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World Chess PLC
Annual Report • Apr 26, 2024
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Annual Report
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National Storage Mechanism | Additional information 
RNS Number : 0946M
World Chess PLC
26 April 2024
26 April 2024
World Chess Plc
("World Chess" or the "Company")
Financial Results for the year ended 31 December 2023
World Chess plc (LSE:CHSS), a prominent chess organisation committed to enhancing the global mass market appeal of chess by introducing a variety of innovative chess-related activities, today publishes its financial results for the year ended 31 December 2023.
Copies of the Company's full Annual Report and Financial Statements for the period ended 31 December 2023 will be made available on the Company's website at https://worldchess.com and uploaded to the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Highlights:
· Listing Success : In April 2023 the Company listed on the Main Market of the London Stock Exchange, raising approximately €3.5 million (before expenses) on listing and a further €2.3 million from an existing investor after the listing.
· Berlin Club Opening : In May 2023 World Chess Club Berlin (worldchessclubberlin.com) officially opened after a successful soft launch during the 2022 FIDE Grand Prix. The club has established a vibrant, cultural hub for chess enthusiasts and is a model that World Chess hopes to replicate in other cities worldwide.
· Armageddon Championship Series : In September 2023 the final of the inaugural Armageddon Chess Championship was hosted by World Chess Club Berlin, the culmination of a five event series which attracted top talent and a significant three-series sponsorship agreement with it.com Domains.
· Broadcast Expansion : The Group has partnered with 33 television networks, including Bloomberg and CNBC, to broadcast its Armageddon Championship highlights globally, making the Armageddon Championship Series one of the most televised chess events.
· Digital Innovation : In October 2023, the FIDE Online Arena (chessarena.com) launched version 2.0, introducing new features and improved gameplay following significant investment during the year.
Commenting on the World Chess's performance, Ilya Merenzon, CEO, said: "World Chess has delivered on several major projects during 2023, which have significantly enhanced our brand proposition. Our first chess club successfully opened in Berlin and hosted the finals of the Armageddon series. This new chess format has captured the attention of chess enthusiasts on a global scale, with match content shown across 33 different broadcast networks.
"We made an important investment in the FIDE Online Arena chess platform to upgrade the overall player experience. FIDE 2.0 went live towards to the end of 2023 and has been well received by our community and subscriptions have continued to rise.
"As we advance through 2024, we remain committed to expanding the World Chess ecosystem. We will be launching new initiatives associated with the FIDE Online Arena to help drive growth, whilst attracting new commercial partners. We look forward to bringing news of our progress throughout the rest of 2024."
For more information, please visit https://worldchess.com/investors or contact:
| World Chess Ilya Merenzon, CEO |
Via Yellow Jersey PR |
| Novum Securities Limited (Financial Advisor) David Coffman / George Duxberry |
+44 (0) 20 7399 9400 |
| Allenby Capital Limited (Broker) Joscelin Pinnington / Tony Quirke (Sales) John Depasquale / Lauren Wright (Corporate Finance) |
+44 (0) 20 3328 5656 |
| Yellow Jersey PR Charles Goodwin Annabelle Wills |
+44 (0) 774 778 8221 +44 (0) 777 519 4357 |
Notes to Editors
About World Chess Plc
World Chess (LSE: CHSS) is a London-based chess gaming and entertainment company and Fédération Internationale des Échecs ('FIDE') official commercial partner. World Chess organized the FIDE Championship Matches in the USA, and the UK, and revolutionized the sport by signing the biggest media partnerships in history. World Chess develops Armageddon, the chess league for prime-time television. World Chess also runs FIDE Online Arena, the exclusive official chess gaming platform. More at worldchess.com .
Statement from the Chair
I am pleased to report progress for World Chess Plc., during 2023. The Company continued to focus on its goal of seeking to grow by tapping into the mass market appeal of chess, driving several growth initiatives during the year.
The Company`s strategy for growth is to create diversified revenue streams spanning online gaming, tournaments, chess clubs and merchandise. Despite being one of the oldest leisure and sporting activities in the world, chess is, in the Board's view, still in its infancy in terms of commercialisation.
The Company's listing on the London Stock Exchange in April 2023, raised approximately €3.5m (before expenses) of new funds from investors. Subsequent to the listing, an existing investor agreed to subscribe a further €2.3m in tranches from September 2023, with the last tranche of this investment due to be received by May 2024. The Board believes that the listing should provide access to future funding support and has already helped to raise the profile of the World Chess brand and the sport.
During the financial year, the Company invested in the commercial areas described above, including major investment for the development, and opening of World Chess Club Berlin and the subsequent staging of the Armageddon Chess Championships at this venue.
In addition to the Berlin club, investment was made to improve the playing experience on the Company`s chess gaming platform, FIDE Online Arena. Following the strategic investment made across the business, the Board expects to see increased revenues during the course of 2024.
For the year ended 31 December 2023, the Company generated revenues of approximately €2.3m with an operating loss of approximately €4.5m, with high expenditure attributed to the London listing costs and investment projects, notably World Chess Club Berlin.
The Company continues to benefit from the considerable efforts of the management team and staff. I thank them for their hard work and commitment throughout last year, and in going forward.
Outlook
The impact of inflation and higher interest rates, and resulting costs pressures, have made it a difficult environment for the Company to navigate. These economic challenges remain for the business in 2024. However, the Board is cautiously optimistic of achieving revenue growth over the course of the year. The Board intends to pursue further opportunities that align with the Company`s strategy as a chess-focused business to build shareholder value.
Graham Woolfman
Chair
25 April 2024
Statement from the Chief Executive
2023 was a pivotal period for our Company, coinciding with our debut as a listed company. At the heart of our strategic vision lies a dedication to pioneering innovative chess-related commercial ventures. By diversifying our offerings and engaging our audiences in novel and captivating ways, we aim to propel chess into the modern era while cementing its status as a cherished sport.
The funds raised through our listing on the London Stock Exchange have enabled us to make crucial investments in our digital infrastructure, notably in the enhancement of the FIDE Online Arena and the establishment of the World Chess Club Berlin. Furthermore, we have successfully increased brand recognition, agreed new commercial partnerships and laid the groundwork for growth in 2024 and beyond.
Investment in the FIDE Platform
Throughout the year, we executed significant upgrades to the FIDE Online Arena, culminating in the unveiling of Arena 2.0 in the final quarter. This enhanced platform not only gives players a FIDE-recognised online rating but also delivers an improved gaming experience, boasting industry-leading speed. Additionally, our proprietary anti-cheating technology, NightWatch, has been integrated to ensure fair play, complemented by personalised chess board skins and consumer-centric updates aimed at enriching user engagement.
To improve our player acquisition, we modified our subscription model , increasing our player base by 40% to 750,000 registered users, with 8,500 'pro-members' opting for the premium experience at €50 per year.
Opening World Chess Club Berlin and expanding our merchandise range
The opening of World Chess Club Berlin marks our first foray into physical spaces. It's not just a place to play chess; it's where culture, community, and competition collide. We're crafting experiences that go beyond the sport, making chess not just a game but a lifestyle.
We have seen revenue building through the Club's café, the physical and online merchandise shop and unique chess events, including our sold-out night of 'Chess Boxing'. With plans to open more clubs in strategic locations, we are excited at the prospect of creating more welcoming spaces in the coming years.
In line with our brand-building strategy and efforts to captivate new audiences, we have expanded our range of chess-related products and branded merchandise. From exclusive chess maps to bespoke boards and pieces, our merchandise celebrates the richness and diversity of chess culture. Through these meticulously curated offerings and partnerships, we aim to elevate the chess experience and foster deeper engagement within the global chess community.
New tournament format and events
Our Armageddon Championship Series, hosted at World Chess Club Berlin, redefined the excitement surrounding chess, transforming a traditional game into a riveting spectator sport. Characterised by its high-intensity and fast-paced format, the inaugural series gained widespread acclaim and was broadcast across 33 networks, including major media outlets like Bloomberg and CNBC.
Starting in March 2023 before concluding at the Grand Finale in September 2023, this fresh new twist on competitive chess was able to take the game to a new level in terms of attracting a global audience. We also signed a partnership with IT.com Domains Ltd ('it.com Domains') for a three-series contract worth over €1.2m, underscoring the growing interest from sponsors to associate themselves with chess and the audiences we can attract.
In line with our commitment to fostering a more inclusive global chess community, we are proud to champion women within the sport. Through initiatives like our online tournament series, 'Swiss Queens Wednesday,' in collaboration with FIDE, we are striving to address the gender disparity in chess participation. A recent YouGov survey revealed that women comprise only 30% of chess players worldwide, highlighting the untapped potential for positive change and the commercial opportunities it presents.
2024 and further ahead
During 2023 the Group has been building the infrastructure for our digital offering, chessarena.com, as well as the World Chess ecosystem. As we enter 2024, our primary objective is to launch these initiatives into the market, with a keen emphasis on cultivating an engaging environment for both subscribers and partners.
Our strategic vision encompasses a multifaceted approach aimed at enhancing the online chess experience. This entails leveraging innovative design elements and pioneering features to revolutionise gameplay. Concurrently, our marketing efforts will be intensified to establish Chessarena as a household name, bolstered by the introduction of media and merchandise offerings. Moreover, we are committed to expanding our business-to-business sector, introducing new products tailored for chess clubs.
