Final Results

Gfinity PLC
22 December 2023
 

21 December 2023

For immediate release

 

Gfinity PLC

("Gfinity" or the "Company")

 

Audited Results for the year ended 30 June 2023

 

The Board of Gfinity announces the audited annual results for the year ended 30 June 2023. The Annual Report and Accounts will shortly be sent to shareholders and will be available on the Company's website,  http://www.gfinityplc.com together with a copy of this announcement.

 

For further information please contact:

 

Enquiries:

Gfinity Plc

Neville Upton

 

ir@gfinity.net

 

Beaumont Cornish Limited

Nominated Adviser and Broker

Roland Cornish

Michael Cornish

 

+44 (0)207 628 3369

www.beaumontcornish.co.uk

 

 

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. The person who arranged for the release of this announcement on behalf of the Company was Neville Upton, Director.

 

Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated Adviser and is authorised and regulated by the FCA. Beaumont Cornish's responsibilities as the Company's Nominated Adviser, including a responsibility to advise and guide the Company on its responsibilities under the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange. Beaumont Cornish is not acting for and will not be responsible to any other persons for providing protections afforded to customers of Beaumont Cornish nor for advising them in relation to the proposed arrangements described in this announcement or any matter referred to in it.

 

Chairman's Report

I have pleasure in presenting our annual accounts for the financial year ended 30 June 2023.

 

It has been a difficult year for the Company as we transitioned from esports solutions and software development, to a pure play digital media company. The new focus is on cost reduction and a quality product, targeting profitability, with the objective to create longevity in the Company and support and stabilise the share price for our investors.

 

The restructuring has led to a reduction in revenue to £2.2m, a decrease of 60% YOY, with a loss of £10.3m. Within this loss, we were able to complete the full restructuring of the business so that we enter the new financial year in a much stronger position.

 

FY 2023, we exited our esports arena in London and also decided to no longer offer physical events in the future, as both the arena and esports events had shown no profitability, longevity or scalability for the business.

 

In June 2023, we exited the majority of Athlos Game Technologies Ltd ("Athlos"), as the capital required to build a SaaS company from scratch proved too much for our balance sheet to sustain. Athlos continued to lose significant capital on a monthly basis with no new contracts in the pipeline and we deemed it a prudent decision to exit the company and focus our capital on business areas with more consistent and known opportunity.

 

The economics of the business has become more predictable, with the departure of previous senior management and our old business model being stripped down. We now run a good business, with a sensible and much smaller cost base. We expect our salary bill for the following financial year to be reduced by over 65% and headcount by 50%.

 

Our operating cost base has been streamlined, with the combined operating costs of both continued and discontinued operations for FY2023 as shown in note 10, down 68% year-on-year when compared to our current annualised cost base of £2.5m.

 

These changes by no means limit the opportunity of the Company, as we are now operated by a leaner team, with known M&A experience in a market with many opportunities. Our customer base of hard-to-reach gamers, is one of the most coveted by brands and advertisers, and gaming is a sector continuing to grow year-on-year. By focusing on one industry vertical, we have already been able to improve our product offering including the launch of a new website in the summer.

 

In summary, I would like to say thank you to the Gfinity team, who have supported us through a challenging year of transition - They are dedicated writers and developers, and have a clear passion for gaming. And I would also like to thank all our clients and partners that choose to work with Gfinity together with our shareholders. Their continued support is never taken for granted and we can now look forward to growing together.

 

 

 

 

 

Neville Upton

Chairman

20 December 2023

 

Chief Executive Officer's Report

When appointed CEO in August 2023, I set out to quickly bring the economics of our business under control after a long period of loss-making business decisions trying to build long term value.

 

The decision to focus the Company as a pure play digital media company, was straightforward, as we not only had some excellent sites, although they were in need of fresh management and some fixing, but we also had a solid core team of writers, editors and developers who are the backbone of the new look Gfinity.

 

By having a singular focus and product vertical, the team can now really show their expertise in running digital assets to rebuild our Ebitda and create a long term, reliably profitable company. The digital asset space offers great opportunities, including potential acquisitions, and rewards companies who deliver great product and adapt to changes in the industry.

 

A significant subject in tech is obviously Artificial Intelligence ("AI") and the impact of Large Language Models on businesses. At Gfinity, we are embracing this opportunity by utilising tools to improve our product and increase efficiencies, while ensuring our own team can add their unique magical human intervention for us to be the go-to sites for gamers and esports enthusiasts looking for compelling and engaging content .

 

We are also very excited about the opportunities of AI in video, and I believe video will increasingly become part of the future product offering of the company, thus adapting to the needs of a new generation of gamers.

 

We are building our own engagement tools in our sites where our community will be entertained through playing games and watching unique content.

 

We have emerged from  a difficult year for GDM. At the end of the June monthly sessions across all sites were 9 million and combined with our social media channels we reach more than 20 million gamers each month.

 

We have now built a stronger foundation for future growth and will work opportunistically through the next year to find additive transactions to grow the network and company.

 

Financial Highlights:

The company operated in FY 2023 with 3 loss-making business divisions.

While all 3 presented opportunities to create shareholder value, Athlos and Gfinity Esports Solutions were more risky ventures and required more capital.

Athlos is a ground breaking product but needed significant funding. Gfinity sold 72.5% of Athlos and removed liabilities for 6 months to relieve the balance sheet. This division was significantly loss-making each month as it invested in further feature development and started to invest heavily in the go-to-market plan.  Up to the date of disposal of 5 June 2023, the Group recorded revenue from Athlos of £323,873 and a loss of £715,616.

Gfinity esports solutions division was unpredictable with short term, often one-off contracts with a large fixed cost base. The Formula 1 contract which had been the cornerstone of the division and which contributed 60% of revenue and 83% of gross profit of the eSports division, was not renewed. Most of the other revenue was one-off consultancy contracts and low margin content production. As announced in the year, The Board decided to close down the division:  

·              December 2022, closed down the Gfinity Arena to reduce exposure to Esports 

·              June 2023, announced the closure of the division

·              Since year end the division has been sold with Gfinity retaining a 15% stake

GDM witnessed significant headwinds with numerous changes to the google algorithms and a well-publicised decline in the ad rates seen across all digital media. This required a new approach to running the business. A lower cost base, leaner management team and bigger focus on quality content and improved User Experience was needed.

·                 Implemented a significant cost reduction programme in June 2023.

·                 Moved advertising agency in April 2023 which saw an increase in ad rates which negated the general decline in ad rates across the digital media sector

·                 We restructured the dense advertising structure in sites to make it more favourable for search engine optimisation

·                 We improved site mechanics so that numbers would increase in the fourth quarter of calendar year 2023.

Changes in Organisation

The former Chief Executive Officer John Clarke, resigned in February 2023.

With the closure of the esports division and divestment of Athlos we did not need such a heavy central cost base and in August 2023 our former CFO, Jon Hall, left the business and all central functions were reduced in size. I joined the company as Chief Executive  in August 2023 and have implemented a leaner operating model with the prior Head of Operations now looking after day to day running of the business with myself and the board overseeing long term strategy.  This new operating model has also seen a reduced number of editors across the sites a new content production process and more resource in direct revenue generation.  Len Rinaldi left the Board in May 2023.

Growth

Having stabilised the business with a lower cost base and stronger operating foundations, we are now embarking on a growth plan. In July 2023 we launched a new website, starfieldportal, it is now receiving over 35k sessions a day. We aim to release more websites in 2024, as this incurs minimal capital and can leverage our scalable platform and extensive social media presence.

GDM's competitive advantage is technology; content and Search Engine Optimisation (SEO) expertise; and commercial leverage.

 

We have;

·              a strong young team who understand the future of digital communications and media

·              a technology platform that allows us to scale the content suite

·              an ad tech capability to increase our revenues

·              a sales team to exploit the need for brands to reach the difficult to reach Gen Z community

·              a continuing relationship with Athlos and esports solutions team where we can provide some compelling gaming

solutions by amalgamating skill sets.

 

Our dedicated team

 

The progress we are making across the business is a direct consequence of the passion and spirit shown by the team. Every day team members are stepping up, innovating, selling ideas, building networks, impressing partners with the quality of their work, and making things happen in a challenging economic environment. Gfinity is benefiting from having leaders across the business driven by their desire to build something special.

 

Outlook

 

The strategic focus on GDM gives us greater control over our destiny. It allows us to become a leader in one discipline while also navigating the economic headwinds. We have seen a nervousness from publishers to commit investment and advertising rates  have been impacted across the whole of digital media. It is crucial that we continue to manage our cost base zealously while being innovative and adopting to the new technological opportunities. The team will remain agile, flexible, and entrepreneurial, continually adopting to new opportunities and providing compelling engagement to the gaming community.

 

Conclusion

 

The transformation of Gfinity' s business model is now well underway; we are developing expertise to be leading force in digital media across the gaming community. I would like to thank the Gfinity team, our business partners and our clients for their continued hard work and support.

