FORTIFAI LTD - Annual Report 2021

==> picture [148 x 50] intentionally omitted <==

==> picture [36 x 22] intentionally omitted <==

Mighty Kingdom Limited (ASX: MKL) ABN: 39 627 145 260 ASX APPENDIX 4E

Year Ended 30 June 2021

==> picture [325 x 10] intentionally omitted <==

----- Start of picture text -----

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report
----- End of picture text -----

==> picture [36 x 22] intentionally omitted <==

Results for Announcement	3
Review and Results of Operations	4
Forward Strategy and Outlook	6
Consolidated Statement of Profit or Loss and Other Comprehensive Income	7
Consolidated Statement of Financial Position	8
Consolidated Statement of Changes in Equity	9
Consolidated Statement of Cash Flows	10
Notes to the Consolidated Financial Statements	11

==> picture [596 x 416] intentionally omitted <==

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Company Details

Name of entity: ABN: Reporting period: Previous period

Mighty Kingdom Limited ("Mighty Kingdom" or "the Company") 39 627 145 260

For the year ended 30 June 2021 (“FY21”) For the year ended 30 June 2020 (“FY20”)

Results for announcement to the market

Results for announcement to the market
				$'000
Revenue from ordinary activities	up	29%	to	3,278
Loss from ordinary activities after tax attributable to the owners of Mighty Kingdom Limited	up	99%	to	(7,146)
Loss for the year attributable to the owners of Mighty Kingdom Limited	up	99%	to	(7,146)

		Franked
	Amount	amount per
Dividends(distributions)	per share	share
Final Dividend Interim Dividend	Nil ¢	Nil ¢
Previous corresponding period	Nil ¢	Nil ¢
Record date for determining entitlements to the dividends	N/A	N/A

Summary

Mighty Kingdom commenced trading on the ASX on 21 April 2021 raising $18m via Initial Public Offering.
Strong cash position of $13.6m as at 30 June 2021 to fund investment in original IP development alongside existing Work for Hire business.
29% increase in revenue to $3.28m over the previous corresponding year.
Mighty Kingdom has continued to invest in hiring and training development teams to work across multiple pipeline projects consistent with the Company's strategy and the large opportunity ahead of it. This includes the development of Original IP games that are expected to be self-published or published through third parties over FY22 and FY23.
Mighty Kingdom increased the embedded value of its development pipeline during FY21 with contracts extended with existing partners (SpinMaster, Funcom and Uken) and new contracts signed with Mattel and East Side Games.

Net loss from continuing operations was $7,145,601 (2020: operating net loss $3,589,665). This increase is due largely to the one-off expenses of $1,818,966 incurred in initial public offering (“IPO”), capital raising and pre-IPO issuance of convertible notes and share options. Increased employee costs from additional hires to support the expanding business made up the remainder of the loss. Excluding one-off expenses relating to the IPO results in a normalised net loss of $5,326,632.

Net tangible assets

Net tangible assets
	June 2021	June 2020
Net tangible assets per ordinary security	6.98 ¢	(48.82) ¢

The net tangible asset per ordinary security is calculated based on 151,682,493 ordinary shares on issue at 30 June 2021 and 7,500,000 shares in existence at 30 June 2020.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Review and results of operations

Initial public offering (“IPO”)

The Company converted from proprietary to public company effective 27 November 2020, with a corresponding name change from "Mighty Kingdom Group Pty Ltd" to "Mighty Kingdom Limited".

Following a successful IPO which raised gross funds of $18,000,000, the Company was admitted to the Official List of ASX on 20 April 2021 (quotation of its securities on the ASX commenced on 21 April 2021). The funds raised have contributed to the Group’s equity increasing net of transaction costs by $16,984,731.

The June 2021 results included $178,260 which was expensed as part of the IPO capital raising exercise, $116,841 was expensed as finance cost related to pre-IPO convertible note and $1,523,864 was expensed associated with issuance of 14,111,989 options to directors and employees. These one-off costs totalled $1,818,966 in the current year results and are not of a recurring nature.

This can be summarised as follows:

This can be summarised as follows:
	2021	2020
	$'000	$'000
Revenue from ordinary activities	3,278	2,536
Loss after income tax	(7,146)	(3,590)
Addback of non-recurring items
Costs associated with IPO Capital raising	178	-
Finance costs on convertible notes	117	-
Share-based payment with issuance of options	1,524	-
Normalised loss after income tax (Non statutory disclosure)	(5,327)	(3,590)

Convertible notes

On 16 December 2020, the Company entered into Convertible Loan Agreements to a total value of $4,000,000, convertible to shares at IPO on the basis of $0.24 per share. During the financial year ended 30 June 2021, all Convertible Notes converted to shares prior to IPO, resulting in the issue of a total of 16,666,667 shares. The transaction costs of $384,210 on convertible notes have been recognised in Share Capital (Note 16). A finance cost of $116,841 has been recognised in the profit or loss representing amortisation of transaction costs until conversion.

Issuance of Share Options

On 20 November 2020, the Company issued 12,488,859 options with an exercise price of $0.15 each to certain employees.
On 16 December 2020, the Company issued 649,252 options with an exercise price of $0.30 each to a Non-Executive Director.
On 3 March 2021 and 10 March 2021, the Company issued a total of 973,878 options (each 486,939) with an exercise price of $0.30 to Non-Executive Directors.
The Company issued 4,679,500 Options to Investors in a pre-IPO capital raising on 17 February 2021 with an exercise price of $0.15.

Each Option entitles the holder to one Share on exercise of the Option. No option has been exercised up to the date of the report.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Review of results

The Company and its controlled entities (the “Group”) present its preliminary results for FY21. The results reflect the Group’s continuing capital investment in building scalable technologies and operational capability and expenditure associated with developing a strong pipeline of games to be bought to market in FY22.

The Group has successfully executed its business strategies on the following matters:

Continuous investment in original IP development while maintaining the quality of Work for Hire contracts.
Mitigating risk on development of new IP and capability through co-development contracts.
Effective management across the project pipeline with a well-balanced future release schedule.
Developing Mighty Kingdom leadership in creative talent acquisition and retention, with less than 3% in HR turnover rate.
Enhanced board and senior management team with the key hire of Amy Guan in the role of CFO.

