NKTN.L Regulatory News (NKTN)

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 international B2B mobile gaming platform and content provider, announces its results for the year ended 30 June 2015. During the period, Nektan continued to drive growth in its key markets and is reporting adjusted EBITDA for the year slightly ahead of expectations. Post period, momentum has continued; in Europe, with Q1 revenues for the current financial year surpassing the total revenues for the entire previous year; and, in the US market with a significant increase in land based casino partners. The Group has also successfully raised an additional £2.75 million to further accelerate growth.

Year-End Highlights:

· The Group continues 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 multi-year contract

· Nektan's US joint venture with Spin Games LLC, Respin LLC ("Respin"), continues 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 positioned to continue to execute on the strategy, scale the business and drive profitable growth

Financial Summary:

*Adjusted EBITDA excludes listing and fundraising costs, exchange differences, and non-cash charges relating to share based payments

**Adjusted loss before taxation excludes share based payment expense and listing and transaction costs

Post Period End Highlights:

· Real Money Gaming: continues 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 entire previous quarter due to the continued increase in first time 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 entire previous year

o Launch of Nektan Marketing Services ("NMS") in September, in partnership with Fred Done (Founder of Betfred, one of the world's largest independent bookmakers) and Warren Jacobs (Managing Director of Active 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 solution across the U.S., targeting 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 operational in these casinos (30 June 2015: 25)

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

o A further 22 land-based casinos have now been contracted or have signed letters of intent for delivery of an initial additional 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 additional £2.75 million to underpin expansion in the US tribal and commercial casino market and to support working capital requirements

David Gosen, Chief Executive 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 continues 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 existing partner base, emphasises the strength of our proprietary, scalable platform, content and sector expertise, all of which leave the Group well-positioned to benefit from the opportunities available to us in a growing market. We remain confident in our outlook for the full year and beyond as Nektan continues to strengthen its position and to deliver strong momentum in our key markets in Europe and the US."

For further information on the Group, please contact:

Further information on Nektan can be found on the Group's website at www.nektan.com

About Nektan:

Nektan is a leading international B2B mobile gaming content developer and platform provider. The Group designs, builds and operates mobile games in the regulated, interactive real money gaming ("RMG") and freemium gaming space, delivering original and innovative content to large commercial organisations that have established online audiences.

Nektan's full end-to-end technology platform, Evolve, simplifies and supports the route to mobile and desktop gaming revenues, managing the full customer experience and back-office operations, allowing commercial partners to focus solely on marketing 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 innovative way of increasing revenue from end-of-life cabinets whilst providing players new and innovative content to play, which includes functionality 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 Executive'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 position as the international, B2B mobile platform and gaming provider of choice. Nektan's principal market are the regulated RMG sectors in the US and Europe where the Group continues to disrupt and exploit the changing market dynamics through innovation.

The Group's competitive advantage is its white label full end-to-end technology platform, Evolve (launched in April 2014), and its growing suite of high quality mobile gaming products, which together continue to prove very attractive to commercial entities, 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 opportunities we see in the US land-based casino market through in-venue mobile technology. The Group's joint venture, Respin, offers casino operators an innovative and capital efficient way of refreshing their customer offer and increasing revenue from unsupported end-of-life slot machines whilst providing players new and innovative content to play which includes functionality 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 opportunities arise, all of which continues 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 platform 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 continues to strengthen its performance with its first US product Xtraspin. The uplift in revenues experienced by casino partners with Xtraspin wheels underlines the significant commercial opportunities which are further reflected in the continued 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 letters of intent for delivery of in-venue mobile gaming.

The operating loss for the year was £7.2 million (2014: £5.7 million loss). Adjusted EBITDA, which excludes listing costs, exchange differences, and non-cash charges relating 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 continued as set out in our recent Trading Update. Net Gaming Revenues in the month of August alone surpassed the total revenues of the entire previous quarter, attributable in part to a continued increase in first time 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 operational. Furthermore, casino operators are seeing revenue "coin in" uplifts 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 letters of intent for delivery of an initial additional 130 Xtraspin wheels.