Among our upcoming enhancements, we are exploring the integration of social features, such as stickers, to enrich the gaming experience. Additionally, we aspire to merge the dynamics of a sports platform with a communication app, creating a unique synergy. The implementation of cutting-edge AI technology will significantly elevate our anti-cheating measures, ensuring the integrity of gameplay. Furthermore, we envision a dedicated television product for chess, granting the sport a permanent presence on television screens globally.
We have invested substantial resources in terms of capital, expertise, and with the dedication of our team, there is still much to do in pursuit of our journey to redefine and innovate across the landscape of chess.
Ilya Merenzon
Chief Executive Officer
25 April 2024
Financial Review
2023 saw the Company's listing on the Main Market of the London Stock Exchange raising €3.5m for investment of €817,533 (2022: €799,866) in the development of the FIDE Online Arena; and €510,898 (2022: €635,818) in the opening of World Chess Club Berlin.
| 2023 | 2022 | ||||
| € | € | ||||
| REVENUE | 2,345,492 | 2,796,207 | |||
| GROSS PROFIT | 179,102 | 705,453 | |||
| GROSS PROFIT % | 8% | 25% | |||
| Other operating income | 11,706 | 92,399 | |||
| Administrative expenses | (4,344,248) | (3,278,281) | |||
| OPERATING LOSS BEFORE EXCEPTIONAL ITEMS | (4,153,440 ) | (2,480,429) | |||
| Addback: Depreciation and amortisation | 843,237 | 632,936 | |||
| PRE-EXCEPTIONAL ITEMS EBITDA LOSS | (3,310,203 ) | (1,847,493) | |||
| Exceptional Items | (326,776) | 23,000 | |||
| Finance costs | (191,393) | (337,460) | |||
| Finance income | 139 | 521 | |||
| LOSS BEFORE INCOME TAX | (4,671,470) | (2,794,368) | |||
Revenue and Gross Profit
Whilst the Group has four distinct revenue generating activities, revenues in 2023 and 2022 were dominated by tournament sponsorships. 2023 saw €1,381,340 of tournament revenue being 59% of total revenue (2022: €1,711,331 being 61% of total revenue). This reduction in tournament revenue followed the Group's strategic decision to launch Armageddon, its own proprietary tournament series, rather than continue to solely promote FIDE tournaments. Whilst the Armageddon was a great success in terms of participation and media coverage, as a new event series it does not yet command the same level of sponsorship as the FIDE Grand Prix events which took place in 2022.
Part of the Group's tournament strategy is to use a dedicated event space, afforded by World Chess Club Berlin, to host events rather than constructing temporary staging for each event. This strategy led to a reduction in the average costs associated with hosting each of the five Armageddon series events, however with five events taking place in 2023 compared to the three which took place in 2022 the overall cost of sales increased by 4%, this together with the 16% fall in revenue resulted in a 75% reduction in gross profit.
Loss per share
The loss per share was €0.007 (2022: €0.004), resulting from both an increase in operating losses and in the weighted average number of shares in issue, from 597,912,402 in 2022 to 650,232,851 in 2023. At 31 December 2023 there were a total of 667,193,501 shares in issue.
Cash flows
The Consolidated Statement of Cash Flows is set out on page 52 to these consolidated financial statements, during 2023 the Group raised €3,475,569 from the issue of new equity capital on listing and a further €1,040,329 in loans were also converted into new equity capital. The Company also received €1,508,737 from an existing shareholder for a new share subscription which was issued in February 2024 as set out in note 32.
Statement of Financial Position
The Consolidated Statement of Financial Position as at 31 December 2023 shows the Group's total net assets having decreased to €1,007,724 (2022: €1,163,425).
Capital expenditure
The development of the FIDE Online Arena remained a priority during the year with additional investment of €817,533 (2022: €799,866), bringing the total invested to €3,924,971 with a carrying value at 31 December 2023 of €2,692,024.
Investments and impairment
As detailed in notes 11, 13 and 14 to the consolidated financial statements the Directors considered the carrying value of investments, goodwill and intangible assets at 31 December 2023 based on detailed budgets and forecasts, these budgets and forecasts generally cover a five-year period. Based on this the Directors concluded that no impairment was necessary at 31 December 2023 or 31 December 2022.
Cash and debt position
At the year end the Group has total cash balances of €186,881 (2022: €35,565) and total borrowings of €1,453,470 (2022: €2,485,797) giving a net debt figure of €1,266,589 (2022: €2,450,232).
As at 23 April 2024, the date of signing these consolidated financial statements, the Group had total cash of €220,122 (28 April 2023: €1,830,936) and total borrowings of €32,986 (28 April 2023: €62,676) giving a net debt figure of €187,136 (28 April 2023: €1,768,260).
Going concern
Based on the Group's Statement of Financial Position and a review of its forecast future operating budgets and forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of signing of these consolidated financial statements. This review of future operating budgets and forecasts included certain reasonable downside scenarios and confirmed that even in the case of such downside scenarios the Group could continue to operate and meet its obligations as they fall due. Accordingly, the Directors have adopted the going concern basis in preparing the Annual Report and consolidated financial statements.
In making this assessment, the Directors have considered the resilience of the Group in severe but plausible scenarios, taking into account the principal risks and uncertainties facing the Group as detailed on page 12 and the effectiveness of any mitigating actions. The Directors' assessment considered the potential impacts of these scenarios, both individually and in combination, on the Group's business model, future performance, solvency and liquidity over the period. Sensitivity analysis was also used to stress test the Group's strategic plan and to confirm that sufficient headroom would remain under the Group's available sources of finance. The Directors consider that under each of these scenarios, the mitigating actions would be effective and sufficient to ensure the continued viability of the Group.
Richard Collett
Chief Financial Officer
25 April 2024
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
| 2023 | 2022 | ||||
| Notes | € | € | |||
| Revenue | 3 | 2,345,492 | 2,796,207 | ||
| Cost of sales | (2,166,390) | (2,090,754) | |||
| GROSS PROFIT | 179,102 | 705,453 | |||
| Other operating income | 11,706 | 92,399 | |||
| Administrative expenses | (4,344,248) | (3,278,281) | |||
| OPERATING LOSS BEFORE EXCEPTIONAL ITEMS | (4,153,440) | (2,480,429) | |||
| Exceptional Items | 5 | (326,776) | 23,000 | ||
| OPERATING LOSS | (4,480,216) | (2,457,429) | |||
| Finance costs | 6 | (191,393) | (337,460) | ||
| Finance income | 6 | 139 | 521 | ||
| LOSS BEFORE INCOME TAX | 7 | (4,671,470) | (2,794,368) | ||
| Income tax | 8 | (13,629) | 332,680 | ||
| LOSS FOR THE YEAR | (4,685,099) | (2,461,688) | |||
| OTHER COMPREHENSIVE INCOME | |||||
| Loss on currency translation | (7,323) | (19,787) | |||
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | (4,692,422) | (2,481,475) | |||
| Loss attributable to: | |||||
| Owners of the parent | (4,685,099) | (2,461,688) | |||
| Total comprehensive income attributable to: | |||||
| Owners of the parent | (4,692,422) | (2,481,475) | |||
| LOSS PER SHARE - CONTINUING AND TOTAL OPERATIONS | |||||
| Basic and diluted | 10 | (0.007) | (0.004) | ||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2023
| 2023 | 2022 | ||||
| Notes | € | € | |||
| NON-CURRENT ASSETS | |||||
| Owned: Intangible assets | 11 | 3,086,827 | 2,763,358 | ||
| Owned: Property, plant and equipment | 12 | 1,029,516 | 714,116 | ||
| Right-of-use: Property, plant and equipment | 12, 23 | 1,206,820 | 1,236,968 | ||
| Deferred tax | 27 | 63,272 | 76,697 | ||
| 5,386,435 | 4,791,139 | ||||
| CURRENT ASSETS | |||||
| Inventories | 15 | 187,018 | 187,691 | ||
| Trade and other receivables | 16 | 256,464 | 662,566 | ||
| Tax receivable | - | 251,117 | |||
| Cash and cash equivalents | 17 | 186,881 | 35,565 | ||
| 630,363 | 1,136,939 | ||||
| TOTAL ASSETS | 6,016,798 | 5,928,078 | |||
| EQUITY AND LIABILITIES | |||||
| SHAREHOLDERS' EQUITY | |||||
| Called up share capital | 18 | 75,647 | 68,260 | ||
| Share premium | 19 | 11,048,183 | 6,518,849 | ||
| Translation reserve | 20 | 58,618 | 65,941 | ||
| Retained earnings | 20 | (10,174,724) | (5,489,625) | ||
| TOTAL EQUITY | 1,007,724 | 1,163,425 | |||
| NON-CURRENT LIABILITIES | |||||
| Lease liabilities | 23 | 1,304,273 | 1,308,003 | ||
| Provision for liabilities | 26 | 157,887 | 180,652 | ||
| 1,462,160 | 1,488,655 | ||||
| CURRENT LIABILITIES | |||||
| Trade and other payables | 21 | 3,397,717 | 2,098,204 | ||
| Lease liabilities | 23 | 116,208 | 95,686 | ||
| Interest bearing loans and borrowings | 22 | 32,989 | 1,082,108 | ||
| 3,546,914 | 3,275,998 | ||||
| TOTAL LIABILITIES | 5,009,074 | 4,764,653 | |||
| TOTAL EQUITY AND LIABILITIES | 6,016,798 | 5,928,078 |
The financial statements were approved by the Board of Directors and authorised for issue on 25 April 2024 and were signed on its behalf by:
Ilya Merenzon
Chief Executive Officer
COMPANY STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2023
| 2023 | 2022 | ||||
| Notes | € | € | |||
| NON-CURRENT ASSETS | |||||
| Investments | 14 | 301,616 | 301,616 | ||
| 301,616 | 301,616 | ||||
| CURRENT ASSETS | |||||
| Trade and other receivables | 16 | 5,790,209 | 4,919,305 | ||
| Tax receivable | 6,025 | - | |||
| Cash and cash equivalents | 17 | 21,366 | 6,242 | ||
| 5,817,600 | 4,925,547 | ||||
| TOTAL ASSETS | 6,119,216 | 5,227,163 | |||
| EQUITY AND LIABILITIES | |||||
| SHAREHOLDERS' EQUITY | |||||
| Called up share capital | 18 | 75,647 | 68,260 | ||
| Share premium | 19 | 11,048,183 | 6,518,849 | ||
| Retained earnings | 20 | (6,871,864) | (5,329,173) | ||
| TOTAL EQUITY | 4,251,966 | 1,257,936 | |||
| CURRENT LIABILITIES | |||||
| Trade and other payables | 21 | 1,867,250 | 2,950,159 | ||
| Interest bearing loans and borrowings | 22 | - | 1,019,068 | ||
| 1,867,250 | 3,969,227 | ||||
| TOTAL LIABILITIES | 1,867,250 | 3,969,227 | |||
| TOTAL EQUITY AND LIABILITIES | 6,119,216 | 5,227,163 |
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent company is not presented as part of these financial statements. The parent company's loss for the financial year was €1,542,691 (2022: €578,448).
