Current Trading, Outlook and Full Year Results

RNS Number : 9918W

Immotion Group PLC

29 April 2021

Immotion Group plc

("Immotion", the "Company" or the "Group")

Current Trading, Outlook and Full Year Results

Immotion Group (AIM:IMMO.L), the UK-based immersive entertainment group, is pleased to provide an update on current trading and to announce its results for the year ended 31 December 2020.

Highlights - Post Period End

· Clear evidence of recovery in trading in core LBE business - led by US business

· March saw highest monthly partner revenue to date

· Unaudited Group revenue in March 2021 £440,000 (substantially greater than in January and February 2021 combined)

· Further LBE revenue growth expected to follow in coming months:

o Permitted capacity in Las Vegas to be increased from 50% to 80% from 1 May and 100% from 1 June 2020

o Strong opening for 22-seat installation at Clearwater Aquarium (23 March 2020)

o UK LBE business set to re-open on 17 May 2020

o UK and USA estates expected to be fully open for busy summer period

· Let's Explore launched in USA and Canada and on sale via Amazon in the UK and USA

· Forward stock of Let's Explore product bought at substantially reduced cost per unit

· Let's Explore now fulfilled locally in USA

· Core product enhanced and range supplemented to drive increased basket sizes

· Uvisan making good progress and contribution to central costs

· Cleanroom by Uvisan - full room UV-C disinfection system to launch in May - early enquiries from blue chip customers

Highlights - 2020

· Results very heavily impacted by COVID-19 lockdowns and impact of social distancing

· Revenue £2,848,000 (2019: £3,606,000)

· EBITDA loss narrowed to £1,690,000 (2019: £2,494,000 loss)

· LBE revenue declined from £2,932,000 in 2019 to £2,075,000 in 2020

· Administrative expenses (before depreciation, amortisation, impairment, share based payments and one-off costs) fell to £2,731,000 (2019: £3,591,000)

· Government grants and loans of £760,000 received (£479,000 of grants taken to the income statement)

· Two placings completed following start of pandemic - raising £2,362,000 net

· Total adjusted loss* £4,189,000 (2019: £4,355,000)

· Total adjusted loss* per share 1.17p (2019: 1.72p loss)

*Adjusted loss is the loss after taxation, adjusted for share based payments, impairment charges and restructuring costs.

Chairman's Statement

The only way to describe 2020 is a year of unprecedented and unforeseeable challenges. The COVID-19 pandemic caused restrictions and lockdowns, which effectively closed our business for lengthy periods in 2020.

Rather than sailing into profitable waters in Spring 2020 as we had expected, we had to batten down the hatches and move into survival mode, requiring very tough decisions, particularly those which impacted our people. However, thanks to the resilience of our team, and the support of our shareholders, we have navigated through what we all hope is the worst of the impact of the COVID-19 pandemic on our business, though we are not complacent.

Creative actions from our team saw two new divisions emerge, 'Let's Explore' and 'Uvisan'. The combination of these new revenue streams, and more importantly, the ongoing recovery of our core Location Based Entertainment (LBE) business, particularly as conditions improve in the USA, and with the UK set to re-open in mid-May 2021, has significantly boosted our confidence.

While the future currently looks considerably healthier, we have reflected carefully on what risk appetite we have in the short term, as well as the resources available to us. We have concluded that the balance of 2021 should be a period of measured investment, as well as the coming of age of our Group, with the key short-term objective being to move the Group into EBITDA profitability and positive operating cashflows. With tight cost control, our existing partner business should be a platform for the overall profitability of our Group and our new divisions should then provide further contribution.

We remain confident about the prospects for our core LBE business. There is much still to go after in the aquarium market, where we now have a very strong reputation, particularly in the USA, with Mandalay Bay and Clearwater Aquarium being two strong exemplars of the way forward - larger, more fully integrated attractions, which offer both economies of effort as well as strong potential economics for both partners. We will seek opportunities in the zoo market in earnest in 2022, when hopefully we will have the pandemic behind us. Our refined LBE model along with the global opportunities that we believe remain for the growth of our LBE business give us belief in its future potential, particularly in a post-pandemic environment.

'Let's Explore' and 'Uvisan' are a testament to the creativity and versatility of our team and enable us to leverage our skills and central operating cost base. 'Let's Explore' gives us a seasonal balance to our LBE activities, with Q4 likely to be its strongest period by far with both Black Friday and the holiday season.

Uvisan is seeking to capitalise on the greater attention we expect organisations to pay to ensure safe working conditions for their people and customers, and to address workplace risks that were not considered before the pandemic. This has the potential to become a significant market. Early blue-chip enquiries for our 'Cleanroom by Uvisan' product, have been encouraging.

We look forward to watching these new activities evolve alongside the expected recovery and future growth of our core business. While there is still reason for caution, we have demonstrated that we are single-minded, creative and fleet of foot. While we can only play in the conditions that prevail, we remain confident in our ability to succeed.

Chief Executive's Report

To say 2020 was a difficult year for the Group would be an understatement. The Group's core Location Based Entertainment (LBE) business suffered considerably due to the lockdowns imposed as a result of the COVID-19 pandemic and the significant focus became the mitigation of the effects of the pandemic. We have worked tirelessly to position the Group for a strong recovery from the pandemic and the current outlook is considerably better as our key markets have emerged or are due to emerge from lockdown. I will first summarise the Group's current position and outlook as I feel this will be of more interest to our shareholders, before turning my attention to a review of 2020's performance.

Trading Post Period End & Outlook

Despite a challenging January and February 2021, impacted by the ongoing pandemic related restrictions, March and April 2021 have seen a strong rebound in revenue, led primarily by the USA Location Based Entertainment business.

In March 2021 we saw our LBE revenues almost double compared to February, with total unaudited Group revenue in March 2021 of circa £440k. This momentum along with the lifting of restrictions in Las Vegas, USA (allowing 80% capacity as of 1 May 2021 and 100% effective 1 June 2021); the UK business expected to come back on stream in mid-May; and the busy summer period should see our LBE revenues grow substantially. This, along with contributions from our Home Based Entertainment (HBE) and Uvisan divisions, should allow us to move to profitability on a monthly basis at the EBITDA level. The combination of an expected strong summer for our LBE business, together with an expected busy Q4 2021 for 'Let's Explore' (which coincides with a quieter quarter for LBE) will give some welcome "seasonal" balance to our Group activities.

We have continued to maintain tight control of costs, with monthly central overheads and salaries currently running at circa £215k per month. This lower cost base is now supporting three divisions. We have identified further cost savings, particularly in occupancy costs and we would expect those to come through in H2 2021.

Much of the required investment in assets and stock to support our 2021 plan has already been made, which should allow us, with careful management of our cash resources, to be self-funded for the remainder of 2021.

We currently have paid in full for stock of a further 50 motion platforms (106 seats) for the LBE business. To make these operational involves relatively small spending on headsets and dressing of the sites, as well as road transport of equipment from our warehouse to site.

In addition, we have in aggregate circa 12,000 fully paid Let's Explore Mega Packs in our UK and USA warehouses, plus a further 34,000 units in production. Net of deposits already paid, circa £130,000 remains to be paid over the coming months, which we expect to be largely self-funding from sales in that period. This approach has enabled us to plan ahead and secure a significantly lower unit product cost.