 

 

 

 

 

David Halley

Chief Executive Officer

20 December 2023

 

 

 

 

Group Statement of Profit or Loss

For the ended 30 June 2023

Notes

Year to  30 June 2023

Year to 30 June 2022

Continuing Operations

 

£

£

 




Revenue


        2,190,216 

 2,695,388

Cost of Sales


           (953,905)

(1,247,317)

Gross profit


               1,236,311

  1,448,071





Administration expenses

6

(3,788,329)

(2,870,623)

Operating Loss from trading activities *


(2,552,018)

(1,422,552)





Impairment charge


(5,984,171)

(76,989)

Re-assessment of Deferred Consideration


            931,311

              -

Loss arising on loss of control of a subsidiary

5

(548,761)

             -

Net finance costs

8

(25,976)

            77





Loss on ordinary activities before taxation


(8,179,615)

(1,499,464)

Taxation

9

           974,876

    209,968

Loss from continuing operations


(7,204,739)

(1,289,496)





Loss on discontinued operations, net of tax

10

(3,050,097)

(2,521,464)





Loss for the year


(10,254,836)

(3,810,960)





 

Earnings per share - Continuing operations

11

 

(0.42)

(0.13)

 (Pence - Basic and Diluted)







 

* Operating Loss from trading activities is the Operating Loss for the year before impairment, movements on deferred consideration, and loss on the loss of control of a subsidiary.

 

 

Group Statement of Comprehensive Income

 



Year to 30 June 2023

 

Year to 30 June 2022

 



£

 

£







Loss for the Period

 


(10,254,836)

 

(3,810,960)

 






Items that may subsequently be reclassified to profit or loss

 

















Foreign exchange profit / (loss) on retranslation of foreign subsidiaries



-


(3,458)







Other Comprehensive Income for the period



-


(3,458)













Loss and total comprehensive income for the period

 


(10,254,836)

 

(3,814,418)

 



 

 

 

 

 

 

Group Statement of Financial Position

As at June 2023

 

 

Notes

 

30-Jun-23

 

30-Jun-22


 

 

£

 

£

NON-CURRENT ASSETS






Property, plant and equipment

12


         14,757


      148,510

Goodwill

13


       495,288


   4,714,399

Intangible fixed assets

14


       415,155


   4,575,141




       925,200

 

   9,438,050

CURRENT ASSETS






Trade and other receivables

16


        644,540


    1,968,893

Cash and cash equivalents

17


        270,476


   2,141,361




        915,016


   4,110,254







TOTAL ASSETS

 

 

     1,840,216

 

 13,548,304







EQUITY AND LIABILITIES






Equity






Ordinary share capital

19


     2,649,030


  1,315,697

Share premium account



   55,367,959


  54,858,008

Other reserves



        423,613


  3,706,664

Retained earnings



   (57,989,529)


(51,113,657)

Non controlling interest



                   3


                 3

Total equity


 

       451,076

 

  8,766,715


 





NON-CURRENT LIABILITIES






Other Payables

20


      17,669


       840,742

Deferred Tax Liabilities

18


         72,390


      897,575







CURRENT LIABILITIES






Trade and other payables

20


     1,060,794


    3,043,272

Provisions

27


238,287


-

Total liabilities


 

     1,389,140

 

   4,718,589


 





TOTAL EQUITY AND LIABILITIES


 

    1,840,216

 

 13,548,304

 

 

The notes form an integral part of these financial statements.

Registered number: 08232509

Signed on behalf of the board on 20 December 2023:

David Halley

Neville Upton

Chief Executive Officer

Non-Executive Chairman

 

 

Company Statement of Financial Position

As at 30 June 2023

 

 

 

Notes

 

 

30-Jun-23

 

Restated

30-Jun-22

 

 

 

£

 

£

NON-CURRENT ASSETS

 





Property, plant and equipment

12


                   13,162


             145,079

Goodwill

13


                 495,289


          2,274,565

Intangible fixed assets

14


                 125,594


          1,059,549

Investment in subsidiaries             

15


                 139,146


6,069,716

Investment in associate

5

 


                            5


-

TOTAL NON-CURRENT ASSETS



                773,196


        9,548,909

 












CURRENT ASSETS






Trade and other receivables

16


                 531,365


          1,880,830

Cash and cash equivalents

17


                   71,255


          1,361,279







TOTAL CURRENT ASSETS


 

                 602,620

 

           3,242,109

 


 

 

 

 

TOTAL ASSETS


 

              1,375,816

 

         12,791,018







EQUITY AND LIABILITIES


















Equity






Ordinary share capital

19


                  2,649,030


            1,315,697

Share premium account



            55,367,959


          54,858,008

Other reserves



                 423,613


           3,728,622

Retained earnings



(58,779,718)


(50,588,868)







Total equity


 

(339,116)

 

          9,313,459


 

 

 

 



 

 

 

 

NON-CURRENT LIABILITIES






Other payables

20


                   17,669


             840,751

Deferred tax liabilities

18


-    


             84,924













CURRENT LIABILITIES






Trade and other payables

20

 


              1,459,026


           2,551,884

Provisions

27


                 238,237


- 

Total liabilities


 

              1,714,932

 

          3,477,559

 












TOTAL EQUITY AND LIABILITIES


 

              1,375,816

 

        12,791,018

 






 

 

 

The notes form an integral part of these financial statements.

As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The parent Company's loss for the year amounts to £11,569,814 (2022: loss of £4,248,407).

Registered number: 08232509

 

Signed on behalf of the board on 20 December 2023:

 

David Halley

Neville Upton

Chief Executive Officer

Non-Executive Chairman

 

 

Group Statement of Changes in Equity

As at 30 June 2023

 

 

Ordinary shares

Share premium

Share option reserve

Retained earnings

NCI

Forex

Total equity

 

£

£

£

£

£

£

£

 
































At 30 June 2021

930,513

   46,511,089

  3,403,414

(47,302,697)

-

(18,500)

    3,523,819

















Loss for the period

 -

 -

 -

(3,810,960)

 -

 -

 

(3,810,960)

Other comprehensive income

 -

 -

 -

-

 -

 (3,458)

 (3,458)

Total comprehensive income

 -

 -

 -

 

(3,810,960)

 -

 

(3,458)

 

(3,814,418)









Proceeds of shares issued

385,184

  8,667,150

 -

 -

 -

 -

  9,052,334

Share Issue Costs

 -

 (320,231)

 -

 -

 -

 -

 (320,231)

Share options expensed

 -

 -

       325,208

 -

 -

 -

      495,220

Addition of NCI

 -

 -

 -

 -

3

 -

                 3









Total transactions with owners, recognised directly in equity

385,184

 8,346,919

       325,208

 -

3

 -

   9,227,326

























At June 2022 - Restated

 

1,315,697

 

54,858,008

   3,728,622

(51,113,657)

 

3

 

(21,958)

  

  8,766,715









Loss for the period

 -

 -

 -

(10,254,836)

 -

 -

 

(10,254,836)

Other comprehensive income

 -

 -

 -

-

 -

-

-

Total comprehensive income

 -

 -

 -

 

(10,254,836)

 

-

 

-

 

(10,254,836)









Proceeds of shares issued

1,333,333

    666,667

 -

 -

 -

 -

   2,000,000

Share Issue Costs

 -

 (156,716)

44,010

 -

 -

 -

 (112,706)

Share options expensed

 -

 -

         51,903

 -

 -

 -

        51,903




        





Release to Retained Earnings

 -

 -

   (3,400,992)

 3,400,992

 -

 -

               -

Total transactions with owners, recognised directly in equity

1,333,333

     509,951

(3,305,079)

 (6,853,914)

-

-

   1,939,197

At 30 June 2023

  2,649,030

    55,367,959

       423,543

(57,967,501)

3

 (21,958)

     451,076

 
















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"Ordinary shares" represents the nominal value of issued share capital.

"Share premium" represents the proceeds on issue of shares in excess of nominal value, less directly attributable issue costs.

"Share option reserve" represents the fair value of share based payments that are in issue at the reporting date.

"Retained earnings" represents the cumulative profits and losses of the business.

