these processes.
The company’s investment in technology
has also allowed it to continue delivering
high quality content, without the need for
participants to travel into the arena.
Gfinity maintains a strong core group of
investors but has also sought over recent
fundraises to broaden this shareholder base.
In that context, we were delighted in the
fundraise completed in September 2021 to
introduce a new cornerstone institutional
investor Canaccord Genuity.
As noted previously, the company has also
undertaken a restructuring to significantly
reduce the month on month cost base.
This, combined with the growth of the
profitable Gfinity Digital Media business and
acquisition of Megit Ltd, will support the
business as it drives to a cash flow positive
position.
Liquidity risk
Gfinity is currently a loss-making company
and as such, must ensure that it has sufficient
capital available to deliver on its strategy.
Access to key skills
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,
Gfinity would not be able to provide the
depth of solutions to its client base or build
its own Gfinity “tribe”.
Gfinity places a 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.
21
GFINITY plc | Annual Report & Financial Statements 2021
OPERATIONAL RISKS (continued)
Data security risk
Gfinity has built a large community
of esports fans playing, watching and
socialising through its own platform and
those of CEVO and RealSport. Increasing
levels of data protection regulation,
including GDPR legislation, and ongoing
cyber security risks, 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 significantly erode
trust, both among the esports community
and prospective commercial partners.
Gfinity 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.
Neville Upton
Chairman
12 November 2021
22
GFINITY plc | Annual Report & Financial Statements 2021
GFINITY plc | Annual Report & Financial Statements 2020
23
23
Annual Report & Financial Statements 2021
GOVERNANCE
GFINITY plc | Annual Report & Financial Statements 2021
GFINITY plc | Annual Report & Financial Statements 2021
GOVERNANCE
Corporate Governance Report
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.
Board of directors:
The Gfinity plc board is responsible for:
■ Setting the strategy across all Gfinity
group companies;
■ Defining the business model and the
financial framework within which the
business must operate;
■ Setting and ensuring the
implementation of the culture, to
deliver success;
■ Designing and implementing controls
and the risk management framework;
■ Ensuring communication with
key stakeholders, including staff,
shareholders, suppliers and customers;
■ Appointing a senior Executive Team,
capable of delivering on the defined
strategy;
■ Monitoring performance against the
above areas and taking remedial
actions as appropriate;
■ Ensuring availability of capital to deliver
on the chosen strategy.
Chair’s statement
on corporate governance
“The Directors recognise the
fundamental importance of
good corporate governance
in providing an efficient,
effective and dynamic
management framework to
ensure that the Company is
managed in the right way for
the benefit of all shareholders
over the medium to long-term.
In view of this, the board
of Gfinity 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 Gfinity
believe is correct for Gfinity
in its current stage of growth.
This section of the report
provides further details on
how Gfinity complies with
these principles of good
corporate governance. Further
information can also be
found on our investor website
www.gfinityplc.com.”
Neville Upton
Chairman
26
GOVERNANCE
Board of Directors
GFINITY plc | Annual Report & Financial Statements 2021
NEVILLE UPTON, CHAIRMAN
Appointed: 15 January 2014
After graduating at the London school of Economics, Neville joined Coopers & Lybrand where he qualified 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 Finance and Operations Director, in 1998 he established a call centre business, The Listening Company, which
specialised 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 Gfinity in
2012 and assumed the role of Chairman in March 2020.
JOHN CLARKE, CHIEF EXECUTIVE OFFICER
Appointed: 18 September 2018
John is an experienced business executive having worked in and with leading global companies for the last 25 years. Prior to joining Gfinity,
John worked for HEINEKEN N.V. where he was Head of Global Communications and, most recently, 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 was appointed to the board in September 2018, originally as a non-executive director. In May 2019 he was appointed
as the Chief Commerical and Brand Officer, in which role he oversaw a rapid expansion of the Gfinity and RealSport communities. John was
appointed Chief Executive in March 2020.
JONATHAN HALL, CHIEF FINANCIAL AND OPERATIONS OFFICER
Appointed: 1 September 2014
Jon qualified as a Chartered Accountant with Arthur Andersen followed by a period of six years specialising in organisation and business
process design with PA Consulting, a leading London based management consultancy firm. He subsequently spent five years as a Finance
Director of Saracens Ltd and the wider Premier Team Holdings Group, before joining Gfinity in August 2014 where he led the process of
the Company’s admission to AIM. As Chief Financial and Operations Officer Jon has responsibility for all aspects of finance and accounting,
including financial planning, reporting and accessing capital to fund growth. He also retains responsibility for all company operations including
event delivery, technology, HR and legal matters.
LEONARD RINALDI, INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed: 18 December 2020
Len Rinaldi retired in April 2019 after 12 years as the General Manager, Western Europe, Apple, Inc., where he led sales / general
management across Western Europe. Previously, as Apple’s CFO EMEIA 2007 – 2012, he oversaw revenue hyper growth from $7bn to $40bn.
Len also sat on the boards of Apple India (revenues $800m) as it entered the market, and Apple France (revenues $4bn).
His early career was spent in finance and business development/sales roles at AT&T and Alcatel Lucent, and has lived in Saudi Arabia,
Singapore, USA, Paris, and London. Len holds an MBA in Finance from FDU. In addition he has Executive Leadership Certifications from
Wharton School of Business and the University of Notre Dame.
HUGO DRAYTON, INDEPENDENT NON-EXECUTIVE DIRECTOR
Appointed: 21 May 2021
Hugo has spent the past 30 years in publishing and media, as a pioneer in digital media, including planning and launching the UK’s first online
newspaper – Electronic Telegraph, in 1994. He led Inskin Media, as CEO, for 10 years until 2020, growing it from start-up to a global, brand
advertising business. Previously, he spent 10 years at The Telegraph Group, latterly as Group Managing Director. Hugo led Advertising.com,
Europe, for 2 years, and was launch CEO of behavioural marketing company, Phorm.
Hugo is a non-executive director on the board of FTSE250 Future plc, and is an investor/advisor to several media and ad-tech businesses. He
serves as a Trustee of the Felix Byam Shaw (Felix Project) and British Skin Foundation charities.
His early career was spent overseas, in Europe and South America, with Coats Viyella, and launching automated telephony services across
Europe with Reed Telemedia.
27
GFINITY plc | Annual Report & Financial Statements 2021
GOVERNANCE
Board Composition and Performance
The composition of the Gfinity board
is structured to contain the range of
skills and personal qualities required to
effectively discharge its duties. The board
recognises that as Gfinity develops, within
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 the
Nominations Committee. Further details
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.
Attendance Record:
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 Chairman, Neville Upton
also retains responsibility for oversight
of the development and delivery of the
Company’s strategy, supported by the
Executive Directors.
The Chair ensures that the board considers
the key issues affecting the Group, both
operationally and financially, and together
with the Company Secretary ensures the
correct information flows between the
board, its respective committees and
between the Independent Directors and
senior management.
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 confidential sounding board to the
chairs of those committees.
Board Conduct of Business:
Full board meetings are held monthly,
other than in August and December,
meaning a minimum of ten meetings per
annum to conduct the regular business of
the board. Further full board meetings shall
be held as required to provide approval on
specific matters, including major corporate
transactions and the allotment of new
shares. Over the course of both FY20 and
FY21, this resulted in a significant number
of meetings to approve the allotment
of new shares granted in respect of the
exercise of warrants relating to fundraise
undertaken in April 2020.
The quorum for a board meeting to be
considered valid is two.
Director
Neville Upton
John Clarke
Jonathan Hall
Preeti Mardia
Andy MacLeod
Leonard Rinaldi
Hugo Drayton
Number of Meetings Attended
Total Meetings in Period in Office
29
29
29
27
29
13
2
29
29
29
27
29
13
2
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, it was decided to introduce two new
members to the board, both of whom bring strong governance
capability, coupled with deep expertise in sectors highly relevant
to Gfinity’s continued growth.
Performance of the board is assessed on an annual basis. This
process is led by the Chair of the board, supported by the Chief
Financial and Operations Officer, and assesses 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 confidence to
shareholders on the integrity of the financial results of the
Company, expressed in this annual report and accounts, and
other relevant public announcements made by 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:
■ Leonard Rinaldi (Chair)
■ Neville Upton
■ Jonathan Hall
Prior to her resignation from the board, Preeti Mardia was the
Chair of the Audit Committee, while Andy MacLeod was also a
member of the Audit Committee prior to his resignation from the
board.
28
GFINITY plc | Annual Report & Financial Statements 2021
Attendance Record:
Director
Preeti Mardia
Andy MacLeod
Jonathan Hall
Leonard Rinaldi*
Neville Upton*
Number of Meetings Attended
Total Meetings in Period in Office
2
2
2
-
-
2
2
2
-
-
* The first Audit Committee meetings following Neville Upton and Leonard Rinaldi’s appointment took place following the period end.
Nominations Committee
The Nominations 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
Attendance Record:
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.
Prior to his resignation from the Board
Andy MacLeod acted as Chair of the
Nominations Committee, while prior to her
resignation Preeti Mardia also served as a
member of the Nominations Committee.
The Nominations Committee comprises of:
■ Hugo Drayton (Chair)
■ Neville Upton
■ John Clarke
Director
Andy MacLeod
Preeti Mardia
Neville Upton
John Clarke
Hugo Drayton
Number of Meetings Attended
Total Meetings in Period in Office
2
1
2
2
-
2
1
2
2
-
Remuneration Committee
The Remuneration Committee is
responsible for outlining the principles of
remuneration strategy to be applied across
the Gfinity Group. It also directly approves
the remuneration of all directors, together
with the grant of any option over shares in
Gfinity 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 six Board meetings per annum, 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
Hugo Drayton, Neville Upton and Leonard
Rinaldi. Andy MacLeod and Preeti Mardia
both formed part of the remuneration
committee prior to their resignations.
Attendance Record:
Director
Andy MacLeod
Preeti Mardia
Hugo Drayton
Neville Upton
Leonard Rinaldi
Number of Meetings Attended
Total Meetings in Period in Office
3
2
-
1
1
3
2
-
1
1
29
Full disclosure of director remuneration is provided within the Directors Remuneration Report.
GOVERNANCE
Directors’ Remuneration Report
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
financial year of the Company
and so Gfinity plc makes
the following disclosures
voluntarily, which are not
intended to, and 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
Gfinity 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 Financial and Operations Officer.
The remuneration packages of Executive
Directors comprise the following elements:
Basic salary and benefits
Basic salaries for Executive Directors are
reviewed annually and take into account
individual performance, market practice
and the financial 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 and relative to the experience of the
individuals in question. Executive Directors
are eligible for pension contributions and
participation in the Company’s health
insurance and life assurance schemes.
Annual bonuses
Bonuses awarded to Executive Directors
are included in the Directors’ Emoluments
table on page 32. Bonuses form part of the
overall remuneration of Executive Directors
and are aligned to the achievement of
financial and strategic milestones which are
designed to promote long-term value for
all shareholders.
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.
30
All directors hold either shares or share
options in the company. The board of
Gfinity believes offering Non- Executive
Directors shares in the Company at a price
and level that aligns them with the interests
of the wider shareholder base is in interests
of all shareholders. The Board also believes
it is an essential part of attracting high
calibre individuals to the Board.
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 into comprehensive
director service contracts at the time, or
immediately in advance of commencing
their roles.
All Executive directors’ appointments are
subject to six 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 office 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.
GFINITY plc | Annual Report & Financial Statements 2021 DIRECTORS’ INTERESTS IN SHARES
The interests of the Directors at 30 June 2021 in the shares of the Company were:
Director
Neville Upton
John Clarke
Jonathan Hall
Andrew MacLeod
Hugo Drayton
Leonard Rinaldi
SHARE OPTIONS
Number of Ordinary Shares
Percentage of issued share capital
14,877,245
1,222,222
1,222,222
78,704
0
0
17,400,393
2.05%
0.10%
0.10%
0.01%
0.00%
0.00%
2.26%
Directors’ interests in options over the ordinary shares in the company were as follows:
Director
Neville Upton
John Clarke
Jonathan Hall
Andrew MacLeod
Hugo Drayton
Leonard Rinaldi
Preeti Mardia*
As at 30 June 2020
Options Granted
Options Lapsed
As at 30 June 2021
5,000,000
8,000,000
5,000,000
1,000,000
-
-
1,000,000
-
6,000,000
4,000,000
-
4,000,000
4,000,000
-
-
-
-
-
-
-
-
5,000,000
14,000,000
9,000,000
1,000,000
4,000,000
4,000,000
1,000,000
*Preeti Mardia resigned from the board on 21 May 2021.
