Preliminary Results for the year ended 31 Dec 2019

RNS Number : 1510R

Immotion Group PLC

26 June 2020

 

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Immotion Group plc

("Immotion Group" or "the Group")

Preliminary Results for the year ended 31 December 2019

Immotion Group (AIM:IMMO.L), the UK-based immersive virtual reality ("VR") out-of-home entertainment business, is pleased to announce its preliminary results for the year ended 31 December 2019.

Financial Highlights - 2019

· Total revenue £3,624,000 (£3,606,000 of which from continuing operations)

· Revenue from VR Operations increased 221% to £2,932,000

· H2 VR revenue increased to £1,785,000 (H1: £1,147,000)

· Total underlying EBITDA loss from continuing operations £2,458,000 - in line with expectations

· Total underlying loss before tax £4,443,000¹

· Total underlying loss per share 1.72p¹

2019 Operational Highlights

· Focus on profitable Partner model driving growth

· Partner model gained significant traction

· Partnership deals with top quality high footfall sites including Merlin, Shedd Aquarium and Mandalay Bay

· Partner installed base increased four-fold to 185 headsets (2018: 46)

· Overall partner estate performed well (average revenue per Headset £303)

· Aquarium segment performed strongly (average revenue per headset £476)

· IVR estate traded well through the year

Post Period End Highlights

· Two placings raised an aggregate of £4.0m (net of expenses) completed on 10^th February 2020 and 27^th May 2020 respectively

· Landmark Partnership announced with MGM Resorts

· Aquarium performance remained strong

· Visibility to 454 headsets (based on installs and contracts concluded)

· Further product development to open up new target sectors

· Monthly EBITDA breakeven was in sight prior to COVID-19 lockdown

______________

¹ before impairment charges, restructuring costs and share based payments

 Enquiries:

Immotion Group	Martin Higginson	Tel: [phone]
WH Ireland Limited (Nomad and Joint Broker)	Corporate Finance: Adrian Hadden Darshan Patel Matthew Chan	Tel: [phone]
Alvarium Capital Partners Limited (Joint Broker)	Alex Davies	Tel: [phone]
Shard Capital Partners Limited (Joint Broker)	Damon Heath Erik Woolgar	Tel: [phone]

Chairman's Statement

Recent events have, of course, been dominated by COVID-19 and we, like many businesses, have been very heavily impacted.  Whilst we are seeing some early signs of the economies in the USA and Europe re-opening, it will take some time to understand the impact of the new realities, including social distancing requirements, on our Partners' operations in particular.  We expect the disruption will continue well into 2021, with gradual improvement, and we have endeavoured to equip ourselves for this challenging period by strengthening our balance sheet, protecting cash, reducing costs and seeking all available Government support.

The totally unexpected pandemic should not overshadow the achievements of 2019, a year of considerable progress for Immotion.  Our business had begun to develop scale and, having invested heavily in proprietary content, software development and installations into Partner sites, profitability and positive operating cashflow were in clear sight. 

Having clarified our strategy for this new and exciting market, we were focused on execution.  We saw considerable success in winning new high-quality aquarium partners in both the USA and Europe and saw a strong performance from this cohort.  This was a major endorsement of our offering.  There is still considerable opportunity for growth in this segment and the lessons learned will be applied to a number of new sectors which we believe share common features once normal trading conditions return. 

Given the nascent nature of our market, it is likely that we will evolve and refine our offering further seeking to become a more integral part of our Partners' offering where possible.

Despite the uncertainties being caused by COVID-19, we are confident that we have passed the 'forming and storming' phase of our development and, once normal trading conditions return, are set for profitable growth and establishing ourselves as a market leader in out of home immersive 'edutainment' solutions.

We have taken the steps as described above to help us navigate through this crisis so that we can then capitalise on the progress we have made to date when some degree of normality returns.

Chief Executive's Report

2019 was a year of intense activity for the Group and our first full year as a listed company.  It was only our second full year of trading, since the creation of the Group in December 2017.

As we have learned more about our nascent marketplace, we have adjusted our strategy accordingly.  We have focused fully on growing our Partnership model, where we see significant opportunity for our immersive 'edutainment' experiences, that fit with high traffic destinations, operated by established sector participants.  We believe there is a huge opportunity on a global basis across aquariums, zoos, science centres, museums and other selected high traffic entertainment destinations. 

Our decision to focus was fully vindicated by progress up to the COVID-19 lockdown. Our Partner offering gained significant traction in the USA and Europe and revenue grew strongly.  Our ImmotionVR sites also traded well, though we do not intend to grow this part of our business due to the significantly greater returns seen from our Partner estate.

We ended 2019 with 303 installed headsets, almost doubling our installed base year on year from 158.  The growth was driven by Partner installations, which increased from 46 to 185 at year end. At the time of writing we have an installed base of 332 headsets (234 Partner and 98 ImmotionVR), with a further 122 Partner headsets contracted, giving visibility through to 454 headsets. 

	Installed	Contracted	Total
USA
- Partner	115	94	209
- ImmotionVR	14	-	14
UK
- Partner	58	6	64
- ImmotionVR	84	-	84
ROTW
- Partner	61	22	83
- ImmotionVR	-	-	-
Total	332	122	454

Based on expected performance in normal pre COVID-19 trading conditions, this portfolio would, fully installed, have delivered monthly EBITDA profit and positive operating cashflow based on our cash operating costs pre COVID-19.