"NCI" represents the cumulative profit and losses attributable to minority shareholders of subsidiaries

"Forex" represents the cumulative effect of retranslating the results of foreign operations into the presentation currency

 

 

Company Statement of Changes in Equity

As at 30 June 2023

 

Ordinary shares

Share premium

Share option reserve

Accumulated Deficit

Total equity

 

 

£

£

£

£

£

 

At 30 June 2021

930,513

46,511,089

3,403,414

(46,340,461)

4,504,555

 

Loss for the period

-

-

-

(4,248,407)

(4,248,407)

 

Other Comprehensive Income

-

-

-

                          -  

                          -  

 

Total comprehensive income

                       -  

                       -  

                       -  

(4,248,407)

(4,248,407)

 







 

Shares Issued

385,184

8,667,150

-

-

 9,052,334

 

Share issue costs

                       -  

(320,231)

-

-

(320,231)

 

Share options issued

                       -  

                       -  

    325,208

-  

     325,208

 

Shares as deferred consideration

-

-

-

-

-  

 







 

Total transactions with owners, recognised directly in equity

 385,184

8,346,919

325,208

-  

9,227,323

 

At 30 June 2022 - restated

1,315,697

54,858,008

3,728,622

(50,588,868)

9,313,459

 

 












 






 






Loss for the period

-

-

-

(11,569,814)

(11,569,814)

 

Other Comprehensive Income

-

-

-

-  

-  

 







 

Total comprehensive income

-  

-

                 -

(11,569,814)

(11,569,814)

 







 

Proceeds of Shares Issued

1,333,333

     666,667

-

-

   2,000,000

 

Share issue costs

-  

 (156,716)

44,010

-

(112,706)

 

Share options expensed

-  

-                      

           29,945

                  -  

        29,945

 

Release to Retained Earnings

- 

- 

(3,378,964)

      3,378,964

-

 

Total transactions with owners, recognised directly in equity

1,333,333

 509,951

(3,305,009)

      3,378,964

    1,917,239

 

At 30 June 2023

2,649,030

55,367,959

423,613

 (58,779,718)

   (339,116)

 

 

 

Group Statement of Cash Flows

   As at 30 June 2023

Group

 

Restated


2023

2022

Operating

£

£




Loss for the year

(10,254,837)

(3,810,960)

Adjustments for:



Depreciation

                  33,254

                 112,993

Amortisation

             1,846,164

              1,554,745

Impairment of assets

             5,984,171

                   76,989

Gain on disposal of fixed assets

(112,808)

                            -

Gain on disposal of associate

-

(45,090)

Finance income

(885)

                          77

Finance costs

                    77,691

                            -

Share based payments

                    29,945

                 325,208

Increase in credit loss provision

                   51,494

                             -

Re-evaluation of contingent consideration

(931,311)

                             -

Loss on loss of control of subsidiary

                 548,761

                             -

Increase in provisions

                 238,287

                             -

Current and deferred tax credit

(974,876)

(298,177)

Total

(3,464,950)

(2,084,215)

Decrease in receivables

              1,324,353

(524,205)

Decrease in payables excluding contingent consideration

(907,062)

(110,916)

Tax credit recovered

                109,732

                  142,162

Net operating outflow

(2,937,927)

(2,577,174)

Investing



Interest received

                       885

                          77

PPE additions

(3,498)

(74,137)

Intangible additions

                            -

(685,951)

Payment of deferred/contingent consideration

(1,031,307)

(1,774,020)

Proceeds on disposal of associate

                           -

                    45,090

Net proceeds on disposal of assets

                213,668

                             -

Total

(820,252)

(2,488,941)

Financing



Net proceeds on issue of shares

              1,887,294

              5,831,603

Total

              1,887,294

              5,831,603




Net decrease in cash

(1,870,885)

765,488

Cash at the start of the year

             2,141,361

                1,375,873

Cash at the end of the year

                  270,476

               2,141,361

Net decrease in cash

(1,870,885)

                  765,488




There were no investing or financing cash flows for discontinued operations.

The net cash outflow on operating activities for discontinued operations was £(2,166,061) (2022: £(2,679,157).

Company Statement of Cash Flows

As at 30 June 2023

Company

 

Restated

 

2023

2022


£

£

Operating






Loss for the year

(11,569,814)

(4,248,407)

Adjustments for:



Depreciation

                34,657

                  108,787

Amortisation

              378,515

                   235,738

Impairment of assets

           7,716,918

                    41,616

Gain on disposal of fixed assets

(112,808)

                              -

Gain on disposal of associate

                         -

(45,090)

Finance income

(885)

(1)

Finance costs

                77,691

                              -

Share based payments

                29,945

                   495,220

Increase in credit loss provision

              187,815

                              -

Re-evaluation of contingent consideration

(931,311)

                              -

Loss on disposal of intangible

              548,761

                              -

Increase in provisions

              238,287

                              -

Current and deferred tax credit

                      234

(213,562)

Total

(3,401,995)

(2,925,699)

Decrease in receivables

           1,349,466

                     28,603

Decrease in payables excluding contingent consideration

(597,442)

(556,176)

Tax credit recovered

              109,732

                   142,162

Net operating outflow

(2,540,239)

(3,311,110)




Investing



Interest received

                      885

                              1

PPE additions

(3,498)

(74,149)

Intangible additions

                         0

(685,951)

Payment of deferred/contingent consideration

(495,416)

(1,774,020)

Proceeds on disposal of associate

                         0

                     45,090

Net proceeds on disposal of assets

              213,668

                              0

Net amounts advanced to subsidiaries

(352,718)

                              0

Total

(637,079)

(2,489,029)




Financing



Net proceeds on issue of shares

             1,887,294

                 5,831,603

Total

             1,887,294

                 5,831,603




Net decrease in cash

(1,290,024)

                    31,464




Cash at the start of the year

             1,361,279

                 1,329,815

Cash at the end of the year

                  71,255

                 1,361,279

Net decrease in cash

(1,290,024)

                    31,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 and domiciled in England and Wales and is AIM listed. The address of the registered office is given on page 2. The registered number of the company is 08232509.

 

The 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 UK-adopted 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 2022, 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, unless 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.

 

New and amended accounting standards effective during the year

 

The following amended standards and interpretations were effective during the year:

 

• Amendments to IAS 16: Property, Plant and Equipment: proceeds before intended use

• IAS 37: Onerous Contracts: costs of fulfilling a contract

• Annual Improvements to IFRS Standards 2018-2020

• Amendments to IFRS 3: Business Combinations: reference to conceptual framework

 

The adoption of the standards and interpretations 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.

 

New standards, interpretations and amendments issued but not yet effective

 

The following new accounting standards, amendments and interpretations to accounting standards have been issued but these are not mandatory for 30 June 2023 and they have not been adopted early by the Group:

 

• Amendments to IAS 1: Classification of liabilities as current and non-current

• Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of accounting policies

• Amendments to IAS 8: Definition of accounting estimates

• Amendments to IAS 12: Deferred Tax related to assets and liabilities arising from a single transaction

 

The Directors anticipate that the adoption of planned standards and interpretations in future periods will not have a material impact on the Group Financial Statements.

 

 

Going Concern

 

As explained in the Chairman's Report and the Chief Executive Officer's Report, it has been a difficult year for the Group and Company as it transitioned away from esports solutions and software development to a pure play Digital Media company.

 

At the time of issuing these Financial Statement, this restructuring is largely complete and the Group and Company has reduced its overhead base to support and develop its Digital Media assets and the Directors firmly believe that the steps taken will lead to profitability in the short term.

 

The Directors have prepared a base case cashflow forecast through to 31 December 2024, which assumes certain growth targets are met.

 

The Directors believe that the growth targets are reasonable and attainable, and in view of this, the Directors are confident that the Group and Company has adequate resources to continue to operate for at least twelve months from the date of approval of these Financial Statements and have, therefore, continued to adopt the going concern basis in preparing the Directors' Report and Financial Statements.

 

However, the Directors recognise that achievement of the growth targets are subject to external factors outside of their control and so they have also prepared a severe but plausible cashflow projection to assess cashflows in such a scenario.  Should the forecast growth of the Group and Company be not forthcoming or be slower than anticipated, the Group and Company will need to secure additional funding in the period to 31 December 2024.

 

The Group and Company continues to enjoy the support of its major shareholders, and should further funding be necessary, the Directors believe that this support will continue. On this basis, the Directors consider that it is appropriate that the going concern basis is applied in the preparation of these Financial Statements.

 

However, whilst the Directors are confident of continuing to raise additional funds as needed to finance the business in accordance with its Digital Media strategy, they nevertheless recognise that a material uncertainty exists which might impact the Group and Company's ability to continue to realise its assets and discharge its liabilities as they fall due in the normal course of the business and therefore its ability to continue to operate as a going concern.

 

Basis of consolidation

 

The Group accounts consolidate the results 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 control, which is where the Group has power over the investee, is exposed to variable returns from its involvement with the investee and where the Group has the ability to use its power over the investee to affect the amount of returns. 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.

 

Where the Group assesses that it has significant influence over an investee, but not control, the investment is accounted for as an associate.  Associates are not consolidated but are equity accounted and the group records its share of the associate's loss to the extent the cost less impairment of the investment in greater than nil.

 

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 subsidiaries

 

Investments in subsidiaries are held in the Company balance sheet at cost and reviewed annually for impairment. Where the Company acquires subsidiaries with contingent or deferred consideration, the initial estimate of the present value of future payments is included in the cost of the investment and any subsequent changes recorded through profit or loss.

 

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:

·      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 based on the number of sessions where ads are displayed on the website. Revenue is recognised on a 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. Such revenue is recognised over time based on an estimate of total costs incurred.

 

Foreign currencies

 

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

 

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

 

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

 

Taxation

 

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

 

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

 

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

 

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

 

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

 

Credits in respect of Research and Development activities are recognised upon receipt of payment from HMRC.

 

Share based payments

 

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

 

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

 

Property, plant and equipment

 

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

 

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

 

Office equipment

3 years straight line

Computer equipment

3 years straight line

Production equipment

3 years straight line

Leasehold improvements

Over the period of the lease or, where management have reasonable grounds to

believe the property will be occupied beyond the terms of the lease, 3 years straight line

 

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

 

Intangible fixed assets

 

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

 

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:

 

Web Platforms

3-5 years

Engage

3-5 years

Other Intangible assets

3-5 years

 

 

 

Amortisation expense is included within administrative expenses in the profit or loss account.