Location Based Entertainment ( LBE)

Our core LBE business has begun to recover strongly, driven largely by the improvement in the USA. With COVID-19 restrictions easing and leisure venues set to either re-open or ease restrictions (where already open), we expect to have the large majority of our LBE sites open for summer. We hope to see all our UK sites re-open in mid-May 2021 and, so long as the overall pandemic restrictions ease as currently expected, we would hope to see a strong summer contribution driven by "staycations" and pent-up consumer demand particularly in the UK.

In the USA, the majority of our LBE sites are already trading and remaining COVID-19 related restrictions are being relaxed. Importantly, the capacity restrictions relating to our installation at Shark Reef Aquarium, Las Vegas, were relaxed from 15 March 2021 and capacity is now back at the same level permitted when we opened the site in August 2020. This has, from April 2021, had a positive impact on revenue and contribution from this key site and with a further lifting of local restrictions due on 1 May 2021 to 80% and then to 100% on 1 June 2021 we expect to see further increases over the coming weeks and months.

Trading began at our new 22-seat installation at Clearwater Marine Aquarium, Florida, USA, on 22 March 2021 and the early uptake has been very strong, with high levels of utilisation.

March 2021 saw our best result, in terms of turnover and contribution, since October 2020, and we expect this to grow again in April 2021 (with a full month back at 50% capacity at Shark Reef Aquarium) and again in May 2021, as the UK sites come back on stream, with peak seasonal performance in the UK and USA expected in July and August 2021.

In terms of new LBE sites, we remain focused on deploying the VR platforms that we currently hold in stock. We have recently installed new units into Virginia Aquarium (4 seats) as well as increasing capacity at our installations at Mystic Aquarium (up to 8 seats) and OdySea Aquarium (up to 6 seats) ahead of the summer season. We are also contracted to install 8 seats into Sea Life Brighton in time for its reopening on 17 May 2021.

We remain focused on larger, more integrated installs, with the focus for the remainder of 2021 being on quality over quantity.

In Australia, in addition to our two existing sites, Sea Life Sydney and Sea Life Melbourne, we have opened a new tower coaster installation in the observation deck on the Sydney Tower Eye and early trading has been encouraging. This is a very prestigious and high traffic site.

Due to strategic changes at our site at Dubai Aquarium we have decided to uninstall from that location and are repatriating the equipment, which will be re-deployed elsewhere. We continue to review our options for the remaining three Middle East sites.

Home Based Entertainment (HBE)

Let's Explore has continued to make solid progress with the product now launched in a number of new territories, including USA and Canada. We have re-organised the supply chain and made a substantial forward commitment to stock. This has allowed us to obtain substantial product cost reductions and to plan ahead.

We took the opportunity in January and February 2021 to pull back on UK marketing as consumers recovered from Christmas spending. In this period, we focused on operational matters, planning for international roll out.

We soft launched in the USA in early March 2021, fulfilling from the UK and we will be scaling up marketing in the USA from early April 2021 as we begin shipping from our fulfilment partner in Wisconsin.

Whilst margins in March 2021 were impacted as we sold through old stock at a significantly higher unit cost as well as substantial international shipping charges, it did allow us to prove USA demand before launching with local distribution. All stock now on hand in the USA and to be delivered to us going forward is at the new significantly lower product cost, though we do still have some of the higher cost stock in the UK to sell through.

With stock now in the USA, we are exploring selling through our LBE Partner network. It is our intention to be up and running with key US partners for the Summer 2021 season. We have also now started to sell on Amazon, both in the UK and USA.

Further products have been added to the Let's Explore Oceans portfolio, including our new Explore the Oceans 78-page Augmented Reality book and Flashcard pack. These new products join our Oceans book pack and fossils, all of which offer the opportunity to increase basket sizes and margin.

We have also tested advertising into territories further afield to establish potential demand. Again, we have fulfilled demand from the UK, which has impacted margin, but this has been on a relatively small scale and has been useful in informing our thoughts on which territories to target. We are now examining how to optimise distribution for these territories.

Whilst we are looking to build sales volumes through the year, our focus will be on the key Christmas season and Q4 2021 in particular, where our product is perfectly suited as a Christmas and seasonal gift to be purchased by parents, grandparents, relatives and friends.

Uvisan

Uvisan has continued to make good progress and has now sold almost 50 cabinets into a range of sectors from universities and schools through to the NHS. High profile clients have included Aardman Animation, the studio behind Wallace & Gromit; the British Film Institute; and a number of well-known universities.

We have also appointed a number of re-sellers in the UK and in Europe and in the coming months we will look at potential distribution into the USA.

We have also developed 'Cleanroom by Uvisan' and have a trial site with Chichester University. The university will use the system to disinfect its state-of-the-art recording studio and equipment (such as mixing and editing desks) as well as cameras and related equipment. The system uses fixed UV-C lights, along with a proprietary safety and control system to provide rapid disinfection of un-occupied rooms. This system can achieve ambient and surface disinfection in less than 10 minutes, allowing for rapid and safe turnover of rooms between user groups.

Along with the UV disinfection cabinets, Uvisan now has a more rounded offering. Uvisan already makes a small contribution to our Group overheads and, with 'Cleanroom from Uvisan' coming on stream, we would expect to see this grow in H2 and beyond.

Review of 2020

The Group began 2020 full of optimism with EBITDA profitability coming into clear sight and a plan for further strong growth. As with all leisure businesses, the pandemic hit us in March 2020 with the full force of mandatory closures and worldwide lockdown.

Essentially, 2020 became about survival and, as the lockdown gripped, we took the steps necessary to cut costs (including salary cuts), manage cashflows and obtain available government support in both the UK and the USA. However, with no revenue for lengthy periods of time we suffered very substantial losses and cash outflow in the year. These are detailed in the financial review which follows.

With a continued belief in the long-term prospects for our business, we took the opportunity to strengthen our balance sheet, with two equity fundraises following the start of the pandemic. We are grateful to our core shareholders for their support during what was a very tough and uncertain time.

Our board and family members showed their faith and determination by investing a further £500,000 into the business, being almost half of the equity fundraise we undertook in November 2020.

There were of course periods when the LBE business was allowed to re-open and we did make progress. The opening of our landmark site at Mandalay Bay (albeit delayed, and with much restricted capacity) was extremely pleasing. However, we also took the decision not to rush to open some sites, and on the whole we took a cautious approach being highly selective in making new investment, recognising the need to maintain cash reserves to enable us to manage our way through extended periods of lockdown and disruption.

We continued to have faith in our core LBE business model but also took the view that we needed to try to innovate (albeit on a limited budget) and hence 'Let's Explore' and 'Uvisan' were born.

There is now a real sense of emerging from the darkness and the focus must be on what lies ahead.

Our whole board wishes to put on record that the professionalism of those that have worked tirelessly throughout the period (often on a more than a full-time basis and for reduced salary) and the grace, patience and understanding of those that have been furloughed on reduced income has been humbling.

Location Based Entertainment (LBE)

The growth of our partner estate stalled as the pandemic took hold and the opening of our landmark site at Shark Reef Aquarium, Mandalay Bay, Las Vegas was delayed from April 2020 until early August 2020, as work on site had to be halted when Las Vegas went into lockdown.

The bulk of our estate was shut for lengthy periods. In the UK, we had three full months of lockdown in Q2 2020 and a further period of lockdown in November 2020 with zero revenue across all sites. In the USA, localised lockdowns reduced our Q2 2020 trade to virtually nil, with a number remaining closed until now. In the Middle East, all of our sites were effectively closed from mid-March 2020 for the remainder of the year.