We would expect that in the coming months we will install the contracted headsets (including 36 at Mandalay Bay) but much will depend on the rate of Partner site re-openings, footfall levels, social distancing requirements and the overall level of public confidence as lockdowns are lifted.

Partner Estate

Our Partner estate has grown from 46 headsets at the close of 2018 to 185 at year end 2019 and would reach 356 with the benefit of contracted but not yet installed headsets. 

We were pleased with the performance of our Partner estate in 2019 and in particular the aquarium sites.  Aquariums have performed consistently strongly with average weekly gross revenue per headset of £476 in the full year, versus £303 average for the overall Partner estate in 2019.

Given the nature of our pipeline of new sites, we expect to see the overall representation of the aquarium sector grow strongly.  These sites outperform other partner sites and we would expect that this in normal circumstances would boost significantly the overall average weekly revenue per headset for our Partner estate.

We have secured Partnerships with many top leisure groups and leading aquariums in both Europe and the USA with the following being particularly noteworthy: Merlin Entertainments, MGM Resorts and Shedd Aquarium.  We believe this is a testament to the attraction of our Partner proposition.

Our initial offering to Partners was based on a small footprint, typically two to six headsets and we looked at a range of sectors, including more broadly-based entertainment venues.  Led by results, we have focused on the sectors above and have aimed to develop VR experiences that are a good fit with Partners' offerings (e.g. our Shark Dive and Swimming with Humpbacks experiences, targeted at aquariums).  This has allowed us to narrow the range of content being produced and better focus our content creation team.  We have also developed theming and branding alongside our hardware to better communicate with potential audiences and ultimately to drive revenues.

We believe that the evidence from the aquarium sector suggests that a focused offering for high traffic 'edutainment' verticals will provide superior performance to more general leisure entertainment sites for the following reasons:

-  Natural fit with Partner core offering

-  Lack of competing products at Partner venue

-  Less "wear out" factor for content as visits to these types of venue are relatively infrequent

Accordingly, whilst we continue to seek further substantial growth opportunities in the aquarium sector, we are developing new products aimed at other global sectors which share similar characteristics with aquariums.  For example, our new dinosaur experience will allow us to target zoos, science centres and museums.

With the larger installations, the aim is to become more of an integral part of the location rather than just a smaller ancillary offering. Sea Life London exemplifies a more integrated offering in a space constrained environment, with additional theming it is a more natural element of the visitor journey.  Mandalay Bay is the exemplar of what can be done on a much larger scale, when space permits, allowing a full pre-show area, with interactive and immersive educational and fun exhibits.

We believe that these types of attractions will have much more impact on visitors and allow much larger numbers of visitors to enjoy the attraction, particularly during seasonal peaks, such as school and summer holidays. The focus will be on blue chip, high traffic Partners, where possible seeking longer deal terms and 'share of gate' revenues (akin to Mandalay Bay), which will drive quality of earnings and mitigate risk.

ImmotionVR

Our ImmotionVR estate ended 2019 with 9 sites (117 headsets) including a new site at The O2 in London. At present, all ImmotionVR sites are closed and we will need to review these as lockdowns are lifted.  Ordinarily we would expect that they would deliver a solid and profitable contribution across the year but, unlike our Partner business, they have fixed salary and (in a number of cases) fixed occupancy costs.  Accordingly, their viability will depend on the level of footfall when sites re-open post COVID-19.  Nevertheless, it is not part of the strategy to grow this part of the business as we believe better returns on investment are available in the Partner model.

Financial Review

Total revenue for the period was £3,624,000 (2018: £2,854,000) of which £3,606,000 came from continuing operations (2018: £1,948,000).

Revenue from VR activities grew from £1,326,000 in 2018 to £2,932,000, increasing by 221 per cent.

The underlying EBITDA loss of £2,458,000 was in line with expectations. 

Gross margin from continuing operations increased from 26.3% to 30.4%, resulting from the cessation of a number of loss making ImmotionVR centres, pre-dominantly driven by the mix effect of higher margin Partner business (essentially Immotion's % share of gross revenue).  Margin in the Partner business was 39% and 13% in ImmotionVR (circa 20% excluding discontinued sites).  Overall margin is expected to climb strongly as the mix of headsets moves in favour of the Partner business. 

General and administration costs² from continuing operations were £3,591,000 (2018: £2,872,000).  This represents a full year of trading at greater scale.  Despite the growth of our business, we have sought to control costs.  For example, we reduced the size of the CGI studio team in Manchester as we focus on a narrower range of content for the Partner business.

Restructuring and other one-off costs of £427,000³ largely reflected the reduction of the studio team, many of whom were long-serving employees.  This is broken down as follows:

Item	£	Comments
Payments to former director	90,000	Including 6 months' notice and ex gratia payments
Notice and redundancy payments to former employees	187,000	Relates to 17 employees
Payment to Consultant	50,000	For advice in relation to re-structuring of studio (settled in shares)
Other	100,000	Legal fees, employee relocation grants, branch closures and other restructuring costs
	427,000

___________________

² Before depreciation, amortisation, impairment, share based payments, disposal losses and restructuring costs.