To continue to support business growth and development and to underpin our continued 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 additional £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 continued to invest in our Evolve gaming platform and innovative high quality games to ensure that our product remains market-leading and that we retain our competitive advantage. Evolve is focused on supporting mobile gaming first as well as enabling desktop, ensuring its products provide a superior mobile entertainment experience for end users. The Group can identify architecture developments and prioritise these as it sees fit due to having full ownership of its platform, which also allows the Group to integrate third-party software in short timeframes 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 solution in a matter of weeks rather than months. The existing investment in Evolve's software architecture and product development acts as a significant barrier to entry in offering a robust B2B mobile gaming platform. We continue to add high quality partners and, at the year-end, we had 20 live RMG casino partners, including the landmark multi-year relationship with The Sun newspaper in the UK to develop and operate Sun Play, an innovative new gaming product launched in the UK in June 2015. Nektan was contracted following a rigorous selection process, and this is testimony 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.

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 meeting its strategic goals. David Gosen further strengthened the team when he joined as CEO in January 2015, bringing 25 years of gaming and technology expertise.

On behalf of the Board, we would also like to thank all of Nektan's employees for their continued 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 estimated $3 billion a year potential market. In both markets, supported by our leading full end-to-end technology platform, Evolve, the opportunities are substantial and there is significant interest in Nektan's offering.

Post period end, we have secured additional investment, raising £2.75 million through the issue of Convertible Loan Notes and equity to new and existing 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 existing partner base, emphasises the strength of our proprietary, scalable platform, content and sector expertise, all of which leave the Group well-positioned to benefit from the opportunities available to us in a growing market. We remain confident in our outlook for the full year and beyond as Nektan continues to strengthen its position and to deliver strong momentum in our key markets in Europe and the US.

Gary Shaw and David Gosen

Executive Chairman and Chief Executive 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 position as the international, B2B mobile platform and gaming provider of choice, recognised for being at the forefront of innovation in mobile gaming and through its revenue share and licensing business model, to generate high operational leverage and high margins. The Group's strategy is focused on:

· operating, distributing and monetising RMG entertainment for white label partners with access to large online audiences;

· continuing to develop and enhance the Group's end-to-end platform, including the ability to deploy content across mobile and desktop and to continue innovating content-rich and original gaming products; and

· targeting the land based US casino market with in-venue mobile technology by adding a "bolt-on" module or by refurbishing the machines from the estimated 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 operations, allowing the partner solely to focus on marketing the product to its consumers. Net gaming revenue is split between the Group and the partner, with limited technical or integration cost attached to each launch.

At the year-end there were 20 live RMG casino partners, including the landmark multi-year relationship 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 monetises its content and platform through four routes to market: white label implementations, house brands, content licensing and joint ventures.

White labelling sits at the heart of Nektan's B2B business model, which is focussed on targeting large commercial organisations and media owners that have established online audiences. The Group has to develop a full end-to-end technology platform, Evolve, which is focussed on supporting 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 implementations, 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 estimated to have a lifetime value of £300 over an average lifetime of 19 months.

The Group also has a number of Freemium bingo partners and continues to monitor the growth potential of this sector.

The Respin joint venture, targeting 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 position to gain significant share of the fast-growing mobile gaming market, underpinned by its focused strategy and end-to-end gaming platform and content portfolio 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 estimation that mobile gambling - including betting, gaming and lottery - will generate just over €19 billion of gross win by 2018, reflecting 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 active use worldwide by 2017, implying 46% and 30% year on year (YOY) growth in smartphone and tablet adoption respectively. A study published by Deloitte estimated that smartphone penetration 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 betting operators have been building up their mobile offerings in recent years and are exhibiting 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 consumption. Consumers have also become more accepting 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 positioned 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 multiple devices, from mobile phones to tablets, laptops and desktop PCs. In addition, to fully leverage the opportunity, its end-to-end platform, Evolve, simplifies the route to real money mobile gaming revenues for partners, by managing the full customer experience and back-office operations for the partner.

US casinos and land-based technology

The US Casino market is estimated to be worth c.US$66bn in 2015 and is the second largest gambling market in the world, after Macau in China (source: Statista 2015). There are two distinct 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 traditional slot machines, video poker and bingo - at tribal casinos, commercial casinos, racetrack casinos, and/or bars, restaurants or other licensed establishments.

