GDEV Inc 6-K/A, filed Nov 22, 2023
GDEV Inc. (GDEV)
About this 6-K/A
GDEV Inc filed this 6-K/A on November 22, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K/A
(Amendment No. 1)
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2023
Commission File Number: 001-40758
GDEV Inc.
(Translation of registrant’s name into English)
55, Griva Digeni
3101, Limassol
Cyprus
Telephone: +35722580040
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
EXPLANATORY NOTE
GDEV Inc. (NASDAQ: GDEV) (the “Company”) is filing this Amendment No. 1 to the Company’s Form 6-K, originally filed with the Securities and Exchange Commission (the “SEC”) on September 29, 2023 (the “Original Filing”), to amend and restate the Company’s unaudited interim condensed consolidated financial statements for the six months ended June 30, 2023 (the “2023 Interim Financial Statements”), attached as Exhibit 99.1 to the Original Filing.
The 2023 Interim Financial Statements include the Company’s interim condensed consolidated statement of profit or loss and other comprehensive income for the six months ended June 30, 2023 and 2022 (the “2023 Interim P&L”). The 2023 Interim P&L sets forth comparative period information in respect of the six months ended June 30, 2022 (the “2022 Comparative Period Information”). The financial information covered by the 2022 Comparative Period Information was previously published by the Company in its interim condensed consolidated statement of profit or loss and other comprehensive income for the six months ended June 30, 2022 (the “2022 Interim P&L”), included as part of the Company’s unaudited interim condensed consolidated financial statements for the six months ended June 30, 2022, attached as Exhibit 99.2 to the Company’s Form 6-K filed with the SEC on September 28, 2022 (the “2022 Interim Financial Statements”).
Subsequent to the publication of the 2022 Interim Financial Statements, the Company determined that revisions to the 2022 Interim Financial Statements and related disclosures were required to comply with the requirements of IAS No.8, “Accounting Policies, Changes in Accounting Estimates and Errors,” for the correction of an error in the previously issued 2022 Interim Financial Statements. The revisions were necessary to disclose the effects of an error in the misclassification of the sale of the Company’s former Russia-based subsidiaries as discontinued operations. Accordingly, certain amounts appearing in the 2022 Comparative Period Information were restated in the 2023 Interim P&L in comparison to the 2022 Interim P&L (the “Restatements”).
The Company is amending and restating the 2023 Interim Financial Statements to clarify the Restatements reflected in the 2023 Interim Financial Statements and the basis behind the Restatements.
The Company’s amended and restated unaudited interim condensed consolidated financial statements for the six months ended June 30, 2023 is attached to this Amendment No. 1 as Exhibit 99.1.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 22, 2023
| GDEV Inc. | ||
| By: | /s/ Alexander Karavaev | |
| Name: Alexander Karavaev | ||
| Title: Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit | Description |
| 99.1 | Amended and restated unaudited interim condensed consolidated financial statements of GDEV Inc. for the six months ended June 30, 2023. |
Exhibit 99.1
GDEV Inc.
Unaudited Interim Condensed Consolidated Financial Statements
For the six months ended June 30, 2023 and June 30, 2022
GDEV Inc.
Contents
| UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT JUNE 30, 2023 AND DECEMBER 31, 2022 | 3 |
| UNAUDITED INTERIM CONDENSED CONCONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 | 4 |
| UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 | 5 |
| UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022 | 6 |
| NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 7 |
2
GDEV Inc.
Interim Condensed Consolidated Statement of Financial Position
As at June 30, 2023 (unaudited) and December 31, 2022
(in thousands of US$)
| Note | June 30, 2023 | December 31, 2022 | ||||||||
| ASSETS | ||||||||||
| Non-current assets | ||||||||||
| Property and equipment | 14 | 863 | 786 | |||||||
| Right-of-use assets | 18 | 1,489 | 1,462 | |||||||
| Intangible assets | 15 | 10,763 | 12,977 | |||||||
| Goodwill | 3,15 | 1,836 | 1,836 | |||||||
| Investments in equity accounted associates | 16 | — | — | |||||||
| Long-term deferred platform commission fees | 26 | 83,197 | 94,682 | |||||||
| Deferred tax asset | 13 | 59 | 108 | |||||||
| Other non-current investments | 23 | 18,533 | 17,903 | |||||||
| Other non-current assets | 13 | 107 | 107 | |||||||
| Loans receivable - non-current | 17 | — | 3,317 | |||||||
| Total non-current assets | 116,847 | 133,178 | ||||||||
| Current assets | ||||||||||
| Indemnification asset | 13,16,21 | 2,512 | 2,512 | |||||||
| Trade and other receivables | 19 | 41,125 | 45,372 | |||||||
| Loans receivable | 17 | 478 | 517 | |||||||
| Other investments | 23 | 69,308 | 50,365 | |||||||
| Prepaid tax | 13 | 3,305 | 3,326 | |||||||
| Cash | 24 | 68,581 | 86,774 | |||||||
| Total current assets | 185,309 | 188,866 | ||||||||
| Total assets | 302,156 | 322,044 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Equity | ||||||||||
| Share capital | 25 | — | — | |||||||
| Additional paid-in capital | 24,000 | 23,685 | ||||||||
| Share-based payments reserve | 144,608 | 144,240 | ||||||||
| Translation reserve | 4,474 | 3,493 | ||||||||
| Accumulated deficit | (308,851 | ) | (320,194 | ) | ||||||
| Equity attributable to equity holders of the Company | (135,769 | ) | (148,776 | ) | ||||||
| Non-controlling interest | — | — | ||||||||
| Total equity | (135,769 | ) | (148,776 | ) | ||||||
| Non-current liabilities | ||||||||||
| Lease liabilities - non-current | 18 | 110 | 444 | |||||||
| Long-term deferred revenue | 26 | 100,549 | 96,887 | |||||||
| Share warrant obligations | 22 | 2,430 | 13,035 | |||||||
| Put option liabilities - non-current | 3,16 | 6,685 | 27,475 | |||||||
| Other non-current liabilities | 16 | 70 | 577 | |||||||
| Total non-current liabilities | 109,844 | 138,418 | ||||||||
| Current liabilities | ||||||||||
| Lease liabilities - current | 18 | 771 | 743 | |||||||
| Trade and other payables | 20 | 28,253 | 30,521 | |||||||
| Provisions for non-income tax risks | 3,21 | 1,336 | 1,336 | |||||||
| Put option liabilities - current | 3,16 | 21,560 | — | |||||||
| Tax liability | 3,13 | 4,637 | 4,250 | |||||||
| Deferred revenue | 26 | 271,524 | 295,552 | |||||||
| Total current liabilities | 328,081 | 332,402 | ||||||||
| Total liabilities | 437,925 | 470,820 | ||||||||
| Total liabilities and shareholders’ equity | 302,156 | 322,044 | ||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
3
GDEV Inc.
Unaudited Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the six months ended June 30, 2023 and 20221
(in thousands of US$)
| Six months ended | Six months ended | ||||||||||
| Note | June 30, 2023 | June 30, 2022, restated | |||||||||
| Revenue | 7 | 234,139 | 252,780 | ||||||||
| Costs and expenses, excluding depreciation and amortization | |||||||||||
| Cost of revenue: | |||||||||||
| Platform commissions | (56,428 | ) | (68,839 | ) | |||||||
| Game operation cost | 9 | (26,785 | ) | (20,540 | ) | ||||||
| Other operating income | 1,539 | 376 | |||||||||
| Selling and marketing expenses | 10 | (129,135 | ) | (91,289 | ) | ||||||
| General and administrative expenses | 11 | (14,796 | ) | (14,808 | ) | ||||||
| Impairment loss on trade receivables and loans receivable | 9,10 | (4,296 | ) | (3,919 | ) | ||||||
| Total costs and expenses, excluding depreciation and amortization | (229,901 | ) | (199,019 | ) | |||||||
| Depreciation and amortization | 14,15,18 | (2,903 | ) | (3,617 | ) | ||||||
| Profit from operations | 1,335 | 50,144 | |||||||||
| Finance income | 12 | 3,042 | 335 | ||||||||
| Finance expenses | (1,992 | ) | (1,279 | ) | |||||||
| Change in fair value of share warrant obligation and other financial instruments | 22,29 | 10,547 | 7,268 | ||||||||
| Share of loss of equity-accounted associates | 16 | (515 | ) | (1,640 | ) | ||||||
| Profit before income tax | 12,417 | 54,828 | |||||||||
| Income tax expense | 13 | (1,074 | ) | (2,090 | ) | ||||||
| Profit for the period, net of tax | 11,343 | 52,738 | |||||||||
| Attributable to equity holders of the Company | 11,343 | 53,063 | |||||||||
| Attributable to non-controlling interest | — | (325 | ) | ||||||||
| Other comprehensive income | |||||||||||
| Items that are or may be reclassified subsequently to profit or loss | 1,007 | 3,177 | |||||||||
| Foreign currency translation difference | 981 | 3,177 | |||||||||
| Other | 26 | — | |||||||||
| Total comprehensive income for the period, net of tax | 12,350 | 55,915 | |||||||||
| Attributable to equity holders of the Company | 12,350 | 56,240 | |||||||||
| Attributable to non-controlling interest | — | (325 | ) | ||||||||
| Earnings per share: | |||||||||||
| Basic and diluted earnings per share, US$ | 6 | 0.06 | 0.27 | ||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1For further information, see Note 4 (Accounting judgments, estimates and assumptions — Correction of errors)
4
GDEV Inc.
