GAMING REALMS PLC — Earnings Release 2015

May 4, 2016

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RNS Number : 1407X

Gaming Realms PLC

04 May 2016

Gaming Realms plc

(the "Company" or the "Group")

Results for the year ended 31 December 2015

Trading update for the quarter ended 31 March 2016

Gaming Realms plc, the creator and publisher of mobile real money and social games, today announces its results for the year ended 31 December 2015. Additionally, the Group provides a trading update for the first quarter of 2016.

2015 Financial Highlights:

·      Revenue up 116%# to £21.2m for the year ended 31 December 2015 (12m 2014: £9.8m, 15m 2014: £11.2m)

·      Real money gaming revenue up 362%# to £10.8m (12m 2014: £2.3m, 15m 2014: £2.7m)

·      Social and licensing revenue up 294%# to £2.5m (12m 2014: £0.6m, 15m 2014: £1.2m)

·      Total new depositing players up 55%# to 169,988 (12m 2014: 109,561, 15m: 138,852)

·      Adjusted EBITDA loss of £4.1m (15m 2014: £7.8m) which includes marketing investment of £11.5m (15m 2014: £10.2m)

2015 Operational Highlights:

·      Completed £12.5m fundraising and acquisition of GameHouse social mobile gaming business and Slingo IP and games

·      Launch of proprietary platform ("Grizzly") and the migration of PocketFruity brand onto Grizzly platform together with launch of slingo.com

·      Launch of Slingo Blast and Lucky Streak Slots free to play apps

Q1 2016 Trading Update:

·      Revenue up 100% to £7.5m (Q1 2015: £3.8m)

·      Real money gambling revenue up 128% to £4.2m (Q1 2015: £1.8m)

·      Social and licensing revenue up 643% to £2.0m (Q1 2015: £0.3m)

·      Total new depositing players increased 73% to 62,106 (Q1 2015: 35,857)

·      81% of real money players on proprietary platform playing via mobile

·      Signed licensing deals with Scientific Games, Zynga, Freemantle Media and Endemol

·      Launched new 'Britain's Got Talent' games website

·      Signed partnership with Pala Interactive to provide bingo software for Pala Bingo in New Jersey, USA

·      Disposed of Dragonfish white label business for £2.4m

Patrick Southon, CEO, commented:

"The launch of our proprietary platform at the start of 2015 and acquisition of Slingo IP and games has transformed the business and our content proposition. The progress made at the start of 2016, with a number of licence agreements in place with major brands and media publishing companies, means that Gaming Realms is opening up a number of new channels to market its games across both real money and social segments. The Group is on track to continue its targeted growth for the year." 

# Year-on-year comparatives have been adjusted to the 12 month period to 31 December 2014. The Group's 2014 full year results reported its performance for the 15 month period to 31 December 2014.

Contacts:

Gaming Realms Patrick Southon, CEO Mark Segal, FD	+44 (0) 845 123 3773
Cenkos Securities (Nomad and Broker) Max Hartley (Nomad) Julian Morse (Broker)	+44 (0) 20 7397 8900
Yellow Jersey PR Charles Goodwin Aidan Stanley	+44 (0) 7747 788 221

About Gaming Realms

Gaming Realms creates and publishes innovative real money and social games for mobile, with operations in the UK and US. Through its market leading mobile platform and unique IP and brands, Gaming Realms is bringing together media, entertainment and gaming assets in new game formats. The Gaming Realms management team includes accomplished entrepreneurs and experienced executives from a wide range of leading gaming and media companies.

Chairman's Statement

Dear Shareholder,

On behalf of the Board, I am pleased to report that significant progress was made in 2015. We have developed and published real money and free to play original content on our new proprietary gaming platform, with positive business intelligence, growth and results supporting our strategy. This has continued into the current year.

In August 2015, Gaming Realms completed the acquisition of the GameHouse social and mobile assets and Slingo brand from RealNetworks, Inc. With this came the IP for Slingo, a new social games platform, a portfolio of mobile games, two games studios and highly experienced team in Seattle and Vancouver Island.