The financial statements were approved by the Board of Directors and authorised for issue on 25 April 2024 and were signed on its behalf by:
Ilya Merenzon
Chief Executive Officer
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
| Called up share capital | Retained Earnings | Share Premium | Translation reserve | Total equity | |||||
| € | € | € | € | € | |||||
| Balance at 1 January 2022 | 66,996 | (3,027,937) | 5,520,114 | 85,728 | 2,644,901 | ||||
| Changes in equity | |||||||||
| Issue of share capital | 1,264 | - | 998,735 | - | 999,999 | ||||
| Total comprehensive income | - | (2,461,688) | - | (19,787) | (2,481,475) | ||||
| Balance at 31 December 2022 | 68,260 | (5,489,625) | 6,518,849 | 65,941 | 1,163,425 | ||||
| Changes in equity | |||||||||
| Issue of share capital | 7,387 | - | 4,529,334 | - | 4,536,721 | ||||
| Total comprehensive income | - | (4,685,099) | - | (7,323) | (4,692,422) | ||||
| Balance at 31 December 2023 | 75,647 | (10,174,724) | 11,048,183 | 58,618 | 1,007,724 | ||||
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
| Called up share capital | Retained Earnings | Share Premium | Total equity | ||||
| € | € | € | € | ||||
| Balance at 1 January 2022 | 66,996 | (4,750,725) | 5,520,114 | 836,385 | |||
| Changes in equity | |||||||
| Issue of share capital | 1,264 | - | 998,735 | 999,999 | |||
| Total comprehensive income | - | (578,448) | - | (578,448) | |||
| Balance at 31 December 2022 | 68,260 | (5,329,173) | 6,518,849 | 1,257,936 | |||
| Changes in equity | |||||||
| Issue of share capital | 7,387 | - | 4,529,334 | 4,536,721 | |||
| Total comprehensive income | - | (1,542,691) | - | (1,542,691) | |||
| Balance at 31 December 2023 | 75,647 | (6,871,864) | 11,048,183 | 4,251,966 | |||
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
| 2023 | 2022 | ||||
| Notes | € | € | |||
| Cash flows from operating activities | |||||
| Cash absorbed from operations | 1 | (3,338,149) | (512,077) | ||
| Interest paid | (6,638) | (179,610) | |||
| Finance cost paid | (163,495) | (157,850) | |||
| Tax refund received | 250,913 | 20,600 | |||
| Net cash used in operating activities | (3,257,369) | (828,937) | |||
| Cash flows from investing activities | |||||
| Purchase of intangible fixed assets | (3,317,267) | (799,865) | |||
| Proceeds from disposal of intangible fixed assets | 2,495,727 | 1,367,702 | |||
| Purchase of property, plant and equipment | (631,603) | (635,818) | |||
| Proceeds from disposal of property, plant and equipment | 1,185 | 23,214 | |||
| Interest received | 139 | 521 | |||
| Net cash used in investing activities | (1,451,819) | (44,246) | |||
| Cash flows from financing activities | |||||
| Loan advanced in the year | 1,508,737 | 1,019,068 | |||
| Loan repayments in year | (30,050) | (1,341,854) | |||
| Payment of lease liabilities | (100,596) | (21,986) | |||
| Amount introduced by directors | 14,167 | 120,619 | |||
| Proceeds from share issue | 3,475,569 | 999,999 | |||
| Net cash generated from financing activities | 4,867,827 | 775,846 | |||
| Increase/(decrease) in cash and cash equivalents | 158,639 | (97,337) | |||
| Cash and cash equivalents at beginning of year | 2 | 35,565 | 152,689 | ||
| Effect of foreign exchange rate changes | (7,323) | (19,787) | |||
| Cash and cash equivalents at end of year | 2 | 186,881 | 35,565 | ||
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
| 2023 | 2022 | ||||
| Notes | € | € | |||
| Cash flows from operating activities | |||||
| Cash absorbed by operations | 1 | (1,655,432) | (104,814) | ||
| Interest paid | - | (84,353) | |||
| Finance cost paid | - | (123,415) | |||
| Net cash used in operating activities | (1,655,432) | (312,582) | |||
| Cash flows from investing activities | |||||
| Purchase of intangible fixed assets | - | (275,000) | |||
| Interest received | 106,145 | 20,820 | |||
| Net cash generated from/(used in) from investing activities | 106,145 | (254,180) | |||
| Cash flows from financing activities | |||||
| Loan advanced in the year | 1,508,737 | 1,019,068 | |||
| Amounts received from group undertakings | - | 157,633 | |||
| Amounts paid to group undertakings | (3,436,509) | (1,640,863) | |||
| Amount introduced by directors | 16,613 | 3,060 | |||
| Proceeds from share issue | 3,475,570 | 999,999 | |||
| Net cash generated from financing activities | 1,564,411 | 538,897 | |||
| Increase/(decrease) in cash and cash equivalents | 15,124 | (27,865) | |||
| Cash and cash equivalents at beginning of year | 2 | 6,242 | 34,107 | ||
| Cash and cash equivalents at end of year | 2 | 21,366 | 6,242 | ||
NOTES TO THE STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
| 1 | RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH ABSORBED FROM OPERATIONS | |||||
| Group | 2023 | 2022 | ||||
| € | € | |||||
| Loss before income tax | (4,671,470) | (2,794,368) | ||||
| Depreciation and amortisation | 843,237 | 632,935 | ||||
| Provision | (22,765) | 180,652 | ||||
| Finance costs | 191,393 | 337,460 | ||||
| Finance income | (139) | (521) | ||||
| (3,659,744) | (1,643,842) | |||||
| Decrease in inventories | 673 | 30,702 | ||||
| Decrease in trade and other receivables | 406,102 | 2,699,953 | ||||
| Decrease in trade and other payables | (85,180) | (1,598,890) | ||||
| Cash absorbed from operations | (3,338,149) | (512,077) |
| Company | 2023 | 2022 | ||||
| € | € | |||||
| Loss before income tax | (1,542,691) | (578,448) | ||||
| Finance costs | 21,260 | 207,766 | ||||
| Finance income | (106,145) | (20,820) | ||||
| (1,627,576) | (391,502) | |||||
| (Increase)/decrease in trade and other receivables | (6,118) | 182,297 | ||||
| (Decrease)/increase in trade and other payables | (21,738) | 104,391 | ||||
| Cash absorbed by operations | (1,655,432) | (104,814) |
| 2 | CASH AND CASH EQUIVALENTS | |||||
| The amounts disclosed on the Statements of Cash Flows in respect of cash and cash equivalents are in respect of these Statement of Financial Position amounts: | ||||||
| Group | 2023 | 2022 | ||||
| € | € | |||||
| Year ended 31 December 2023 | ||||||
| Cash and cash equivalents | 186,881 | 35,565 | ||||
| Year ended 31 December 2022 | ||||||
| Cash and cash equivalents | 35,565 | 152,689 | ||||
| Company | 2023 | 2022 | ||||
| € | € | |||||
| Year ended 31 December 2023 | ||||||
| Cash and cash equivalents | 21,366 | 6,242 | ||||
| Year ended 31 December 2022 | ||||||
| Cash and cash equivalents | 6,242 | 34,107 | ||||
| 3 | RECONCILIATION OF NET DEBT | |||||
| Group | 2023 | 2022 | ||||
| € | € | |||||
| At 31 December | ||||||
| Other loans | (32,989) | (1,082,108) | ||||
| Lease liabilities | (1,420,481) | (1,403,689) | ||||
| Total Borrowings | (1,453,470) | (2,485,797) | ||||
| Cash and cash equivalents | 186,881 | 35,565 | ||||
| Net debt | (1,266,589) | (2,450,232) | ||||
| Company | 2023 | 2022 | ||||
| € | € | |||||
| At 31 December | ||||||
| Other loans | - | (1,019,068) | ||||
| Cash and cash equivalents | 21,366 | 6,242 | ||||
| Net cash/(debt) | 21,366 | (1,012,826) | ||||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1 STATUTORY INFORMATION
World Chess PLC is a public company, limited by shares, registered in England and Wales. The company's registered number and registered office address can be found on the Company Information page.