Game Revenue ($) Total Income ($) 3.28M 6.13M 2020: 2.54M (+29.26%) 2020: 4.23M (+41.78%)

During FY21 the Group reported a 29% increase in game revenue to $3,278,029 (FY20: $2,535,915) and continued year on year total income growth of 42% to $6,125,634, including $861,216 increase from Jobkeeper subsidy. This reflected the Group’s continuing investment in transition from Work for Hire to co-development (cost and revenue-sharing of IP development with publishers and other game developers) and in due course retaining 100% of game equity via ownership, development, and publishing of original IP.

Game Revenue ($'000)

==> picture [343 x 177] intentionally omitted <==

----- Start of picture text -----

$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$-
FY19 FY20 FY21
Co-development Original IP License Work for hire
----- End of picture text -----

The Coronavirus (COVID-19) pandemic has slowed down development dependent on external global partners, and key global marketing and business development activities did not go ahead due to cancellations of major global tradeshows. However, we are seeing many opportunities open up as our global partners and potential partners find successful ways to manage the impacts of the pandemic.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Forward strategy and outlook

Mighty Kingdom has invested significant resources during FY21 in implementing the abovementioned initiatives and executing its strategy to enhance business disciplines. The Board is optimistic that the benefits of its enhanced governance and risk mitigation strategies will see further improvements in the use of capital to develop a successful pipeline of games.

Mighty Kingdom continues to increase the embedded value in this pipeline by adding more projects to the build phase, transferring them into the growth phase and then sustaining inmarket games to maximise life-time value of each product.

In FY22, the Company will release several new games, as well as transition through to the revenue realisation phase of the product life cycle, whilst capitalising on those games already in market.

Mighty Kingdom will also continue to pursue its expansion strategy through organic growth of existing relationships and contracts, continued business development activities, as well as focusing on implementation of our strategies towards developing and releasing more original product.

Audit of accounts

This report is based on the Consolidated Financial Statements and Notes of Mighty Kingdom Limited which are in the process of being audited by Grant Thornton Audit Pty Ltd.

Other information requiring disclosure to comply with ASX listing rule 4.3A is contained in and should be read in conjunction with the Financial Statements, the notes to the Financial Statements and the Directors’ Report for the year ended 30 June 2021 attached to this report.

Signed on behalf of the Board of Mighty Kingdom Limited

==> picture [124 x 43] intentionally omitted <==

Michelle Guthrie Chair 30 August 2021

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

MIGHTY KINGDOM LIMITED

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021

Notes	2021 2020 $ $
Revenue 3 Other income 4 Employee benefits expenses 5 Share-based payment expenses 19 Product development expenses Selling costs Capital raising and IPO expenses Administrative expenses Professional and consultancy fees Other expenses Depreciation and amortisation Loss from operations Finance expenses Finance income Loss before income tax Income tax (expense) / benefit 6 Loss after income tax Other comprehensive income / (loss) for the year, net of income tax Total comprehensive loss for the year Loss per share - basic and diluted 17	3,278,029 2,535,915 2,847,605 1,696,394 (8,930,751) (5,977,390) (1,523,864) - (1,079,538) (872,061) (119,856) (84,840) (178,260) - (719,157) (543,602) (420,975) (104,454) (35,712) (7,467) (204,045) (152,585)
	(7,086,524) (3,510,090) (171,074) (86,204) 52,468 -
	(7,205,130) (3,596,294) 59,529 6,629
	(7,145,601) (3,589,665)
	- -
	(7,145,601) (3,589,665) (0.10) (0.07)

This statement should be read in conjunction with the notes to the financial statements.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

Notes	2021 2020 $ $ 13,553,042 81,656 1,485,875 1,532,956 372,513 32,958 516,481 - 316,676 11,122 16,244,587 1,658,692 1,151,949 837,526 345,822 201,587 1,315,850 468,782 2,813,621 1,507,895 19,058,208 3,166,587 2,191,245 2,985,625 5,275 452,015 144,637 - 1,379,137 1,038,124 53,664 378,788 348,391 93,943 4,122,349 4,948,495 1,269,564 - 99,172 91,455 584,276 830,734 58,304 99,853 1,021,687 388,824 3,033,003 1,410,866 7,155,352 6,359,361 11,902,856 (3,192,774) 24,218,367 3,501,000 1,523,864 - (13,839,375) (6,693,774) 11,902,856 (3,192,774)
Assets Current assets Cash and cash equivalents 7 Trade and other receivables 8 Prepayments Contract assets 13 Other current assets Total current assets Non-current assets Deferred tax asset 6 Property, plant and equipment 9 Right-of-use assets 10 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 12 Contract liabilities 13 Provision for income tax Employee benefits 14 Loans and borrowings 15 Lease liabilities 10 Total current liabilities Non-current liabilities Trade and other payables 12 Employee benefits 14 Deferred tax liabilities 6 Loans and borrowings 15 Lease liabilities 10 Total non-current liabilities Total liabilities Net assets / (liabilities) Equity / (deficit) Share capital 16 Share-based payment reserves 19 Retained losses Total equity/ (deficit)

Notes

2021
2020
$
$
13,553,042
81,656
1,485,875
1,532,956
372,513
32,958
516,481
-
316,676
11,122
16,244,587
1,658,692
1,151,949
837,526
345,822
201,587
1,315,850
468,782
2,813,621
1,507,895
19,058,208
3,166,587
2,191,245
2,985,625
5,275
452,015
144,637
-
1,379,137
1,038,124
53,664
378,788
348,391
93,943
4,122,349
4,948,495
1,269,564
-
99,172
91,455
584,276
830,734
58,304
99,853
1,021,687
388,824
3,033,003
1,410,866
7,155,352
6,359,361
11,902,856
(3,192,774)
24,218,367
3,501,000
1,523,864
-
(13,839,375)
(6,693,774)
11,902,856
(3,192,774)

Assets
Current assets
Cash and cash equivalents
7
Trade and other receivables
8
Prepayments
Contract assets
13
Other current assets
Total current assets
Non-current assets
Deferred tax asset
6
Property, plant and equipment
9
Right-of-use assets
10
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
12
Contract liabilities
13
Provision for income tax
Employee benefits
14
Loans and borrowings
15
Lease liabilities
10
Total current liabilities
Non-current liabilities
Trade and other payables
12
Employee benefits
14
Deferred tax liabilities
6
Loans and borrowings
15
Lease liabilities
10
Total non-current liabilities
Total liabilities
Net assets / (liabilities)
Equity / (deficit)
Share capital
16
Share-based payment reserves
19
Retained losses
Total equity/ (deficit)

