GAMING REALMS PLC — Earnings Release 2014

Apr 22, 2015

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RNS Number : 9243K

Gaming Realms PLC

22 April 2015

Gaming Realms plc

(the "Company" or the "Group")

Preliminary Results for the period ended 31 December 2014

Trading update for the quarter ended 31 March 2015

Launch of proprietary platform has led to strong growth in revenue and mobile play

Gaming Realms plc, the creator and developer of interactive next generation online gaming products, today announces its results for the fifteen month period ended 31 December 2014. Additionally, the Group provides a trading update for the first quarter of 2015.

First Quarter Trading Update

·      Quarter on quarter revenue up 23% to £3.8m (Q4/14: £3.1m)

·      Quarter on quarter real money gambling revenue up 80% to £1.8m (Q4/14: £1.0m)

·      New depositing players increased 51% to 35,857 (Q4/14: 23,731)

·      Daily average depositors increased 20% to 7,233 (Q4/14: 6,003)

·      Launch of proprietary platform has led to strong growth in revenue and mobile play

·      68% of revenue on new developed platform coming from mobile

·      Migration of PocketFruity gaming brand to our new proprietary platform

Full Period 2014 Financial Highlights

·     Revenue increase of 1,174% to £11.2m for the fifteen months trading to 31 December 2014 (2013: £0.9m)

·     Adjusted EBITDA* loss of £7.8m (2013: £2.3m)

·     Marketing investment of £10.2m (2013: £1.8m) and amortisation of intangibles of £1.3m (2013: £0.2m)      resulted in a loss before taxation of £9.8m (2013: £3.4m)

·     Strong balance sheet with cash and cash equivalents of £4.0m as of 31 December 2014 (2013: £5.2m)

Full Period 2014 Operational Highlights

·      Acquisition of QuickThink Media and Blueburra Holdings

·      Delivery of new in-house scalable platform targeted at mobile and social elements

·      Obtained licences from Alderney Gambling Control Commission and the UK Gambling Commission

·      Launch of SpinGenie gaming brand delivered immediate strong results

Michael Buckley, Chairman, said:

"The Group has remained focussed on delivering multi-platform real money gambling to the casual gambling market through new content and social elements. Gaming Realms delivered a transformational year in 2014, the acquisition of QuickThink Media and Blueburra Holdings has enabled us to grow the customer base more rapidly. The completion of our proprietary platform and the successful inception of the SpinGenie brand have provided us with the foundations to deliver our unique gaming offering."

"This progress combined with the investment in marketing our brands has led to excellent growth in 2014 where revenues increased 1,174% to £11.2m and we experienced strong growth in the first quarter of this year with new and daily depositors up 51% and 20% respectively. Revenue has grown 23% in the first quarter of 2015 as we focus on growing our new platform where 68% of our gambling revenues are coming from mobile and tablet play."

* Adjusted EBITDA is a non-GAAP measure and excludes listing, acquisition, restructuring, other expenses and share based payment charges

- Ends -

For more information contact:

Gaming Realms Patrick Southon, Chief Executive Mark Segal, Chief Financial Officer	+44 (0) 84 5123 3773
Cenkos Securities (Nomad and Broker) Max Hartley (Nomad), Nick Searle (Sales)	+44 (0) 20 7397 8900
Bell Pottinger Olly Scott James Newman	+44 (0) 20 3772 2500

About Gaming Realms

Gaming Realms Limited is an online gaming business formed by the founders of Cashcade Limited (operator the Foxy Bingo brand) in 2012 to develop a new generation of social bingo and slot machine gaming concepts.

Chairman's Statement

I am pleased to announce strong growth in the 15 month period ended 31 December 2014.

Gaming Realms has delivered solid growth in 2014 with revenues having increased to £11.2m (2013: £0.9m) with an adjusted EBITDA loss to £7.8m (2013: £2.3m) reflecting the Group's investment in player acquisition and platform development.

Acquisitions

In December 2013 Gaming Realms acquired QuickThink Media Limited, an award winning specialist online gambling marketing agency for £2.3m. The addition of the QuickThink Media team has enhanced the Group's strategy of acquiring players across its brands.

On 5 September 2014 Gaming Realms acquired Blueburra Holdings Limited for up to £10.5m. Voted best Bingo Affiliate (bingoport.com) this has enhanced the marketing capabilities of the Group even further.

These two businesses are important building blocks in both marketing and data acquisition to support the Group's overall strategy.

Strategy

Gaming Realms strategy has remained focussed on delivering real money gambling to the casual gaming market through new content and social elements across multi-platforms. We have built our new proprietary platform and have launched SpinGenie which is specifically designed for the mobile led platform. The period also saw the successful migration of PocketFruity to the platform. We have been very successful in acquiring new players with 138,852 new depositing players acquired across the Group's brands in the period (2013: 18,881).

The new platform is delivering very strong growth and results on mobile. We are seeing 62% of our players using a mobile device with over 60% of new users registering and depositing on mobile.

We are looking to add new unique content onto the platform and announced in December 2014 the exclusive licence for a real money gambling version of Slingo from RealNetworks which is an exciting format for the platform. At its peak, Slingo achieved 52 million unique monthly active players worldwide and it lends itself very well to the mobile gaming market. We have added social gaming features into the player experience which has increased player retention and ultimately player lifetime values.

Financial Review

In line with the trading update issued on the 23 March 2015, Gaming Realms is pleased to announce solid growth throughout 2014 with revenue rising to £11.2m (2013: £0.9m) and a corresponding increase of adjusted EBITDA loss to £7.8m (2013: £2.3m) as the Group has invested in player acquisition and platform development. Investment in player acquisition has led to an increase in average daily active depositing players to 4,198 (2013: 1,012). As at 31 December 2014 the Group had no debt and held £4.0m (2013: £5.2m) in cash.

Outlook

With our heavy investment in player acquisition and platform development, the Board believe Gaming Realms is well placed to continue growth throughout 2015. We have seen very positive results in the first quarter of 2015, with net gaming revenue from real money on our platform increasing 80% quarter on quarter to £1.8m (Q4/14: £1.0m).

Financial key performance indicators

	2014 £000s	2013 £000s
Revenue	11,227	881
Adjusted EBITDA	(7,818)	(2,323)
EPS from continuing operations (pence)	(5.90)	(9.34)
Total Assets	23,298	12,563
Cash and cash equivalents at the period end	4,014	5,185
Average monthly depositing players (number)	9,257	9,153
Average daily active depositing players (number)	4,198	1,012

Market Positioning

UK market consists of only 1.73m online slot players and 2.48m online bingo players as at May 2014. (Source: Kadence Online Bingo Market sizing May 2014)

After only 6 months of operation SpinGenie now accounts for 1.2% of the 1.73m UK slot market; management believes this is not only indicative of good growth to-date but also demonstrates the size of the opportunity as yet untapped by the Group's products.