20,000,000
18,000,000
0
38,000,000
31
GFINITY plc | Annual Report & Financial Statements 2021 GOVERNANCE
Audited Information – this section forms part of the
financial statements by cross-reference.
DIRECTORS’ EMOLUMENTS
Emoluments of the directors for the year ended 30 June 2021 are shown below.
30 June 2021
30 June 2020
Bonus
Pension
Total
Remuneration
Total
Remuneration
Director
Neville Upton
John Clarke
Jonathan Hall
Andrew MacLeod
Hugo Charles Drayton
Leonard Richard Rinaldi
Preeti Mardia*
Salary &
Fees
£
50,000
140,000
136,000
25,000
4,444
21,449
22,321
£
-
20,000
20,000
-
-
-
-
£
-
2,192
2,192
-
-
-
830
£
50,000
162,192
158,192
25,000
4,444
21,449
23,151
399,215
40,000
5,214
444,428
*Preeti Mardia resigned from the board on 21 May 2021.
This report was approved by the board and signed on its behalf.
Neville Upton
Chairman
12 November 2021
32
£
106,250
168,442
163,692
25,000
0
0
25,942
489,326
GFINITY plc | Annual Report & Financial Statements 2021 GOVERNANCE
Directors’ Report
The directors present their
annual report on the affairs of
the Company, together with
the financial statements and
auditor’s report, for the year
ended 30 June 2021.
Principal activities
Capital structure
Gfinity is a world leading esports company.
As a trusted independent esports provider
it designs, develops and delivers esports
solutions to publishers, sports rights
holders, brands and media companies that
connects them with hundreds of millions
of young gamers. Gfinity is also becoming
a standalone media distribution business,
organically engaging with a rapidly
growing community of gamers on its
own digital channels; Gfinityesports.com,
RealSport101.com and StealthOptional.
com.
An overview of Gfinity’s strategy and
business model is provided within the
Gfinity At A Glance section of this Strategic
report.
Future development
Our development objectives for 2021–22
and beyond are disclosed in the Strategic
Report.
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 flows.
No changes were made to these
objectives, policies or processes during the
year ended 30 June 2021.
Results and dividends
The consolidated income statement is set
out on page 44.
The Group’s loss after taxation amounted
to £3.8m (2020: loss of £7.7m).
The directors do not recommend the
payment of a dividend for the year ended
30 June 2021.
33
GFINITY plc | Annual Report & Financial Statements 2021 Preeti Mardia
Executive Chairman
(Resigned: 21 May 2021)
Andy MacLeod
Non-Executive Director
Directors’ indemnities
The Company has made qualifying third
party indemnity provisions for the benefit
of its directors, which were made during
the year and remain in force at the date of
this report.
GFINITY plc | Annual Report & Financial Statements 2021
Events since the balance
sheet date
On 23 August 2021 Gfinity announced
its intention to raise up to £3.3m and to
acquire the entire share capital of Megit
Limited, owner of the Stock Informer
brand. On 24 August, the company
announced the successful completion of
this placing and related acquisition, subject
to shareholder approval. On 10 September,
it was announced that this approval had
been granted at an Extraordinary General
Meeting of the Company.
On 8 September 2021, Gfinity announced
that it had completed the acquisition of the
trade and assets of SiegeGG, the popular
website and social channels relating to
the competitive scene of the Rainbow Six
Siege.
Research and development
The Company undertakes development
activities which involve a planned
investment in the building and
enhancement of Gfinity 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 benefits in
the form of cash flows to the Company.
Further information on development
activities are provided in the Strategic
Report.
Risk Management
Information on Gfinity’s approach to
risk management is provided within the
Principal Risks and Uncertainties section of
this report.
Directors
The following directors held office as
indicated below for the year ended 30
June 2020 and up to the date of signing
the consolidated financial statements
except where otherwise shown.
Neville Upton
Chairman
John Clarke
Chief Executive Officer
Jonathan Hall
Chief Finance and Operations Officer
Leonard Rinaldi
Non-Executive Director
(Appointed: 18 December 2020)
Hugo Drayton
Non-Executive Director
(Appointed: 21 May 2021)
34
GOVERNANCE
Statement of Directors’ responsibilities
GFINITY plc | Annual Report & Financial Statements 2021
The directors are responsible
for preparing the annual
report and the financial
statements in accordance
with applicable law and
regulations. Company law
requires the directors to
prepare financial statements
for each financial year. Under
that law the directors have
elected to prepare company
financial statements in
accordance with International
Financial Reporting Standards
(“IFRSs”) as adopted by the
European Union.
Under company law the directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs of the
Company and of the profit or loss of the
Company for the period. The directors
are also required to prepare financial
statements in accordance with the rules of
the London Stock Exchange for companies
trading securities on AIM. In preparing
these financial statements, the directors are
required to:
■ present fairly the financial position,
financial performance and cashflows 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 financial statements; and
■ prepare the financial 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 sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies
Act 2006.
They are also responsible for safeguarding
the assets of the Company and hence for
taking reasonable steps for the prevention
and detection of fraud and other
irregularities.
The directors are responsible for ensuring
the annual report and the financial
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 financial statements,
which may vary from legislation in other
jurisdictions. The directors are responsible
for the maintenance and integrity of
the corporate and financial 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
confirms 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 confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
Companies Act 2006.
Blick Rothenberg Audit LLP have expressed
their willingness to continue in office as
auditors and a resolution to reappoint
them will be proposed at the forthcoming
Annual General Meeting.
By order of the board:
Neville Upton
Chairman
12 November 2021
35
Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
GFINITY plc | Annual Report & Financial Statements 2021
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2021
Opinion
We have audited the financial
statements of Gfinity PLC
(‘the parent company’) and
its subsidiaries (the ‘group’)
for the year ended 30 June
2021 which comprise the
group statement of profit or
loss, the group statement
of comprehensive income,
the group and company
statements of financial
position, the group and
company statements of
changes in equity, the group
and company statements 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 in accordance with
international accounting
standards in conformity with
the requirements of the
Companies Act 2006.
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 below and the two
subsidiaries were assessed as not being
significant components and therefore
have been audited according to group
performance materiality.
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.
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.
In our opinion:
■ the financial statements give a true
and fair view of the state of the group’s
and parent company’s affairs as at 30
June 2021, and of the group’s and the
parent company’s loss for the year then
ended;
■ the group and parent company
financial statements have been
properly prepared in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006; and
■ the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the financial
statements section of our report. We are
independent of the group and parent
company in accordance with the ethical
requirements that are relevant to our audit
of the financial statements in the UK,
including the Financial Reporting Council’s
Ethical Standard, and we have fulfilled our
other ethical responsibilities in accordance
with these requirements. We believe that
the audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion
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
38
FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2021 (continued)
GFINITY plc | Annual Report & Financial Statements 2021
Key audit matter
How the scope of our audit addressed the risk
Going concern assessment (Group and parent company)
At the balance sheet date the group had net current assets of
£0.8m, which includes cash and cash equivalents of £1.4m. The
group’s post-tax loss for the year was £2.9m and it reported net
cash used in operating activities of £1.6m. Continued losses of
this magnitude would result in a rapid depletion of cash reserves
and the corresponding net asset position of the group. If the
going concern assumption were not appropriate this would
have a pervasive effect which could impact on the group’s and
parent company’s ability to realise assets in the normal course of
business.
The appropriateness of applying the going concern basis has
been discussed in note 2 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.
We challenged the significant inputs and assumptions used in the
forecast model and evaluated the feasibility of options available to
management in the event that the projected cash flows fall below
forecast figures. Specifically, we considered the evidence provided
by management in support of their view that the Group would be
able to raise further funds through another round of investment
funding.
The Group’s ability to generate sufficient cash inflows to avoid
the need for additional fund raising is particularly sensitive to
revenue assumptions which are inherently difficult to predict.
Consequently, it is a reasonably possible outcome that the group
and parent company will need to seek additional funding, meaning
management’s assessment of the likelihood of being able to raise
such funding is critical to their conclusion that there is no material
uncertainty in relation to the group and parent company’s ability to
continue as a going concern.
In light of the evidence available at the date of this report, we
consider the judgements made by management in applying the
going concern assumption to be reasonable.
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.
Goodwill impairment assessment (Group and Parent company)
The group had recognised goodwill of £2.8m, including £0.3m
arising on a business acquisition during the year (note 14). In
addition, the parent company has recognised goodwill of £2.6m,
including £0.3m arising on a business acquisition during the year,
as well as £2.3m recognised following the hive-up of the trade &
assets of RealSM Ltd (note 16).
We evaluated Management’s 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.
Based on our procedures and the evidence available to the date
of this report we concur with Management’s conclusion in respect
of the impairment of goodwill assigned to the Cevo Inc. CGU, and
that the residual carrying value of goodwill, as disclosed in note 14,
represents the recoverable amount and therefore that no further
adjustment to the carrying value is necessary.
Goodwill has an indefinite life as at the balance sheet date and
therefore is required to be tested for impairment on an annual
basis. The directors have allocated goodwill to individual cash
generating units (‘CGUs’) in order assess whether the carrying
amount of goodwill is in excess of its recoverable value, being
the higher of value-in-use and fair value less costs to dispose.
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.
Management performed a full impairment review of the goodwill
recognised, which has resulted in an impairment charge of £0.9m
being recognised in the year in respect of goodwill allocated to
the Cevo Inc. CGU.
39
FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2021 (continued)
Key audit matter
How the scope of our audit addressed the risk
We evaluated Management’s assessment of whether impairment
indicators exist for respective assets by reviewing the internal and
external factors that were considered in making their assessment in
each case.
Where impairment indicators were identified and a full impairment
review performed, we evaluated Management’s assessment of the
carrying value of the asset by reviewing the cash flow forecasts
included in Management’s value-in-use calculations for the relevant
asset.
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 the
intangible assets.
Based on our procedures and the evidence available to the date
of this report we concur with Management’s conclusion that the
carrying value of intangible assets, as disclosed in note 3, represents
the recoverable amount and therefore that no adjustment to the
carrying value of intangible assets 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 concur with Management’s conclusion in respect of
the impairment of the Cevo Inc. investment.
Valuation of intangible assets (Group and Parent company)
The group had intangible assets of £0.7m and the parent
company had intangible assets of £0.5m with remaining useful
economic lives of up to 3 years as at the balance sheet date
(note 15).
Management are required to conduct impairment reviews where
there is an indication of impairment of an asset. The assessment
of whether there are impairment indicators and, where indicators
are identified, the determination of the recoverable amount
of the asset requires significant estimation and judgement, as
disclosed in note 3. Accordingly, the carrying value of intangible
assets has been identified as a key audit risk.
Management identified an impairment indicator for the
Customer relationship asset and therefore performed a full
impairment review to compare the carrying amount of asset to
its recoverable value. Management’s conclusion was that there
was no material difference between the asset’s carrying amount
and its recoverable value, and therefore no adjustment has been
made.
Valuation of investments (Parent company)
Prior to the adjustment below, the company had investments in
its subsidiaries of £2.2m (note 16) as at the balance sheet date.
Management are required to conduct impairment reviews where
there is an indication of impairment of an asset. The assessment
of whether there are impairment indicators and, where indicators
are identified, the determination of the recoverable amount
of the asset requires significant estimation and judgement, as
disclosed in note 3. Accordingly, the carrying value of intangible
assets has been identified as a key audit risk.
Management identified an impairment indicator for the Cevo
Inc. investment following the impairment of the corresponding
goodwill on a consolidated basis, and therefore performed a full
impairment review to compare the carrying amount of asset to
its recoverable value. This resulted in an impairment charge of
£2.2m being recognised in the year.
This is not a complete list of all risks identified by our audit.
40
GFINITY plc | Annual Report & Financial Statements 2021 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 £125,000
(2020: £400,000). 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 4.0% (2020: 4.8%) of loss
before tax, 2.2% (2020: 8.9%) of revenue
and 1.8% (2020: 10.0%) of total assets.
We use performance materiality to
reduce to an appropriately low level
the probability that the aggregate
of uncorrected and undetected
misstatements exceeds overall materiality.