The movement of our portfolio during 2020, and since period end, can be summarised as follows:

	Total		USA		UK		ROW
	Sites	Headsets	Sites	Headsets	Sites	Headsets	Sites	Headsets
At 1 January 2020	46	302	20	99	16	142	10	61
Installed in 2020	10	103	7	84	3	19	-	-
Uninstalled in 2020	(8)	(60)	(3)	(20)	(5)	(40)	-	-
At 31 December 2020	48	345	24	163	14	121	10	61
Installed in 2021	2	32	1	28	-	-	1	4
Uninstalled in 2021	(1)	(2)	(1)	(2)	-	-	-	-
At 31 March 2021	49	375	24	189	14	121	11	65

Revenues at sites that re-opened in the year were initially heavily impacted, particularly in the earlier stages of the pandemic. This appears to have been in large part the result of capacity and social distancing restrictions imposed by the venues themselves.

In the USA, we have seen an improving picture with easing of COVID-19 measures and we are hopeful that as restrictions continue to be eased and attendances recover to pre-pandemic levels we believe we should see a return towards similar levels of revenue seen in the same periods before the pandemic.

As of 31 March 2021, the operational status of our installed base was as follows:

	Total		USA		UK		ROW
	Sites	Headsets	Sites	Headsets	Sites	Headsets	Sites	Headsets
At 31 March 2021	49	375	24	189	14	121	11	65
Fully operational	26	213	19	166			7	47
Site closed	18	139	-	-	14	121	4	18
Site open but installation not operating	5	23	5	23	-	-	-	-

Home Based Entertainment (HBE) - Let's Explore

We conceived of the idea for Let's Explore in the depths of the first UK lockdown. Given the uncertainty around the length and impact of the pandemic and the fact that our LBE business was shut in its entirety, we felt the need to be proactive and create a hedge against our LBE business, recognising that cash was very tight.

Using elements of our LBE business's content and the skills of our creative and marketing teams we designed an interactive in-home product that aimed to be both fun and educational. We put together interactive undersea experiences using both VR and AR elements, all driven from our holographic viewing cube.

Once the product was designed, we sourced all the various elements (headsets, cubes, books, packaging, etc.). However, given our desire to launch for Christmas 2020, it was not possible to consolidate and source all the elements at lowest cost or indeed to optimize the logistics.

We took a cautious approach to the amount of stock we bought ahead of Christmas (again at the expense of margin). Given long lead times from China by sea, there were elements, such as headsets, that we had to air freight to the UK when it became apparent that there was substantial demand.

In addition, as we had decided to focus on digital marketing only, there was little time to test and build up our credentials with social media marketing partners, such as Facebook, who limit advertising spend for new advertisers.

We launched the Let's Explore Oceans Mega Pack on 1 October 2020 and this was very well received with strong reviews, selling circa 11,000 units before the year-end, generating £669,000 of revenue.

This early success gave us the belief that we should develop the business further and we remain excited by its prospects.

Uvisan

Uvisan was born out of the need to be able to safely and effectively sanitise the VR headsets at our LBE sites. It was clear that at a site such as Las Vegas where we need to keep two batches of 36 headsets rotating every 10 minutes that alcohol wipes would be just too laborious and time consuming in addition to the risk of damaging equipment and the environment.

UV light is a well-established means of disinfection, used in many industries, including the food industry. (UV-C light kills 99.9% of bacteria and viruses with the right dosage). It is particularly well suited for rapid disinfection of touched and shared equipment and is perfect for sensitive electronic equipment that can be damaged by moisture or abrasive substances.

Early on we undertook successful tests of our equipment with third parties and were delighted when HP recommended our cabinets for disinfecting their range of VR headsets.

It was apparent to us that other businesses utilising VR headsets would have the same need but that there could be wider demand from those who use shared equipment and spaces.

We began some soft marketing in August 2020 and found that there was demand but clearly (and ironically) periods of lockdown made this challenging. Nevertheless, we had some early orders supplying schools, universities, the creative industries and others.

Recent sales to a number of prestigious clients, including Aardman and the NHS, have given the directors confidence to expand this business division. A number of distribution agreements have now been entered into for the UK and Europe.

At the same time, we began looking at wider needs for rapid disinfection and accordingly we began to develop what has become "Cleanroom by UVISAN". This is a whole room UV-C disinfection system. For this to be a viable product, we decided to develop a proprietary safety and control system. We have worked to develop this product with Chichester University and have now installed the prototype Cleanroom system in their state-of-the-art audio suite.

Uvisan will shortly have the necessary CE and other accreditations for its new 'Cleanroom' product. Along with the UV disinfection cabinets the business now has a more rounded offering. We now have a number of enquiries from substantial blue chip counterparties regarding potential 'Cleanroom by Uvisan' installations. Today, Uvisan makes a small contribution to our Group overheads and with Cleanroom we would expect to see this grow in H2 and beyond.

Financial Review for the year ended 31 December 2020

Total revenue for the year reduced to £2,848,000 (2019: £3,606,000). Unsurprisingly, this decline was largely driven by lockdowns in response to the pandemic and the ongoing impact of lockdown periods - LBE segment revenues declined by £857,000 to £2,075,000 (2019: £2,932,000).

Let's Explore, the in-home consumer product created in response to the pandemic, generated revenue of £669,000 in the period from its launch on 1 October 2020 (2019: £nil).

A significant area of focus in the year was to secure available governmental COVID-19 related financial support in both the UK and USA to the fullest extent possible. We received £479,000 in the year through the UK Coronavirus Job Retention Scheme (included within other income). We also received £119,000 as a loan through the USA Paycheck Protection Program for which we have received full forgiveness since the year end (and as such no credit to the income statement has been made in the 2020 accounts).

Cost reductions were a key focus as the lockdowns in the UK and USA took hold. Administrative expenses (excluding depreciation, amortisation, impairment, share based payments and one-off costs) fell to £2,731,000 (2019: £3,591,000). Whilst the entirety of this reduction cannot be attributed to actions taken in response to COVID-19 (a programme of cost reductions was being implemented late in 2019), the Group made further significant cost savings resulting from temporary pay reductions for the majority of staff and, regrettably a number of redundancies were also made.

The Group made an adjusted EBITDA loss of £1,690,000 during the year (2019: £2,494,000).

Following an impairment review, the Directors decided to write-off certain pieces of VR content created by the Group historically, which are not expected to recover their carrying value. This resulted in an impairment charge of £253,000 in the year.

The Group's loss after tax in the year was £4,732,000 (2019: £5,415,000). The adjusted loss per share* was 1.17p (2019: 1.72p).

Overall cash inflow in the year was £1,190,000 being cash outflow of £2,012,000 from operations, a £1,393,000 outflow from investing activities and a £4,595,000 inflow from financing activities.

Operating cash outflows in the year were £2,012,000 (2019: £2,246,000). The difference from EBITDA was predominantly a result of net working capital outflows in the period of £192,000 (of which £152,000 was the build-up of stock for Let's Explore and Uvisan) and the cash impact of restructuring costs of circa £96,000.

Investing cash outflows reduced substantially to £1,393,000 (2019: £2,762,000). This was the result of substantial reductions of both intangible and tangible asset additions, in the case of the former due to our content creators being on furlough for a substantial part of the year, and in the case of the latter due to significantly fewer new partner installations and associated spend in the period.

Net financing activities produced a cash inflow of £4,595,000 (2019: £4,771,000) due in the main to the three equity placings which took place in the year (net proceeds of which were £5,012,000).

Net assets at the balance sheet date were £6,714,000 (2019: £6,275,000).

Whilst we are feeling as positive about our business and the outlook as we have in over a year, I feel obligated in the current environment to point out that there does remain considerable uncertainty as to how the situation with COVID-19 (and its variants) will evolve and what the impact of that could be on our business.