³ Excludes discontinued operations

After careful consideration, we have taken an impairment charge of £458,000 against the carrying value of intangible assets.  This relates to early content developed when the Company was focused on developing large volumes of diverse content for the retail and family entertainment centre market and for use on a diverse group of machine types.  All content produced now is focused on our key Partner vertical segments and on a limited range of motion platforms.

Overall cash outflow in the year was £237,000.  Cash outflow from continuing operations was £2,246,000 including restructuring costs of £377,000 (a further £50,000 of restructuring costs were paid in shares to a consultant) and our continued expansion of the business, in terms of hardware deployed at partner sites, further development of content and finishing of our proprietary operating system, resulting in combined capital expenditure of £3,841,000.

Tangible fixed asset additions of £2,883,000 reflected the roll out of our Partner estate and the building of buffer stock of 136 headsets (seats) ahead of year end for the Q1 2020 deployment schedule.

Intangible assets additions were £1,005,000 reflecting our further investment in content, including the ongoing development of our dinosaur content scheduled for release in H2 2020, as well as the substantial completion of our proprietary software.

Net cash inflow from equity was £5,348,000 and net repayments on debt funding (including IFRS 16 leases) represented £560,000.

Net assets at period end were £6,275,000.

Underlying loss per share was 1.72p³.  Total loss per share was 2.12p.

_________________

³ Adjusted for impairment charges, restructuring costs and share based payments

Post Period End Activity & Outlook

Following the equity fundraise of £2.85m in February 2020, the Company was extremely well poised, not only with its honed business model, but also with the imminent installation and expected April 2020 opening of its large format installation into MGM Resort's Mandalay Bay aquarium in Las Vegas. Together with other contracted installs then on hand, we expected to reach EBITDA breakeven in April 2020 and achieve positive operating cash flow shortly thereafter.

However, during March 2020, and as a direct result of the COVID-19 pandemic, the vast majority of the Company's Partner sites and all of our own ImmotionVR sites closed, following local and national government-imposed lockdowns. This has resulted in the Group having no revenue. At the time of writing, it appears that many sites will remain closed until at least 30 June 2020 and revenue through to 30 June will be zero or minimal.

In addition to the impact on existing Partner and ImmotionVR sites, the Company was unable to complete the major installation at Mandalay Bay (36 headsets) which was well underway before lockdown. Additionally, we were unable to install into a number of other contracted Partner sites (in addition to Mandalay Bay, the Company has a further 86 headsets contracted).

Beyond the contracted installs noted, we intend to invest very selectively for the remainder of 2020 unless a more rapid recovery emerges.

We remain optimistic about our growth prospects once more normal trading conditions return and we believe that potential Partners will continue to find our proposition compelling, particularly as many may be capital constrained and looking to re-build revenues. As we come out of lockdown and enter the recovery phase, we will continue marketing to prospective new Partners, particularly in the aquarium sector in both the USA and Europe. We will be cautious as to entering new Partnerships, being led by the extent of the wider recovery, as well as the quality of opportunity and commercial terms that can be struck.

Whilst in lockdown, we have taken the opportunity to review our recommended cleaning procedures and we are testing a new UV cleaning unit that could be used to achieve rapid sterilisation of headsets at Partner venues. Despite our view that family groups tend to go on our motion platforms together (as they are in clusters of 2-4 seats), we will also be working with Partners on any local social distancing requirements.

We have also undertaken a broad range of actions to manage the cost base and cash flow in light of the COVID-19 pandemic including pay cuts for the majority of staff, furloughing staff and applications for the various government subsidies available.  As a result, total monthly central cash operating costs, including certain costs normally capitalised have been reduced to circa £200,000 from circa £310,000.

In the USA, the Company has received a loan of $161,000 under the Paycheck Protection Program, some or all of which should be forgiven, with any remainder subject to a nominal interest rate and repayable over two years.  We have also applied for a loan under the USA's Economic Injury Disaster Loan programme.

In the UK, we have been receiving the furlough grant in respect of those employees furloughed.  We are also pursuing a loan through the government's Coronavirus Business Interruption Loan Schemes.

We will continue to review all operating costs on an ongoing basis so that we can if necessary, flex the total operating costs to activity and revenue levels.

The Company also strengthened its balance sheet by undertaking a further equity fundraise, completed in late May, which raised £1.35m gross.  This puts us in a stronger position to ride out the economic storm resulting from the COVID-19 pandemic. 

The period since mid-March has been extremely challenging and we expect continued disruption for some time to come.  We will remain focused on costs and working with key partners as the recovery takes hold.  We believe we have built the foundations of a valuable business and we will do all we can to emerge from the other side of the current crisis.

 IMMOTION GROUP PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

		Year ended	Year ended
		31 December	31 December
		2019	2018
	Note	£'000	£'000
Revenue - continuing operations		3,606	1,948
Cost of sales - continuing operations		(2,509)	(1,436)
		------------	------------
Gross profit		1,097	512
Administrative expenses - continuing operations		(6,524)	(4,264)
		--------------	--------------
Loss from Operations		(5,427)	(3,752)
Memorandum: Adjusted EBITDA		(2,494)	(2,360)
Depreciation		(1,304)	(405)
Amortisation		(561)	(178)
Impairment of intangible assets		(458)	-
Share based payments		(171)	(137)
Acquisition & listing costs		-	(672)
Loss on disposal of fixed assets		(12)	-
Restructuring costs		(427)	-
		--------------	--------------
Loss from Operations		(5,427)	(3,752)
Finance costs		(108)	(57)
Finance income		4	2
		------------	------------
Loss before taxation and attributable to equity holders of the parent		(5,531)	(3,807)
Taxation		84	159
		------------	------------
Loss from continuing operations Discontinued operations (net of tax) Loss after taxation	9	(5,447) 32 ------------ (5,415)	(3,648) (175) ------------ (3,823)
Other comprehensive expense
Loss on translation of subsidiary		(29)	(16)
Loss after taxation and attributable to equity holders of the parent and total comprehensive income for the period		------------ (5,444)	------------ (3,839)
		======	======
		Year ended	Year ended
		31 December	31 December
		2019	2018
		£0.01	£0.01
Loss per share
Basic (continuing)	5	(2.13)	(2.31)
Basic (discontinuing)		0.01	(0.11)
		======	======
		(2.12)	(2.42)
Earnings/(Loss) per share
Diluted (continuing)	5	(2.13)	(2.31)
Diluted (discontinuing)		0.01	(0.11)
		======	======
		(2.12)	(2.42)

IMMOTION GROUP PLC 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

AS AT 31 DECEMBER 2019

	Share capital	Share premium	Foreign Exchange Reserve	Retained (deficit)/ earnings	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2018	-	3,704	-	(175)	3,529
Issue of shares	26	6,786	-	-	6,812
Issue costs deducted from equity	-	(439)	-	-	(439)
Loss after tax	-	-	-	(3,823)	(3,823)
Equity settled share-based payments	-	-	-	137	137
Bonus issue	52	(52)	-	-	-
Currency translation of overseas subsidiary	-	-	(16)	-	(16)
	--------------	--------------	--------------	--------------	--------------
Balance at 31 December 2018	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
	--------------	--------------	--------------	--------------	--------------

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 31 DECEMBER 2019

		31 December 2019		31 December 2018
ASSETS	Note	£'000		£'000
Non-current assets
Property, plant and equipment	6	3,132		1,574
Intangible fixed assets	7	4,020		4,038
		-----------------		-----------------
Total non-current assets		7,152		5,612
Current assets
Inventories		-		133
Trade and other receivables		803		1,410
Cash and cash equivalents		474		711
		-----------------		-----------------
Total current assets		1,277		2,254
		-----------------		-----------------
Total assets		8,429		7,866
		=========		=========
LIABILITIES
Current liabilities
Trade and other payables		(1,060)		(886)
Loans and borrowings		(101)		(229)
Lease liabilities		(401)		-
Deferred tax liability		(27)		(26)
Contract liabilities		(14)		(189)
		-----------------		-----------------
Total current liabilities		(1,603)		(1,330)
		-----------------		-----------------
Non-current liabilities
Other payables		-		(54)
Loans		(55)		(218)
Lease liabilities		(496)		-
Deferred tax liability		-		(64)
		------------------		------------------
		(551)		(336)
		------------------		------------------
Total liabilities		(2,154)		(1,666)
		------------------		------------------
Total net assets		6,275		6,200
		=========		=========
Capital and reserves attributable to owners
of the parent
Share capital	8	115		78
Share premium		15,310		9,999
Foreign exchange reserve		(45)		(16)
Retained earnings/(deficit)		(9,105)		(3,861)
		------------------		------------------
Total equity		6,275		6,200
		=========		=========

The financial statements were approved by the Board and authorised for issue on 25 June 2020.

Martin Higginson    David Marks

Chief Executive Officer    Group Finance Director

IMMOTION GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

				Year ended 31 December 2019 £'000				Year ended  31 December 2018 £'000
Cash flows from operating activities
Loss before tax including discontinued operations Adjustments for:				(5,499)				(3,982)
Share based payments				171				137
Depreciation on property plant and equipment				1,304				405
Depreciation on stock transfers				(2)				(20)
Loss on disposal of fixed assets				12				-
Amortisation of intangible assets				561				178
Impairment of intangible assets				458				231
Finance costs				108				57
Finance income				(4)				(2)
Foreign exchange on retranslation of fixed assets				(32)				(28)
Foreign exchange loss				(29)				(16)
Corporation tax received/(paid)				289				(13)
				-----------------				-----------------
Cash flows from operating activities before changes				(2,663)				(3,053)
in working capital
Decrease/(Increase) in inventories				133				(133)
Decrease/(increase) in trade and other receivables				339				(458)
(Decrease)/Increase in trade and other payables				(55)				168
				-----------------				-----------------
Cash used in operations				(2,246)				(3,476)
Investing activities
Purchase of intangible assets				(1,005)				(1,542)
Purchase of property, plant and equipment				(2,883)				(1,524)
Disposals of property, plant and equipment				15				76
Foreign exchange on retranslation of fixed assets				32				-
				-----------------				-----------------
Net cash used in investing activities				(3,841)				(2,990)
Financing activities
Finance costs				(108)				(57)
Finance income				4				2
New loans and finance leases				1,166				179
Loan repayments				(560)				(89)
Issue of convertible loan stock				-				488
Issue of new share capital				5,721				6,324
Costs on issue of shares				(373)				(439)
				-----------------				-----------------
Net cash from financing activities				5,850				6,408
				-----------------				-----------------
Net decrease in cash and cash equivalents				(237)				(58)
Cash and cash equivalents at beginning of the period				711				769
				------------------				------------------
Cash and cash equivalents at end of the period				474				711
				=========				=========
	Reconciliation of net cashflow to movement in net debt:			Year ended			Year ended
				31 December 2019			31 December 2018
				£000			£000
	Net decrease in cash and cash equivalents			(237)			(58)
	New loans and finance leases			(1,166)			(179)
	Repayment of loans			560			89
				-----------------			-----------------
	Movement in net funds in the year			(843)			(148)
	Net funds at 1 January			264			412
				-----------------			------------------
	Net (debt)/funds at 31 December			(579)			264
				=========			=========

Breakdown of net (debt)/funds
Cash and cash equivalents	474			711
Loans and borrowings	(156)			(447)
Lease liabilities	(897)			-
	-----------------			------------------
Net (debt)/funds at 31 December	(579)			264
	=========			=========

IMMOTION GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

 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, Mediacity, Manchester, M50 3SP. The Group is listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The principal activity of the Group during the year was the production of virtual reality content, experiences, equipment and software design.

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 3.

2.  STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED IN THE CURRENT FINANCIAL YEAR ENDED 31 DECEMBER 2019

The accounting policies adopted are consistent with those of the previous financial year except for the following new and amended standards and interpretations during the year that are applicable to the Group.

IFRS 16 is effective from 1 January 2019. The standard eliminates the classification of leases as either operating or finance leases and introduces a single accounting model. Lessees are required to recognise a right-of-use asset and related lease liability for their operating leases and show depreciation of leased assets and interest on lease liabilities separately in their income statement. IFRS 16 requires the Group to recognise substantially all of its operating leases on the balance sheet.

The Group adopted IFRS 16 effective 1 January 2019 on a modified retrospective basis. Accordingly, prior year financial information has not been restated and will continue to be reported under IAS 17: Leases. The right-of-use asset and lease liability have initially been measured at the present value of remaining lease payments, with the right-of-use asset being subject to certain adjustments.

When applying IFRS 16, the Company has applied the following practical expedients, on transition date:

• Reliance on the previous identification of a lease (as provided by IAS 17) for all contracts that existed on the date of initial application;

• Exclusion of initial direct costs from the measurement of the right-of-use asset at the date of initial application;

• The accounting for operating leases with a remaining term of less than 12 months as at 1 January 2019 as short-term leases.

The following table reconciles the opening balance for the lease liabilities as at 1 January 2019 based on the operating lease obligations as at 31 December 2018:

	2019
	£'000
Loss for the period to 31 December 2019:	(5,415)
Add back: notional interest charged on finance leases	53
Add back: depreciation on right-of-use asset	349
Less: rent which would have been charged before transition:	(396)
Revised loss for 31 December 2019:	(5,409)
Additional profit/(loss) gained as a result of transition:	6
The following table reconciles the minimum lease commitments disclosed in the Group's financial statements as at 31 December 2018 to the amount of lease liabilities on 1 January 2019:
Minimum operating lease commitment at 31 December 2018:	1,338
Less: short term leases not recognised under IFRS 16	(53)
Less: leases terminated before 31 December 2019	(51)
Less: service charge commitments	(155)
Undiscounted lease payments:	1,079
Less: effect of discounting using the incremental borrowing rate as at the date of initial application	(132)
Lease liabilities recognised at 1 January 2019	947
New leases in 2019	223
Interest for year to 31 December 2019	53
Rental payments for 12 months to 31 December 2019	(396)
Lease liability at 31 December 2019	827

3.   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.

The financial information set out in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2019 but is derived from those financial statements which were approved by the Board of Directors on 25 June 2020. The Auditors have reported on the Group's statutory financial statements and their report was (i) unqualified (ii) did include a material uncertainty in relation to going concern without qualifying their report and (iii) did not contain a statement under section 498(2) or 498(3) Companies Act 2006.  The statutory financial statements for the year ended 31 December 2019 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

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 £5,415k for the year and a net cash outflow of £237k. The loss in the year and the post year end 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.

On 12 February 2020, the Group raised £2.85 million (before costs) through an additional issue of shares for cash. On 27 May 2020, the Group raised a further £1.35 million (before costs) through an additional issue of shares for cash.

The Directors have prepared forecasts covering the period to December 2021, assessing the trading projections and cash flow excluding the potential impact of COVID-19 which is considered below. The projections include the likely headset roll out and the revenue that will be generated should the Group meet their projections.

The uncertainty as to the future impact on the Group of the recent COVID-19 outbreak has been considered as part of the Directors' consideration of the going concern basis of preparation. All revenue generating activity ceased during March 2020 for an indeterminate period of time and, as such, ithe Group is currently generating almost no revenue. Lockdown has to date resulted in the Group stopping the installation of any new equipment at new Partner sites..

The Directors have modelled various scenarios for when lockdown may be lifted and have modelled the potential impact on sales and the results of the Group, again covering the period to December 2021. In preparing this analysis, a number of scenarios were modelled ranging from the lockdown ending on 1 July 2020 to the lockdown ending on 1 September 2020, with a reduction in forecast sales ranging from 30% to 50% for the rest of 2020. In each scenario, mitigating actions within the control of management have been modelled. However, it is difficult to predict the overall outcome and impact of COVID-19 at this stage.

The models prepared showed that there may be a requirement for additional funding to continue being able to operate as a going concern. This was a significant factor in the Group's decision to raise additional funds on 27 May 2020.

The Directors note the commitment to provide financial support made by the UK Government for UK businesses, including a £330bn funding package. Whilst there remains uncertainty around this, the Directors believe that the Group would qualify for financial assistance schemes within this package. The Group has obtained funding through the Paycheck Protection Program in the USA.

Based on the models prepared and the indications (as noted above with the two fundraises post year-end) regarding the ability to obtain further funding, 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 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.

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

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 revenue is recognised on the date which the sale to the customer takes place. The Group considers the performance obligations to have been transferred upon delivery of the service.

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.

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.

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.

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 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 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.

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.

Property, plant and equipment

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 / 33% straight line retail premises

Plant & Equipment   - 33% straight line

Fixtures & Fittings  - 20% to 33% straight line

IFRS 16 right of use assets  - Over term of lease

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. 

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.

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.

4.  SEGMENTAL INFORMATION

  A segmental analysis of revenue and expenditure for the year ended 31 December 2019 is below. Immotion Group Plc changed its internal reporting during the year ended 31 December 2019 and the segmental analysis is therefore prepared on a different basis to 2018.

		Immotion VR	Partners	Hardware	Content	Head office	Total continuing operations	Dis-continued operations	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue		1,241	1,585	106	649	25	3,606	18	3,624
Cost of sales		(1,081)	(964)	(112)	(352)	-	(2,509)	18	(2,491)
Administrative expenses*		(385)	(1,169)	-	(175)	(1,862)	(3,591)	-	(3,591)
Operating (loss)/profit		(225)	(548)	(6)	122	(1,837)	(2,494)	36	(2,458)
Amortisation		(32)	(111)	-	(314)	(104)	(561)	-	(561)
Depreciation		(462)	(576)	-	(65)	(201)	(1,304)	-	(1,304)
Impairment		-	-	-	(458)	-	(458)	-	(458)
Loss on disposal		(18)	-	-	6	-	(12)	-	(12)
Restructuring costs		(52)	(57)	-	(244)	(74)	(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		(789)	(1,292)	(6)	(953)	(2,407)	(5,447)	32	(5,415)
		=======	=======	=======	=======	=======	=======	=======	=======

*Administrative expenses exclude depreciation, amortisation, share based payments and acquisition and listing costs.

A segmental analysis of revenue and expenditure for the year ended 31 December 2018 is below:

		VR Experiences		Client Services	Head Office	Total continuing operations	Discontinued operations	Total 2018
		£'000		£'000	£'000	£'000	£'000	£'000
Revenue		1,326		622	-	1,948	906	2,854
Cost of sales		(1,233)		(203)	-	(1,436)	(473)	(1,909)
Administrative expenses*		(726)		(304)	(1,842)	(2,872)	(292)	(3,164)
Operating (loss)/profit			(633)	115	(1,842)	(2,360)	141	(2,219)
Amortisation		(93)		-	(85)	(178)	(231)	(409)
Depreciation		(357)		-	(48)	(405)	-	(405)
Acquisition and listing costs		-		-	(672)	(672)	(85)	(757)
Share based payments		-		-	(137)	(137)	-	(137)
Finance costs		-		-	(57)	(57)	-	(57)
Finance income		-		-	2	2	-	2
Tax		-		-	159	159	-	159
		-------------		-------------	-------------	-------------	-------------	-------------
(Loss)/Profit for the year		(1,083)		115	(2,680)	(3,648)	(175)	(3,823)
		======		======	======	======	======	======

*Administrative expenses exclude depreciation, amortisation, share based payments and acquisition and listing costs.

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 2019 Continuing	31 December 2019 Discontinuing	31 December 2018 Continuing		31 December 2018 Discontinuing
	£'000	£'000	£'000		£'000
United Kingdom	1,599	-	790		221
United States of America	1,031	18	636		-
Netherlands	422	-	-		230
Australia	187	-	-		-
China	156	-	49		-
Germany	83	-	-		(6)
Saudi Arabia	62	-	48		-
United Arab Emirates	55	-	136		-
Japan	5	-	49		449
France	5	-	-		-
Estonia	1	-	16		-
Spain	-	-	224		-
Eire	-	-	-		8
Switzerland	-	-	-		4
	-------------	-------------	-------------		-------------
	3,606	18	1,948		906
	======	======	======		======
	Total assets by location		Net tangible capital expenditure by location
	31 December 2019	31 December 2018	31 December 2019	31 December 2018
United Kingdom	6,554	7,032	1,182	1,033
United States of America	1,698	834	1,358	491
Australia	52		73
China	14	-	17	-
Germany	43	-	65	-
Saudi Arabia	82	-	96	-
United Arab Emirates	95	-	83	-
France	8	-	9	-
	-------------	-------------	-------------	-------------
	8,546	7,866	2,883	1,524
	======	======	======	======

5.	EARNINGS PER SHARE
		2019	2018
		£'000	£'000
	The earnings per share is based on the following:
	Continuing earnings post tax loss attributable to shareholders	(5,447)	(3,648)
	Discontinued earnings post tax loss attributable to shareholders	32	(175)
		==========	===========
	Basic weighted average number of shares	255,564,704	158,136,544
	Diluted weighted average number of shares	255,564,704	158,136,544
		==========	===========
		£0.01	£0.01
	Basic earnings per share	(2.12)	(2.42)
	Diluted earnings per share	(2.12)	(2.42)
		==========	==========
	Continuing earnings per share	(2.13)	(2.31)
	Continuing diluted earnings per share	(2.13)	(2.31)
		==========	==========
	Discontinued earnings per share	0.01	(0.11)
	Discontinued diluted earnings per share	0.01	(0.11)
		==========	==========
	Underlying loss: continuing operations	(4,391)	(2,838)
	Underlying loss: discontinued operations	36	140
		==========	==========
	Basic weighted average number of shares	255,564,704	158,136,544
	Diluted weighted average number of shares	265,290,288	164,025,259
		==========	==========
		£0.01	£0.01
	Basic underlying loss per share	(1.72)	(1.71)
	Diluted underlying loss per share	(1.72)	(1.71)
		==========	==========
	Basic underlying loss per share: continuing operations	(1.73)	(1.80)
	Diluted underlying loss per share: continuing operations	(1.73)	(1.80)
		==========	==========
	Basic underlying earnings per share: discontinued operations	0.01	0.09
	Diluted underlying earnings per share: discontinued operations	0.01	0.09
		==========	==========

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. 

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

6.		TANGIBLE FIXED ASSETS
						Leasehold Property		Equipment		Fixtures and Fittings			IFRS 16 Right-of-Use asset		Total
						£'000		£'000		'000			£'000		£'000
	Cost
	Balance at 1 January 2018					158		310		25			-		493
	Additions					245		1,263		16			-		1,524
	Transfers to inventory					-		(76)		-			-		(76)
	Foreign exchange					2		39		2			-		43
						---------		---------		--------------			--------------		---------------
	Balance at 1 January 2019					405		1,536		43			-		1,984
	Impact of change in accounting policy					-		-		-			1,079		1,079
						---------		---------		--------------			--------------		---------------
	Balance at 1 January 2019 (adjusted balance)					405		1,536		43			1,079		3,063
	Additions					159		1,499		5			-		1,663
	Transfers from inventory					-		147		-			-		147
	Transfers to inventory					-		(6)		-			-		(6)
	Disposals					(17)		(38)		-			-		(55)
	Foreign exchange					(1)		(20)		(1)			-		(22)
						---------		---------		--------------			--------------		---------------
	Balance at 31 December 2019					546		3,118		47			1,079		4,790
						---------		---------		--------------			--------------		---------------
	Accumulated depreciation
	Balance at 1 January 2018					-		-		-			-		-
	Depreciation charge on owned assets					65		248		17			-		330
	Depreciation charge on financed assets					-		75		-			-		75
	Transfers to inventory					-		(20)		-			-		(20)
	Foreign exchange adjustment					-		23		2			-		25
						----------	----------			---------			-------------	---------------
	Balance at 1 January 2019					65		326		19			-		410
	Depreciation charge on owned assets					146		725		13			-		884
	Depreciation charge on financed assets					-		71		-			349		420
	Transfers to inventory					-		2		-			-		2
	Disposals					(5)		(26)		-			-		(31)
	Foreign exchange adjustment					(1)		(18)		(1)			(7)		(27)
						---------		---------		--------------			--------------		---------------
	Balance at 31 December 2019					205		1,080		31			342		1,658
						---------		---------		--------------			--------------		---------------
	Net Book Value
	At 31 December 2019					341		2,038		16			737		3,132
						=====		=====		=====			=====		=====
	At 31 December 2018					340		1,210		24			-		1,574
						=====		=====		=====			=====		======
	At 31 December 2017					158		310		25			-		493
						=====		=====		=====			=====		======

The net book value of assets held under finance leases or hire purchase contracts, included above, are £803k (2018: £137k) relating to VR Hardware and property leases. The depreciation charge on these assets was £420k (2018: £75k).

The net book value of owned and leased assets included as "Tangible fixed assets" in the Statement of Financial Position is as follows:

		2019 £'000
	Tangible fixed assets owned	2,329
	Tangible fixed assets subject to hire purchase and finance lease arrangements	803
		---------
		3,132
		=====

Information about the leased assets is summarised below:

		2019 £'000
	Equipment	66
	IFRS 16 leased property	737
		---------
		803
		=====

Depreciation charge in respect of the leased assets is as follows:

		2019 £'000
	Equipment	71
	IFRS 16 leased property	349
		---------
		420
		=====

7.	INTANGIBLE ASSETS	Development	Goodwill	Other
	GROUP	Costs	Arising on	Intangible
			Consolidation	Assets	Total
		£'000	£'000	£'000	£'000
	Cost
	Balance at 1 January 2018	2	2,438	455	2,895
	Additions	1,493	-	49	1,542
	Foreign exchange	11	-	-	11
		-------------	-------------	------------	---------------
	Balance at 1 January 2019	1,506	2,438	504	4,448
	Additions	970	-	35	1,005
	Impairment	(494)	-	-	(494)
	Foreign exchange	(9)	-	-	(9)
		-------------	-------------	------------	---------------
	Balance at 31 December 2019	1,973	2,438	539	4,950
		-------------	------------	------------	---------------
	Accumulated amortisation
	Balance at 1 January 2018	-	-	-	-
	Amortisation	93	-	85	178
	Impairment	-	-	231	231
	Foreign exchange	1	-	-	1
		-------------	-------------	------------	---------------
	Balance at 1 January 2019	94	-	316	410
	Amortisation	455	-	106	561
	Impairment	(36)	-	-	(36)
	Foreign exchange	(5)	-	-	(5)
		------------	-----------	------------	---------------
	Balance at 31 December 2019	508	-	422	930
		-----------	------------	------------	---------------
	Net Book Value
	At 31 December 2019	1,465	2,438	117	4,020
		======	======	======	=======
	At 31 December 2018	1,412	2,438	188	4,038
		======	======	======	=======
	At 31 December 2017	2	2,438	455	2,895
		======	======	======	======

Other intangible assets comprise £74k (2018: £148k) relating to identifiable relations between acquired companies and associated client base with the remaining £43k of other intangible assets relating to website development costs.

Amortisation is charged over a period between 2 and 10 years.

GOODWILL AND IMPAIRMENT
The carrying value of goodwill in respect of each cash generating unit is as follows:
							31 December 2019		31 December 2018
							£'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

The recoverable amount of Immotion Studios Limited has been determined from a review of the current and anticipated performance of this unit. In preparing this projection, a discount rate of 10% (based on the weighted average cost of capital) has been applied to forecast earnings for 2020, 2021 and 2022. The discount rate was based on the Company's cost of capital as estimated by management.

C.2K Entertainment Inc.

The recoverable amount of C.2K Entertainment Inc has been determined from a review of the current and anticipated performance of this unit. In preparing this projection, a discount rate of 10% (based on the weighted average cost of capital) has been applied to forecast earnings for 2020, 2021 and 2022. The discount rate was based on the Company's cost of capital as estimated by management.

Immotion Limited

The recoverable amount of Immotion Limited has been determined from a review of the current and anticipated performance of this unit. In preparing this projection, a discount rate of 10% (based on the weighted average cost of capital) has been applied to forecast earnings for 2020, 2021 and 2022. The discount rate was based on the Company's cost of capital as estimated by management.

8.		SHARE CAPITAL		31 December 2019		31 December 2018
			£'000		£'000
	Called up share capital
	Allotted, called up and fully paid
	286,165,544 Ordinary shares of 0.040108663 pence each		115		78
	(2018: 195,351,590 ordinary shares)
			------------		------------
			115		78
			======		======

Shares issued during the year ended 31 December 2019:

Date	Description	No. of shares	Price per share	Gross share value	Cash received
			£	£	£
1 March 2019	Placing on AIM	54,999,994	0.0600	3,300,000	3,300,000
5 August 2019	Placing on AIM	35,111,107	0.0675	2,370,000	2,370,000
31 October 2019	Shares issued as payment for services	147,059	0.0680	10,000	-
16 December 2019	Shares issued as payment for services	555,794	0.0720	40,000	-
Total		90,813,954		5,720,000	5,670,000
At 31 December 2018		195,351,590		10,569,011	7,403,887
At 31 December 2019		286,165,544		16,289,011	13,073,887

Cash received does not include costs relating to share issues. In the year to 31 December 2019, costs of £373k were incurred relating to share issues and these costs were charged against share premium. Shares issued on 31 October 2019 and 16 December 2019 were shares in lieu of fees.

9.    DISCONTINUED OPERATIONS

	2019  Continuing Operations	2019 Discontinuing Operations	2019  Total
	£'000	£'000	£'000
Revenue	3,606	18	3,624
Cost of sales	(2,509)	18	(2,491)
	------------	------------	------------
Gross profit	1,097	36	1,133
Administrative expenses	(6,524)	(4)	(6,528)
	--------------	--------------	--------------
Loss from Operations	(5,427)	32	(5,395)
Finance costs	(108)	-	(108)
Finance income	4	-	4
	------------	------------	------------
Loss before taxation and attributable to equity holders of the parent	(5,531)	32	(5,499)
Taxation	84	-	84
	------------	------------	------------
Loss after taxation	(5,447)	32	(5,415)
Other comprehensive expense
Loss on translation of subsidiary	(29)	-	(29)
Loss after taxation and attributable to equity holders of the parent and total comprehensive income for the period	------------ (5,476)	------------ 32	------------ (5,444)
	======	======	======
Cash flows from discontinued operations for 2019 are as follows:
	Continuing	Discontinuing	Total
	£'000	£'000	£'000
Operating cash flows	(2,268)	22	(2,246)
Investing cash flows	(3,841)	-	(3,841)
Financing cash flows	5,850	-	5,850
	------------	------------	------------

Cash flows from discontinued operations for 2018 are as follows:
	Continuing	Discontinuing	Total
	£'000	£'000	£'000
Operating cash flows	(3,652)	176	(3,476)
Investing cash flows	(2,990)	-	(2,990)
Financing cash flows	6,408	-	6,408
	------------	------------	------------

 

 

END

 

 

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