During the year, two original Slingo real money games were developed and published on the Grizzly platform, and have quickly become amongst our best performing games in the UK. In our social business we launched two free to play mobile apps during the year (Slingo Blast and Lucky Streak Slots), as well as continuing to publish and monetise several acquired games including Hidden Artifacts.

Since the acquisition from RealNetworks, Inc. we have also built and launched a new social casino, Lucky Streak Slots and signed new strategic partnership agreements with Zynga and Scientific Games to distribute Slingo into adjacent gaming markets currently outside our strategic focus. This clearly highlights the strength of our IP and ability to extend its reach into massive markets such as national and state lotteries as well as the global gaming machine market with leading providers.

Our strategic focus has been further underlined by streamlining our operational focus on our own proprietary technology and game publishing. We have therefore sold our third-party platform gaming assets and as we believed we could achieve superior economics from selling these assets as well as increasing management focus in the areas of highest shareholder return.

Financial review

Following the trading update in January, I am pleased to report that the Group has delivered full year 2015 revenue of £21.2m and an adjusted EBITDA loss of £4.1m, which is in line with market expectations. The 2015 performance has seen an increase of revenue of 116% versus the comparable 12 months to 31 December 2014. Adjusted EBITDA loss has also decreased by 30% in the same period.

People

During 2015 the Group deepened its talent pool in critical areas related to our platform and content development and with the social gaming acquisition brought a further 57 experienced professionals into Gaming Realms. At year end we employed 169 people (2014: 84).

It is the view of the Board that this expansion in multiple territories continues to have a very positive impact on both culture and performance.

Outlook for 2016

The first quarter of 2016 has seen further increase in like-for-like revenues of 7% to £7.5m from the previous quarter (Q4 2015: £7.0m).

Our strategy of investing in content, platforms and building a large and profitable audience continues to drive our growth. In addition to our B2B licensing partnerships into global lottery and land-based casino markets, our ability to attract highly complementary media brands such as Britain's Got Talent, the X Factor and Deal or No Deal into our own B2C business offers us potential for further growth in the remainder of 2016.

The Board is excited by the progress of the Group in the year under review, encouraged by the developments already achieved in the current year, and believes that shareholders should share their enthusiasm and confidence in the future of Gaming Realms.

Chief Executive's Review

Overview

Our second full year of trading has delivered tangible success as we have transitioned to a broader developer, publisher and licensor of next generation mobile gaming content. It was the first full year of operation for our Grizzly platform, which we have been able to scale rapidly with both content and audience. Additionally, the platform has lowered cost per acquisition ("CPA") and shortened our investment payback periods.

The acquisition of the GameHouse social mobile gaming business and Slingo IP and games, has enabled this transition to occur in not just the UK regulated gaming market, but also into a new global mobile market across multiple channels.

This has been clearly evidenced by a growing number of strategic lottery, media and platform partnerships.

Our platform investment has also paid off, allowing a single focus on core content development usable across real money and social audiences as well as through the above mentioned distribution partnerships.

Platform and content development

During the year our Grizzly platform was significantly enhanced following our beta launch of SpinGenie in Q4 2014, which scaled to over £24m in deposits and £403m in wagers in 2015. We added new third-party branded games and migrated PocketFruity casino onto the Grizzly platform in Q1 2015. This allowed efficiency within the development team and also increased scalability for the brand.

We also built our first real money Slingo games, Slingo Riches and Slingo Extreme - they quickly became the top performing games in 2015, accounting for 21% of the gross gaming revenue in Q4 and were the most popular games played by over 47% of the funded players.

With the Group's continued mobile focus in terms of both platform and the content, 80% of our players' gamble on mobile devices, accounting for 73% of our Gross Gaming Revenue in the UK.

In our social business, we grew our active development to five games in the portfolio by the end of 2015. Both Slingo Adventure and Slingo Shuffle mobile apps were launched in 2015 and together with the existing apps, scaled to approximately 964,000 monthly average users ("MAU").  We also completed the beta version of Slingo Blast for iOS and Android and our new social version of our platform from which we beta launched our new social casino, Lucky Streak Slots in December.