 

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 or cost savings.

 

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.

 

Contingent consideration arising in a business combination is held at fair value at each reporting date.  After the initial accounting for the business combination, any changes in the estimated or actual consideration payable are taken to profit or loss.  Future expected payments are held at their present value where the effect of discounting is material.  The unwinding of contingent consideration is recognised as a finance cost in profit or loss.

 

Financial assets

 

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

 

Provision is made for diminution in value where appropriate.

 

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

 

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

 

Warrants

 

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

 

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

 

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

 

 

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 unless recognised at  appoint in time. 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.

 

Stock Informer Revenue that is recognised on a monthly is based on the transactional sales value of all transactions in month for all associate affiliate partners. The transactional sales value represents the total commission value due to Gfinity of all pending and approved payments coming in for a given month across the affiliate 3rd party providers that are contracted and based on the specific affiliate commission % with Stock Informer. In month "Transactional Value" will specifically exclude approved payments from prior months, as this has already been recognised as revenue in the prior months. A credit note provision is raised monthly which is based on the value of all pending commission transactions across all affiliates with a credit note % assumption applied to this which is based on the average return % over the past 6 months. The credit note provision is assessed monthly in relation to the level of pending transactions that have either been paid resulting in earnings, which results in a release of the provision, or declined, which results in a credit and offset against the credit note provision, thus utilising the provision in place

 

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.

 

Judgements and estimates: Impairment of goodwill and intangible assets, and estimation of the fair value of contingent consideration

 

The Group holds goodwill and intangible assets arising from business acquisitions or the internal generation of development assets.  Judgement is applied in determining the recoverable amount of assets.

 

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, a full impairment test is performed. In light of the loss reported in the year, the Board determined that a full impairment test should be performed on all intangible assets.  Goodwill must be tested for impairment annually.  Where goodwill arises in a business combination, management determined that each website brand is a separate cash generating unit and so any the goodwill arising from that acquisition is associated with the acquired brand.  No goodwill is allocated across multiple Cash Generating Units.

 

For the purpose of impairment testing at 30 June 2023, management have determined that the appropriate method to apply is a fair value less costs to dispose approach.  In previous years, management have used a value in use model and therefore this represents a change in methodology.  The reason for the change in methodology is due to the uncertainty experienced in the year and therefore which had led to earlier forecasts not having been achieved.  Management consider that a revenue based multiple is a more accurate estimation tool for the recoverable amount of its intangible assets.

 

Therefore all impairment tests have been performed using a fair value method on the basis of a multiple of revenue achieved for the respective brand in the year ended 30 June 2023.

 

Management undertook a careful assessment of the appropriate revenue multiple and determined that 1x revenue represents their best estimate of the recoverable amount of each brand.  This fair value estimation technique is a Level 2 valuation technique in the Fair Value Hierarchy as there is no directly observable market valuation of each brand, but management have identified the valuation of similar assets through the relevant trading multiples of similar businesses in similar sectors, through the observed implied multiples in recent transactions involving similar assets and through industry and other benchmarks.

 

Further detail of the results of impairment tests of each material Cash Generating Unit are summarised below.  All of Megit, Siege.gg, RealSport and EpicStream are within the Gfinity Digital Media operating segment. In each case, 'costs to sell' are considered to be immaterial as there are no physical assets in any case.  Impairment expenses have been separately identified in the statement of profit or loss.  No previous impairments were reversed during the year.

 

Megit

 

The group acquired the entire issued share capital of Megit Limited in September 2021.  Megit operates the StockInformer website which enables gamers to locate and find the best pricing and availability of tech and other products.

 

At 30 June 2022 the group held goodwill of £2,439,834 and intangible assets of £3,505,996 in respect of Megit.  These assets were tested for impairment collectively as they form a single Cash Generating Unit.

 

The result of the impairment test was as a recoverable amount of £289,561 and therefore an impairment charge of £4,198,217 was recorded.  This was allocated first to goodwill and then to intangible assets as required by IAS 36. 

 

The factors giving rise to the impairment were the well-publicised challenges arising from changes to the algorithms applied by Google and other traffic sources in the period.

 

At 30 June 2023, management have also applied judgement in their assessment of any remaining contingent consideration based on revenue-based earnouts in the acquisition agreement.  The range of potential payable amounts is between nil and £1.8m.  Management's estimate of the undiscounted future payment is £223,645 based on projected cash flows of the business and this has been reflected in liabilities on a discounted basis.  Management have discounted future cash flows using a discount rate of 20% which is based on a review of the discount rates used by listed business with a similar risk profile.  Contingent consideration is therefore based on a Level 3 basis of the Fair Value Hierarchy as the inputs are not directly or indirectly observable.

 

Due to the challenging trading environment, amounts payable under the contingent consideration arrangements were significantly lower than initially forecast and therefore certain contingent consideration liabilities were released to profit or loss in the year, of a total of £855,482 in respect of Megit.

 

In respect of the Company's investment in Megit Limited as a subsidiary, an impairment was recorded to bring the investment to the directors' best estimate of the recoverable amount by reference to the recoverable net assets of Megit.  An impairment of £5,930,565 was therefore recorded by the Company in profit or loss.

 

Siege.gg

 

Siege.gg is the leading digital property in the competitive Rainbow 6 Siege space.  It has a strong audience and domain authority, together with proprietary statistical database.

 

At 30 June 2022 the group held goodwill of £370,775 and intangible assets of £100,215 in respect of Siege.gg.  These were tested within a single Cash Generating Unit.

 

The result of the impairment test was a recoverable amount of £41,541 and so an impairment expense of £560,104 was recorded. This was allocated first to goodwill and then to intangible assets as required by IAS 36. 

 

The factors giving rise to the impairment were changes to Google algorithms and changes in the underlying user base of the website.

 

RealSport

 

Realsport101.com is a leading source of news and information about competitive sport gaming.

 

The carrying value of goodwill in respect of RealSport at 30 June 2022 was £1,643,006. 

 

The result of the impairment test was a recoverable amount of £234,505 and therefore an impairment of £1,408,501 was recorded.

 

The factors giving rise to the impairment were changes to Google algorithms and changes in the underlying user base of the website.

 

EpicStream

 

EpicStream.com is a leading online source of geek and pop culture news.

 

The carrying value of goodwill in respect of EpicStream was £260,783 at 30 June 2022 and intangibles were £273,382 at that date.  These assts were tested jointly as a single Cash Generating Unit.

 

The result of the impairment test was that no impairment was required, because the brand generated revenue in excess of the value of assets tested.  If management had applied a revenue multiple of 0.93x or below, an impairment would have been recorded.

 

Engage / Athlos

 

Engage is the company's proprietary gaming technology, developed in-house, and marketed under the Athlos brand.

 

During the year, the associated IP was assigned to Athlos Game Technologies Ltd and as the Group lost control of this entity in the period, the asset was derecognised from the group balance sheet.  No amounts were capitalised in the period.

 

Therefore the asset was not tested for impairment.  Further details are given in Note 5, including in respect of judgements applied by management in assessing the nature of the relationship between the Company and Athlos at year end.

 

Athlos is recorded as a separate operating segment.

 

 

4.   REVENUE

 

The Group's policy on revenue recognition is as outlined in note 2. The Group's revenue disaggregated by primary geographical market is as follows:

 

Year to 30 June 2023


Total

 


£

United Kingdom


4,343,202

North America


265,605

ROW


814,764




Total

 

5,423,571

 

 

 

Year to 30 June 2022



Total

 



£

United Kingdom



2,830,620

North America



1,563,982

ROW



865,904





Total

 


5,260,506

 

 Profit and loss information for each operating segment is given in note 10.

 

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

 


Year to 30 June 2023












Digital Media


eSports


Athlos


Total



£


£


£


£

Services transferred at


2,190,216


-


-


2,190,216

a point in time



-


2,909,482


323,873


3,233,355

Services transferred over time










Total

 

2,190,216


2,909,482


323,873


5,423,571





















Year to 30 June 2022












Digital Media


eSports


Athlos


Total



£


£


£


£

Services transferred at


2,695,388


-


-


2,695,388

a point in time

Services transferred over time


-


2,248,233


316,885


2,565,118









Total


2,695,388


2,248,233


316,885


5,260,506

 

As at 30 June 2023 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

         


Year to 30 June 2023

 

Year to 30 June 2022

 


£

 

£

Contract Assets


Nil


246,428

Contract Liabilities


Nil


208,715

 

 

The Group agrees payment terms with each customer at the outset of the contract and typically agrees 30 day payment terms.  All revenue streams which are recognised over time were completed and invoiced in the year resulting in no contract assets or liabilities at 30 June 2023.  All brought forward contract assets and liabilities were realised in the year.

 

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.        

 

5.     DISCONTINUED OPERATIONS AND INTEREST IN ASSOCIATE

 

As disclosed in Note 10, management consider that the group's activities in the year comprise three operating segments being Gfinity Digital Media, Athlos and eSports.

The company announced on 6 June 2023 that it had decided to close the eSports operating segment and to dispose of 72.5% of its interest in Athlos Game Technologies Ltd ("Athlos").