The Group's Respin joint venture is a genuinely disruptive business in an estimated potential market of $3bn. 40% of slot machines on casino floors are estimated 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 innovative and capital efficient way of refreshing their customer offer and increasing revenue from unsupported end-of-life slot machines whilst providing players new and innovative content to play which includes functionality on mobile devices.

The freemium opportunity

The Social Games market is estimated to reach $3.5bn this year, up from $2.8bn in 2014 (Source: Cenkos 2015). With real money online gaming effectively 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 continue to be secondary in focus at this point until its revenue and profit potential is demonstrated.

Operational and financial review

The Group has made considerable operational progress over the year, signing high-profile B2B customers and attracting an impressive level of interest from US casinos. The successful signing of large media groups and gaming operators demonstrates the quality of Nektan's platform and games.

Europe partners

The Group's early traction in Europe reinforces the quality of its technology-led mobile gaming proposition capability to disrupt the mobile gaming market. The Group's existing 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 multi-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 marketing including editorial promotion. This is a multi-year contract with potentially significant net gaming revenue share to Nektan.

Given the depth of the pipeline across all existing offerings, management is confident that the commercial future of the business is exciting.

Real money gaming KPIs

The performance of the Group during the year demonstrates the operational progress achieved. The Directors regard, in addition to net gaming revenue and EBITDA, the growth in first time depositors, player deposits and player cash stakes as reliable measures of performance that demonstrate growing sustainable lifetime revenues from players:

· first time 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 letters 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 betting market that was terminated in order for the Group to focus on its core strategy and the development of its proprietary Evolve platform.

Expenses

The marketing, 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.

Administrative expenses, excluding listing costs, were reduced by 20% to £5.9 million (2014: £7.4 million). The Company incurred £1.3 million in one off costs in relation to the admission of Nektan plc to the Alternative Investment Market of the London Stock Exchange and raising additional financing during the year.

EBITDA

The operating loss for the year was £7.2 million (2014: £5.7 million loss). Adjusted EBITDA, which excludes listing costs, exchange differences, and non-cash charges relating 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 operating 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 initial contribution to Respin of £315k (USD$500k) and the further £1,434k in respect of operating costs is included investments at the year end. The Group's share of the operating 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 transaction costs) and Convertible Loan Notes of £5.5 million (net of transaction costs). During the year the £1.9 million spent on purchase of intangible fixed assets related to the capitalisation of internal development time.

In April and May 2015 the Company issued Convertible Loan Notes to existing and new institutional 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 Securities Exchange (the "CISE"). The Convertible Loan Notes attract accrued interest at a rate of 10 percent per annum, paid quarterly in arrears and are secured by a first ranking fixed and floating charge on the assets of the Company and each of the Company's subsidiaries, with all other loans to the Company ranking behind the Convertible Loan Notes' security.

Post period end, as planned, the Company raised an additional £2.75 million through the issue of £2.39 million of Convertible Loan Notes and a placing of 232,258 new Ordinary Shares of 155p each.

Dependent on certain conditions, 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' existing authority to allot new Ordinary Shares for cash on a non-pre-emptive basis.

Principal risks

There are a number of potential risks and uncertainties 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:

David Gosen

Chief Executive Officer

NEKTAN PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2015

NEKTAN PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 30 June 2015

NEKTAN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2015

NEKTAN PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

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 allotted, called up and fully paid.

Share premium

Represents the amount of subscribed for share capital in excess of nominal value.

Capital contribution 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 obligation 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.

Foreign exchange reserve

Represents the gains/losses arising on retranslating the net assets of overseas operations into UK Pound Sterling.

Shares to be issued reserve

Represents the share subscriptions received by investors for shares issued in the following year.

Retained earnings

Represents the cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

Share option reserve

Represents the cumulative value of share option charges recorded in the consolidated statement of comprehensive income.

NEKTAN PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2015

NEKTAN PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the period ended 30 June 2015

1. Accounting 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 information does not constitute 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.

Statutory accounts for the year ended 30 June 2015 will be filed with Companies House Gibraltar following the Company's Annual General Meeting. The auditors have reported on those accounts and their report was unqualified and did not contain statements under section 10(2) of the Gibraltar Companies (Accounts) Act 1999 or section 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. After reviewing the Group's forecast, annual budget, liquidity requirements and new financing arrangements, including continued shareholders support, the directors are satisfied that the Group will have adequate resources to continue to operate for the foreseeable future.

