Nektan PLC | Final Results | FE InvestEgate

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Nektan PLC | Final Results | FE InvestEgate

http://www.investegate.co.uk/ArticlePrint.aspx?id=2015101507...

Nektan PLC

Final Results RNS Number : 3204C Nektan PLC 15 October 2015

15 October 2015 NEKTAN PLC ("Nektan", the "Company" or the "Group") Audited results for the year ended 30 June 2015 Nektan plc (AIM: NKTN), a leading internaAonal B2B mobile gaming plaDorm and content provider, announces its results for the year ended 30 June 2015. During the period, Nektan conAnued to drive growth in its key markets and is reporAng adjusted EBITDA for the year slightly ahead of expectaAons. Post period, momentum has conAnued; in Europe, with Q1 revenues for the current ﬁnancial year surpassing the total revenues for the enAre previous year; and, in the US market with a signiﬁcant increase in land based casino partners. The Group has also successfully raised an addiAonal £2.75 million to further accelerate growth. Year-‐End Highlights: ·

The Group conAnues to see strong and consistent quarterly growth in Real Money Gaming ("RMG") in Europe across all key performance indicators ("KPIs")

·

The successful launch of Sun Play in June 2015 in partnership with News UK, to develop and operate Sun Play, a best in class gaming and entertainment experience across mobile, tablet and desktop, on a mulA-‐year contract

·

Nektan's US joint venture with Spin Games LLC, Respin LLC ("Respin"), conAnues to see considerable momentum building in the US from its ﬁrst mover advantage

·

The Group announced in April and May 2015 a new ﬁnancing package totalling approximately £8 million, ensuring that the Group is well posiAoned to conAnue to execute on the strategy, scale the business and drive proﬁtable growth

Financial Summary:

Total revenue Adjusted EBITDA* OperaAng loss Loss before taxaAon Adjusted loss before taxaAon** Basic loss per share (pence) Diluted loss per share (pence)

Year ended 30 June 2015 £'000 528 (5,109) (7,209) (8,123) (6,850) (39.6) (39.6)

Year ended 30 June 2014 £'000 1,865 (3,477) (5,726) (5,731) (5,476) (35.4) (35.4)

*Adjusted EBITDA excludes lis3ng and fundraising costs, exchange diﬀerences, and non-‐cash charges rela3ng to share based payments **Adjusted loss before taxa3on excludes share based payment expense and lis3ng and transac3on costs

Post Period End Highlights: ·

·

·

Real Money Gaming: conAnues to see strong and consistent quarterly growth in Europe across all KPIs o

Net Gaming Revenues in the month of August alone surpassed the total revenues of the enAre previous quarter due to the conAnued increase in ﬁrst Ame depositors and over 70% growth in deposit amounts made by players

o

Q1 revenues for the current ﬁnancial year have surpassed the total revenues for the enAre previous year

o

Launch of Nektan MarkeAng Services ("NMS") in September, in partnership with Fred Done (Founder of BeDred, one of the world's largest independent bookmakers) and Warren Jacobs (Managing Director of AcAve Win Media Ltd)

Respin: The ﬁrst Respin gaming deployments with US land-‐based casinos are Xtraspin wheels, which are mobile technology enabled bolt-‐on modules to slot machines. Respin is currently rolling out its mobile gaming soluAon across the U.S., targeAng land based casinos in 32 States. o

Xtraspin wheels are now live in 12 casinos across California and Nevada, tripling since the end of June (30 June 2015: 4)

o

A total of 74 Xtraspin wheels are operaAonal in these casinos (30 June 2015: 25)

o

Casino operators are seeing revenue "coin in" uplijs in excess of 30% on slot machines with Xtraspin wheels

o

A further 22 land-‐based casinos have now been contracted or have signed lekers of intent for delivery of an iniAal addiAonal 130 Xtraspin wheels

o

Respin has recently been granted approval for its ﬁrst patent for Xtraspin, helping to strengthen its ﬁrst mover advantage

As announced on 6 October, the Group has raised an addiAonal £2.75 million to underpin expansion in the US tribal and commercial casino market and to support working capital requirements

David Gosen, Chief ExecuTve Oﬃcer, said: "I am pleased to report Nektan's ﬁrst full year results since our IPO. The Group has made considerable progress during the year and conAnues to see strong quarterly growth in Europe across all key performance indicators and strong momentum in the US, through Respin, our US joint venture. Our pipeline remains very encouraging and, along with our exisAng partner base, emphasises the strength of our proprietary, scalable plaDorm, content and sector experAse, all of which leave the Group well-‐posiAoned to beneﬁt from the opportuniAes available to us in a growing market. We remain conﬁdent in our outlook for the full year and beyond as Nektan conAnues to strengthen its posiAon and to deliver strong momentum in our key markets in Europe and the US." For further informaTon on the Group, please contact:

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Nektan David Gosen, Chief ExecuAve Oﬃcer

via Newgate below

Zeus Capital Limited (Nominated Adviser & Broker) Nicholas How (Corporate Finance) Adam Pollock (Corporate Broking)

Tel: +44 (0)20 3829 5000

Newgate (PR Adviser) James Benjamin Alex Shilov

Tel: +44 (0)20 7680 6550 Em: [email protected]

Further informaAon on Nektan can be found on the Group's website at www.nektan.com About Nektan: Nektan is a leading internaAonal B2B mobile gaming content developer and plaDorm provider. The Group designs, builds and operates mobile games in the regulated, interacAve real money gaming ("RMG") and freemium gaming space, delivering original and innovaAve content to large commercial organisaAons that have established online audiences. Nektan's full end-‐to-‐end technology plaDorm, Evolve, simpliﬁes and supports the route to mobile and desktop gaming revenues, managing the full customer experience and back-‐oﬃce operaAons, allowing commercial partners to focus solely on markeAng the product to their consumers. Nektan also operates a joint venture, Respin LLC, with Spin Games LLC that provides US land-‐based casinos with in-‐venue mobile technology and an innovaAve way of increasing revenue from end-‐of-‐life cabinets whilst providing players new and innovaAve content to play, which includes funcAonality on mobile devices. Nektan is regulated by the Gibraltar Licensing Authority and the UK Gambling Commission, as well as in the Irish market, and has oﬃces in Gibraltar, London and Las Vegas with Respin based in Reno, Nevada.

Chairman and Chief ExecuTve's Statement Overview Over the last year and following the period end, Nektan has made considerable, tangible progress with strong momentum in its key markets in Europe and the US and strong quarterly growth across all key performance indicators. Nektan operates in the high growth market of mobile gaming and the Group aims to strengthen its posiAon as the internaAonal, B2B mobile plaDorm and gaming provider of choice. Nektan's principal market are the regulated RMG sectors in the US and Europe where the Group conAnues to disrupt and exploit the changing market dynamics through innovaAon. The Group's compeAAve advantage is its white label full end-‐to-‐end technology plaDorm, Evolve (launched in April 2014), and its growing suite of high quality mobile gaming products, which together conAnue to prove very akracAve to commercial enAAes, media agencies and aﬃliates that have large established online audiences. In November 2014, the Group signed a joint venture agreement with Spin Games LLC ("Spin Games") to target the opportuniAes we see in the US land-‐based casino market through in-‐venue mobile technology. The Group's joint venture, Respin, oﬀers casino operators an innovaAve and capital eﬃcient way of refreshing their customer oﬀer and increasing revenue from unsupported end-‐of-‐life slot machines whilst providing players new and innovaAve content to play which includes funcAonality on mobile devices. Our admission to AIM in November 2014 helped to enhance Nektan's proﬁle and credibility with major partners, whilst also providing access to capital as commercial opportuniAes arise, all of which conAnues to support our growth plans. Performance During the year, the Group's European business has delivered material growth in all RMG casino KPIs, since the launch of the Evolve plaDorm and house RMG casino brand, Chomp Casino, in April 2014. RMG net gaming revenue in the year ending June 2015 was £385k (2014: £10k). In the US, Respin conAnues to strengthen its performance with its ﬁrst US product Xtraspin. The uplij in revenues experienced by casino partners with Xtraspin wheels underlines the signiﬁcant commercial opportuniAes which are further reﬂected in the conAnued growth of its casino contract pipeline which at year end saw four live casinos and a further 18 land-‐based casinos either contracted or with lekers of intent for delivery of in-‐venue mobile gaming. The operaAng loss for the year was £7.2 million (2014: £5.7 million loss). Adjusted EBITDA, which excludes lisAng costs, exchange diﬀerences, and non-‐cash charges relaAng to share based payments was a loss of £5.1 million (2014: £3.5 million loss). Since the period end, momentum across the Group has conAnued as set out in our recent Trading Update. Net Gaming Revenues in the month of August alone surpassed the total revenues of the enAre previous quarter, akributable in part to a conAnued increase in ﬁrst Ame depositors and over 70% growth in deposit amounts made by players. In the US, Xtraspin wheels are now live in 12 casinos across California and Nevada, tripling since the end of June with a total of 74 Xtraspin wheels operaAonal. Furthermore, casino operators are seeing revenue "coin in" uplijs in excess of 30% on slot machines with Xtraspin wheels and this is driving the growth in the conﬁrmed pipeline, with a further 22 land-‐based casinos now contracted or with lekers of intent for delivery of an iniAal addiAonal 130 Xtraspin wheels. To conAnue to support business growth and development and to underpin our conAnued progress in key markets, in April and May 2015 the Company announced a ﬁnance package totalling, in aggregate, gross proceeds of £8.0 million. Furthermore and as announced on 6 October that the Company has raised an addiAonal £2.75 million, to underpin expansion in the US tribal and commercial casino market and to support working capital requirements. Key drivers Over the past 12 months, we have conAnued to invest in our Evolve gaming plaDorm and innovaAve high quality games to ensure that our product remains market-‐leading and that we retain our compeAAve advantage. Evolve is focused on supporAng mobile gaming ﬁrst as well as enabling desktop, ensuring its products provide a superior mobile entertainment experience for end users. The Group can idenAfy architecture developments and prioriAse these as it sees ﬁt due to having full ownership of its plaDorm, which also allows the Group to integrate third-‐party sojware in short Ameframes and at a lower cost. The design of Evolve allows the Group the ﬂexibility to meet the demand of evolving and new markets, ensuring it has a speed-‐to-‐market advantage and the ability to produce a partner branded soluAon in a maker of weeks rather than months. The exisAng investment in Evolve's sojware architecture and product development acts as a signiﬁcant barrier to entry in oﬀering a robust B2B mobile gaming plaDorm. We conAnue to add high quality partners and, at the year-‐end, we had 20 live RMG casino partners, including the landmark mulA-‐year relaAonship with The Sun newspaper in the UK to develop and operate Sun Play, an innovaAve new gaming product launched in the UK in June 2015. Nektan was contracted following a rigorous selecAon process, and this is tesAmony to the quality of our B2B oﬀer. Sun Play combines free-‐to-‐play skill games with a suite of real money games that are designed to be played on the go by the readers of The Sun newspaper's print and online formats. We are also delighted with the signiﬁcant interest received so far in the US for the in-‐venue mobile technology developed with Spin Games in the Respin joint venture. Moreover, as recently announced, Respin has now been granted approval for its ﬁrst patent for Xtraspin, which helps to further strengthen its ﬁrst mover advantage.