Therefore the results of the eSports and Athlos segments are reflected as discontinued operations in the group statement of profit or loss.  The results for the year to 30 June 2022 have been represented as required by IFRS 5.

In respect of the eSports division, it was announced on 5 December 2023 that the remaining trade and assets of the eSports segment had been sold to Ingenuity Loop Limited for consideration of £15,000.

In respect of Athlos, on 5 June 2023 the group concluded a share purchase agreement with Tourbillon Group UK Limited, under which Tourbillon subscribed for new shares in Athlos resulting in Tourbillon gaining a controlling interest.  The SPA also provided for the Athlos IP, previously referred to by Gfinity as the Engage development asset, would be assigned to Athlos at the date of completion of the SPA.  Tourbillon undertook certain funding commitments with effect from the effective date of the transaction, significantly reducing Gfinity's funding obligations whilst retaining a minority interest.  The SPA also provided for Gfinity to retain access to the Engage platform IP.

In light of the SPA, the Board considered the nature of the resulting relationship with Athlos and considered that the facts and circumstances indicated that Athlos was, from the date of the transaction and as at 30 June 2023, an associate.  This is because of the group's continuing 27.5% equity and voting interest and the entitlement to appoint a director to the board of Athlos.  Therefore the Group was deemed to have lost control and no longer consolidated the results of Athlos from that date.  Accordingly, the group recorded a loss on loss of control of subsidiary in the group profit and loss account of £548,761, representing the carrying value of the Engage IP at the date of loss of control.  Management further considered the fair value of the resulting interest in Athlos and concluded that whilst the business has significant prospects, a value of nil was appropriate in light of the record of losses of the Athlos business, its status as an early stage project and the funding requirements to bring the product to profitability.

Therefore the deemed cost of the equity-accounted associate is nil and under equity accounting, no share of associate's losses are reflected in the group profit and loss statement.

After the balance sheet date, on 27 November 2023, the company announced the disposal of its remaining interest in Athlos for consideration of £260,000. See note 25 for more details.

The registered office address of Athlos is 16 Great Queen Street, London, WC2B 5AH.

At 30 June 2023, the Company's historic cost of investment in Athlos was £5.

 

6.   OPERATING EXPENSES

Group





Year to 30 June 2023

Year to 30 June 2022


£

£

Depreciation of property, plant and equipment

33,254

                  112,993

Amortisation & impairment of intangible fixed assets

3,611,225

               1,631,734

Goodwill impairment

4,219,110  

-  

Staff costs (see note 7)

3,148,791

              3,406,569

Auditors' remuneration for auditing the accounts of the Company

55,000

                    72,000

Auditors' remuneration for other non-audit services:



 - Other services related to taxation

3,240

                      7,229

 - All other services

4,025

                     16,101

Net foreign exchange (gains)/ losses

21,824

(54,405)

 

 

7.     PARTICULARS OF EMPLOYEES

Number of employees

 

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

was:

 

 

Group

 

Year to 30 June 2023

 

Year to 30 June 2022

 

Board

6


6

Operations

 38


 38


44


44

 

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

Group



Year to 30 June 2023

 

Year to 30 June 2022

 


£

 

£

 

Wages and salaries

 2,726,670


2,514,773

 

Social security costs

 323,812


340,929

 

Pensions

 49,714


55,648

 

Share based payments (Note 22)

 48,595


495,220

 


3,148,791


          3,406,570

 

 

Total remuneration for Directors during the year was £595,780 (2022: £520,141).

 

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

 

The Board consider there are no key management personnel other than the Board.

 

The number of directors to whom retirement benefits accrued during the period was 3 (2022: 3).

 

8.   FINANCE INCOME/COSTS

 

Group


Year to 30 June 2023

 

Year to 30 June 2022


£

 

£

Interest income on bank deposits

                      885


77

Notional interest on contingent consideration

(77,691)


0


(76,806)

 

77

 

The net finance cost relating to continuing operations was £25,976.

 

9.   TAXATION

Group


Year to 30 June 2023

 

Year to 30 June 2022


£

 

£

Current tax








Corporation tax charge/ (credit)

 (146,691)


                       84,600

Total current tax

(149,691)


                       84,600





Deferred tax




   Relating to origination and reversal of temporary differences

(825,185)


(294,568)

Taxation (credit) reported in the income statement

(974,876)


(209,968)

 

Factors affecting tax charge for the period

 

A reconciliation of taxation expense applicable to accounting profit before taxation at the statutory tax rate of 19% (2021:    19%), to taxation expense at the Groups effective tax rate for the period is as follows:

Year to 30 June 2023

 

Year to 30 June 2022


£

 

 

£

 

Loss on ordinary activities before taxation

(10,254,836)


(3,810,960)

Profit/ (Loss) multiplied by effective rate of 19%

(1,948,419)


(724,082)

Effect of:




Expenses not deductible for tax purposes

                   349,574


                    102,803

   Movement in unrecognised deferred tax asset arising from tax   

   losses

                1,598,845


                    536,679

Movement in deferred tax arising from other temporary timing differences

                   825,184


294,568

R&D Credit received

                   109,732


-

Over Provision in prior years

                     39,960


-

Tax Credit

                    974,876


                    209,968

 




Split as




Current tax

                   149,691


                     84,600

Deferred tax

                   825,185


                   379,168

Taxation (credit)/charge reported in the income statement

                   974,876


                   209,968

 

The whole current and deferred tax credit in the consolidated profit and loss account relates to continued operations.

The Group has estimated tax losses of £52.2m (2022: £43.75m) available for offset against future taxable profits. A potential deferred tax asset of £13.0m has not been recognised due to the uncertainty of future profits. The tax losses have no expiry date.

With effect from 1 April 2023, HMRC introduced a headline UK corporation tax of 25%.

 

10.   OPERATING SEGMENTS

 


Year to 30 June 2023

 

 






 


Esports

Athlos

Digital Media

Total

 


£

£

£

£

 

Revenue

     2,909,482

    323,873

             2,190,216

        5,423,571

 

Cost of sales

(1,665,890)

(172,205)

(953,904)

(2,791,999)

 

Impairment Charge

                   -

             -

(5,984,171)

(5,987,171)

 

Admin expenses

(3,300,378)

(855,862)

(3,788,329)

(7,944,570)

 

Loss on disposal of Associate

                     -

              -

(548,761)

(548,761)

 

Restructuring Cost

(238,287)

              -

                           -

(238,287)

 

Re-assessment of Deferred Consideration

- 

                -

931,311 

            931,311

 

Net Finance Expenses

(39,369)

(11,461)

(25,976)

(76,806)

 

Tax

                   -

               -

                 974,876

           974,876

 

Loss

(2,334,442)

(715,656)

(7,204,739)

(10,254,837)

 






 


 

Year to 30 June 2022

 

 



Esports

Athlos

Digital Media

Total


£

£

£

£

Revenue

     2,248,233

    316,885

             2,695,388

        5,260,506

Cost of sales

(1,146,974)

(152,217)

(1,247,317)

(2,546,507)

Impairment Charge

                    -

              -

(76,989)

(76,989)

Admin expenses

(3,302,189)

(530,293)

(2,870,623)

(6,703,105)

Loss on disposal of Associate

           45,090

              -

                           -

             45,090

Restructuring Cost

                  -

              -

                           -

                      -

Re-assessment of Deferred Consideration

-

-

                           0

                      0

Net Finance Expenses

                 -

              -

                         77

                    77

Tax

                  -

              -

                 209,968

            209,968

Loss

(2,155,839)

(365,625)

(1,289,496)

    (3,810,960)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management identify operating segments through consideration of the aggregated data reviewed by the Board in monitoring the performance of the business. 

 

As disclosed in Note 5, during the year both the Esports and Athlos segments were discontinued.  Therefore the loss after tax from discontinued operations was £3,050,097.

 

In line with IFRS 8 para 23, assets and liabilities split by segment are not disclosed as these are not regularly reviewed by the Board in this way.  All material assets at year end relate only to Gfinity Digital Media, being the only segment which is a continuing operation.  Within continuing operations, being only the Digital Media division, two key customers accounted for 46% and 12% of revenue.  Within discontinued operations,  three key customers accounted for 67%, 14%, 13% respectively, all within the Esports segment.

 

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.

All EPS and DEPS figures stated below are presented in pence.