Marketing

Our marketing strategy during the year was to continue to target growth on the Grizzly platform. We added new features to the platform to allow for multiple offers by different channels which yielded improved returns and lower CPA. The result has been an overall CPA on the Grizzly platform of £79 with 78,198 new depositing players in the year. We believe this is the lowest CPA across the industry for a UK casino. Our revenue per depositing player was £125 which is reflective of the new player base in 2015.

Marketing for our social gaming apps followed a similar strategy in order to get scale on the platforms. With new app releases in the year and constant release cycles, we were able to continuously improve acquisition and retention campaigns during the year. The cost of a new depositing player was £21.

Our cross device marketing capability continues to be a significant asset of the Group. In addition to marketing our own UK regulated gaming properties, our team integrated and complimented our social marketing activities immediately following the acquisition. With the sale of our third-party platform driven websites in 2016, our team will further focus on our B2C in both the real money and social markets leveraging a single BI and data platform.

Our player acquisition and CRM programs continue to leverage cutting edge technology, data science algorithms and proven talent in both the UK and the US.

Licensing and content innovation

In line with the Group strategy of developing, publishing and licensing next generation mobile content, we made great progress in 2015. Furthermore, as we have moved into 2016, we have seen the benefit of this with licensing deals with Zynga and Scientific Games. We are also delighted to have obtained a transactional waiver for New Jersey to provide a new bingo game into that market through a partnership with Pala Interactive.

We have also looked to partner with market leading content providers, integrating games from Ainsworth Technology, Instant Win Gaming, NetEnt and IGT. On top of this we have more recently signed licenses with Fremantle Media and Endemol to build unique branded Slingo games to widen our marketing appeal. Our strategy is also to look at new gaming formats and we are very pleased to have recently released a new game, Magic Mine, which will be published on our Grizzly platform.

Social games and Slingo IP acquisition

The acquisition of the Social Gaming and Slingo assets has enhanced each area of our content development, mobile audience scaling and platform leverage capability. Acquiring two games studios, rebranded as Blastworks, with their associated mobile marketing and publishing teams in Seattle and Vancouver Island, together with experienced leadership, operating under the name Blastworks, has opened up several new revenue streams and content opportunities for the Group.

It has brought revenues through its free to play apps in the US (65%), the UK (5%) and rest of the world (30%). The revenue is derived from the in-game sale of virtual goods and advertising services. We engage with our users on our free to play platform which is delivered through mobile platforms such as iOS, Android and Amazon as well as social networking sites such as Facebook.

In just over four months since acquisition the assets delivered £2.5m in revenue to 31 December 2015 and we acquired 36,835 in new depositing players.

Outlook

Our strategy for 2016 is to consolidate and focus on our core products. By disposing of our third-party platform driven websites, we are in a stronger position to streamline operations on our proprietary platforms. We continue to develop unique content which will bring exciting licensing opportunities in 2016 and deliver growth and new potential for the Group. This content will also be delivered on our core platforms to enable greater product differentiation and player engagement. With the proven success of marketing acquisition and the new platform, together with Slingo, we are in a strong position for significant progress.

Financial review

Overview

Gaming Realms has delivered growth of 116% year-on-year to £21.2m (12m 2014: £9.8m, 15m 2014: £11.2m). The growth is a combination of organic and acquisition. Real money gambling on the Grizzly platform has grown 362% to £10.8m (12m 2014: £2.3m, 15m 2014: 2.7m), with the acquisition of the free to play assets from RealNetworks, Inc. adding a further £2.5m since the acquisition. With investment in marketing and development of the platform we had an adjusted EBITDA loss of £4.1m (12m 2014: £5.9m, 15m 2014: £7.8m).

Marketing for the year was £11.5m (12m 2014: £8.1m, 15m 2014: £10.2m) as the Group continued to acquire players to grow its platform and revenues.

During the year, Gaming Realms acquired the free to play Slingo assets and games studios. The attributable revenue from acquisition was £2.5m with adjusted EBITDA loss attributed to these assets of £1.4m.