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Proven management team Nektan has built a strong senior management team with signiﬁcant experience of building and leading high growth companies in the technology and gaming industries. Between them, the team has led pioneering companies including B2C, B2B, white label and content licensing businesses, and possesses the ability to assist the Group in meeAng its strategic goals. David Gosen further strengthened the team when he joined as CEO in January 2015, bringing 25 years of gaming and technology experAse. On behalf of the Board, we would also like to thank all of Nektan's employees for their conAnued hard work and commitment. Outlook In Europe, Nektan is expanding its business in the fastest growing segment of the online gaming market and in the US the Group, alongside our JV partner, is now live with RMG mobile technology in the esAmated $3 billion a year potenAal market. In both markets, supported by our leading full end-‐to-‐end technology plaDorm, Evolve, the opportuniAes are substanAal and there is signiﬁcant interest in Nektan's oﬀering. Post period end, we have secured addiAonal investment, raising £2.75 million through the issue of ConverAble Loan Notes and equity to new and exisAng investors to support the Group's overall growth strategy and maintain strong momentum in its key markets. Our pipeline remains very encouraging and, along with our exisAng partner base, emphasises the strength of our proprietary, scalable plaDorm, content and sector experAse, all of which leave the Group well-‐posiAoned to beneﬁt from the opportuniAes available to us in a growing market. We remain conﬁdent in our outlook for the full year and beyond as Nektan conAnues to strengthen its posiAon and to deliver strong momentum in our key markets in Europe and the US. Gary Shaw and David Gosen ExecuTve Chairman and Chief ExecuTve Oﬃcer

Strategic Report Our business model and strategy Nektan's core market is the regulated mobile RMG sector. In the early stages of the Group's development it has focused speciﬁcally on white label casino. Nektan aims to strengthen its posiAon as the internaAonal, B2B mobile plaDorm and gaming provider of choice, recognised for being at the forefront of innovaAon in mobile gaming and through its revenue share and licensing business model, to generate high operaAonal leverage and high margins. The Group's strategy is focused on: ·

operaAng, distribuAng and moneAsing RMG entertainment for white label partners with access to large online audiences;

·

conAnuing to develop and enhance the Group's end-‐to-‐end plaDorm, including the ability to deploy content across mobile and desktop and to conAnue innovaAng content-‐rich and original gaming products; and

·

targeAng the land based US casino market with in-‐venue mobile technology by adding a "bolt-‐on" module or by refurbishing the machines from the esAmated 40% of slot machines in the US casino market that are no longer supported by manufacturers.

Nektan simpliﬁes the route to mobile gaming revenues for its partners, managing the full customer experience and back-‐oﬃce operaAons, allowing the partner solely to focus on markeAng the product to its consumers. Net gaming revenue is split between the Group and the partner, with limited technical or integraAon cost akached to each launch. At the year-‐end there were 20 live RMG casino partners, including the landmark mulA-‐year relaAonship with The Sun newspaper in the UK to develop and operate Sun Play, a best in class gaming and entertainment experience across mobile, tablet and desktop. Nektan moneAses its content and plaDorm through four routes to market: white label implementaAons, house brands, content licensing and joint ventures. White labelling sits at the heart of Nektan's B2B business model, which is focussed on targeAng large commercial organisaAons and media owners that have established online audiences. The Group has to develop a full end-‐to-‐end technology plaDorm, Evolve, which is focussed on supporAng mobile gaming and proprietary gaming assets. It has been designed to oﬀer industry leading speed to market for partners, be adaptable to brand look and feel and to support the delivery of the games to all internet-‐enabled devices. With white label implementaAons, Nektan retains a share of the net revenue generated, typically between 30-‐35%. The size of this share will depend on the scale of the partner and the commercial value access to its online audience is deemed to deliver. Partners are categorised as large, medium or small based on the audience size and, based on industry norms, the average player is esAmated to have a lifeAme value of £300 over an average lifeAme of 19 months. The Group also has a number of Freemium bingo partners and conAnues to monitor the growth potenAal of this sector. The Respin joint venture, targeAng the land based US casino market with in-‐venue mobile technology, operates a per unit leasing model based on a ﬁxed dollar amount per day for each unit installed. The ﬁrst product developed by the joint venture, XtraSpin, is priced at $12 per day per unit. Market overview The Group is in a strong posiAon to gain signiﬁcant share of the fast-‐growing mobile gaming market, underpinned by its focused strategy and end-‐to-‐end gaming plaDorm and content porDolio speciﬁcally designed for the mobile channel. Mobile RMG in Europe Nektan's considerable market opportunity is driven by the increase in ownership of smart phones and the reshaping of the Internet by mobile devices. Within the gaming sector, mobile is the fastest growing segment, reﬂected by the esAmaAon that mobile gambling -‐ including bevng, gaming and lokery -‐ will generate just over €19 billion of gross win by 2018, reﬂecAng a CAGR of 29.5 per cent (source: H2GC). Forrester Research predicts that there could be 3.4 billion smartphones and 905 million tablets in acAve use worldwide by 2017, implying 46% and 30% year on year (YOY) growth in smartphone and tablet adopAon respecAvely. A study published by Deloike esAmated that smartphone penetraAon is at 66%, while 54% of UK households now own a tablet (source: Ofcom). This has driven consumer demand for all forms of mobile entertainment, including mobile gambling. Growth in mobile gaming is also clearly evidenced by the fact that many of the established bevng operators have been building up their mobile oﬀerings in recent years and are exhibiAng strong growth in their mobile channels. Drivers for mobile gaming include convenience, privacy, an improving user experience based on user interface enhancements, and content conﬁgured speciﬁcally for mobile consumpAon. Consumers have also become more accepAng of mobile based payments. These drivers underpin the H2GC forecast growth of the mobile based gaming market from €0.95bn in 2014 to €2.25bn by 2018 and to €2.81bn by 2020. Nektan is well posiAoned within the expanding mobile market, with its content being built in HTML5, a mobile development technology that allows games to be built once and then deployed across mulAple devices, from mobile phones to tablets, laptops and desktop PCs. In addiAon, to fully leverage the opportunity, its end-‐to-‐end plaDorm, Evolve, simpliﬁes the route to real money mobile gaming revenues for partners, by managing the full customer experience and back-‐oﬃce operaAons for the partner. US casinos and land-‐based technology The US Casino market is esAmated to be worth c.US$66bn in 2015 and is the second largest gambling market in the world, ajer Macau in China (source: StaAsta 2015). There are two disAnct types of casino in the US: tribal and commercial. In 2012 the split between commercial and tribal gaming revenues was 57%/43%. There are 39 states that have some form of legalised electronic gaming device -‐ including tradiAonal slot machines, video poker and bingo -‐ at tribal

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casinos, commercial casinos, racetrack casinos, and/or bars, restaurants or other licensed establishments. The Group's Respin joint venture is a genuinely disrupAve business in an esAmated potenAal market of $3bn. 40% of slot machines on casino ﬂoors are esAmated to be unsupported by the original manufacturer, based on the 2013 ﬁgure of 775,000 slot machines in commercial and tribal casinos. An opportunity has arisen, on which Respin is capitalising and has gained ﬁrst mover advantage, as a result of casino operators' reluctance to purchase new machines from manufacturers. Respin oﬀers casino operators an innovaAve and capital eﬃcient way of refreshing their customer oﬀer and increasing revenue from unsupported end-‐of-‐life slot machines whilst providing players new and innovaAve content to play which includes funcAonality on mobile devices. The freemium opportunity The Social Games market is esAmated to reach $3.5bn this year, up from $2.8bn in 2014 (Source: Cenkos 2015). With real money online gaming eﬀecAvely banned in most US states, social casino games have grown strongly in North America led by the likes of Caesars and Zynga. The Group's freemium growth strategy for mobile based social gaming product will conAnue to be secondary in focus at this point unAl its revenue and proﬁt potenAal is demonstrated.

OperaTonal and ﬁnancial review The Group has made considerable operaAonal progress over the year, signing high-‐proﬁle B2B customers and akracAng an impressive level of interest from US casinos. The successful signing of large media groups and gaming operators demonstrates the quality of Nektan's plaDorm and games. Europe partners The Group's early tracAon in Europe reinforces the quality of its technology-‐led mobile gaming proposiAon capability to disrupt the mobile gaming market. The Group's exisAng 20 live white label RMG partners comprise a mix of media companies with large audiences and established gaming brands. On the content licensing side, a further ﬁve customers have signed a contract to licence content. Nektan has also signed a mulA-‐year partnership with News UK, which combines free-‐to-‐play skill games with a suite of real money games that are designed to be played on the go by the readers of The Sun newspaper's print and online formats. This landmark deal will signiﬁcantly underpin the revenues of the European RMG business. Launched and live in June 2015 Sun Play will reach the Sun's 5.4 million UK adult readership that has a strong gaming heritage underpinned by Sun Bingo. The Sun funds all markeAng including editorial promoAon. This is a mulA-‐year contract with potenAally signiﬁcant net gaming revenue share to Nektan. Given the depth of the pipeline across all exisAng oﬀerings, management is conﬁdent that the commercial future of the business is exciAng. Real money gaming KPIs The performance of the Group during the year demonstrates the operaAonal progress achieved. The Directors regard, in addiAon to net gaming revenue and EBITDA, the growth in ﬁrst Ame depositors, player deposits and player cash stakes as reliable measures of performance that demonstrate growing sustainable lifeAme revenues from players: ·

ﬁrst Ame depositors were 3,153 in Q4 versus 416 in Q1;

·

cash stakes in Q4 of the year were £6.2 million versus £1.4 million in Q1; and

·

deposit amounts were £491k in Q4 versus £136k in Q1.