 






2023

2022

 All Operations




 

Earnings


(10,254,836)

(3,980,972)





Weighted Average Shares


     1,735,787,903

                  1,122,821,000





EPS


                 (0.59)

(0.35)

DEPS


                 (0.59)

(0.35)





Continuing Operations






2023

2022





Earnings


(7,204,739)

 (1,459,508)





Weighted Average Shares


               1,735,787,903

                           1,122,821,000





EPS


(0.42)

(0.13)

DEPS


(0.42)

(0.13)





Discontinued Operations






2023

2022





Earnings


(3,050,097)

(2,251,464)





Weighted Average Shares


            1,735,788,903

                   1,122,821,000





EPS


(0.18)

(0.22)

DEPS


(0.18)

(0.22)

 

12.        PROPERTY, PLANT AND EQUIPMENT

Group

 

 

 

 

 

Office equipment

Computer & Production Equipment

Leasehold Improvements

Total

Cost

£

£

£

£

At 1 July 2021

               63,143

           1,096,133

           1,633,942

           2,793,218

Addition

 -

               74,137

 -

               74,137

At 30 June 2022

63,143

1,170,270

1,633,942

2,867,355






Amortisation





At 1 July 2021

               62,346

           1,006,802

           1,536,704

           2,605,852

Charge for the period

                   797

             106,510

                 5,686

             112,993

At 30 June 2022

              63,143

1,113,312

1,542,390

2,718,845






Net Book Value





30 June 2022

                     -  

               56,958

               91,552

             148,510

30 June 2021

                   797

89,331

97,238

           187,366






 

Office equipment

Computer & Production Equipment

Leasehold Improvements

Total

Cost

£

£

£

£

At 1 July 2022

               63,143

           1,170,270

           1,633,942

           2,867,355

Addition

 -

                 3,498

 -

                 3,498

Disposals

             (63,143)

         (1,145,455)

         (1,633,942)

         (2,842,540)

At 30 June 2023

                     -  

28,313

                     -  

28,313






Amortisation





At 1 July 2022

               63,143

           1,113,312

           1,542,390

           2,718,845

Charge for the period

 -

               32,457

 -

               32,457

Disposals

             (63,143)

         (1,132,213)

         (1,542,390)

         (2,737,746)

At 30 June 2023

                     -  

13,556

                     -  

13,556






Net Book Value





30 June 2023

                     -  

               14,757

                     -  

               14,757

30 June 2022

                     -  

               56,958

               91,552

             148,510





















Company





 

Office equipment

Computer & Production Equipment

Leasehold Improvements

Total

Cost

£

£

£

£

At 1 July 2021

               51,743

           1,068,236

           1,633,941

           2,753,920

Addition

 -

               74,138

 -

               74,138

At 30 June 2022

               51,743

           1,142,374

           1,633,941

           2,828,058






Amortisation





At 1 July 2021

               39,997

             997,491

           1,536,704

           2,574,192

Charge for the period

                 9,546

               93,555

                 5,686

             108,787

At 30 June 2022

               49,543

           1,091,046

           1,542,390

           2,682,979






Net Book Value





30 June 2022

                 2,200

               51,328

               91,551

             145,079

30 June 2021

               11,746

               70,745

               97,237

             179,728







Office equipment

Computer & Production Equipment

Leasehold Improvements

Total

Cost

£

£

£

£

At 1 July 2022

               51,743

           1,142,374

           1,633,941

           2,828,058

Addition

 -

                 3,498

 -

                 3,498

Disposals

             (51,743)

         (1,117,559)

         (1,633,941)

         (2,803,243)

At 30 June 2023

                     -  

               28,313

                     -  

               28,313






Amortisation





At 1 July 2022

               49,543

           1,091,046

           1,542,390

           2,682,979

Charge for the period

                 2,200

               32,457

 -

               34,657

Disposals

             (51,743)

         (1,108,352)

         (1,542,390)

         (2,702,485)

At 30 June 2023

                     -  

               15,151

                     -  

               15,151






Net Book Value





30 June 2023

                     -  

               13,162

                     -  

               13,162

30 June 2022

                 2,200

               51,328

               91,551

             145,079



13.       GOODWILL

Group


Cost


At 1 July 2021

    1,903,790

Additions arising from business combinations

    2,810,609

At 30 June 2022

    4,714,399

 


Impairment


At 1 July 2021

              -  

Charge for the period

              -  

At 30 June 2022

              -  

 


Net Book Value


30 June 2022

 4,714,399

30 June 2021

 1,903,790

 


Cost

 £

At 1 July 2022 and 30 June 2023

    4,714,399



Impairment


At 1 July 2022

              -  

Charge for the period

    4,219,111

At 30 June 2023

    4,219,111



Net Book Value


30 June 2023

    495,288

30 June 2022

 4,714,399

 

 

 

 

Company


Cost


At 1 July 2021

    2,568,417

Additions arising from business combinations

      370,775

At 30 June 2022

    2,939,192

 


Impairment


At 1 July 2021

              -  

Charge for the period

      664,627

At 30 June 2022

      664,627

 


Net Book Value


30 June 2022

 2,274,565

30 June 2021

 2,568,417

 

 

Cost

£

At 1 July 2022 and 30 June 2023

    2,939,192



Impairment


At 1 July 2022

      664,627

Charge for the period

    1,779,276

At 30 June 2023

    2,443,903



Net Book Value


30 June 2023

    495,289

30 June 2022

 2,274,565

 

 

The Group and Company hold goodwill in respect of the acquisitions of the trade and assets of Siege.gg, EpicStream and RealSport in earlier periods.  An impairment charge of £370,775 and £1,408,501 was recorded in respect of Siege.gg and RealSport respectively, in both the Group and Company profit and loss accounts.

 

Additionally, the Group carries goodwill in respect of the acquisition of Megit Limited in the prior year.  An impairment charge of £2,439,834 was recorded in the group profit and loss account.

 

In all cases, management assigned goodwill to cash generating units, being the group of assets associated with the acquired website and associated infrastructure, since each online brand has separately identifiable cash flows.

 

Refer to Note 3 for details of impairment tests.

14.       INTANGIBLE FIXED ASSETS

Group

Web Platforms

Engage

Other Intangibles

Total

Cost

£

£

£

£

At 1 July 2021

                  576,822

                             -  

              2,480,481

              3,057,303

Addition

-

 685,951

-

             685,951

Acquired through business combination

          4,816,443

-

-

         4,816,443

At 30 June 2022

5,393,265

685,951

2,480,481

8,559,697






Amortisation and impairment

 




At 1 July 2021

           104,211

 -

        2,248,611

         2,352,822

Charge for the period

     1,390,196

 -

             164,549

         1,554,745

Impairment

19,265

-

57,724

76,989

At 30 June 2022

1,513,672

-  

2,470,724

      3,984,556






Net Book Value

 




30 June 2022

          3,879,593

            685,951

                 9,597

        4,575,141

30 June 2021

472,611

  -

      231,870

            704,481







Web Platforms

Engage

Other Intangibles

Total

Cost

 




At 1 July 2022

          5,393,265

             685,951

          2,480,481

        8,559,697

Disposals

 -

         (685,951)

            (64,919)

          (750,870)

At 30 June 2023

5,393,265

-  

           2,415,562

           7,808,827






Amortisation and impairment

 




At 1 July 2022

            1,513,672

                          -  

            2,470,884

            3,984,556

Charge for the period

         1,699,377

             137,190

                 9,597

          1,846,164

Disposals

-

         (137,190)

           (64,919)

          (202,109)

Impairment

            1,765,061

 -

 -

            1,765,061

At 30 June 2023

            4,978,110

                          -  

            2,415,562

            7,393,672






Net Book Value

 




30 June 2023

        415,155

                         -  

         -

       415,155

30 June 2022

         3,879,593

            685,951

                9,597

         4,575,141

 

Web platforms includes web domains and platform technology acquired in the acquisitions of Megit Limited, Siege.gg and EpicStream.

Engage is the group's proprietary software which was assigned to Athlos Game Technologies Ltd in the year and therefore disposed, since the group lost control of Athlos during the period (see Note 5).

Other intangibles includes technology platforms and customer lists arising in earlier acquisitions.

 

INTANGIBLE FIXED ASSETS (continued) 

Company

Web Platforms

Engage

Other Intangibles

Total

Cost

£

£

£

£

At 1 July 2021

             576,822

                     -  

                    64,919

             641,741

Addition

 -

             685,951

 -

             685,951

Acquired through business combination

             155,989

 -

 -

             155,989

At 30 June 2022

               732,811

               685,951

                  64,919

            1,483,681






Amortisation and impairment

 




At 1 July 2021

             104,211

 -

                      7,195

             111,406

Charge for the period

             235,738

 -

 -

             235,738

Impairment

                  19,265

 -

                  57,724

                  76,989

At 30 June 2022

               359,214

                          -  

                  64,919

               424,133






Net Book Value

 




30 June 2022

             373,597

             685,951

                          -  

           1,059,548

30 June 2021

          472,611

 -

57,724

       530,335







Web Platforms

Engage

Other Intangibles

Total

Cost

 




At 1 July 2022

             713,546

             685,951

                      7,195

           1,406,692

Addition

 -

 -

 -

                     -  

Disposals

 -

            (685,951)

 -

            (685,951)

At 30 June 2023

               713,546

                          -  

                    7,195

               720,741






Amortisation and impairment

 




At 1 July 2022

             339,949

                     -  

                      7,195

             347,144

Charge for the period

             241,325

             137,190

 -

             378,515

Disposals

-

            (137,190)

 -

            (137,190)

Impairment

6678



                    6,678

At 30 June 2023

               587,952

                          -  

                    7,195

               595,147






Net Book Value

 




30 June 2023

             125,594

                     -  

                          -  

             125,594

30 June 2022

373,597

          685,951

                          -  

1,059,548


15. INVESTMENT IN SUBSIDIARIES

Company


 

Year to 30 June 2023

 

 

Restated (Note 27)

Year to 30 June 2022


£

 

£

At 1 July

            6,069,716


-

Additions

-


               6,069,716

Impairment

(5,930,565)


-

Loss of control of subsidiary

(5)


-

 

                139,146

 

              6,069,716

 

 

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 Limited

 

Megit Limited

 

AFG-Games Ltd

England

 

England

 

England

 

 

Ordinary Shares

Ordinary Shares

Ordinary Shares

100%

 

100%

 

72%

Online media

 

eCommerce and affiliate revenues

 

Dormant

 

 

RealSM Ltd's registered office address is The Foundry, 77 Fulham Palace Road, London, United Kingdom, W6 8JB. CEVO's registered address is 128 Maringo Rd, Ephrata, WA 98823. AFG-Games Limited's registered office address is 77 Fulham Palace Road, Foundry Building, Smiths Square, London, England, W6 8AF. Megit Limited's registered office address is 16 Great Queen Street, London, England, WC2B 5AH

 

RealSM Limited, AFG-Games Limited and Megit Limited are exempt from the requirements of the Act relating to the audit of individual accounts in accordance with 479A of the C.A. 2006. Gfinity Plc guarantees all outstanding liabilities to which these subsidiaries are subject at year-end, until they are satisfied in full and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary company is liable in respect of those liabilities.

