Notes forming part of the consolidated financial statements

For the 6 months ended 30 June 2023

1. Accounting policies

General Information

Gaming Realms plc ("the Company") and its subsidiaries (together "the Group").

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is Two Valentine Place, London, SE1 8QH.

The results for the six months ended 30 June 2023 and 30 June 2022 are unaudited.

Basis of preparation

The financial information for the year ended 31 December 2022 included in these financial statements does not constitute the full statutory accounts for that year. The Annual Report and Financial Statements for 2022 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2022 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

This interim report, which has neither been audited nor reviewed by independent auditors, was approved by the board of directors on 11 September 2023. The financial information in this interim report has been prepared in accordance with UK adopted international accounting standards. The accounting policies applied by the Group in this financial information are the same as those applied by the Group in its financial statements for the year ended 31 December 2022 and which will form the basis of the 2023 financial statements.

The consolidated financial statements are presented in Sterling.

Restatement of comparatives

The comparative results for the period ended 30 June 2022 have been restated for the following items:

·      Management believes the presentation of hosting costs as an operating expense rather than an administrative expense more accurately reflects the function of the expense.  Therefore £601,196 of hosting costs incurred in the comparative period have been reclassified from administrative expenses to operating expenses.  This reclassification has no impact on reported EBITDA or profit after tax for the comparative period.

·      In the financial statements for the year ended 31 December 2022, the functional currency of a group company was changed, effective 1 January 2022.  This change was omitted from the 2022 interim financial statements, which have been restated to reflect this change from 1 January 2022.  The restatement has reduced the total amortisation charge by £15,079 to £1,737,493, and reduced the tax credit by £2,564 to £42,155.  The overall impact is no change to the previously reported EBITDA and an increase in the reported profit after tax by £15,515 for the comparative period.

Going concern

The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. 

The Group prepares cash flow forecasts and re-forecasts at least bi-annually as part of the business planning process. 

The Directors have reviewed forecast cash flows for the period to December 2025, and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due.

Accordingly, these financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Group will realise its assets and discharge its liabilities in the normal course of business.

EBITDA

EBITDA is a non-GAAP company specific measure defined as profit or loss before tax adjusted for finance income and expense, depreciation and amortisation.  EBITDA before share option and related charges (Adjusted EBITDA) is considered to be a key performance measure by the Directors as it serves as an indicator of financial performance.

2. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance.

The Group has two reportable segments.

·      Licensing - B2B brand and content licensing to partners in the US and Europe; and

·      Social publishing - provides B2C freemium games to the US.

Revenue

The Group has disaggregated revenue into various categories in the following table which is intended to:

·   Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic date; and

·   Enable users to understand the relationship with revenue segment information provided below.

2. Segment information (continued)

EBITDA

2. Segment information (continued)

As per Note 1, the restatement of comparative results relating to hosting fees has also been reflected in the segmental information. In the licensing segment £440,153 has been reclassified from administrative expenses to operating expenses, in the social publishing segment the reclassification is £161,043.

3. Finance income and expense

4. Earnings per share

Basic earnings per share is calculated by dividing the result attributable to ordinary shareholders by the weighted average number of shares in issue during the period.  The calculation of diluted EPS is based on the result attributable to ordinary shareholders and weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.  The Group's potentially dilutive securities consist of share options.

5. Property, plant and equipment

	ROU lease assets	Leasehold improvements	Computers and related equipment	Office furniture and equipment	Total
	£	£	£	£	£
Cost
At 1 January 2023	835,973	63,113	436,667	68,231	1,403,984
Additions	-	-	24,261	1,075	25,336
Disposals	(121,996)	-	-	-	(121,996)
Exchange differences	(4,279)	(160)	(3,320)	(1,046)	(8,805)
At 30 June 2023	709,698	62,953	457,608	68,260	1,298,519
Accumulated deprecation and impairment
At 1 January 2023	493,168	46,326	266,456	62,625	868,575
Depreciation charge	78,193	6,163	49,137	1,551	135,044
Disposals	(121,996)	-	-	-	(121,996)
Exchange differences	(210)	(160)	(2,251)	(981)	(3,602)
At 30 June 2023	449,155	52,329	313,342	63,195	878,021
Net book value
At 1 January 2023	342,805	16,787	170,211	5,606	535,409
At 30 June 2023	260,543	10,624	144,266	5,065	420,498