US In the US, Respin has generated signiﬁcant partner interest with 18 land-‐based casinos contracted or with lekers of intent already for delivery of in-‐venue mobile enabled gaming in the current ﬁnancial year (currently 34). At the year-‐end there were four casinos live with 25 Xtraspin wheels, across Nevada and California, delivering increases of "coin in" revenues to the casinos in excess of 30%. Revenue The Group has seen material growth in all RMG casino key performance measures, since the launch of the house RMG casino brand, Chomp Casino, in April 2014. RMG net gaming revenue in the year ending June 2015 was £385k (2014: £10k) from a total of £1,085k in RMG player cash deposits (2014: £13k). Revenue from content licensing was £29k (2014: £1,614k) which was generated from a legacy revenue share agreement with one third party operator and from the mobile games deal with LeoVegas. The prior year content licensing revenue was generated in respect of revenue share and other services provided by Nektan UK Limited (formerly Mfuse Limited) to third party operators in the sports bevng market that was terminated in order for the Group to focus on its core strategy and the development of its proprietary Evolve plaDorm. Expenses The markeAng, partner and aﬃliate costs were £724k for the year (2014: £169k) of which £418k related to spend on the two casino RMG house brands, Chomp Casino and Sapphire Rooms. AdministraAve expenses, excluding lisAng costs, were reduced by 20% to £5.9 million (2014: £7.4 million). The Company incurred £1.3 million in one oﬀ costs in relaAon to the admission of Nektan plc to the AlternaAve Investment Market of the London Stock Exchange and raising addiAonal ﬁnancing during the year. EBITDA The operaAng loss for the year was £7.2 million (2014: £5.7 million loss). Adjusted EBITDA, which excludes lisAng costs, exchange diﬀerences, and non-‐cash charges relaAng to share based payments, was a loss of £5.1 million (2014: £3.5 million loss). During the year Nektan contributed £299k to the Broadcast Gaming joint venture for the development of the freemium gaming US mobile opportunity, which has been included within loans to joint ventures. The Group's share of the operaAng loss of Broadcast Gaming was £115k. Nektan contributed £1,749k to the Respin joint venture for the development of in-‐venue class II mobile gaming product. The iniAal contribuAon to Respin of £315k (USD$500k) and the further £1,434k in respect of operaAng costs is included investments at the year end. The Group's share of the operaAng loss of Respin was £685k. Cash ﬂow The Group's cash balance at 30 June 2015 was £3.4 million (2014: £0.9 million). Net proceeds of £13.2 million were raised in the year from issuing new shares of £7.7 million (net of transacAon costs) and ConverAble Loan Notes of £5.5 million (net of transacAon costs). During the year the £1.9 million spent on purchase of intangible ﬁxed assets related to the capitalisaAon of internal development Ame. In April and May 2015 the Company issued ConverAble Loan Notes to exisAng and new insAtuAonal and private investors raising, in aggregate, gross proceeds of £5.9 million through the issue of, in aggregate, £0.5 million secured unlisted series B loan notes due for repayment on 28 April 2020 which are compliant with applicable venture capital trust rules and the issue of, in aggregate, £5.4 million secured listed series A loan notes due for repayment on 28 April 2020 listed on the Channel Islands SecuriAes Exchange (the "CISE"). The ConverAble Loan Notes akract accrued interest at a rate of 10 percent per annum, paid quarterly in arrears and are secured by a ﬁrst ranking ﬁxed and ﬂoaAng charge on the assets of the Company and each of the Company's subsidiaries, with all other loans to the Company ranking behind the ConverAble Loan Notes' security. Post period end, as planned, the Company raised an addiAonal £2.75 million through the issue of £2.39 million of ConverAble Loan Notes and a placing of 232,258 new Ordinary Shares of 155p each. Dependent on certain condiAons, if conversion were to occur in full the company would have to issue, in aggregate, a minimum of 3,974,493 Ordinary shares. The new Ordinary Shares to be issued pursuant to the conversion fall within the Directors' exisAng authority to allot new Ordinary Shares for cash on a non-‐pre-‐empAve basis. Principal risks

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There are a number of potenAal risks and uncertainAes that could have a material impact on the Group's long-‐term performance and could cause results to diﬀer materially from expected and historical results. The principal risks to which the business is exposed are set out below:

Risk

Background

Legal and regulatory risks Loss of gambling Failure to comply with the terms of the licences Group's exisAng or future gambling licences may lead to penalAes, sancAons or ulAmately the revocaAon of relevant operaAng licences.

Change in regulaAons and restricAons on expansion into target markets

MiTgaTng controls

The Group overall has a focused compliance approach with a dedicated in house compliance resource to develop relaAonships with regulators, keep up to date with legal and regulatory developments, ensure necessary staﬀ training and enable conAnuaAon of all necessary licences to allow the Group to conAnue its business.

The laws and regulaAons governing remote gambling are highly complex, vary greatly from jurisdicAon to jurisdicAon and are constantly evolving. Further, there are ojen diﬀerences between the acAviAes and types of games that are permiked to be oﬀered, the technical requirements and restricAons which apply to those games, the manner and extent to which they can be marketed and other condiAons of operaAon imposed in diﬀerent jurisdicAons.

As an established regulated supplier, the Group monitors legal and regulatory developments in all of its material markets closely and generally seeks to keep up to date on legal and regulatory developments aﬀecAng the remote gambling industry as a whole.

The success of the Group's services is dependent on the strength of its white label partners' brands and the eﬀecAveness of their markeAng. If its partners do not invest in the markeAng of the Group's services or do not market eﬀecAvely, the amount of revenue generated by customers of those products is likely to be impacted.

The Group works closely, through its account management team, with its broad base of partners to ensure best markeAng pracAce is implemented and that partners fulﬁl their obligaAons.

CompeAAon

The online gambling and social gaming markets are becoming increasingly compeAAve as the popularity and sophisAcaAon of mobile technology rises. Failure to compete eﬀecAvely may result in losing customers and market share to exisAng and/or new compeAtors.

The Group conAnues to invest signiﬁcant resources to improve its technology and content porDolio whilst also diversifying its partner and geographical base.

Fraud

Online transacAons, and in parAcular online gambling transacAons, may be subject to sophisAcated schemes or collusion to defraud, launder money or other illegal acAviAes. There is a risk that the Group's products or systems may be used for those purposes by its customers.

The Group has implemented policies and procedures designed to minimise the risk of fraud and money laundering, including conducAng anA-‐money laundering checks on its customers.

As a provider of online gambling services, the Group's business is reliant on technology and advanced informaAon systems. If the Group does not invest in the maintenance and further development of its technology systems, there is a risk that these systems may not cope with the needs of the business and may fail.

The Group conAnues to invest in its proprietary plaDorm to ensure the necessary features and funcAonality meet their partner needs. In addiAon it has adopted industry standard protecAons to detect intrusions or other security breaches and implements preventaAve measures to protect against sabotage, hackers, viruses and other cyber-‐ crime.

The marketplace Dependency on success of partner markeAng

Technology Dependence on technology

The Group is reliant on the Internet and is vulnerable to acAviAes such as distributed denial of service akacks, other forms of cyber-‐crime and a wide range of malicious viruses. Employees Reliance on key personnel

The Group's future success depends on the conAnued service of senior and key management, the retenAon of which cannot be guaranteed.

The Group ensures that key personnel are appropriately rewarded and incenAvised. This is through a mixture of short-‐term and long-‐term incenAves.

David Gosen Chief ExecuTve Oﬃcer

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NEKTAN PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2015

Year ended 30 June 2015

Year ended 30 June 2014

Notes

£'000

£'000

2

528 (303) 225

1,865 (132) 1,733

4

(724) (7,188) 478

(169) (7,430) 140

Adjusted EBITDA LisAng and fundraising costs DepreciaAon AmorAsaAon of intangible assets Share based payment charges

10 9 25

(5,109) (1,266) (224) (603) (7)

(3,477) -‐ (162) (1,832) (255)

OperaTng loss Finance income Finance expense Share of loss of joint ventures

3 7 7 11

(7,209) 1 (230) (685)

(5,726) 1 (6) -‐

Loss before taxaTon Tax (charge)/credit

8

(8,123) (19)

(5,731) 310

(8,142)

(5,421)

4

3

(8,138)

(5,418)

(39.6) (39.6)

(35.4) (35.4)

Revenue Cost of sales Gross proﬁt MarkeAng, partner and aﬃliate costs AdministraAve expenses Other income

Loss for the year Other comprehensive income for the year Exchange diﬀerences arising on translaAon of foreign operaAons which may be reclassiﬁed to proﬁt or loss

3

Total comprehensive loss for the year

Earnings per share a_ributable to the Ordinary equity holders of the parent Basic (pence) Diluted (pence)

6 6

NEKTAN PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION For the year ended 30 June 2015

Year ended 30 June 2015

Year ended 30 June 2014

Notes

£'000

£'000

Non-‐current assets Intangible assets Property, plant and equipment Investments in equity accounted joint ventures

9 10 11

3,146 115 1,064 4,325

1,843 315 -‐ 2,158

Current assets Trade and other receivables Cash and cash equivalents

12 13

1,473 3,396 4,869

857 877 1,734

9,194

3,892

1,442 583 2,025

811 -‐ 811

Total assets Current liabiliTes Trade and other payables ConverAble loan notes

14 15

Non-‐current liabiliTes

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4,507 24 4,531

-‐ 44 44

Total liabiliTes

6,556

855

Net assets

2,638

3,037

226 22,330 (2) 3,306 262 (56) (23,428)

-‐ 14,824 (2) 3,306 255 (60) (15,286)

2,638

3,037

Equity akributable to equity holder: Share capital Share premium Merger reserve Capital contribuAon reserve Share opAon reserve Foreign exchange reserve Retained earnings

15 18

17

Total equity

NEKTAN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2015

Share capital

Share premium

Shares to be issued reserve

Share opTon reserve

Capital contribuTon reserve

Merger reserve

Foreign exchange reserve

Retained earnings

Total equity

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 1 July 2013

-‐

2

10,578

-‐

3,306

(2)

(63)

(9,865)

3,956

Loss for the year Other comprehensive income Issue of shares Shares subscribed for (net of costs) Share based payments