 

During the year, additional ordinary shares were issued in Athlos Game Technologies Ltd such that the company considered the relationship with Athlos to be an associate rather than a subsidiary at the year end. Further details are given in Note 5.

 

 

16.    TRADE AND OTHER RECEIVABLES

Group

 


Company

 


Year to 30 June 2023

 

Year to 30 June 2022


Year to 30 June 2023

 

Year to 30 June 2022


£

 

£


£

 

£

Trade receivables

         524,690


      1,495,773


         487,490


      1,445,075

Provision for expected credit loss

(58,864)


(7,370)


(58,864)


(243)


         465,826


       1,488,403


         428,626


       1,444,832

Prepayments and accrued income

         178,714


         478,372


         102,739


          351,028

Amounts due in less than one year

         644,540


      1,966,775


         531,365


       1,795,860









Amounts due from group undertakings

-


-


-


82,856

Other receivables

-


2,118


-


2,114

Total

644,540


1,968,893


531,365


1,880,830

 

Amounts due from group undertakings of £nil are considered to be due in more than one year (2022: £82,856).

 

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.

 

17.    CASH AND CASH EQUIVALENTS

 

Group

 

 


Company

 

 


Year to 30 June 2023

 

Year to 30 June 2022


Year to 30 June 2023

 

Year to 30 June 2022

 


£

 

£


£

 

£

 

Cash at bank and in hand

270,476


2,141,361


71,255


1,361,279

 

Total

270,476

 

2,141,361

 

71,255

 

1,361,279

 

 

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.

 

18.    DEFERRED TAX LIABILITIES

Group

 


Year to 30 June 2023

 

Year to 30 June 2022


£

 

£

At 1 July

                  897.575


                 127,835

Arising on business combination

-


               1,064,308

Credited to profit or loss

(825,185)


(294,568)

At 30 June

                     72,390


                897,574

 

Company

Year to 30 June 2023

 

Year to 30 June 2022


£

 

£

At 1 July

                           94,748


                       94,748

Credited to profit or loss

(94,748)


-

At 30 June

0


94,748

 

 

The deferred tax liability relates entirely to temporary differences on intangible assets arising on business combinations.

 

19.    ISSUED SHARE 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:




Ordinary Shares

 










Number

Share Capital £

 






As at 30 June 2021




930,513,248

930,513







Issued during the financial year



385,183,331

385,184

September to April 2022 at between £0.001 and £0.004 per share



As at 30 June 2022




1,315,696,579

1,315,697







Issued during the financial year March 2023 at £0.0015 per share



1,333,333,334

1,333,333







As at 30 June 2023




2,649,029,913

2,649,030

 

Ordinary shares entitle the holder to full voting, dividend and rights on winding up.

 

Subsequent to the year end, 750,000,000 shares were issued at £0.0006 per share, generating proceeds

of £450,000 before expenses.

In respect of the issue of 1,333,333,334 shares in the period, the company issued 39,720,000 warrants exercisable between 6 and 18 months from the issue date at 0.1325p.  A fair value of £44,010, derived using the Black Scholes model, was credited to share premium as a directly attributed cost of issue.

 

20.       TRADE AND OTHER PAYABLES 

 

Group

 


Company

 


Year to 30 June 2023

 

Year to 30 June 2022


Year to 30 June 2023

 

Year to 30 June 2022


£

 

£


£

 

£

Non-current liabilities

 

 

 


 

 

 

Other payables (deferred consideration)

17,669


840,751


17,669


840,751

Deferred tax liabilities

72,390


897,575


-


895,751


90,059

 

1,738,326

 

17,669

 

1,736,502









Current liabilities








Trade payables

412,395


571,389


383,737


533,395

Other taxation and social security

201,745


145,021


201,745


144,300

Accrued expenditure and deferred revenue

226,181


1,033,303


226,188


896,299

Other payables

220,473


1,293,550


220,473


977,890

Amounts owed to group undertakings


 

-


426,883


-


1,060,794


     3,043,263

 

1,459,026

 

2,551,884 

 



 




 

Total

1,150,853

 

4,781,589

 

1,476,695

 

4,288,386

 

 


 


 


 

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.

 

Contingent consideration arising from business combinations is held at fair value at each reporting date. During the year, payments of £1,075,416 were paid and the fair value of remaining contingent consideration at 30 June 2023 was assessed as £202,455, of which £17,669 is expected to be payable in more than 1 year.

 

20.    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 other than contingent consideration arising on business combinations which is held at fair value at each reporting date.

 

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

Year to 30 June 2023

 

Year to 30 June 2022


Year to 30 June 2023

 

Year to 30 June 2022

£

 

£


£

 

£

465,826


1,968,893


428,626


1,880,830

 

The Group trade receivables balance represents amounts due from third parties. At the balance sheet date, the Group's trade receivables totalled £524,690 against which an expected credit loss provision of £58,864 had been raised (2022: £1,495,773 less a provision of £7,370).

 

The Company's receivables include £575,177 of inter-company funding (2022: £652,054) and this receivable is provided against in full due to uncertainty of the timing over which the respective subsidiaries will be in a position to reimburse these amounts.

 

The Company's trade receivables totalled £487,490 less a provision for doubtful debt of £58,864 (2022: £1,445,075 less a provision for expected credit losses of £243).

 

The Group's policy is to raise expected credit loss provisions where payments have been not received within the contractual due date.  The Group continues to seek to collect all debts until such time as a debt it written off.  The Group writes off debt when it considers that there is no prospect of recovery, for example when a debtor enters into administration or the Group is aware of other factors indicative of this outcome.

 

At the balance sheet date, one customer represented 59% of gross Group trade receivables.  This amount was collected in full after the balance sheet date.

 

There were no contract assets at 30 June 2023.

 

Liquidity risk

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

 

Foreign exchange risk

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

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

Group


Year to 30 June 2023


Year to 30 June 2022


USD ($)

EUR (€)

GBP (£)


USD ($)

EUR (€)

GBP (£)

Trade and other receivables

          3,000

             150,148


53,048

            -  

1,446,932

Accrued income

-

                     -  


41,018

            -  

444,668

Cash


             211,779


98,695

            -  

2,060,264

Trade and other payables

       125,643

          8,413

             971,990


70,212

            -  

4,723,896

Net current assets/ liabilities

     822,890

      11,413

        1,333,917

 

262,973

0

8,675,760

















 


Company

 


Year to 30 June 2023


 

 

Year to 30 June 2022

 

 

 


USD ($)

EUR (€)

GBP (£)


USD ($)

EUR (€)

GBP (£)

 

Trade and other receivables

     506,015

       3,000

           129,740


       896,172

            -  

          708,454

 

Amounts due from Group  Undertakings

             -  

             -  

                   -  


               -  

            -  

            82,856

 

Accrued income

             -  

             -  

                   -  


               -  

            -  

          351,028

 

Cash

      42,520


            37,728


         71,416

            -  

        1,302,597

 

Trade and other payables

      89,505

       8,413

           971,990


         99,960

            -  

        4,206,250

 

Amounts due to Group Undertakings

             -  

- 

           426,883


               -  

            -  

                  -  

 

Net current assets/ liabilities

638,040

11,413

1,566,341

 

1,067,548

-

6,651,185

 

 

Fair value estimation

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

 

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

 

Capital management

The Company is funded entirely through shareholders' funds.

 

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

 

21.       SHARE BASED PAYMENTS

 

Equity-settled share option plans

The Company has a share option scheme for employees of the Group.  All share options are equity-settled.

 

The table below summarises movements in the number of share options in issue in the year:

  

Share options

Number

 

Weighted average exercise price (£)







Shares options as at 30 June 2021

                 96,176,363


0.0556


Shares options granted

                13,300,000


0.0125


Share options forfeited

(14,870,408)


0.0257


Share options exercised

(1,433,331)


0.0100


LTIP share options as at 30 June 2022

               93,172,624


0.0483


 

 


 

  Shares options as at 30 June 2022

93,172,624


0.0483

  Shares options granted

-


-

  Share options forfeited

(62,322,624)


0.0578

  Share options exercised

-


-

  LTIP share options as at 30 June 2023

34,850,000


0.0257






 

 

Options vest over periods defined in the respective option agreements and at the discretion of the board of directors.