To make year on year comparison easier, certain comparatives have been adjusted to 12 months to 31 December 2014 on an estimated actual basis as noted in the following table:

	1 January 2015 to 31 December 2015	1 January 2014 to 31 December 2014	Change	1 October 2013 to 31 December 2013	1 October 2013 to 31 December 2014
	£	£	%	£	£
Revenue	21,208,446	9,798,299	116	1,428,907	11,227,206
Marketing expenses	(11,510,755)	(8,122,725)	42	(2,082,995)	(10,205,720)
Operating expenses	(5,725,255)	(2,089,814)	174	(370,364)	(2,460,178)
Administrative expenses	(8,079,852)	(5,436,039)	49	(943,574)	(6,379,613)
Adjusted EBITDA*	(4,107,416)	(5,850,279)	(30)	(1,968,026)	(7,818,305)

Following the acquisition of the trade and assets of the Slingo free to play apps and game studios from RealNetworks, we have introduced a new segment, social gaming and licensing, for the US business. The integration of the social free to play business has been integrated well into the Group and we are pleased with the initial contribution from this operation.

Income statement items

Revenue is made up of £10.8m (2014: £2.7m) from real money gambling on our Grizzly platform, £7.8m (2014: £7.4m) from marketing services and £2.5m from the Slingo assets acquired from RealNetworks, Inc. on 10 August 2015.

The increase in revenue in real money gambling is a reflection of the continuing investment into development, £1.8m (2014: £0.6m) and marketing £6.2m. The marketing has been very successful in the year delivering 78,198 new depositing players at a cost per acquisition of £79. We have also seen positive ROI on marketing within six months after paying point of consumption tax, third-party licences and ID and transaction fees.

Point of consumption tax was introduced in December 2014 and accounted for £1.5m (2014: £0.4m) cost for real money gambling.

Operating expenses, including point of consumption tax, transaction fees and third-party licences totalled £5.7m (2014: £2.5m). The increase is a result of the introduction of point of consumption tax, and also driven by increased revenues and player deposits. The addition of the Slingo business also accounted for £0.6m of operating costs. The costs are in line with management expectations.

Social games, Slingo IP acquisition and placing of £12.5m

On 10 August 2015, the Group acquired the following assets from RealNetworks Inc: GameHouse US; social and mobile freemium portfolio games and publishing network; Slingo brand and patents; certain game domains including sudoku.com and mahjong.com; an intellectual property licence relating to the GameHouse Promotion Network and the entire issued share capital of Backstage Technologies Inc which includes the Canadian Game studio and collectively have organised these under a new division called Blastworks. The acquisition is in line with the Group's strategy to build an international portfolio of engaging casual gaming brands. This operation is reported in Social Gaming and Licensing segment. The segment generated revenue of £2.5m and an adjusted EBITDA loss of £1.4m in the period between 10 August 2015 and 31 December 2015.

Total consideration for the acquisition was £12m ($18m) of which £6.9m ($10.7m) was paid in cash on completion with $4m payable on the first anniversary of completion and the remaining $4m payable on the second anniversary. The Group incurred acquisition related costs of £0.3m which have been disclosed in note 2.

As part of the acquisition, the Group raised £12.5m for the issue of approximately 50m new ordinary shares as a placing completed on 10 August 2015. Costs incurred in relation to the placing totalled £0.5m.

Details of the fair value of identifiable assets and liabilities acquired and purchase consideration and goodwill are disclosed in note 9.

Dividend

During the year, Gaming Realms did not pay an interim or final 2014 dividend. The Board of Directors are not proposing a final dividend for the current year.

Corporation and deferred taxation

The Group received £213,083 in research and development credits in the year and has recognised the unwind of deferred tax of £122,692 (2014: £46,431) on business combinations. 