2 ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with UK - adopted International Accounting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
The financial statements are presented in Euro which is the functional currency of the Group and rounded to the nearest €.
Going concern
Based on the Group's Statement of Financial Position and a review of its forecast future operating budgets and forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of signing of these consolidated financial statements. This review of future operating budgets and forecasts included certain reasonable downside scenarios and confirmed that even in the case of such downside scenarios the Group could continue to operate and meet its obligations as they fall due. Accordingly, the Directors have adopted the going concern basis in preparing the Annual Report and consolidated financial statements.
The Directors have assessed the viability of the Group over a five-year period, taking account of the Group's current position and prospects, its strategic plan and the principal risks and how these are managed. Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over this period.
In making this assessment, the Directors have considered the resilience of the Group in severe but plausible scenarios, taking into account the principal risks and uncertainties facing the Group and the effectiveness of any mitigating actions. The Directors' assessment considered the potential impacts of these scenarios, both individually and in combination, on the Group's business model, future performance, solvency and liquidity over the period. Sensitivity analysis was also used to stress test the Group's strategic plan and to confirm that sufficient headroom would remain available under the Group's credit facilities. The Directors consider that under each of these scenarios, the mitigating actions would be effective and sufficient to ensure the continued viability of the Group.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Company.
Intra-group balances and transactions are eliminated on consolidation. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as gains, but only to the extent that there is no evidence of impairment.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with UK - adopted International Accounting Standards requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amounts, events or actions, actual results ultimately 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. The material areas in which estimates and judgements are applied as follows:
Goodwill and other intangible assets for impairment
The Group is required to test, on an annual basis, whether goodwill and other intangible assets have suffered any impairment. Determining whether there has been any impairment requires an estimation of the fair value in use of the cash-generating units. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value, the discount rate applied is 16.15% (2022: 11.83%) and the carrying value of goodwill and other intangible assets is set out in the table below (notes 11 and 13):
| Group | ||||
| 2023 | 2022 | |||
| € | € | |||
| Exclusive FIDE rights | 331,588 | 442,117 | ||
| Software Licences | 59,000 | 82,000 | ||
| Online Platform | 2,692,024 | 2,239,033 |
Crypto-assets valuation
The Group has historically received some sponsorship revenue in the form of crypto-assets which it has converted to fiat currencies at the earliest opportunity, usually upon receipt or in accordance with an agreed schedule of conversion. The Group has not traded in crypto-assets to date and such activities do not form part of its strategy.
The Group has the objective of converting crypto-assets into fiat currency, predominately US Dollars or Euros at the earliest opportunity; the rate of exchange for crypto-assets can be volatile with significant increases and decreases occurring in a few hours, the decision of when to convert crypto-assets into fiat currency is a key source of uncertainty and estimation.
Crypto-assets held by the Group are shown within intangible assets on the Consolidated Statement of Financial Position at the prevailing exchange rate (see note 11).
| Group | Company | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| € | € | € | € | |||||
| Crypto-assets | 4,215 | 208 | - | - |
Legal proceedings provisions
Provisions for legal proceedings are recognised as other expenses when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be measured reliably. At the Statement of Financial Position date there is an ongoing claim with one supplier, if the claim is successful then an invoice, amounting to €1,140,000, will become payable. The invoice is not included in the accounts as the Directors consider it to be null and void and raised by the supplier in breach of contract (see note 28).
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue from sale of goods is recognised when control of the goods has transferred to the customer. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Any revenue received in advance gives rise to contract liabilities which is deferred and included in accruals and deferred income. The carrying amount of the deferred income included in payables being €650,098 (2022: €959,012).
No obligation for returns, refunds or other similar obligation is recognised, the Directors following careful consideration, having concluded that any potential obligation is trivial.
The following criteria must also be met before revenue is recognised:
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
· The Company has transferred the significant risks and rewards of ownership to the buyer;
· The Company 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 measured reliably;
· It is probable that the Company will receive the consideration due under the transaction; and
· The costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
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 turnover can be measured reliably;
· It is probable the Company will receive the consideration due under the contract;
· The stage of completion 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.
The policies specific to the Group's revenue types within its activities are outlined below:
Events
Revenue is recognised in the period in which the event takes place; revenue is typically linked to multiyear agreements where payment is received in advance of the event to which it relates.
Online income
Revenue is recognised over the period of the subscription; online subscriptions are paid annually in advance.
Merchandising and Clubs
Revenue is recognised when control of the goods has transferred to the customer; typically, control is transferred upon payment by the customer.
Collateral rewards received
The Group was entitled to the interest receivable on collateral provided in crypto-assets by a partner to secure a loan. The interest receivable was in exchange for share options provided to the partner. The share options were exercised in January 2021 and the loan was repaid and the collateral returned in January 2022. In 2023 rewards of €nil (2022: €9,142) were recognised within exceptional items in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified and reported in a manner consistent with the internal reporting provided to chief operating decision maker ('CODM'), who is responsible for allocating resources and assessing performance of the operating segments as identified by the Directors.
The Directors have reviewed the Group's activities and consider the Group to comprise a single line of business being a mass market promoter of chess. Within the single line of business, the Group undertakes integrated revenue generating activities across tournaments, an online platform and merchandise and clubs. These revenue generating activities are closely aligned within a business model which seeks to promote a chess community across tournaments, online and physical environments.
The individual revenue generating activities are managed in an integrated way by the CODM and executive management team who review financial information on the same integrated way. The Group has geographically separate operations and a geographic split of revenue as well as the split between the revenue types within its activities is included in note 3.
Cash and cash equivalents
Cash represents cash in hand and deposits held on demand with financial institutions. Cash equivalents are short-term, highly-liquid investments with original maturities of three months or less (as at their date of acquisition). Cash equivalents are readily convertible to known amounts of cash and subject to an insignificant risk of change in that cash value.
In the presentation of the Statement of Cash Flows, cash and cash equivalents also include bank overdrafts. Any such overdrafts are shown within borrowings under 'current liabilities' on the Statement of Financial Position.
Goodwill
Goodwill is recorded as an intangible asset and is the surplus of the cost of acquisition over the fair value of identifiable net assets acquired. Goodwill is reviewed annually for impairment. Any impairment identified as a result of the review is charged in the Statement of Profit or Loss and Other Comprehensive Income.
Crypto-assets
Included within intangible assets are crypto-assets held in the Group's name in the Binance crypto exchange, the Group has not traded in crypto-assets to date and such activities do not form part of its strategy. The crypto-assets are not held as long-term investments, nor do they form part of the Group's inventory. The Group's strategy is to convert crypto-assets to fiat currencies at the earliest opportunity, usually upon receipt or in accordance with an agreed schedule of conversion.
Any crypto-assets received are recognised at the exchange rate prevailing at the date that the risk and reward associated with the crypto-asset passes to the Group. Where the exchange rate of the crypto-assets has a guaranteed minimum floor price, a receivable is recognised for any short-fall.
Crypto-assets are not amortised but are reviewed for impairment if the prevailing exchange rate indicates their value has fallen below their carrying value. Any impairment or realised exchange gains on the conversion of crypto-assets to fiat currency are recognised within exceptional items on the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Other intangible assets
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets.
Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
· Exclusive rights to organise and host top level chess events in association with FIDE, the life of the contract, being ten years, using the straight-line method.
· Capitalised costs associated with developing the online platform used for the FIDE Online Arena, ten years using the straight-line method.
· Licences to operate certain software incorporated into the platform, the life of the contract, being five years. using the straight-line method.
The basis for choosing these useful lives is with reference to the years over which they can continue to generate value for the Group.
The Group reviews the amortisation year and methodology when events and circumstances indicate that the useful lives may have changed since the last reporting date and the amortisation charge for the year is included in Administrative Expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Property, plant and equipment
Depreciation is provided in order to write off each asset over its estimated useful life or, if held as a right-of-use asset, over the lease term, whichever is the shorter, which are typically.
· Fixtures and fittings - Straight line over 5 years
· Computer equipment - Straight line over 3 years
Financial instruments
The Group only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other receivables and payables, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade receivables and payables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of trade debt deferred beyond normal business terms or financed at a rate of interest that is not market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the company would receive for the asset if it were to be sold at the date of the Statement of Financial Position.
Financial assets and liabilities are offset, and the net amount reported in the Statement of Financial Position when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Inventories
Inventories of finished goods are valued at the lower of cost and net realisable value (the estimated selling price less the estimated costs to sell), after making due allowance for obsolete and slow-moving items.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules in the UK, USA and Germany where the Group operates, using tax rates enacted or substantively enacted by the date of the Statement of Financial Position.
Current tax represents the amount of tax payable or receivable in respect of the taxable profit (or loss) for the current or past reporting periods. It is measured at the amount expected to be paid or recovered using the tax rates and laws that have been enacted or substantively enacted by the date of the Statement of Financial Position.