-‐ -‐ -‐ -‐ -‐

-‐ -‐ 10,578 4,244 -‐

-‐ -‐ (10,578) -‐ -‐

-‐ -‐ -‐ -‐ 255

-‐ -‐ -‐ -‐ -‐

-‐ -‐ -‐ -‐ -‐

-‐ 3 -‐ -‐ -‐

(5,421) -‐ -‐ -‐ -‐

(5,421) 3 -‐ 4,244 255

At 30 June 2014

-‐

14,824

-‐

255

3,306

(2)

(60)

(15,286)

3,037

Loss for the year Other comprehensive income Rebasing of shares Issue of shares (net of costs) Share based payments

-‐ -‐ 197 29 -‐

-‐ -‐ (197) 7,703 -‐

-‐ -‐ -‐ -‐ -‐

-‐ -‐ -‐ -‐ 7

-‐ -‐ -‐ -‐ -‐

-‐ -‐ -‐ -‐ -‐

-‐ 4 -‐ -‐ -‐

(8,142) -‐ -‐ -‐ -‐

(8,142) 4 -‐ 7,732 7

At 30 June 2015

226

22,330

-‐

262

3,306

(2)

(56)

(23,428)

2,638

NEKTAN PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (ConTnued) For the year ended 30 June 2015 The following describes the nature and purpose of each reserve within equity: Share capital Represents the nominal value of shares alloked, called up and fully paid. Share premium Represents the amount of subscribed for share capital in excess of nominal value. Capital contribuTon reserve Represents: (a) Nominal value of shares held by a shareholder in a subsidiary Company and contributed to Nektan plc. (b) The release of the Group's obligaAon to repay borrowings of £3,304,000. Merger reserve The diﬀerence between the nominal value of the Nektan (Gibraltar) Limited shares acquired in May 2011 and the nominal value of shares in Nektan plc issued to acquire these shares as part of a Group restructuring.

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Foreign exchange reserve Represents the gains/losses arising on retranslaAng the net assets of overseas operaAons into UK Pound Sterling. Shares to be issued reserve Represents the share subscripAons received by investors for shares issued in the following year. Retained earnings Represents the cumulaAve net gains and losses recognised in the consolidated statement of comprehensive income. Share opTon reserve Represents the cumulaAve value of share opAon charges recorded in the consolidated statement of comprehensive income.

NEKTAN PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2015

Notes Cash ﬂow from operaTng acTviTes Loss for the year Adjustments for: AmorAsaAon of intangible assets DepreciaAon of property, plant and equipment Share based payment expense Loss on disposal Finance expense Finance income Share of loss of joint ventures Income tax expense/(credit) OperaTng cash ﬂow before movement in working capital (Increase) / decrease in trade and other receivables Increase in trade and other payables

9 10 10 7 7 11 8

12 14

Cash generated used in operaTons Income taxes paid/Income tax credit received Net cash ouelow from operaTng acTviTes Cash ﬂow from invesTng acTviTes Purchase of intangible ﬁxed assets Purchase of property, plant and equipment Investments in joint ventures Loans to joint ventures Deferred and conAngent consideraAon payments

9 10 11 11

Net cash used in invesTng acTviTes Cash ﬂow from ﬁnancing acTviTes Interest paid Interest received Issue of converAble debt (net of costs) Proceeds on subscripAon for shares (net of costs)

15

Net cash generated from ﬁnancing acTviTes Net increase in cash and cash equivalents

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

(8,142)

(5,421)

603 224 7 3 230 (1) 685 19

1,832 162 255 -‐ 6 (1) -‐ (310)

(6,372)

(3,477)

(317) 23

1,439 169

(6,666)

(1,869)

-‐

-‐

(6,666)

(1,869)

(1,909) (24) (1,749) (299) -‐

(818) (167) -‐ (164) (977)

(3,981)

(2,126)

(92) 1 5,525 7,732

(6) 1 -‐ 4,244

13,166

4,239

2,519

244

Cash and cash equivalents at beginning of period

13

877

633

Cash and cash equivalents at end of period

13

3,396

877

NEKTAN PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the period ended 30 June 2015 1. AccounTng policies Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards including International Accounting Standards ('IASs') and interpretations (collectively 'IFRS') as published by the International Accounting Standards Board ("IASB") which have been adopted by the European Commission and endorsed for use in the EU for the purposes of the Group's full year financial statements. The consolidated ﬁnancial statements comply with the Gibraltar Companies (Consolidated Accounts) Act 1999 and the Gibraltar Companies Act 1930 (as amended). The ﬁnancial statements are presented in UK Pound Sterling ('Sterling') and rounded to the nearest £'000. The ﬁnancial informaAon does not consAtute the Group's statutory accounts for the year ended 30 June 2015 or the year ended 30 June 2014 but is derived from those accounts.

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Statutory accounts for the year ended 30 June 2015 will be ﬁled with Companies House Gibraltar following the Company's Annual General MeeAng. The auditors have reported on those accounts and their report was unqualiﬁed and did not contain statements under secAon 10(2) of the Gibraltar Companies (Accounts) Act 1999 or secAon 182(1) (a) of the Gibraltar Companies Act 1930. Statutory accounts for the year ended 30 June 2015 will be filed with Companies House Gibraltar following the Company's Annual General Meeting. The ﬁnancial statements have been prepared on a going concern basis. Ajer reviewing the Group's forecast, annual budget, liquidity requirements and new ﬁnancing arrangements, including conAnued shareholders support, the directors are saAsﬁed that the Group will have adequate resources to conAnue to operate for the foreseeable future. Adoption of new and revised Standards and Interpretations In the current reporAng period, the Group has adopted a number of revised standards and interpretaAons including IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other En33es. However, none of these have had a material impact on the Group's reporAng. In addiAon, the IASB has issued a number of IFRS and IFRIC amendments or interpretaAons that are not yet eﬀecAve including IFRS 9 Financial Instruments and IFRS 15 Revenue from contracts with customers. It is not expected that any of these will have a material impact on the Group. CriTcal accounTng policies, esTmates and judgements The preparaAon of consolidated ﬁnancial statements under IFRS requires the Group to make esAmates and judgments that aﬀect the applicaAon of policies and reported amounts. EsAmates and judgments are conAnually evaluated and are based on historical experience and other factors including expectaAons of future events that are believed to be reasonable under the circumstances. Actual results may diﬀer from these esAmates. Reference is made in this note to accounAng policies which cover areas that the Directors consider require esAmates and assumpAons which have a signiﬁcant risk of causing a material adjustment to the carrying amount of assets and liabiliAes within the next ﬁnancial year. These policies together with references to the related notes to the ﬁnancial statements, can be found below: -‐ Revenue recogniAon (note 1) -‐ CapitalisaAon of Intangible assets and impairment of goodwill (note 9) -‐ Fair Value of DerivaAves (note 19) Basis of consolidaTon The consolidated ﬁnancial statements incorporate the ﬁnancial informaAon of the Company and enAAes controlled by the Company made up to 30 June 2015. Control is achieved where the Company has the power to govern the ﬁnancial and operaAng policies of an enAty so as to obtain beneﬁts from its acAviAes. EnAAes included within the consolidaAon that have been acquired by the Company are accounted for using acquisiAon or merger accounAng as appropriate. The consolidated ﬁnancial statements include the combinaAon of businesses achieved through a Group restructuring that falls outside the scope of IFRS 3 Business CombinaAons. Accordingly, following the guidance regarding the selecAon of an appropriate accounAng policy provided by IAS 8 AccounAng policies: Changes in accounAng esAmates and errors, these ﬁnancial statements have been prepared using the principles of merger accounAng set out in FRS 6 AcquisiAons and Mergers and UK Generally Accepted AccounAng PracAce ('UK GAAP'). When merger accounAng is applied, the investment is recorded in the Company's balance sheet at the nominal value of shares issued together with the fair value of any consideraAon paid. In the consolidated ﬁnancial statements, merged subsidiary undertakings are treated as if they had always been a member of the Group. The corresponding ﬁgures for the previous year include its results for that period, the assets and liabiliAes at the previous balance sheet date and the shares issued by the Company as consideraAon as if they have always been in issue. Any diﬀerences between the nominal value of the shares acquired by the Company and those issued by the Company to acquire them are taken to a separate merger reserve. Where acquisiAon accounAng is applied, the results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the eﬀecAve date of acquisiAon and up to the eﬀecAve date of disposal, as appropriate. Uniform accounAng policies have been adopted across the Group. All intra-‐Group transacAons, balances, income and expenses are eliminated on consolidaAon. Foreign currencies The consolidated ﬁnancial statements of the Group are prepared in Sterling, this consAtutes the funcAonal and presentaAonal currency. TransacAons and balances in foreign currencies are converted into Sterling as follows; TransacAons entered into by the Group in a currency other than the funcAonal currency are recorded at the rates ruling when the transacAons occur. Foreign currency monetary assets and liabiliAes are translated at the rates ruling at the reporAng date. Exchange diﬀerences arising on retranslaAon of unsekled monetary assets and liabiliAes are recognised immediately in the proﬁt and loss. On consolidaAon, the results of overseas operaAons are translated into Sterling at rates ruling when the transacAon took place. All assets and liabiliAes of overseas operaAons, including goodwill arising on the acquisiAon of those operaAons, are translated at the rate ruling at the reporAng date. Exchange diﬀerences arising on translaAng the opening net assets at the opening rate and the results of overseas operaAons at the actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. On disposal of a foreign operaAon, the cumulaAve exchange diﬀerences recognised in the foreign exchange reserve relaAng to that operaAon up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the proﬁt or loss on disposal. Revenue recogniTon Revenue arises from the below sources: Real money gaming Net gaming revenue derives from online gambling operaAons and is deﬁned as the diﬀerence between the amounts of bets placed by players less amounts won by players. It is stated ajer deducAon of promoAonal bonuses. Net gaming revenue is recognised to the extent that it is probable that economic beneﬁts will ﬂow to the Group and the revenue can be reliably measured. Revenue is recognised in the accounAng periods in which the transacAons occur. Game and plaKorm development Net revenue receivable from acAviAes in respect of game and plaDorm development comprises fees earned from development of games for