Unaudited Interim Condensed Consolidated Statement of Changes in Equity
For the six months ended June 30, 2023 and 2022
(in thousands of US$ except number of shares)
| Equity | ||||||||||||||||||||||||||||||||||||||
| Number | Additional | Share-based | attributable to | Non- | ||||||||||||||||||||||||||||||||||
| of shares | Share | paid-in | payments | Translation | Accumulated | equity holders of | controlling | |||||||||||||||||||||||||||||||
| Note | outstanding | capital | capital | reserve | reserve | deficit | the Company | interest | Total | |||||||||||||||||||||||||||||
| Balance at January 1, 2022 | 196,523,101 | — | 25,880 | 140,489 | 36 | (327,497 | ) | (161,092 | ) | 44 | (161,048 | ) | ||||||||||||||||||||||||||
| Profit for the period | — | — | — | — | — | 53,063 | 53,063 | (325 | ) | 52,738 | ||||||||||||||||||||||||||||
| Other comprehensive income | 25 | — | — | — | — | 3,177 | — | 3,177 | — | 3,177 | ||||||||||||||||||||||||||||
| Total comprehensive income for the period | — | — | — | — | 3,177 | 53,063 | 56,240 | (325 | ) | 55,915 | ||||||||||||||||||||||||||||
| Issue of ordinary shares related to business combination | 15 | — | — | (2,094 | ) | — | — | — | (2,094 | ) | — | (2,094 | ) | |||||||||||||||||||||||||
| Share-based payments | 30 | — | — | — | 2,029 | — | — | 2,029 | — | 2,029 | ||||||||||||||||||||||||||||
| Total transactions with shareholders | — | — | (2,094 | ) | 2,029 | — | — | (65 | ) | — | (65 | ) | ||||||||||||||||||||||||||
| Balance at June 30, 2022 | 196,523,101 | — | 23,786 | 142,518 | 3,213 | (274,434 | ) | (104,917 | ) | (281 | ) | (105,198 | ) | |||||||||||||||||||||||||
| Equity | ||||||||||||||||||||||||||||||||||||||
| Number | Additional | Share-based | attributable to | Non- | ||||||||||||||||||||||||||||||||||
| of shares | Share | paid-in | payments | Translation | Accumulated | equity holders of | controlling | |||||||||||||||||||||||||||||||
| Note | outstanding | capital | capital | reserve | reserve | deficit | the Company | interest | Total | |||||||||||||||||||||||||||||
| Balance at January 1, 2023 | 197,092,402 | — | 23,685 | 144,240 | 3,493 | (320,194 | ) | (148,776 | ) | — | (148,776 | ) | ||||||||||||||||||||||||||
| Profit for the period | — | — | — | — | — | 11,343 | 11,343 | — | 11,343 | |||||||||||||||||||||||||||||
| Other comprehensive income | 25 | — | — | 26 | — | 981 | — | 1,007 | — | 1,007 | ||||||||||||||||||||||||||||
| Total comprehensive loss for the period | — | — | 26 | — | 981 | 11,343 | 12,350 | — | 12,350 | |||||||||||||||||||||||||||||
| Share-based payments and exercise of options | 30 | 222,198 | — | 289 | 368 | — | — | 657 | — | 657 | ||||||||||||||||||||||||||||
| Total transactions with shareholders | 222,198 | — | 289 | 368 | — | — | 657 | — | 657 | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 197,314,600 | — | 24,000 | 144,608 | 4,474 | (308,851 | ) | (135,769 | ) | — | (135,769 | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
5
GDEV Inc.
Unaudited Interim Condensed Consolidated Statement of Cash Flows
For the six months ended June 30, 2023 and 2022
(in thousands of US$)
| Six months ended | Six months ended | |||||||||
| Note | June 30, 2023 | June 30, 2022 | ||||||||
| Operating activities | ||||||||||
| Profit for the period, net of tax | 11,343 | 52,738 | ||||||||
| Adjustments for: | ||||||||||
| Depreciation and amortization | 14,15,18 | 2,903 | 3,617 | |||||||
| Share-based payments expense | 30 | 1,044 | 2,029 | |||||||
| Income from share option forfeiture | 3,16 | (159 | ) | — | ||||||
| Share of loss of equity-accounted associates | 16 | 515 | 1,640 | |||||||
| Expected credit losses | 17,19,29 | 4,296 | 3,919 | |||||||
| Property and equipment write-off | — | 313 | ||||||||
| Impairment of intangible assets | — | 241 | ||||||||
| Change in fair value of share warrant obligations and other financial instruments | 22,29 | (10,547 | ) | (7,268 | ) | |||||
| Change in fair value of other investments | (564 | ) | — | |||||||
| Unwinding of discount on the put option liability | 12 | 204 | 101 | |||||||
| Receivables write-off | 19 | 50 | — | |||||||
| Interest income | 12 | (2,009 | ) | (335 | ) | |||||
| Interest expense | 12 | 22 | 77 | |||||||
| Dividend income | (469 | ) | — | |||||||
| Foreign exchange loss/(gain) | 12 | 1,595 | 779 | |||||||
| Income tax expense | 13 | 1,074 | 2,092 | |||||||
| 9,298 | 59,943 | |||||||||
| Changes in working capital: | ||||||||||
| Decrease in deferred platform commissions | 26 | 11,485 | 11,093 | |||||||
| Decrease in deferred revenue | 26 | (20,366 | ) | (13,374 | ) | |||||
| Increase/(decrease) in trade and other receivables | 19 | 2,393 | (2,128 | ) | ||||||
| Decrease in trade and other payables | 20 | (2,631 | ) | (15,768 | ) | |||||
| (9,119 | ) | (20,177 | ) | |||||||
| Income tax paid | (265 | ) | (202 | ) | ||||||
| Net cash flows (used in)/generated from operating activities | (86 | ) | 39,564 | |||||||
| Investing activities | ||||||||||
| Acquisition of intangible assets | 15 | (20 | ) | (107 | ) | |||||
| Acquisition of property and equipment | 14 | (211 | ) | (516 | ) | |||||
| Acquisition of right of use | (169 | ) | — | |||||||
| Acquisition of subsidiary net of cash acquired | 3 | — | (50,022 | ) | ||||||
| Investments in equity accounted associates | 16 | (515 | ) | (15,000 | ) | |||||
| Loans granted | 17 | (447 | ) | (17,786 | ) | |||||
| Proceeds from repayment of loans | 17 | 470 | 125 | |||||||
| Acquisition of other investments | 23 | (53,640 | ) | — | ||||||
| Proceeds from redemption of investments | 35,546 | — | ||||||||
| Interest received | 169 | — | ||||||||
| Dividends received | 469 | — | ||||||||
| Net cash flows used in investing activities | (18,348 | ) | (83,306 | ) | ||||||
| Financing activities | ||||||||||
| Payments of lease liabilities | 18 | (765 | ) | (1,438 | ) | |||||
| Proceeds from borrowings | — | 165 | ||||||||
| Interest on lease | 18 | (22 | ) | (77 | ) | |||||
| Net cash flows used in financing activities | (787 | ) | (1,350 | ) | ||||||
| Net (decrease)/increase in cash for the period | (19,221 | ) | (45,092 | ) | ||||||
| Cash at the beginning of the period | 86,774 | 142,802 | ||||||||
| Effect of changes in exchange rates on cash held | 1,028 | 1,367 | ||||||||
| Cash at the end of the period | 68,581 | 99,077 | ||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
6
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
1. Reporting entity
GDEV Inc. (formerly, Nexters Inc.) (the “Company”) is a company incorporated under the laws of the British Virgin Islands on January 27, 2021, which was formed for the sole purpose of effectuating a merger with Kismet Acquisition One Corp (“Kismet” a Special Purpose Acquisition Company (“SPAC”)).
The mailing and registered address of GDEV Inc.’s principal executive office is 55, Griva Digeni, 3101, Limassol, Cyprus.
GDEV Inc. is the direct parent of Nexters Global Ltd, which was incorporated in Cyprus on November 2, 2009 as a private limited liability company under the Cyprus Companies Law, Cap. 113. Nexters Global Ltd’s registered office is at Faneromenis 107, 6031, Larnaca, Cyprus. Nexters Global Ltd generates the majority of the Company’s revenues.
These interim condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at and for the six months ended June 30, 2023 and 2022.
The principal activities of the Company and its subsidiaries (the “Group”) are the development and publishing of online games for mobile, web and social platforms. The Group also derives revenue from advertising services. Information about the Company’s main subsidiaries is disclosed in Note 28.
The Company’s ordinary shares and warrants are listed on Nasdaq under the symbols GDEV and GDEVW, respectively.
The Group has no ultimate controlling party.
2. Basis of presentation
2.1. Statement of compliance
The accompanying interim condensed financial information that refer to the period ended on June 30, 2023, have been prepared in accordance with the International Accounting Standard (IAS) 34 “Interim Financial Reporting”.
These interim condensed consolidated financial statements were authorized for issue by the Group’s Board of Directors on September 28, 2023.
2.2. Basis of presentation
These interim condensed consolidated financial statements have been prepared based on historical cost basis unless disclosed otherwise and are presented in United States Dollars ($) which is also the functional currency of GDEV Inc. and Nexters Global Ltd. All amounts are presented in thousands, rounded to the nearest thousand unless indicated otherwise.
2.3.Basis of consolidation
The Group controls the entity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
| ● | Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee), |
| ● | Exposure, or rights, to variable returns from its involvement with the investee, and |
| ● | The ability to use its power over the investee to affect its returns. |
7
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
When the Group has less than a majority of the voting or similar rights of an investee, where control is exercised through voting rights, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| ● | The contractual arrangement with the other vote holders of the investee, |
| ● | Rights arising from other contractual arrangements, |
| ● | The Group’s voting rights and potential voting rights. |
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of an investee begins when the Group obtains control over the investee and ceases when the Group loses control over the investee. Assets, liabilities, income and expenses of an investee acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the investee. The financial statements of the investees are prepared for the same reporting period as the parent company, using consistent accounting policies.
All intra-group balances, income, expenses and unrealized gains and losses resulting from intra-group transactions are eliminated in full.
| 3. | Summary of significant accounting policies |
The accounting policies have been applied consistently throughout the periods presented in these interim condensed consolidated financial statements.
The principal accounting policies used to prepare these interim condesed consolidated financial statements are set out below.
| 3.1. | Business combinations and goodwill |
Business combinations are accounted for using the acquisition method.
The cost of an acquisition is measured as the total of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred, such as finder's fees, legal fees, due diligence fees, and other professional and consulting fees, are expensed and included in general and administrative expenses.
The Group measures goodwill as the fair value of the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, less the net amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as at the acquisition date.
Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Group to the previous owners of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination.
If control is achieved in stages, the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss.
A contingent liability of the acquiree is recognized in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably.
8
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Only components of non-controlling interest constituting a present ownership interest that entitles their holder to a proportionate share of the entity’s net assets in the event of liquidation are measured at either fair value or at the present ownership instruments’ proportionate share of the acquiree’s identifiable net assets. All other components are measured at their acquisition date fair value.