This statement should be read in conjunction with the notes to the financial statements.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021

	Share capital Share- based payment reserve Retained losses Total $ $ $ $
Balance at 1 July 2019 Loss for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their Contributions of equity - non- redeemable preference shares Dividends paid or provided for Balance at 30 June 2020 Loss for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their Proceeds from issue of ordinary shares - IPO Shares issued to IPO brokers and corporate advisors IPO costs Share-based payments (Note 19) Conversion of convertible notes, net of transaction costs Balance at 30 June 2021	2,501,000 - (3,104,109) (603,109)
	- - (3,589,665) (3,589,665) - - - -
	- - (3,589,665) (3,589,665)
	capacity as owners: 1,000,000 - - 1,000,000 - - - -
	3,501,000 - (6,693,774) (3,192,774)
	- - (7,145,601) (7,145,601) - - - -
	- - (7,145,601) (7,145,601)
	capacity as owners: 18,000,000 - - 18,000,000 892,249 - - 892,249 (1,907,513) - - (1,907,514) - 1,523,864 - 1,523,864 3,732,631 - - 3,732,631
	24,218,367 1,523,864 (13,839,375) 11,902,856

This statement should be read in conjunction with the notes to the financial statements.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021

Notes	2021 2020 $ $
Operating activities Receipts from customers Payments to suppliers and employees Research and development incentive Other government grant income Other income Interest received Interest paid Net cash (used in) operating activities 21 Investing activities Purchase of property, plant and equipment Net cash (used in) investing activities 9 Financing activities Proceeds from issue of non-redeemable preference shares Proceeds from issue of convertible notes Transaction costs related to issuance of convertible notes Proceeds from issue of shares - IPO Transaction costs related to the IPO Loan repayment made during the year Principal elements of lease payments Loan obtained during the year Net cash provided by financing activities Net change in cash and cash equivalents held Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of year 7 (a)	3,105,666 2,108,204 (11,321,234) (5,110,761) 560,937 958,683 1,532,215 865,617 10,673 - 52,468 - (11,062) (53,175)
	(6,070,337) (1,231,432)
	(214,088) (110,160)
	(214,088) (110,160)
	- 1,000,000 4,000,000 - (384,210) - 18,000,000 - (1,371,979) - (241,265) (43,474) (121,327) (121,327) - 200,000
	19,881,219 1,035,199
	13,596,794 (306,393) (43,752) 262,641
	13,553,042 (43,752)

This statement should be read in conjunction with the notes to the financial statements.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

MIGHTY KINGDOM LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021

1 General Information

Mighty Kingdom Limited is a company limited by shares that is incorporated and domiciled in Australia.

The Group's principal activities are developing a broad portfolio of video games for console, PC and mobile platforms. Mobile games and apps developed and/or published by the Group are made available for customers on different App's stores, including Apple's App Store, Google's Google Play and Valve’s Steam Store. In addition to receiving fees for development work from clients, The Group monetizes its games and apps through In-App purchases and advertising offered to the consumers within games and apps for smartphones and tablets.

2.1 Summary of significant accounting policies

(a) Basis of preparation of the financial report

The financial report includes the unaudited consolidated financial statements and notes of Mighty Kingdom Limited and Controlled Entities (Consolidated Group or Group).

These financial statements are consolidated financial statements that have been prepared in accordance with Australian Accounting Standards. Mighty Kingdom Limited is a for-profit entity for the purpose of preparing the financial statements. The Group’s financial statements have been prepared on an accruals basis and under the historical cost conventions.

(b) Basis of consolidation

The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Mighty Kingdom Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 11.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or the noncontrolling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of profit and loss and other comprehensive income.

Consolidated financial statement presentation

The consolidation financial statements (post combination) incorporate the acquired entity's results as if both entities (acquirer and acquire) had always been combined with incorporate the acquired entity's results as if both entities (acquirer and acquire) had always been combined for the year and the comparative financial year.

(c) Income tax

The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised, or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the entity in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled, and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists, and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(d) Tax consolidation

Mighty Kingdom Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Mighty Kingdom Limited and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Mighty Kingdom Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate Mighty Kingdom Limited for any current tax payable assumed and are compensated by Mighty Kingdom Limited or any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Mighty Kingdom Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.

(e) Fair value of assets and liabilities

The Group measures some of its assets and liabilities at fair value on either a recurring or nonrecurring basis, depending on the requirements of the applicable Accounting Standard.

Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e., unforced) transaction between independent, knowledgeable and willing market participants at the measurement date.

As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.

To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs).

For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use.

The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instrument, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(f) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value, as indicated, less, where applicable, any accumulated depreciation and impairment losses.

(i) Plant and equipment

Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 2.1(i) for details of impairment).

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss in the financial period in which they are incurred.

(ii)

Depreciation

The depreciable amount of all fixed assets, including buildings and capitalised lease assets but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Asset category	Useful life	Depreciation rate
Office
equipment	5 Years	20%
Motor Vehicle	4 Years	25%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are recognised in profit or loss when the item is derecognised. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

(g) Lease

At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts that are classified as short-term leases (lease with remaining lease term of 12 months or less) and leases of low-value assets are recognised as an operating expense on a straight-line basis over the term of the lease.

Initially, the lease liability is measured at the present value of the lease payments still to be paid at the commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate.

Lease payments included in the measurement of the lease liability are as follows:

fixed lease payments less any lease incentives;

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
the amount expected to be payable by the lessee under residual value guarantees;
the exercise price of purchase options, if the lessee is reasonably certain to exercise the options;
lease payments under extension options if lessee is reasonably certain to exercise the options; and
payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

Subsequently, the lease liability is measured by a reduction to the carrying amount of any payments made and an increase to reflect any interest on the lease liability.

The right-of-use assets is an initial measurement of the corresponding lease liability less any incentives and initial direct costs. Subsequently, the measurement is the cost less accumulated depreciation (and impairment if applicable). Right-of-use assets are depreciated over the lease term or useful life of the underlying asset whichever is the shortest.

Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates exercising a purchase option, the specific asset is depreciated over the useful life of the underlying asset.