As part of the preparation of our accounts, we are required to consider these matters and Note 2 to this release details our thought process in this regard. From our perspective the key risk would come from further widespread and or lengthy lockdowns, particularly as it impacts our key LBE sites. At the time of writing that does not appear to be a major risk in the USA, which now accounts for the majority of our LBE revenue and the UK remains set to re-open in mid-May 2021.

Conclusion

I would particularly like to thank our fantastic team and supportive shareholders, as we have come through a period of huge challenge. Absent any material deterioration in the recovery from the pandemic conditions, we are optimistic about the outlook for the remainder of 2021 and are now seeing a strong recovery.

We have a plan for 2021, which should underpin our Group becoming profitable and generating positive operating cashflows, whilst reflecting the need for caution and the resources available to us. Much of the investment to support that plan has already been made and, with a strong recovery underway, we will seek to manage our resources so that our plans for the remainder of 2021 will be self-funding.

We look forward to the year ahead with renewed optimism but are also cognisant of the fluid nature of the current business environment and will adapt our plans as needed. Having survived what has hopefully been the worst of the pandemic, we are now intent on driving our business forward with renewed vigour and optimism.

*Adjusted loss is the loss after taxation, adjusted for share based payments, impairment charges and restructuring costs.

Enquiries:

For further information please visit www.immotion.co.uk , or contact:

Immotion Group

Martin Higginson

David Marks

Tel + 44 (0) 207 220 1666

WH Ireland Limited

(Nomad and Joint Broker)

Adrian Hadden

Darshan Patel

Matthew Chan

Tel + 44 (0) 207 220 1666

Alvarium Capital Partners

(Joint Broker)

Alex Davies

Tel: +44 (0) 207 195 1458

Shard Capital Partners LLP

(Co-Broker)

Damon Heath

Erik Woolgar

Tel: +44 (0) 20 7186 9900

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

			Year ended	Year ended
			31 December	31 December
			2020	2019
	Note		£'000	£'000

Revenue - continuing operations			2,848	3,606

Cost of sales - continuing operations			(2,382)	(2,509)
			------------	------------
Gross profit			466	1,097

Administrative expenses - continuing operations			(5,779)	(6,524)

Other operating income			575	-
			--------------	--------------
Loss from operations			(4,738)	(5,427)

Memorandum: Adjusted EBITDA			(1,690)	(2,494)
Depreciation			(1,751)	(1,304)
Amortisation			(719)	(561)
Impairment of tangible and intangible assets			(253)	(458)
Share based payments			(194)	(171)
Loss on disposal of fixed assets			(35)	(12)
Restructuring costs			(96)	(427)
			--------------	--------------
Loss from operations			(4,738)	(5,427)


Finance costs			(82)	(108)
Finance income			2	4
			------------	------------
Loss before taxation and attributable to equity holders of the parent			(4,818)	(5,531)

Taxation			86	84
			------------	------------
Loss from continuing operations Discontinued operations (net of tax) Loss after taxation			(4,732) - ------------ (4,732)	(5,447) 32 ------------ (5,415)

Other comprehensive expense
Loss on translation of subsidiary			(35)	(29)

Loss after taxation and attributable to equity holders of the parent and total comprehensive income for the period			------------ (4,767)	------------ (5,444)
			======	======


			Year ended	Year ended
		31 December		31 December
			2020	2019
			£0.01	£0.01
Loss per share
Basic (continuing)	5		(1.33)	(2.13)
Basic (discontinued)			0.00	0.01
			======	======
			(1.33)	(2.12)
Loss per share
Diluted (continuing)	5		(1.33)	(2.13)
Diluted (discontinued)			0.00	0.01
			======	======
			(1.33)	(2.12)

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 31 DECEMBER 2020

	Share capital	Share premium	Foreign exchange reserve	Retained (deficit)/ earnings	Total equity
	£'000	£'000	£'000	£'000	£'000


Balance at 1 January 2019	78	9,999	(16)	(3,861)	6,200

Issue of shares	37	5,684	-	-	5,721

Issue costs deducted from equity	-	(373)	-	-	(373)

Loss after tax	-	-	-	(5,415)	(5,415)

Equity settled share-based payments	-	-	-	171	171

Currency translation of overseas subsidiary	-	-	(29)	-	(29)
	--------------	--------------	--------------	--------------	--------------
Balance at 31 December 2019	115	15,310	(45)	(9,105)	6,275
	--------------	--------------	--------------	--------------	--------------

Issue of shares	49	5,352	-	-	5,401

Issue costs deducted from equity	-	(389)	-	-	(389)

Loss after tax	-	-	-	(4,732)	(4,732)

Equity settled share-based payments	-	-	-	194	194

Currency translation of overseas subsidiary	-	-	(35)	-	(35)
	--------------	--------------	--------------	--------------	--------------
Balance at 31 December 2020	164	20,273	(80)	(13,643)	6,714
	--------------	--------------	--------------	--------------	--------------

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 DECEMBER 2020

		31 December 2020	31 December 2019
ASSETS	Note	£'000	£'000
Non-current assets
Property, plant and equipment	6	2,260	3,132
Intangible fixed assets	7	3,625	4,020
		-----------------	-----------------
Total non-current assets		5,885	7,152

Current assets
Inventories		152	-
Trade and other receivables		829	703
Contract assets		91	100
Cash and cash equivalents		1,664	474
		-----------------	-----------------
Total current assets		2,736	1,277
		-----------------	-----------------
Total assets		8,621	8,429
		=========	=========
LIABILITIES
Current liabilities
Trade and other payables		(1,153)	(1,060)
Loans and borrowings		(175)	(101)
Lease liabilities		(231)	(401)
Deferred tax liability		-	(27)
Contract liabilities		(12)	(14)
		-----------------	-----------------
Total current liabilities		(1,571)	(1,603)
		-----------------	-----------------
Non-current liabilities
Loans		(160)	(55)
Lease liabilities		(176)	(496)
		------------------	------------------
Total non-current liabilities		(336)	(551)
		------------------	------------------
Total liabilities		(1,907)	(2,154)
		------------------	------------------
Total net assets		6,714	6,275
		=========	=========
Capital and reserves attributable to owners
of the parent
Share capital	8	164	115
Share premium		20,273	15,310
Foreign exchange reserve		(80)	(45)
Retained earnings/(deficit)		(13,643)	(9,105)
		------------------	------------------
Total equity		6,714	6,275
		=========	=========

The financial statements were approved by the Board and authorised for issue on 28 April 2021

Martin Higginson David Marks

Chief Executive Officer Group Finance Director

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

	Year ended 31 December 2020 £'000		Year ended 31 December 2019 £'000
Cash flows from operating activities
Loss before tax including discontinued operations Adjustments for:	(4,818)		(5,499)
Share based payments	194		171
Depreciation on property plant and equipment	1,751		1,304
Depreciation on stock transfers	-		(2)
Loss on disposal of fixed assets	35		12
Amortisation of intangible assets	719		561
Impairment of tangible and intangible assets	253		458
Finance costs	82		108
Finance income	(2)		(4)
Foreign exchange on retranslation of fixed assets	(72)		(32)
Foreign exchange loss	(35)		(29)
Corporation tax repayment received	73		289
	-----------------		-----------------
Cash flows from operating activities before changes	(1,820)		(2,663)
in working capital