The Group accounts for a change in the ownership interest of a subsidiary (without loss of control) as a transaction with owners in their capacity as owners. Therefore, such transactions do not give rise to goodwill, nor do they give rise to a gain or loss and are accounted for as an equity transaction.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested annually for impairment. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the synergies of the combination and/or from the future cash flows provided by the acquired businesses, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. If the Group reorganizes its reporting structure in a way that changes the composition of one or more cash-generating units to which goodwill has been allocated, the goodwill is reallocated to the units affected. The reallocation is performed using a relative value approach similar to that used in connection with the disposal of an operation within a cash-generating unit, unless some other method better reflects the goodwill associated with the reorganized units.
3.2. Foreign currency translation
The interim condensed consolidated financial statements are presented in US dollars (US$), which is the Group’s presentation currency. Each entity in the Group determines its own functional currency, depending on what the underlying economic environment is, and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency at the functional currency rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the functional currency rate of exchange at the reporting date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income or profit or loss is also recognized in other comprehensive income or profit or loss, respectively).
The functional currency of the foreign operations is generally US Dollar or the respective local currency – Euro (€), Russian rouble (RUB), Armenian dram (AMD) or Kazakhstani tenge (KZT). As at the reporting date, the assets and liabilities of these operations are translated into the presentation currency of the Group (the US$) at the rate of exchange at the reporting date and their statements of comprehensive income are translated at the average exchange rates for the relevant periods or exchange rates prevailing on the dates of specific transactions. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign entity, the cumulative amount recognized in equity relating to that particular foreign operation is reclassified to the profit or loss.
| 4. | Accounting judgments, estimates and assumptions |
In preparing these interim condensed consolidated financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, incomes and expenses. Actual results may differ from these estimates.
9
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those described in the Group’s consolidated financial statements for the year ended December 31, 2022 except for as described below.
Change in estimates
Warrants’ valuation
Upon completion of the Transaction on August 26, 2021, each outstanding warrant to purchase Kismet’s ordinary shares was converted into a warrant to acquire one ordinary share of the Company, at a price of US$11.50 per share. A total of 20,250,000 Kismet warrants were converted into 20,249,993 warrants of the Company, 13,499,993 of which are public and 6,750,000 of which are private.
The Company accounts for the warrants in its financial statements as a liability in accordance with IAS 32 - Financial Instruments: Presentation and IFRS 9 - Financial Instruments, based on the fact the fixed-for-fixed criteria is not met. This is due to the fact that investors can exercise their warrants on a cashless basis according to make-whole table, where warrants are exchanged into a fractional number of shares depending on the stock price at time of redemption and remaining time to warrant expiration. The warrants are initially recorded at fair value and then remeasured at each reporting date until exercised or expired, with any change in fair value to be recognized in profit or loss within the line Change in fair value of share warrant obligation and other financial instruments.
Management used traded market price from NASDAQ for the purpose of estimating fair value of Private and Public Warrants as at June 30, 2023 as the trading was resumed on the 16th of March while as at December 31,2022 management used the Monte Carlo simulations to determine the value of the Private and Public warrants (see Note 22 for details).
The effect of the change in the measurement of the warrants’ fair value as at June 30, 2023 is 10,839 being a decrease in the fair value, as compared with the value that would have been determined by the valuation method used as at December 31, 2022 where the Company used Monte-Carlo simulation with the following input parameters:
| ● | Implied multiples were calculated using the last quoted share price before the trading halt was introduced to estimate a discount/(premium) to median multiples of peer group (30% for EV/Bookings and 2% for EV/EBITDA); |
| ● | Median EV/Bookings and EV/EBITDA multiples of peer group were calculated as at the reporting date; |
| ● | Discounts/(premiums) from the multiples calculated in the first step were applied to estimate our multiples as at the reporting date. |
Based on the above multiples and actual number of bookings and EBITDA during the year we estimated our enterprise value and, based on the number of outstanding shares as at December 21, 2022, the starting price of our shares, which was the input parameter of the Monte Carlo model, which is different from the approach used as at June 30, 2023, where quoted market price was used as the fair value of one warrant.
Measurement of the financial instruments issued as part of the investments in associates
Significant judgment is required in measurement of the fair value of the financial instruments related to the investments in equity-accounted associates during the current reporting period, which included contingent consideration (sellers and founders earn-outs), call and put options of GDEV Inc. and respective shareholders as per shareholders’ and share purchase agreements and conversion option for the loan issued to Castcrown Ltd.
Fair value of the mentioned financial instruments considers the likelihood of achievement by the associates of performance targets such as those in respect of Net bookings and EBITDA over certain agreed periods of time. In order to estimate achievement of such performance targets management utilized Monte-Carlo simulations over the agreed periods and projected various outcomes for each performance target based on the underlying management assumptions of the investees’ future business growth. Management determined the fair values of the financial instruments based on outputs provided by those Monte-Carlo simulations.
10
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
In order to determine the fair value of the financial instruments (see Note 16 for details) as at June 30, 2023 management applied the following assumptions:
| ● | Target pay back of 365 days on marketing investments in customer acquisition (i.e. the period over which we expect to recover marketing expenses made) applied to the projected periods. This assumption is based on the historical effectiveness of marketing expenses for Hero Wars game and the adjustment applied by management related to uncertainty of the games being new. |
| ● | Discount rate based on risk-free rate of 4.49%. |
| ● | Valuation of investees based on forward multiples of Enterprise Value to Net bookings of 1.47 and Enterprise Value to Investor's consolidated management EBITDA of 7.91 based on publicly traded peers from gaming industry, while as at December 31, 2022 the valuation was performed based on historical multiples. |
| ● | Assumption of Standard deviation (Sigma parameter of GBM distribution) of marketing expenditure incurred in order to generate bookings over the projected period of time with bookings benchmarked against historic performance of the same genre games in the gaming industry and implying certain Failure rate for such games. |
Due to the fact that stochastic generated marketing costs are mainly dependent from sigma parameter of GBM distribution, sigma was used in sensitivity tests to determine change in fair value of financial instruments with the change of marketing costs.
The effect of the change in the measurement approach on the estimated fair values of the financial instruments of MX Capital Ltd as at June 30, 2023 is 120 being an increase in the fair value of put option, no effect on the fair values of other financial instruments.
The analysis of sensitivity to the key parameters of financial model in MX Capital Ltd as at June 30, 2023:
| ● | While other parameters remain constant, an increase of target pay back on marketing investments by 30 days would decrease the fair value of sellers earn-outs by 7 and increase the fair value of put option by 45, the fair value of other financial instruments would remain unchanged. |
| ● | While other parameters remain constant, a decrease of target pay back on marketing investments by 30 days would increase the fair value of sellers earn-outs by 32 and decrease the fair value of put option by 98, the fair value of other financial instruments would remain unchanged. |
| ● | While other parameters remain constant, an increase of risk-free rate by 0.1 percentage would decrease the fair value of put option by 61, the fair value of other financial instruments would remain unchanged. |
| ● | While other parameters remain constant, a decrease of risk-free rate by 0.1 percentage points would increase the fair value of put option by 61, the fair value of other financial instruments would remain unchanged. |
| ● | While other parameters remain constant, an increase of multiples by 10% would decrease the fair value of put option by 358, the fair value of call option would remain unchanged. |
| ● | While other parameters remain constant, a decrease of multiples by 10% would increase the fair value of put option by 159, the fair value of call option would remain unchanged. |
11
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| ● | While other parameters remain constant, an increase of sigma by 10% would increase the fair value of sellers earn-outs by 12 and decrease the fair value of put option by 36, the fair value of other financial instruments would remain unchanged. |
| ● | While other parameters remain constant, a decrease of sigma by 10% would decrease the fair value of sellers earn-outs by 59 and increase the fair value of put option by 178, the fair value of other financial instruments would remain unchanged. |
The analysis of sensitivity to the key parameters of financial model of Castcrown Ltd shows that there is no reasonably possible change in the key parameters that would materially change the fair value of the relevant financial instruments.
Correction of error
In its interim condensed consolidated financial statements as at June 30, 2022 and for the six months then ended, the Group had previously presented the operation of its Russian subsidiaries, which were sold on August 18, 2022, incorrectly as discontinued operations and accordingly:
| ● | The financial result of the Russian subsidiaries for the period was presented in a separate line in the interim condensed consolidated statement of profit or loss under the caption “Loss for the period from discontinued operations, net of tax”. |
The operations disposed of did not qualify for discontinued operations presentation since the Russian subsidiaries did not represent a separate operating segment of the Group and accordingly the criteria in order to be classified as discontinued operations were not met.
Accordingly, the interim condensed consolidated statement of profit or loss and other comprehensive income for the six months ended June 30, 2022 was restated in order to correct the classification of the financial results of the Russian subsidiaries to the continuing operations.
The table below presents the amount of the correction for each comparative period per each financial statement line affected. They represent the results attributable to Russian companies for the respective periods after all intercompany eliminations.
| Six months ended June 30, 2022, restated | Six months ended June 30, 2022, as previously reported | Six months ended June 30, 2022, adjustment | ||||||||||
| Revenue | 252,780 | 251,837 | 943 | |||||||||
| Costs and expenses, excluding depreciation and amortization | ||||||||||||
| Cost of revenue: | ||||||||||||
| Platform commissions | (68,839 | ) | (68,839 | ) | — | |||||||
| Game operation cost | (20,540 | ) | (6,597 | ) | (13,943 | ) | ||||||
| Other operating income | 376 | — | 376 | |||||||||
| Selling and marketing expenses | (91,289 | ) | (91,321 | ) | 32 | |||||||
| General and administrative expenses | (18,727 | ) | (13,680 | ) | (5,047 | ) | ||||||
| Total costs and expenses, excluding depreciation and amortization | (199,019 | ) | (180,437 | ) | (18,582 | ) | ||||||
| Depreciation and amortization | (3,617 | ) | (2,287 | ) | (1,330 | ) | ||||||
| Profit from operations | 50,144 | 69,113 | (18,969 | ) | ||||||||
| Finance income | 335 | 743 | (408 | ) | ||||||||
| Finance expenses | (1,279 | ) | (350 | ) | (929 | ) | ||||||
| Profit before income tax | 54,828 | 75,134 | (20,306 | ) | ||||||||
| Income tax expense | (2,090 | ) | (2,025 | ) | (65 | ) | ||||||
| Profit for the period, net of tax | 52,738 | 73,109 | (20,371 | ) | ||||||||
| Basic and diluted earnings per share, for continuing operations, US$ | 0.27 | — | 0.27 | |||||||||
| Basic and diluted earnings per share, for total operations, US$ | 0.27 | 0.27 | — | |||||||||
There is no effect to interim condensed consolidated statement of financial position as at June 30, 2023 and December 31, 2022, as the respective subsidiaries were properly classified as held for sale as at June 30, 2022 and were sold as at December 31, 2022 and June 30, 2023.