(h) Financial instruments

(i) Initial recognition and measurement

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e., trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified "at fair value through profit or loss", in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in AASB 15. A financial liability is measured at fair value through profit or loss if the financial liability is:

a contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies;
held for trading; or
initially designated as at fair value through profit or loss.

All other financial liabilities are subsequently measured at amortised cost using the effective interest method.

(ii) Classification and subsequent measurement Financial liabilities

Financial instruments are subsequently measured at:

amortised cost; or
fair value through profit or loss.

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Financial assets

Financial assets are subsequently measured at:

amortised cost.
Measurement is on the basis of two primary criteria:
the contractual cash flow characteristics of the financial asset; and
the business model for managing the financial assets.

A financial asset that meets the following conditions is subsequently measured at amortised cost:

the financial asset is managed solely to collect contractual cash flows; and
the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

Derecognition

Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position.

Derecognition of financial liabilities

A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition of a new financial liability.

The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Derecognition of financial assets

A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred.

All of the following criteria need to be satisfied for derecognition of financial asset:

the right to receive cash flows from the asset has expired or been transferred;
all risk and rewards of ownership of the asset have been substantially transferred; and
the Group no longer controls the asset (i.e. the Group has no practical ability to make a unilateral decision to sell the asset to a third party).

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

(i) Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on:

financial assets that are measured at amortised cost; or
contract assets.

(j) Impairment of non-financial assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use to the

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Impairment testing is performed annually of intangible assets with indefinite lives.

(k) Employee benefits

Short-term employee benefits

Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.

The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position.

Other long-term employee benefits

Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage assumptions for other long term employee benefits, the net change in the obligation is recognised in profit or loss as part of employee benefits expense in the periods in which the changes occur.

The Company’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions.

(l) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

(m) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at-call with banks, other shortterm highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown as borrowings in current liabilities on the statement of financial position.

(n) Revenue

Revenue arises mainly from the development of the interactive entertainment software products, online game services, online advertising services, and licensing services. The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised goods or services to customers at an amount that reflects the consideration the Group expects to receive in exchange for those goods or services.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Revenue is recognised by applying a five-step model as follows:

1. Identifying the contract with customer.

2. Identifying the performance obligation.

3. Determining the transaction price.

4. Allocating the transaction price to the performance obligation.

5. Recognising revenue when / as performance(s) obligations are met.

The total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at point in time or over time. When (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.

The Group reports revenue on a gross or net basis depending on whether the Group is acting as a principal or an agent in a transaction. The Group is a principal if it controls the specified product or service before that product or service is transferred to a customer or it has a right to direct others to provide the product or service to the customer on the Group’s behalf. Indicators that the Group is a principal include but not limited to whether the Group (i) is the primary obligor in the arrangement; (ii) has latitude in establishing the selling price; (iii) has discretion in supplier selection; (iv) changes the product or performs part of the service, and (v) has involvement in the determination of product or service specifications.

The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than passage of time required before the consideration is due.

(i) Work for hire revenue

Work for hire contract is assessed separately using the five-step method above, with the fair value of revenue allocated against the performance obligations in the contract. Variable consideration is considered for each contract and constraint is applied where appropriate. A custom-built game does not have any alternative use with provides us an enforceable right to payments. The works in these game development projects are usually constant or nearly constant throughout the lifetime of a project. Revenue related to development is recognised in accordance with an input method and the straight-line method.

(ii) Co-development revenue

The Group shares the development costs with game publishers and other game developers in Co-development projects. Co-development revenue is contracted revenue. In the contract, the estimated transaction price for the performance obligation includes both fixed ("development revenue") and variable revenue (such as "royalties") and recognised over the term of each contract.

(iii) Original IP revenue

Original IP is concepts and IP originated and owned by the Group. The Group may transfer certain rights to such IP, originated by the Group, to the client for a finite period or in perpetuity, typically earning a combination of fixed consideration in the form of development revenue and variable consideration such as royalties or similar income. Both development revenue and variable revenue are reassessed at each reporting date (with changes in the estimate recognised in the income statement) and recognised over the term of each contract.

Where the Group fully funds the development of its Original-IP and retains legal title to such IP, it will earn game revenues or similar income. The Group may, at times, license such IP to clients with a view to maximising game revenues. The license revenue is recognised on a straight-line method over the license period.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(iv) License revenue

License revenue is revenue that is generated from obtaining a license from licensor with a right to access the client's intellectual property, and includes revenue generated from In-app purchase, advertising or other monetisation methods. The license revenue is recognised over the term of each monetisation process.

(o) Other income

(i) Other income

Other income is recognised when it is received or when the right to receive payment is established.

(ii) Government grant income

Government grants, including non-monetary grants at fair value, are only recognised when there is reasonable assurance that:

all conditions attaching to the Government grant will be complied with;
the value of the grant can be determined with reasonable certainty; and
the grant will be received.

Government grants are recognised in the profit or loss over the periods in which the Group recognises related expenses. Where government grants relate to costs which have been capitalised as non-current assets these are recognised as a reduction to the related noncurrent asset in the consolidated statement of financial position and transferred to profit or loss over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

(p) Foreign currency

Transactions in foreign currencies are translated to the respective functional currencies of the entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currencies at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year adjusted for payments during the year and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates on the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve, in equity. If the foreign operation is not a wholly owned controlled entity, then the relevant proportion of the translation difference is allocated to non-controlling interests. Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

(q) Trade and other receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 2.1(i) for further discussion on the determination of impairment losses.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(r) Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the Company that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

(s) Share Capital

Ordinary shares, and preference shares which do not result in the Group having a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities with the holder under conditions that are potentially unfavourable to the Group, are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(t) Share-based payments

Equity-settled share-based compensation benefits are provided to employees and directors. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and directors in exchange for the rendering of services.

The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Judgements are also applied in relation to estimations of the number of options which are expected to vest, by reference to historic attrition rates and expected outcomes under relevant performance conditions.

The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied.

(u) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from financing and investing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.

(v) Segmental reporting

The Group reports its business activities in one area: video games development, which is reported in a manner consistent with the internal reporting to the Board of Directors, which has been identified as the chief operating decision maker. The Board of Directors consists of the Executive Directors and the Non-Executive Directors.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(w) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

Where the Group retrospectively applies an accounting policy, makes a retrospective restatement of items in the financial statements or reclassifies items in its financial statements, a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements is presented.

(x) Critical accounting estimates and judgements

The Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company.