Commercial legislation within the Russian Federation in which the Group operated prior to April 2022, including tax legislation, is subject to varying interpretations and frequent changes. The Group's management is confident that all necessary tax accruals have been made and, accordingly, no additional provision is required in the Consolidated Financial Statements.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date.
Deferred tax represents the future tax consequences of transactions and events recognised in the financial statements of current and previous periods. It is recognised in respect of all timing differences, with certain exceptions. Timing differences are differences between taxable profits and total comprehensive income as stated in the financial statements that arise from the inclusion of income and expense in tax assessments in periods different from those in which they are recognised in the financial statements. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date that are expected to apply to the reversal of timing differences.
Research and development
Research and development expenditure is capitalised if it can be demonstrated that:
· it is technically and commercially feasible to develop the asset for future economic benefit;
· adequate resources are available to maintain and complete the development;
· there is the intention to complete and develop the asset for future economic benefit;
· the Group is able to use the asset;
· use of the asset will generate future economic benefit; and
· expenditure on the development of the asset can be measured reliably.
Other development expenditure is recognised in the Consolidated Statement of Profit and Loss as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated impairment losses.
Foreign currencies
Assets and liabilities in foreign currencies are translated into euro at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into euro at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.
IFRS 16 'Leases'
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Where ownership of the right-of-use asset transfers to the lessee at the end of the lease term, the right-of-use asset is depreciated over the asset's remaining useful life. If ownership of the right-of-use asset does not transfer to the lessee at the end of the lease term, depreciation is charged over the shorter of the useful life of the right-of-use asset and the lease term.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
· Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
· Amounts expected to be payable by the lessee under residual value guarantees; and
· Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate. Right-of-use assets are measured at cost comprising the following:
· The amount of the initial measurement of lease liability;
· Any lease payments made at or before the commencement date less any lease incentives received; and
· Any initial direct costs.
Adoption of new and revised standards
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective from 1 January 2023, none of which have a material impact on these financial statements.
Standards issued but not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the group has decided not to apply early.
The following amendments are effective for the period beginning 1 January 2024;
· IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities as Current or Non-Current);
· IFRS 16 Leases (Amendment - Liability in a sale and leaseback); and
· IAS 7 and IFRS 7 (Amendment - Supplier Finance Arrangements).
It is not expected that the amendments listed above, once adopted, will have a material impact on the financial statements.
Financial liabilities
The Group does not have financial liabilities that would be classified as fair value through the profit or loss. Therefore, all financial liabilities are classified as other financial liabilities.
The Group use the amortised cost method for financial liabilities include borrowings, trade and other payables and are recognised at their original amount.
3 REVENUE
| Revenue from contracts with customers | ||||||
| Revenue by business class | 2023 | 2022 | ||||
| € | € | |||||
| Tournaments | 1,381,341 | 1,711,331 | ||||
| Online Arena | 204,151 | 399,074 | ||||
| Clubs | 163,305 | 110,335 | ||||
| Merchandising | 596,695 | 575,467 | ||||
| 2,345,492 | 2,796,207 | |||||
| By geographical area | 2023 | 2022 | ||||
| € | € | |||||
| United Kingdom | 1,391,453 | 2,661,639 | ||||
| Russia | - | 27,578 | ||||
| United States of America | 51,804 | 50,540 | ||||
| Europe | 902,235 | 56,450 | ||||
| 2,345,492 | 2,796,207 | |||||
Major customer
Included in Tournament revenue are revenues of €991,008 which are attributable to two major customers, being customers who each represent more than 10% of revenue; revenue attributable to the two major customers are Customer 1: €606,008 (2022: €1,163,411) and Customer 2: €385,000 (2022: €nil).
4 EMPLOYEES AND DIRECTORS
The aggregate payroll costs (including Directors not under employment contracts) were:
Contributions to a defined contribution pension scheme on behalf of all employees of €1,544 (2022: €nil) were made during the year.
In the opinion of the Board, only the Directors of the Company, as detailed in the Corporate Governance Report, are regarded as key management personnel. The remuneration of key management personnel during 2023 was, in aggregate, €491,490 (2022: €327,001).
Contributions to a defined contribution pension scheme on behalf of directors of €1,283 (2022: €nil) were made during the year.
| 2023 | 2022 | |||||
| € | € | |||||
| Directors' remuneration: | 491,490 | 327,001 | ||||
Further details of Directors', including Non-Executive Directors', remuneration and fees during the year are set out in the Directors Remuneration Report on page 31 of these consolidated financial statements.
The highest paid director was Ilya Merenzon whose total remuneration was €210,000 (2022: €192,000).
In 2023 Directors Remuneration included €nil (2022: €5,000) in respect of compensation for loss of office.
The Group had no UK employees in 2023 and 2022 except the directors.
5 EXCEPTIONAL ITEMS
| 2023 | 2022 | |||||
| € | € | |||||
| Listing costs | 308,250 | - | ||||
| Exchange loss/(gain) on Crypto-assets | 18,526 | (13,472) | ||||
| Gain on disposal of World Chess Russia LLC | - | 27,330 | ||||
| Collateral rewards received | - | 9,142 | ||||
| 326,776 | 23,000 |
Listing Costs
One-off costs associated with the Company's listing on the Main Market of the London Stock Exchange in April 2023.
Exchange loss/(gain) on Crypto-assets
The majority of the crypto-assets held by the Group was converted into fiat currency on receipt, however where crypto assets are received in stablecoin which track the US Dollar variances occur between the USD value of the crypto assets received and their equivalent Euro value.
Gain on disposal of World Chess Russia LLC
In April 2022 the entire share capital of World Chess Russia LLC was disposed of as a result, a profit on disposal of €27,330 was recognised.
Collateral rewards received
The Group was entitled to the interest receivable on collateral provided in crypto-assets by a partner to secure a loan. The interest receivable was in exchange for share options provided to the partner. The share options were exercised in January 2021 and the loan was repaid and the collateral returned in January 2022.
6 NET FINANCE COSTS
| 2023 | 2022 | |||||
| € | € | |||||
| Finance income: | ||||||
| Loan interest receivable | 139 | 521 | ||||
| 139 | 521 | |||||
| Finance costs: | ||||||
| Other loan interest | 27,898 | 179,610 | ||||
| Interest on IFRS 16 lease liabilities | 163,495 | 157,850 | ||||
| 191,393 | 337,460 | |||||
7 LOSS BEFORE INCOME TAX
The loss before income tax is stated after charging/(crediting):
| 2023 | 2022 | |||||
| € | € | |||||
| Cost of inventories recognised as expense | 2,166,390 | 2,090,754 | ||||
| Research costs expensed | 90,124 | 88,874 | ||||
| Depreciation - owned assets | 194,313 | 25,300 | ||||
| Depreciation - right-of-use assets | 150,853 | 189,475 | ||||
| Exclusive FIDE rights amortisation | 110,529 | 110,529 | ||||
| Licence amortisation | 23,000 | 23,000 | ||||
| Computer software amortisation | 364,542 | 284,632 | ||||
| Auditors' remuneration | 109,908 | 72,641 | ||||
| Foreign exchange loss | 1,970 | 9,790 |
Amortisation of intangible assets is included in Administrative expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
8 INCOME TAX
Analysis of tax expense/(income)
| 2023 | 2022 | |||||
| € | € | |||||
| Current tax: | ||||||
| Corporation tax | 204 | (255,983) | ||||
| Deferred tax | 13,425 | (76,697) | ||||
| Total tax expense/(income) in consolidated statement of profit or loss and other comprehensive income | 13,629 | (332,680) | ||||
Factors affecting the tax expense
The tax assessed for the year is lower (2022 - lower) the standard rate of corporation tax in the UK. The difference is explained below:
| 2023 | 2022 | |||||
| € | € | |||||
| Loss before income tax | (4,671,470) | (2,794,368) | ||||
| Loss multiplied by the standard rate of corporation tax in the UK of 23.52% (2022 - 19%) | (1,098,730) | (530,930) | ||||
| Effect of: | ||||||
| Originations and reversal of temporary differences | 13,425 | (76,697) | ||||
| Capital allowances in excess of depreciation | (262,437) | (74,706) | ||||
| Non-taxable expenses | 155,622 | 138,474 | ||||
| Tax losses carried forward | 1,205,545 | 467,162 | ||||
| Research and development credit | - | (256,197) | ||||
| Foreign tax | 204 | 214 | ||||
| Tax expense/(income) | 13,629 | (332,680) | ||||
The corporation tax in the UK increased from 19% to 25% on 1 April 2023 an equivalent annual rate of 23.52% for the year ended 31 December 2023.
9 LOSS OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, statement of profit or loss and other comprehensive income of the parent company is not presented as part of these financial statements. The parent company's loss for the financial year was €1,542,691 (2022: €578,448).
10 EARNINGS PER SHARE
The basic earnings per share is calculated by dividing the loss attributable to owners of the parent company by the weighted average number of shares in issue during the year. In calculating the diluted earnings per share, any outstanding share options, warrants and convertible loans are taken into account where the impact of these is dilutive.
| 2023 | 2022 | |||||
| Loss attributable to the owners of the parent company € | (4,685,099) | (2,461,688) | ||||
| Weighted average number of shares in issue | 650,232,851 | 597,912,402 | ||||
| Basic and diluted earnings per share | (€0.007) | (€0.004) |
After the reporting period, and as set out in note 32, 24,538,536 new ordinary shares were issued in February 2024 and the Company has agreed to issue a further 11,667,187 new ordinary shares in May 2024.