(Increase)/Decrease in inventories	(152)		133
(Increase)/Decrease in trade and other receivables	(132)		339
Increase/(Decrease) in trade and other payables	92		(55)
	-----------------		-----------------
Cash used in operations	(2,012)		(2,246)

Investing activities
Purchase of intangible assets	(545)		(1,005)
Purchase of property, plant and equipment	(1,069)		(1,804)
Proceeds from disposals of property, plant and equipment	159		15
Foreign exchange on retranslation of fixed assets	62		32
	-----------------		-----------------
Net cash used in investing activities	(1,393)		(2,762)

Financing activities
Finance costs	(82)		(108)
Finance income	2		4
New loans and finance leases	302		87
Loan and finance lease repayments	(615)		(560)
Foreign exchange on retranslation of financing	(24)		-
Issue of new share capital	5,401		5,721
Costs on issue of shares	(389)		(373)
	-----------------		-----------------
Net cash from financing activities	4,595		4,771
	-----------------		-----------------
Net increase/(decrease) in cash and cash equivalents	1,190		(237)

Cash and cash equivalents at beginning of the period	474		711
	------------------		------------------
Cash and cash equivalents at end of the period	1,664		474
	=========		=========


Reconciliation of net cashflow to movement in net debt:	Year ended	Year ended
	31 December 2020	31 December 2019
	£000	£000

Net increase/(decrease) in cash and cash equivalents	1,190	(237)

New loans and finance leases	(328)	(1,166)
Repayment of loans and finance leases	615	560
Foreign exchange on retranslation of financing	24	-
	-----------------	-----------------
Movement in net funds in the year	1,501	(843)

Net debt/(funds) at 1 January	(579)	264
	-----------------	-----------------
Net funds/(debt) at 31 December	922	(579)
	=========	=========

Breakdown of net funds/(debts)

Cash and cash equivalents	1,664	474
Loans and borrowings	(335)	(156)
Lease liabilities	(407)	(897)
	-----------------	-----------------
Net funds/(debts) at 31 December	922	(579)
	=========	=========

IMMOTION GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1. GENERAL INFORMATION

Immotion Group plc is a public limited company incorporated and domiciled in the United Kingdom. The address of the registered office is East Wing, Ground Floor, The Victoria, MediacityUK, Manchester, M50 3SP. The Group is listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The principal activities of the Group during the year were the provision of virtual reality (VR) experiences to partner sites and via its own ImmotionVR sites; and the sale of the Let's Explore virtual and augmented reality consumer product.

These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 2.

2. ACCOUNTING POLICIES

Principal accounting policies

The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs") and those parts of the Companies Act 2006 which apply to companies preparing their financial statements under IFRSs. The financial statements are presented to the nearest round thousand (£'000) except when otherwise indicated.

Basis of Consolidation

The Group comprises a holding company and a number of individual subsidiaries and all of these have been included in the consolidated financial statements in accordance with the principles of acquisition accounting as laid out by IFRS 3 Business Combinations.

Going concern

The Group incurred a loss after taxation of £4,732,000 for the year and an operating cash outflow of £2,012,000. The loss in the year and the continuation post year end of the operational disruption and economic uncertainty created by COVID-19 lockdowns indicate the existence of a material uncertainty which may cast significant doubt on the Group's ability to continue as a going concern unless losses after taxation are reduced significantly and/or new equity funds raised as required.

The Directors have prepared forecasts covering the period to December 2022, assessing the trading projections and cash flow taking into consideration the continued impact of COVID-19. The projections include:

· the anticipated reopening of partner and ImmotionVR sites as lockdowns are lifted with revenue from each site projected to be 50% of pre-COVID levels in 2021 and 75% in 2022;

· no further lockdowns affecting partner and ImmotionVR sites;

· selective opening of a small number of new partner sites;

· forecasted revenue and contribution of Let's Explore; and

· the impact of government support packages available in the UK and USA.

Whilst the forecasts prepared did not indicate a requirement for additional funding to enable the Group to continue being able to operate as a going concern, the Directors note that there is still considerable uncertainty as to whether the assumptions made in preparing these forecasts will turn out to be accurate. If there were to be further lockdowns, they could have a material impact on the Group's ability to generate revenue from partner and ImmotionVR sites. Should this happen, the Directors may need to consider mitigating actions available to them which are likely to include the pursuit of any government support available, identifying cost savings and/or seeking external finance in the form of debt or equity.

Based on the forecast prepared, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

The financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

Business combinations and goodwill

Acquisitions of subsidiaries and business are accounted for using the acquisition method. The assets and liabilities and contingent liabilities of the subsidiaries are measured at their fair value at the date of acquisition. Any excess of acquisition over fair values of the identifiable net assets acquired is recognised as goodwill. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment twice annually. Any impairment is recognised immediately in profit or loss accounts and is not subsequently reversed. Acquisition related costs are recognised in the income statement as incurred.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes. The following criteria must also be met before revenue is recognised:

Partners

Partner revenue is recognised on the date which the sale to the customer takes place. The Group acts as the principal in the transaction and therefore recognises the revenue charged to the end user in full with the concession partners' shares deducted as a cost of sale.

Hardware Sales

Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

· the Group has transferred the significant risks and rewards of ownership to the buyer;

· the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

· the amount of revenue can be reliably measured;

· it is probable that the Group will receive the consideration due under the transaction; and

· the costs incurred or to be incurred in respect of the transaction can be reliably measured.

Hardware sales revenue is normally recognised on the date that the hardware is delivered to the customer. In the event that a customer is not ready to take delivery of the hardware and have requested a delayed delivery date, the Group applies the specifics of IFRS 15 Bill-and-Hold arrangements. Revenue is then recognised in advance of delivery. Under the Bill-and-Hold arrangements:

· the goods are complete and ready for collection;

· the goods are separately identified from the Group's other stock and are not used to fulfil any other areas;

· the customer has specifically requested that the goods be held pending collection; and

· normal payment terms apply to the Bill-and-Hold arrangement.

Let's Explore

Revenue is recognised on sales of the Let's Explore products in the period in which the corresponding order is placed and paid for. A provision for future refunds is deducted from revenue each period.

Content

Revenue from a contract to provide services is recognised in the period in which the services are provided in accordance with the stage of completion of the contract when all of the following conditions are satisfied:

· the amount of revenue can be measured reliably;

· it is probable that the Group will receive the consideration due under the contract;

· the performance obligations of the contract at the end of the reporting period can be measured reliably; and

· the costs incurred and the costs to complete the contract can be measured reliably.

Content licensing revenue is recognised on the date on which the related sale of that content by the licensee takes place where agreements do not provide for new or updated content to be supplied. Where Immotion Group is committed under licensing agreements to producing new content, or material updates, revenue is recognised over the period of the agreement. No element of financing is deemed present as the sales are made with standard credit terms of 30 days which is consistent with market practice. The Group does not expect to have any contracts where the period between the transfer of the promised services or goods to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

Leases

The Company assesses whether a contract is or contains a lease, at inception of a contract. The Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. In the latter cases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed payments), less any lease incentives.

The lease liability is included in Payables in the Statement of Financial Position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the payments made.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The right-of-use assets are included in the tangible fixed assets in the Statement of Financial Position.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment losses where applicable.

Foreign currency

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pound sterling, which is the functional currency of the Group, and the presentational currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the Group company's functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non- monetary items, any exchange component of the gain or loss is also recognised directly in equity.

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 reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income and expense in the period of the disposal of the operation. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates.

Tangible assets

Property, plant and equipment are stated at cost net of accumulated depreciation and provision for impairment. Depreciation is provided on all property plant and equipment, at rates calculated to write off the cost less estimated residual value, of each asset on a straight-line basis over its expected useful life.