12
| 5. | Segment reporting |
| A. | Basis for segmentation |
The Group operates through four operating segments, which are Nexters Global Ltd, MX Capital Ltd, Lightmap Ltd, and Castcrown Ltd, while the last two of them are not considered to be reportable segments based on the criteria (quantitative thresholds) of IFRS 8. The financial information reviewed by our Chief Operating Decision Maker, which is our Board of Directors, is included within the operating segments mentioned above for purposes of allocating resources and evaluating financial performance.
The following summary describes the operations of the reportable segment:
| Reportable segments | Operations | |
| Nexters Global Ltd | Game development and publishing | |
| MX Capital Ltd | Game development and publishing |
| B. | Information about reportable segments |
Information related to the reportable segment is set out below. Segment management EBITDA is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industry.
The Company defines Management EBITDA as the net income/loss as presented in the Group's consolidated financial statements in accordance with IFRS, adjusted to exclude (i) loss for the period from our Russian subsidiaries that have been sold, (iii) income tax expense, (iv) net finance income/expense, (v) change in fair value of share warrant obligations and other financial instruments, (vi) share of loss of equity-accounted associates, (vii) depreciation and amortization, (viii) share-based payment expense and (ix) certain non-cash or other special items that are not considered indicative of our ongoing operating performance (see the reconciliation below).
| Six months ended June 30, 2023 | Nexters Global Ltd | MX Capital Ltd | All other segments | Total | ||||||||||||
| Segment revenue | 225,463 | — | 8,676 | 234,139 | ||||||||||||
| Segment management EBITDA | 12,381 | — | (15,311 | ) | (2,930 | ) | ||||||||||
| Six months ended June 30, 2022 | Nexters Global Ltd | MX Capital Ltd | All other segments | Total | ||||||||||||
| Segment revenue | 249,313 | — | 3,467 | 252,780 | ||||||||||||
| Segment management EBITDA | 65,848 | (3,137 | ) | (9,958 | ) | 52,753 | ||||||||||
13
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| C. | Reconciliation of information on reportable segment to the amounts reported in the financial statements |
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Profit/(loss) before income tax | ||||||||
| Management EBITDA for reportable segments | 12,381 | 62,711 | ||||||
| Management EBITDA for other segments | (15,311 | ) | (9,958 | ) | ||||
| Net effect from recognition of deferred net revenues | 8,881 | 2,281 | ||||||
| Depreciation and amortization | (2,903 | ) | (3,617 | ) | ||||
| Finance income | 3,042 | 335 | ||||||
| Finance expenses | (1,992 | ) | (1,279 | ) | ||||
| Share-based payments expense | 1,044 | 2,029 | ||||||
| Impairment loss on trade receivables and loans receivable | (4,296 | ) | (3,919 | ) | ||||
| Change in fair value of share warrant obligation and other financial instruments | 10,547 | 7,268 | ||||||
| Impairment loss on Intangible assets | — | 241 | ||||||
| Share of loss of equity-accounted associates | (515 | ) | (1,640 | ) | ||||
| Other operating income | 1,539 | 376 | ||||||
| Consolidatied profit/(loss) before income tax | 12,417 | 54,828 | ||||||
We disclose the geographical distribution of our revenue in Note 7. We do not have the ability to track revenue deferral on a by-country basis therefore we applied average deferral rate to in-game purchases disaggregated by geography.
Non-current assets excluding financial instruments and deferred taxes by geography are presented below as at June 30, 2023:
| Cyprus | Armenia | Kazakhstan | Spain | Total | ||||||||||||||||
| Property and equipment | 705 | 94 | 63 | 1 | 863 | |||||||||||||||
| Right-of-use assets | 1,126 | 363 | — | — | 1,489 | |||||||||||||||
| Intangible assets | 10,732 | 25 | 6 | — | 10,763 | |||||||||||||||
| Goodwill | 1,836 | — | — | — | 1,836 | |||||||||||||||
| Long-term deferred platform commission fees | 83,197 | — | — | — | 83,197 | |||||||||||||||
| 97,596 | 482 | 69 | 1 | 98,148 | ||||||||||||||||
As at December 31, 2022:
| Cyprus | Armenia | Kazakhstan | Spain | Total | ||||||||||||||||
| Property and equipment | 672 | 67 | 46 | 1 | 786 | |||||||||||||||
| Right-of-use assets | 1,298 | 164 | — | — | 1,462 | |||||||||||||||
| Intangible assets | 12,959 | 17 | 1 | — | 12,977 | |||||||||||||||
| Goodwill | 1,836 | — | — | — | 1,836 | |||||||||||||||
| Long-term deferred platform commission fees | 94,682 | — | — | — | 94,682 | |||||||||||||||
| Loans receivable - non-current | 3,317 | — | — | — | 3,317 | |||||||||||||||
| 114,764 | 248 | 47 | 1 | 115,060 | ||||||||||||||||
14
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| 6. | Earnings per share |
Basic earnings per share amounts are calculated by dividing profit for the period net of tax attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit for the period net of tax attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the earnings and number of shares used in basic and diluted earnings per share computations for the six months ended June 30, 2023 and 2022:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Profit for the year net of tax attributable to ordinary equity holders of the parent for basic earnings | 11,343 | 53,063 | ||||||
| Weighted average number of ordinary shares for basic and diluted earnings per share | 197,314,600 | 197,971,371 | ||||||
| Earnings per share: | ||||||||
| Earnings attributable to ordinary equity holders of the parent, US$ | 0.06 | 0.27 | ||||||
The Company does not consider the effect of the warrants sold in the Initial Public Offering and private placement and the options granted under Employee Stock Option plan in the calculation of diluted earnings per share, since they do not have a dilutive effect as at the reporting date they are out of the money, except an insignificant portion of vested options with strike price of 0. Deferred exchange shares are not considered by the Company in calculation of the basic and diluted earnings per share, as the instrument is neither vested at the reporting date nor would have been vested if the reporting date was the end of the contingent period, due to the fact that the vesting conditions in relation to the entire number of 20,000,000 deferred exchange shares were not met at the reporting date.
The weighted average number of ordinary shares (both basic and diluted) includes 569,301 shares issued as consideration for the acquisition of Lightmap and 864,269 shares that may be issued in the future as a deferred consideration for the acquisition of Lightmap Ltd as discussed in the Note 15.
| 7. | Revenue |
The following table summarizes revenue from contracts with customers for the six months ended June 30, 2023 and 2022:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| In-game purchases | 218,339 | 241,958 | ||||||
| Advertising | 15,800 | 10,822 | ||||||
| Total | 234,139 | 252,780 | ||||||
15
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The following table sets forth revenue disaggregated based on geographical location of our payers:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| US | 84,436 | 81,385 | ||||||
| Europe | 55,729 | 53,485 | ||||||
| Asia | 57,421 | 68,367 | ||||||
| Other | 36,553 | 49,543 | ||||||
| Total | 234,139 | 252,780 | ||||||
92% of the Group’s total revenues for the six months ended June 30, 2023 was generated by Hero Wars game title (99% - for the six months ended June 30, 2022).
The amount of revenue recognized at a point in time was 42,790 for the six months ended June 30, 2023 and 49,370 for the six months ended June 30, 2022. The amount of related platform commissions expenses recognized was 7,445 for the six months ended June 30, 2023 and 8,647 for the six months ended June 30, 2022. During the six months ended June 30, 2023 and 2022 no individual end customer accounted for more than 10% of our revenues.
| 8. | Acquisition and disposal of subsidiaries in Russia |
On February 3, 2021, Nexters Global Ltd acquired 100% of the voting shares in Nexters Online LLC and Nexters Studio LLC, two Russian game development studios, for the total consideration of 1,247 (RUB 93 million). The consideration was fully paid in cash. The Company's management considers the acquisition of the product development team as a primary business purpose of the transactions. The acquisitions have been accounted for using the acquisition method.
On December 9, 2021, Nexters Global Ltd acquired 70% of the voting shares in Game Positive LLC, a company registered in accordance with the laws of the Russian Federation, for the total consideration of 1. The consideration was fully paid in cash. The Company's management considers the acquisition of the product development team as a primary business purpose of the deal. The acquisition has been accounted for using the acquisition method.
Goodwill recognized in the amount of 1,501 (1,473 goodwill as at the dates of acquisitions and 28 of translation reserve as at December 31, 2021) is attributable primarily to the expected synergies and was assigned to the CGU Nexters Global, which was the only CGU at the time of the acquisition. The acquisition of Game Positive LLC resulted in a gain on bargain purchase as the fair value of assets acquired and liabilities assumed exceeded the total of fair value of consideration paid and the proportionate value of non-controlling interest by 79. The Group recognized the amount as a gain which was reflected in Other income within Net finance income. None of the goodwill is deductible for the income tax purposes. The Company did not recognize separately from the acquisitions any acquisition related costs.
Property and equipment of Nexters Studio LLC, Nexters Online LLC and Game Positive LLC (“Russian companies”) consist of office equipment purchased within 2020, therefore its fair value approximates to its carrying amount.
At the date of the acquisition, the fair value of the trade and other receivables of Russian companies approximates to its carrying amount due to the fact they are represented by short-term accounts receivable.
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities.
The companies’ trade and other payables amount mainly represent gross contractual amounts of the trade payables.
16
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Nexters Global Ltd and Russian companies were parties to a pre-existing relationship, which should be accounted for separately from the business combination. No additional adjustment was made for the amount by which the contract is favorable or unfavorable from the perspective of the acquirer when compared with terms of current market transactions for the same or similar items, as the transactions comprising pre-existing relationship were executed on the market terms.
On July 12, 2022, the Company’s Board of Directors resolved to sell all its Russian subsidiaries to local management as part of the Group’s strategy to eliminate to a maximum extent possible the risks related to the Russian Federation.