Specifically, we use performance
materiality in determining the scope of
our audit and the nature and extent of
our testing of account balances, classes
of transactions and disclosures, for
example in determining sample sizes. Our
performance materiality was 75% of overall
materiality, amounting to £94,000 for
both the parent company and the group’s
financial statements.
In determining the performance materiality,
we considered a number of factors - the
history of misstatements, risk assessment
and aggregation risk, and the effectiveness
of controls.
We report to the Audit Committee all
identified unadjusted errors in excess
of £12,500. Errors below that threshold
would also be reported if, in our opinion
as auditor, disclosure was required on
qualitative grounds.
Conclusions relating to going
concern
In auditing the financial statements, we
have concluded that the directors’ use of
the going concern basis of accounting in
the preparation of the financial statements
is appropriate.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the parent
company or the group’s ability to continue
as a going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities
of the directors with respect to going
concern are described in the relevant
sections of this report.
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 their environment obtained
in the course of the audit, we have not
identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the
following matters 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 are not in agreement with
the accounting records and returns; or
■ certain disclosures of directors’
remuneration specified by law are not
made; or
41
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Independent Auditor’s Report to the members of
Gfinity PLC for the year ended 30 June 2020 (continued)
■ we have not received all the
information and explanations we
require for our audit.
to which our procedures are capable of
detecting irregularities, including fraud is
detailed below:
■ information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement, the directors
are responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view, and
for such internal control as the directors
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
group’s and 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 auditors’
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.
Irregularities, including fraud, are
instances of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above, to
detect material misstatements in respect of
irregularities, including fraud. The extent
42
We identify and assess the risks of material
misstatement of the financial statements,
whether due to fraud or error, and then
design and perform audit procedures
responsive to those risks, including
obtaining audit evidence that is sufficient
and appropriate to provide a basis for our
opinion.
We evaluated management’s incentives
and opportunities for fraudulent
manipulation of the financial statements
(including the risk of override of controls)
and determined that the principal risks
were related to posting inappropriate
journal entries to manipulate revenue or
profits, and management bias in significant
accounting estimates and judgements –
particularly those identified in the key audit
matters outlined above.
Audit procedures performed by the
engagement team included:
■ Obtaining an understanding of the
legal and regulatory framework that the
parent company or the group operates
in and focusing on those laws and
regulations that had a direct effect on
the financial statements;
■ Discussing with management and
the Audit Committee the group’s
policies with regards to identifying,
evaluating and complying with laws
and regulations, and for detecting
and responding to the risks of fraud,
including consideration of known or
suspected instances of non-compliance
with laws and regulation or fraud;
■ Identifying and testing journal entries
based on our risk assessment, as well
as performing analytical procedures
and reviewing financial records to
identify any unusual or unexpected
relationships that may indicate risks of
material misstatement due to fraud;
■ Reviewing the financial statement
disclosures and testing these to
supporting documentation to assess
compliance with applicable laws and
regulations; and
■ Challenging assumptions and
judgements made by management in
their significant accounting estimates
and judgements, in particular in
relation to those outlined above in key
audit matters.
There are inherent limitations in our
audit procedures described above. The
more removed that laws and regulations
are from financial transactions, the less
likely it is that we would become aware
of non-compliance. Auditing standards
also limit the audit procedures required
to identify non-compliance with laws and
regulations to enquiry of the directors and
other management and the inspection of
regulatory and legal correspondence, if
any.
Material misstatements that arise due to
fraud can be harder to detect than those
that arise from error as they may involve
deliberate concealment or collusion.
A further description of our responsibilities
for the audit of the financial statements
is located on the Financial Reporting
Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of this report
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the company’s
members those matters we are required
to state to them in an Auditors’ report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the company and the company’s members
as a body, for our audit work, for this
report, or for the opinions we have formed.
Philip Vipond
Senior Statutory Auditor
for and on behalf of
Blick Rothenberg Audit LLP,
Chartered Accountants
Statutory Auditor
16 Great Queen Street
London
WC2B 5AH
12 November 2021
GFINITY plc | Annual Report & Financial Statements 2021 GFINITY plc | Annual Report & Financial Statements 2021
4343
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Group Statement of Profit or Loss
Director
Notes
1 July 2020 to 30 June 2021
1 July 2019 to 30 June 2020
£
£
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross Profit / (Loss)
Other income
Administrative expenses
Operating loss
Disposal of Associate Gain / (Loss)
Share of Associate Profit / (Loss)
Finance Income
Finance Costs
Loss on ordinary activities before tax
Taxation
Retained loss for the year
Loss and total comprehensive income
for the period
Earnings per share
6
7
17
17
9
9
10
11
5,693,385
(3,085,409)
2,607,976
54,354
(7,179,327)
(4,516,997)
459,706
-
4
(10,236)
(4,067,524)
221,929
(3,845,595)
(3,845,595)
-(0.00)
4,485,565
(1,714,740)
2,770,825
73,041
(10,681,476)
(7,837,610)
-
(308,214)
2,622
(39,768)
(8,182,970)
457,663
(7,725,307)
(7,725,307)
-(0.01)
44
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Director
Notes
1 July 2020 to 30 June 2021
1 July 2019 to 30 June 2020
£
£
GROUP STATEMENT OF COMPREHENSIVE INCOME
Loss for the period
(3,845,595)
(7,725,307)
Other comprehensive income
Items that will not be reclassified to
profit or loss
Foreign exchange profit / (loss) on
retranslation of foreign Subsidiaries
Other Comprehensive Income for the
period
Loss and total comprehensive income
for the period
(12,887)
(12,887)
(6,117)
(6,117)
(3,858,482)
(7,731,424)
45
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Group Statement of Financial Position
Director
Notes
NON CURRENT ASSETS
Property, plant and equipment
Right of Use assets
Goodwill
Intangible fixed assets
Investments in Joint Ventures and
Associates
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Ordinary shares
Share premium account
Other reserves
Retained earnings
Total equity
Non-current Liabilities
Other Payables
Deferred tax liabilities
Current liabilities
Trade and other payables
Total liabilities
12
13
14
15
17
18
19
21
22
20
22
30 June 2021
£
187,366
-
1,903,790
704,481
-
30 June 2020
£
213,288
428,305
2,544,526
613,164
-
2,795,637
3,799,283
1,586,850
1,375,873
2,962,723
5,758,360
930,513
46,511,089
3,384,914
(47,302,697)
3,523,819
254,986
127,835
1,851,720
2,234,541
1,391,332
1,600,597
2,991,929
6,791,212
725,868
44,405,085
3,132,220
(43,457,102)
4,806,071
-
92,059
2,985,042
1,893,081
1,985,141
TOTAL EQUITY AND LIABILITIES
5,758,360
6,791,212
The notes on pages 52 to 83 form an integral part of these financial statements.
Registered number: 08232509
Signed on behalf of the board on 12 November 2021:
Neville Upton
Chairman
46
Jonathan Hall
Chief Financial and Operations Officer
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Company Statement of Financial Position
Director
Notes
NON CURRENT ASSETS
Property, plant and equipment
Right of use assets
Investment in Subsidiaries
Goodwill
Investments in Joint Ventures & Associates
Intangible fixed assets
TOTAL NON-CURRENT ASSETS
12
13
16
14
17
15
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
EQUITY AND LIABILITIES
Total Equity
Ordinary shares
Share premium account
Other reserves
Retained earnings
Total equity
Non-current liabilities
Other creditors
Deferred tax liabilities
Current liabilities
Trade and other payables
Total liabilities
TOTAL EQUITY AND LIABILITIES
18
19
21
22
20
22
30 June 2021
£
30 June 2020
£
179,727
-
-
2,568,417
-
530,336
3,278,479
2,051,596
1,329,815
3,381,410
6,659,890
930,513
46,511,089
3,403,414
(46,340,461)
4,504,555
254,986
94,748
1,805,601
2,155,334
6,659,890
187,176
428,305
4,466,133
-
-
57,724
5,139,338
2,843,800
1,531,360
4,375,160
9,514,498
725,868
44,405,085
3,137,832
(40,601,156)
7,667,629
-
-
1,846,869
1,846,869
9,514,498
The notes on pages 52 to 83 form an integral part of these financial statements.
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these
financial statements. The parent Company’s loss for the year amounts to £5,739,305 (2020: loss of £7,493,221).
Registered number: 08232509.
Signed on behalf of the board on 12 November 2021:
Neville Upton
Chairman
Jonathan Hall
Chief Financial and Operations Officer
47
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Group Statement of Changes in Equity
Director
Ordinary
shares
£
Share
premium
Share option
reserve
£
£
Retained
earnings
£
At 30 June 2019
362,897
37,455,839
1,637,258
(35,731,795)
Forex
Total equity
£
504
£
3,724,704
-
-
-
-
-
-
362,971
7,372,852
(423,605)
-
1,500,573
362,971
6,949,247
1,500,573
(7,725,307)
-
(7,725,307)
-
(6,117)
(6,117)
(7,725,307)
(6,117)
(7,731,424)
-
-
-
-
-
-
-
-
7,735,823
(423,605)
1,500,573
8,812,791
At 30 June 2020
725,868
44,405,085
3,137,831
(43,457,102)
(5,613)
4,806,070
-
-
-
-
-
-
204,645
2,110,793
(4,789)
-
265,583
204,645
2,106,004
265,583
(3,845,595)
-
(3,845,595)
-
(12,887)
(12,887)
(3,845,595)
(12,887)
(3,858,482)
-
-
-
-
-
-
-
-
2,315,438
(4,789)
265,583
2,576,232
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Share issue costs
Share options
expensed
Total transactions
with owners,
recognised directly
in equity
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Share issue costs
Share options
expensed
Total transactions
with owners,
recognised directly
in equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 June 2021
930,513
46,511,089
3,403,414
(47,302,697)
(18,500)
3,523,819
48
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Company Statement of Changes in Equity
Director
At 30 June 2019
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Share issue costs
Share options
expensed
Shares as deferred
consideration
Total transactions
with owners,
recognised directly
in equity
Ordinary
shares
£
Share
premium
£
Share option reserve
Retained earnings
Total equity
£
£
£
362,897
37,455,838
1,637,258
(33,107,935)
6,348,058
-
-
-
-
-
-
362,971
7,372,852
(423,605)
-
-
-
-
-
1,500,573
-
362,971
6,949,247
1,500,573
-
-
-
-
-
(7,493,221)
(7,493,221)
-
-
(7,493,221)
(7,493,221)
-
-
-
-
-
7,735,823
(423,605)
1,500,573
-
8,812,791
At 30 June 2020
725,868
44,405,085
3,137,831
(40,601,156)
7,667,628
Loss for the period
Other Comprehensive
Income
Total comprehensive
income
Proceeds of Shares
Issued
Share issue costs
Share options
expensed
Shares as deferred
consideration
Total transactions
with owners,
recognised directly
in equity
-
-
-
-
-
-
204,645
2,110,793
-
-
-
(4,789)
-
-
-
-
-
-
-
265,583
-
204,645
2,106,004
265,583
(5,739,305)
(5,739,305)
-
-
(5,739,305)
(5,739,305)
-
-
-
-
-
2,315,438
(4,789)
265,583
-
2,576,232
At 30 June 2021
930,513
46,511,089
3,403,414
(46,340,461)
4,504,555
49
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Group Statement of Cash Flows
Director
Note
30-Jun-21
£
30-Jun-20
£
(2,049,663)
(5,290,351)
4
(106,642)
(16,030)
459,706
-
337,038
1,950,649
-
(439,621)
(10,236)
1,500,792
(211,833)
(12,887)
1,600,596
1,375,876
2,622
(100,765)
(57,724)
-
(308,214)
(464,081)
7,312,218
-
(597,015)
(2,511)
6,712,692
958,260
(6,117)
648,454
1,600,596
23
9
12
15
Cash flow used in operating activities
Net cash used in operating activities
Cash flow from / (used in) investing
activities
Interest received
Additions to property, plant and
equipment
Additions to intangible Assets
Gain on disposal of associate
Investment in associate
Net cash used in investing activities
Cash flow from / (used in) financing
activities
Issue of equity share capital
Share issue cost
Repayment of leases
Bank interest payable
Net cash from financing activities
Net increase in cash and cash equivalents
Effect of Currency translation on cash
Opening cash and cash equivalents
Closing cash and cash equivalents
50
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Company Statement of Cash Flows
Director
Note
30-Jun-21
£
30-Jun-20
£
23
9
12
15
Cash flow used in operating activities
Net cash used in operating activities
Cash flow from/(used in)
investing activities
Interest received
Additions to property, plant and
equipment
Additions to Intangible Assets
Disposal of Associate Gain / (Loss)
Investment in Associate
Net cash used in investing activities
Cash flow from / (used in)
financing activities
Issue of equity share capital
Repayment of leases
Bank interest payable
Net cash from financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
(2,040,690)
(5,322,647)
4
(105,327)
(16,030)
459,706
-
338,353
1,950,650
(439,621)
(10,236)
1,500,793
(201,545)
1,531,360
1,329,815
2,622
(98,444)
(57,724)
-
(308,214)
(461,760)
7,312,218
(597,014)
(2,511)
6,712,692
928,285
603,076
1,531,360
51
GFINITY plc | Annual Report & Financial Statements 2021
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Notes to the Financial Statements
1. General Information
Gfinity plc (“the Company”) is a public company limited by shares incorporated in the United
Kingdom under the Companies Act 2006, registered in England and Wales and is AIM listed.