The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful economic life.

The method of depreciation for each class of depreciable asset is:

VR Hardware - 33% straight line

Computer equipment - 33% straight line

Leasehold property - Over term of lease

Leasehold property improvements - Over term of lease

Plant & Equipment - 33% straight line

Fixtures & Fittings - 20% to 33% straight line

IFRS 16 right of use assets - Over term of lease

Intangible assets

Intangible assets include goodwill arising on the acquisition of subsidiaries and represents the difference between the fair value of the consideration payable and the fair value of the net assets that have been acquired. The residual element of goodwill is not being amortised but is subject to twice-annual impairment review.

Also included within intangible assets are various assets separately identified in business combinations (such as customer lists) to which the Directors have ascribed a commercial value and a useful economic life. The ascribed value of these intangible assets is being amortised on a straight-line basis over their estimated useful economic life, which is considered to be 3 years.

Internally generated intangible assets

An internally-generated intangible asset arising from the Group's development activities is capitalised and held as an intangible asset in the statement of financial position when the costs relate to a clearly defined project; the costs are separately identifiable; the outcome of such a project has been assessed with reasonable certainty as to its technical feasibility and its ultimate commercial viability; the aggregate of the defined costs plus all future expected costs in bringing the product to market is exceeded by the future expected sales revenue; and adequate resources are expected to exist to enable the project to be completed. Internally generated intangible assets are amortised over their estimated useful lives, being 3 years from completion of development. Other development expenditure is recognised as an expense in the income statement in the period in which it is incurred.

Impairment of assets

Impairment tests on goodwill are undertaken twice-annually. The recoverable value of goodwill is estimated on the basis of value in use, defined as the present value of the cash generating units with which the goodwill is associated. When value in use is less than the book value, an impairment is recorded and is irreversible.

Other non-financial assets are subject to impairment tests whenever circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its estimated recoverable value (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable value of an individual asset, the impairment test is carried out on the asset's cash-generating unit. The carrying value of property, plant and equipment is assessed in order to determine if there is an indication of impairment. Any impairment is charged to the statement of comprehensive income. Impairment charges are included under administrative expenses within the consolidated statement of comprehensive income.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Financial instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument.

The Group always recognises lifetime expected credit losses for trade receivables and amounts due on contracts with customers. The expected credit losses on these financial assets are estimated based on the Group's historical credit loss experience, adjusted for facts that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecasted conditions at the reporting date, including time value of money where appropriate. Lifetime expected credit losses are losses which will result from all possible default events over the expected life of a financial instrument.

Contract assets

Contract assets are recognised when the Group has satisfied a performance obligation but cannot recognise a receivable until other obligations are satisfied. Contract assets represent a right to payment that is conditional on further performance while receivables represent an unconditional right to payment.

Contract liabilities

Contract liabilities comprise payments in advance of revenue recognition and revenue deferred due to contract performance obligations not being completed. They are classified as current liabilities if the contract performance obligations are due to be completed within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Contract liabilities are recognised initially at fair value and subsequently at amortised cost.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in profit or loss.

Cash and cash equivalents

Cash and cash equivalents are recognised as financial assets. They comprise cash held by the Group and short-term bank deposits with an original maturity date of three months or less.

Trade payables

Trade payables are initially recognised as financial liabilities measured at fair value, and subsequent to initial recognition are measured at amortised cost.

Bank borrowings

Interest bearing bank loans, overdrafts and other loans are recognised as financial liabilities and recorded at fair value, net of direct issue costs. Finance costs are accounted for on an amortised cost basis in the income statement using the effective interest rate.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deduction of all its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs.

Share based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income on a straight-line basis over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of options expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where share options are cancelled due to employees leaving the Group's employment before they have vested, cumulative share based payment expenses recognised in respect of those employees are reversed through the statement of comprehensive income.

Where share options are replaced the fair value of the replaced options at the date of grant continues to be recognised through the statement of comprehensive income in addition to a charge equating to the incremental value of the new options granted.

Fair value is calculated either using the Monte-Carlo model or Black-Scholes model.

Pensions

The pension schemes operated by the Group are defined contribution schemes. The pension cost charge represents the contributions payable by the Group.

Taxation and deferred taxation

Corporation tax payable is provided on taxable profits at prevailing rates.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on:

· the initial recognition of goodwill; and

· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit.

Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profit will be available against which the asset can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

· the same taxable Group company; or

· different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Government grants

The Group recognises government grants when it has reasonable assurance that it will comply with the relevant conditions and the grant will be received.

Grants related to income are recognised in the profit and loss account in line with the recognition of the expenses that the grants are intended to compensate. Such grants are presented as income and are not deducted from the related expenditure.

Grants related to assets are presented as deferred income and are amortised over the useful life of the asset.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Directors, who are responsible for allocating resources and assessing performance of the operating segments.

A business segment is a group of assets and operations, engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments.

A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. The Executive Directors assess the performance of the operating segments based on the measures of revenue, profit before taxation (PBT) and profit after taxation (PAT). Central overheads are not allocated to business segments.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

In the application of the Group's accounting policies, which are described in note 2, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on experience and other factors considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgments and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Critical accounting judgments

Revenue recognition

The revenue for the sale of hardware is recognised once the benefits and control of these items are no longer with the Group and are instead with the customer. Revenue is recognised under the specifics of

IFRS 15 Bill-and-Hold arrangements for Hardware that was not delivered to the customer by the year-end. Management exercise judgment to consider when the risks have been transferred to the customer.

Revenue from the sale of Let's Explore packages is recognised on receipt of payment, which is a condition for an order to be accepted. At each accounting date provision is made for refunds to be made for orders received and paid for, prior to the accounting date. This provision is based on past experience of the level of refund applications received.

Partner revenue is accounted for on the basis that the Group acts as the principal in the transactions between partners and customers. Gross sales of services by partners to end customers are reported to the Group regularly and are included within the Group's turnover without any deductions.

Project revenue is recognised in proportion to the estimate of project completion at period end. Estimating project completion requires management judgment as to the percentage complete at period end and the amount of revenue to be recognised.

Recoverability criteria for capitalisation of development expenditure

The Group recognises costs incurred on development projects as an intangible asset which satisfies the requirements of IAS 38. The calculation of the costs incurred includes the percentage of time spent by certain employees on the development project. The decision whether to capitalise and how to determine the period of economic benefit of a development project requires an assessment of the commercial viability of the project and the prospect of selling the project to new or existing customers. An assessment is made as to the future economic benefits of the project and whether an impairment is needed.

Impairment of goodwill

Impairment of the valuation of the goodwill relating to the acquisition of subsidiaries is considered twice annually for indicators of impairment to ensure that the asset is not overstated within the financial statements. The twice annual impairment assessment in respect of goodwill requires estimates of the value in use (or fair value less costs to sell) of subsidiaries to which goodwill has been allocated. As a result, estimates of future cash flows are required, together with an appropriate discount factor for the purpose of determining the present value of those cash flows.

R&D tax credits

Uncertainties exist in relation to the interpretation of complex tax legislation, changes in tax laws and the amount and timing of future taxable income. This could necessitate future adjustments to taxable income and expenses already recorded.

At the year-end date, tax liabilities and assets reflect management's judgments in respect of the application of the tax regulations, in particular the R&D tax regulations and management's estimate of the future amounts that will be settled.

In assessing the year-end tax liability, the Group has made a provisional assessment as to the likely amount of development expenditure that will be eligible under each of the HMRC's large company and SME R&D tax credit schemes.