(i) Impairment - general

The Group assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the Company that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations, which incorporate various key assumptions.

(ii) Employee benefits

For the purpose of measurement, AASB 119: Employee Benefits defines obligations for short-term employee benefits as obligations expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related services. As the Group expects that all its employees would use all their annual leave entitlements earned during a reporting period before 12 months after the end of the reporting period, the Directors consider that obligations for annual leave entitlements satisfy the definition of short-term employee benefits and, therefore, can be measured at the (undiscounted) amounts expected to be paid to employees when the obligations are settled.

(iii) Research and development incentive

Research and development incentive is recognised at fair value when there is reasonable assurance that the income will be received. The expected future R&D tax incentive, for qualifying R&D expenditure for the current financial year, has been accrued and is also recognised as other income in the statement of profit and loss. It has been established that the conditions of this future R&D incentive have been met and that the expected amount of the incentive can be reliably measured.

(iv) Initial public offering costs

The Group undertook an IPO to list on the ASX during the year. Costs incurred that are directly attributable and incremental to the issuance of new equity (net of tax) have been recognised in equity as an offset to the proceeds of capital raised. Management exercised judgement in determining an allocation methodology (between equity and expense) for costs which relate to both the issuance of new equity and other activities. The Group’s methodology was determined with reference to the ratio of the number of new shares issued in raising capital to the number of the existing shares prior to IPO, and the nature and purpose of services rendered in incurring costs. All other costs were expensed in the statement of profit or loss and other comprehensive income during the year.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(v) The Novel Coronavirus (‘COVID-19’)

Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the COVID-19 pandemic.

2.2 New accounting standards and interpretations adopted during the year

The new and amended accounting standards, and Interpretations which came into effect on 1 July 2020 do not have impact to the Group's financial statements.

The 30 June 2021 financial statements, and respective notes to the financial statements have been prepared in accordance with the new and amended accounting standards. The accounting policies in the notes below have also been updated to reflect the new and amended accounting standards in effect during the period.

In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final agenda decision, Configuration or customisation costs in a cloud computing arrangement. The decision discusses whether configuration or customisation expenditure relating to cloud computing arrangements is able to be recognised as an intangible asset and if not, over what time period the expenditure is expensed.

The Group’s accounting policy has not capitalised any costs related to cloud computing arrangements as intangible assets in the Statement of Financial Position. Therefore, there are no impacts to the Group's current and historical financial statements.

2.3 Standards issued but not yet effective

There are a number of new accounting standards and amendments issued, but not yet effective, none of which have been early adopted by the Group in this Financial Report. The new standards and amendments (noted below), when applied in future periods, are not expected to have a material impact on the financial position of the Group.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

3 Revenue

	2021 2020 $ $
Co-development and original IP Licence revenue Work for hire	1,613,953 1,193,860 392,564 477,014 1,271,512 865,041
	3,278,029 2,535,915
Recognised over time	3,278,029 2,535,915

4 Other income

Government grant income - Jobkeeper subsidy - SA video game development grant - Other grants Research and development tax incentive(i) Other income	1,518,858 657,642 350,000 - 13,357 471,716 954,717 560,937 10,673 6,099
	2,847,605 1,696,394

(i) The Research and development tax Incentive is a government programme that aims to stimulate Australian investment in Research and development ("R&D"). The tax incentive reduces company R&D costs by offering tax offsets or tax refund for eligible R&D expenditure.

5 Employee benefit expenses

Wages and salaries Contributions to defined contribution superannuation funds Annual and long service leave expense Covid-19 leave expense(ii) Payroll tax expense Other employee benefits	7,493,917 4,596,773 805,708 428,695 270,884 246,061 77,846 540,104 35,456 150,371 246,940 15,386
	8,930,751 5,977,390

(ii) The Group introduced Covid-19 leave in April 2020 to compensate people for working more than their paid work hours which was adjusted under Covid-19 pandemic. This leave can be taken by the employee or bought back by the Group after the work conditions relating to the pandemic have subsided.

6 Income tax (benefit) / expense

6 Income tax (benefit) / expense
The components of income tax expense comprise:	2021 $ 2020 $
Current tax expense Deferred tax expense / (income)	144,637 - (204,166) (6,629)
	(59,529) (6,629)

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the company's applicable income tax rate is as follows:

Loss before income tax expense Tax at the statutory tax rate of 26% (2020: 27.5%) Income not subject to taxation Expenses not deductible for taxation Tax losses and deductible temporary differences not recognised Change in the tax rate Under-provision from prior year Utilisation of unrecognised tax losses Income tax (benefit) / expense	(7,205,130) (3,596,294) (1,873,334) (988,981) (248,226) (168,008) 1,267,665 361,102 649,369 791,461 370 - 144,637 - - (2,203)
	(59,529) (6,629)

The Group did not recognise deferred income tax assets in respect of unrecognised tax losses of $7,111,192 as at 30 June 2021 (2020: $3,327,349) that can be carried forward against future taxable income.

Mighty Kingdom Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation from 1 July 2020. The head entity, Mighty Kingdom Limited and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Mighty Kingdom Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

7 Cash and cash equivalents

	2021 $ 2020 $
Cash and cash equivalents consist of the following Cash at bank and in hand: - AUD - USD	13,063,857 6,428 489,185 75,228
	13,553,042 81,656

7 (a) For the purposes of the consolidated statement of cash flow, the consolidated cash and cash equivalents comprise the following:

Cash and bank balances Less: Bank overdrafts (Note 15) Cash and cash equivalents per consolidated statement of cash flow	13,553,042 81,656 - (125,408)
	13,553,042 (43,752)

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

8 Trade and other receivables

	2021 2020 $$
Trade receivables Less: provision for expected credit losses Other receivables Research and development incentive receivable Related party receivables - Amount receivable from director / shareholder	152,729 638,656 - - 353,726 315,368 954,717 560,937 24,703 17,995
	1,485,875 1,532,956

All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.