6. Intangible assets

 

	Goodwill	Customer database	Software	Development costs	Licenses	Domain names	Intellectual Property	Total
	£	£	£	£	£	£	£	£
Cost
At 1 January 2023	6,799,250	1,490,536	1,316,645	21,493,414	319,471	8,874	5,844,747	37,272,937
Additions	-	-	16,627	2,204,419	67,136	-	-	2,288,182
Exchange differences	(54,383)	-	-	(29,931)	(392)	-	-	(84,706)
At 30 June 2023	6,744,867	1,490,536	1,333,272	23,667,902	386,215	8,874	5,844,747	39,476,413
Accumulated amortisation and impairment
At 1 January 2023	1,650,000	1,490,536	1,291,285	14,879,872	129,430	8,874	5,400,088	24,850,085
Amortisation charge	-	-	20,483	1,559,222	66,249	-	365,543	2,011,497
Exchange differences	-	-	-	(10,989)	-	-	-	(10,989)
At 30 June 2023	1,650,000	1,490,536	1,311,768	16,428,105	195,679	8,874	5,765,631	26,850,593
Net book value
At 1 January 2023	5,149,250	-	25,360	6,613,542	190,041	-	444,659	12,422,852
At 30 June 2023	5,094,867	-	21,504	7,239,797	190,536	-	79,116	12,625,820

 

 

7. Trade and other receivables

 

	30 June 2023	31 December 2022
	£	£
Trade receivables	2,755,937	3,497,710
Other receivables	262,098	145,506
Tax and social security	550,878	280,912
Prepayments and accrued income	1,662,583	1,412,202
	5,231,496	5,336,330

 

All amounts shown fall due for payment within one year.

 

8. Trade and other payables

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. All amounts shown fall due for payment within one year.

9. Share capital

The issue of 881,506 ordinary shares relates to the exercise of share options during the period.  The increase in share capital of £88,150 and share premium of £16,961, totalling £105,111 is disclosed in the consolidated statement of changes in equity and consolidated statement of cash flows.

10. Share based payments

The share option and related charges income statement expense comprises:

IFRS 2 (Share-based payments) requires that the fair value of equity settled transactions are calculated and systematically charged to the statement of comprehensive income over the vesting period.  The total fair value that was charged to the income statement in the period in relation to equity-settled share-based payments was £116,220 (H1'22: £253,775).

Where individual EMI thresholds are exceeded or when unapproved share options are exercised by overseas employees, the Group is subject to employer taxes payable on the taxable gain on exercise.  Since these taxes are directly related to outstanding share options, the income statement charge has been included within share option and related charges.  The Group uses its closing share price at the reporting date to calculate such taxes to accrue.  The tax related income statement charge for the period was £129,836 (H1'22: £90,956 credit).

11. Related party transactions

Jim Ryan is a Non-Executive Director of the Company and the CEO of Pala Interactive, which has a real-money online casino and bingo site in New Jersey, Pennsylvania and Ontario. During the period, total license fees earned by the Group were $30,259 (H1'22: $10,401) with $23,180 due at 30 June 2023 (30 June 2022: $940).  During the period the Group distributed its content to certain North American partners via Pala's B2B platform distribution network, with platform fees of $7,933 being incurred (H1'22: $108) of which $3,243 was owed at 30 June 2023 (30 June 2022: $108).

During the period £90,000 (H1'22: £75,000) of consulting fees were paid to Dawnglen Finance Limited, a company controlled by Michael Buckley. No amounts were owed at 30 June 2023 (30 June 2022: £Nil).

12. Post balance sheet events

On 2 August 2023 3,455,000 share options were granted to certain Directors and employees of the Group. All of the options vest on 30 June 2026. All of the options have an exercise price of nil pence.