 

The exercise prices of options outstanding at 30 June 2023 range from 1p to 6.25p.

 

All share options outstanding at 30 June 2023 were exercisable.

 

The weighted average remaining exercise period of options at 30 June 2023 was 7.5 years.

 

Of the options outstanding at the year end, 18,000,000 (2022: 36,000,000) were held by directors.  Details of all options and warrants held by directors are contained within the Directors' Remuneration Report.

 

No share options were granted in the period.  The inputs into option pricing models are available in earlier annual reports.  All share options were valued using Black Scholes models.

 

All share options were granted at an exercise price equivalent to the market price at the date of grant.

 

All options are held in Gfinity plc with no options held over any of the group's subsidiaries.

 

Subsequent to the year end, the CEO David Halley was granted 271,922,393 share options; see Note 25 for more details.

 

22.    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 2021

                20,050,500


0.010

Warrants granted

              216,000,000


0.013

Warrants exercised

(13,750,000)


0.010

Warrants lapsed/forfeited

(6,300,500)


0.010

Warrants as at 30 June 2022

              216,000,000


0.0125





Warrants as at 30 June 2022

216,000,000


0.0125

Warrants granted

1,373,053,333


0.0022

Warrants exercised

-


-

Warrants lapsed/forfeited

(216,000,000)


0.0125

Warrants as at 30 June 2023

1,373,053,333


0.0022


1,373,053,333 warrants were granted in the period. The warrants exercised were granted prior to the year ended June 2021 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.

 

 

23.    RELATED PARTY TRANSACTIONS

 

The Directors' Report provides details of director remuneration and share options and warrants held by the directors at the end of the period. No directors were issued options during the year and no directors exercised share options in the year.  Certain directors received warrants by virtue of participating in the fundraising in the year on the same terms as other investors.

 

Transactions and balances with Group subsidiaries and associates in the year:

 

CEVO:

During the year, the Company advanced cash of £502,718 (2022: nil) to Cevo and Cevo incurred costs of £477,092 (2022: £234,959) on the Company's behalf.  The year end amount repayable to the Company was £594,824 (2022: £569,198).

 

RealSM:

During the year, the Company costs on RealSM's behalf of £6,595 (2022: £5,979).  The year end amount payable to the Company was £12,574 (2022: £5,979).

 

Megit:

During the year, the company incurred costs of £250,355 (2022: £109,718) on behalf of Megit.  Megit advanced cash of £150,000 to the Company and incurred costs on behalf of the Company of £604,115 (2022: £32,842).  The year end position is that the Company owed £426,883 to Megit (2022: £76,877 due from Megit).

 

Athlos:

Whilst Athlos was a subsidiary of the Group, the Company incurred net costs on behalf of Athlos of £87,417 (2022: nil) which was released under the terms of the sale agreement.  Subsequent to the disposal, the Company incurred costs of £63,717 on behalf of Athlos and the amount receivable at the year end was £63,717 (2022: nil).

 

Subsequent to the year end, the Company disposed of its remaining interest in Athlos to Tourbillon Group UK Limited of which David Halley is a Director and shareholder.

 

 

24.       EVENTS AFTER THE REPORTING PERIOD

 

In August 2023 the company raised £450,000 before expenses through the issue of 750,000,000 shares at 0.06p each.  At the same time, the company's ordinary shares were reorganised such that each ordinary share of 0.1p nominal value was split into one share of 0.01p nominal value and one deferred share of 0.09p.  Ordinary shares retain the same rights and deferred shares have no substantive rights.

 

Also in August 2023, David Halley joined the Board as CEO and Jonathan Hall resigned as a director.  David Halley will receive no cash remuneration and instead will be issued 271,922,393 share options exercisable at 0.06p for 7 years from issue, vesting 50% on grant and 50% after one year.

 

In September 2023, Neville Upton and Hugo Drayton, Directors, were issued 91,773,808 and 44,187,389 share options respectively.  The options vest 50% immediately and 50% after one year, at an exercise price of 0.06p. The exercise period is 7 years from grant. A further 33,990,300 new share options were issued to certain employees on the same terms. In addition, 75,990,299 new warrants were issued to certain advisers on the same terms.

 

In November 2023, the Group disposed of its remaining interest in Athlos for cash proceeds of £260,000.

 

In December 2023, the Group sold the remaining trade and assets of its Esports division for cash proceeds of £15,000.  The eSports division was closed in June 2023.  Gfinity also received a 15% equity interest in Ingenuity Loop Limited which the majority shareholder has the option to buy out for £200,000 in cash at any time for the first 12 months post transaction.  Neville Upton, director of Gfinity, joined the board of Ingenuity Loop as CEO and indirectly holds approximately 41% equity interest in Ingenuity Loop.

 

 

25.       RESTATEMENT

 

The Directors noted that certain adjustments had been incorrectly reflected in the prior year annual report and financial statements.  These related to the following areas:

 

1) In the Company financial statements only, deferred tax arising on the business combination with Megit had incorrectly been reflected as part of the cost of investment in subsidiary in Megit.  Therefore the cost of investment has been reduced by £1,030,581 with a corresponding reduction in deferred tax liability within the Company balance sheet.

 

2) In the Company financial statements only, movement on deferred tax liabilities in respect of Megit, arising from the above error, had been posted to profit or loss.  As the initial recognition of a deferred tax liability as incorrect, the movements were incorrect.  Therefore £219,347 has been reversed in profit or loss and has been removed from deferred tax liabilities.

 

3) In the Group and Company financial statements, the directors noted that the vesting period of certain share options used for accounting purposes did not align with the contractual vesting conditions of option issues.  The result was excess of share option charges in the prior year of £170,012, with a corresponding adjustment to the share based payment reserve.

 

The summarised impact of the restatements is presented below:

 

Group





As previously reported

Restatement

Corrected position


at 30 June 2022

 

at 30 June 2022


£

£

£





Revenue

                                 5,693,385

                            -  

                       5,693,385

Cost of sales

                               (2,546,508)

                            -  

                     (2,546,508)

Gross profit

                                 3,146,877

                            -  

                       3,146,877

Admin expenses

                               (6,950,105)

                    170,012

                     (6,780,093)

Other profit and loss items

                                  (177,744)

                            -  

                        (177,744)

Loss for the year

                             (3,980,972)

                  170,012

                   (3,810,960)





Non-current assets

                                 9,438,050

                            -  

                       9,438,050

Current assets

                                 4,110,254

                            -  

                       4,110,254

Current liabilities

                               (3,043,272)

                            -  

                     (3,043,272)

Non-current liabilities

                               (1,738,317)

                            -  

                     (1,738,317)

Net assets

                              8,766,715

                            -  

                     8,766,715





Other reserves

                                 3,876,676

                  (170,012)

                       3,706,664

Retained earnings

                             (51,283,669)

                    170,012

                    (51,113,657)

Other equity items

                               56,173,708

                            -  

                     56,173,708

Total equity

                              8,766,715

                            -  

                     8,766,715

 

The impact of the above adjustment to profit or loss was to reduce the reported loss per share from 0.35p to 0.34p.

 

Note that as a result of the decision to discontinue Athlos and Esports in the year, the group profit and loss account has otherwise been represented to separate the results from discontinued operations and so the above analysis is not directly comparable to the comparatives as they are presented this year.  The represented Operating Segments note provides a profit and loss analysis by segment in the current and comparative year.

 

 

Company









As previously reported

Restatement

Corrected position


at 30 June 2022

 

at 30 June 2022


£

£

£





Loss for the year

                          (4,198,665)

                (49,742)

                (4,248,407)





Investment in subsidiary

                            7,100,297

           (1,030,581)

                  6,069,716

Other non-current assets

                            3,479,193

                           -  

                  3,479,193

Current assets

                            3,242,109

                           -  

                  3,242,109

Current liabilities

                          (2,551,884)

                           -  

                (2,551,884)

Deferred tax liability

                             (895,751)

               810,827

                     (84,924)

Other non-current liabilities

                             (840,751)

                           -  

                    (840,751)

Net assets

                            9,533,213

              (219,754)

                  9,313,459





Other reserves

                            3,898,634

              (170,012)

                  3,728,622

Retained earnings

                        (50,539,126)

                (49,742)

              (50,588,868)

Other equity items

                          56,173,705

                           -  

                56,173,705

Total equity

                            9,533,213

              (219,754)

                  9,313,459

 

 

26.       PROVISIONS

 

As announced during the year under review, the company closed its eSports division. Some of the costs of closure were incurred and expensed during the year. However, some costs remained unsettled as at 30 June 2023, and the company has a provision of £238,287 to meet these costs, post year end.

 

There were no provisions at 30 June 2022; the provision of £238,237 was created during the year and there was no release or utilisation of the provision, therefore the closing provision was £238,237.  The provision is not discounted as amounts are expected to be utilised within a year.

 

 

 

 END

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