9 Property, plant and equipment

		Office
	Motor Vehicle	Equipment	Total
	$	$	$
Gross carrying amount
Balance at 1 July 2020	31,709	295,790	327,499
Additions during the year	-	214,088	214,088
Disposals during the year	-	-	-
Balance at 30 June 2021	31,709	509,878	541,587
Depreciation and impairment
Balance at 1 July 2020	(31,709)	(94,203)	(125,912)
Depreciation during the year	-	(69,853)	(69,853)
Disposals during the year	-	-	-
Balance at 30 June 2021	(31,709)	(164,056)	(195,765)
Carrying amount at 30 June 2021	-	345,822	345,822
Gross carrying amount
Balance at 1 July 2019	31,709	185,630	217,339
Additions during the year	-	110,160	110,160
Disposals during the year	-	-	-
Balance at 30 June 2020	31,709	295,790	327,499
Depreciation and impairment
Balance at 1 July 2019	(31,709)	(43,898)	(75,607)
Depreciation during the year	-	(50,305)	(50,305)
Disposals during the year	-	-	-
Balance at 30 June 2020	(31,709)	(94,203)	(125,912)
Carrying amount at 30 June 2020	-	201,587	201,587

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

10 Lease

10 Lease
	2021 2020
	Property Total $ $
Right-of-use assets Balance at 1 July 2020 Additions during the year Disposals and transfers during the year Total right-of-use-assets Depreciation during the year Net carrying value at the end of the year	468,782 468,782 981,257 981,257 - - 1,450,039 1,450,039 (134,189) (134,189) 1,315,850 1,315,850

	Property Total $ $
Right-of-use assets Balance at 1 July 2019 Additions during the year Disposals and transfers during the year Total right-of-use-assets Depreciation during the year Net carrying value at the end of the year	- - 571,061 571,061 - -
	571,061 571,061
	(102,279) (102,279)
	468,782 468,782

	2021 2020 $ $
Lease liabilities (current) Lease liabilities (non-current)	348,391 93,943 1,021,687 388,824
	1,370,078 482,767

The Group has leases for office buildings. Each lease is reflected in the consolidated statement of financial position as a right-of-use asset and a lease liability. Variable lease payments which do not depend on an index or a rate (such as lease payments based on a percentage of Group sales) are excluded from the initial measurement of the lease liability and asset. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment (see Note 9).

Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset to another party, the right-of-use asset can only be used by the Group. For leases over office buildings the Group must keep those properties in a good state of repair and return the properties in their original condition at the end of the lease. Further, the Group must insure right-of-use assets and incur maintenance fees on such items in accordance with the lease contracts.

The Group entered into a new lease agreement for an office building during the year. The lease has term of 34 months starting from June 2021. The lease rental is subject to annual fixed rate review and doesn’t have options to purchase or extension.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

The table below describes the nature of the Group’s leasing activities by type of right-of-use asset recognised in the consolidated statement of financial position.

	No of		No of	No of	No of leases
	right-		leases	leases	with variable	No of	Average
Right-	of use	Range of	with	with	payments	leases with	remaining
of use	asset	remaining	extension	options to	linked to an	termination	lease
asset	leased	term	options	purchase	index	options	term
Office
building	2	1-3 years	1	Nil	Nil	Nil	2 years

11 Shares in controlled entities

11 Shares in controlled entities
	Equity Interest	Held
	2021	2020
	%	%
Name and interest in controlled entity
Mighty Kingdom Games Pty Ltd	100	100
Mighty Kingdom Services Pty Ltd	100	100
Mighty Kingdom IP Pty Ltd	100	100
Rise Games Pty Ltd	100	100

(a) The subsidiaries listed above have share capital consisting solely of ordinary shares, which are held directly by the Group.
(b) Each subsidiary’s principal place of business is Australia which is also its country of incorporation or registration.

12 Trade and other payables

	2021 2020 $ $
Current Trade payables Accrued expenses Taxes payable(a) Payroll liabilities Other payables Amounts payable to related entities - Amount payable to director / shareholder Non-current Taxes payable(a)	501,893 171,654 300,364 129,707 600,000 2,066,627 741,445 393,933 42,623 218,784 4,920 4,920
	2,191,245 2,985,625
	1,269,564 -

(a) On 20 November 2020, Mighty Kingdom Services Pty Ltd has arranged an interest-free payment plan with the Australian Taxation Office (ATO) to repay the outstanding tax liabilities over the next four years, which related to its outstanding GST and PAYG withholding obligations. ("New Payment Plan"). This New Payment Plan is replacement to the arrangement that was previously in place as of 30 June 2020.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Conditions of the New Payment Plan:

Make payments on due dates stipulated on the arrangement. The dates are regular instalments until August 2024; and
Lodge and pay all ongoing tax obligations by their due dates.

The breach of any conditions above results payment of the full amount and any accrued general interest charge (GIC).

The Group complied with the above conditions as of 30 June 2021.

13 Contract assets and liabilities

Contract assets

Contract assets
	2021	2020
	$	$
Contract assets(a)	516,481	-

(a) Contract assets relates to work that has been undertaken in relation to ongoing projects where the revenue is recognised over time but had not been billed as at the reporting date.

Contract liabilities

Contract liabilities
Current
Deferred service income(a)	5,275	452,015

(b) Deferred service income represents customer payments received in advance of performance that are expected to be recognised as revenue in the next financial periods.

Unsatisfied performance obligations

The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $5,275 as at 30 June 2021 ($452,015 as at 30 June 2020) and is expected to be recognised as revenue in future periods as follows:

Within 6 months 6 to 12 months 12 to 18 months 18 to 24 months	5,275 452,015 - - - - - -
	5,275 452,015

14 Employee benefits

Current Provision for annual leave Provision for Covid-19 leave Provision for long service leave	727,942 380,571 345,433 540,104 305,762 117,449
	1,379,137 1,038,124
Non-current Provision for long service leave	99,172 91,455

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

15 Loans and borrowings

		2021 2020 $ $
	Current Obligations under finance leases and hire purchase contracts Unsecured loan from South Australian Film Corporation (SAFC)(a) Bank overdraft Secured bank loan(b)	- 1,821 - 200,000 - 125,408 53,664 51,559
		53,664 378,788
	Non-current Secured bank loan(b)	58,304 99,853
		58,304 99,853
	Summary of secured bank loans Commonwealth Bank of Australia Commonwealth Bank of Australia Secured loans at beginning of the year Loan repayments made during year New borrowings during the year Secured loans at end of the year	111,968 151,412 151,412 184,560 (39,444) (33,148) - -
		111,968 151,412

(a) South Australian Film Corporation (SAFC) facility

The SAFC has agreed to lend the Group $200,000 loan amount for working capital cashflow purposes.