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customers for use on the Group's plaDorms and from the sale of plaDorm sojware and related services. Revenue in respect of game development and the sale of plaDorm sojware is recognised when cerAﬁcaAon for the game has been obtained, delivery has occurred and the contract fee has been ﬁxed, contractual or determinable and collectability is probable. Services revenue principally relates to implementaAon services. Such services are generally separable from the other elements or arrangements. Revenue for such services is recognised over the period of delivery of these services. Where an element of the fee is conAngent on the successful delivery of the implementaAon project, the revenue is not recognised unAl such Ame that it is probable that the requirements under that speciﬁc contract will be met. Revenue share and other services Net revenue receivable in respect of revenue share and other services comprises a percentage of the revenue generated by the contracAng party from use of the Group's intellectual property in online gaming acAviAes, and from fees charged for the services rendered. Net revenue is recognised in the accounAng periods in which the gaming transacAons occur or the services are rendered. Cost of sales Cost of sales consists primarily of licensing fees, gaming taxes, regulatory and compliance expenses, merchant fees, chargebacks and plaDorm licensing expenses. All expenses are recognised on an accruals basis and in line with the appropriate revenue. The 2014 cost allocaAons have been restated to reﬂect the cost of sales deﬁniAon as detailed above. The restatement has no impact on the 2014 operaAng loss, loss before tax, or loss for the year. MarkeTng, partner and aﬃliate costs MarkeAng, partner and aﬃliate costs consists primarily of revenue share, commission, aﬃliate expenses and online and oﬄine adverAsing. Other income Other income consists of research and development taxaAon credits. The income is recognised when receipt is virtually certain. Goodwill Goodwill represents the excess of the cost of a business combinaAon over the total acquisiAon date fair value of the idenAﬁable assets, liabiliAes and conAngent liabiliAes acquired. Cost comprises the fair value of assets given, liabiliAes assumed and equity instruments issued, plus the amount of any non-‐controlling interests in the acquiree. ConAngent consideraAon is included in cost at its acquisiAon date fair value and, in the case of conAngent consideraAon classiﬁed as a ﬁnancial liability, remeasured subsequently through proﬁt or loss. Goodwill is capitalised as an intangible asset with an impairment in carrying value being charged to the consolidated statement of comprehensive income. Externally acquired intangible assets Externally acquired intangible assets are iniAally recognised at cost and subsequently amorAsed on a straight-‐line basis over their useful economic lives which is typically over a period of three years. Intangible assets are recognised on business combinaAons if they are separable from the acquired enAty or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at using appropriate valuaAon techniques (see secAon related to criAcal esAmates and judgements below). In process research and development programmes acquired in such combinaAons are recognised as an asset even if subsequent expenditure is wriken 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 methods used to determine the cost of intangibles acquired in a business combinaAon are as follows: Intangible asset Developed sojware Contractual relaAonships

Useful economic life Three years Term of contract

Valua3on method Replacement cost Discounted cash ﬂows

Internally generated intangible assets (development costs) Expenditure incurred on development acAviAes including the Group's sojware development is capitalised only where the expenditure will lead to new or substanAally improved products, the products are technically and commercially feasible and the Group has suﬃcient resources to complete development. Capitalised development costs are amorAsed over three years. The amorAsaAon expenses are included within administraAve expenses in the consolidated statement of comprehensive income. Development expenditure not saAsfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated statement of comprehensive income as incurred. Subsequent expenditure on capitalised intangible assets is capitalised only where it clearly increases the economic beneﬁts to be derived from the asset to which it relates. All other expenditure, including that incurred in order to maintain the level of performance of an intangible asset, is expensed as incurred. Property, plant and equipment DepreciaAon is calculated to write oﬀ the cost of ﬁxed assets on a straight-‐line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose are: Fixtures, ﬁvngs and equipment -‐ 20 -‐ 33 percent straight-‐line Oﬃce equipment -‐ 20 -‐ 33 percent straight-‐line Computer equipment -‐ 33 percent straight-‐line Subsequent expenditures are included in the carrying amount of an asset or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts will ﬂow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are

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charged to the consolidated statement of comprehensive income during the ﬁnancial period in which they are incurred. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the consolidated statement of comprehensive income. Impairment of property, plant and equipment and internally generated 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 wriken down accordingly. Where it is not possible to esAmate 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 idenAﬁable cash ﬂows; its cash generaAng units ('CGUs'). Goodwill is allocated on iniAal recogniAon to each of the Group's CGUs that are expected to beneﬁt from the synergies of the combinaAon giving 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. Financial assets The Group classiﬁes its ﬁnancial assets as loans and receivables. The classiﬁcaAon depends on the purpose for which the ﬁnancial assets were acquired. Management determines the classiﬁcaAon of its ﬁnancial assets at iniAal recogniAon. Loans and receivables are non-‐derivaAve ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an acAve market. They are included in current assets, except for those with maturiAes greater than 12 months ajer the balance sheet date. These are classiﬁed as non-‐current assets. The Group's loans and receivables comprise investments in equity accounted joint ventures, trade and other receivables, cash equivalents, and loans to joint ventures in the balance sheet. Financial assets are derecognised when the rights to receive cash ﬂows from the investments have expired or have been transferred and the Group has transferred substanAally all risks and rewards of ownership. Loans and receivables are carried at amorAsed cost using the eﬀecAve interest method. Trade receivables Trade receivables are recognised iniAally at fair value and subsequently measured at amorAsed cost using the eﬀecAve interest method less provision for impairment. Appropriate provisions for esAmated irrecoverable amounts are recognised in the statement of comprehensive income when there is objecAve evidence that the assets are impaired. Interest income is recognised by applying the eﬀecAve interest rate, except for short-‐term receivables when the recogniAon of interest would be immaterial. Impairment provisions are recognised when there is objecAve evidence (such as signiﬁcant ﬁnancial diﬃculAes 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 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 administraAve expenses in the statement of comprehensive income. On conﬁrmaAon that the trade receivable will not be collectable, the gross carrying value of the asset is wriken oﬀ against the associated provision. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, and other short-‐term highly liquid investments that have maturiAes of three months or less from incepAon, are readily converAble to a known amount of cash and are subject to an insigniﬁcant risk of changes in value. Financial liabiliTes Financial liabiliAes are classiﬁed as ﬁnancial liabiliAes at fair value through proﬁt or loss or as ﬁnancial liabiliAes measured at amorAsed cost, as appropriate. The Group determines the classiﬁcaAon of its ﬁnancial liabiliAes at iniAal recogniAon. The measurement of ﬁnancial liabiliAes depends on their classiﬁcaAon: (i) ﬁnancial liabiliAes at fair value through proﬁt or loss are carried on the balance sheet at fair value with gains or losses recognised in the income statement; and (ii) ﬁnancial liabiliAes measured at amorAsed cost are iniAally recognised at fair value and subsequently measured at amorAsed cost using the eﬀecAve interest method. AmorAsed cost is calculated by taking into account any issue costs, and any discount or premium on seklement. Gains and losses arising on the repurchase, seklement or cancellaAon of liabiliAes are recognised respecAvely in interest and other revenues and ﬁnance costs. The Group derecognises a ﬁnancial liability from its balance sheet when the obligaAon speciﬁed in the contract or arrangement is discharged, cancelled or expires. Trade and other payables Trade payables are iniAally measured at their fair value and are subsequently measured at their amorAsed cost using the eﬀecAve interest rate method; this method allocates interest expense over the relevant period by applying the 'eﬀecAve interest rate' to the carrying amount of the liability. ConverTble debt Where the converAble debt issued coverts into a variable number of shares the proceeds received on issue are allocated between the derivaAve ﬁnancial liability and the host debt based upon their fair values. Subsequently the conversion opAon is measured at fair value through proﬁt and loss and the debt component and as a ﬁnancial liability measured at amorAsed cost unAl exAnguished on conversion or maturity of the debt. TransacAon costs directly akributable to the raising of converAble debt are allocated across the derivaAve ﬁnancial liability component and the debt liability component. TransacAon costs allocated to the derivaAve ﬁnancial liability component are expensed to the income statement as they are incurred. TransacAon costs allocated to the debt liability component are deducted from the residual value recognised as the debt liability on recogniAon.

Share capital Financial instruments issued by the Group are classiﬁed as equity only to the extent that they do not meet the deﬁniAon of a ﬁnancial liability or ﬁnancial asset. Current and deferred tax

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TaxaAon represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt diﬀers from net proﬁt reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deducAble in other years and it further excludes items that are never taxable or deducAble. The Group's liability for current tax is calculated using tax rates that have been enacted or substanAvely enacted by the statement of ﬁnancial posiAon date. Tax losses arising as a result of research and development expenditure and subsequently surrendered for tax credit are recognised within other income and as an other debtor. Deferred tax Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is sekled based upon tax rates that have been enacted or substanAvely enacted by the balance sheet date. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax is the tax expected to be payable or recoverable on diﬀerences between the carrying amounts of assets and liabiliAes in the ﬁnancial statements and the corresponding tax bases used in the computaAon of taxable proﬁt, and is accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deducAble temporary diﬀerences can be uAlised. The carrying amount of deferred tax assets is reviewed at each statement of ﬁnancial posiAon date and reduced to the extent that it is no longer probable that suﬃcient taxable proﬁts will be available to allow all or part of the asset to be recovered. Deferred tax is measured using tax rates that have been enacted or substanAvely enacted by the statement of ﬁnancial posiAon date and are expected to apply when the related deferred tax asset or liability is realised or sekled. Deferred tax is not discounted.

Leased assets Where substanAally all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a 'ﬁnance lease'), the asset is treated as if it had been purchased outright. The amount iniAally recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proporAon of the lease liability. The capital element reduces the balance owed to the lessor. Where substanAally all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operaAng lease'), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-‐line basis over the lease term. The aggregate beneﬁt of lease incenAves is recognised as a reducAon of the rental expense over the lease term on a straight-‐line basis. Share based payments Where equity-‐sekled share opAons are awarded to employees or service providers, the fair value of the opAons at the date of grant is charged to the consolidated statement of comprehensive income over the vesAng period. Non-‐market vesAng condiAons are taken into account by adjusAng the number of equity instruments expected to vest at each reporAng date so that, ulAmately, the cumulaAve amount recognised over the vesAng period is based on the number of opAons that eventually vest. Non-‐vesAng condiAons and market vesAng condiAons are factored into the fair value of the opAons granted. As long as all other vesAng condiAons are saAsﬁed, a charge is made irrespecAve of whether the market vesAng condiAons are saAsﬁed. The cumulaAve expense is not adjusted for failure to achieve a market vesAng condiAon or where a non-‐vesAng condiAon is not saAsﬁed. Where the terms and condiAons of opAons are modiﬁed before they vest, the increase in the fair value of the opAons, measured immediately before and ajer the modiﬁcaAon, is also charged to the consolidated statement of comprehensive income over the remaining vesAng period. 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. Adjusted EBITDA The Group deﬁnes adjusted EBITDA as the operaAng result before depreciaAon, amorAsaAon, lisAng costs and fundraising costs, and non-‐cash charges relaAng to share based payments. Joint ventures A joint venture is a contractual arrangement whereby the Group and other parAes undertake an economic acAvity that is subject to joint control; that is, when the strategic, ﬁnancial and operaAng policy decisions relaAng to the acAviAes require the unanimous consent of the parAes sharing control. The Group reports its interests in jointly controlled enAAes using the equity method of accounAng. Under the equity method, investments in joint ventures are carried in the consolidated statement of ﬁnancial posiAon at cost as adjusted for post-‐acquisiAon changes in the Group's share of the net assets of the joint venture, less any impairment in the value of the investment. Losses of a joint venture in excess of the Group's interest in that investment are not recognised. AddiAonal losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or construcAve obligaAons or made payments on behalf of the joint venture.

2. Segmental informaTon InformaAon reported to the Group's Chief ExecuAve, the strategic chief operaAng decision-‐maker, for the purposes of resource allocaAon and assessment of the Group's segmental performance, is primarily focused on the originaAon of the revenue stream. The Group's principal reportable segments under IFRS 8 are therefore as follows: · ·

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·

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Sojware development Segment revenues and results The following is an analysis of the Group's revenue and results by reportable segment: Real money gaming

Year ended 30 June 2015

£'000

Content licensing and revenue share £'000

Net revenue Cost of sales MarkeAng partner and aﬃliate costs Segment result

385 (303) (724) (642)

29 -‐ -‐ 29

Sohware development

Total

£'000

£'000

114 -‐ -‐ 114

528 (303) (724) (499)

AdministraAon expenses Other income Net ﬁnance expense Share of loss of JV TaxaAon Loss for the year

(7,188) 478 (229) (685) (19) (8,142)

Real money gaming

Year ended 30 June 2014

£'000

Content licensing and revenue share £'000

Net revenue Cost of sales MarkeAng partner and aﬃliate costs Segment result

10 (132) (169) (291)

1,614 -‐ -‐ 1,614

Sohware development

Total

£'000

£'000

241 -‐ -‐ 241

1,865 (132) (169) 1,564

AdministraAon expenses Other income Net ﬁnance expense TaxaAon Loss for the year

(7,430) 140 (5) 310 (5,421)

The accounAng policies of the reportable segments follow the same policies as described in Note 1. Segment result represents the gross proﬁt earned by each segment without allocaAon of the share of administraAon costs including Directors' salaries, ﬁnance costs and income tax expense. This is the measure reported to the Group's Chief ExecuAve for the purpose of resource allocaAon and assessment of segment performance. AdministraAon expenses comprise principally the employment and oﬃce costs incurred by the Group. Segment assets and liabiliTes Assets and liabiliAes are not separately analysed or reported to the Group's Chief ExecuAve and are not used to assist in decisions surrounding resource allocaAon and assessment of segment performance. As such, an analysis of segment assets and liabiliAes has not been included in this ﬁnancial informaAon. Geographical analysis of non-‐current assets The following table provides an analysis of the Group's non-‐current assets, excluding goodwill and investments in equity accounted joint ventures, by geographical segment:

Gibraltar UK US

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

2,282 59 1 2,342

1,026 211 2 1,239

Geographical analysis of revenues The following table provides an analysis of the Group's revenue by geographical segment:

Gibraltar UK Sweden Rest of the World

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

112 389 -‐ 27 528

1,270 506 52 37 1,865

InformaTon about major customers During the year ended 30 June 2014 the Group had two customers which generated revenue greater than 10 percent of total net revenue. Customer 1 generated revenue of £1,126,000 represenAng 60 percent of total net revenue, all of which was within the content licensing and

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revenue share segment. Customer 2 generated revenue of £241,000 represenAng 13 percent of total net revenue, all of which was within the content licensing and revenue share segment. During the year ended 30 June 2015 the Group had one customer which generated revenue greater than 10 percent of total net revenue. The customer generated revenue of £75,000 represenAng 14 percent of total net revenue, all of which was within the sojware development segment.

3. OperaTng Loss OperaAng loss has been arrived at ajer charging: Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

Staﬀ costs (Note 5) Auditor's remuneraAon: Audit of the Company's annual accounts Fees payable to the company's auditor and its associates for other services: Audit of the subsidiaries annual accounts Other assurance services Tax compliance services Tax advisory services Other non-‐audit services

2,787

1,770

43

-‐

31 6 2 -‐ 50

25 65 3 14 115

Rent payable under operaAng leases AmorAsaAon DepreciaAon Loss on disposal Loss on foreign exchange LisAng and fundraising costs

287 603 224 3 4 1,266

310 1,832 162 -‐ 3 -‐

Year ended 30 June 2015

Year ended 30 June 2014

338 140 478

-‐ 140 140

Year ended 30 June 2015

Year ended 30 June 2014

5 62 67

4 54 58

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

3,510 318 34 107 3,969

2,282 169 13 38 2,502

(1,182) 2,787

(732) 1,770

4. Other income

R&D tax credit Other Income

5. Staﬀ costs

The average number of employees (including Directors) employed was: Management AdministraAon and technical staﬀ

The aggregate remuneraAon of the above employees comprised (including Directors): Wages and salaries Social security costs Pension costs Beneﬁts in kind Staﬀ costs capitalised in respect of internally generated intangible assets

In the statement of comprehensive income, total staﬀ costs are included within administraAve expenses.

6. Loss per share Basic loss per share is calculated by dividing the loss akributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the year. Year ended 30 June 2015

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Basic and diluted Loss ajer tax (£'000) Weighted average number of shares Weighted average loss per share (pence)

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(8,142) 20,559,033 (39.6)

(5,421) 15,315,450 (35.4)

The result for the year ended 30 June 2015 as well as the other period presented was a loss and therefore there was no diﬀerence between the basic and diluted loss per share.

7. Finance income and costs Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

1 1

1 1

(230) (230)

(6) (6)

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

39 (20) 19

71 (381) (310)

Finance income Interest income Total ﬁnance income Finance expense Interest payable Total ﬁnance costs

8. TaxaTon

Current tax Deferred tax Tax charge / (credit) on loss on ordinary acAviAes

The total tax credit can be reconciled to the overall tax charge as follows: Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

Factors aﬀecAng tax charge for year: The tax assessed for the relevant period is higher than the average standard rate of corporaAon tax in Gibraltar of 10 percent (2014: 10 percent). The diﬀerences are explained below: Loss before taxaAon Loss before taxaAon mulAplied by the average standard rate of tax in the year of 10 percent (2014: 10 percent). Eﬀects of: Expenses not deducAble for tax purposes Other tax diﬀerences Current year tax losses not recognised Income not taxable Deferred tax credit on acquired intangibles Reversal of deferred tax asset Deferred tax movement Tax charge / (credit) for year

(8,123)

(5,731)

(812)

(573)

128 39 715 (31) (8) -‐ (12) 19

181 -‐ 463 -‐ (414) 29 4 (310)

The Group has maximum corporaAon tax losses carried forward at each period end as set out below: Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

19,871

12,717

Year ended 30 June 2015

Year ended 30 June 2014

CorporaAon tax losses carried forward Details of the deferred tax asset recognised are as set out below:

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At the beginning of the year Credited to income statement, in respect of tax losses Charged to income statement for tax losses not uAlised At the end of the year

£'000

£'000

-‐ -‐ -‐

29 -‐ (29)

-‐

-‐

In addiAon, the Group has an unrecognised deferred tax asset as follows: Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

2,053 2,053

1,274 1,274

Tax losses carried forward

9. Intangible assets Development sohware

Licence fees

Computer sohware

Contract intangible

Goodwill

£'000

£'000

£'000

£'000

£'000

£'000

-‐ 808 -‐ 808 1,909 -‐ 2,717

88 -‐ -‐ 88 -‐ -‐ 88

229 10 -‐ 239 -‐ (3) 236

2,152 -‐ (2,152) -‐ -‐ -‐ -‐

919 -‐ -‐ 919 -‐ -‐ 919

3,388 818 (2,152) 2,054 1,909 (3) 3,960

-‐ 37 -‐ 37 563 600

87 1 -‐ 88 -‐ 88

43 43 -‐ 86 40 126

401 1,751 (2,152) -‐ -‐ -‐

-‐ -‐ -‐ -‐ -‐ -‐

531 1,832 (2,152) 211 603 814

-‐ 771 2,117

1 -‐ -‐

186 153 110

1,751 -‐ -‐

919 919 919

2,857 1,843 3,146

Cost At 30 June 2013 AddiAons Disposals At 30 June 2014 AddiAons Disposals At 30 June 2015 Accumulated amorTsaTon At 30 June 2013 Charge for the year Eliminated on disposal At 30 June 2014 Charge for the year At 30 June 2015 Net book value At 30 June 2013 At 30 June 2014 At 30 June 2015

Total

The goodwill of £919,000 arose from the acquisiAon of Nektan UK Limited, formerly mFuse Limited, (mobile sojware development) in June 2013. Impairment In accordance with IAS 36 Impairment of Assets, the Group regularly monitors the carrying value of its intangible assets. A detailed review was undertaken at 30 June 2015 to assess whether the carrying value of assets was supported by the net present value of future cashﬂows derived from those assets The recoverable amount of the cash generaAng unit akributable to goodwill and other intangible assets of £20,863,696 has been determined using a value in use calculaAon. The calculaAon of the value in use is based on a 3 year forecast model containing assumpAons including the following key items: · ·

Discount rate of 20 percent Cashﬂows for FY 2016, FY 2017 and FY 2018 based on the board approved budgets

·

Terminal Growth rate of 2 percent

These assumpAons were based upon management's experience, as well as industry data where available. The Directors have concluded that, ajer applying sensiAviAes to the model, there is no reasonably possible change in the key assumpAons which would cause the carrying value of goodwill and other intangibles to exceed their value in use.

10. Plant, property and equipment Computer equipment

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Oﬃce equipment

Fixtures, ﬁnngs and

Total

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equipment £'000

£'000

£'000

£'000

Cost At 30 June 2013 AddiAons At 30 June 2014 AddiAons Disposals At 30 June 2015

428 155 583 20 -‐ 603

40 12 52 4 -‐ 56

24 -‐ 24 -‐ -‐ 24

492 167 659 24 -‐ 683

Accumulated depreciaTon At 30 June 2013 Charge for the year At 30 June 2014 Charge for the year At 30 June 2015

176 148 324 193 517

1 8 9 21 30

5 6 11 10 21

182 162 344 224 568

Net book value At 30 June 2013 At 30 June 2014 At 30 June 2015

252 259 86

39 43 26

19 13 3

310 315 115

11. Joint ventures The following enAAes meet the deﬁniAon of a joint venture and have been equity accounted in the consolidated ﬁnancial statements:

Name

Country of incorporaTon

ProporTon of voTng rights held

Broadcast Gaming Limited

Gibraltar

50%

ReSpin Games LLC

USA

50%

Nature of business Freemium gaming services Gaming sojware development Total £'000

At 30 June 2014 AddiAons Share of losses At 30 June 2015

-‐ 1,749 (685) 1,064

Aggregated amounts relaAng to joint ventures are as follows:

For the year ended 30 June 2015: Non-‐current assets Current assets Total liabiliAes Net assets/(liabiliAes) Group's share of net assets/(liabiliAes) Revenues Loss

Broadcast Gaming Limited

ReSpin Games LLC

£'000

£'000

-‐ 251 481 (230) (115) -‐ (230)

255 59 163 148 74 -‐ (1,370)

The share of losses of the Broadcast Gaming Limited have not been recognised as they would reduce the investment below zero. The Group's share of losses totalled £115,000. During the year, the Group became a joint venture partner in ReSpin Games LLC, providing an iniAal contribuAon of £315,000 and further contractual £1,434,000, which is included in the cost of investments. The share of losses of the joint venture totalling £685,000 have been deducted from the investment to leave a carrying value of £1,064,000. As part of the Group's investment into ReSpin Games LLC, the Group have a contractual commitment to provide further contribuAons of up to US$2,324,000 to ReSpin Games LLC. No amounts have been included in the ﬁnancial statements in respect of this commitment.

12. Trade and other receivables

Trade receivables Other receivables Loan to joint ventures Prepayments

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At 30 June 2015

At 30 June 2014

£'000

£'000

12 776 463 222 1,473

392 151 164 150 857

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The ageing of trade receivables that are past due but not impaired is shown below, these relate to customers with no default history:

Between one and two months Between two and three months More than three months

At 30 June 2015

At 30 June 2014

£'000

£'000

4 -‐ -‐ 4

-‐ -‐ 75 75

No receivables have been impaired in the current ﬁnancial year (2014: £98k). In determining the recoverability of trade receivables the Group considers any change in the credit quality of the receivable from the date credit was granted up to the reporAng date. The Group does not have any signiﬁcant credit risk exposure to any single counterparty. The Directors consider that the carrying amount of the trade receivables, other receivables and the loan to the joint ventures approximate to their fair value due to their short term maturity. The maximum exposure to credit risk at the reporAng date is the carrying value of each class of receivable shown above. The Group does not hold any collateral as security.

13. Cash and cash equivalents

Cash in bank accounts

At 30 June 2015

At 30 June 2014

£'000

£'000

3,396

877

Interest is earned at ﬂoaAng rates on cash held on short-‐term deposit. All of the Group's cash and cash equivalents are held with major UK or US banks. The following cash and cash equivalent amounts were held in foreign currencies. The remaining balance was denominated in UK Pound Sterling (£).

United States Dollars Euros

At 30 June 2015

At 30 June 2014

£'000

£'000

16 -‐ 16

8 -‐ 8

The Directors consider that the carrying value of cash and cash equivalents is approximate to their fair value.

14. Trade and other payables

Trade payables Other payables Accruals DerivaAve ﬁnancial liability

At 30 June 2015

At 30 June 2014

£'000

£'000

427 210 370 435 1,442

263 123 425 -‐ 811

Player balances represent amounts due to customers including net deposits received, undrawn winnings and certain promoAonal bonuses. Player balances for the year ended 30 June 2015 are £22,000 (2014: £3,000) and are included in Other Payables above. DerivaAve ﬁnancial liability relates to the fair value derivaAve component of the converAble loan notes issued in the year. Details of the converAble loan notes issued by the Group in the year can be found in Note 15. The Directors consider that the carrying value of trade and other payables is approximate to their fair value. The Group has ﬁnancial risk management policies in place to ensure that all payables are paid within the credit Ameframe and no interest has been charged by any suppliers as a result of late payment of invoices.

15. ConverTble Loan Notes During the year the Company raised £5,829,000 through the issue of converAble loan notes. The conversion price is at a 25 percent premium to the price of the Ordinary shares at the date the converAble loan notes were subscribed for, subject to a maximum conversion price of 209 pence a share. Interest of 10 percent per annum is payable quarterly in arrears. Any notes that have not been converted will be redeemed in full on 28 April 2020. The notes can be converted at any Ame through to 28 April 2020. At 30 June 2015 £'000

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At 30 June 2014 £'000

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ConverAble loan notes Current liabiliTes ConverAble loan notes Non-‐current liabiliTes

-‐ -‐ -‐ -‐

583 583 4,507 4,507

The number of shares that will be issued upon conversion of the notes are variable and therefore on recogniAon the proceeds received from the issue of the notes, net of directly akributable transacAon costs, have been allocated between the derivaAve ﬁnancial liability based upon the fair values on incepAon of the conversion opAon and the host debt. The debt component has subsequently been measured at amorAsed cost based on an eﬀecAve interest rate of 13.56 percent for Tranche 1 and 13.61 percent for Tranche 2. The diﬀerence between the carrying amount of the liability component at the date of issue and the amount reported at 30 June 2015 represents the eﬀecAve interest rate less the interest paid to that date The derivaAve ﬁnancial liability has been revalued at the balance sheet date (note 14), which has resulted in a fair value movement of £43,000 that has been recognised as an expense in the income statement through ﬁnance expenses. TransacAon costs directly akributable to the issue of the converAble loan notes amounted to £381,000.

16. Subsidiaries Details of the Group's subsidiaries as at 30 June 2015 are set out below:

Name

Country of incorporaTon

ProporTon of voTng rights and Ordinary share capital held

Nature of business

Nektan UK Limited Nektan Gibraltar Limited Nektan America Limited Nektan USA Inc

United Kingdom Gibraltar USA USA

100% 100% 100% 100%

Mobile sojware development Internet gaming services Commercial development Internet gaming services

17. Share capital

Allo9ed, issued and fully paid At 30 June 2013 Issued during the year At 30 June 2014 Issued during the year Bonus Issue Total before rebasing (nominal value per share £0.000001) Total ajer rebasing (nominal value per share £0.01) Issued during the year At 30 June 2015

Ordinary shares number

Ordinary shares £

5,000,000 13,829,956 18,829,956 858,400 196,863,871,644 196,883,560,000

5 14 19 20 196,884 196,884

19,688,356 2,886,021 22,574,377

196,884 28,860 225,744

The issued and fully paid share capital of the Group amounts to £225,744 and is split into 22,574,377 ordinary shares. On 30 September 2014, by resoluAon of the members of the Company the sum of £196,863 being part of the share premium account was capitalised and the Directors were authorised to make a bonus issue of 196,863,871,644 Ordinary shares to the members of the Company at the rate of 9,999 new shares for every one exisAng share held by them. CondiAonal upon the Directors exercising their authority pursuant to this, the 196,863,871,644 Ordinary shares were consolidated and divided into 19,688,356 new Ordinary shares of £0.01 each.

Authorised share capital The authorised share capital of the Company is £1,000,000 divided into 100,000,000 Ordinary Shares (2014: 30,000,000 shares of £0.000001 each) of which 22,574,377 Ordinary shares have been issued, credited as fully paid (2014: 18,829,956).

18. Deferred tax liability Total £'000 At 30 June 2013

455

Credited to the income statement on amorAsaAon of acquired intangibles Charged to the income statement in respect of accelerated capital allowances At 30 June 2014

(414) 3 44

Credited to the income statement on amorAsaAon of acquired intangibles Charged to the income statement in respect of accelerated capital allowances At 30 June 2015

(8) (12) 24

There is no deferred tax arising in respect of other comprehensive income.

19. Financial instruments and risk management The Group is exposed to the risks that arise from its use of ﬁnancial instruments. This note describes the objecAves, policies and processes of the Group for managing those risks and the methods used to measure them. Further quanAtaAve informaAon in respect of these risks is presented throughout this ﬁnancial informaAon. The Group's overall risk management programme focuses on the unpredictability of ﬁnancial markets and seeks to minimise potenAal adverse eﬀects on the Group's ﬁnancial performance.

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Risk management is carried out by management under policies approved by the Board of Directors. Management idenAﬁes and evaluates ﬁnancial risks in close co-‐operaAon with the Group's operaAng segments. The Board provides principles for overall risk management, as well as policies covering speciﬁc areas, such as interest rate risk and currency risk. Principal ﬁnancial instruments The principal ﬁnancial instruments used by the Group, from which ﬁnancial instrument risk arises are as follows: · · · · ·

Trade and other receivables Trade and other payables ConverAble loan notes and derivaAves Cash and cash equivalents Investment in Joint Venture EnAAes

Financial assets The Group held the following ﬁnancial assets:

Loans and receivables: Investment in joint venture enAAes Cash and cash equivalents Trade and other receivables

At 30 June 2015 £'000

At 30 June 2014 £'000

1,064 3,396 1,251 5,711

-‐ 877 707 1,584

At 30 June 2015 £'000

At 30 June 2014 £'000

1,007 5,090 6,097

811 -‐ 811

Financial liabiliTes The Group held the following ﬁnancial liabiliAes:

AmorAsed cost: Trade and other payables ConverAble loan notes

Financial instruments not measured at fair value within the ﬁnancial statements Financial instruments not measured at fair value include cash and cash equivalents, trade and other receivables, trade and other payables and converAble loan notes. The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables and converAble loan notes approximate their fair value. Financial Instruments Measured at Fair Value Included in level 3 of the fair value hierarchy is derivaAve ﬁnancial liabiliAes, which is carried at fair value through proﬁt and loss and therefore movements in fair value are recognised in the income statement through ﬁnance expenses. No other ﬁnancial instruments are measured at fair value through proﬁt and loss. There have been no transfers between levels in any of the above periods. The valuaAon technique used in determining the fair value measurement of derivaAve ﬁnancial liabiliAes was the Black Scholes model. The signiﬁcant unobservable inputs in this valuaAon model are the expected date of conversion, volaAlity and dividend yield. At year-‐end, these inputs were as follows: · · ·

Expected date of conversion-‐ 2.8 years from year-‐end VolaAlity-‐ 23.4% Dividend Yield-‐ 0%

Financial instruments not measured at fair value within the ﬁnancial statements (conTnued) The reconciliaAon of the opening and closing fair value balance of level 3 ﬁnancial liabiliAes is as follows: DerivaTve Financial Liability £'000

As at 30 June 2014 Issues Total gains or losses in proﬁt or loss As at 30 June 2015

-‐ 392 43 435

Management controls and procedures The Group's Directors monitor and manage the ﬁnancial risks relaAng to the operaAon of the Group. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. Market risk The Group's acAviAes expose it primarily to the ﬁnancial risks of changes in foreign currency exchange rates and interest rates. Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates.