Prior to the launch of SpinGenie the UK gambling landscape was roughly 92% playing on desktop which contrasts starkly against the 68% mobile and tablet devices which SpinGenie exhibits, again further evidence of the opportunity that the Group has within the UK market place.

4G was introduced to the UK two and a half years ago. Since then the number of subscribers has exceeded 15m growing at more than double the rate of 3G subscriptions. (Source: wired.co.uk January 2015). The proliferation of 4G will result in mobile data usage growing 70% year on year with average data use on 4G being three times more than 3G average per user. (Source: digitalspy December 2014).

Ad network InMobi asserts mobile media time spent by consumers now exceeds TV usage and also PC internet usage with 25% of this time spent playing games and listening to music. (Source: InMobi February 2014).

The newly developed Gaming Realms platform and products, such as SpinGenie, are built to take advantage of the uptake in 4G and mobile media time. The platform and brand are designed for mobile play which will be the preferred consumption touch point from 2015. Encouragingly we are already seeing increased registrations and deposits on the latest devices and screens. The Board believes that Gaming Realms is well positioned to capitalise on these market factors.

Chief Executive's Statement

We have built a new range of products to enable users to gamble via new touch points such as mobile.

Development

We are continuing to see a shift in player behaviour towards mobile play and social games. We took the decision in November 2013 to accelerate our expansion to exploit this market with the investment in our social gaming platform for real money gambling games. Our subsidiary, Bear Group Limited, obtained licences from the Alderney Gambling Control Commission and the UK Gambling Commission and launched its first brand SpinGenie in September 2014. This has been a major undertaking for the Group.

SpinGenie has been built to work cross platform and specifically for mobile acquisition and play. It has also accommodated social gaming elements of levels and rewards to encourage increased player engagement. We have been very pleased with the last six months growth on SpinGenie with over 22,000 new depositing players up to 31 March 2015. Over 60% of the players are registering via mobile or tablet devices and the easy sign up process has resulted in much lower cost per acquisition ("CPA") than we have been seeing in other casinos we have marketed.

Such was the success that in March 2015 we also migrated our existing real money gambling brand PocketFruity onto the new platform. This has seen synergies in terms of maintaining only one platform but also seen increased deposits and number of daily players since the successful migration. We are optimistic we can also see rapid growth from PocketFruity.

Marketing

A very important part of our strategy is being able to achieve a position as active market leader in terms of player acquisition. To this end we have acquired two award winning businesses. QuickThink Media is a specialist online gambling marketing agency which we have utilised to acquire players across our portfolio of brands. In the financial period, the Group marketing spend was £10.2m (2013: £1.75m) acquiring a total of 138,852 new depositing players at an overall CPA of £73.50. QuickThink Media also marketed a number of white label sites including a joint venture with Iceland Bingo.

In September 2014, the Group acquired Blueburra Holdings which brought with it a number of white label bingo brands and affiliate portal bingoport.com. With both these assets, the Group has gained a large database of valuable players to whom we are able to cross-sell effectively across all the sites in order to prolong activity within the portfolio of products. Since acquisition we have also achieved operational synergies with the integration of Blueburra Holdings into the Group.

Licensing deals focusing on innovative content

Gaming Realms will continue to invest heavily in marketing and grow the SpinGenie and PocketFruity brands. We will also continue to enhance the player experience as we add more unique content to the platform. We are excited by the potential for Slingo and aim to add more social elements into the gaming experience and further reduce CPA.

We believe licensing deals exemplified by the RealNetworks deal, are of particular interest to our key market segment: the UK female market. This market has to date been under represented in the UK due to the heavy focus on Sports books. Early statistics support this hypothesis with 60% of players being female on SpinGenie as well as providing a higher revenue per player.

Above all player protection is key

Lastly, as well as the focus on marketing and revenue, the Group remains focussed on providing the highest levels of player protection and fraud control as part of its ongoing UK and Alderney licensing obligations. We will continue to refine and develop this so as to preclude as far as possible both minors and persons prone to addiction.

Case Study: SpinGenie

SpinGenie is the first brand to be launched on our new proprietary platform. The platform has been designed and built to target the mobile casual gambling market. We have seen 61% of registrations via a mobile device and 3.7 times more sessions on mobile than desktop. In total 68% of our active players have played on a mobile device. We have used the platform to add unique content such as Slingo and progressive levels which has increased player engagement. The result has been an increase of 80% month on month for deposits and 61% for daily active players. The CPA has been dropping with increased spends as we have been able to make changes to the product as well as optimise the overall spends per channel.

Our Strategy

Gaming Realms will grow its business by offering its products to a substantial and growing customer base; through a unified technology platform which deploys the latest customer acquisition, retention and monetisation techniques.

Acquisition

·    developed new proprietary platform in order to acquire through mobile and add in attribution models

·    launch of SpinGenie brand has had positive effect on acquisition, driving more new depositing players to the platform

·    acquisition of QuickThink Media and Blueburra Holdings has increased marketing power for own platform

Retention

·    SpinGenie has been built with in-game levels and for players to achieve targets. This has increased retention to 50% in their second month

·    we have implemented Algorithmic CRM across all platforms with increased retention and monetisation of players

·    we have built in-game notifications for players to increase retention on the site

·    we have built engaging mobile proposition with almost four times more sessions on this device versus traditional desktop

Monetisation Chart

·    we have built a strong team for VIP management to build relationships to increase revenues and retention from the player segment

·    we have implemented payment via mobile phone to attract a wider base of players. This accounts for c. 20% of deposits on the platform

The Group's work on delivering a platform which is scalable, mobile focussed and with built in social gaming elements is at the center of our strategy. The platform and more unique content, such as Slingo, are deployed for this purpose in order to:

·      target the casual gambling market;

·      shared distribution via web, tablet and mobile platforms; and

·      deploy common success factors in customer acquisition and retention, design and monetisation

This strategy is attractive by virtue of:

·      the platform is now scaling rapidly with 79% month on month growth in deposits to March 2015;

·      an experienced management team with a strong track record;

·      a well-defined market; and

·      strong potential for growth in shareholder value.