Critical accounting estimates

Amortisation of intangible assets

The periods of amortisation adopted to write down capitalised intangible assets and capitalised staff costs requires judgments to be made in respect of estimating the useful lives of the intangible assets to determine an appropriate amortisation rate. Capitalised development costs are being amortised on a straight-line basis over the period when economic benefits are expected to be received, which has been estimated at 3 years.

Depreciation

The useful economic lives of tangible fixed assets are based on management's judgment and experience. When management identifies that actual useful economic lives differ materially from the estimates used to calculate deprecation, that charge is added retrospectively. Due to the significance of tangible fixed assets to the Group, variances between actual and estimated useful economic lives could impact on the operating results both positively and negatively.

Share based payments expense

Non-market performance and service conditions are included in the assumptions about the number of options that are expected to vest. At the end of each reporting period the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to the original estimates, if any, in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. This requires a judgment as to how many options will meet the future vesting criteria as well as the judgments required in estimating the fair value of the options.

Where options are cancelled, followed by the grant of new options at or close to the time of the cancellations, a key judgment, based on the reasons for the cancellations and the new issues, is made as to the extent to which the new options granted are modifications of, or replacements for, the cancelled options, or new options.

IFRS 16 discount rates

The Group estimates an appropriate discount rate based on an incremental rate of borrowing for the calculation of the IFRS 16 right-of-use assets. This requires judgment as to an appropriate discount rate.

4. SEGMENTAL INFORMATION

A segmental analysis of revenue and expenditure for the year ended 31 December 2020 is below. Immotion Group Plc changed its internal reporting during the year ended 31 December 2020 and the segmental analysis has been prepared on a different basis to 2019. The 2019 comparative analysis has been amended in line with the segments adopted in 2020.

	Location Based Entertainment	Home Based Entertainment	Head office	Total
	£'000	£'000	£'000	£'000

Revenue	2,075	669	104	2,848
Cost of sales	(1,746)	(573)	(63)	(2,382)

Administrative expenses*	(1,298)	(134)	(1,299)	(2,731)
Other operating income	484	-	91	575

Operating loss	(485)	(38)	(1,167)	(1,690)

Amortisation	(442)	(81)	(196)	(719)
Depreciation	(1,593)	-	(158)	(1,751)
Impairment	(37)	-	(216)	(253)
Loss on disposal	(35)	-	-	(35)
Restructuring costs	(77)	-	(19)	(96)
Share based payments	-	-	(194)	(194)
Finance costs	(50)	-	(32)	(82)
Finance income	-	-	2	2
Taxation	-	-	86	86
	-------------	-------------	-------------	-------------
Loss for the year	(2,719)	(119)	(1,894)	(4,732)
	=======	=======	=======	=======

*Administrative expenses exclude depreciation, amortisation, impairment, loss on disposal, restructuring costs and share based payments.

All operations are continuing.

A segmental analysis of revenue and expenditure for the year ended 31 December 2019 is below:

	LBE	HBE	Head office	Total continuing operations	Dis-continued operations	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Revenue	2,932	-	674	3,606	18	3,624
Cost of sales	(2,157)	-	(352)	(2,509)	18	(2,491)

Administrative expenses*	(1,554)	-	(2,037)	(3,591)	-	(3,591)

Operating (loss)/profit	(779)	-	(1,715)	(2,494)	36	(2,458)

Amortisation	(143)	-	(418)	(561)	-	(561)
Depreciation	(1,038)	-	(266)	(1,304)	-	(1,304)
Impairment	-	-	(458)	(458)	-	(458)
Loss on disposal	(18)	-	6	(12)	-	(12)
Restructuring costs	(109)	-	(318)	(427)	(4)	(431)
Share based payments	-	-	(171)	(171)	-	(171)
Finance costs	-	-	(108)	(108)	-	(108)
Finance income	-	-	4	4	-	4
Tax	-	-	84	84	-	84
	-------------	-------------	-------------	-------------	-------------	-------------
(Loss)/Profit for the year	(2,087)	-	(3,360)	(5,447)	32	(5,415)
	=======	=======	=======	=======	=======	=======

*Administrative expenses exclude depreciation, amortisation, impairment, loss on disposal, restructuring costs and share based payments.

The segmental analysis above reflects the parameters applied by the Board when considering the Group's monthly management accounts.

The table below splits revenue, assets and capital expenditure by location:

	External revenue by location of customer		External revenue by location of customer
	31 December 2020 Continuing	31 December 2020 Discontinued	31 December 2019 Continuing		31 December 2019 Discontinued
	£'000	£'000	£'000		£'000

United Kingdom	1,395	-	1,599		-
United States of America	1,176	-	1,031		18
Australia	124	-	187		-
United Arab Emirates	38	-	55		-
China	35	-	156		-
Saudi Arabia	35	-	62		-
Netherlands	27	-	422		-
Germany	13	-	83		-
France	5	-	5		-
Japan	-	-	5		-
Estonia	-	-	1		-
	-------------	-------------	-------------		-------------
	2,848	-	3,606		18
	======	======	======		======

	Total assets by location		Net tangible capital expenditure by location
	31 December 2020	31 December 2019	31 December 2020	31 December 2019
	£'000	£'000	£'000	£'000

United Kingdom	6,901	6,437	266	1,182
United States of America	1,542	1,698	813	1,358
United Arab Emirates	56	95	6	83
Saudi Arabia	50	82	-	96
Australia	35	52	8	73
Germany	22	43	-	65
China	9	14	-	17
France	6	8	2	9
	----------	-------------	-------------	-------------
	8,621	8,429	1,095	2,883
	======	======	======	======

5. EARNINGS PER SHARE

	2020	2019
	'000	£'000
The earnings per share is based on the following:

Continuing post tax loss attributable to shareholders	(4,732)	(5,447)
Discontinued post tax loss attributable to shareholders	-	32

	==========	==========
Basic weighted average number of shares	356,941,188	255,564,704
Diluted weighted average number of shares	356,941,188	255,564,704
	==========	==========

	£0.01	£0.01
Basic loss per share	(1.33)	(2.12)
Diluted loss per share	(1.33)	(2.12)
	==========	==========
Continuing loss per share	(1.33)	(2.13)
Continuing diluted loss per share	(1.33)	(2.13)
	==========	==========
Discontinued earnings per share	-	0.01
Discontinued diluted earnings per share	-	0.01
	==========	==========

Adjusted loss: continuing operations	(4,189)	(4,391)
Adjusted earnings: discontinued operations	-	36

	==========	==========
Basic weighted average number of shares	356,941,188	255,564,704
Diluted weighted average number of shares	356,941,188	265,290,288
	==========	==========

	£0.01	£0.01
Basic adjusted loss per share	(1.17)	(1.72)
Diluted adjusted loss per share	(1.17)	(1.72)
	==========	==========
Basic adjusted loss per share: continuing operations	(1.17)	(1.73)
Diluted adjusted loss per share: continuing operations	(1.17)	(1.73)
	==========	==========
Basic adjusted earnings per share: discontinued operations	-	0.01
Diluted adjusted earnings per share: discontinued operations	-	0.01
	==========	==========

Earnings/(Loss) per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. 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. The exercise price of the outstanding share options is significantly more than the average and closing share price. Therefore, as per IAS33 the potential ordinary shares are disregarded in the calculation of diluted EPS.

Adjusted loss is the loss after taxation, adjusted for share based payments, impairment charges and restructuring costs.