Consolidated Statement of Profit and Loss and Other Comprehensive Income

For the year ended 31 December 2015

	Note	1 January 2015 to 31 December 2015 £	1 October 2013 to 31 December 2014 £
Revenue		21,208,446	11,227,206
Marketing expenses		(11,510,755)	(10,205,720)
Operating expenses		(5,725,255)	(2,460,178)
Administrative expenses		(8,079,852)	(6,379,613)
Adjusted EBITDA*		(4,107,416)	(7,818,305)
Acquisition costs	2	(318,853)	(140,773)
Restructuring costs	2	-	(80,839)
Share-based payment	2	(673,730)	(438,169)
EBITDA		(5,099,999)	(8,478,086)
Amortisation of intangible assets	7	(2,230,940)	(1,277,357)
Depreciation of property, plant and equipment		(59,861)	(41,252)
Finance expense	4	(393,579)	(57,355)
Finance income	4	7,579	14,601
Loss before tax		(7,776,800)	(9,839,449)
Tax credit	5	335,775	92,399
Loss for the financial year attributable to owners of the parent		(7,441,025)	(9,747,050)
Other comprehensive income
Exchange losses arising on translation of foreign operations		605,546	-
Total other comprehensive income		605,546	-
Total comprehensive income		(6,835,479)	(9,747,050)

Earnings per share
Loss per share
Basic and diluted (pence)	6	(3.45)	(5.90)

Consolidated Statement of Financial Position

As at 31 December 2015

	Note	31 December 2015 £	31 December 2014 £
### Assets
### Non-current assets
Property, plant and equipment		189,652	143,164
Goodwill	7	18,092,116	13,543,905
Intangible assets	7	10,835,685	3,213,519
Other assets		152,000	158,500
		29,269,453	17,059,088
### Current assets
Trade and other receivables		4,018,084	2,224,741
Cash and cash equivalents		2,536,388	4,013,894
		6,554,472	6,238,635
### Total assets		35,823,925	23,297,723
### Liabilities
### Current liabilities
Trade and other payables		4,327,965	2,750,136
Loans and borrowings		-	14,504
Deferred and contingent consideration		4,990,966	2,500,000
		9,318,931	5,264,640
### Non-current liabilities
Deferred tax liability		1,232,597	39,288
Deferred and contingent consideration		2,474,533	2,387,648
		3,707,130	2,426,936
### Total liabilities		13,026,061	7,691,576
### Net assets		22,797,864	15,606,147
### Equity
Share capital	8	24,920,829	19,517,049
Share premium		85,127,955	78,119,547
Merger reserve		(68,393,657)	(69,334,935)
Foreign exchange reserve		605,546	-
Retained earnings		(19,462,809)	(12,695,514)
### Total equity attributable to owners of the parent		22,797,864	15,606,147

Consolidated Statement of Cash Flows

For the year ended 31 December 2015

	Note	2015 £	2014 £
### Cash flows from operating activities
Loss for the year		(7,441,025)	(9,747,050)
Adjustments for:
Depreciation of property, plant and equipment		59,861	41,252
Amortisation of intangible fixed assets	7	2,230,940	1,277,357
Finance income	4	(7,579)	(14,601)
Finance expense	4	254,462	57,355
Unwind of deferred tax recognised on business acquisitions	5	(122,692)	(46,431)
Loss on disposal of property, plant and equipment		42,372	30,243
Loss on disposal of intangible assets	7	106,043	-
Share-based payment expense		673,730	438,169
(Increase)/decrease in trade and other receivables		(1,177,150)	39,776
Increase/(decrease) in trade and other payables		1,458,801	(22,760)
Decrease/(increase) in other assets		6,500	(99,402)
### Net cash flows from operating activities		(3,915,737)	(8,046,092)
### Investing activities
Acquisition of subsidiary, net of cash acquired		(6,652,050)	(3,290,311)
Purchases of property, plant and equipment		(68,055)	(107,240)
Purchase of intangibles	7	(1,805,913)	(583,364)
Interest received	4	7,579	14,601
### Net cash from investing activities		(8,518,439)	(3,966,314)
### Financing activities
Proceeds of Ordinary Share issue		12,500,000	11,938,999
Issuance cost of shares		(501,534)	(130,702)
Payment of deferred consideration		(1,250,000)	(825,000)
Fair value adjustment to contingent consideration	4	(134,017)	-
Foreign exchange loss on deferred consideration	4	273,134	-
Contingent consideration on prior period acquisitions		105,000	-
Repayment of other loans		(14,504)	(30,000)
Interest paid	4	(21,409)	(10,035)
### Net cash from financing activities		10,956,670	10,943,262
### Net decrease in cash and cash equivalents		(1,477,506)	(1,069,144)
### Cash and cash equivalents at beginning of year		3,994,326	5,063,470
### Cash and cash equivalents at end of year		2,516,820	3,994,326

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

	Share capital £	Share premium £	Shares to be issued £	Merger reserve £	Foreign exchange reserve £	Retained earnings £	Total equity £
1 October 2013	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	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	-	-	803,571	-	-	-	803,571
Settlement of shares to be issued	-	-	(803,571)	-	-	(21,429)	(825,000)
Share-based payment on share options	-	-	-	-	-	438,169	438,169
31 December 2014	19,517,049	78,119,547	-	(69,334,935)	-	(12,695,514)	15,606,147
Loss for the year	-	-	-	-	-	(7,441,025)	(7,441,025)
Other comprehensive income	-	-	-		605,546	-	605,546
Total comprehensive income for the year	-	-	-	-	605,546	(7,441,025)	(6,835,479)
Contributions by and distributions to owners
Shares issued as part of the consideration in a business combination	413,722	-	-	941,278	-	-	1,355,000
Shares issued as part of the capital raising	4,990,058	7,509,942	-	-	-	-	12,500,000
Cost of issue of Ordinary Share capital	-	(501,534)	-	-	-	-	(501,534)
Share-based payment on share options	-	-	-	-	-	673,730	673,730
31 December 2015	24,920,829	85,127,955	-	(68,393,657)	605,546	(19,462,809)	22,797,864

Notes to the Consolidated Financial Statements

For the year ended 31 December 2015

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 One Valentine Place, London, SE1 8QH.

Basis of preparation

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.

The consolidated financial statements are presented in sterling.

The financial information in this document has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards, International Accounting Standards and interpretations (collectively, "IFRS") issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 31 December 2014 or 31 December 2015.

Statutory accounts for the year ended 31 December 2014 have been filed with the Registrar of Companies and those for the year ended 31 December 2015 will be delivered to the Registrar in due course; both have been reported on by independent auditors. The independent auditors' reports on the Annual Report and Accounts for the year ended 31 December 2014 and 31 December 2015 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 preparation of financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies.

Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 31 December 2015 and the results of all subsidiaries for the year 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.

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.

2. Adjusted EBITDA

	2015 £	2014 £
Acquisition costs	318,853	140,773
Restructuring costs	-	80,839
Share-based payments	673,730	438,169
	992,583	659,781

During the year, the Group incurred acquisition fees of £318,853 for the acquisition of gaming assets and Backstage Technologies Inc from RealNetworks Inc.

3. Segment information

The Board is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance. The Group has two reportable segment. The social gaming provides freemium gaming and licensing services to the US and Europe. The real money gambling products and marketing services operates our brands and provides other digital marketing services to both gaming and non-gaming clients in the UK. 

Revenue by product:

	2015 £	2014 £
Real money gambling	10,801,303	2,667,596
Social gaming and licensing	2,537,158	1,176,082
Marketing services	7,839,299	7,383,528
Other	30,686	-
	21,208,446	11,227,206

There was 1 (2014: 1) customer who generated more than 10% of total revenue. Total sales to this customer, which received marketing services, in the year were £1,296,670 (2014: £1,338,882). This major customer receives marketing services from the Group.

Geographical information

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

	External revenue by location of customers 2015 £	External revenue by location of customers 2014 £
UK, including Channel Islands	17,656,043	9,850,955
US	1,752,753	878,868
Rest of the World	1,799,650	497,383
	21,208,446	11,227,206

The acquisition during the year (see note 9) formed a new segment for the Group, which was previously managed as one segment. Segmental reporting for the year is as below:

	Real money gambling and marketing services £	Social gaming and licensing £	Other^ £	Total 2015 £
Revenue	18,640,602	2,537,158	30,686	21,208,446
Adjusted EBITDA	(831,773)	(1,389,042)	(1,886,601)	(4,107,416)
Listing and acquisition costs				(318,853)
Share-based payment				(673,730)
EBITDA				(5,099,999)
Amortisation of Intangible assets				(2,230,940)
Depreciation of property, plant and equipment				(59,861)
Finance expense				(393,579)
Finance income				7,579
Loss before tax				(7,776,800)

^ Other segment noted above includes unallocated head office activities

4. Finance income and expense

	2015 £	2014 £
### Finance income
Interest received	7,579	14,601
### Total finance income	7,579	14,601
### Finance expense
Bank interest expense paid	21,409	10,035
Deferred and contingent consideration unwinding	233,053	47,320
Fair-value adjustment of contingent consideration	(134,017)	-
Foreign exchange movement on deferred consideration	273,134	-
### Total finance expense	393,579	57,355

The deferred consideration in relation to the acquisition from RealNetworks, Inc. was retranslated at the year-end exchange rate which resulted in a £273,134 charge in the current year. In addition to this, the Blueburra Holdings Limited contingent consideration was settled post year-end through the disposal of the white labels as set out in note 10, the credit represents a fair value adjustment to the contingent consideration.

5. Tax expense

	2015 £	2014 £
Tax expense
Current tax expense
Current tax credit on losses for the period	213,083	45,968
Total current tax	213,083	45,968
Deferred tax expense
Origination and reversal of temporary differences	122,692	46,431
Total deferred tax	122,692	46,431
Total tax expense	335,775	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:

	2015 £	2014 £
Loss for the period	(7,776,800)	(9,839,449)
Expected tax at effective rate of corporation tax in the UK of 20.25% (2014: 21.75%)	(1,574,802)	(2,140,080)
Expenses not deductible for tax purposes	273,077	120,098
Depreciation in excess of capital allowances	18,501	8,972
Effects of overseas taxation	316,501	75,736
Adjustment in respect of loss carried back	-	(45,968)
Unwind of deferred tax recognised on business acquisitions	(122,692)	(46,431)
Research & development tax credit	(213,083)	-
Tax losses carried forward	966,723	1,935,274
Total tax credit	(335,775)	(92,399)

6. 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.

	2015 £	2014 £
Loss after tax	(7,441,025)	(9,757,050)
	Number	Number
Weighted average number of ordinary shares used in calculating basic loss per share	215,672,706	165,220,742
Weighted average number of ordinary shares used in calculating dilutive loss per share	215,672,706	165,220,742
Basic and diluted loss per share (pence)	(3.45)	(5.90)

7. Intangible assets

	Goodwill £	Customer database £	Software £	Development costs £	Domain names £	Intellectual property £	Total £
### Cost
Balance at 1 October 2013	4,810,187	387,512	361,684	525,961	-	-	6,085,344
Acquired through business combination	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
Acquired through business combination	4,300,671	1,289,563	1,039,236	-	320,832	5,076,493	12,026,795
Additions	-	-	-	1,805,913	-	-	1,805,913
Disposals	-	-	(361,684)	-	-	-	(361,684)
FX movement	247,540	64,532	52,005	-	16,055	277,886	658,018
At 31 December 2015	18,092,116	4,543,648	1,091,241	2,888,724	363,401	5,354,379	32,333,509
Amortisation
Balance at 1 October 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
Amortisation charge	-	1,202,670	172,321	554,061	46,325	255,563	2,230,940
Disposals	-	-	(255,641)	-	-	-	(255,641)
FX movement	-	(4,711)	(3,797)	-	(1,172)	(6,954)	(16,634)
At 31 December 2015	-	2,055,945	135,717	919,856	45,581	248,609	3,405,708
Net book value
At 31 December 2014	13,543,905	2,331,567	138,850	717,016	26,086	-	16,757,424
At 31 December 2015	18,092,116	2,487,703	955,524	1,968,868	317,820	5,105,770	28,927,801

8. Share capital

Ordinary shares

	2015 Number	2015 £	2014 Number	2014 £
Ordinary shares of 10 pence each	249,208,292	24,920,829	195,170,489	19,517,049

On 11 August 2015, 47,415,000 shares were issued at £0.25 per share and 2,485,578 shares were issued at £0.26 per share with costs of £501,534 associated with the share issue.