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Foreign currency risk management The Group has exposure to foreign currency risk due to the number of jurisdicAons in which it operates and the number of currencies used. The Board carefully monitors exchange rate ﬂuctuaAons and reviews their impact on the net assets and posiAon of the Group and seeks to economically hedge the impact of foreign exchange by holding suﬃcient cash in the relevant currencies. The Group does not enter into any derivaAve ﬁnancial instruments to manage its exposure to foreign currency risk. All trade and other receivable are denominated in Sterling.

The following trade and other payable balances were held in foreign currencies. The remaining balance was denominated in Sterling. At 30 June 2015

At 30 June 2014

£'000

£'000

19 -‐ 4 23

14 135 -‐ 149

United States Dollars Swedish Krona Euro

At each period end, if the US Dollar, Euro and Swedish Krona had strengthened or weakened by 10 percent against Sterling with all other variables held constant, post-‐tax loss for the year/period would have increased/(decreased) by: At 30 June 2015 £'000

At 30 June 2014 £'000

4

17

(4)

(14)

Strengthened by 10 percent Increase in post-‐tax loss and impact on equity Weakened by 10 percent Decrease in post-‐tax loss and impact on equity

Interest rate risk management The Group has minimal exposure to interest rate risk. During the year to 30 June 2015 the Group was exposed to interest rate risk on some of its ﬁnancial assets, being cash held on bank deposit. The interest rate receivable on these balances was at a rate less than 0.1 percent (2014: less than 0.1 percent). The Directors currently believe that interest rate risk is at an acceptable level. Due to its minimum exposure to interest rate risk, the Group has not prepared any sensiAvity analysis. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligaAons resulAng in ﬁnancial loss to the Group. Credit risk arises principally from the Group's cash balances and trade and other receivables. The concentraAon of the Group's credit risk is considered by counterparty, geography and currency. The Group gives careful consideraAon to which organisaAons it uses for its banking services in order to minimise credit risk. An allowance for impairment is made where there is an idenAﬁed loss event which, based on previous experience, is evidence of a reducAon in the recoverability of the cash ﬂows, although there have been no such impairments over the review period. Management considers the above measures to be suﬃcient to control the credit risk exposure.

Liquidity risk management Liquidity risk is the risk that the Group will encounter diﬃculty in meeAng its ﬁnancial obligaAons as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining suﬃcient cash. UlAmate responsibility for liquidity risk management rests with the Board of Directors. The Board manages liquidity risk by regularly reviewing the Group's cash requirements by reference to short-‐term cash ﬂow forecasts and medium term working capital projecAons prepared by management. Maturity of ﬁnancial liabiliTes The following table sets out the non-‐discounted contractual maturiAes of ﬁnancial liabiliAes: Year ended 30 June 2015

One year or less £'000

Two to ﬁve years £'000

Five years and over £'000

Total £'000

Trade and other payables ConverAble loan notes

1,442 583 2,025

-‐ 4,507 4,507

-‐ -‐ -‐

1,442 5,090 6,532

Year ended 30 June 2014

One year or less £'000

Two to ﬁve years £'000

Five years and over £'000

Total £'000

811 811

-‐ -‐

-‐ -‐

811 811

Trade and other payables

Capital management The Group is currently funded principally through shareholders' funds. During the year ended 30 June 2015, £5.8 million was raised through converAble loan notes. Details of the converAble loan notes of the Group can be found in Note 15. 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. Fair value esTmaTon The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values because of the short-‐term nature of such assets and the eﬀect of discounAng liabiliAes is negligible. The risk in respect of fair value esAmaAon is in respect of

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acquisiAon accounAng.

20. Related party transacTons Balances and transacAons between the Company and its subsidiaries, which are related parAes, have been eliminated on consolidaAon and are not disclosed in this note. The remuneraAon of the directors, who are the key management personnel of the Group, is set out below:

The aggregate remuneraAon comprised: Wages and salaries Fees Beneﬁts in kind

Year ended 30 June 2015

Year ended 30 June 2014

£'000

£'000

252 55 9 316

140 24 1 165

The following related party transacAons took place during the period: A Non-‐execuAve Director provided consultancy services through a service company to the Group in relaAon to the admission to trading on AIM amounAng to £45,000 (2014: nil). The amount outstanding at year-‐end was £nil (2014: £nil). During the year ended 30 June 2014, the Group entered into a sojware licence agreement with a related Company by virtue of a member of key management being a Director of the related Company. Revenue for the year ended 30 June 2015 of £23,000 (2014: £241,000) was recorded in respect of the sojware developed and this amount remained due in full at the year-‐end. During the year ended 30 June 2014, 137,510 share opAons were issued to a shareholder in lieu of services provided. The opAons were capable of exercise on issue at nominal value and a charge of £200,000 was recorded in the income statement. No further issue of opAons during the year ended 30 June 2015. As at 30 June 2014, a Director and shareholder had a loan balance outstanding of £37,000 and this amount was included in current liabiliAes. Repayment of £19,000 was made by the Group during the current year and the balance outstanding at 30 June 2015 is £18,000. The loan is interest free and repayable on demand. During the year ended 30 June 2015, the Group received loans from a shareholder totalling £1,370,000 which was subsequently converted to Ordinary shares. Prior to conversion interest of £31,000 was charged. A Director and shareholder of Nektan plc, loaned the Company £270,000 during the 30 June 2015 ﬁnancial year (2014: nil). The loan was repaid with accrued interest of £15,000 by 30 June 2015 (2014: nil). A Non-‐execuAve Director and shareholder of Nektan plc, loaned the Company £50,000 during the 30 June 2015 ﬁnancial year (2014: nil). The loan was repaid with accrued interest of £800 by 30 June 2015 (2014: nil). During the year, the Group loaned a further £299,000 to Broadcast Gaming Limited, a joint venture of Nektan Plc. The total balance as at 30 June 2015 was £463,000 (2014: £164,000), which has been included within loans to joint ventures within Trade and Other Receivables. No interest has been charged on this balance. During the year, the Group became a joint venture partner in ReSpin Games LLC, providing an iniAal contribuAon of £315,000 and further contractual £1,433,000, which is included in the cost of investments. The share of losses of the joint venture totalling £786,000 have been deducted from the investment to leave a carrying value of £962,000. As part of the Group's investment into ReSpin Games LLC, the Group have a contractual commitment to provide further contribuAons of US$2,324,000 to ReSpin Games LLC. No amounts have been included in the ﬁnancial statements in respect of this commitment.

21. Post-‐balance sheet events On 6 October 2015 the Group announced addiAonal ﬁnancing raising gross proceeds of £2.75 million through the issue of ConverAble Loan Notes and equity.

22. UlTmate parent undertaking The directors consider that there is no one ulAmate controlling party.

23. OperaTng leases The total future value of minimum lease payments due is as follows: Land and buildings

OperaAng leases Expiring less than one year Expiring between one and two years Expiring between two and ﬁve years

At 30 June 2015 £'000

At 30 June 2014 £'000

229 70 207 506

223 3 1 227

24. ConTngent liabiliTes As part of the Board's ongoing regulatory compliance process, the Board conAnues to monitor legal and regulatory developments and their potenAal impact on the Group.

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Management is not aware of any conAngencies that may have a signiﬁcant impact on the ﬁnancial posiAon of the Group.

25. Share based payments Employees Nektan Holdings Limited acquired Nektan UK Limited in June 2013. In prior years Nektan UK Limited had set up a Senior Management Long-‐Term IncenAve Scheme under which opAons were exercisable based on a target acquisiAon price as sApulated in the agreements. On acquisiAon by Nektan Holdings Limited, employees exercised 7,974 opAons under this scheme. At 30 June 2014 all remaining opAons under the scheme had lapsed or been forfeited. Nektan UK Limited also operated an equity-‐sekled share based remuneraAon scheme for employees. Post-‐acquisiAon no opAons were granted or exercised under the scheme. At 30 June 2014 all remaining opAons had lapsed or been forfeited. Service providers During the year ended 30 June 2015 opAons over 58,617 (2014: 521,218) shares were granted to service providers. The opAons are exercisable at any Ame prior to their expiry ﬁve years from issue. During the year ended 30 June 2014, the remaining 137,510 opAons were exercisable immediately ajer grant. A share based payment charge of £7,000 (2014:£255,000) has been recognised in respect of opAons granted. 2015 Weighted average exercise price (p)

2015 Number

2014 Weighted average exercise price (p)

2014 Number

0.91 2.36 1.05

521,218 58,617 579,835

-‐ 0.91 0.91

-‐ 521,218 521,218

Outstanding 1 July Granted during the year Outstanding at 30 June

The exercise price of opAons outstanding at 30 June 2015 ranged between £0.01 and £2.36 (2014: ranged between £0.01 and £1.45) and their weighted average contractual life was three years seven months (2014: three years four months). The weighted average fair value of each opAon granted during the period was £0.02 (2014: £0.50). The following informaAon is relevant in the determinaAon of the fair value of opAons granted.

OpAon pricing model used Share price at date of grant Exercise price (weighted average) OpAon life (years) Risk free rate Expected volaAlity Expected dividend yield

Year ended 30 June 2015

Year ended 30 June 2014

Black-‐Scholes £1.90 £2.36 0.6 0.89% 23.4% Nil

Black-‐Scholes £1.40 £0.91 0.7 0.89% 30.7% -‐ 34.2% Nil

The volaAlity assumpAon, measured at the standard deviaAon of expected share price returns, is based on a staAsAcal analysis of monthly share prices.

This information is provided by RNS The company news service from the London Stock Exchange END

FR FFMSSIFISEES

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