The address of the registered office is given on page 6. The registered number of the company
is 08232509.
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. Principal activities are discussed in the Strategic
report.
2. Accounting Policies
Basis of preparation
The Company has prepared the accounts
on the basis of all applicable International
Financial Reporting
Standards (IFRS), including all International
Accounting Standards (IAS), Standing
Interpretations Committee (SIC) and
the International Financial Reporting
Interpretations Committee (IFRIC)
interpretations issued by the International
Accounting Standards Board (IASB) with
effective dates for accounting periods
beginning on or after 1 July 2020, together
with those parts of the Companies Act
2006 applicable to companies reporting
under IFRS.
The accounts have been prepared on the
historical cost basis, except for otherwise
stated below. The principal accounting
policies, which have been consistently
applied throughout the period presented,
are set out below.
The preparation of financial statements
in conformity with IFRS requires the
use of certain estimates. It also requires
management to exercise its judgement
in the process of applying the company’s
accounting policies. Estimates and
judgements are continually reviewed
and are based on historical experience
and other factors including expectations
of future events that are believed to be
reasonable under the circumstances.
52
Standards, Interpretation and
amendments to published
standards effective in the accounts
The Group has applied the following
new standards and interpretations for the
first time for the annual reporting period
commencing 1 July 2020:
Standards, interpretation and
amendments to published
standards that are not yet
effective
New standards and interpretations that
are in issue but not yet effective are listed
below:
■ Amendments to IFRS 3 Definition of a
Business.
■ Amendments to IAS 1 and IAS 8
Definition of Material.
■ Amendments to References to the
Conceptual Framework in IFRS
Standards.
■ Amendments to IFRS 10 and IAS 28:
Sale or Contribution of Assets between
an Investor and its Associate or Joint
Venture
■ Amendments to IFRS 16: COVID-19-
Related Rent Concessions
The adoption of the standards and
interpretations listed above has not led
to any changes to the Group’s accounting
policies or had any other material impact
on the financial position or performance of
the Group.
■ Amendments to IFRS 9, IAS 39 and
IFRS 7: Interest Rate Benchmark
Reform
■ IFRS 17 Insurance Contracts.
The adoption of the above standards and
interpretations is not expected to lead to
any changes to the Group’s accounting
policies or have any other material impact
on the financial position or performance of
the Group.
Going concern
At the end of the period the Group had
cash and cash equivalents amounting
to £1,375,673 and the Company had
cash and cash equivalents amounting to
£1,329,815. Further to this at the balance
sheet date, there were 20,050,500 warrants
outstanding over ordinary shares in the
company at an exercise price of 1p, to be
exercised on or before 20 October 2021.
Following the balance sheet date, on 23
August 2021, the Company announced
its intention to undertake a placing to
raise £3.3m before costs (£3.1m after
costs). This placing was over-subscribed
and successfully completed without a
GFINITY plc | Annual Report & Financial Statements 2021
significant discount to market price having to be offered. It also
saw a significant investment from a new cornerstone institution in
Canaccord Genuity.
Of the funds raised, £2.5m were used as the initial consideration
to acquire Megit Ltd, the owner of the highly profitable Stock
Informer business. This is in addition to equity and earn-out
consideration outlined in the Post Balance Sheet Events note. In
its last completed accounting period, to 31 March 2021, Megit Ltd
recorded revenue of £2.3m and profit before tax of £2.2m. While
the year to March 2021 was a particularly successful year for the
company, supported by the launch of next generation consoles,
the directors expect the Stock Informer business to continue to
deliver significant levels of revenue, at a net margin of around
75%, allowing for incremental investment to support long term
growth and diversification of the revenue model.
As outlined in the Strategic Report, over the past 18 months, the
Group has significantly restructured its underlying operations,
creating a significant new revenue stream in the Gfinity Digital
Media business, while delivering a year-on-year reduction in
adjusted administrative expenses of 35%. Even prior to the
acquisition this has resulted in a significantly reduced level of
cash-burn, as the business drives towards its target of profitability
on an adjusted operating profit basis within the next 12 months.
Management have prepared forecasts to 31 December 2022,
which indicate that if the business performs in line with target,
then current cash reserves, supplemented by expected further
exercise of warrants as outlined above, would provide sufficient
funding to allow the Group to continue operating for a period
of at least 12 months following the approval of these financial
statements. Forecasts have also been prepared, which show an
adverse variance to the budget scenario of 20% in Gfinity Digital
Media and 25% in all other areas. Under this scenario, there are
still sufficient cash reserves for the Group to operate for a period
of at least 12 months following the approval of these financial
statements.
As a result, the directors do not believe that further cash is
required in order to deliver on current plans for the business.
It should be noted, however, that in a sector that is still rapidly
developing and in a period of ongoing economic uncertainty,
there are inherent uncertainties within the forecasts. In this regard,
in a period in which a high level of revenue growth is expected,
cash flow forecasts are particularly sensitive to the delivery of
new client contracts. While the directors are confident that these
contracts will be secured, the timing of this cannot be certain.
In this context, there remains a material risk that the cash flow
forecasts are not met, which would result in additional funding
being required and therefore the directors assessment of the
likelihood of being able to raise such funding is critical to their
conclusion that there is no material uncertainty in relation to the
Group and the Company’s ability to continue as a going concern.
In this context, directors’ belief that further cash reserves could be
secured if required are based on:
■ Strong investor support, demonstrated by an over-subscribed
placing completed in August 2021, which included a new
cornerstone institutional shareholder;
■ A historic track-record of being able to raise funds, even at a
time of peak economic and political uncertainty in April 2020;
■ Ongoing strong investor interest in esports and broader video
gaming sectors.
Consequently, the directors believe that it is appropriate for the
accounts to be prepared on a going concern basis.
Basis of consolidation
The Group accounts consolidate those of the Company and all
of its subsidiary undertakings drawn up to 30 June each year.
Subsidiary undertakings are those entities over which the Group
has the ability to govern the financial and operating policies
through the exercise of voting rights. The results of subsidiaries
acquired or sold are consolidated for the periods from or to the
date on which control passed. Acquisitions are accounted for
under the acquisition method.
Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities
recognised. If, after reassessment, the Group’s interest in the
net fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or
loss.
All intra group balances, transactions, income and expenses and
profit and losses on transactions between the Company and its
subsidiaries and between subsidiaries are eliminated.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is not amortised but is reviewed for impairment at least
annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units (‘CGUs’)
expected to benefit from the synergies of the combination. CGUs
to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the CGU is
less than the carrying amount of the unit, the impairment loss
is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-
rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Investment in associates
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a joint
venture. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or join control over those policies.
The Group’s interests in jointly controlled entities are incorporated
in the financial information using the equity method of accounting.
Investments in joint ventures are carried in the balance sheet at
cost as adjusted by post acquisition changes in the Group’s share
of the net assets of the associate, less any impairment in the value
of the individual investments. The Group’s share of the net profit
or loss of the joint venture is shown as a single line item in the
Consolidated Statement of Comprehensive Income.
■ Underlying value in owned technology and an owned
community of up to 15 million gamers per month across
Gfinity’s owned web platforms;
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.
53
GFINITY plc | Annual Report & Financial Statements 2021
FINANCIAL STATEMENTS
Notes to the Financial Statements (continued)
The carrying amount of equity-accounted investments is tested for
impairment at least annually.
Investment in Subsidiaries
Investments in subsidiaries are held in the Company balance sheet
at cost and reviewed annually for impairment.
Revenue
Revenue comprises the fair value of the consideration received
or receivable for the sale of services in the normal course of the
Group’s activities. Revenue is shown net of value added tax.
To determine whether to recognise revenue, the Group
follows a 5-step process:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are
satisfied.
Revenue is recognised either at a point in time or over time, when
(or as) the Group satisfies performance obligations by transferring
the promised goods or services to its customers. The Group bases
its estimates on historical results, taking into consideration the
type of customer, the type of transaction and the specifics of each
arrangement.
Revenue comprises of:
■ Partner programme delivery fees: Revenue recognised in line
with the date at which work is performed.
■ Sponsorship revenues: Revenue is recognised on the date
the relevant sponsored event takes place. In the event of
long-term sponsorship contracts, the revenue is released on
a straight-line basis across the term of the contract, except in
instances where a significant proportion of the revenue relates
to specific activation activities, in which case the revenue is
released in line with when that work is performed.
■ Advertising revenues: Fees are earned each time a user clicks
on one of the ads that are displayed on the website. Revenue
is recognised on a pay-per-click, or cost per mille (CPM) basis.
■ Broadcaster revenues: Rights fees are received from linear
broadcasters and online streaming platforms in return for
rights to access broadcast content. Revenue is recognised
once the relevant performance obligations are completed
which is typically at the point the broadcast occurs.
■ Licensing revenues: Fees charged for the licensing of Gfinity
esports technology, outside of the scope of a broader
managed esports service provision.
■ Consultancy Fees: Revenue is recognised in line with the
profile of resources dedicated to the programme across the
assignment duration.
Leases and right-of-use-assets
The Group recognises a right-of-use asset and a lease liability at
the lease commencement date. The right- of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or
to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the end
of the lease term, unless the lease transfers ownership of the
underlying asset to the Group by the end of the lease term or
the cost of the right-of-use asset reflects that the Group will
exercise a purchase option. In that case the right-of-use asset
will be depreciated over the useful life of the underlying asset,
which is determined on the same basis as those of property and
equipment. In addition, the right-of- use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is measured at amortised cost using the
effective interest method, and is initially measured at the
present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate.
Short-term leases and leases of low-value assets:
The Group has elected not to recognise right-of-use assets and
lease liabilities for leases of low-value assets and short-term
leases. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease
term.
Foreign currencies
Transactions in foreign currencies are recorded at the rates of
exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date.
Exchange differences arising on the settlement of monetary items,
and on the retranslation of monetary items, are included in the
income statement for the year.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet
date. Income and expense items are translated at the average
54
GFINITY plc | Annual Report & Financial Statements 2021
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.
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.
Taxation
The taxation expense represents the sum of the tax currently
payable and deferred tax.
The charge for current tax is based on the results for the period
as adjusted for items that are non-assessable or disallowed. It is
calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used
in the computations of taxable profit and is accounted for using
the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable
temporary differences, and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary
difference arises from goodwill (or any discount on acquisition) or
from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither
the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that the directors
do not have a high degree of certainty that sufficient taxable
profits will be available in the medium-term to allow all or part of
the asset to be recovered.
Credits in respect of Research and Development activities are
recognised at the point at which the asset becomes profitable and
quantifiable. This is typically at the point at which a claim has been
prepared and submitted to HMRC.
Share Based Payments
The Company provides equity-settled share-based payments in
the form of share options. Equity-settled share-based payments
are measured at fair value (excluding the effect of non-market-
based vesting conditions) at the date of grant. The fair value
determined at the date of grant is expensed on a straight line
basis over the vesting period, based on the Company’s estimate
of shares which will eventually vest and adjusted for the effect
of non-market based vesting conditions. The Company uses
an appropriate valuation model utilising a Black-Scholes model
in order to arrive at a fair value at the date share options are
granted.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
accumulated depreciation and impairment, if any. Historical
cost includes expenditure that is directly attributable to the
acquisition of the items. Subsequent costs are included in the
carrying amount of the asset or recognised as a separate asset,
as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the company and
that the cost of the item can be measured reliably. The carrying
amount of parts that are replaced is derecognised. The costs of
the day-to-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
Depreciation is calculated using the straight-line method to
allocate the cost or revalued amounts of tangible fixed assets to
their residual values over their useful economic lives, as follows:
Office equipment
3 years straight line
Computer equipment
3 years straight line
Production equipment
3 years straight line
Leasehold improvements
Over the period of the lease
or, where management have
reasonable grounds to believe
the property will be occupied
beyond the terms of the lease,
3 years straight line
The residual values and useful economic lives of the assets are
reviewed, and adjusted if appropriate, at each balance sheet date.
The carrying amount of an asset is written down immediately to
its recoverable amount if the carrying amount is greater than its
estimated recoverable value. Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount
and are recognised within other gains or losses in the income
statement.
55
FINANCIAL STATEMENTS
Notes to the Financial Statements (continued)
Intangible fixed assets
Intangible assets other than goodwill are recognised where the purchase or internal development of such assets are expected to directly
contribute towards the company’s ability to generate revenues over a multiple years.
Intangible fixed assets are stated at historical cost less accumulated amortisation and impairment, if any. The cost of intangible assets
acquired in a business combination is their fair value as at the date of acquisition. Where the cost is not clearly identifiable discounted
cash flows are utilised to estimate either the cost to develop the resource or, where there are already profits attributable the asset, to
estimate future cash inflows. Historical cost includes expenditure that is directly attributable to the acquisition or development of the
items. Subsequent costs are included in the carrying amount of the asset or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the company and that the cost of the item can be
measured reliably.
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
Technology Platform
5 years straight line
Customer Relationships
5 years
Software
Development
3 years straight line
Web traffic
acquired
in business
combination
3 years straight line
Cutomer
Relationship
5 years
Technology
Platform
5 years straight line
“The costs of the day-to-
day servicing of property,
plant and equipment are
recognised in profit or loss
as incurred.”
56
GFINITY plc | Annual Report & Financial Statements 2021 Warrants
Warrants are in respect of call options granted to investors by the
group and are classified as equity only to the extent that they do
not meet the definition of a financial liability or financial asset.
The fair value of warrants is determined at the date of grant and is
recognised in equity. When the warrants are exercised, the group
transfers the appropriate amount of shares to the investor, and the
proceeds received net of any directly attributable transaction costs
are credited directly to equity.
The group uses an appropriate valuation model utilising a Black-
Scholes model in order to arrive at a fair value at the date warrants
are granted.
Government Grants Policy
Grants that compensate the group for expenses incurred are
recognised in profit or loss as other income in the periods in
which the expenses are recognised, unless the conditions for
receiving the grant are met after the related expenses have been
recognised. In this case, the grant is recognised when it becomes
receivable.
Research and development costs
Development expenditure is capitalised as an intangible asset,
only if the development costs can be measured reliably and it is
anticipated that the product being built will be completed and will
generate future economic benefits in the form of cash flows to the
Group.
Research expenditure that does not meet this criteria is
recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an
asset in a subsequent period.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
at call with banks, and other short-term highly liquid investments
with original maturities of three months or less. These are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities are obligations to pay cash or other financial
instruments and are recognised when the company becomes a
party to the contractual provisions of the instrument. Financial
liabilities are classified according to the substance of the
contractual arrangements entered into. All interest-related charges
are recognised as an expense in the income statement.
Trade and other payables are not interest bearing and are
recorded initially at fair value net of transactions costs and
thereafter at amortised cost using the effective interest rate
method.
An equity instrument is any contract that evidence a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
at the proceeds received, net of direct issue costs.
Financial assets
Financial assets are recognised in the balance sheet when the
Company becomes a party to the contractual provisions of the
instrument and are recognised in the balance sheet at the lower of
cost and net realisable value.
Provision is made for diminution in value where appropriate.
Income and expenditure arising on financial instruments is
recognised on the accruals basis and credited or charged to the
statement of comprehensive income in the financial period to
which it relates.
Trade receivables do not carry any interest and are initially
recognised at fair value, subsequently reduced by appropriate
allowances for estimated irrecoverable amounts.
57
GFINITY plc | Annual Report & Financial Statements 2021 FINANCIAL STATEMENTS
Notes to the Financial Statements (continued)
There were no revenue contracts requiring
judgement that impact on the reported
revenue for the financial year, or contract
assets or liabilities at the balance sheet
date for either the current or the prior year.
Judgement: Intangible assets recognised
on business combinations:
IIntangible assets in business combinations
are recognised when the asset is
separately identifiable and based on the
probable future economic benefit that
arises owing to the Group’s control of the
asset. Typically, the Group will utilise a
discounted cash flow to establish the future
economic benefits and therefore the fair
value of the asset.
The Group identified three intangible
assets in relation to the two acquisitions
undertaken in the year to 30 June 2018
and three intangible assets in relation
to the acquisition of EpicStream Inc. on
3 December 2020 which is mentioned
in Note 28. As these assets have a finite
economic life, in line with IAS 36, they
are only subject to further testing for
impairment when there are either internal
or external indicators of impairment.
Based on a review of updated cash flow
projections it was decided that there were
no indicators of impairment in any of the
intangible assets. Following further review
of updated cash flow projections relating
to the relationship, it was determined that
no impairment was required. This further
testing is discussed in the ‘Impairment
testing’ section below.
Estimation: Impairment testing:
On an annual basis the Group reviews
relevant classes of assets, including
investments, intangible assets and goodwill
for indications of impairment. Where such
indications exist, full impairment testing
through an analysis of the value of future
cash flows is undertaken. The recoverable
amounts of cash generating units have
been determined based on value-in-use
calculations which require the use of
estimates. Management has prepared
discounted cash flows based on the latest
strategic plan. Discount rate has been
calculated using the Capital Asset Pricing
model with reference to the value of UK 10
year gilts as a proxy for a risk free rate and
the volatility of Gfinity’s share price relative
to that of AIM since listing.
Goodwill carried in relation to CEVO in
the group financial statements:
Gfinity acquired CEVO, Inc in July 2017,
since which time the Cevo business has
provided significant value to the overall
Group. Intangible assets continue to be
recognized in respect of:
■ CEVO’s proprietary esports platform,
which forms the basis of the current
Gfinity Esports platform, which
continues to be used to support
multiple esports programmes for high-
profile clients.
■ CEVO’s ongoing commercial
relationship with Nvidia, from which it
continues to derive revenue.
Over time, however, the operations
of CEVO have become increasingly
interlinked with those of Gfinity, with
former directors of CEVO now holding
senior roles within the Gfinity business,
including Head of Technology and Head
of Product. As a result, it has become
increasingly difficult, outside of the specific
intangibles, to quantify the value of future
cash flows relating specifically to the CEVO
brand. On that basis, directors have taken
the decision in this year to impair the value
of goodwill in respect of CEVO to zero.
This resulted in an impairment charge of
£0.9m.
3. Critical Accounting
Judgements and Estimates
The preparation of financial statements
in conformity with IFRS requires the
use of certain estimates. It also requires
management to exercise its judgement
in the process of applying the company’s
accounting policies. Estimates and
judgements are continually reviewed
and are based on historical experience
and other factors including expectations
of future events that are believed to be
reasonable under the circumstances.
Judgement: Revenue recognition:
The Group’s revenue recognition policy
is based on separating contracts into
discrete performance obligations with
revenue then recognised based on
the percentage completion of each
performance obligation. Where the value
of each distinct performance obligation
is not set out in a contract Management
estimate the value of each performance
obligation based on the level of resource
required to complete the performance
obligation in comparison to the overall
level of resource required to fulfil the
contract. For example, if a contract did
not stipulate the value by region of a
broadcast agreement management
would use appropriate weighting (e.g.
audience size) to estimate the value of
each region, with each region viewed
as a separate performance obligation.
Revenue would then be recognised based
on the percentage completion of each
performance obligation. In instances where
there is no other readily available proxy
Management will estimate the value of
each performance obligation based on the
relative cost to deliver.
Revenue settled by means other than cash
(e.g. via equity in a associate) is recognised
based on the value stipulated in the
contract for goods or services, which would
be set at fair value, with the revenue then
recognised based performance obligations
in the manner described above.
58
GFINITY plc | Annual Report & Financial Statements 2021 Goodwill carried in relation to
Real Sport:
The carrying value of goodwill in relation to
RealSport was assessed using the bottom-
up financial model created as part of the
business planning process, which reflects
the strong growth in monetisation seen
through FY21.
This model assumes a monthly average
number of unique visitors to the
platform through FY22 of 5.3m. By way
of comparison the most recent monthly
total (in September 2021) was 4.9m, with
growth expected in Q4, with further game
releases. Thereafter it is assumed that
audience numbers will increase at an a
CAGR of 30% p.a. for the first 2 years,
before levelling off slightly with a 5%
increase thereafter.
Revenue has been calculated using a
blended rate, factoring in both real time
bidding and direct sale banner advertising,
video advertising and cost per click affiliate
revenues, giving an overall rate of 10p per
annum per monthly average user.
On this basis, the net present value of
future cash flows has been calculated at
£5.5m. This represents a surplus of £4.1m
over the carrying value of goodwill, with
the intangibles recognized in respect of
the RealSport acquisition having been fully
amortised. On that basis, no impairment is
proposed.
CEVO customer relationships:
The remaining value of CEVO customer
relationship was assessed by way of an
analysis of likely revenue and costs relating
to the customer in question over the final
year of the original intangible asset life.
These were assessed on the basis of
current open purchase orders, expected
renewal of purchase orders based on work
that it is anticipated will renew, together
with a smaller allowance for new work,
based on levels secured in previous years.
Cash flows were discounted using a cost of
capital of 13%.
The result of the above analysis gave an
NPV of £0.1m, in line with the carrying
value of the intangible. No impairment is
therefore proposed.
Goodwill and Intangible Assets carried
in relation to Epicstream:
Three intangible assets were recognized in
respect of the acquisition of Epicstream:
• The existing social audience and
related domain authority of the main
Epicstream site (Epicstream.com)
• The value of the Magic the Gathering
social audience, which has been
leveraged to create a new site
(MTGRocks.com); and
• The remaining social audience from a
Facebook community featuring over 6
million likes.
These assets, net of deferred tax, had a
combined value of £0.5m. With the fair
value of consideration estimated at £0.7m,
this resulted in Goodwill of £0.3m.
The requirement for full impairment testing
was assessed through a comparison of
actual cash flows generated from the
Epicstream business, against the cash
flow projections used in calculation of the
original asset values. With actual cash
flows showing a positive variance to the
original projections, it was considered that
there was no indication of impairment and
hence full, detailed impairment testing was
not required.
Valuation of investment in RealSport:
The activities of the RealSport brand
are now undertaken within the Gfinity
Ltd entity, with Real SM Ltd not actively
trading. As a result, while the goodwill
relating to the RealSport brand remains,
directors considered that it would not be
appropriate to continue to carry a value of
investment in the RealSport entity on the
Gfinity company balance sheet.
The value of this investment has therefore
been reclassified as goodwill, reflecting the
absorption of the value of the RealSport
brand within the Gfinity Ltd entity.
This has no impact on the consolidated
income statement.
Valuation of investment in CEVO,
Inc in the parent company financial
statements:
The value of the investment held in CEVO,
Inc has been reviewed in line with the
calculation of the value of the goodwill
and related intangible. This value has
been reduced by £0.9m in the year, in line
with the reduction to the carrying value of
goodwill.
Judgement: Transfer of trade and assets
within the group:
The transfer of trade and assets between
entities under common control falls outside
the scope of IFRS 3 and therefore requires
judgement to develop an accounting
policy that provides relevant and reliable
information in accordance with IAS 8.
Management have elected to account for
this transaction as a ‘hive-up’ of trade and
assets to the parent company. Accordingly,
the net assets transferred to the parent
company have been recorded in line
with the amortised cost recognised on a
consolidated basis for the corresponding
net assets. The excess of the previously
recognised investment value over the
net assets transferred is recognised as
goodwill.
59
GFINITY plc | Annual Report & Financial Statements 2021 4. Revenue
The Group’s policy on revenue recognition is as outlined in note 2. The year ending 30 June 2021 included £0.36m included in the
contract liability balance at the beginning of the period (2020:£0.7m).
The Group’s revenue disaggregated by primary geographical markets is as follows:
30 June 2021
30 June 2020
Gfinity
CEVO
Total
Gfinity
CEVO
Total
4,144,440
-
4,144,440
3,431,492
-
3,431,492
902,408
322,741
1,225,150
27,206
157,829
185,035
539,069
-
539,069
869,039
-
869,038
5,585,918
322,741
5,908,659
4,327,737
157,829
4,485,565
United
Kingdom
North
America
ROW
Total
The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
30 June 2021
30 June 2020
Gfinity
£
CEVO
£
Total
£
Gfinity
£
3,432,959
322,741
3,755,700
2,582,447
CEVO
£
-
Total
£
2,582,447
2,152,959
-
2,152,959
1,745,289
157,829
1,903,118
Services
transferred at a
point in time
Services
transferred over
time
Total
5,585,918
322,741
5,908,659
4,327,736
157,829
4,485,565
As at 30 June 2021 the Group had the amounts shown below held on the consolidated statement of financial position in relation to
contracts either performed in full during the year or ongoing as at the year end. All amounts were either due within one year or, in the
case of contract liabilities, the work was to be performed within one year of the balance sheet date.
Trade Receivables
Contract Assets
Contract Liabilities
30 June 2021
30 June 2020
£1,024,696
£244,835
£364,024
£608,189
£154,287
£358,246
Trade receivables are non-interest bearing and are generally on 30-day terms.
Contract assets are initially recognised for revenue earned while the services are delivered over time or when billing is subject to final
agreement on completion of the milestone. Once the amounts are billed the contract asset is transferred to trade receivables.
Contract liabilities arise when amounts are paid in advance of the delivery of the service. These are then transferred to the statement of
comprehensive income as either milestones are completed or work is completed overtime. Revenue of £0.36m was recognised in the
year ending 30 June 2021 that was held as a contract liability as 30 June 2020. All these amounts were held in Gfinity.
60
GFINITY plc | Annual Report & Financial Statements 2021 5. Segmental Information
The management consider the group to operate as a single segment following the integration of Cevo’s activities into that of the group
(included in Chief Financial and Operations Officer’s Report in Strategic Report) and therefore no segmental analysis is required.
The Group has two single external customers which have revenue equal to or greater than 10% of the group’s revenue. The revenue
from each of these customers is: £0.94 and £0.69m. The customers are major sports rights holders, financial services and media
companies. These revenues are attributed to the Gfinity segment.
6. Other Income
There are no unfulfilled conditions or other contingencies attaching to these grants. Other income reflects government grant income
received in the year in respect of the furlough scheme.
Government grant income
7. Operating Expenses
Operating loss is stated after charging:
Depreciation of property, plant and equipment
Depreciation on Right of Use assets
Amortisation & impairment of intangible fixed assets
Goodwill impairment
Rentals under short-term leases
Expensed development costs
Staff costs (see note Particulars of employees)
2,844,335
Costs of inventories expensed
Auditors’ remuneration for auditing the accounts
of the Company
Auditors’ remuneration for other non-audit services:
■ Other services related to taxation
■ All other services
Net foreign exchange (gains) / losses
-
66,500
8,408
21,836
34,027
30 June 2021
30 June 2020
Group
£
54,354
£
73,041
Group
30 June 2021
30 June 2020
£
132,478
428,305
492,700
901,519
439,621
150,058
£
370,589
571,074
478,553
-
514,106
185,376
5,781,866
-
45,000
2,500
8,975
(3,453)
61
GFINITY plc | Annual Report & Financial Statements 2021
8. Particulars Of Employees
Number of employees
The average number of people (including directors) employed by the Company during the financial period was:
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
38
54
35
48
The aggregate payroll costs of staff (including directors) were:
Wages and salaries
Social security costs
Pensions
Equity settled
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
2,253,444
271,347
53,962
265,583
£
3,762,138
449,154
70,000
1,500,573
£
2,087,944
255,310
53,962
265,583
£
3,723,272
445,557
41,744
1,500,573
2,844,335
5,781,865
2,662,798
5,711,146
Total remuneration for Directors during the year was £444,428 (2020: £806,608).
The board of directors comprise the only persons having authority and responsibility for planning, directing and controlling the activities
of the Group.
30 June 2021
30 June 2020
Group
£
4
(9,228)
(1,009)
(10,232)
£
2,622
(37,257)
0
(34,635)
9. Finance Income/Costs
Interest income on bank deposits
Finance lease interest
Other interest cost
62
GFINITY plc | Annual Report & Financial Statements 2021
10. Taxation
(a) Major components of taxation expense for the period ended 30 June 2021 are:
Income statement
Current tax
Corporation tax charge / (credit)
Total current tax
Deferred tax
Relating to origination and reversal of temporary
differences
Taxation charge / (credit) reported in the income
statement
(b) Factors affecting tax charge for the period
30 June 2021
£
(162,957)
(162,957)
(58,972)
(221,929)
Group
30 June 2020
£
(227,004)
(227,004)
(230,659)
(457,663)
A reconciliation of taxation expense applicable to accounting profit before taxation at the statutory tax rate of 19% (2020: 19%), to
taxation expense at the Company’s effective tax rate for the period is as follows:
Loss on ordinary activities before taxation
Profit / (Loss) multiplied by rate of tax
Effects of:
Expenses not deductible for tax purposes
Movement in unrecognised deferred tax arising
from tax losses
Movement in unrecognised deferred tax arising from
other temporary timing differences
Adjustment in respect of R&D tax credits
Taxation charge/ (credit) reported in the income
statement
30 June 2021
£
(3,845,796)
(730,701)
318,906
709,763
(356,940)
(162,957)
(221,929)
Group
30 June 2020
£
(8,182,970)
(1,554,764)
349,439
1,135,046
(160,379)
(227,004)
(457,662)
(c) Unrecognised deferred tax asset
The Group has an unrecognised deferred tax asset arising from
trading losses carried forward of £10,508,932 (2020: £7,277,026)
calculated at the substantively enacted Corporation tax rate at
the balance sheet date of 25% (2019: 19%). These trading losses
will reverse against future taxable trading profits and no asset has
been recognised due to uncertainties over the timing and nature
of such gains in accordance with IAS 12.
63
GFINITY plc | Annual Report & Financial Statements 2021
11. Earnings Per Share
Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary
shares in issue during the period.
IAS 33 requires presentation of diluted EPS when a Company could be called upon to issue shares that would decrease earnings per
share or increase the loss per share. For a loss making Company with outstanding share options, net loss per share would be decreased
by the exercise of options and therefore the effect of options has been disregarded in the calculation of diluted EPS.
Loss attributable to shareholders from continuing
operations
Weighted average number of ordinary shares
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
£
£
£
(3,858,482)
(7,731,424)
(5,739,305)
(7,493,221)
Number
000’s
809,795
Number
000’s
518,172
Number
000’s
809,795
Number
000’s
518,172
Loss per ordinary share for continuing operations
(0.00)
(0.01)
(0.01)
(0.01)
12. Property Plant and Equipment
Group Property Plant and Equipment
Office
equipment
Computer & production
equipment
Leasehold
Improvement
£
£
£
62,292
849
-
63,141
15,066
14,776
-
29,842
33,301
47,228
902,216
87,362
-
989,578
740,843
177,229
-
918,072
71,505
161,373
621,862
12,701
-
634,563
347,350
178,731
-
526,081
108,482
274,512
Total
£
1,586,370
100,912
-
1,687,282
1,103,259
370,736
-
1,473,995
213,288
483,113
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
Depreciation
At 1 July 2019
Charge for the period
Disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
64
GFINITY plc | Annual Report & Financial Statements 2021 Group Property, Plant and Equipment (continued)
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
Depreciation
At 1 July 2020
Charge for the period
Disposals
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Office
equipment
Computer & production
equipment
Leasehold
Improvement
£
£
£
63,141
-
-
989,578
106,642
(85)
634,563
-
-
Total
£
1,687,282
106,642
(85)
63,141
1,096,135
634,563
1,793,839
29,842
32,504
-
62,346
795
33,301
918,072
88,729
-
1,006,801
89,333
71,505
526,081
11,244
-
537,325
97,238
108,482
Company Property, Plant and Equipment
Office
equipment
Computer & production
equipment
Leasehold
Improvement
£
£
£
1,473,995
132,478
-
1,606,473
187,366
213,288
Total
£
1,550,855
98,444
-
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
Depreciation
At 1 July 2019
Charge for the period
Disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
50,894
849
-
51,743
12,504
14,776
-
27,280
24,463
38,390
878,100
84,894
-
621,861
12,701
-
962,994
634,562
1,649,299
731,898
176,864
-
908,762
54,232
146,202
347,350
178,731
-
526,081
108,481
274,511
1,091,752
370,371
-
1,462,123
187,176
459,103
65
GFINITY plc | Annual Report & Financial Statements 2021 Company Property, Plant and Equipment (continued)
Office
equipment
Computer & production
equipment
Leasehold
Improvement
£
£
£
51,743
-
-
962,994
105,327
(85)
634,562
-
-
Total
£
1,649,299
105,327
(85)
Cost
At 1 July 2020
Additions
Disposals
At 30 June 2021
51,743
1,068,236
634,562
1,754,541
Depreciation
At 1 July 2020
Charge for the period
Disposals
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
27,280
12,717
-
39,997
11,746
24,463
908,762
88,729
-
997,491
70,745
54,232
1,097,155
11,244
-
1,462,123
112,691
-
537,326
1,574,814
97,237
108,481
179,727
187,176
13. Right Of Use Assets
The carrying value of right-of-use assets by class is:
Group and company
Cost
At 30 June 2019
On adoption of IFRS 16
At 30 June 2020
Accumulated depreciation
At 30 June 2019
Charge for the year
At 30 June 2020
Net carrying amount
At 30 June 2019
At 30 June 2020
66
Premises
£
-
999,379
999,379
-
571,074
571,074
428,305
–
GFINITY plc | Annual Report & Financial Statements 2021
13. Right Of Use Assets (continued)
Group and company
Cost
At 30 June 2020
At 30 June 2021
Accumulated depreciation
At 30 June 2020
Charge for the year
At 30 June 2021
Net carrying amount
At 30 June 2021
At 30 June 2020
14. Goodwill
Group
Cost
At 1 July 2020
Acquisition of business
At 30 June 2021
Impairment
At 1 July 2020
Charge for the period
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
Premises
£
999,379
-
571,074
428,305
999,379
-
428,305
£
2,544,526
260,783
2,805,309
0
901,519
901,519
1,903,790
2,544,526
67
GFINITY plc | Annual Report & Financial Statements 2021
14. Goodwill (continued)
Company
Cost
At 1 July 2020
Acquisition of business
Recognised on hive-up of
subsidiary trade and assets
At 30 June 2021
Impairment
At 1 July 2020
Charge for the period
At 30 June 2021
Net book value
At 30 June 2021
At 30 June 2020
£
-
260,783
2,307,634
2,568,417
-
-
-
2,568,417
-
Goodwill at 1 July 2020 recognised in the Group financial statements is in respect of the acquisitions of CEVO Inc. and RealSM Ltd that
took place in the year ended 30 June 2018.
Goodwill of £260,783 has been recognised in the Group and the Company financial statements following the acquisition of trade and
assets of EpicStream Inc, on 3 December 2020 (note 28).
Goodwill of £2,307,634 has been recognised in the Company financial statements following the hive-up of the trade and assets of
RealSM Ltd that concluded during the year. This amount has been reclassified from investment in subsidiaries (note 16).
68
GFINITY plc | Annual Report & Financial Statements 2021 15. Intangible Fixed Assets
Group
Customer
Relationship
Real Sport
Platform
Cevo Gaming
Platform
Assets Under
Construction
£
£
£
£
Total
£
Cost
At 1 July 2019
Additions
Disposals
1,198,661
935,518
281,383
57,724
2,473,286
-
-
-
-
-
-
-
-
-
-
At 30 June 2020
1,198,661
935,518
281,383
57,724
2,473,286
Amortisation
At 1 July 2019
Charge for the
period
867,197
108,414
405,220
313,553
109,152
56,586
At 30 June 2020
975,611
718,773
165,738
-
-
-
1,530,319
478,553
1,860,122
Net book value
At 30 June 2020
At 30 June 2019
223,050
331,464
216,745
530,298
115,645
172,231
57,724
-
613,164
1,033,993
Additions
Acquisitions
through business
combination
Disposals
At 30 June 2021
Amortisation
At 1 July 2020
Charge for the
period
Customer
Relationship
Real Sport
Web Platform
CEVO
Gaming Platform
Assets Under
Construction
Web
Platforms
£
£
£
£
Cost
At 1 July 2020
1,198,661
935,518
281,383
57,724
-
-
-
-
-
-
-
-
-
-
-
-
Total
£
2,473,286
7,195
576,822
£
-
7,195
576,822
-
-
1,198,661
935,518
281,383
57,724
584,017
3,057,303
975,611
108,118
718,773
216,745
165,738
56,431
At 30 June 2021
1,083,729
935,518
222,169
-
-
-
-
1,860,122
111,406
492,700
111,406
2,352,822
Net book value
At 30 June 2021
At 30 June 2020
114,932
223,050
-
216,745
59,214
115,645
57,724
57,724
472,612
-
704,481
613,164
69
GFINITY plc | Annual Report & Financial Statements 2021
15. Intangible Fixed Assets (continued)
Company
Assets Under
Construction
Software
Development
Web Platforms
£
£
Cost
At 1 July 2019
Additions
Disposals
At 30 June 2020
Amortisation
At 1 July 2019
Charge for the period
Disposals
At 30 June 2020
Net book value
At 30 June 2020
At 30 June 2019
Cost
At 1 July 2020
Additions
Acquisitions through business combination
Disposals
At 30 June 2021
Amortisation
At 1 July 2019
Charge for the period
Disposals
At 30 June 2021
Net book value
At 30 June 2020
At 30 June 2019
£
-
57,724
-
57,724
-
-
-
-
57,724
-
57,724
-
-
-
57,724
-
-
-
-
57,724
57,724
148,750
-
-
148,750
148,750
-
-
148,750
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£
148,750
57,724
-
206,474
148,750
-
-
148,750
57,724
-
57,724
7,195
576,822
-
641,741
-
111,406
-
-
-
-
-
-
-
-
-
-
-
-
7,195
576,822
-
584,017
-
111,406
-
111,406
111,406
472,612
-
530,336
57,724
Assets under construction relate to costs incurred in the implementation of a new ERP system for the company. Implementation work
in respect of this asset was paused in the year to focus resources on key growth activities, however, it remains the intention to complete
and utilize the investment made to date in the future.
70
GFINITY plc | Annual Report & Financial Statements 2021
16. Investment in subsidiaries
At 1 July
Reclassifying investment in subsidiary to
goodwill
Impairment
At 30 June
30 June 2021
£
4,466,133
(2,307,634)
(2,158,499)
-
Company
30 June 2020
£
4,466,133
-
-
4,466,133
The investments in subsidiaries represented the purchase of CEVO and Real Sport on 24 July 2017 and 13 March 2018 respectively.
The fair value of consideration at acquisition for CEVO was £2,158,498 for 100% of the share capital and this has been fully impaired in
year ended 30 June 2021 following an impairment review (note 3). The fair value at acquisition of RealSM Ltd was £2,307,634 for 100%
of the share capital and this has been reclassified to Goodwill following the hive-up of the trade and assets of the subsidiary company
(Note 16).
Subsidiary undertaking
Country of incorporation
Holding
Proportion of voting
rights and capital held
Nature of business
CEVO Inc.
USA
Ordinary shares
100%
IT Development and
Tournament and event
operator
RealSM Ltd
England
Ordinary Shares
100%
Online media
RealSM Ltd registered offices are The Foundry, 77 Fulham Palace Road, London, United Kingdom, W6 8JB. CEVO’s registered address
is 128 Maringo Rd, Ephrata, WA 98823
RealSM is exempt from the requirements of the Act relating to the audit of individual accounts in accordance with 479A of the C.A.
2006.
17. Investment in associates
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
-
-
-
-
-
£
-
308,214
(308,214)
-
-
£
-
-
-
-
-
£
-
308,214
(308,214)
-
-
At 1 July
Investment
Share of Losses
Impairment
At 30 June
In the year ended 30 June 2020, the investment in associate relates to the acquisition of 33% of the Esports Awards Limited on its
incorporation in February 2017 and 30% of Gfinity Esports Australia on its incorporation in August 2017. During the year end 30 June
2020, Gfinity Esports Australia ceased trading. As a result the carrying value of all investment into the entity has been written off in full.
Both investments are held in Gfinity plc.
71
GFINITY plc | Annual Report & Financial Statements 2021
17. Investment in associates (continued)
Associate undertaking
Country of
incorporation
Holding
Proportion of voting
rights and capital held
Nature of business
Esports Industry
Awards Ltd
Gfinity Esports Australia
PTY Limited
England
Australia
Ordinary shares
2021
33%
2022
33%
Ordinary Shares
0%
30%
Dormant
Tournament and
event operator
On 18 December 2020 Gfinity disposed of its 33% holding in Esports Awards Ltd, recognised under the equity method. The investment
had a carrying value at the point of disposal of £nil. Net proceeds from the transaction were £459,706, resulting in a corresponding gain
on disposal of £459,706.
Esports Awards LTD’s registered offices are Belfry House, Champions Way, Hendon, London, England, NW4 1PX. The registered office
of Gfinity Esports Australia is Suite 5, Level 1, 100 William Street, Sydney, NSW 2011.
18. Trade and Other Receivables
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
£
£
£
1,313,447
(356,480)
956,967
151,150
-
-
831,580
(250,110)
581,470
308,214
-
-
1,272,742
(356,480)
831,580
(250,110)
916,262
581,470
151,149
308,495
-
-
-
-
479,398
501,367
450,704
448,095
1,586,850
1,391,051
1,518,116
1,338,060
-
-
-
-
533,480
1,505,740
-
-
Trade receivables
Provision for doubtful debts
Other receivables
Amounts due from group
undertakings
Amounts due from related
undertakings
Prepayments and accrued
income
Amounts due in less than
one year
Amounts due from group
undertakings
Prepayments and accrued
income
Total
1,586,850
1,391,051
2,051,596
2,843,800
Amount due from group undertakings of £533,480 are considered to be due in more than one year (2020:£1,505,740) while
prepayments include a rental deposit of £101,015 that was recovered in July 2021.
The directors consider that the carrying amount of trade and other receivables approximates to their fair value due to the short-term
nature of these financial assets.
72
GFINITY plc | Annual Report & Financial Statements 2021
19. Cash and Cash Equivalents
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
£
£
£
Cash at bank and in hand
1,375,873
1,600,597
1,329,815
1,531,360
Total
1,375,873
1,600,597
1,329,815
1,531,360
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents
does not differ from the carrying value.
20. Deferred Tax Liabilities
At 1 July
Arising on business combination
Credited to profit or loss
At 30 June
The provision for deferred taxation is made up as follows:
Temporary timing differences on intangible
assets
30 June 2021
£
92,059
94,748
(58,972)
127,835
Group
30 June 2020
£
322,718
-
(230,659)
92,059
127,835
92,059
At 1 July
Arising on business combination
Credited to profit or loss
At 30 June
Temporary timing differences on intangible
assets
30 June 2021
£
-
115,543
(20,795)
94,748
94,748
Company
30 June 2020
£
-
-
-
-
-
73
GFINITY plc | Annual Report & Financial Statements 2021 21. 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
Number
£
As at 30 June 2019
Issued on 31 July 2019 at £0.045
Issued on 2 April 2020 at £0.01
Issued on 21 April 2020 at £0.01
Issued between 22 April and 30 June 2020 at £0.01
As at 30 June 2020
Issued between 6 July 2020 and 04 June 2021 at £0.01
As at 30 June 2021
22. Trades and other Payables
362,897,087
116,666,666
56,839,167
168,160,833
21,304,500
725,868,253
204,644,995
930,513,248
362,897
116,667
56,839
168,161
21,305
725,868
204,645
930,513
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
254,986
254,986
680,419
65,776
1,105,526
-
£
-
-
450,264
103,930
910,582
428,305
£
254,986
254,986
634,299
65,776
1,105,526
-
£
-
-
416,865
91,117
910,582
428,305
Non-current liabilities
Other Payables (Deferred
consideration)
Current liabilities
Trade payables
Other taxation and social
security
Accrued expenditure and
deferred revenue
Lease Liabilities
Total
2,106,706
1,893,081
2,060,587
1,846,869
1,851,720
1,893,081
1,805,601
1,846,869
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The directors consider that
the carrying amount of trade payables approximates to their fair value due to their short-term nature.
74
GFINITY plc | Annual Report & Financial Statements 2021 23. Notes To The Cash Flow Statement
Cash flows from operating activities
Loss for the financial year
Depreciation of property, plant and equipment
Depreciation on right of use assets
Amortisation of intangible fixed assets
Goodwill impairment
Interest Received
Interest Payable
Share based payments
(Increase) / decrease in trade and other receivables
Increase in trade and other payables
Share of Associate Losses
Disposal of fixed assets
Gain on disposal of Associate
Corporation tax charge
Corporation tax (paid) / R&D credits received
Cash used by operating activities
Net cash used by operating activities
Cash flows from operating activities
Loss for the financial year
Depreciation of property, plant and equipment
Depreciation on Right of Use assets
Amortisation of intangible fixed assets
Investment impairment
Interest Received
Interest Payable
Share of Associate Losses
Gain on disposal of Associate
Share based payments
(Increase) / decrease in trade and other receivables
Increase / (decrease) in trade and other payables
Loss on disposal of fixed assets
Taxation charge
Corporation tax (paid) / R&D credits received
Net Operating Cashflow
Net cash used by operating activities
Group
30 June 2021
30 June 2020
£
£
(3,845,595)
(7,725,307)
132,478
428,305
492,700
901,519
(4)
10,236
265,583
(280,359)
300,020
-
85
(459,706)
227,004
(221,929)
(2,049,663)
(2,049,663)
(5,739,305)
112,691
428,305
111,406
2,158,499
(4)
10,236
-
(459,706)
265,583
707,362
300,112
85
(162,957)
227,004
(2,040,690)
(2,040,690)
370,589
571,074
478,553
-
(2,622)
39,768
1,500,573
931,047
(1,531,582)
308,214
-
-
(457,663)
227,004
(5,290,351)
(5,290,351)
Company
(7,720,225)
370,371
571,074
-
-
(2,622)
39,768
308,214
-
1,500,573
916,564
(1,533,368)
-
-
227,004
(5,322,647)
(5,322,647)
75
GFINITY plc | Annual Report & Financial Statements 2021 24. Financial Instruments And Risk Management
The Company uses a limited number of financial instruments, comprising cash, short-term deposits, and various items such as trade
receivables and payables, which arise directly from operations. The Company does not trade in financial instruments. All of the
Company’s financial instruments are measured at amortised cost.
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and
liquidity risk.
Credit risk
The Company’s principal financial assets are bank balances and cash, trade and other receivables.
Bank balances and cash are held by banks with high credit ratings assigned by independent credit rating agencies. Management is of
the opinion that cash balances do not represent a significant credit risk.
As the Group does not hold security against trade and other receivables, its credit risk exposure is as follows:
Group
Company
30 June 2021
30 June 2020
30 June 2021
30 June 2020
£
£
£
£
1,586,850
1,146,912
2,051,596
2,599,380
The trade receivables balance represents amounts due from third
parties. At the balance sheet date, the Group’s trade receivables
totaled £1,313,447 less a provision of £356,480 (2020: £831,580
less a provision of £250,110). The Company’s receivables
include £533,480 of inter-company funding (2020: £1,505,740).
The Company’s trade receivables totaled £1,272,742 less a
provision for doubtful debt of £356,480 (2020: £831,580 less a
provision for doubtful debt of £250,110).
There are no significant overdue but not impaired trade
receivables at the balance sheet date. The Company balance
sheet includes inter-company receivables which are not
considered to be at risk as the Company retains control over the
debtor however it is not anticipated that the Group companies will
repay these amounts in the next 12 months.
At the balance sheet date an amount of £316,699 was due from
one customer representing a concentration of credit risk. This
amount has not been recovered in full since the balance sheet
date, however is fully provided against in the year-end balance
sheet.
Liquidity risk
All trade and other payables are due for settlement within one
year of the balance sheet date. The use of instant access deposits
ensures sufficient working capital is available at all times.
Foreign exchange risk
The Company operates in overseas markets by selling directly
from the UK, owns an overseas subsidiary and reports in GBP. It is
therefore subject to currency exposures on transactions while the
Group is subject to currency exposures on consolidation of the
overseas subsidiary.
Financial instruments held by the Company and their carrying
values were as follows:
30 June 2021
30 June 2020
USD ($)
GBP (£)
USD ($)
57,048
39,284
56,248
58,997
-
1,524,796
216,805
1,335,540
2,350,781
-
-
65,890
92,689
(39,588)
-
Group
GBP (£)
990,979
102,661
1,525,657
(1,861,075)
-
211,577
5,427,923
118,991
758,222
Trade and other
receivables
Accrued income
Cash
Trade and other
payables
Derivative Financial
Instruments
Net Current Assets /
Liabilities
76
GFINITY plc | Annual Report & Financial Statements 2021 30 June 2021
30 June 2020
USD ($)
460,599
747,680
-
122,703
-
-
GBP (£)
943,989
952,675
216,805
1,242,264
2,346,757
-
USD ($)
-
-
-
31,645
-
-
Company
GBP (£)
990,979
1,505,740
102,661
1,505,775
(1,846,869)
-
1,330,982
5,702,490
31,645
2,258,286
Trade and other
receivables
Amounts due from
Group Undertakings
Accrued income
Cash
Trade and other
payables
Derivative Financial
Instruments
Net Current Assets /
Liabilities
Financial liabilities included in the balance sheet relate to the IAS
39 category of other financial liabilities held at amortised cost.
As cash is held at floating interest rates, its carrying value
approximates to fair value.
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.
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.
7777
GFINITY plc | Annual Report & Financial Statements 2021 25. Share Based Payments
Equity-settled share option plans
Options
The Company has a share option scheme for employees of the Group.
The tables below summarises the exercise terms of the various options over Ordinary shares of £0.001 each
which had been granted, and were still outstanding, as at 30 June 2021.
Number
Weighted average exercise price
46,859,795
47,075,621
(28,344,836)
(3,879,553)
61,693,027
£
0.1382
0.0125
(0.1267)
(0.1323)
0.0486
Number
Weighted average exercise price
61,693,027
49,400,000
(4,050,001)
(10,866,663)
96,176,363
£
0.0486
0.0409
0.0100
0.0110
0.0556
LTIP options
Shares Options as at 30 June 2019
Shares Options Granted
Share Options Replaced
Share Options Forfeited
LTIP Share Options as at 30 June 2020
LTIP options
Shares Options as at 30 June 2020
Shares Options Granted
Share Options Forfeited
Share Options Exercised
LTIP share options as at 30 June 2021
78
GFINITY plc | Annual Report & Financial Statements 2021 Options for non-employee services
Non-market condition shares
Number
Weighted average exercise price
Shares Options as at 30 June 2019
Shares Options Granted
Share Options Lapsed
Share Options as at 30 June 2020
7,500,000
-
-
7,500,000
£
0.20
-
-
0.20
Non-market condition shares
Number
Weighted average exercise price
Shares Options as at 30 June 2020
Shares Options Granted
Share Options Lapsed
Share Options as at 30 June 2021
7,500,000
-
(3,500,000)
4,000,000
£
0.20
-
0.20
0.20
Options vest over periods defined in the respective option
agreements and at the discretion of the board of directors.
37,750,016 options vested during the year (2020: 28,837,544).
Of the options outstanding 38,000,000 (2020: 20,000,000) are
held by directors. Full details of all options held by directors are
contained within the Directors’ Remuneration Report.
The principal assumptions input into the Black Scholes model to
calculate the value of LTIP share options issued for compliance
with IFRS 2 “Share Based Payments” are included below, where
applicable.
Weighted average exercise price
Average expected life
Expected volatility
Risk free rate
Expected dividend yield
All options were granted at an exercise price equivalent to the
market price at the date of grant. The weighted average exercise
price of LTIP options outstanding at 30 June 2021 was £0.0496
(2020: £0.0486). The weighted average fair value of options issued
during the period was £0.0404 (2020: £0.0125).
The average expected life is based on directors’ best estimate
taking into account the vesting conditions of the options.
Expected volatility has been calculated with reference to the
actual volatility of the share price since over the year prior to the
date of grant.
30 June 2021
30 June 2020
£0.0556
1.0 years
86.62%
0%
0%
£0. 0125
1.0 years
81.01%
0%
0%
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 £nil (2020:£nil).
All options are held in Gfinity plc with no options held over any of
the subsidiaries.
79
GFINITY plc | Annual Report & Financial Statements 2021 26. Warrants
The Company has granted warrants over Ordinary Shares as outlined in the table below.
Number
Weighted average exercise price
Warrants
Warrants as at 30 June 2019
Warrants granted
Warrants exercised
Warrants lapsed/forfeited
Warrants as at 30 June 2020
Warrants as at 30 June 2020
Warrants granted
Warrants exercised
Warrants lapsed/forfeited
Warrants as at 30 June 2021
-
225,000,000
(21,304,500)
-
203,695,500
203,695,500
-
(183,645,000)
-
20,050,500
£
0.000
0.010
0.010
0.000
0.0100
0.010
0.000
0.010
0.000
0.0100
No warrants were granted in the period. The warrants exercised were granted in year ended June 2020 and this figure represented
one warrant per ordinary share acquired as part of the fundraise at an exercise price equal to that at which shares were acquired in the
fundraise. All warrants are non-transferrable and have an exercise period of 18 months from the date of issue.
The fair value of warrants was calculated according to the Black Scholes model, however, no adjustment has been recognised in respect
of the warrants, as directors consider this amount to be immaterial.
27. Related Party Transactions
The Directors Remuneration Report provides details of share options issued to certain directors in the period. Further information on
share options are provided in Note 24. In addition to the share options granted in the year, the directors also participated in share
placings as outlined in the table below. All shares subscribed for by directors were at the same price and under the same conditions as
all other participants in the placings:
John Clarke
Jonathan Hall
June 2021, exercise of warrants
at 1p per share
500,000
500,000
Transactions with Group subsidiaries in the year:
CEVO: There was a management recharge from Gfinity to
CEVO of £13,409 (2020: £95,767) and a recharge from CEVO
to Gfinity for technology services of £215,274 (2020: £719,953).
There were no cash advances to and expenses paid on behalf of
CEVO by Gfinity (2020: £440,200). At the balance sheet date the
intercompany loan due to Gfinity from CEVO was £533,480 (2020:
£528,481).
Real Sport: There were cash advances to and expenses paid on
behalf of Real Sport by Gfinity of £5,734 (2020: £157,677). At the
balance sheet date the intercompany loan due to Gfinity from Real
Sport was £952,675 (2020: £977,260).
There was no revenue from transactions with associates in the
year (2020: £0 from the Esports Awards Ltd and £0 with Gfinity
Australia). During the period there was a gain of £459,706 from
disposal of Esports Awards Ltd as mentioned in Note 17.
80
GFINITY plc | Annual Report & Financial Statements 2021 28. Business Combinations
Acquisition of EpicStream
On 3 December 2020 Gfinity PLC acquired the trade and assets of EpicStream Inc, an online news community for fantasy and sci-
fi movies, television, video games, collectible cards and comic books. EpicStream generates revenue through programmatic ads,
sponsored content, ecommerce and content creation. Gfinity will also monetise all EpicStream’s social channels. The acquisition means
that Gfinity will assume ownership of the EpicStream.com website, its extensive social media network and their respective historic
content. The continued growth of the platform will be supported by its founders joining the Gfinity team.
Purchase consideration
Initial consideration
Shares (10,000,000 Ordinary shares at £0.36)
Total initial consideration
Deferred consideration
Contingent consideration at fair value
Total deferred consideration
Total consideration payable
Contingent consideration
£
360,000
360,000
353,227
353,227
713,227
Contingent consideration is payable based on revenue generated from the acquired assets. The amount payable is calculated at 30%
of relevant revenues received in the first and second 12 month periods after the acquisition date, up to a maximum of £900,000 in each
12 month period. The fair value of the contingent consideration is currently estimated to be £353,227 based on forecast revenues at the
date of the acquisition. The maximum contingent consideration payable is £1,800,000.
Net assets acquired
The fair values of the assets and liabilities of the acquired assets of EpicStream as at the date of acquisition are as follows:
Intangible assets: web traffic
Deferred tax liability
Net identifiable assets acquired
Add: Goodwill
Net assets acquired
£
567,987
(115,543)
452,445
260,783
713,227
81
GFINITY plc | Annual Report & Financial Statements 2021 28. Business Combinations (continued)
The goodwill that arises from the business combination reflects the profitability of the acquired trade and assets and the enhanced
growth prospects for the combined business. None of the goodwill is expected to be deductible for tax purposes.
EpicStream’s post acquisition revenue was £57,800 with a gross profit of £23,005. If the business had been controlled for the full year,
the revenue and gross profit would have been as below:
Revenue
Cost of sales
Gross profit
£
99,086
59,649
39,437
29. Events Occuring After The Reporting Period
Acquisition of Megit Limited and Placing
On 23 August 2021, Gfinity announced its intention and agreement, subject to completion of a successful placing and settlement of
the initial consideration, to acquire Megit Limited. Megit Limited, was the private company which owns and operates the website
Stock Informer, in both the UK and US. The Stock Informer brand has become an established authority on the availability of hard to find
items of stock, with a particular emphasis on products of relevance to gamers, enabling it to drive profitable revenue through affiliate
commissions.
On 24 August it was announced that an oversubscribed placing had been successfully completed, subject to shareholder approval,
raising £3.3m prior to expenses at the prevailing market price of 4p per ordinary share. This transaction was approved by shareholders
at an Extraordinary General Meeting of the company on 10 September. The transaction formally completed on 14 September 2021.
Consideration for the transaction was as outlined below:
Purchase consideration
Purchase consideration
Initial Consideration:
Initial Cash Consideration
Shares (62,500,000 shares at £0.04)
Total Initial Consideration
Contingent Consideration
30% revenue earn out on revenue earned
by Stock Informer brand in the 3 years post
acquisition, capped at £1,800,000:
Contingent Consideration
Estimated Total Consideration
82
£
2,500,000
2,500,000
5,000,000
1,260,000
1,260,000
6,260,000
GFINITY plc | Annual Report & Financial Statements 2021 The provisionally determined fair value of assets and liabilities of Megit Limited as at the date of acquisition are as follows:
Cash and cash equivalents
Receivables
Payables (incl Corporation tax)
Add: goodwill and intangibles
Net Assets Acquired
Contingent Consideration:
£
50,000
347,196
(397,196)
6,260,000
6,260,000
Contingent consideration is due amounting to 30% of revenue, net of sales taxes, earned in the 3 calendar years following acquisition.
This consideration is capped at £1,800,000, being 30% of £6,000,000. The fair value of this consideration has been assessed at
£1,260,000, being 30% of £4,200,000.
Information not disclosed as not yet available:
At the time the financial statements were authorized for issue, the group had not yet fully completed the accounting for the acquisition
of Megit Limited. In particular the fair value of assets and liabilities disclosed above have only been determined provisionally. Full
analysis of the categorization between goodwill and other separately identifiable assets is also still to be calculated and as a result, any
deferred tax on such assets is yet to be calculated.
Acquisition of trade and assets of Siege GG
On 8 September 2021 Gfinity announced the acquisition of the trade and assets of SiegeGG. This included the website, related social
platforms, statistical database and supporting technology and methodology that has helped SiegeGG become the authority on the
competitive scene around the Rainbow Six Siege game.
Consideration in respect of this transaction was as follows:
Initial Consideration:
Shares (9,000,000 shares at £0.044)
Total Initial Consideration
Contingent Consideration:
30% revenue earn out on revenue earned
by Stock Informer brand in the 2 years post
acquisition, capped at £1,500,000
Contingent Consideration
Estimated Total Consideration
Contingent Consideration:
£
396,000
396,000
180,000
180,000
576,000
Contingent consideration is due amounting to 30% of revenue, net of sales taxes, earned in the 2 calendar years following acquisition.
This consideration is capped at £1,500,000. The fair value of this consideration has been assessed at £180,000, being 30% of £600,000.
No value has been ascribed to tangible fixed assets acquired under this transaction, hence the full value of the opening balance sheet
will represent goodwill and intangibles. Full analysis of the categorization between goodwill and other separately identifiable assets is
also still to be calculated and as a result, any deferred tax on such assets is yet to be calculated.
83
GFINITY plc | Annual Report & Financial Statements 2021 APPENDIX
Image Credits
Photographer
Joe Brady
Photographer
Tia Thorne
Photographer
KUNOS Simulazioni Srl
Photographer
The Codemasters Software
Company Limited
84
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Page Credit
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GFINITY plc | Annual Report & Financial Statements 2021 85
GFINITY plc | Annual Report & Financial Statements 2021