11 INTANGIBLE ASSETS
Group
| Exclusive FIDE rights | Software Licence | Online Platform | Crypto-assets | Total | ||||||
| € | € | € | € | € | ||||||
| COST | ||||||||||
| At 1 January 2023 | 1,105,291 | 115,000 | 3,107,438 | 208 | 4,327,937 | |||||
| Additions | 1,105,291 | - | 817,533 | 2,499,734 | 4,422,558 | |||||
| Disposals | (1,105,291) | - | - | (2,495,727) | (3,601,018) | |||||
| At 31 December 2023 | 1,105,291 | 115,000 | 3,924,971 | 4,215 | 5,149,477 | |||||
| AMORTISATION | ||||||||||
| At 1 January 2023 | 663,174 | 33,000 | 868,405 | - | 1,564,579 | |||||
| Amortisation for year | 110,529 | 23,000 | 364,542 | - | 498,071 | |||||
| Additions | 773.703 | - | - | - | 773.703 | |||||
| Elimination on disposals | (773,703) | - | - | - | (773,703) | |||||
| At 31 December 2023 | 773,703 | 56,000 | 1,232,947 | - | 2,062,650 | |||||
| NET BOOK VALUE | ||||||||||
| At 31 December 2023 | 331,588 | 59,000 | 2,692,024 | 4,215 | 3,086,827 | |||||
The Exclusive FIDE rights were varied after the 2022 FIDE Grand Prix, this variation has been treated as the disposal if the original Exclusive FIDE rights and the acquisition of alternative Exclusive FIDE rights of the same cost and accumulated amortisation.
| Exclusive FIDE rights | Software Licence | Online Platform | Crypto-assets | Total | ||||||
| € | € | € | € | € | ||||||
| COST | ||||||||||
| At 1 January 2022 | 1,105,291 | 115,000 | 2,307,572 | 1,367,910 | 4,895,773 | |||||
| Additions | - | - | 799,866 | - | 799,866 | |||||
| Disposals | - | - | - | (1,367,702) | (1,367,702) | |||||
| At 31 December 2022 | 1,105,291 | 115,000 | 3,107,438 | 208 | 4,327,937 | |||||
| AMORTISATION | ||||||||||
| At 1 January 2022 | 552,645 | 10,000 | 583,773 | - | 1,146,418 | |||||
| Amortisation for year | 110,529 | 23,000 | 284,632 | - | 418,161 | |||||
| At 31 December 2022 | 663,174 | 33,000 | 868,405 | - | 1,564,579 | |||||
| NET BOOK VALUE | ||||||||||
| At 31 December 2022 | 442,117 | 82,000 | 2,239,033 | 208 | 2,763,358 |
The Directors considered the carrying value at 31 December 2023 for each asset identified above (except crypto-assets), based on a detailed budget and forecast, discounted over five years at the Groups current cost of capital, considered by the Directors to be 16.15%, and it was determined that no impairment was required. Where an asset does not generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets the carrying value was considered against the smallest identifiable group of assets that generates cash inflows (cash generating unit or CGU).
The Directors considered the carrying value at 31 December 2023 for crypto-assets based on the prevailing exchange rate at which the crypto-asset could readily be converted into US dollars or Euros and it was determined that no impairment was required.
12 PROPERTY, PLANT AND EQUIPMENT
Group
| Right of use asset | Fixtures and fittings | Computer Equipment | Total | |||||
| € | € | € | € | |||||
| COST | ||||||||
| At 1 January 2023 | 1,374,409 | 773,918 | 1,698 | 2,150,025 | ||||
| Additions | 120,705 | 510,898 | - | 631,603 | ||||
| Disposals | - | (1,185) | - | (1,185) | ||||
| At 31 December 2023 | 1,495,114 | 1,283,631 | 1,698 | 2,780,443 | ||||
| DEPRECIATION | ||||||||
| At 1 January 2023 | 137,441 | 59,802 | 1,698 | 198,941 | ||||
| Charge for year | 150,853 | 194,313 | - | 345,166 | ||||
| At 31 December 2023 | 288,294 | 254,115 | 1,698 | 544,107 | ||||
| NET BOOK VALUE | ||||||||
| At 31 December 2023 | 1,206,820 | 1,029,516 | - | 2,236,336 |
| Right of use asset | Fixtures and fittings | Computer Equipment | Total | |||||
| € | € | € | € | |||||
| COST | ||||||||
| At 1 January 2022 | 441,942 | 212,236 | 1,698 | 655,876 | ||||
| Additions | 1,374,409 | 635,818 | - | 2,010,227 | ||||
| Disposals | (441,942) | (74,136) | - | (516,078) | ||||
| At 31 December 2022 | 1,374,409 | 773,918 | 1,698 | 2,150,025 | ||||
| DEPRECIATION | ||||||||
| At 1 January 2022 | 419,908 | 85,424 | 1,698 | 507,030 | ||||
| Charge for year | 189,475 | 25,300 | - | 214,775 | ||||
| Elimination on disposal | (441,942) | (50,922) | - | (492,864) | ||||
| Exchange difference | (30,000) | - | - | (30,000) | ||||
| At 31 December 2022 | 137,441 | 59,802 | 1,698 | 198,941 | ||||
| NET BOOK VALUE | ||||||||
| At 31 December 2022 | 1,236,968 | 714,116 | - | 1,951,084 |
Included in the net book value of fixtures and fittings is €1,027,734 (2022: €647,083) relating to World Chess Club Berlin which was functionally complete at 31 December 2022 but did not yet fully open until May 2023 .
13 GOODWILL
Group
| 2023 | 2022 | |||
| € | € | |||
| COST | ||||
| At 1 January | 136,244 | 142,474 | ||
| Disposal | (136,244 | (6,230) | ||
| At 31 December | - | 136,244 | ||
| IMPAIRMENTS | ||||
| At 1 January | 136,244 | 142,474 | ||
| Elimination on disposal | (136,244) | (6,230) | ||
| At 31 December | - | 136,244 | ||
| CARRYING VALUE | ||||
| At 1 January | - | - | ||
| At 31 December | - | - | ||
Goodwill arose on the acquisition of World Chess Russia LLC and World Chess Digital Limited.
World Chess Digital Limited was dormant throughout 2022 and remained dormant until it was dissolved on 15 September 2023.
In 2022 the Group disposed of World Chess Russia LLC.
14 INVESTMENTS
Company
Shares in group undertakings
| 2023 | 2022 | |||
| € | € | |||
| COST | ||||
| At 1 January | 351,616 | 251,616 | ||
| Additions | - | 275,000 | ||
| Disposals | - | (175,000) | ||
| At 31 December | 351,616 | 351,616 | ||
| IMPAIRMENTS | ||||
| At 1 January | 50,000 | 225,000 | ||
| Disposals | - | (175,000) | ||
| At 31 December | 50,000 | 50,000 | ||
| CARRYING VALUE | ||||
| At 1 January | 301,616 | 26,616 | ||
| At 31 December | 301,616 | 301,616 | ||
The Directors considered the carrying value at 31 December 2023 for each group undertaking, identified below, based on a detailed budget and forecast, discounted over five years at the Groups current cost of capital, considered by the Directors to be 16.15% and it was determined that no further impairment was required.
World Chess Digital Limited was dormant throughout 2022 and remained dormant until it was dissolved on 15 September 2023, the carrying value of the investment at 31 December 2022 and the date of disposal was €nil.
In 2022 the Group disposed of World Chess Russia LLC.
The Group's investments at the Statement of Financial Position date in the share capital of companies include the following subsidiaries:
World Chess Events Limited
Registered office: Eastcastle House, 27/28 Eastcastle Street, United Kingdom, W1W 8DH
Nature of business: Organising chess events (Worldwide)
Class of shares: % holding
Ordinary 100.00
World Chess US, Inc
Registered office: 1201 N. Orange Street, Suite 762, Wilmington, New Castle County, DE, USA 19801
Nature of business: Organising chess events (USA), online chess
Class of shares: % holding
Ordinary 100.00
World Chess Europe GmbH
Registered office: Mittelstrasse 51 - 53, 10117 Berlin, Deutschland
Nature of business: Various chess related activities
Class of shares: % holding
Ordinary 100.00
During the year, World Chess PLC provided a capital contribution of €nil (2022: €275,000) to this company.
World Chess Sakartvelo LLC
Registered office: Georgia, City Tbilisi, Didube district, Ak. Tsereteli Avenue, N 49-51-51a, Entrance 3, Floor 13, Apartment N 128
Nature of business: Organising chess events, chess club activities
Class of shares: % holding
Ordinary 100.00
This company was incorporated on 2 June 2022 but did not commence trading until 1 January 2023.
World Chess Russia LLC
Registered office: 123242, Moscow, Kudrinskaya Square, 1 room XIIB
Nature of business: Organising chess events, chess club activities
Class of shares: % holding
Ordinary 0.00
In April 2022 the entire share capital in this company was disposed of.
World Chess Digital Limited (formerly CNCweb Limited)
Registered office: 21st Floor, Tay Chau Building, 262 Des Voeux Road Central, Hong Kong
Nature of business: Operation of online chess platform
Class of shares: % holding
Ordinary 0.00
World Chess Digital Limited was dormant throughout 2022 and remained dormant until it was dissolved on 15 September 2023.