Consolidated Statement of Profit and Loss and Other Comprehensive Income

For the period 1 October 2013 to 31 December 2014

	Note			1 October 2013 to 31 December 2014			2 July 2012 to 30 September 2013
				£			£
							As restated (Note 17)
Revenue				11,227,206			881,060
Marketing expenses				(10,205,720)			(1,750,777)
Operating expenses				(2,460,178)			(348,260)
Administrative expenses				(6,379,613)			(1,105,366)
				___________			___________
Adjusted EBITDA*				(7,818,305)			(2,323,343)
Listing and acquisition costs				(140,773)			(436,341)
Restructuring costs				(80,839)			-
Share-based payment arising on reverse transaction	17			-			(431,392)
Share-based payment				(438,169)			(36,471)
				____________			____________
EBITDA				(8,478,086)			(3,227,547)
Amortisation of intangible assets				(1,277,357)			(169,686)
Depreciation of property, plant and equipment				(41,252)			(3,015)
Finance expense	3			(57,355)			(3,313)
Finance income	3			14,601			1,886
				____________			____________
Loss before tax				(9,839,449)			(3,401,675)
Tax expense	4			92,399			-
				____________			____________
Loss and total comprehensive income for the financial period attributable to owners of the parent				(9,747,050)			(3,401,675)
				____________			____________
Earnings per share
Loss per share
Basic and diluted (pence)	5		(5.90)				(9.34)
			__________				____________

* Adjusted EBITDA is a non-GAAP measure and excludes listing, acquisition, restructuring, other expenses and share based payment charges

Consolidated Statement of Financial Position

As at 31 December 2014

	Note		31 December		30 September
			2014		2013
			£		£
					As restated (Note 17)
Assets
Non-current assets
Property, plant and equipment	6		143,164		59,640
Goodwill	7		13,543,905		4,810,187
Intangible assets	7		3,213,519		1,105,471
Other assets	8		158,500		57,598
			__________		__________
			17,059,088		6,032,896
			__________		__________
Current assets
Trade and other receivables	10		2,224,741		1,344,776
Cash and cash equivalents	9		4,013,894		5,185,323
			__________		__________
			6,238,635		6,530,099
			__________		__________
Total assets			23,297,723		12,562,995
			__________		__________
Current liabilities
Trade and other payables	11		2,750,136		1,890,331
Loans and borrowings	12		14,504		24,000
Contingent consideration	16		2,500,000		-
			__________		__________
			5,264,640		1,914,331
			__________		__________
Liabilities
Non-current liabilities
Deferred tax liability			39,288		-
Contingent consideration	16		2,387,648		-
Loans and borrowings	12		-		20,504
			__________		__________
			2,426,936		20,504
			__________		__________
Total liabilities			7,691,576		1,934,835
			__________		__________
Net assets			15,606,147		10,628,160
			__________		__________
Equity
Share capital	14		19,517,049		14,633,369
Share premium			78,119,547		70,437,354
Merger reserve			(69,334,935)		(71,077,359)
Retained earnings			(12,695,514)		(3,365,204)
			__________		__________
Total equity attributable to owners of the parent			15,606,147		10,628,160
			__--________		__--________

Consolidated Statement of Cash Flows

For the period 1 October 2013 to 31 December 2014

	Note	2014		2013
		£		£ As restated (Note 17)
Cash flows from operating activities
Loss for the period		(9,747,050)		(3,401,675)
Adjustments for:
Depreciation of property, plant and equipment	6	41,252		3,015
Amortisation of intangible fixed assets	7	1,277,357		169,686
Finance income	3	(14,601)		(1,886)
Finance expense	3	57,355		3,313
Fair value adjustment to equity interest held	17	-		38,187
Income tax credit	4	(46,431)		-
Loss on disposal of property, plant and equipment	6	30,243		-
Share-based payment arising on reverse transaction	17	-		431,392
Share-based payment expense		438,169		36,471
		_______		_______
Decrease/(increase) in trade and other receivables		39,776		(658,500)
Decrease in trade and other payables		(22,760)		(408,507)
Increase in other assets		(99,402)		(2,000)
		_______		_______
Net cash flows from operating activities		(8,046,092)		(3,790,504)
		_______		_______
Investing activities
Acquisition of subsidiary, net of cash acquired	16,17	(3,290,311)		119,622
Investments	17	-		(533,842)
Purchases of property, plant and equipment	6	(107,240)		(34,706)
Purchase of intangibles	7	(583,364)		(410,206)
Interest received	3	14,601		1,886
		_______		_______
Net cash from investing activities		(3,966,314)		(857,246)
		_______		_______
Financing activities
Acquisition of Gaming Realms plc, net of cash acquired		-		3,838,539
Proceeds of Ordinary Share issue		11,938,999		5,910,010
Payment of deferred consideration	17	(825,000)		-
Issuance cost of shares		(130,702)		(30,016)
Repayment of other loans	12	(30,000)		(4,000)
Interest paid	3	(10,035)		(3,313)
		_______		_______
Net cash from financing activities		10,943,262		9,711,220
Net (decrease)/increase in cash and cash equivalents		(1,069,144)		5,063,470
Cash and cash equivalents at beginning of period		5,063,470		-
		_______		_______
Cash and cash equivalents at end of period	9	3,994,326		5,063,470
		_______		_______

Consolidated Statement of Changes in Equity

For the period ended 31 December 2014

	Share capital	Share premium	Shares to be issued	Merger reserve		Retained earnings		Total equity
	£	£	£	£		£ As restated (Note 17)		£ As restated (Note 17)
2 July 2012	-	-	-	-		-		-
Loss for the period	-	-	-	-		(3,401,675)		(3,401,675)
Issue of share capital	223,750	2,276,250	-	-		-		2,500,000
Adjustments in respect of reverse transaction	8,262,661	67,404,195	-	(72,134,521)		-		3,532,335
Shares issued as part of the consideration in a business combination (Note 17)	3,523,873	-	-	1,057,162		-		4,581,035
Shares issued as part of the capital raising	2,623,085	786,925	-	-		-		3,410,010
Cost of issue of Ordinary Share capital	-	(30,016)	-	-		-		(30,016)
Share-based payment on share options	-	-	-	-		36,471		36,471
30 September 2013 (as restated)	14,633,369	70,437,354	-	(71,077,359)		(3,365,204)		10,628,160
Loss for the period	-	-	-	-		(9,747,050)		(9,747,050)
Shares issued as part of the consideration in a business combination (Note 16)	757,576	-	-	1,742,424		-		2,500,000
Shares issued as part of the capital raising	4,126,104	7,812,895	-	-		-		11,938,999
Cost of issue of Ordinary Share capital	-	(130,702)	-	-		-		(130,702)
Shares to be issued (Note 16)	-	-	803,571	-		-		803,571
Settlement of shares to be issued (Note 16)			(803,571)			(21,429)		(825,000)
Share-based payment on share options	-	-		-		438,169		438,169
	19,517,049	78,119,547	-	(69,334,935)		(12,695,514)		15,606,147

Notes to the Consolidated Financial Statements

For the period ended 31 December 2014

1. Accounting policies

General information

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

The Company is admitted to trading on AIM of the London Stock Exchange. It is incorporated and domiciled in the UK. The address of its registered office is 1 Valentine Place, London SE1 8QH.

Basis of preparation

The financial information set out in these preliminary results does not constitute the Company's statutory accounts for the period ended 31 December 2014.