Adoption of new and revised Standards and Interpretations

In the current reporting period, the Group has adopted a number of revised standards and interpretations including IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. However, none of these have had a material impact on the Group's reporting. In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations that are not yet effective 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.

Critical accounting policies, estimates and judgements

The preparation of consolidated financial statements under IFRS requires the Group to make estimates and judgments that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Reference is made in this note to accounting policies which cover areas that the Directors consider require estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. These policies together with references to the related notes to the financial statements, can be found below:

- Revenue recognition (note 1)

- Capitalisation of Intangible assets and impairment of goodwill (note 9)

- Fair Value of Derivatives (note 19)

Basis of consolidation

The consolidated financial statements incorporate the financial information of the Company and entities controlled by the Company made up to 30 June 2015. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Entities included within the consolidation that have been acquired by the Company are accounted for using acquisition or merger accounting as appropriate.

The consolidated financial statements include the combination of businesses achieved through a Group restructuring that falls outside the scope of IFRS 3 Business Combinations. Accordingly, following the guidance regarding the selection of an appropriate accounting policy provided by IAS 8 Accounting policies: Changes in accounting estimates and errors, these financial statements have been prepared using the principles of merger accounting set out in FRS 6 Acquisitions and Mergers and UK Generally Accepted Accounting Practice ('UK GAAP').

When merger accounting 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 consideration 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 liabilities at the previous balance sheet date and the shares issued by the Company as consideration 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 acquisition accounting is applied, the results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Uniform accounting policies have been adopted across the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Foreign currencies

The consolidated financial statements of the Group are prepared in Sterling, this constitutes the functional and presentational currency. Transactions and balances in foreign currencies are converted into Sterling as follows;

Transactions entered into by the Group in a currency other than the functional currency are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on retranslation of unsettled monetary assets and liabilities are recognised immediately in the profit and loss.

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

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

Revenue recognition

Revenue arises from the below sources:

Real money gaming

Net gaming revenue derives from online gambling operations and is defined as the difference between the amounts of bets placed by players less amounts won by players. It is stated after deduction of promotional 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 accounting periods in which the transactions occur.

Game and platform development

Net revenue receivable from activities in respect of game and platform development comprises fees earned from development of games for customers for use on the Group's platforms and from the sale of platform software and related services.

Revenue in respect of game development and the sale of platform software is recognised when certification 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 implementation 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 contingent on the successful delivery of the implementation project, the revenue is not recognised until such time 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 contracting party from use of the Group's intellectual property in online gaming activities, and from fees charged for the services rendered. Net revenue is recognised in the accounting periods in which the gaming transactions 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 platform licensing expenses. All expenses are recognised on an accruals basis and in line with the appropriate revenue.

The 2014 cost allocations have been restated to reflect the cost of sales definition as detailed above. The restatement has no impact on the 2014 operating loss, loss before tax, or loss for the year.

Marketing, partner and affiliate costs

Marketing, partner and affiliate costs consists primarily of revenue share, commission, affiliate expenses and online and offline advertising.

Other income

Other income consists of research and development taxation credits. The income is recognised when receipt is virtually certain.

Goodwill

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

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration 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 initially recognised at cost and subsequently amortised 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 combinations if they are separable from the acquired entity or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at using appropriate valuation techniques (see section related to critical estimates and judgements below).

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

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

Internally generated intangible assets (development costs)

Expenditure incurred on development activities including the Group's software development is capitalised only where the expenditure will lead to new or substantially improved products, the products are technically and commercially feasible and the Group has sufficient resources to complete development.

Capitalised development costs are amortised over three years. The amortisation expenses are included within administrative expenses in the consolidated statement of comprehensive income.

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

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

Depreciation 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, fittings 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 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 written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination 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 classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after 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 substantially all risks and rewards of ownership. Loans and receivables are carried at amortised cost using the effective interest method.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the assets are impaired. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

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

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and other short-term highly liquid investments that have maturities of three months or less from inception, are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities

Financial liabilities are classified as financial liabilities at fair value through profit or loss or as financial liabilities measured at amortised cost, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

The measurement of financial liabilities depends on their classification: (i) financial liabilities 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 liabilities measured at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognised respectively in interest and other revenues and finance costs. The Group derecognises a financial liability from its balance sheet when the obligation specified in the contract or arrangement is discharged, cancelled or expires.