Therefore the Group sold 100% shares in the charter capitals of the wholly owned subsidiaries Nexters Studio LLC, Nexters Online LLC and Lightmap LLC (see Note 15) and 70% shares in the charter capital of Game Positive LLC for the amounts not less than 200 thousand Russian rubles, 100 thousand Russian rubles, 100 thousand Russian rubles and 100 thousand Russian rubles, respectively.
The sale of Nexters Studio LLC, Nexters Online LLC and Game Positive LLC was completed on August 18, 2022 and the sale of Lightmap LLC on August 31, 2022 with the respective loss of 4,969.
No goodwill resulted from the acquisitions of the Russian subsidiaries was written-off a result of the sale as the Company expects to continue to benefit from the acquisition synergies, being the ability to use their workforce which was substantially relocated to the Group’s other companies.
| 9. | Game operation cost |
Game operation cost consists of employee benefits expenses and technical support services. The following table summarizes game operation cost for the six months ended June 30, 2023 and 2022.
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Employee benefits expenses | (21,152 | ) | (17,078 | ) | ||||
| Technical support services | (5,633 | ) | (3,462 | ) | ||||
| (26,785 | ) | (20,540 | ) | |||||
Technical support services mainly relate to maintenance and upgrades of the Group’s software applications provided by a third party and costs associated with hosting services.
| 10. | Selling and marketing expenses |
Selling and marketing expenses consist mainly of expenses to attract new users through advertising. The following table summarizes selling and marketing expenses for the six months ended June 30, 2023 and 2022.
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Advertising costs | (125,289 | ) | (88,289 | ) | ||||
| Employee benefits expenses | (3,846 | ) | (3,000 | ) | ||||
| (129,135 | ) | (91,289 | ) | |||||
17
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| 11. | General and administrative expenses |
The following table summarizes general and administrative expenses for the six months ended June 30, 2023 and 2022:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Employee benefits expenses | (8,776 | ) | (9,375 | ) | ||||
| Professional fees | (2,789 | ) | (2,159 | ) | ||||
| Liability insurance cost | (810 | ) | (734 | ) | ||||
| Other operating expenses | (2,421 | ) | (2,540 | ) | ||||
| (14,796 | ) | (14,808 | ) | |||||
| 12. | Finance income and finance expenses |
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Interest income under the effective interest method on: | ||||||||
| - Debt securities - at amortised cost | 982 | — | ||||||
| - Debt securities - at FVOCI | 34 | — | ||||||
| - Loans receivable | 993 | 335 | ||||||
| Total interest income arising from financial assets | 2,009 | 335 | ||||||
| Dividend income: | ||||||||
| - Equity securities at FVTPL | 469 | — | ||||||
| Financial assets at FVTPL - net change in fair value: | ||||||||
| - Mandatorily measured at FVTPL - held for trading | 564 | — | ||||||
| Net foreign exchange gain | — | — | ||||||
| Finance income - other | 1,033 | — | ||||||
| Interest expense | (22 | ) | (77 | ) | ||||
| Bank charges | (171 | ) | (322 | ) | ||||
| Unwinding of discount on the put option liability | (204 | ) | (101 | ) | ||||
| Net foreign exchange loss | (1,595 | ) | (779 | ) | ||||
| Finance expenses - other | (1,992 | ) | (1,279 | ) | ||||
| Net finance income/(expense) | 1,050 | (944 | ) | |||||
| 13. | Taxation |
For the six months ended June 30, 2023 and 2022 the Group recognized income tax expense in the amount of 1,074 and 2,090 respectively.
The applicable tax rate used for reconciliation of the effective tax rate, below, is 12.5%, which is the tax rate enacted in Cyprus, the place where our revenue is mainly generated, at the end of the reporting period. The holding company is established in British Virgin Islands and has its effective place of management and tax residency in Cyprus.
(a) Cyprus IP box regime
In 2012, the government of Cyprus introduced a regime applicable to Intellectual Property (IP) (the ‘Old IP Regime’). The provisions of the Old IP regime allow for an 80% deemed deduction on royalty income and capital gains upon disposal of IP, owned by Cypriot resident companies (net of any direct expenses and amortization amounts over a 5-year period), bringing the effective tax rate on eligible IP income down to 2.5%.
18
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
In 2016, the House of Representatives passed amendments to the Income Tax Law (the ‘New IP Regime’) in order to align the current Cyprus IP tax legislation with the provisions of Action 5 of the OECD’s Base Erosion and Profit Shifting (BEPS) project. The amendments apply retroactively, from July 1, 2016, but according to transitional arrangements, companies benefiting from the Old IP Regime could continue to apply its provisions until June 30, 2021, as long as the IP assets either generated income or their development was completed as at June 30, 2016. Therefore, the Group continued to benefit from the Old IP Regime up to June 30, 2021.
Starting from July 1, 2021, the Group applies the provisions of the New IP Regime, which are based on the nexus approach. According to the nexus approach, for an intangible asset to qualify for the benefits of the regime, there needs to be a direct link between the qualifying income and the qualifying expenses contributing to that income. An amount equal to 80% of the qualifying profits earned from qualifying intangible assets are excluded from the taxable profit, bringing the effective tax rate on eligible IP income down to 2.5%.
Under both the Old and the New IP Regimes, in case a loss arises instead of profit, the amount of loss that can be set off is limited to 20%. The respective tax loss can be carried forward and utilized for the period of 5 years. Ending of the Old IP Box regime on June 30, 2021 and transition to the New IP Regime does not affect the amount of income tax recognized at June 30, 2023, nor is it expected to increase the Group’s future current tax charge significantly.
(b) Reconciliation of the effective tax rate
The reconciliation of the effective tax rate to a statutory tax rate is presented in a table below:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Profit/(loss) before income tax | 12,417 | 54,828 | ||||||
| Tax calculated at the applicable tax rate | (1,552 | ) | (6,689 | ) | ||||
| Effect of different tax rates in other countries | (755 | ) | (25 | ) | ||||
| Tax effect of expenses not deductible for tax purposes and non-taxable income | 293 | (630 | ) | |||||
| Tax effect of deductions under special tax regimes | 1,752 | 5,620 | ||||||
| Tax effect of tax losses brought forward | 36 | 812 | ||||||
| Tax effect of not recognised deferred tax asset regarding the loss carryforward | (321 | ) | (760 | ) | ||||
| Overseas tax in excess of credit claim used during the period | (491 | ) | (418 | ) | ||||
| Income tax related to prior periods | (36 | ) | — | |||||
| Income tax expense | (1,074 | ) | (2,090 | ) | ||||
(c) Uncertainty over the income tax treatment and unrecognized deferred tax asset
Starting from January 1, 2019 the Group has changed its tax reporting principles, judgments and estimates in a few areas including, among others, revenue recognition for in-game purchases and software development costs, which resulted in a substantial amount of revenues related to in-game purchases made by Group’s consumers in 2019 being deferred to 2020 and beyond (see Note 26 for details), as well as software development costs being expensed as incurred. As a consequence, the Company’s major operating subsidiary has booked substantial tax losses in 2019, 2020 and 2021.
Tax losses may be carried forward for five years. As at June 30, 2023 the Group did not recognize a deferred tax asset of 305 resulting from the tax losses reported in 2023, because the tax authorities have not yet audited the Group's tax reconrds after the application of new accounting principles, jugdements and estimates and there is no assurance regarding the applicability of the loss carry forward (as at December 31, 2022: 41). Tax losses for which no deferred tax asset was recognized mainly expire in 2029.
(d) Prepaid tax
Prepaid tax amount is mainly represented by the overpaid corporate income tax by Nexters Global Ltd. The Company plans to offset this amount against the tax liability for the years 2022, 2023 and 2024 if applicable. Prior to the return of the amount the tax authorities have to examine our tax accounts. The examination is still in process as at the date of issue of these interim condensed consolidated financial statements.
19
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
14. Property and equipment
During the six months ended June 30, 2023, the Group acquired property and equipment with a cost of 220 (six months ended June 30, 2022: 584). No property and equipment was acquired in the process of acquisition of subsidiaries (six months ended June 30, 2022: 68). The assets with the cost of 11 were disposed of by the Group during the six months ended June 30, 2023 (six months ended June 30, 2022: 0).
15. Intangible assets and goodwill
Intangible assets
During the six months ended June 30, 2023, the Group acquired intangible assets with a cost of 16 (six months ended June 30, 2022: 17,770). No intangible assets were acquired in the process of acquisition of subsidiaries (six months ended June 30, 2022: 17,664). No assets were disposed of by the Group during the six months ended June 30, 2023 and 2022.
Acquisition of intangibles in the first half of 2022 consists of the intangible assets acquired as part of the acquisition of Lightmap Ltd. The intangible assets acquired mainly include the assets related to the Lightmap’s game “Pixel Gun”. The respective intangible assets are amortized over a period of four years. The impairment attributable to intangible assets is accrued based on the CGU valuation as discussed below.
The amount of amortization is mostly attributable to the Game operation cost.
Business combinations and goodwill
A. Acquisition of game development studios
On January 25, 2022, Company’s Board of directors approved the acquisition of interest in three game development studios, aiming at accelerating the Group’s product growth strategy and enlarging its player base.
The Company acquired 100%, 100%, 48.8% and 49.5% of the issued share capital of Gracevale Ltd, Lightmap LLC, MX Capital Ltd, and Castcrown Ltd, respectively.
On January 27, 2022, the Company entered into a share purchase agreement to acquire 100% of the issued share capital of Gracevale Ltd, developer and publisher of PixelGun 3D mobile shooter title, for a total consideration of up to 70,000. The deal included a cash consideration of 55,517, consideration in the form of the Company’s equity of 3,158, and a deferred share consideration of 8,237. In parallel with the acquisition of Gracevale Ltd, the Company also acquired 100% of Lightmap LLC for an amount of 150, which was taking part in the maintenance and support of Pixel Gun 3D. The two transactions were fully executed on January 31, 2022. The deal is accounted for as business combinations based on the provisions of IFRS 3. Gracevale Ltd was renamed to Lightmap Ltd on March 30, 2022.
