February 28, 2018 Gate Ventures PLC (»Gate Ventures«or»Gate«or»The Company«)

Transcription

1 Gate Ventures PLC Interim results ISIN Number: GB00BYX2WP92 TICKER: GATE Gate Ventures PLC Press Release February 28, 2018 Gate Ventures PLC (»Gate Ventures«or»Gate«or»The Company«) Interim results for the financial period from July 1, 2017 to December 31, 2017 The Board of Gate Ventures PLC (»The Board«) is pleased to announce its interim results for the first half of The Company s fiscal year 2017/2018 dated July 1, 2017 to December 31, 2017 (»The Period«).»The Board is pleased to publish The Company s interim report for the financial period from July 1, 2017 to December 31, The Company has increased both investments and intake of new capital in The Period and will continue to expand its investment portfolio in the second half of the fiscal year«, says Gate Ventures Chairman Lord Michael Grade. Notably, The Company has made new investments in art-tech marketplace Rise Art Ltd. (15% holding) as well as Chinese/Hong Kong film productions Fagara in Mara (10% holding) and Theory of Ambitions (2.5% holding), which are to premiere across cinemas in China and Hong Kong in Loyalty card app Bink (4% holding), SaaS provider Ensygnia (7% holding), interactive casual games network PlayJam (25% holding) and AR/VR production studio Gate Reality (wholly-owned subsidiary) are all at steady holding and performing in line with expectations. Gate s theatre business has also shown some positive progress with 42nd Street being extended to October 2018 at the Theatre Royal Drury Lane, whilst Sunset Boulevard s financial performance is being observed. Infinity Creative Media (16% holding) did however not perform as expected, leading Gate to recognize a fair value loss. The Board also decided to realise its investment in Reach 4 Entertainment (24% holding) thus incurring a minor loss. In The Period, The Board were delighted to announce the appointment of Sarah Ferguson, Duchess of York, to The Board as Executive Director, whilst Dr. Johnny Hon stepped down as Chairman, the position being taken up by Director Lord Michael Grade. The Board were also delighted to announce the appointment of Anita Luu as Chief Operating Officer. Financially, The Company generated revenues of 1,090k in The Period from the investments described above. Less the administrative costs of 3,063k, an operating loss of 2,047k and a loss before tax of 2,038k was incurred. A total of 6,385k has been raised in The Period from investors, which will help Gate Ventures in continuing and maintaining its strategic investments. The Company's directors have determined that the principal risks and uncertainties have not changed since the prior annual report dated June 30, 2017, while the financials are on budget for The Period and projections for the second half of the fiscal year 2017/2018 remain unchanged. -END-

2 Further Enquiries: Gate Ventures PLC (The Company): // +44 (0) Keswick Global AG (Certified Adviser): // Rossen & Company ApS (Financial PR): nic@rossen.com // Notes to Editors: Gate Ventures was founded in 2015 to make investments and capitalise on investment opportunities in the media and entertainment sectors. The Company focuses primarily on investments and operational opportunities in the UK and China covering theatre, television, media technology and e-commerce. The Company's investments include various theatre productions such as the successful Sunset Boulevard and 42nd Street (which is currently showing in London), virtual reality (»VR«), and technology companies Bink and PlayJam amongst many others. Gate Ventures has made a total of ten investments since it was established, and to date, has successfully raised over EUR25 million reflecting the Company's significant growth thus far. -END-

3 GATE VENTURES PLC (Company Number: ) INTERIM FINANCIAL REPORT For the financial period from 1 July 2017 to 31 December

4 Contents Interim management report 3 Independent review report to Gate Ventures Plc 6 Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income 8 Condensed Consolidated Balance Sheet 9 Condensed Consolidated Statement of Changes in Equity 10 Condensed Consolidated Cash Flow Statement 12 Notes to the Consolidated Financial Statements 13 2

5 Interim Management Report In the six months to December 2017, the company raised an additional 6.385m in new capital to put towards new projects and working capital. This capital raise has enabled the directors to continue to grow Gate s investment portfolio. In the period, the Company has committed to a 1.3m investment in Rise Art Ltd for a 15% stake. Rise Art are leading the art-tech revolution with their online e-commerce marketplace for contemporary art, handpicked by experts. The Directors are very optimistic and excited about this investment particularly as it marks Gate s first step into the e-commerce sector. Rise Art have been showing impressive growth and Gate feel they have invested at the right time. Gate will also work with Rise Art to help develop their Asia strategy. Our investment in Bink has continued to perform well with the company reporting another fantastic 6- months to 31 December. During the period Bink added 2 large UK retailers, Harvey Nichols and Iceland, to their portfolio, showing the continued upward momentum of its app and the business as a whole. During the period the company also raised further funds in order for them to continue to expand their business. The excellent results of Bink during the period have been reflected in an increase in the value of our investment resulting in a fair value gain of 1,217,587 being recorded in Other Comprehensive Income for the period. Infinity Creative Media hasn t performed as well as expected in the 6 months to 31 December which has led to Gate having to recognise a fair value loss on its investment for the period in Other Comprehensive Income of 1,386,970. Although their performance over this period was below expectations, they did produce and hold The Best FIFA Football Awards at the end of October which generated very positive exposure for the company and its ability to create high quality media content. The Board still has strong support for Infinity Creative Media and Gate s investment in it and believes their outlook and pipeline is positive. Our investments in Ensygnia and PlayJam have continued to perform in line with expectations since our 30 June 2017 accounts and therefore have not resulted in a fair value movement during the period. After the period ended, the board of directors decided to dispose of its investment in Reach 4 Entertainment. The Board are very pleased with the progress R4E were making but due to other strategic projects on the horizon and working capital requirements, we felt now was the appropriate time to dispose of our interest. The Directors will provide further information on these new projects in due course. In the period a profit of 1.33m was recognised, and upon disposal an overall loss of 188k was recorded on the investment. Part of the proceeds from the sales of our R4E investment have been put towards two Chinese movies, Fagara in Mara and Theory of Ambitions. These movies are set to be released in 2018, and as part of the company s ongoing efforts to become one of the leading entertainment investors globally, Gate s latest investments offer an entrée into major film productions in Greater China, as well as generate confidence and credibility in the company for future film endeavours globally. China's film market is set to continue to grow. In 2016, there were over 1.37 billion viewers in China s urban cinemas. To meet the demand, China now boasts 49,000 cinema screens in China, surpassing the United States. It is expected that the box office revenue in China will reach RMB 55 billion (est. US$8.73 billion) in 2017, representing a year-on-year increase of 10%. Gate has invested HK$8,941, ( 838,159) in Fagara in Mara for a 10% stake, and HK$11,764, ( 1,102,841) in Theory of Ambitions for a 2.5% stake. 3

6 Interim Management Report (continued) Gates Theatre business has also shown some positive progress, offset by a decline in the expected returns generated from the Sunset Boulevard investment. 42nd Street is produced by Gate directors Michael Grade and Michael Linnit. The show opened at the world famous, 2,000-seater Theatre Royal Drury Lane in March 2017 to outstanding reviews. The Board are delighted with the show s progress and have extended the run until October As per the accounting principles of valuing the investment by performing a discounted cash flow on the total expected cash receipts from the investment, we have recorded a net loss of 86k in the period relating to 42 nd Street. This was due to the extension of the show which means the cash received from the investment will be received at a later date than originally forecast. When this is discounted back to investment date it gives a lower value than had it been received at the original earlier date, therefore creating a fair value loss. In the period the Board received the results of its investment into Sunset Boulevard on Broadway. The show opened to amazing reviews and helped to establish the company in America. Due to its limited run we unfortunately had to recognised a loss of 223k in the period. This was due to the expected cash inflow from the production being reduced by US$300k upon final results of the production being known. The Board also have a strong pipeline of Theatre projects that it is currently working on as it looks to expand its investments in this sector. Gate Reality has continued to make positive progress and continued to grow at the forefront of the virtual and augmented reality industry. Following our successful live-stream projects with NTT Docomo and Mr. Robot, we are now partnering with Livit Productions, who after securing a deal with NBC, will be outsourcing their 360º Live Streaming productions to Gate Reality. Gate Reality is currently in production of a pioneering Augmented Reality piece for the world s third most valuable sports brand. As an approved supplier for their Global network, this begins a very exciting working relationship. We have continued to create truly unique sport content attracting press coverage on networks such as Sky Sports and BBC, and are currently in final stage discussions to produce a suite of content for 2 major UK Premiership clubs. Other Gate Reality projects about to go into production include a partnership with The Ministry of Education to integrate VR/AR technologies throughout the Sri Lankan school curriculum, across all grades and subjects, to enhance learning. As the industry grows Gate Reality is finding numerous uses of the technology for its clients, which will help to drive longterm growth and a bright future for the Company and investors. The company is currently loss making but performing within budget. We hope the momentum gained over the last 12 months will bring the company into profit in the very near future. The Board was delighted to announce the appointment of Sarah Ferguson, Duchess of York, to the Board as Executive Director. The Duchess will assist the company with the branding and marketing of specific products, mainly in the United States and China. We are currently working with the Duchess on some exciting projects that we hope to finalise and announce in the short term. The board were also delighted to announce the appointment of Anita Luu, Chief Operating Officer. Anita has extensive strategy expertise in China and will help Gate s expansion to the Chinese market. In December 2017, Dr Johnny Hon stepped down as Chairman for Gate to concentrate on other projects and his numerous business activities. Dr Hon will continue to advise the company and the Board thank him for his valuable contribution since August Lord Michael Grade has become Gate s Chairman. 4

7 Interim Management Report (continued) The Group s operating expenses are in line with budget for the period. The increased administration costs from 1.9m to 3.0m are due to the increasing business development costs relating to future projects. The administration costs also reflect 6 months of costs for Gate Reality, compared to 1 month in the same period last year. We have also expensed the development and production costs relating to the performances of Legendary Romance last year at the Williamstown Film Festival which resulted in additional administration expenses of 315k. The board expects to make a return on this initial investment phase over the medium term when the production is staged either on Broadway or in London s West End. Revenue of 1,090k generated from the investments described above, less the administrative costs of 3,063k have driven an operating loss of 2,047k and a loss before tax of 2,038k. Other financial assets have increased to 13,450k (June 2017: 10,231k) reflecting additional investments of 2,543k plus net valuation gains of 850k. Loans and borrowings of 1,144k were repaid using the additional funds raised in the period, and cash and cash equivalents have decreased to 103k (June 2017: 273k) reflecting repayment of borrowings, additional investments made and the cash outflow from operating activities noted above, offset by 6,385k of funds raised in the period. Going Concern The financial statements have been prepared on a going concern basis as the Directors continue to believe in the longer-term viability of the Group s business and they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Responsibility statement of the directors in respect of the half-yearly financial report The directors confirm that to the best of their knowledge: the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; the interim management report includes a fair review of the business, including: (a) an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and (b) related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. Richard Carter Director 22 February

8 Independent Review Report to Gate Ventures Plc Conclusion We have been engaged by the company to review the condensed set of financial statements in the halfyearly report for the six months ended 31 December 2017 which comprises the condensed consolidated balance sheet as at 31 December 2017, the condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six month period then ended, and notes to the interim financial information ( the condensed consolidated interim financial information ). Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the half-yearly report for the six months ended 31 December 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Nasdaq First North Nordic Rulebook. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the halfyearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Directors responsibilities The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the requirements of the Nasdaq First North Nordic Rulebook. As disclosed in note 1, the annual consolidated financial statements of the company are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review. 6

9 Independent Review Report to Gate Ventures Plc (continued) The purpose of our review work and to whom we owe our responsibilities This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. Simon Richardson (Senior Statutory Auditor) For and on behalf of KPMG LLP Chartered Accountants 15 Canada Square London E14 5GL 22 February

10 Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income for the period ended 31 December 2017 (Company Number: ) Note 6 months ended 31 December months ended 31 December 2016 (unaudited) (unaudited) Revenue - Interest income from theatre production investments 169, Income from virtual reality content production 95, Fair value gains on investments 824, Other revenue - 138,672 1,090, ,672 Cost of sales (73,386) (49,515) Gross profit 1,016,829 89,157 Administrative expenses (3,063,439) (1,901,274) Operating loss (2,046,610) (1,812,117) Gain on sale of business operations 2-491,397 Financial income 9,063 1,862 Loss before tax (2,037,547) (1,318,858) Taxation - - Loss for the period (2,037,547) (1,318,858) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Available-for-sale financial assets net change in fair value (153,442) 4,683 Total comprehensive loss (2,190,989) (1,314,175) Loss for the period attributable to: Equity holders of the parent (2,037,547) (1,318,858) Total comprehensive loss attributable to: Equity holders of the parent (2,190,989) (1,314,175) Earnings per share Basic 8 Loss of 0.5 pence Loss of 0.3 pence Earnings per share Diluted 8 Loss of 0.5 pence Loss of 0.3 pence 8

11 Condensed Consolidated Balance Sheet at 31 December 2017 (Company Number: ) Note At 31 December 2017 (unaudited) At 30 June 2017 Non-current assets Property, plant and equipment 157, ,291 Other financial assets 5 13,450,284 10,231,628 Current assets 13,607,707 10,437,919 Trade and other receivables 912,970 1,213,811 Cash and cash equivalents 103, ,964 1,015,990 1,486,775 Total assets 14,623,697 11,924,694 Current liabilities Trade and other payables 416, ,355 Loans and borrowings - 1,144,303 Deferred income - 13,877 Total liabilities 416,527 1,611,535 Net assets 14,207,170 10,313,159 Equity attributable to equity holders of the parent Share capital 7 362, ,071 Share premium 7 21,272,462 16,284,524 Prepaid share reserve 1,385, ,000 Revaluation reserve 640, ,686 Retained earnings (9,452,669) (7,415,122) Total equity 14,207,170 10,313,159 These interim financial statements were approved by the board of directors on 22 February 2018 and were signed on its behalf by: Richard Carter Director 9

12 Condensed Consolidated Statement of Changes in Equity for period ended 31 December 2017 Share capital Share premium Prepaid share reserve Revaluation Reserve Retained earnings Total Equity Balance at 1 July ,071 16,284, , ,686 (7,415,122) 10,313,159 Total comprehensive income for the period Profit or loss (2,037,547) (2,037,547) Other comprehensive income (153,442) - (153,442) Total comprehensive income for the period 350,071 16,284, , ,244 (9,452,669) 8,122,170 Transactions with owners of the Group Contribution and distributions Issue of shares 12,062 4,987,938 (300,000) - - 4,700,000 Payment received for shares not yet issued - - 1,385, ,385,000 Total contributions by and distributions to owners 12,062 4,987,938 1,085, ,085,000 Balance at 31 December 2017 (unaudited) 362,133 21,272,462 1,385, ,207,170 10

13 Condensed Consolidated Statement of Changes in Equity for period ended 31 December 2016 Share capital Share premium Prepaid share reserve Revaluation Reserve Retained earnings Total parent equity Noncontrolling interest Total equity Balance at 1 July ,685 11,934, (2,327,989) 9,948, ,003 10,150,865 Total comprehensive income for the period Profit or loss (5,087,133) (5,087,133) - (5,087,133) Other comprehensive income , , ,686 Total comprehensive income for the period ,686 (5,087,133) (4,293,447) - (4,293,447) Transactions with owners of the Group Contribution and distributions Issue of shares 7,386 4,350, ,357,744-4,357,744 Payment received for shares not yet issued , , ,000 Total contributions by and distributions to owners Changes in ownership interests Disposal of business operations with a noncontrolling interest 7,386 4,350, , ,657,744-4,657, (202,003) (202,003) Changes in ownership interests (202,003) (202,003) Total transactions with owners of the Group 7,386 4,350, , ,657,744 (202,003) 4,455,741 Balance at 30 June ,071 16,284, , ,686 (7,415,122) 10,313,159-10,313,159 11

14 Condensed Consolidated Statement of Cash Flows for period ended 31 December 2017 Note 6 months ended 31 December months ended 31 December 2016 Cash flows from operating activities Loss for the period (2,037,547) (1,318,858) Adjustments for: Depreciation 53,568 35,797 Expenses relating to the issue of warrants - 60,000 Financial income (9,063) (1,862) Changes in fair value of other financial assets (1,003,551) - Redemptions from theatre production investments 174,700 - Gain on sale of business operations - (491,397) (2,821,893) (1,716,320) (Increase)/decrease in trade and other receivables 300, ,604 Increase/(decrease) in trade and other payables (50,705) 946,436 Net cash used in operating activities (2,571,757) (268,280) Cash flows from investing activities Interest received 9,063 1,862 Disposal of business operations, net of cash disposed 2 - (224,217) Acquisition of property, plant and equipment (4,700) (107,703) Acquisition of other financial assets (2,543,247) (3,565,762) Net cash used in investing activities (2,538,884) (3,895,820) Cash flows from financing activities Proceeds from the issue of share capital 7 5,000,000 2,250,006 Prepaid share capital 1,085,000 Repayment of borrowings (1,144,303) - Net cash from financing activities 4,940,697 2,250,006 Net decrease in cash and cash equivalents (169,944) (1,914,094) Cash and cash equivalents at the beginning of the period 272,964 2,108,949 Cash and cash equivalents at the end of the period 103, ,855 12

15 Notes to the consolidated financial statements (forming part of the financial statements) 1 Accounting policies Basis of preparation The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The interim condensed consolidated financial statements for the six months ended 31 December 2017 have been prepared on a going concern basis in accordance with IAS 34 Interim Financial Reporting, applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the period ended 30 June The preparation of condensed consolidated interim financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results for which form the basis of making the judgements about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates. 2 Acquisitions/disposals of subsidiaries Infinity House Productions/Gate Reality Limited On 17th November 2016, Gate Ventures plc, who already owned 65% of the issued capital, acquired from Rosemary Reed and Corinna McCann, their shares, which accounted for the remaining 35% of the Company, in Infinity House Productions Limited, making that Company a wholly owned subsidiary of Gate Ventures plc. The remaining shares were acquired at nil cost however Gate Ventures took over the 350 receivable in the Company. The subsidiary has been renamed and rebranded as Gate Reality Limited and has subsequently set up operations in UK, US and China under new management. On the same day, Gate Ventures plc, having now acquired 100% of the Company, ceased their business operations with Rosemary Reed, Corinna McCann and their Company Infinity House Productions and Retail Limited, which continues to operate using the Infinity brand. It was agreed that 1.25 million would be paid to Gate Ventures plc for the ceasing of these business operations, the results of which are set out below. Gate Ventures acquired the remaining shares as it wanted to have 100% control over the direction and development the entity through which it now runs its virtual reality business. Gate Reality Limited has and will continue to operate in creating virtual reality content for film, television, concert and theatre. Koffi Designs Limited Gate Ventures China On 20th July 2016, Gate Ventures plc, who had no previous holding in the Company, invested 236,000 in Koffi Designs Limited, a Hong Kong based company. The amount invested was split between HK$2 which was paid to the owners of the Company to acquire 100% of the shares and the remaining was invested as new capital in to the Company. The purpose of this was to create a Wholly Foreign-Owned Enterprise (WFOE) to allow Gate Ventures plc access to, and investment in, the Chinese market. This WFOE was set up and this created Gate Ventures China Operations. In the six months to 31 December 2017 the subsidiary contributed a net loss of 73,758 to the consolidated net loss for the period. 13

16 Notes to the consolidated financial statements (continued) 2 Acquisitions/disposals of subsidiaries (continued) Disposals in the prior period The disposal of the Infinity House Productions business operations had the following effect on the Group s assets, liabilities and net loss for the prior period. Carrying values at disposal date Net assets at the disposal date: Goodwill 455,348 Property, plant and equipment 95,122 Cash and cash equivalents 494,217 Other receivables 10,370 Trade and other payables (94,451) Net assets 960,606 Less: non-controlling interest (202,003) Assets disposed from the group 758,603 Consideration receivable for sale 1,250,000 Gain on disposal 491,397 The group incurred acquisition and disposal related costs of 32,658 related to legal and professional services. These costs have been included in administrative expenses in the group s consolidated statement of profit or loss. As at 30 June 2017 there was 980,000 of the consideration still outstanding and classified as a receivable on the balance sheet. Since the original agreement, which stated that there would be 7 payments made on this amount, the terms have been renegotiated. There is now 248,000 of payments due in the next 12 months as well as legal fees amounting to 62,000 for the renegotiation. The remaining 732,000 of the consideration is due after 12 months. After the 30 June 2017 reporting date we were notified that the company these amounts were receivable from went in to liquidation. Although Gate fully intends to pursue every option available to us to fully recover the amount, we assessed the amounts that we were very confident of recovering and impaired the receivable by the amount of 794,550 to a carrying amount of 247,450 for the 30 June 2017 accounts. There has been no changes to this assessment during the current period and the carrying amount still represents the amount of the receivable that has been guaranteed by assets of the shareholders. 14

17 Notes to the consolidated financial statements (continued) 3 Segment Reporting The directors of the group have determined that there are two operating segments within the group, one being Gate Ventures, which includes Gate China, and one being Gate Reality. These have been determined to be separate operating segments as Gate Ventures operates a primarily investment based business, whereby it invests in companies and theatre projects, and Gate Reality is a virtual reality content production company, which delivers end to end virtual reality content. Gate Reality, which is a 100% subsidiary of Gate Ventures plc, includes the US operations. This is because Gate Reality Limited is domiciled in the UK and it wholly owns the Limited Liability Company that is in the United States. Of the revenue earned by Gate Reality for the period to 31 December 2017, 98% of this was from external customers outside of the UK. Although more than 10% of the revenue reported for Gate Reality can be attributed to a single customer, the entity does not consider itself reliant on this customer. This is due to the relative start-up status of this business and the nature of virtual reality content production which is generally for stand-alone projects which are often one off per customer. It presents a fairer view to say the business is reliant on the ability to procure new clients and contracts rather than a single customer. There was no revenue and a non-material non-current asset balance relating to Gate China. For the 6 month period ended 31 December 2017 Gate Ventures Gate Reality Total Revenue - Interest income from theatre production investments 169, ,528 - Income from virtual reality content production - 95,874 95,874 - Fair value gains on investments 824, , ,341 95,874 1,090,215 Cost of sales (10,214) (63,172) (73,386) Gross profit 984,127 32,702 1,016,829 Administrative expenses (2,831,810) (231,629) (3,063,439) Operating loss (1,847,683) (198,927) (2,046,610) Financial income 9,063-9,063 Loss before tax (1,838,620) (198,927) (2,037,547) Taxation Loss for the period (1,838,620) (198,927) (2,037,547) 15

18 Notes to the consolidated financial statements (continued) 3 Segment Reporting (continued) For the 6 month period ended 31 December 2017 (continued) Gate Ventures Gate Reality Total Capital additions: Property, plant and equipment - 4,470 4,470 Balance sheet: Non-current assets 13,575,400 32,307 13,607,707 Current assets 989,688 26,302 1,015,990 Total segment assets 14,565,088 58,609 14,623,697 Liabilities: Total segment liabilities (364,052) (52,475) (416,527) For the period ended 31 December 2016 Gate Ventures Gate Reality Total Revenue - Other revenue 138, , , ,672 Cost of sales (49,515) - (49,515) Gross profit 89,157-89,157 Administrative expenses (1,840,024) (61,250) (1,901,274) Operating loss (1,750,867) (61,250) (1,812,117) Gain on sale of business operations 491, ,397 Financial income 1,862-1,862 Loss before tax (1,257,608) (61,250) (1,318,858) Taxation Loss for the period (1,257,608) (61,250) (1,318,858) 16

19 Notes to the consolidated financial statements (continued) 3 Segment Reporting (continued) For the 6 month period ended 31 December 2016 (continued) Capital additions: Gate Ventures Gate Reality Total Property, plant and equipment - 1,824 1,824 Balance sheet: Non-current assets 10,312,816 1,824 10,314,640 Current assets 1,654,631 16,148 1,670,779 Total segment assets 11,967,447 17,972 11,985,419 Liabilities: Total segment liabilities (962,504) (78,222) (1,040,726) 4 Investments in subsidiaries and associates The Company has the following investments in subsidiaries and associates at 31 December 2017: Country of Incorporation Registered number Registered Address Ownership Gate Reality Limited UK th Floor, 17 Old Park Lane, London W1K 1QT 100% Koffi Designs Limited - Gate China HK th Floor, Bank of China Tower, 1 Garden Road, Central, Hong Kong 100% PlayJam Holdings Limited UK Bourne House, Queen Street, Gomshall, Surrey, GU5 9LY 26% reach4entertainment Enterprises plc UK Wellington House, 125 Strand, London, WC2R 0AP 24% 17

20 Notes to the consolidated financial statements (continued) 4 Investments in subsidiaries and associates (continued) Group composition Gate Reality Limited and Koffi Designs Limited are considered as Subsidiaries because the Company has 100% ownership and voting rights in each company. PlayJam Holdings Limited and reach4entertainment Enterprises plc are considered associates as the Company holds more than 20% of the issued capital and also has a board member on their board who is a board member of Gate Ventures plc. Investments in associates are usually required to be accounted for using the equity method. However, Gate Ventures, in line with the standards, has determined itself to be a venture capital or similar organisation. The standards therefore offer an exemption from accounting for these associates using the equity method and instead allows them to be classified as fair value through profit or loss (FVTPL) financial assets, which Gate Ventures has elected to take. As reach4entertainment is quoted on an active market, the fair value is based upon the quoted share price at year-end with any fair value gains or losses recognised through the Statement of profit or loss. PlayJam is not quoted on an active market and therefore the fair value is based upon relevant information available to the Directors, most notably the valuation derived from a recent funding round. Further details are included in note Other financial assets Non-current 31-Dec 30-Jun Non-current Available for sale financial assets Opening balance 7,224,674 4,800,000 - Additions 1,196,220 3,112,809 - Redemptions (174,700) (311,535) - Changes to fair value gains (656,381) 793,686 - Interest income from theatre production investments 193, ,630 - Changes in value due to exchange rate movements (16,349) (41,916) - Held to maturity investment converted to ordinary shares 83, Reclassified to at fair value through profit or loss - (1,300,000) Closing balance 7,850,381 7,224,674 An investment is classified as available for sale where it is a non-derivative financial instrument that is not a loan or receivable, does not have a fixed maturity and it is not held at fair value through profit or loss. Investments in equity instruments which are classified as available for sale and have a quoted market price are revalued to their fair value using this quoted market price at each reporting period. 18

21 Notes to the consolidated financial statements (continued) 5 Other financial assets (continued) Investments in equity instruments which are classified as available for sale and do not have a quoted market price are revalued to their fair value using their most recent share price from their most recent round of fund raising at each reporting period. Other factors which are used to support a fair value increase or decrease in an investment that does not have a quoted market price include looking at EBITDA forecasts, positive and negative information about the investee that is publicly available and investor presentations that contain both financial and non-financial performance indicators. Where these factors do not support the figures from the latest round of fund raising we will determine what factors in aggregate a reliable fair value. Investments in available for sale equity instruments comprise 5,409,875 (2016: 4,989,798) and net fair value losses in the period were 152,926 (2016: nil) Other financial assets comprise loans to fund theatre operations. As the returns on the loans are dependent upon the ticket sales and the profits of the underlying theatre operations the loans are largely with non fixed repayment dates and variable repayment amounts. The assets are recorded at fair value, being the estimated amount receivable by the Group, discounted to present day values. The fair value of future anticipated cash receipts takes into account the directors view of significant unobservable inputs including future ticket sales, the expected timing of receipts and the estimation of costs of production and also the likelihood that the theatre defaults on a repayment and they are therefore classified as a level 3 instrument. The directors revisit the future anticipated cash receipts from the assets at the end of each reporting period and any changes in estimation are recognised through profit and loss The difference between the anticipated future receipt and the initial fair value is charged over the estimated deferred term, with the financial asset increasing to its full expected cash settlement value on the anticipated receipt dates. The imputed interest income for the period ended 31 December 2017 was 193,303 (2016: nil), offset by a foreign exchange loss of 16,349. Credit risk, which the directors do not consider to be significant, is accounted for in determining present values. The directors review the financial assets for impairment at the end of each reporting period. There were no indicators of impairment at 31 December None of these amounts are past due. At initial recognition, the fair value of the assets is calculated using a discount rate, appropriate to the class of assets, which reflects market conditions at the date of entering into the transaction. The directors consider at the end of each reporting period whether the initial market discount rate still reflects up to date market conditions. If a revision is required, the fair value of the asset is re-measured at the present value of the revised future cash flows using this revised discount rate; the difference between this value and the carrying value of the asset is recorded against the carrying value of the asset and recognised directly in the Statement of Profit and Loss and Comprehensive Income. During the period a loss of 279,577 (2016: 0) was recognised in the Statement of Profit and Loss and Comprehensive Income. This was due to 42nd Street being extended and therefore the expected cash in flow from it to the Company being moved to a further date in the future. As the cash flow is expected at a further future date, when this is discounted back to investment date it gives a lower value than had it been received at the original earlier date, therefore creating a fair value loss. As the costs of running a production can be reliably estimated, the main driver which changes the estimated cash flow is the percentage of tickets sold. Therefore if ticket sales increase we would see the fair value of the investment increase, along with an increase to the accruing interest, and intern if they decrease we would see a decrease in the fair value, along with a decrease in the interest accruing. A 5% increase in estimated ticket sales would affect the profit and loss with a decrease to the loss of 18,352. An equal change in the opposite direction would have increased the loss by 18,352. Available for sale debt comprise 2,440,505 (2017: 2,541,191). There were no fair value gains in the period in other comprehensive income. 19

22 Notes to the consolidated financial statements (continued) 5 Other financial assets (continued) 31-Dec 30-Jun Held to maturity financial assets Opening balance 81, Additions - 79,750 - Accrued interest 1,783 2,081 - Converted to ordinary shares (83,614) - Closing balance - 81,831 An investment is classified as held to maturity where it is a non-derivative financial asset with determinable payments and a fixed maturity. Held to maturity investments fair value is determined is determined by the cost of the instrument plus any accrued interest up to the date of the end of the financial report. During the period the convertible loan notes which represented the full value of investments held to maturity were converted to ordinary shares of the company. The conversion means the value of these shares is now shown in available for sale financial assets. 31-Dec 30-Jun Financial assets designated as fair value through profit or loss Opening balance 2,925,123 1,740,705 - Additions 1,347,027 1,037,952 - Fair value gains and losses 1,327,753 (1,153,534) - Reclassified from available for sale - 1,300,000 Closing balance 5,599,903 2,925,123 Investments in equity instruments which are designated as fair value through profit or loss and have a quoted market price are revalued to their fair value using this quoted market price at each reporting period. 20

23 Notes to the consolidated financial statements (continued) 5 Other financial assets (continued) Investments in equity instruments which are designated as fair value through profit or loss and do not have a quoted market price are revalued to their fair value using their most recent share price from their most recent round of fund raising at each reporting period. Other factors which are used to support a fair value increase or decrease in an investment that does not have a quoted market price include looking at EBITDA forecasts, positive and negative information about the investee that is publicly available and investor presentations that contain both financial and nonfinancial performance indicators. Where these factors do not support the figures from the latest round of fund raising we will determine what factors in aggregate a reliable fair value. 6 Fair value of financial instruments Fair values The table below analyses financial instruments, into a fair value hierarchy based on the valuation technique used to determine fair value. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). 21

24 Notes to the consolidated financial statements (continued) 6 Fair value of financial instruments (continued) 31 December 2017 The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as follows: Financial assets - Designated as fair value through profit or loss (note 5) Equity shares valued at cost Total financial assets at fair value through profit or loss At fair value Available-forsale Loans and receivables/ (payables) Total Level One Level Two Level Three 5,599, ,599,904 5,080, ,311 5,599, ,599,904 5,080, ,311 Financial assets (note 5) Equity shares Theatre productions - 5,409,875-5,409, ,409,875-2,440,505-2,440, ,440,505 Total available for sale financial assets - 7,850,380-7,850, ,850,380 Financial assets/(liabilities) - Loans and receivables/(payables) not measured at fair value Trade and other receivables , , Trade and other payables - - (416,527) (416,527) Cash and cash equivalents , , Total loans and receivables , , ,599,904 7,850, ,463 14,049,747 5,080,593-8,369,691 22

25 Notes to the consolidated financial statements (continued) 6 Fair value of financial instruments (continued) 30 June 2017 The fair values of all financial assets and financial liabilities by class together with their carrying amounts shown in the balance sheet are as follows: Financial assets - Designated as fair value through profit or loss (note 5) Equity shares valued at cost Total financial assets at fair value through profit or loss At fair value Held-tomaturity Availablefor-sale Loans and receivables/ (payables) Total Level One Level Two Level Three 2,925, ,925,123 2,405, ,311 2,925, ,925,123 2,405, ,311 Financial assets (note 5) Equity shares Theatre productions - 81,831 4,683,483-4,765, ,764, ,541,191-2,541, ,541,191 Total available for sale financial assets - 81,831 7,224,674-7,306, ,305,989 Financial assets/(liabilities) - Loans and receivables/(payables) not measured at fair value Trade and other receivables ,213,811 1,213, Trade and other payables (453,355) (453,355) Loans and borrowings (1,144,303) (1,144,303) Deferred income (13,877) (13,877) Cash and cash equivalent , , Total loans and receivables (124,760) (124,760) ,925,123 81,831 7,224,674 (124,760) 10,106,868 2,406,328-7,825,300 23

26 Notes to the consolidated financial statements (continued) 6 Fair value of financial instruments (continued) For those assets which are classified as level one assets, they have a quoted share price on an active market (either the London stock exchange or Nasdaq First North). For those assets which are equity instruments and are classified as level three assets, the Company has derived their share price from the latest round of fund raising. Theatre productions which are classified as level 3 available for sale debt instruments are valued at each reporting date by determining the estimated future cash flows and then discounting this back using an effective interest rate method. Further information is included in note 5. Other assets and liabilities are held at cost less any provision for impairment which approximates their fair value. The effect of the revaluation of those assets classified as level 1 on the profit and loss and other comprehensive income is as follows: 31-Dec 30-Jun Opening balance 2,406,328 1,740,705 Total gains or losses - in profit and loss (financial assets at fair value through profit or loss) 1,327,754 (372,845) - in other comprehensive income (available for sale equity chares) (516) 516 Purchases 1,347,027 1,037,952 Closing balance 5,080,593 2,406,328 The effect of the revaluation of those assets classified as level 3 on the profit and loss and other comprehensive income is as follows: 31-Dec 30-Jun Opening balance 7,825,300 4,800,000 Total gains or losses - in profit and loss (financial assets at fair value through profit or loss) (502,941) (780,689) - in profit and loss (finance income - held to maturity investments) 1,784 2,081 - in profit and loss (interest income from theatre production investments) 193, ,630 - in profit and loss (exchange gains and losses) (16,349) (41,916) - in other comprehensive income (available for sale equity shares) (152,926) 793,170 Redemptions from theatre shows (174,700) (311,535) Purchases 1,196,220 3,192,559 Closing balance 8,369,691 7,825,300 24

27 Notes to the consolidated financial statements (continued) 7 Capital and reserves Allotted, called up and fully paid 350, ,685 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. During the period the Company issued 15,077,162 (2016: 37,500,001) ordinary shares for a consideration of 5,000,000 (2016: 2,250,006), settled in cash. The nominal value of the Company s shares is (2016: ). 8 Earning per share The calculation of basic and diluted earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding. i. Loss attributable to ordinary shareholders Loss for the period, attributable to the owners of the Company (2,037,547) (1,318,858) ii. Weighted-average number of ordinary shares Ordinary Shares In thousands of shares Note Issued ordinary shares at the beginning of the period 432,611 3,426,852 Effect of shares issued in October ,666 Effect of 8 to 1 share consolidation in November (3,016,053) Effect of shares issued in March ,146 Effect of shares issued in October ,637 - Weighted average number of ordinary shares at 31 December 439, ,611 25

28 Notes to the consolidated financial statements (continued) 9 Related parties Related party transactions During the financial period ended 31 December 2017, Global Group International Holdings Limited, of which a director of the Company, Dr Johnny Hon, is a director, has paid 1,393,272 (2016: 747,792) on behalf of the Group for the administrative expenses incurred by the Group. These payments were administrative expenses paid to third parties and recharged to the Group. As at 31 December ,612 (2016: 27,370) was outstanding to be paid. During the financial period ended 31 December 2017, Global Group Capital Management Limited, of which a director of the Company, Dr Johnny Hon, is a director, was paid 91,155 (2016: 19,177) for professional services and expenses paid on behalf of the Group for the administrative expenses incurred by the Group. These payments were administrative expenses paid to third parties and recharged to the Group. As at 31 December 2017 nil (2016: 12,240) was outstanding to be paid. During the financial period ended 31 December 2017, The Gradelinnit Company Limited, a company where certain directors of the Company, Michael Grade and Michael Linnit, have beneficial interests and also are directors, provided professional services mainly relating to the investment in the theatre related project to the Company. The fees incurred in administrative expenses in the period ended 31 December 2017 was 112,870 (2016: 108,000). During the prior period Gate Ventures plc had lent The GradeLinnit Company 250,000. As at 31 December ,325 was outstanding to be received. During the financial period ended 31 December 2017, Lotus Capital Ventures Limited, which is owned by a partner of a director of the Company, Dr Johnny Hon, was paid US$600,000 ( 486,264). This was for repayment of a loan granted for the purpose of investing. There was no outstanding balance at the end of the period. During the financial period ended 31 December 2017, Bryant Park Consulting Limited, of which a director of the Company, Richard Carter, is a director, was paid US$266,667 ( 211,000) and 63,000. This was for repayment of loans granted in the prior period for the purpose of investing. There was no outstanding balance at the end of the period. During the financial period ended 31 December 2017, Geoff Morrow Limited, of which a director of the Company, Geoffrey Morrow, is a director, was paid 390,000. This was for repayment of loans granted in the prior period for the purpose of a short term operating loan. There was no outstanding balance at the end of the period. During the financial period ended 31 December 2017, the Company made 290,000 of cash advances to a director for the purposes of production development. As at 31 December ,195 was outstanding. For the list of subsidiaries, please refer to the Note 3. All transactions with related parties are performed on an arm s length basis. 26