Statutory accounts for the period ended 30 September 2013 have been filed with the Registrar of Companies and those for the period ended 31 December 2014 will be delivered to the Registrar in due course; both have been reported on by the Independent Auditors. The independent auditors' reports on the Annual Report and accounts for the period ended 30 September 2013 and 31 December 2014 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The financial information in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The principal accounting policies adopted have been presented below.

The consolidated financial statements are presented in sterling.

Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 31 December 2014 and the results of all subsidiaries for the period then ended.

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

In the prior period, the Company (formerly known as Pursuit Dynamics plc) acquired 100% of the share capital of Bingo Realms Limited. Gaming Realms plc issued 57,692,309 shares to the original shareholders of Bingo Realms Limited.

The issue of shares resulted in Bingo Realms Limited's original shareholders holding a majority share in the Company.

This transaction did not meet the definition of a business combination in IFRS 3 'Business Combinations'. The transaction has therefore been accounted for in the consolidated financial statements in accordance with IFRS 2 'Share-based payment' and has been accounted for as a continuation of the financial statements of Bingo Realms Limited, together with a deemed issue of shares, equivalent to the shares held by the former shareholders of the Company. Bingo Realms Limited was incorporated on the 2 July 2012, no accounts have been produced since its incorporation therefore the consolidated statement of profit and loss and other comprehensive income included in these financial statements is for the period 2 July 2012 to 30 September 2013.

As detailed in note 17 the results for the period ended 30 September 2013 have been restated for adjustments arising from the reverse acquisition accounting.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Revenue

Revenue comprises net gaming revenue derived from online gambling operations, commissions on marketing services and social gaming.

Net gaming revenue derived from real money gaming

Net gaming revenue derives from online gambling operations and is defined as the difference between the amounts of bets placed by the players less amounts won by players. It is stated after deduction of certain bonuses, jackpots and prizes granted to players.

Net gaming revenue is recognised to the extent that its probable economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occur.

Marketing services

Revenue is derived from marketing services provided in relation to online bingo and casino products. The commission revenue is calculated either as a percentage of net gaming revenue from the operators or in line with contracts (typically based on fixed price per player). Commission revenue is recognised to the extent that the probable economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occur.

Revenue is also derived from digital marketing services provided to both gaming and non-gaming clients. The revenue is calculated as a percentage of marketing spend and is recognised when the advertising has been satisfactorily completed.

Social gaming revenue

Social gaming revenue derives from the purchase of credits and awards on the social gaming sites. Social gaming revenue is recognised to the extent that it is probable economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounting periods in which the transactions occur.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure and excludes adjusting items from EBITDA. Adjusting items are non-recurring material items which are outside the normal scope of the Group's ordinary activities. These items are separately disclosed in order to enhance the reader's understanding of the Group's profitability and cash flow generation. Adjusting items include costs arising from a fundamental restructuring of the Group's operations, listing and acquisitions costs and share-based payment charges.

Goodwill

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ("CGUs"). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from a business combination that gives rise to the goodwill.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in statement of comprehensive income.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

Exchange differences recognised as profit or loss in Group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Financial assets

The Group classifies its financial assets depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity.

The Group's accounting policies for financial assets are as follows:

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

Financial liabilities

Financial liabilities held by the Group consist of contingent consideration, customer funds, trade payables and other short-term monetary liabilities.

Financial liabilities are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument and with the exception of contingent consideration, subsequently recognised at amortised cost. Contingent consideration arising from business combinations that is classified as a liability is subsequently measured at fair value through profit and loss.

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

The Group's Ordinary Shares are classified as equity instruments.

Share-based payments

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received.

The fair value of share options issued without market-based vesting conditions is measured by the application of the Black-Scholes option pricing model by reference to the grant date of the options. The fair value of share options issued with market-based vesting conditions is measured by use of the Monte Carlo method.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

In-process research and development programmes acquired in such combinations are recognised as an asset even if subsequent expenditure is written off because the criteria specified in the policy for development costs below are not met.

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Internally generated intangible assets (development costs)

Expenditure on internally developed products is capitalised if it can be demonstrated that:

-  it is technically feasible to develop the product for it to be sold;

-  adequate resources are available to complete the development;

-  there is an intention to complete and sell the product;

-  the Group is able to sell the product;

-  sale of the product will generate future economic benefits; and

-  expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred.

	Intangible asset	Useful economic life
	Customer databases	1-2 years
	Development costs	3 years
	Software	3 years

Domain Name

Externally acquired domain names are capitalised at cost and are subject to 50% straight-line amortisation.

The carrying value of domain names is reviewed when there is an indication of impairment.

Deferred taxation

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

-  The initial recognition of goodwill

-  The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit

-  Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost less estimated residual value, of each asset evenly over its expected useful life as follows:

	Office, furniture and equipment	-	20% per annum straight-line
	Computer equipment	-	33% per annum straight-line
	Leasehold improvements	-	Over the life of the lease

Player liabilities

Liabilities to players comprise the amounts that are credited to customers' accounts including provision for bonuses granted by the Group. These amounts are repayable in accordance with the applicable terms and conditions.

Provisions

Provisions are recognised when the Group has a present or constructive obligation as a result of a past event from which it is probable that it will result in an outflow of economic benefit that can be reasonably estimated

2. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has one reportable segment with three product lines, being social gaming, real money gaming and marketing services. Each product line represent different brands, products and services provided. The social gaming product provide freemium gaming services to the US and Europe. The real money gaming product operates the PocketFruity and SpinGenie brands in the UK. The marketing services product represents the marketing services provided its white label brands. The marketing services segment also includes other digital marketing services provided to both gaming and non-gaming clients. 

Revenue by product:

	2014		2013
	£		£
Social gaming	1,176,082		442,837
Real money gaming	2,667,596		217,196
Marketing services	7,383,528		221,027
	__________		__________
	11,227,206		881,060
	__________		__________

Geographical information

The Group considers that its primary geographic regions are the UK, including Channel Islands, USA and the Rest of World. No revenue is derived from real money gaming in the USA. Revenues from customers outside the UK (including Channel Islands) and USA are not considered sufficiently significant to warrant separate reporting. All non-current assets are based in the UK.

The Group's performance can be reviewed by considering the geographical locations within which all assets in the Group operates. This information is outlined below:

				External revenue by location of customers	External revenue by location of customers
				2014	2013
				£	£
UK, including Channel Islands				9,850,955	455,650
USA				878,868	323,128
Rest of the World				497,383	102,282
				_________	_________
				11,227,206	881,060
				_________	_________

Revenues from one customer total £1,338,882 (2013: nil). This major customer receives marketing services from the Group.

3. Finance income and expense

	2014	2013
Finance income	£	£
Interest received	14,601	1,886
	_________	_________
Total finance income	14,601	1,886
	_________	_________
Finance expense
Bank interest expense paid	10,035	3,313
Contingent consideration unwinding	47,320	-
	_________	_________
Total finance expense	57,355	3,313
	_________	_________

4. Tax expense

		2014	2013
		£	£
(i)	Tax expense
	Current tax expense
	Current tax credit on losses for the period	45,968	-
		_________	_________
	Total current tax	45,968	-
		_________	_________
	Deferred tax expense
	Origination and reversal of temporary differences	46,431	-
		_________	_________
	Total deferred tax	46,431	-
		_________	_________
		92,399	-
		_________	_________

The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK applied to profits for the year are as follows:

		2014	2013
		£	£ As restated
	Loss for the period	(9,839,449)	(3,401,675)
	Expected tax at effective rate of corporation tax in the UK of 21.75% (2013: 23.5%)	(2,140,080)	(799,394)
	Expenses not deductible for tax purposes	120,098	90,664
	Depreciation in excess of capital allowances	8,972	709
	Effects of overseas taxation	75,736	-
	Adjustment in respect of loss carried back	45,968
	Adjustments in respect of deferred tax of prior years	46,431	-
	Tax losses carried forward	1,935,274	708,021
		_________	_________
	Total tax credit/(expense)	92,399	-
		_________	_________

Changes in tax rates and factors affecting the future tax charge

On 2 July 2013, the Finance Bill received its third reading in the House of Commons and so the previously announced reduced rate of corporation tax of 21% from 1 April 2014 was substantively enacted. Accordingly, deferred tax balances as at 31 December 2014 have been recognised at 21% (2013: 23%).

The Chancellor has further stated his intention to reduce the main rate of corporation tax 20% from 1 April 2015. These changes have not been substantively enacted at the balance sheet date. This will have the effect of reducing the Group's future current tax charge accordingly.

As described in Note 16 no deferred tax liabilities have been recognised in respect of intangible assets arising on the acquisitions made in the period as any deferred tax liabilities are offset by recognising an equal and opposite deferred tax asset from the tax losses carried forward.

There are unused tax losses carried forward as at the balance sheet date of £21,695,023 (2013 as restated: £12,797,212) equating to an unrecognised deferred tax asset of £4,339,005 (2013 as restated: £2,943,359). No deferred tax asset has been recognised in respect of these losses, as the recoverability of any asset is dependent upon sufficient profits being achieved in future years to utilise this asset. The timings of such profits are uncertain.

5. Loss per share

Basic loss per share is calculated by dividing the loss attributable to Ordinary Shareholders by the weighted average number of shares in issue during the year. For fully diluted loss per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of dilutive potential Ordinary Shares. The Group's potentially dilutive securities consist of share options and performance shares. As the Group is loss-making, none of the potentially dilutive securities are currently dilutive.

		2014	2013
		£	£ As restated
	Loss after tax	(9,747,050)	(3,401,675)
		__________	__________
		Number	Number
	Weighted average number of Ordinary Shares used in calculating basic loss per share	165,220,742	36,434,501
		__________	__________
	Weighted average number of Ordinary Shares used in calculating dilutive loss per share	165,220,742	36,434,501
		__________	__________

In the prior period, the weighted average number of ordinary shares in issue was calculated using an exchange ratio applied in the reverse takeover.

Basic and diluted loss per share (pence)	(5.90)	(9.34)
	_________	_________

6. Property, plant and equipment

	Leasehold improvements		Computers and related equipment		Office furniture and equipment		Total
	£		£		£		£
Cost
Acquired through business combination	13,046		11,257		3,646		27,949
Additions	24,853		6,136		3,717		34,706
	_________		_________		_________		_________
At 30 September 2013	37,899		17,393		7,363		62,655
	_________		_________		_________		_________
Acquired through business combination	30,953		11,976		4,850		47,779
Additions	45,393		37,264		24,583		107,240
Disposals	(42,852)		-		-		(42,852)
	_________		_________		_________		_________
At 31 December 2014	71,393		66,633		36,796		174,822
	_________		_________		_________		_________
Accumulated deprecation
Depreciation charge	746		1,865		404		3,015
	_________		_________		_________		_________
At 30 September 2013	746		1,865		404		3,015
	_________		_________		_________		_________
Depreciation charge	18,780		17,759		4,713		41,252
Disposals	(12,609)		-		-		(12,609)
	_________		_________		_________		_________
At 31 December 2014	6,917		19,624		5,117		31,658
	_________		_________		_________		_________
Net book value
At 30 September 2013	37,153		15,528		6,959		59,640
	_________		_________		_________		_________
At 31 December 2014	64,476		47,009		31,679		143,164
	_________		_________		_________		_________

7. Intangible assets

	Goodwill	Customer database	Software	Development costs	Domain names	Total
	£	£	£	£		£
Cost
Acquired through business combination (Note 17)	4,810,187	387,512	-	477,439	-	5,675,138
Additions	-	-	361,684	48,522	-	410,206
	_________	_________	_________	_________	________	_________
At 30 September 2013	4,810,187	387,512	361,684	525,961	-	6,085,344
	_________	_________	_________	_________	________	_________
Acquired through business combination (Note 16)	8,733,718	2,802,041	-	-	-	11,535,759
Additions	-	-	-	556,850	26,514	583,364
	_________	_________	_________	_________	________	_________
At 31 December 2014	13,543,905	3,189,553	361,684	1,082,811	26,514	18,204,467
	_________	_________	_________	_________	________	_________
Amortisation
Amortisation charge	-	53,662	71,900	44,124	-	169,686
	_________	_________	_________	_________	________	_________
At 30 September 2013	-	53,662	71,900	44,124	-	169,686
	_________	_________	_________	_________	________	_________
Amortisation charge	-	804,324	150,934	321,671	428	1,277,357
	_________	_________	_________	_________	________	_________
At 31 December 2014	-	857,986	222,834	365,795	428	1,447,043
	_________	_________	_________	_________	________	_________
Net book value
At 30 September 2013	4,810,187	333,850	289,784	481,837	-	5,915,658
	_________	_________	_________	_________	________	_________
At 31 December 2014	13,543,905	2,331,567	138,850	717,016	26,086	16,757,424
	_________	_________	_________	_________	________	_________

Goodwill

Of total goodwill arising on acquisitions in the period of £8,733,718, £1,904,028 arose from the acquisition of Quickthink Media Limited on the 10 December 2013 and £6,829,690 arose from the acquisition of Blueburra Holdings Limited on the 5 September 2014 (see note 16). Goodwill brought forward comprised £3,466,069 of the goodwill arose from the acquisition of Bejig Limited and £1,344,118 from the acquisition of AlchemyBet Limited on the 1 August 2013 (see note 17).

In accordance with IAS 36, the Group regularly monitors the carrying value of its intangible assets. A detailed review was undertaking at 31 December 2014 to assess whether the carrying value of assets was supported by net present value of futures cash flows derived from those assets. The Group has one cash generating unit for which the carrying amount of goodwill is allocated. The recoverable amounts to which the goodwill is allocated has been determined using a value in use calculation. The calculation of value in use is based on several assumptions which feed into a forecast model based on past player lifetime values and experience.

Cash flow projections have been prepared for a five year period following which a long term growth rate of 2% has been assumed. A discount rate of 13% has been used in discounting the projected cash flows, is based on the Group's specific risk adjusted Weighted Average Cost of Capital.

The key assumptions of the forecasts were as follows:

·      number of new player depositing registrations;

·      rate of retention of existing players;

·      spending patterns of players;

·      CPA or installs from different acquisition sources;

The above assumptions are based on the trends noted to date, industry standard measurements and management's experience. The Directors do not believe any reasonably possible change in the key assumptions would lead to an impairment of the carrying amount of the CGUs.

8. Other assets

		2014	2013
		£	£
	Other assets
		158,500	57,598
		_________	_________

Other asset represents the rental deposit on operating leases and deposits held with third party suppliers.

9. Cash and cash equivalents

		2014	2013
		£	£
	Cash and cash equivalents	3,994,326	5,063,470
	Restricted cash	19,568	121,853
		_________	_________
		4,013,894	5,185,323
		_________	_________

Restricted cash of £19,568 (2013: £121,853) relates to funds held in Swiss subsidiaries which are currently undergoing liquidation. The funds are restricted and are not included in the consolidated statement of cash flows.

10. Trade and other receivables

		2014	2013
		£	£
	Trade and other receivables	1,183,859	612,307
	Allowance for doubtful debts	(9,548)	-
		_________	_________
		1,174,311	612,307
		_________	_________
	Prepayments and accrued income	1,050,430	732,469
		_________	_________
		2,224,741	1,344,776
		_________	_________

All amounts shown fall due for payment within one year

11. Trade and other payables

		2014	2013
		£	£ As restated
	Trade and other payables	1,277,163	574,582
	Accruals	1,077,171	1,217,702
	Player liabilities	395,802	98,047
		________	________
		2,750,136	1,890,331
		________	________

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

12. Loans and borrowings

	2014	2013
	£	£
Current liabilities
Loans and borrowings	14,504	24,000
	________	________
Non-current liabilities
Loans and borrowings	-	20,504
	________	________

13. Financial instruments and risk management - Group

The Group is exposed through its operations to risks that arise from use of its financial instruments. The Group does not make any use of derivative-based financial instruments. The Group's financial assets and liabilities are shown on the face of the consolidated statement of financial position and in the table below and they can be classified wholly as either loans and receivables, other assets or other liabilities. The Group has operated with a positive cash balance throughout the period.

	2014	2013
	£	£
Financial assets
Cash and cash equivalents	4,013,894	5,185,323
Trade and other receivables	1,174,311	612,307
Other assets	158,500	57,598
Financial liabilities
Trade and other payables	1,277,163	574,582
Accruals	1,077,171	1,217,702
Player liabilities	395,802	98,047
Loans and borrowings	14,504	44,504
Contingent consideration	4,887,648	-
	__________	__________

Financial assets of the Group are classified as loans and receivables and all financial liabilities are held at amortised cost except contingent consideration which is recognised at fair value through profit and loss. In the Directors' opinion, there is no material difference between the book value and the fair value of any of the financial instruments.

The Group has some exposure to credit risk and liquidity risk. The Group does not have any material exposure to currency risk. There has been no material change to the financial instruments used within the business during the period except for contingent consideration and therefore no material changes to the risk management policies put in place by the Board which are now discussed below.

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. Whilst acknowledging this responsibility, it has delegated the authority and day to day responsibility for designing and operating systems and controls which meet these risk management objectives to the finance and administration function. The Board regularly reviews the effectiveness of these processes in meeting its objectives and considers any necessary changes in response to changes within the business or the environment in which it operates.

Liquidity risk

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. Customer funds are kept in dedicated client accounts, separately from the Group's operational bank accounts.

The following table sets out the contractual maturities of financial liabilities:

		Within 1	1-2		Over
At 31 December 2014		year	years		2 years
		£	£		£
Trade and other payables		1,277,163	-		-
Accruals		1,077,171	-		-
Player liabilities		395,802	-		-
Loans and borrowings		14,504	-		-
Contingent consideration		2,500,000	1,444,364		943,284
		_________	_________		_________
Total		5,264,640	1,444,364		943,284
		_________	_________		_________
		Within 1	1-2		Over
At 30 September 2013 (as restated)		year	years		2 years
		£	£		£
Trade and other payables		574,582	-		-
Accruals		1,217,702	-		-
Player liabilities		98,047	-		-
Loans and borrowings		24,000	20,504		-
		_________	_________		_________
Total		1,914,331	20,504		-
		_________	_________		_________

Credit risk

At 31 December 2014, the analysis of trade and other receivables that were past due but no impaired is as follows:

			Between	Between
			30 and 60	61 and 90	Over
		Current	days	days	91 days
		£	£	£	£
	Trade and other receivables	750,156	268,930	101,801	62,972
	Allowance for doubtful debts	-	-	-	(9,548)
		_________	_________	_________	_________
	At 31 December 2014	750,156	268,930	101,801	53,424
		_________	_________	________	________
	Trade and other receivables	437,398	85,794	75,127	13,988
	Allowance for doubtful debts	-	-	-	-
		_________	_________	_________	_________
	At 30 September 2013	437,398	85,794	75,127	13,988
		_________	_________	________	________

Financial liabilities measured at fair value

The fair value hierarchy of financial liabilities measured at fair value is provided

	2014			2013
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	£	£	£	£	£	£
Contingent consideration (Note 16)	-	-	4,887,648	-	-	-

The fair value measurement hierarchy is based on the inputs to valuation techniques used to measure fair value. The inputs are categorised into three levels, with the highest level (level 1) given to inputs for which there are unadjusted quoted prices in active markets for identical assets or liabilities and the lowest level (level 3) given to unobservable inputs. Level 2 inputs are directly or indirectly observable inputs other than quoted prices

Capital management

The Group is funded entirely through shareholders' funds.

If financing is required the Board will consider whether debt or equity financing is more appropriate and proceed accordingly. The Group is not subject to any externally imposed capital requirements.

14. Share capital

Ordinary Shares

	2014	2014	2013		2013
	Number	£	Number		£
Ordinary Shares of 10 pence each	195,170,489	19,517,049	146,333,690		14,633,369
	__________	__________	__________		__________

Movements in share capital

			Number	£
	Bingo Realms Limited Ordinary Shares issued for cash consideration		2,237,500	223,750
	Adjustments in respect of the reverse transaction		82,626,610	8,262,661
	Ordinary Shares issued in the acquisition of Bejig Limited and AlchemyBet Limited		35,238,730	3,523,873
	Ordinary Shares issued for cash consideration		26,230,850	2,623,085
			__________	__________
	At 30 September 2013		146,333,690	14,633,369
			__________	__________
	Ordinary Shares issued for cash consideration		41,261,041	4,126,104
	Ordinary Shares issued in the acquisition of Blueburra Holdings Limited		7,575,758	757,576
			__________	__________
	At 31 December 2014		195,170,489	19,517,049
			__________	__________

The above analysis of the movements in share capital in the prior period reflects the initial share capital of Bingo Realms Limited subsequently adjusted for the reverse transaction and the subsequent share issues.

Ordinary B Shares and Deferred Shares

Ordinary B Shares have a nominal value of 0.01 pence each ("B Shares") and Deferred Shares have a nominal value of 0.01 pence each ("Deferred Shares"). The B Shares and the Deferred Shares shall not entitle the holders of them to receive notice of, to attend, to speak or to vote at any general meeting (including Annual General Meetings) of the Company. At 31 December 2014 there were no B Shares or Deferred Shares in issue.

15. Leases

The Group had future lease payments under non-cancellable operating leases on land and buildings and other leases. The total future value of minimum lease payments is due as follows:

	2014	2013
	£	£
Not later than one year	118,476	51,480
Later than one year and not later than five years	407,803	90,090
Later than five years	-	-
	_________	_________
	526,279	141,570
	_________	_________

16. Business combinations during the period

Acquisition of Quickthink Media Limited

On 10 December 2013, the Group acquired Quickthink Media Limited, a company in which there are common shareholders and key management personnel, for an estimated total consideration of £2,274,421, comprising of £1,470,850 cash and a deferred payment of 3,571,428 ordinary shares being the equivalent of £803,571 at the time of acquisition to be allotted and admitted to trading 12 months from completion. The deferred payment has been recorded as shares to be issued at the time of acquisition. Acquisition costs of £37,500 arose as a result of the transaction. These have been recognised as part of administrative expenses in the statement of profit and loss. Quickthink Media Limitedis a specialist online gaming marketing agency which will enhance the Group's activities by cost-effectively capturing new users across emerging digital channels such as Facebook. Details of the fair value of identifiable assets and liabilities acquired and purchase consideration and goodwill are as follows:

	Book value	Adjustment	Fair value
	£	£	£
Non-contractual customer lists and relationships	-	458,409	458,409
Trade and other receivables	589,718	-	589,718
Cash	28,485	-	28,485
Trade and other payables	(620,500)	-	(620,500)
Deferred tax liability	-	(85,719)	(85,719)
	__________	__________	__________
Total net assets	(2,297)	372,690	370,393
	__________	__________	__________

Fair value of consideration paid

	£
Cash consideration	1,470,850
Deferred consideration - Gaming Realms plc Ordinary Shares	803,571
	__________
Total consideration	2,274,421
	__________
Goodwill (Note 7)	1,904,028
	__________

Goodwill recognised in the acquisition of QuickThink Media Limited relates to the presence of certain intangible assets such as an experienced workforce, which do not qualify for separate recognition. The net cash acquired was an outflow of £1,442,392. Prior to acquisition for the period 1 October 2013 to 10 December 2013, the revenue generated was £833,115 and loss after tax was £632. Since acquisition, QuickThink Media Limited generated £6,751,974 in revenue and loss after tax of £793,866.

On 2 December 2014, the original shareholders of Quickthink Media Limited agreed to accept £825,000 cash in lieu of the 3,571,428 Ordinary Shares as payment of the deferred consideration. The difference between the fair value of shares to be issued and cash consideration of £21,429 was charged to the profit and loss reserve. The deferred consideration was paid on the 10 December 2014.

Acquisition of Blueburra Holdings Limited

On 5 September 2014, the Group acquired 100% of the voting equity of Blueburra Holdings Limited. Digital Blue Limited, a wholly owned subsidiary of Blueburra Holdings Limited is an eGaming marketing specialist. The acquisition is expected to expedite the Group's marketing strategy in the UK by adding further reach and capability to its current affiliate marketing subsidiary, Quickthink Media and adding an enlarged database of players for cross promotion, as well as further white label brands, which will allow for greater Group cross marketing and consequently, monetisation. Acquisition costs of £103,276 arose as a result of the transaction. These have been recognised as part of administrative expenses in the statement of profit and loss. Details of the fair value of identifiable assets and liabilities acquired and purchase consideration and goodwill are as follows:

	Book value	Adjustment	Fair value
	£	£	£
Non-contractual customer lists and relationships	-	2,343,632	2,343,632
Property, plant and equipment	47,779	-	47,779
Trade and other receivables	330,022	-	330,022
Other assets	1,500	-	1,500
Cash	652,054	-	652,054
Trade and other payables	(364,349)	-	(364,349)
	__________	__________	__________
Total net assets	667,006	2,343,632	3,010,638
	__________	__________	__________

Fair value of consideration paid

	£
Cash consideration	2,500,000
Share consideration	2,500,000
Contingent consideration	4,840,328
	__________
Total consideration	9,840,328
	__________
Goodwill arising on acquisition (Note 7)	6,829,690
	__________

Contingent consideration at acquisition date		4,840,328
Unwinding of discount on contingent consideration		47,320
		__________
Contingent consideration at 31 December 2014		4,887,648
		__________

Consideration of £2,500,000 and 7,575,758 shares with a total value of £2,500,000 were settled on 5 September 2014. The Group has agreed to pay additional consideration of up to £2,750,000 in cash and £2,750,000 in shares dependent on the achievement of set performance targets in the periods ending 31 December 2014, 31 December 2015 and 31 December 2016. The consideration will be settled in cash and ordinary shares of Gaming Realms plc on their payment dates on achieving the relevant targets. The Group has recognised £4,840,328 being the present value of contingent consideration having made a probability based assessment of the amount payable related to the additional consideration, which represents the fair value at acquisition date. Contingent consideration has been calculated based on the Group's expectation of what it will pay in relation to earn out agreement. The earn out targets are based on the EBITDA multiple of the annual results of the acquired business. The fair value of the contingent consideration is calculated by weighting the probability of achieving these targets to give an estimate of the final obligation.

Goodwill recognised in the acquisition of Blueburra Holdings Limited relates to the presence of certain intangible assets, such as experienced workforce and material cost savings, which do not qualify for separate recognition. The net cash acquired was an outflow of £1,847,946. Prior to acquisition for the period 1 October 2013 to 5 September 2014, the revenues generated was £3,797,695 and the consolidated profit after tax was £1,580,400. Since acquisition Blueburra Holdings Limited generated £1,017,421 in revenue and profit after tax of £369,187.

17. Business combinations completed in prior periods

Acquisition of Gaming Realms plc and its controlled entities

In the prior period, Bingo Realms Limited's original shareholders obtained a majority share interest in Gaming Realms plc (formerly known as Pursuit Dynamics plc) as a result of the acquisition transaction.

The transaction did not meet the definition of a business combination in IFRS 3 'Business Combinations'. The transaction has therefore been accounted for in the consolidated financial statements in accordance with IFRS 2 'Share-based Payment' and has been accounted for as a continuation of the financial statements of Bingo Realms Limited, together with a deemed issue of shares, equivalent to the shares held by the former shareholders of the Company. The deemed issue of shares is, in effect, a share-based payment transaction whereby Bingo Realms Limited is deemed to have received the net assets of the Company, together with the listing status of the Company. The overall accounting effect is similar to that of a reverse acquisition in IFRS 3 with the exception that no goodwill is recognised.

Because the consolidated financial statements represent a continuation of the financial statements of Bingo Realms Limited, the principles and guidance on the preparation and presentation of the consolidated financial statements in a reverse acquisition set out in IFRS 3 have been applied:

·    the cost of the acquisition, and amount recognised as issued capital to effect the transaction, is based on the notional amount of shares that Bingo Realms Limited would have needed to issue to acquire the same shareholding percentage in the Company at the acquisition date;

·    retained earnings and other equity balances in the consolidated financial statements at acquisition date are those of Bingo Realms Limited;

·    a shared based payment transaction arises whereby Bingo Realms Limited is deemed to have issued shares in exchange for the net assets of the Company (together with the listing status of the Company). The listing status does not qualify for recognition as an intangible asset and has therefore been expensed;

·    the equity structure in the consolidated financial statements (the number and type of equity instruments issued) at the date of the acquisition reflects the equity structure of the Company, including the equity instruments issued by the Company to effect the acquisition; and

·    the results for the period ended 30 September 2013 comprise the consolidated results for the period of Bingo Realms Limited together since incorporation with the results of the Company from 1 August 2013.

During the period ending 31 December 2014, it was identified that the net assets acquired on the 1 August 2013 as part of the reverse acquisition, did not include an additional liability to the Swiss tax authorities of £112,044. The liability arose as part of the ongoing liquidation process of the existing Swiss entities. The results of the prior year financials have been restated to include the liability to the Swiss tax authorities in accruals at 30 September 2013 with corresponding increase to the share based payment charge on the reverse transaction in 2013.

Details of the (restated) fair value of the asset and liabilities of the Company that were acquired on its acquisition by Bingo Realms Limited are as follows:

	2013 As previously stated	Restated adjustment	2013 As restated
Share-based payment expense	£	£	£
Assets and liabilities acquired:
Cash and cash equivalent	3,960,392	-	3,960,392
Trade and others receivables	165,879	-	165,879
Other assets	8,383	-	8,383
Trade and others liabilities	(921,667)	(112,044)	(1,033,711)
	_________	_________	_________
	3,212,987	(112,044)	3,100,943
	_________	_________	_________

The table above represent the assets and liabilities of Gaming Realms plc (formerly Pursuit Dynamics plc) that were acquired on its acquisition by Bingo Realms Limited. Refer to Note 1 "business combinations".

The fair value of shares that Bingo Realms Limited issued to effect the transaction amounted to £3,532,335. The difference between the fair value of £3,532,335 and the net assets acquired of £3,100,943, being £431,392 has been expensed as a share based payment cost in profit or loss.

Of the £3,960,392 cash acquired in the reverse acquisition, £121,853 does not meet the definition of cash and cash equivalent under IAS 7 "Statement of Cash Flows" and is therefore not included in the consolidated statement of cash flows. The restricted cash relates to funds held in Swiss subsidiaries which are currently undergoing liquidation.

Acquisition of Bejig Limited

On 1 August 2013 the Group acquired 90.66% of the voting equity of BeJig Limited, taking the total ownership of the Group to 100%. The initial 9.34% was acquired previously for cash consideration of £400,000.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

	Book		Fair
	value	Adjustment	value
	£	£	£
Intangible assets	477,439	-	477,439
Property, plant and equipment	27,949	-	27,949
Non-contractual customer lists and relationships	-	256,419	256,419
Trade and other receivables	399,388	-	399,388
Other assets	55,598	-	55,598
Cash	87,714	-	87,714
Trade and other payables	(896,775)	-	(896,775)
	_________	_________	_________
Total net assets	151,313	256,419	407,732
	_________	_________	_________

A deferred tax liability of £58,976 arising as a result of the recognition of additional intangible assets was offset by the recognition of an equivalent deferred tax asset in respect of tax losses in Bejig Limited.

Fair value of consideration paid

	£
Purchase consideration - Gaming Realms plc Ordinary Shares	3,511,988
Cash consideration - previously held equity interest	400,000
Fair value adjustment of previously held equity interest	(38,187)
	_________
Total consideration	3,873,801
	_________
Goodwill (Note 7)	3,466,069
	__________

Goodwill recognised in the acquisition of BeJig Limited relates to the presence of certain intangible assets such as an experienced workforce, which do not qualify for separate recognition.

Acquisition of AlchemyBet Limited

On 1 August 2013 the Group acquired 88.85% of the voting equity of AlchemyBet Limited, taking the total ownership of the Group to 100%. The initial 11.15% was acquired previously for cash consideration of £133,842.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

	Book		Fair
	value	Adjustment	value
	£	£	£
Non-contractual customer lists and relationships	-	131,093	131,093
Trade and other receivables	112,625	-	112,625
Cash	31,908	-	31,908
Trade and other payables	(416,855)	-	(416,855)
	_______	_______	_______
Total net assets	(272,322)	131,093	(141,229)
	_______	_______	_______

A deferred tax liability of £30,151 arising as a result of the recognition of additional intangible assets was offset by the recognition of an equivalent deferred tax asset in respect of tax losses in AlchemyBet Limited.

Fair value of consideration paid

	£
Purchase consideration - Gaming Realms plc Ordinary Shares	1,069,047
Cash consideration - previously held equity interest	133,842
	_________
Total consideration	1,202,889
	_________
Goodwill (Note 7)	1,344,118
	_________

Goodwill recognised in the acquisition of AlchemyBet Limited relates to the presence of certain intangible assets such as the UK gambling license and an experienced workforce, which do not qualify for separate recognition.

18. Events after the reporting date

On the 27 January 2015, the Group decided to restructure the marketing services segment by relocating its operations from the Isle of Man to London. This enabled the Group to consolidate its existing London team by streamlining its process and improving its efficiency.

On the 9 April 2015, Bingo Realms Limited entered into an Asset Sale and Purchase Agreement with European Domain Management Ltd, to sell all associated assets in its Bingo Godz and CastleJackpot brands which were operated by Intellectual Property & Software Limited. The total consideration for the sale was £500,000 in cash, with £200,000 payable on completion and the remainder payable over the next 17 months.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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