6. PROPERTY, PLANT AND EQUIPMENT

	Leasehold Property	Fixtures, Fittings & Equipment	IFRS 16 Right-of-Use Asset	Total
Cost	£'000	'000	£'000	£'000

At 1 January 2019	405	1,579	1,079	3,063
Additions	159	1,504	-	1,663
Transfers from inventory	-	147	-	147
Transfers to inventory	-	(6)	-	(6)
Disposals	(17)	(38)	-	(55)
Foreign exchange	(1)	(21)	-	(22)
	----------	-----------	--------------	---------------
At 31 December 2019	546	3,165	1,079	4,790
	----------	------------	--------------	---------------
At 1 January 2020	546	3,165	1,079	4,790
Additions	50	1,019	26	1,095
Disposals	(123)	(53)	(284)	(460)
Impairment cost	(94)	-	-	(94)
Foreign exchange	1	(39)	(15)	(53)
	---------	--------------	--------------	---------------
At 31 December 2020	380	4,092	806	5,278
	---------	--------------	--------------	---------------
Accumulated depreciation
At 1 January 2019	65	345	-	410
Depreciation charge on owned assets	146	738	-	884
Depreciation charge on financed assets	-	71	349	420
Transfers to inventory	-	2	-	2
Disposals	(5)	(26)	-	(31)
Foreign exchange adjustment	(1)	(19)	(7)	(27)
	-----------	-----------	--------------	---------------
At 31 December 2019	205	1,111	342	1,658
	-----------	-----------	--------------	---------------
At 1 January 2020	205	1,111	342	1,658
Depreciation on owned assets	156	1,189	-	1,345
Depreciation on financed assets	-	66	340	406
Disposals	(71)	(29)	(166)	(266)
Impairment depreciation	(64)	-	-	(64)
Foreign exchange	-	(45)	(16)	(61)
	-------------	--------------	--------------	---------------
At 31 December 2020	226	2,292	500	3,018
	-------------	--------------	--------------	---------------
Net Book Value
At 31 December 2020	154	1,800	306	2,260
	=====	=====	=====	======
At 31 December 2019	341	2,054	737	3,132
	=====	=====	=====	======
At 31 December 2018	340	1,234	-	1,574
	=====	=====	=====	======

The net book value of assets held under finance leases or hire purchase contracts, included above, is £306k (2019: £803k) relating to VR Hardware and property leases. The depreciation charge on these assets was £406k (2019: £420k).

The net book value of owned and leased assets included in property, plant and equipment in the Statement of Financial Position is as follows:

	2020 £'000	2019 £'000

Tangible fixed assets owned	1,954	2,329
Tangible fixed assets subject to hire purchase and finance lease arrangements	306	803
	-----------	------------
	2,260	3,132
	=====	======

Information about the leased assets is summarised below:

	2020 £'000	2019 £'000

Equipment	-	66
IFRS 16 leased property	306	737
	---------	------------
	306	803
	=====	======

The depreciation charge in respect of the leased assets is as follows:

	2020 £'000	2019 £'000

Equipment	66	71
IFRS 16 leased property	340	349
	-----------	------------
	406	420
	=====	======

7. INTANGIBLE ASSETS

	Development	Goodwill	Other	Total
	Costs	Arising on	Intangible
		Consolidation	Assets
Cost	£'000	£'000	£'000	£'000
At 1 January 2019	1,506	2,438	504	4,448
Additions	970	-	35	1,005
Impairment	(494)	-	-	(494)
Foreign exchange	(9)	-	-	(9)
	-------------	-------------	------------	---------------
At 31 December 2019	1,973	2,438	539	4,950
	-------------	------------	------------	---------------
At 1 January 2020	1,973	2,438	539	4,950
Additions	539	-	6	545
Impairment	(332)	-	-	(332)
Foreign exchange	(9)	-	-	(9)
	-------------	-------------	------------	---------------
At 31 December 2020	2,171	2,438	545	5,154
	-------------	------------	------------	---------------
Accumulated amortisation
At 1 January 2019	94	-	316	410
Amortisation	455	-	106	561
Impairment	(36)	-	-	(36)
Foreign exchange	(5)	-	-	(5)
	------------	------------	------------	---------------
At 31 December 2019	508	-	422	930
	-------------	-------------	------------	---------------
At 1 January 2020	508	-	422	930
Amortisation	614	-	105	719
Impairment	(109)	-	-	(109)
Foreign exchange	(11)	-	-	(11)
	------------	-----------	------------	---------------
At 31 December 2020	1,002	-	527	1,529
	------------	------------	------------	---------------
Net Book Value
At 31 December 2020	1,169	2,438	18	3,625
	======	======	======	=======
At 31 December 2019	1,465	2,438	117	4,020
	======	======	======	=======
At 31 December 2018	2	2,438	455	2,895
	======	======	======	=======

Other intangible assets comprise website development and trademark costs. Amortisation is charged over periods ranging between 2 and 10 years.

Goodwill and impairment

The carrying value of goodwill in respect of each entity acquired is as follows:	31 December 2020	31 December 2019
	£'000	£'000

Immotion Studios Limited (previously Studio Liddell Limited)	1,252	1,252
C.2K Entertainment Inc.	748	748
Immotion Limited (previously VR Acquisition (Holdings) Limited)	438	438
	-------------	-------------
	2,438	2,438
	======	======

The Group is obliged to test goodwill annually for impairment, or more frequently if there are indications that goodwill and indefinite life intangibles might be impaired, due to the goodwill deemed to have an indefinite useful life. In order to perform this test, management is required to compare the carrying value of the relevant cash generating unit ("CGU") including the goodwill with its recoverable amount. The recoverable amount of the CGU is determined from a value in use calculation. It is considered that any reasonably possible changes in the key assumptions would not result in an impairment of the present carrying value of the goodwill.

Immotion Studios Limited, C.2K Entertainment Inc. and Immotion Limited were acquired in relation to the Location Based Entertainment segment. The Location Based Entertainment segment has been assessed as a CGU when conducting impairment reviews.

Location Based Entertainment

The recoverable amount of the Location Based Entertainment segment has been determined from a review of the current and anticipated performance. In preparing these projections, a discount rate of 10% (based on the Group's weighted average cost of capital) has been applied to forecast earnings for 2021, 2022 and 2023. The discount rate was based on the Company's cost of capital as estimated by management.

8. SHARE CAPITAL

	31 December 2020	31 December 2019
	£'000	£'000
Called up share capital
Allotted, called up and fully paid

409,538,083 Ordinary shares of 0.040108663 pence each	164	115
(2019: 286,165,544 ordinary shares)
	======	======

Shares issued during the year ended 31 December 2020:

Date	Description	No. of shares	Price per share	Gross share value	Cash received
			£	£	£

12 February 2020	Placing on AIM	39,310,339	0.0725	2,850,000	2,850,000
22 May 2020	Placing on AIM	54,062,200	0.0250	1,351,555	1,351,555
25 November 2020	Placing on AIM	30,000,000	0.0400	1,200,000	1,200,000
Total		123,372,539		5,401,555	5,401,555

At 31 December 2019		286,165,544		16,289,011	13,073,887

At 31 December 2020		409,538,083		16,289,011	13,073,887

Cash received does not include costs relating to share issues. In the year to 31 December 2020, costs of £389k were incurred relating to share issues and these costs were charged against share premium.

9. POST BALANCE SHEET EVENTS

On 31 March 2021, the Company issued 6,000,000 ordinary shares at a price of 5 pence each following an approach from an existing institutional investor, raising £300,000 gross of expenses.

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