Based on the Share Purchase Agreement at the date of acquisition the sellers received the option to require GDEV Inc. to acquire back the Company’s shares issued or to be issued to the seller as part of the acquisition for a price of US$10.00 per share. There are two scenarios when the option becomes exercisable:
| - | the first scenario is when the shares are ineligible for sale on Nasdaq in one year from the date of allotment of such shares; |
20
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| - | the second scenario represents a general right of the sellers to sell their outstanding consideration shares to GDEV Inc. no later than two years from the acquisition date. |
The option is recognized on the acquisition date in the amount of 13,499 in the line Put option liability in this interim condensed consolidated statement of financial position calculated as the present value of the redemption amount of the share consideration discounted using the Company’s incremental borrowing rate of 3%. The unwinding of the discount from the acquisition date until December 31, 2022 amounted to 366, for the six months ended June 30, 2023 – 204.
Acquisitions completed in 2021 are described in Note 8.
B. Consideration transferred
The following table summarises the acquisition-date fair value of each major class of consideration transferred.
| Consideration transferred | ||||
| Cash | 55,667 | |||
| Share consideration | 3,158 | |||
| Deferred share consideration | 8,237 | |||
| Total fair value of consideration | 67,062 | |||
Lightmap Ltd and Lightmap LLC are treated as one integrated business under common control for the acquisition made as in substance they represent a unique business chain.
Share consideration and deferred share consideration fair value were determined using the number of the shares stated in the share purchase agreement multiplied by the share price of GDEV Inc. as at the date of acquisition, which is US$7.97.
The difference between the fair values of share consideration and put option of the sellers of Lightmap Ltd of 2,094 is reflected in the consolidated statement of changes in equity in the line “Issue of ordinary shares related to business combination”.
21
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
C. Fair value of the assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Lightmap Ltd (Lightmap LLC did not have any material assets or liabilities) as at the date of acquisition were:
| Fair value recognized on | ||||
| acquisition, January 31, 2022, | ||||
| Lightmap Ltd | ||||
| Assets | ||||
| Property and equipment | 68 | |||
| Intangible assets (Note 4) | 17,664 | |||
| Right-of-use assets | 230 | |||
| Indemnification asset | 3,159 | |||
| Trade and other receivables | 2,668 | |||
| Cash and cash equivalents | 1,555 | |||
| Prepaid tax | 260 | |||
| 25,604 | ||||
| Liabilities | ||||
| Lease liabilities | (230 | ) | ||
| Trade and other payables | (2,160 | ) | ||
| Provisions for non-income tax risks (Note 21) | (1,381 | ) | ||
| Tax liability (Note 21) | (1,721 | ) | ||
| (5,492 | ) | |||
| Total identifiable net assets at fair value | 20,112 | |||
| Goodwill arising on acquisition | 46,950 | |||
| NCI | — | |||
| Purchase consideration transferred | 67,062 | |||
The Group recognized certain tax uncertainties and risks regarding the determination of taxable income, tax positions, and the calculation of tax liabilities resulting from the acquisition of Lightmap Ltd. The Group considered a range of possible outcomes and probability-weighted amounts associated with the tax risks to determine the expected value of the recognized tax risks in the amount of 1,662.
The Group also recognized a liability in respect of Lightmap Ltd of 1,497 in relation to indirect taxes (VAT and withholding/sale taxes), as it considered that there is a present obligation as a result of past events with the probable outflow of resources. The Company recognized the indemnification asset in the amount equal the total liability of the mentioned risks, as such indemnification was provided in the share purchase agreement.
As at December 31, 2022 the amount of the mentioned liability was decreased by 810 with the respective decrease of the indemnification asset accrued mostly due to the disposal of Lightmap LLC. No changes to the liability were made by the end of June 30, 2023.
D. Goodwill
Goodwill recognized in the amount of 46,950 is attributable primarily to the expected future cash flows to be produced by the acquired business and was assigned to the separate CGU Lightmap Ltd. None of the goodwill is expected to be deductible for income tax purposes. The Company recognized separately from the acquisition the cost of the due diligence of 51 as acquisition-related costs that were expensed in the current period within General and administrative expenses.
Lightmap Ltd’s property and equipment consist of office equipment purchased within the last three years, its fair value approximates its carrying amount.
22
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
At the date of the acquisition, the fair value of the trade and other payables of Lightmap Ltd approximates their carrying amount due to the fact they are represented by short-term advances received and VAT payable.
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities.
The Group’s trade and other receivables amount represents gross contractual amounts for the acquired receivables, its fair value approximates its carrying amount as they are predominantly short-term.
Lightmap Group (i.e. Lightmap Ltd and its subsidiaries) as one CGU was tested for impairment as at December 31, 2022 and subsequently as at March 31, 2023 and June 30, 2023.
E. Reconciliation of carrying amount of goodwill
| Cost | ||||
| Balance at January 1, 2022 | 1,501 | |||
| Acquisition through business combination | 46,950 | |||
| Goodwill impairment | (46,947 | ) | ||
| Translation reserve | 332 | |||
| Balance at December 31, 2022 | 1,836 | |||
| Change | — | |||
| Balance at June 30, 2023 | 1,836 | |||
The recoverable amount of the CGU of 9,606 as at December 31, 2022 has been determined based on a fair value less cost of disposal using public peer group multiples, which was higher than value in use. Value in use was determined through a discounted cash flow method (DCF). For the DCF model the cash flow projections over the three-year period approved by the senior management of the CGU were used and the discount rate of 17.3% being equal to the WACC was applied to the projected cash flows. Fair value less cost of disposal was determined in the following way: for the public peer group analysis, a list of peer companies was compiled, which closely resembled the Group's business model; the most appropriate multiples to estimate the value of the gaming company were identified as EV/EBITDA of 8.03 and 6.86 as forward multiples of 2023 and 2024, respectively, and the cost of disposal was estimated to be insignificant. As a result of this analysis, management has recognized an impairment charge of 47,494 related to the CGU Lightmap Ltd in the year ended December 31,2022, which was allocated to the goodwill attributed to this CGU in the amount of 46,947 and the remaining 547 was allocated to the Intangible asset. The impairment was the result of the overall decline in the gaming industry around the world, as well as the ongoing economic uncertainty, which led to a decrease in bookings in CGU Lightmap Ltd. Goodwill impairment charge is included in the line Goodwill and investment impairment in the consolidated statement of profit or loss and other comprehensive income, the impairment charge related to Intangible asset is included in the line General and administrative expenses in the consolidated statement of profit or loss and other comprehensive income.
The recoverable amount of the CGU as at June 30, 2023 is 16,733 which exceeds the carrying amount, and accordingly no impairment was required.
The impairment process includes assumptions of significant importance, such as a EV/EBITDA multiples, a compound average growth rate of revenues over the forecasted period of 26%, the discount rate as a pre-tax weighted average cost of capital (WACC), the list of peer companies etc.. The assumptions used are based on management's best judgment and were made using Level 2 inputs.
23
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Sensitivity to input parameters
Our estimates are sensitive to input parameters, particularly to change in the EV/EBITDA multiples. Below is the analysis of sensitivity to this parameter:
| ● | While other parameters remain constant, an increase/decrease of the EV/EBITDA multiple by 10% would increase/decrease the recoverable amount of CGU by 1,210 as at June 30, 2023, no impairment arises. |
16. Investments in equity accounted associates
MX Capital Ltd
On January 27, 2022, the Company entered into a share purchase agreement to acquire 48.8% of the issued share capital of MX Capital Ltd, a company with headquarters in Limassol, Cyprus, from Everix Investments Ltd, a Company’s shareholder, for consideration of 15,000. MX Capital Ltd stands behind the RJ Games studio, developer of Puzzle Breakers, a new mobile midcore game that is associated with both puzzle and RPG genres. The transaction was fully executed on February 4, 2022.
Further earn-out payments of up to 35,000 may increase the consideration depending on achievement of certain agreed metrics by MX Capital Ltd (the “sellers earn-outs”). The fair value of such contingent consideration at acquisition was estimated at 2,297, based on Monte-Carlo simulations of monthly marketing expenses of the group’s financial model leading to expected pay-outs of earnouts (see Note 4 for the details).
On the same date, the Company entered into a shareholders’ agreement with the remaining shareholder of MX Capital Ltd, which provided for a put and call options allowing the Company to obtain control over 100% of the issued share capital of MX Capital Ltd in the first half of 2024 (the option shares). The price payable under the put and call options depends on achievement of certain agreed KPIs by MX Capital Ltd. The fair value of such symmetric option at acquisition is 2,623 being an asset and 9,810 being liability arising from it based on the Monte-Carlo simulations of monthly marketing expenses of the group’s financial model leading to expected buy-out of remaining shares (see Note 4 for the details). Also, depending on the achievement of another set of KPIs by MX Capital Ltd, the Company must pay the remaining shareholders an amount not exceeding 100,000 as further consideration for the sale of the option shares (the “Founders earn-outs”).The fair value of Founders earn-outs at acquisition is 258 based on Monte-Carlo simulations of monthly marketing expenses of the group’s financial model leading to expected pay-outs of earnouts (see Note 4 for the details).
The sellers earn-outs (contingent consideration) meet the definition of financial liabilities on the basis that they shall be settled in variable amounts of shares and/or cash depending on the achievement of certain targets by the relevant associates and are recognized within the line Other non-current liabilities in this consolidated statement of financial position.
The MX Capital group’s loss net of tax for the six months ended June 30, 2023 amounted to 13,575, GDEV Inc.’s share of these losses was 6,625, but was not reflected in the interim condensed consolidated statement of profit or loss, as the Group recognizes only the amount of losses until the moment carrying amount of the investment becomes zero.
Castcrown Ltd
On January 27, 2022, the Company entered into a share purchase agreement to acquire approximately 49.5% of the issued share capital of Castcrown Ltd for a total consideration of 2,970. Castcrown Ltd stands behind Royal Ark, a game studio responsible for two survival RPG titles – Dawn of Zombies and Shelter Wars. On the same date, the Company entered into a shareholders’ agreement with the remaining shareholders of Castcrown Ltd, which provided for a put and call option agreement allowing the Company to obtain control over 100% of the issued share capital of Castcrown Ltd. The call option may be exercised no later than April 1, 2027. The put option may be exercised from April 1, 2027 to July 1, 2027. The price payable under the put and call options depends on achievement of certain agreed metrics by Castcrown Ltd and is based on a discount to a projected future enterprise valuation of the Company. In consideration for being granted this call option, the Company agreed to pay to the remaining shareholders an option premium of 1,200 (subject to the adjustment associated with the completion accounts, which related to the performance of Castcrown Ltd prior to the transaction). Following the finalization of the completion accounts, the option premium was adjusted to 515 and was paid to the remaining shareholders in February 2023.