The results of the subsidiaries identified above are included in the consolidated financial statements, results for World Chess Russia LLC are included up to April 2022. All subsidiaries are exempt from an audit except World Chess Events Ltd.
15 INVENTORIES
Group
| 2023 | 2022 | |||
| € | € | |||
| Inventories: | 187,018 | 187,691 |
16 TRADE AND OTHER RECEIVABLES
| Group | Company | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| € | € | € | € | |||||
| Current: | ||||||||
| Trade receivables | 29,668 | 452,754 | - | - | ||||
| Amounts owed by group undertakings | - | - | 5,769,981 | 4,905,195 | ||||
| Other receivables | 204,974 | 205,244 | 1,306 | 12,362 | ||||
| Prepayments and accrued income | 21,822 | 4,568 | 18,922 | 1,748 | ||||
| 256,464 | 662,566 | 5,790,209 | 4,919,305 |
17 CASH AND CASH EQUIVALENTS
| Group | Company | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| € | € | € | € | |||||
| Bank accounts | 186,881 | 35,565 | 21,366 | 6,242 | ||||
| 186,881 | 35,565 | 21,366 | 6,242 |
18 CALLED UP SHARE CAPITAL
| 2023 | 2022 | |||||||
| Number of shares | € | Number of shares | € | |||||
| Allotted, issued, and fully paid Ordinary shares of £0.0001 | 667,193,501 | 75,647 | 602,392,689 | 68,260 |
On 6 April 2023 the Company issued 49,650,972 new ordinary shares for total cash consideration of €3,475,568 and a further 14,861,840 new ordinary shares on the conversion of a loan totalling €1,040,329 and the entire issued share capital, comprising 666,905,501 ordinary shares were admitted for trading on the main market of the London Stock Exchange with ticker symbol CHSS.
On 4 August 2023 a further 288,000 new ordinary shares were issued to the Company's broker in settlement of their brokerage fees of €20,823.
At 31 December 2023 the number of additional shares authorised for issue is 100,000,000 (2022: 100,000,000).
19 SHARE PREMIUM
| 2023 | 2022 | |||
| € | € | |||
| At 1 January | 6,518,849 | 5,520,114 | ||
| Premium arising on issue of equity shares | 4,529,334 | 998,735 | ||
| At 31 December | 11,048,183 | 6,518,849 |
20 RESERVES
Share capital comprises the amount for the nominal value of shares issued.
Share premium comprises the amount subscribed for share capital which exceeds the nominal value, after deducting costs of issue.
Retained earnings comprises of the brought forward cumulative profit and loss balances carried forward from previous accounting periods.
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
21 TRADE AND OTHER PAYABLES
| Group | Company | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| € | € | € | € | |||||
| Trade payables | 728,213 | 657,006 | 7,582 | 81,173 | ||||
| Amounts owed to group undertakings | - | - | 212,044 | 2,783,767 | ||||
| Social security and other taxes | 45,430 | 21,318 | 8,250 | - | ||||
| Other payables | 1,526,843 | 2,650 | 1,519,465 | 1,376 | ||||
| Accruals and deferred income | 962,151 | 1,296,317 | 100,000 | 80,547 | ||||
| Amounts owed to Directors | 135,080 | 120,913 | 19,909 | 3,296 | ||||
| 3,397,717 | 2,098,204 | 1,867,250 | 2,950,159 |
Included in accruals and deferred income at the start of the period was €679,087 (2022: €812,678) of deferred income which was recognised as revenue during the year.
22 FINANCIAL LIABILITIES - BORROWINGS
| Group | Company | |||||||
| 2023 | 2022 | 2023 | 2022 | |||||
| € | € | € | € | |||||
| Current: | ||||||||
| Other loans | 32,989 | 1,082,108 | - | 1,019,068 | ||||
| Lease liabilities (see note 23) | 116,208 | 95,686 | - | - | ||||
| 149,197 | 1,177,794 | - | 1,019,068 | |||||
| Non-current: | ||||||||
| Other loans - 1-2 years | - | - | - | - | ||||
| Lease liabilities (see note 23) | 1,304,273 | 1,308,003 | - | - | ||||
| 1,304,273 | 1,308,003 | - | - |
Terms and debt repayment schedule
Group
| 1 year or less | More than 1 year and less than 5 years | More than 5 years | Totals | |||||
| € | € | € | € | |||||
| Other loans | 32,989 | - | - | 32,989 | ||||
| Lease liabilities (see note 23) | 116,208 | 619,552 | 684,721 | 1,420,481 | ||||
| 149,197 | 619,552 | 684,721 | 1,453,470 |
Company
| 1 year or less | More than 1 year and less than 5 years | More than 5 years | Totals | |||||
| € | € | € | € | |||||
| Other loans | - | - | - | - | ||||
At 31 December 2023 outstanding loans due in less than one year comprise a loan of €32,989 which accrues interest at 10% per year. (2022: loan of €1,019,068 which accrues interest at 8% per year and €63,040 which accrues interest at 10% per year.)
On 6 April 2023, a loan totalling €1,040,329 including accrued interest was converted into new ordinary shares in the Company.
23 LEASES
Group
Right of use asset - property, plant, and equipment
| 2023 | 2022 | |||
| € | € | |||
| COST | ||||
| At 1 January | 1,374,409 | 441,942 | ||
| Additions | 120,705 | 1,374,409 | ||
| Disposals | - | (441,942) | ||
| At 31 December | 1,495,114 | 1,374,409 | ||
| DEPRECIATION | ||||
| At 1 January | 137,441 | 419,908 | ||
| Charge for year | 150,853 | 189,475 | ||
| Elimination on disposal | - | (441,942) | ||
| Exchange difference | - | (30,000) | ||
| At 31 December | 288,294 | 137,441 | ||
| NET BOOK VALUE | ||||
| At 31 December | 1,206,820 | 1,236,968 | ||
All leases are accounted for in accordance with IFRS 16 Leases.
| 31 December 2023 | 31 December 2022 | 31 December 2021 | |||||
| € | € | € | |||||
| Right of use asset | 1,206,820 | 1,236,968 | 22,034 | ||||
| Lease liability | 1,420,481 | 1,403,689 | 21,266 |
A right-of-use asset was recognised in 2022 for a lease on premises to be occupied by World Chess Club Berlin for a term of 10 years ending on 31 December 2031 with an effective interest rate of 11.83%. An addition to the right of use asset of €120,705 was recognised during the year following an increase in lease payments following a review.
In 2022 a right-of-use asset was disposed of during the year relating to premises occupied by the World Chess Club Moscow, the lease was for a term of 5 years ended on 30 April 2022 with an effective interest rate of 10.65%.
Total finance lease interest for 2023 was €163,495 (2022: €157,850) as detailed in note 6.
Right of use assets relating to lease properties are presented as property, plant, and equipment and amortised to the end of the lease term.
Group
Lease liabilities - minimum lease payments fall due as follows:
| 31 December 2023 | 1 year or less | More than 1 year and less than 5 years | More than 5 years | Totals | ||||
| € | € | € | € | |||||
| Gross obligations repayable: | 267,408 | 1,069,632 | 802,224 | 2,139,264 | ||||
| Finance charges repayable: | (151,200) | (450,080) | (117,503) | (718,783) | ||||
| Net obligations repayable: | 116,208 | 619,552 | 684,721 | 1,420,481 |
| 31 December 2022 | 1 year or less | More than 1 year and less than 5 years | More than 5 years | Totals | ||||
| € | € | € | € | |||||
| Gross obligations repayable: | 246,234 | 984,936 | 984,936 | 2,216,106 | ||||
| Finance charges repayable: | (150,548) | (474,791) | (187,078) | (812,417) | ||||
| Net obligations repayable: | 95,686 | 510,145 | 797,858 | 1,403,689 |
24 FINANCIAL INSTRUMENTS
All financial instruments are measured at amortised cost and financial instruments used by the Group, from which financial instrument risk arises are as follows:
· trade and other payables
· cash and cash equivalents; and
· trade and other receivables
The main purpose of these financial instruments is to finance the Group's operations.
| 2023 | 2022 | |||
| € | € | |||
| Other financial assets | ||||
| Trade and other receivables less than one year | 256,464 | 821,028 | ||
| Cash and cash equivalents | 186,881 | 35,773 | ||
| Total financial assets | 443,345 | 856,801 |
| 2023 | 2022 | |||
| € | € | |||
| Other financial liabilities | ||||
| Interest bearing loans and borrowings less than one year | 149,197 | 1,177,794 | ||
| Trade and other payables less than one year | 3,397,717 | 2,098,199 | ||
| Interest bearing loans and borrowings more than one year | 1,304,273 | 1,308,003 | ||
| Total financial liabilities | 4,851,187 | 4,583,996 |
The Directors consider that the carrying value for each class of financial asset and liability, approximates to their fair value.
Financial risk management
The Group's activities expose it to a variety of risks, including market risk (foreign currency risk and interest rate risk), credit risk and liquidity risk. The Group manages these risks through an effective risk management programme, and, through this programme, the Board seeks to minimise the potential adverse effects on the Group's financial performance.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer to a financial instrument fails to meet its contractual obligations. The Group's credit risk is primarily attributable to its receivables and its cash deposits. It is Group policy to assess the credit risk of new customers before entering contracts. The Group continues to assess the risk and a further loss allowance for the full lifetime expected credit losses is recognised if the credit risk has increased significantly since initial recognition. The Group consider any contractual payment being 30 days past due, and each subsequent period of 30 days, to be an indicator of a significant increase in credit risk which may require an additional loss allowance to be recorded.
The risks specific to the Group's revenue types within its activities are outline below:
· Events, payment is typically received in accordance with multi-year agreement in advance of the event to which it relates, the Directors therefore consider the credit risk to be non-trivial but minimal.
· Online income, payment is typically received annually in advance, the Directors therefore consider the credit risk to be trivial.
· Merchandising and Clubs, payment is typically received prior to control of goods purchased being transferred to the customer, the Directors therefore consider the risk to be non-trivial but minimal.
No credit loss was recognised in 2023 or 2022.
Financial assets past due but not impaired as at 31 December 2023:
| Not impaired and not past due | Not impaired but past due by the following amounts | ||||||
| >30 days | >60 days | >90 days | >120 days | ||||
| € | € | € | € | € | |||
| Group: Trade and other receivables | 236,187 | 2,975 | 1,098 | 16,204 | |||
| Company: Trade and other receivables | 5,790,209 | - | - | - | - | ||
Financial assets past due but not impaired as at 31 December 2022:
| Not impaired and not past due | Not impaired but past due by the following amounts | ||||||
| >30 days | >60 days | >90 days | >120 days | ||||
| € | € | € | € | € | |||
| Group: Trade and other receivables | 646,901 | - | - | - | 15,635 | ||
| Company: Trade and other receivables | 4,919,305 | - | - | - | - | ||
Liquidity risk and interest rate risk
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's funding strategy is to ensure a mix of funding sources offering flexibility and cost effectiveness to match the requirements of the Group.
At 31 December 2023 the Group had outstanding loans of €32,989 which accrues interest at a fixed rate of 10% per year. (2022: €1,019,068 which accrued interest at a fixed rate of 8% per year and was secured by collateral put up by a partner company, and €63,040 which accrues interest at a fixed rate of 10%).
Foreign currency risk
The Group's exposure to foreign currency risk is limited as most of its invoicing and payments are denominated in Euro. The Group identifies and manages currency risks using an integrated approach that takes into account the possibility of natural (economic) hedging. For the purpose of short-term management of currency risk, the Group selects the currency to reduce the open currency position (the difference between assets and liabilities in foreign currencies).
Analysis of sensitivity of financial instruments to foreign currency exchange rate risk
Currency risk is assessed monthly using sensitivity analysis and maintained within parameters approved in accordance with the Group's policy. At the reporting date, the effect of the Euro's growth/(depreciation) against other currencies in the Group's profit/(loss) before tax is not significant.
25 CAPITAL MANAGEMENT
The Group's objective when managing capital is to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders.
The Group's capital management strategy is to retain sufficient working capital for operating requirements and to ensure sufficient funding is available to meet commitments as they fall due and to support growth. There are no externally imposed capital requirements.
The Group had net assets of €1,007,724 at 31 December 2023 (2022: €1,163,425), and to maintain or adjust the capital structure the Group may issue new shares of increase borrowings.
| 2023 | 2022 | |||
| € | € | |||
| Interest bearing loans and borrowings | (1,453,470) | (2,485,797) | ||
| Cash and cash equivalents | 186,881 | 35,565 | ||
| Net indebtedness | (1,266,589) | (2,450,232) |
26 PROVISION FOR LIABILITIES
Group
| 2023 | 2022 | |||
| € | € | |||
| PROVISIONS | ||||
| At 1 January | 180,652 | - | ||
| Dilapidations provision | (22,765) | 180,652 | ||
| At 31 December | 157,887 | 180,652 | ||
A dilapidations provision was recognised in 2022 relating to the estimated reinstatement costs at the expiry of a new 10-year lease ending on 31 December 2031.
27 DEFERRED TAX
Group
| 2023 | 2022 | |||
| € | € | |||
| Balance at 1 January | (76,697) | (15,733) | ||
| Movement in current year | 13,425 | (60,964) | ||
| Balance at 31 December | (63,272) | (76,697) | ||
There are €6,397,725 (2022: €4,188,207) of tax losses available to the Group which at the applicable tax rate of 25% would provide an additional deferred tax asset of €1,169,681 (2022: €784,992). This has not been recognised in the financial statements due to the uncertainty of the timing of future taxable profits against which these losses could be utilised.
Deferred tax assets and liabilities are offset when the Company 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.
Analysis of deferred tax:
| 2023 | 2022 | |||
| € | € | |||
| Timing differences arising on provisions for liabilities, lease liabilities and losses carried forward | (470,052) | (531,931) | ||
| Timing difference arising on capital allowances in excess of depreciation | 406,780 | 455,234 | ||
| (63,272) | (76,697) | |||
28 CONTINGENT LIABILITIES
The Group has an ongoing claim with one supplier, if the claim is successful then an invoice, amounting to €1,140,000, will become payable. The invoice is not included in the financial statements as the Directors consider it to be null and void and raised by the supplier in breach of contract.
29 RELATED PARTY DISCLOSURES
Details of the Directors' remuneration and consultancy fees are disclosed in note 4.
Group undertakings
The following transactions took place during the year ended 31 December 2023 with and between group undertakings.
| Payments to World Chess PLC | Payments to/ (receipts from) other group undertakings | |||
| € | € | |||
| World Chess Events Ltd | ||||
| · Payment of interest | 29,152 | - | ||
| · Purchase of inventory | - | 48,107 | ||
| · Sale of inventory | - | (21,289) | ||
| · Staff and other services | 78,791 | 1,588,378 | ||
| · Commission paid on third party transactions | - | 58,810 | ||
| World Chess Europe GmbH | ||||
| · Payment of interest | 76,968 | - | ||
| · Purchase of inventory | - | 21,289 | ||
| · Sale of Inventory | - | (48,107) | ||
| · Provision of staff and other services | - | (674,815) | ||
| World Chess US Inc. | ||||
| · Commission charged on third party transactions | (58,810) | |||
| · Provision of staff and other services | - | (637.563) | ||
| World Chess Sakartvelo LLC | ||||
| · Provision of staff and other services | - | (276,000) |
The following transactions took place during the year ended 31 December 2022 with and between group undertakings.
| Payments to World Chess PLC | Payments to/ (receipts from) other group undertakings | |||
| € | € | |||
| World Chess Events Ltd | ||||
| · Payment of interest | 12,331 | - | ||
| · Purchase of inventory | - | 56,153 | ||
| · Sale of inventory | - | (3,823) | ||
| · Commission paid on third party transactions | - | 26,473 | ||
| · Interest received | - | (4,848) | ||
| World Chess Europe GmbH | ||||
| · Payment of interest | 7,512 | - | ||
| · Purchase of inventory | - | 3,823 | ||
| · Sale of Inventory | - | (56,153) | ||
| World Chess US Inc. | ||||
| · Commission charged on third party transactions | - | (26,473) | ||
| · Payment of interest | - | 4,848 |
The following balances remained outstanding at 31 December 2023 from and between group undertakings.
| Due to/(from) World Chess PLC | Due to/(from) other group undertakings | Total due to/(from) group undertakings | ||||
| € | € | € | ||||
| Ilya Merenzon | (18,015) | (115,171) | (133,186) | |||
| Matvey Shekhovtsov | (1,582) | - | (1,582) | |||
| Neil Rafferty | (312) | - | (312) | |||
| Group undertakings | ||||||
| · World Chess Events Ltd | 3,290,077 | 781,529 | 4,071,606 | |||
| · World Chess Europe GmbH | 2,479,904 | (737,526) | 1,742,378 | |||
| · World Chess US Inc. | (212,044) | (25,652) | (237,696) | |||
| · World Chess Sakartvelo LLC | - | (18,351) | (18,351) | |||
| 5,538,028 | (115,171) | 5,522,857 |
The following balances remained outstanding at 31 December 2022 from and between group undertakings.
| Due to/(from) World Chess PLC | Due to/(from) other group undertakings | Total due to/(from) group undertakings | ||||
| € | € | € | ||||
| Ilya Merenzon | (238) | (93,256) | (93,494) | |||
| Matvey Shekhovtsov | (2,818) | (24,600) | (27,418) | |||
| Group undertakings | ||||||
| · World Chess Events Ltd | 4,044,942 | (2,005,174) | 2,039,768 | |||
| · World Chess Europe GmbH | 860,253 | 99,327 | 959,580 | |||
| · World Chess US Inc. | (2,783,767) | 1,905,848 | (877,919) | |||
| 2,118,372 | (117,855) | 2,000,517 |
30 ULTIMATE CONTROLLING PARTY
The ultimate controlling party is Ilya Merenzon by virtue of his shareholding in the Company.
31 SHARE-BASED PAYMENT TRANSACTIONS
On 4 August 2023 the Company issued 288,000 new ordinary shares to its sole broker, Novum Securities Limited, for the equivalent of €20,160 in settlement of its first year's fees.
32 SUBSEQUENT EVENTS
On 7 February 2024 the Company issued 21,663,386 new ordinary shares to an existing shareholder for total consideration of €1,508,737 and a further 2,867,152 new ordinary shares to Engiscent PTE Ltd, a development partner of the Company, in consideration for €200,000 of development work completed by Engiscent PTE Ltd.
On 8 February 2024 the Company announced that an existing shareholder had agreed to subscribe for 11,667,187 new ordinary shares for total consideration of €816,703 to be paid in five tranches between February 2024 and May 2024.
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