Trade and other payables

Trade payables are initially measured at their fair value and are subsequently measured at their amortised cost using the effective interest rate method; this method allocates interest expense over the relevant period by applying the 'effective interest rate' to the carrying amount of the liability.

Convertible debt

Where the convertible debt issued coverts into a variable number of shares the proceeds received on issue are allocated between the derivative financial liability and the host debt based upon their fair values. Subsequently the conversion option is measured at fair value through profit and loss and the debt component and as a financial liability measured at amortised cost until extinguished on conversion or maturity of the debt.

Transaction costs directly attributable to the raising of convertible debt are allocated across the derivative financial liability component and the debt liability component. Transaction costs allocated to the derivative financial liability component are expensed to the income statement as they are incurred. Transaction costs allocated to the debt liability component are deducted from the residual value recognised as the debt liability on recognition.

Share capital

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

Current and deferred tax

Taxation 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 deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position 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 settled based upon tax rates that have been enacted or substantively 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 liabilities in the financial statements and the corresponding tax bases used in the computation 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 deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each statement of financial position 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 substantively enacted by the statement of financial position date and are expected to apply when the related deferred tax asset or liability is realised or settled. Deferred tax is not discounted.

Leased assets

Where substantially 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 initially 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 proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operating 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 incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

Share based payments

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

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting 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 operating result before depreciation, amortisation, listing costs and fundraising costs, and non-cash charges relating to share based payments.

Joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is, when the strategic, financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

The Group reports its interests in jointly controlled entities using the equity method of accounting. Under the equity method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition 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. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture.

2. Segmental information

Information reported to the Group's Chief Executive, the strategic chief operating decision-maker, for the purposes of resource allocation and assessment of the Group's segmental performance, is primarily focused on the origination of the revenue stream. The Group's principal reportable segments under IFRS 8 are therefore as follows:

· Real money gaming

· Content licensing and revenue share

· Software development

Segment revenues and results

The following is an analysis of the Group's revenue and results by reportable segment:

The accounting 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 allocation of the share of administration costs including Directors' salaries, finance costs and income tax expense. This is the measure reported to the Group's Chief Executive for the purpose of resource allocation and assessment of segment performance. Administration expenses comprise principally the employment and office costs incurred by the Group.

Segment assets and liabilities

Assets and liabilities are not separately analysed or reported to the Group's Chief Executive and are not used to assist in decisions surrounding resource allocation and assessment of segment performance. As such, an analysis of segment assets and liabilities has not been included in this financial information.

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: 

Geographical analysis of revenues

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

Information 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 representing 60 percent of total net revenue, all of which was within the content licensing and revenue share segment. Customer 2 generated revenue of £241,000 representing 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 representing 14 percent of total net revenue, all of which was within the software development segment.

3. Operating Loss

Operating loss has been arrived at after charging:

4. Other income

5. Staff costs

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

6. Loss per share

Basic loss per share is calculated by dividing the loss attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the year.

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

8. Taxation

The total tax credit can be reconciled to the overall tax charge as follows:

The Group has maximum corporation tax losses carried forward at each period end as set out below:

Details of the deferred tax asset recognised are as set out below:

In addition, the Group has an unrecognised deferred tax asset as follows:

9. Intangible assets

The goodwill of £919,000 arose from the acquisition of Nektan UK Limited, formerly mFuse Limited, (mobile software 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 generating unit attributable to goodwill and other intangible assets of £20,863,696 has been determined using a value in use calculation. The calculation of the value in use is based on a 3 year forecast model containing assumptions 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 assumptions were based upon management's experience, as well as industry data where available. The Directors have concluded that, after applying sensitivities to the model, there is no reasonably possible change in the key assumptions which would cause the carrying value of goodwill and other intangibles to exceed their value in use.

10. Plant, property and equipment

11. Joint ventures

The following entities meet the definition of a joint venture and have been equity accounted in the consolidated financial statements:

Aggregated amounts relating to joint ventures are as follows:

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 initial contribution 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 contributions 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

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

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 reporting 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 reporting 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

Interest is earned at floating 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 (£).