24
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The transaction was fully executed on March 30, 2022. The fair value of the call option at acquisition is 1,799 based on the Monte-Carlo simulations of monthly marketing expenses of the group’s financial model (see Note 4 for the details).
The group’s loss net of tax for the six months ended June 30, 2023 amounted to 785. GDEV Inc.’s share of these losses was reflected in the amount of 515 in the interim condensed consolidated statement of profit or loss.
The carrying amount of investments in our consolidated statement of financial position as at December 31, 2022 being equal to 0 represents the initial values of the investment in MX Capital Ltd and Castcrown Ltd less share of loss of a respective associate and impairment loss (where applicable) as follows:
| MX Capital Ltd | Castcrown Ltd | |||||||
| Investment in associates at acquisition | 15,000 | 2,970 | ||||||
| Indemnification asset | (119 | ) | (105 | ) | ||||
| Legal expenses capitalized | 148 | — | ||||||
| Contingent consideration - sellers earn-outs | 2,297 | — | ||||||
| Contingent consideration - founders earn-outs | 258 | — | ||||||
| Liability arising from symmetric put option | 9,810 | — | ||||||
| Asset arising from symmetric call option | (2,623 | ) | — | |||||
| Derivative asset arising from call option | — | (1,799 | ) | |||||
| Initial cost at acquisition | 24,771 | 1,066 | ||||||
| Share of loss of equity-accounted associates | (8,994 | ) | (1,066 | ) | ||||
| Share of OCI of equity-accounted associates | 104 | — | ||||||
| Carrying amount of investment at December 31, 2022 before impairment | 15,881 | — | ||||||
| Investment impairment | (15,881 | ) | — | |||||
| Carrying amount of investment as at December 31, 2022 | — | — | ||||||
The carrying amount of investments in our interim condensed consolidated statement of financial position as at June 30, 2023 being equal to 0 represents the initial values of the investment in MX Capital Ltd and Castcrown Ltd less share of loss of a respective associate and impairment loss (where applicable) as follows:
| MX Capital Ltd | Castcrown Ltd | |||||||
| Carrying amount of investment as at December 31, 2022 | — | — | ||||||
| Additional investment in associate | — | 515 | ||||||
| Share of loss of equity-accounted associates | — | (515 | ) | |||||
| Carrying amount of investment at June 30, 2023 before impairment | — | — | ||||||
| Investment impairment | — | — | ||||||
| Carrying amount of investment as at June 30, 2023 | — | — | ||||||
The impairment as at December 31, 2022 occurred as a result of the overall decline in the gaming industry around the world, as well as the ongoing economic uncertainty, which also led to a decrease in bookings in CGU MX Capital Ltd.
25
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The recoverable amount of the CGU was 0 as at December 31, 2022. Both fair value less cost of disposal using public peer group multiples and the value in use indicated a negative value. Value in use was determined through a discounted cash flow method (DCF). For the DCF model the cash flow projections over the three-year period approved by the senior management of the CGU were used and the discount rate of 19.3% being equal to the WACC was applied to the projected cash flows. Fair value less cost of disposal was determined in the following way: for the public peer group analysis, a list of peer companies was compiled, which closely resembled the Group's business model; the most appropriate multiples to estimate the value of the gaming company were identified as EV/Bookings of 1.2 and EV/EBITDA of 8.6 and the cost of disposal was estimated to be insignificant. As a result of this analysis, management recognized an impairment charge of 15,881 related to the CGU MX Capital Ltd in the year ended December 31, 2022. No additional impairment was charged during the six months ended June 30, 2023.
The impairment process includes assumptions of significant importance, such as growth of revenues and free cash flows, the discount rate as a pre-tax weighted average cost of capital (WACC), the exit EV/EBITDA and EV/ Bookings multiple, the list of peer companies, and the discount to the peer multiples. The assumptions used are based on management's best judgment and were made using Level 2 inputs.
No additional impairment was charged during the six months of 2023.
Sensitivity to input parameters
Our estimates are sensitive to input parameters, particularly to change in the multiples stated above (EV/EBITDA and EV/Bookings). Below is the analysis of sensitivity to this parameter:
| ● | While other parameters remain constant, an increase/decrease of the EV/EBITDA multiple by 10% would not change the recoverable amount based on fair value less cost of disposal as at June 30, 2023. |
| ● | While other parameters remain constant, an increase/decrease of the EV/Bookings multiple by 10% would not change the recoverable amount based on fair value less cost of disposal as at June 30, 2023. |
17. Loans receivable
As part of the share purchase agreement with MX Capital Ltd, the Company entered into a loan agreement with the associate for a total amount of up to 43,000 plus the amount of debt owed by MX Capital Group to an affiliate of a previous shareholder in the total amount of 1,888. The first tranche of the loan for an amount of 8,000 was paid on February 4, 2022 upon the consummation of the acquisition of interest in MX Capital Ltd. On the same date, an additional 1,888 was granted to MX Capital Ltd, being the total debt owed to the affiliate of the former shareholder.
The second tranche of the loan for an amount of 13,000 was paid on July 6, 2022 based on the fact that certain conditions were satisfied. Tranches of 16,000 and 6,000 shall have been available for drawing until February 1, 2023 and September 1, 2023, respectively, depending on the satisfaction by MX Capital Ltd of certain conditions. As of the date of these interim condensed consolidated financial statements both tranches have not been granted as certain conditions were not met. The loan bears interest of 7% per annum and is secured by a pledge of shares in MX Capital Ltd. All amounts granted are due on April 1, 2027.
As part of the share purchase agreement with Castcrown Ltd, the Company entered into an unsecured convertible notes agreement on March 30, 2022 for the amount of up to 16,000 at an interest on 7% p.a. with the due date on March 31, 2025. The first tranche of the notes amounting to 1,500 was acquired on April 1, 2022 and the second tranche in the amount of 6,000 was acquired on May 31, 2022. The Company shall acquire additional notes amounting to 8,500 depending on the achievement by Castcrown Ltd of certain performance targets by December 31, 2024. The Company can convert the notes no earlier than December 31, 2024, unless Castcrown Ltd has met the performance targets earlier than that.
26
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The fair value of conversion feature amounted to 0 as at December 31, 2022 and June 30, 2023. According to IFRS 9 the asset related to the convertible notes is accounted for as its nominal value less fair value of its derivative liability component, as the second is equal to 0, the fair value of the loan equals its carrying amount.
The exposure of the Group to credit risk is reported in Note 29 to these interim condensed consolidated financial statements.
Expected credit losses for loans receivable consist of 8,024 of ECL on the loan receivable from Castcrown Ltd and of 24,762 of ECL on the loan receivable from MX Capital Ltd as at June 30, 2023 (7,826 and 20,649 respectively as at December 31, 2022).
The amount of ECL on the loan receivable from Castcrown Ltd was accrued based on provisions of IFRS 9 on an individual basis as 100% of the total amount as this is the percentage of cases in which the borrower will be in default based on Monte-Carlo simulation used by management for the model to determine fair value of financial instruments.
The amount of ECL on the loan receivable from MX Capital Ltd was accrued based on provisions of IFRS 9 on an individual basis as 100% of the total amount as this is the percentage of cases in which the borrower will be in default based on Monte-Carlo simulation used by management for the model to determine fair value of financial instruments. The management also considers the fair value of the shares pledged amounted to 0 in the calculation of ECL.
On June 20, 2023 the Group entered into new loan agreement with Levelapp Limited issuing the loan of 260 to borrower. The loan accrues the interest of 3% which is considered corresponding to the market terms.
18. Leases
| Right-of-use assets | Lease liabilities | |||||||
| Balance at January 1, 2023 | 1,462 | 1,187 | ||||||
| Additions | 582 | 413 | ||||||
| Acquisitions through business combinations | — | — | ||||||
| Loss on modification | — | — | ||||||
| Depreciation | (536 | ) | — | |||||
| Interest expense | — | 22 | ||||||
| Payments | — | (787 | ) | |||||
| Derecognition of right-of-use assets/lease liabilities due to sale | — | — | ||||||
| Effect of foreign exchange rates | (19 | ) | 46 | |||||
| Balance at June 30, 2023 | 1,489 | 881 | ||||||
| Lease liabilities - current | 771 | |||||||
| Lease liabilities - non-current | 110 | |||||||
| Right-of-use assets | Lease liabilities | |||||||
| Balance at January 1, 2022 | 2,050 | 1,934 | ||||||
| Additions | 1,318 | 1,318 | ||||||
| Acquisitions through business combinations | 62 | 62 | ||||||
| Loss on modification | — | — | ||||||
| Depreciation | (1,262 | ) | — | |||||
| Interest expense | — | 77 | ||||||
| Payments | — | (1,515 | ) | |||||
| Effect of foreign exchange rates | 113 | 92 | ||||||
| Balance at June 30, 2022, restated | 2,281 | 1,968 | ||||||
| Lease liabilities - current | 1,551 | |||||||
| Lease liabilities - non-current | 417 | |||||||
27
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The amounts reflected in the line General and administrative expenses of this interim condensed consolidated statement of profit or loss and other comprehensive income other than depreciation in relation to leases are presented in the table below:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022, restated | |||||||
| Expense relating to low-value leases | 252 | 28 | ||||||
| Interest expense on lease liabilities | 22 | 77 | ||||||
| 274 | 105 | |||||||
On June 1, 2019 Nexters Global Ltd entered into a new lease agreement for the office spaces with a new owner in Larnaca, Cyprus. On June 1, 2021, the lease was renewed for another two years with an option of renewal after that date subject to the adjustment of the lease payments to the market conditions. As the market conditions at the lease expiration date cannot be reliably estimated as at the reporting date management decided not to account for the lease renewal option while determining the amount of right-of-use assets and lease liabilities. On June 1, 2023, the lease was renewed for another two year.
On March 24, 2020 Nexters Global Ltd entered into a new lease agreement over the office spaces in Limassol, Cyprus with a new owner. The lease runs for 5 years, with an option of obtaining a discount while paying in lumpsum for the whole year. As the Group already makes such payments and received the discount for the first year, management decided to account for this option while determining the amount of right-of-use assets and lease liabilities.
The Group measures the lease liability at the present value of the remaining lease payments as if the acquired lease were a new lease at the acquisition date. The Group measures the right-of-use asset at the same amount as the lease liability.