On 9 October 215, 4,137,225 shares were issued to the previous shareholders of Blueburra Holdings Limited as part of their contingent consideration.

9. Business combinations during the YEAR

Acquisition of Gaming Assets and Backstage Technologies Inc (rebranded as Blastworks)

On 10 August 2015, the Group acquired the following assets from RealNetworks Inc: GameHouse US and Canadian Game studios; Social & Mobile Freemium portfolio games and publishing network; Slingo Brand & Patents; certain game domains including Sudoku.com and Mahjong.com; an intellectual property licence relating to the GameHouse Promotion Network and the entire issued share capital of Backstage Technologies Inc. The acquisition is in line with the Group's strategy to build an international portfolio of engaging casual gaming brands. The Slingo assets provide the Group with entry into the fast growing Social Casino Gaming segment of online gaming, whilst the experienced management team and game studio will allow the Group to further grow its ability to develop, distribute and market casual and real-money brands. Acquisition costs of £318,853 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 provisional 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	-	1,289,563	1,289,563
Software	-	1,039,236	1,039,236
Domain names	-	320,832	320,832
Intellectual property	-	5,076,493	5,076,493
Property, plant and equipment	162,927	(81,922)	81,005
Trade and other receivables	490,736	125,373	616,109
Cash	202,506	-	202,506
Trade and other payables	(118,743)	-	(118,743)
Deferred tax asset/(liability)	25,778	(1,273,212)	(1,247,434)
Total net assets	763,204	6,496,363	7,259,567

Fair value of consideration paid

	£
Cash consideration	6,854,556
Deferred consideration	4,705,682
Total consideration	11,560,238
Goodwill arising on acquisition	4,300,671
Deferred consideration at acquisition date	4,705,682
Unwinding of discount on deferred consideration	86,683
FX movement	273,134
Contingent consideration at 31 December 2015	5,065,499

The total consideration for the acquisition is £11,987,862 ($18,682,482), of which £6,854,556 ($10,682,482) was settled in cash. The Group has recognised £4,705,682 ($7,333,571) being the net present value of the deferred consideration of £5,133,306 ($8,000,000) at acquisition date. The deferred consideration is payable in two parts, $4,000,000 twelve month following the acquisition date and a further $4,000,000 twenty-four months following the acquisition date.

Goodwill recognised in the acquisition of Gaming Assets and Backstage Technologies Inc from RealNetworks Inc. represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognised. Goodwill includes an experienced workforce, future synergies and material cost savings. The net cash acquired was an outflow of £6,652,050. The revenue and profit or loss of the acquired assets for the period 1 January 2015 to 9 August 2015 is unavailable and therefore have not been disclosed. Revenue since acquisition totals £2,537,158 and loss since acquisition totals £1,754,604.

10. Events after the reporting date

On 4 March 2016, the Group disposed of the third-party platform driven website properties, for a total consideration of £2.4 million to Silverspin Media Ltd and Black Spark Media Limited. Black Spark Media will pay the Company, upon completion, an up-front cash payment of £1.2 million. The remaining £1.2 million of the total consideration, payable by Silverspin Media, was settled by way of waiving the final earn out payments to the previous shareholders of Blueburra Holdings Limited. This is due as part of the three year earn out and is being settled at a reduced rate by the Group. Chris Phillips and Scott Logan, shareholders of Silverspin Media, and also directors of the Company's subsidiaries Blueburra Holdings Limited and Digital Blue Limited and are therefore classified as related parties.

On 2 March 2016, the Company raised £1,525,00 by issuing 7,625,000 shares at £0.20 per share.

*     EBITDA and Adjusted EBITDA are non-GAAP measures and excludes acquisition, restructuring and other expenses and share based payment charges

This information is provided by RNS

The company news service from the London Stock Exchange

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