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

14. Trade and other payables

Player balances represent amounts due to customers including net deposits received, undrawn winnings and certain promotional bonuses. Player balances for the year ended 30 June 2015 are £22,000 (2014: £3,000) and are included in Other Payables above.

Derivative financial liability relates to the fair value derivative component of the convertible loan notes issued in the year. Details of the convertible 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 timeframe and no interest has been charged by any suppliers as a result of late payment of invoices.

15. Convertible Loan Notes

During the year the Company raised £5,829,000 through the issue of convertible loan notes. The conversion price is at a 25 percent premium to the price of the Ordinary shares at the date the convertible 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 time through to 28 April 2020.

The number of shares that will be issued upon conversion of the notes are variable and therefore on recognition the proceeds received from the issue of the notes, net of directly attributable transaction costs, have been allocated between the derivative financial liability based upon the fair values on inception of the conversion option and the host debt.

The debt component has subsequently been measured at amortised cost based on an effective 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 effective interest rate less the interest paid to that date

The derivative 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.

Transaction costs directly attributable to the issue of the convertible loan notes amounted to £381,000.

16. Subsidiaries

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

17. Share capital

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 resolution 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 existing share held by them. Conditional 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

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 objectives, policies and processes of the Group for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout this financial information.

The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by management under policies approved by the Board of Directors. Management identifies and evaluates financial risks in close co-operation with the Group's operating 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

· Convertible loan notes and derivatives

· Cash and cash equivalents

· Investment in Joint Venture Entities

Financial assets

The Group held the following financial assets:

Financial liabilities

The Group held the following financial liabilities:

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 convertible loan notes.

The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables and convertible loan notes approximate their fair value.

Financial Instruments Measured at Fair Value

Included in level 3 of the fair value hierarchy is derivative financial liabilities, 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 valuation technique used in determining the fair value measurement of derivative financial liabilities was the Black Scholes model. The significant unobservable inputs in this valuation model are the expected date of conversion, volatility and dividend yield. At year-end, these inputs were as follows:

· Expected date of conversion- 2.8 years from year-end

· Volatility- 23.4%

· Dividend Yield- 0%

Financial instruments not measured at fair value within the financial statements (continued)

The reconciliation of the opening and closing fair value balance of level 3 financial liabilities is as follows:

Management controls and procedures

The Group's Directors monitor and manage the financial risks relating to the operation 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 activities 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.

Foreign currency risk management

The Group has exposure to foreign currency risk due to the number of jurisdictions in which it operates and the number of currencies used.

The Board carefully monitors exchange rate fluctuations and reviews their impact on the net assets and position 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 derivative 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 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:

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 sensitivity analysis.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk arises principally from the Group's cash balances and trade and other receivables. The concentration of the Group's credit risk is considered by counterparty, geography and currency.

The Group gives careful consideration to which organisations it uses for its banking services in order to minimise credit risk.

An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction 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 meeting its financial obligations as they fall due. This risk relates to the Group's prudent liquidity risk management and implies maintaining sufficient cash. Ultimate 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 projections prepared by management.

Maturity of financial liabilities

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

Capital management

The Group is currently funded principally through shareholders' funds. During the year ended 30 June 2015, £5.8 million was raised through convertible loan notes. Details of the convertible 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 estimation

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 discounting liabilities is negligible. The risk in respect of fair value estimation is in respect of acquisition accounting.

20. Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The remuneration of the directors, who are the key management personnel of the Group, is set out below:

The following related party transactions took place during the period:

A Non-executive Director provided consultancy services through a service company to the Group in relation to the admission to trading on AIM amounting 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 software 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 software developed and this amount remained due in full at the year-end.

During the year ended 30 June 2014, 137,510 share options were issued to a shareholder in lieu of services provided. The options 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 options 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 liabilities. 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-executive 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 initial contribution 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 contributions 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 additional financing raising gross proceeds of £2.75 million through the issue of Convertible Loan Notes and equity.

22. Ultimate parent undertaking

The directors consider that there is no one ultimate controlling party.

23. Operating leases

The total future value of minimum lease payments due is as follows: