Disposal

Gfinity PLC

05 December 2023

 

For immediate release

5 December 2023

Gfinity PLC

("Gfinity" or the "Company")

Disposal

The Board of Gfinity plc (AIM:GFIN) announces that the Company has today disposed of the remaining business and assets of its former Esports Solutions Division ("Disposal").

Background

As previously announced in February 2023, given the inconsistent nature of service delivery work, and also the high cost to the Company of delivering a true end-to-end esports solution and the resources required to support clients in their activations around the globe, Gfinity had decided to partner with a US esports business to jointly deliver solutions on a profit-share basis and no fixed cost and as a result, had decided to close the Gfinity Arena in Fulham. Subsequently, on 6 June 2023, the Company announced that the Board had decided to close down its Esports Solutions Division as the market for esports remained soft and the directors saw limited profitable growth opportunities and had further resolved to focus solely on the media division.

Disposal

Ingenuity Loop Limited ("Ingenuity Loop" or the "Buyer"), a newly formed company owned by media investor Mike Luckwell,  has agreed to buy the remaining business and assets of the Esports Solutions Division for an upfront cash payment of £15,000 as a contribution to costs incurred by the Esports Solutions Division since August 2023 (including transaction costs) and a 15% equity interest in the Buyer. The Buyer has an option to buy Gfinity's 15% interest in Ingenuity for £200,000 in cash at any time in the first 12 months following completion of the sale. Neville Upton, Non-executive Chairman  of the Company, has agreed to join Ingenuity Loop as Chief Executive and will not receive a salary until Ingenuity Loop is profitable. In return, Neville Upton will have an equity interest of approximately 41.65% in Ingenuity Loop on completion.

Under the proposed terms of the Disposal, the Buyer will have the licence for a transitionary period of up to four years to trade as "Gfinity Esports Solutions" provided that the Buyer is not permitted to make any public announcements using the Gfinity trading name and there are standard provisions protecting Gfinity if in any way the Gfinity brand is brought into disrepute by the Buyer.

The Disposal sale and purchase agreement includes standard drag and tag provisions and warranties by Gfinity capped at the value of the consideration.

Related Party

As Neville Upton has an interest in the Buyer, the Disposal is a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. Accordingly, the Independent Directors (being the Board other than Neville Upton) consider, having consulted with the Company's nominated adviser, that the Disposal is fair and reasonable insofar as Gfinity's Shareholders are concerned. In particular, the Independent Directors have taken into account that:

-      Since June 2023, the Esports Solutions Division has been closed down and all the employees bar-one have been made redundant. The liability in respect of the remaining employee is being transferred to the Buyer and there is the potential for a cash consideration of £200,000 on exercise of the call option by the Buyer;

-      Following the cessation of the Formula 1 contract, Gfinity does not have available cash, internal expertise, or shareholder support to re-generate the Esports Solutions Division;

-      In the current financial year ending 30 June 2024, the Esports Solutions Division revenue is currently expected to be £nil; and

-      There are no other potential purchasers of the Esports Solutions Division and in the absence of the sale, Gfinity would not receive any value for the Esports Solutions Division.

Further AIM Disclosures

The Esports Solutions Division was formerly operated as a division within Gfinity and not as a separate legal and accounting entity. Accordingly, there are no standalone accounts for the business and the following has been extracted from the Company's internal management accounts. In the last published audited accounts for the year ended 30 June 2022, the Esports Solutions Division turnover amounted to £2.0 million and the gross margin amounted to £0.9 million, which was however, substantially accounted for by the Formula 1 contract and which ended in March 2023. In the period since closure in June 2023, turnover has been £nil and the remainder of the Esports Solutions Division has been loss making. As at 31 December 2022, the Esports Solutions Division's unaudited total assets amounted to £0.10 million and £nil as at 30 June 2023 following closure of the division and release of the Gfinity Arena in Fulham.

The Esports Solutions Division has one employee.

The initial cash consideration and in due course any proceeds on exercise of the call option by the Buyer will be used for general working capital.

Other Information

Further information is available from the Company's website which details the company's project portfolio as well as a copy of this announcement: www.gfinityplc.com

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

The person who arranged for the release of this announcement on behalf of the Company was David Halley, Chief Executive.

Enquiries:

Gfinity Plc	David Halley	[e-mail]
Beaumont Cornish Limited Nominated Adviser and Broker	Roland Cornish Michael Cornish	[phone] www.beaumontcornish.co.uk

ENDS

 

END