The loan was originally repayable on or before 30 September 2020. However, on request the SAFC board has approved an extension to the repayment until 31 March 2021 and fully settled on the same date.

(c) Commonwealth Bank of Australia facility

Mighty Kingdom Limited and its controlled entities, negotiated with the Commonwealth Bank of Australia to provide a finance facility to the Mighty Kingdom Limited amounting to $250,000 at a variable rate of 6.85% p.a. As at 30 June 2021 carrying amount of the loan amounted to $111,968 (2020: $151,412).

This loan is repayable monthly within five years by 4 July 2023.

The facilities are secured by Mighty Kingdom Games Pty Ltd comprising: first ranking charge over all present and subsequently acquired property and a guarantee limited to $400,000 by the Managing Director and $400,000 by a close family member of the Managing Director.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

16 Share capital

		2021	2020	2021	2020
	Notes	Shares	Shares	$	$
Ordinary shares - fully paid	(a)	151,682,493	7,500,000	24,218,367	1,000
Non-redeemable preference shares	(b)	-	2,810,605	-	3,500,000
(a) Movements in ordinary	share capital

(b)		Number of Total Shares $
	Balance at beginning of the year Shares split during the year(i) Shares issued on conversion of Preference Shares(ii) Restructured number of shares prior to IPO / note conversion Shares issued, net of transaction costs(iii) Shares issued on conversion of Convertible Notes, net of transaction costs(iv) Shares issued to advisers(v) Balance at end of the year	7,500,000 1,000 45,000,000 - 19,541,659 3,500,000
		72,041,659 3,501,000 60,000,000 16,092,487 16,666,667 3,732,631 2,974,167 892,249
		151,682,493 24,218,367
	Movements in preference share capital	Number of Total Shares $
	Balance at beginning of the year Issued during the year Shares split during the year Shares converted into ordinary shares Balance at end of the year	2,810,605 3,500,000 - - 16,731,054 - (19,541,659) (3,500,000)
		- -

(i) The number of shares on issue at 1 July 2020 was 7,500,000 fully paid shares which were restructured following a 1 for 7 split on 9 November 2020 and became 52,500,000 ordinary shares.

(ii) Preference shares rank in almost all respects equally with the ordinary shares in the share capital of the Company. In the event of the Company reconstructs its share capital, the number of ordinary shares into which a non-redeemable preference share may be converted must be reconstructed in the same manner.

Under the terms of share subscription agreement, the preference share will convert to shares immediately prior to the issue of new shares to investors.

Seed preference share were converted into ordinary shares at the rate of 1 seed preference share for 1 ordinary share and became 19,541,659 ordinary shares immediately prior to the public listing.

(iii) The Company issued 60,000,000 IPO shares on 20 April 2021. The shares were valued at $18,000,000 at $0.30 per share.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

(iv) During the reporting period the Company issued 4,000,000 convertible notes (pre-IPO notes) with a face value of $1.00 each to sophisticated and institutional investors to raise $4,000,000 (before costs) in pre-IPO funding. Under the terms of the convertible note deed poll, the notes would convert to shares based on the IPO or sale event conversion price through a successful IPO before 20 April 2021.

Convertible notes were converted into ordinary shares at the rate of 1 convertible note for 4.1667 ordinary shares and became 16,666,667 ordinary shares immediately prior to the public listing.

Convertible notes movement
	2021 2021 Number $
Balance at 1 July 2020 Issue of convertible notes Transaction costs Addback of finance cost on convertible notes now expensed Conversion of convertible notes Balance at 30 June 2021	- - 4,000,000 4,000,000 - (384,210) - 116,841 16,666,667 (3,732,631)
	- -

(v) The Company issued 1,487,083 shares (each) to the Lead Manager and Corporate Advisor for the IPO, as remuneration and success fees under their mandates related to the IPO. The shares were valued at $892,249 in total and included in the cost of IPO. shares issued at $0.30 per share.

(vi) Shareholder Option Shares

The Company issued 4,679,500 Options to Investors in a pre-IPO capital raising on 17 February 2021. Each Shareholder Option entitles the holder to one Share on exercise of the Shareholder Option.

A Shareholder Option may be exercised at any time between the Listing Date and the date falling 5 years from the applicable grant date at an exercise price of $0.15 per Option.

There are no vesting conditions applicable to Shareholder Options.

17 Loss per share

Both the basic and diluted loss per ordinary share is calculated by dividing the net loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

	2021	2020
Net loss attributable to equity holders of the Company	(7,145,601)	(3,589,665)
Weighted average number of ordinary shares	71,793,033	52,500,000
Basic / diluted loss per share ($)	(0.10)	(0.07)

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

18 Share-based payment reserves

The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services.

19 Share-based payments

During the reporting year, the Company issued the following options:

					Value per
	Number		Vesting		option at	Exercise
	granted	Grant date	date	Expiry Date	grant date($)	price($)
Employees via ESOP	12,488,859	20 Nov 2020	21 Apr 2021	20 Nov 2025	0.10	0.15
Non-Executive Directors	649,252	16 Dec 2020	16 Dec 2020	15 Dec 2023	0.15	0.30
Non-Executive Directors	486,939	3 Mar 2021	3 Mar 2021	2 Mar 2024	0.15	0.30
Non-Executive Directors	486,939	10 Mar 2021	10 Mar 2021	9 Mar 2024	0.15	0.30

	Number of options 2021 $
Employees via ESOP(i) Non-Executive Directors(ii) Total share-based payment reserves	12,488,859 1,273,864 1,623,130 250,000
	14,111,989 1,523,864

The Company has applied the Black-Scholes Valuation Model to determine the fair value of the options granted which considers the exercise price, the term of the options, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Valuation input - Black Scholes	ESOP	Non-Executive Directors
Strick price (nominal value)	$0.15	$0.30
Current price	$0.14	$0.24
Time to expiration (years)	5	3
Risk free rate	0.12%	0.12%
Dividend yield	0%	0%
Volatility (assumed)	106.38%	106.38%
Number of units	12,488,859	1,623,130
Black-Scholes valuation (per option)	$0.102	$0.154
Total Valuation	$1,273,864	$250,000

(i) Employee share options

The Company operates an option plan for employees.

The Employee Share Option Plan ("ESOP") allows for the grant of employee share options to any employee, contractor or Director of a Group Company selected by the Board. Each employee share option entitles the holder to one share on the exercise of the employee share option.

Employee share options will vest automatically on the listing date and the option expiry date is the fifth anniversary of the grant date.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

The table below shows the number and movement in, share options during the period:

	Number of options
Balance at 1 July 2020 Granted during the period Exercised during the period Balance at 30 June 2021	- 12,488,859 -
	12,488,859

(ii) Non-Executive Director share options

During the year the Company issued 1,623,130 share options to Non-Executive Directors, by way of an initial equity- based sign-on incentive. Each Option issued entitles the holder to one ordinary share in the Company on exercise and is exercisable within 3 years of the grant date.

Non-executive director share options vest immediately upon the option grant.

	Number of options
Balance at 1 July 2020 Granted during the period Exercised during the period Balance at 30 June 2021	- 1,623,130 -
	1,623,130

(iii) Lead Manager & Corporate Advisor shares

The Lead Manager and Corporate Advisor was issued 1,487,083 (each) shares at $0.30 per share as remuneration and success fees under their mandates related to the IPO. These shares have been recognised in the consolidated statement of financial position as a cost against the successful IPO.

20 Related party transactions

The Company’s related parties are as follows:

(a) Key management personnel of the Company

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the entity, is considered key management personnel.

(b) Other related parties of the Company

Other related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel, individually or collectively with their close family members.

(c) Transactions and outstanding balances with related parties

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties (i.e., at arm’s length) unless the terms and conditions disclosed below state otherwise. The following transactions occurred with related parties:

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

	2021 2020 $ $
Key management personnel Key management personnel compensation: Short-term employee benefits Post-employment benefits Long-term employment benefits Share-based payments	869,971 464,799 65,755 34,372 121,449 52,827 1,295,898 -
	2,353,073 551,998
Other related parties – director-related entities Amount due from – Managing Director & close family member Amount due to – Managing Director & close family member Bank guarantees provided by – Close family member of the Managing Director (Note 15) Bank guarantees provided by – Managing Director (Note 15)	24,703 17,995 4,920 4,920 400,000 400,000 400,000 400,000

21 Cash flow information

Reconciliation of cash flow from operations with loss after income tax

	2021 2020 $ $
Loss after income tax Non-cash flows in profit or loss: Depreciation expense Interest expense Non-cash share-based payments Non-cash interest payments on convertible notes Deferred tax (income) / expense Changes in assets and liabilities: Decrease / (increase) in trade and other receivables (Increase) in contract assets (Increase) in prepayments and other current assets Increase in trade and other payables Increase in employee benefits (Decrease) / increase in contract liabilities Net cash (used in) operating activities	(7,145,601) (3,589,665) 204,045 152,584 27,381 33,033 1,523,864 - 116,841 - (204,166) (6,629) 47,079 (322,910) (516,481) - (645,109) - 619,821 1,517,667 348,729 959,733 (446,740) 24,755
	(6,070,337) (1,231,432)

2021
2020
$
$

Loss after income tax
Non-cash flows in profit or loss:
Depreciation expense
Interest expense
Non-cash share-based payments
Non-cash interest payments on convertible notes
Deferred tax (income) / expense
Changes in assets and liabilities:
Decrease / (increase) in trade and other receivables
(Increase) in contract assets
(Increase) in prepayments and other current assets
Increase in trade and other payables
Increase in employee benefits
(Decrease) / increase in contract liabilities
Net cash (used in) operating activities

(7,145,601)
(3,589,665)
204,045
152,584
27,381
33,033
1,523,864
-
116,841
-
(204,166)
(6,629)
47,079
(322,910)
(516,481)
-
(645,109)
-
619,821
1,517,667
348,729
959,733
(446,740)
24,755

(6,070,337)
(1,231,432)

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

==> picture [36 x 22] intentionally omitted <==

Signed in accordance with a resolution of the Directors

==> picture [120 x 40] intentionally omitted <==

Michelle Guthrie

Chair 30 August 2021

The release is approved by the Board of Mighty Kingdom Limited.

Mighty Kingdom Limited Appendix 4E – FY21 Preliminary Final Report

AI assistant

FORTIFAI LTD — Annual Report 2021

64950_rns_2021-08-30_47357c85-0003-44b8-8622-4ed6c920c034.pdf

CONTENTS

Company Details

Name of entity: ABN: Reporting period: Previous period

Results for announcement to the market

Summary

Net tangible assets

Review and results of operations

Initial public offering (“IPO”)

Convertible notes

Issuance of Share Options

Review of results

The Group has successfully executed its business strategies on the following matters:

Game Revenue ($'000)

Forward strategy and outlook

Audit of accounts

Signed on behalf of the Board of Mighty Kingdom Limited

MIGHTY KINGDOM LIMITED

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021

MIGHTY KINGDOM LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021

MIGHTY KINGDOM LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021

1 General Information

2.1 Summary of significant accounting policies

(a) Basis of preparation of the financial report

(b) Basis of consolidation

Consolidated financial statement presentation

(c) Income tax

(d) Tax consolidation

(e) Fair value of assets and liabilities

(f) Property, plant and equipment

(i) Plant and equipment

(ii)

Depreciation

(g) Lease

(h) Financial instruments

(i) Initial recognition and measurement

(ii) Classification and subsequent measurement Financial liabilities

Financial assets

Derecognition

Derecognition of financial liabilities

Derecognition of financial assets

(i) Impairment of financial assets

(j) Impairment of non-financial assets

(k) Employee benefits

Short-term employee benefits

Other long-term employee benefits

(l) Provisions

(m) Cash and cash equivalents

(n) Revenue

(i) Work for hire revenue

(ii) Co-development revenue

(iii) Original IP revenue

(iv) License revenue

(o) Other income

(i) Other income

(ii) Government grant income

(p) Foreign currency

(q) Trade and other receivables

(r) Trade and other payables

(s) Share Capital

(t) Share-based payments

(u) Goods and services tax (GST)

(v) Segmental reporting

(w) Comparative figures

(x) Critical accounting estimates and judgements

(i) Impairment - general

(ii) Employee benefits

(iii) Research and development incentive

(iv) Initial public offering costs

(v) The Novel Coronavirus (‘COVID-19’)

2.2 New accounting standards and interpretations adopted during the year

2.3 Standards issued but not yet effective

3 Revenue

4 Other income

5 Employee benefit expenses

6 Income tax (benefit) / expense

FORTIFAI LTD Annual Report 2021