On October 4, 2021 GDEV Inc. entered into a new lease agreement over the office spaces in Limassol, Cyprus. The lease runs for 3 years with an early termination option. Management decided not to account for this option while determining the amount of right-of-use assets and lease liabilities due to the fact its exercise is not reasonably certain.
On December 1, 2021, Jule 29, 2022 and October 4, 2022 Nexters Global Ltd entered into new lease agreements for vehicles. As the terms of the contracts were the same and were entered into at the same time with the same counterparty, the contracts are combined as a single contract. The lease runs for 3 years with an early termination option. Management decided to account for this option while determining the amount of right-of-use assets and lease liabilities due to the fact its exercise is reasonably certain.
On January 31, 2022 GDEV Inc. acquired Lightmap Ltd group which had a lease agreement for the office building in Limassol, Cyprus. The agreement is renewed on April 1, 2023 for 2 more years.
On August 9, 2022 Nexters Studio Armenia LLC entered into a new lease agreement over the office spaces and co-working spaces in Yerevan, Armenia, the lease runs for 2 and 1 years consistently.
Other than the office and leases discussed above the Company has no other material leases.
Total cash outflow for leases recognized in the interim condensed consolidated statement of cash flow is presented below:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Сash outflow for leases | 765 | 1,438 | ||||||
| Cash outflow for low-value leases | 252 | 28 | ||||||
| Total cash outflow for leases | 1,017 | 1,466 | ||||||
All lease obligations of Cypriot companies are denominated in €. The rate of 3% per annum was used as the incremental borrowing rate.
28
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
19. Trade and other receivables
| June 30, 2023 | December 31, 2022 | |||||||
| Trade receivables | 37,001 | 41,874 | ||||||
| Deposits and prepayments | 2,038 | 2,987 | ||||||
| VAT refundable | 2,068 | 460 | ||||||
| Other receivables | 18 | 51 | ||||||
| Total | 41,125 | 45,372 | ||||||
The Group does not hold any collateral over the trade receivables balances, nor is there any related financing component.
The fair values of trade and other receivables approximate to their carrying amounts as presented above as they are mostly of a short-term nature.
The exposure of the Group to credit risk and impairment losses in relation to trade and other receivables is reported in Note 29 to these interim condensed consolidated financial statements.
The amount of ECL in respect of trade and other receivables is 1,414 as at June 30, 2023 and is 1,512 as at December 31, 2022.
20. Trade and other payables
| June 30, 2023 | December 31, 2022 | |||||||
| Trade payables | 14,961 | 22,295 | ||||||
| Accrued salaries, bonuses, vacation pay and related taxes | 6,985 | 2,969 | ||||||
| Provision for indirect taxes | 2,077 | 2,067 | ||||||
| Accrued professional services | 1,319 | 1,526 | ||||||
| VAT payable | 1,300 | — | ||||||
| Indirect taxes payables | 679 | 1,174 | ||||||
| Other payables and advances received | 932 | 490 | ||||||
| Total | 28,253 | 30,521 | ||||||
The exposure of the Group to liquidity risk in relation to financial instruments is reported in Note 29 to the interim condensed consolidated financial statements.
21. Provisions for non-income tax risks
The provisions consist of probable tax risks of Lightmap Ltd of 1,336. The Group recognizes the indemnification asset in the same amount in its interim condensed consolidated statement of financial position.
It is mainly related to the acquired company’s indirect taxes risks together with the interest and penalties accrued which could be claimed by the relevant tax authorities.
22. Share warrant obligation
Upon completion of the Transaction on August 26, 2021, each outstanding warrant to purchase Kismet’s ordinary shares was converted into a warrant to acquire one ordinary share of the Company, at a price of US$11.50 per share. A total of 20,250,000 Kismet warrants were converted into 20,249,993 warrants of the Company, 13,499,993 of which are public and 6,750,000 of which are private.
29
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The fair value of Private and Public Warrants as at June 30, 2023 is determined using Level 1 inputs and is measured using the market price, as at December 31, 2022 the fair value was determined using Level 3 inputs within the fair value hierarchy and is measured using Monte-Carlo simulation method.
Key assumptions of the Monte-Carlo model:
| June 30, 2023 | December 31, 2022 | |||
| Risk free rate | n/a | forward USD overnight index swap (OIS) rates (curve 42) | ||
| Volatility | n/a | forward implied volatility rates based on volatilities of publicly traded peers | ||
| Starting share price | n/a | 4.63 | ||
| Expected warrant life (years) | n/a | 3.7 |
Key input parameter of the model is starting share price. As the trading of the Company’s shares was halted as at December 31, 2022, the Company used Multiples of the Enterprise value (EV) to Bookings and EV to EBITDA based on valuation of our publicly traded peers to estimate the enterprise value and accordingly the starting share price by dividing enterprise value with the number of shares outstanding as follows:
| - | Implied multiples were calculated using the last quoted share price before the trading halt was introduced to estimate a discount/(premium) to median multiples of peer group (30% for EV/Bookings and 2% for EV/EBITDA); |
| - | Median EV/Bookings and EV/EBITDA multiples of peer group were calculated as at the reporting date; |
| - | Discounts/(premiums) from the multiples calculated in the first step were applied to estimate our multiples as at the reporting date. |
| - | Based on the above multiples and our actual number of our earnings and EBITDA during the year we estimated our enterprise value and, based on the number of outstanding shares as at the reporting date, the starting price of our shares. |
These methods provided as at December 31, 2022 the range of the starting share price from US$3.58 based on EV/Bookings multiple to US$5.68 based on EV/EBITDA multiple.
An average of prices determined by multiples above was used as a starting share price for the warrants model.
As at June 30, 2023 Warrants’ price was taken from the market as trading hault was already released, for the effect of change in estimate see Note 4.
30
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The Company has recognized the following warrant obligation:
| Public Warrants | Private Warrants | Total | ||||||||||
| Balance at January 1, 2022 | 10,372 | 11,657 | 22,029 | |||||||||
| Fair value adjustment | (598 | ) | (4,166 | ) | (4,764 | ) | ||||||
| Balance at June 30, 2022 | 9,774 | 7,491 | 17,265 | |||||||||
| Public Warrants | Private Warrants | Total | ||||||||||
| Balance at January 1, 2023 | 7,575 | 5,460 | 13,035 | |||||||||
| Fair value adjustment | (5,955 | ) | (4,650 | ) | (10,605 | ) | ||||||
| Balance at June 30, 2023 | 1,620 | 810 | 2,430 | |||||||||
The change in fair value of share warrant obligation is included in the line Change in fair value of share warrant obligation and other financial instruments in the interim condensed consolidated statement of profit or loss and other comprehensive income.
23. Other investments
Other investments consist of the following:
| June 30, 2023 | December 31, 2022 | |||||||
| Other investments - current | ||||||||
| 1-3 Month T-Bill ETF (BIL) - at fair value through profit or loss | 14,875 | 14,818 | ||||||
| 1.5% US treasury notes - at amortised cost | — | 35,547 | ||||||
| 0% US treasury bills - at amortised cost | 24,714 | — | ||||||
| 0.875% US treasury bills - at amortised cost | 14,736 | — | ||||||
| 0.125% US treasury bills - at amortised cost | 14,983 | — | ||||||
| 69,308 | 50,365 | |||||||
| Other investments - non-current | ||||||||
| 1.7% federal bonds German Government - at fair value through other comprehensive income | 3,092 | 2,969 | ||||||
| iShares 20+ Year Treasury Bond ETF (TLT) - at fair value through profit or loss | 15,441 | 14,934 | ||||||
| 18,533 | 17,903 | |||||||
Debt securities classified as fair value through other comprehensive income, denominated in EUR, have an interest rate of 1.7% and mature in 10 years.
Debt securities classified as amortized cost investments have an interest rate of from 0% to 1.5% and mature in one to three months.
31
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
24. Cash
| June 30, 2023 | December 31, 2022 | |||||||
| Current accounts | 68,566 | 86,759 | ||||||
| Bank deposits | 15 | 15 | ||||||
| Cash | 68,581 | 86,774 | ||||||
| Currency | June 30, 2023 | December 31, 2022 | ||||||
| United States Dollars | 48,518 | 68,517 | ||||||
| Euro | 19,749 | 17,057 | ||||||
| Russian Ruble | 92 | 1,078 | ||||||
| Armenian Dram | 61 | 26 | ||||||
| Kazakhstani tenge | 161 | 96 | ||||||
| Total | 68,581 | 86,774 | ||||||
Impairment on cash has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its cash have low credit risk based on the external credit ratings of the counterparties. Therefore, no impairment allowance was recognized as at June 30, 2023 and December 31, 2022.
25. Share capital and reserves
Nature and purpose of reserves
Additional paid-in capital
The additional paid-in capital is used to recognize equity contributions from shareholders due to Transaction and Lightmap Ltd put option, see Note 15 for further details.
Share-based payments
The share-based payments reserve is used to recognize the cost of equity-settled share-based payments provided to employees, including key management personnel and one service provider performing similar functions, as part of their remuneration, see Note 30 for further details of these plans.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations into the presentation currency of these interim condensed consolidated financial statement as well as revaluation of goodwill as at the reporting date, see interim condensed consolidated statement of changes in equity.
32
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Share capital
Share capital as at June 30, 2023 and December 31, 2022 consisted from the following:
| 2022 | 2022 | |||||||
| Number of shares | US$ | |||||||
| Ordinary shares of $0 each | 197,092,402 | — | ||||||
| 197,092,402 | — | |||||||
| Issued and fully paid | ||||||||
| Balance at January 1, 2022 | 196,523,101 | — | ||||||
| Balance at December 31, 2022 | 197,092,402 | — | ||||||
| 2023 | 2023 | |||||||
| Number of shares | US$ | |||||||
| Ordinary shares of $0 each | 197,314,600 | — | ||||||
| 197,314,600 | — | |||||||
| Issued and fully paid | ||||||||
| Balance at January 1, 2023 | 197,092,402 | — | ||||||
| Balance at June 30, 2023 | 197,314,600 | — | ||||||
26. Deferred revenue and deferred platform commission fees
As at June 30, 2023, deferred revenue is expected to be recognized over an estimated average playing period of the paying users.
Deferred revenue is associated with the portion of in-game purchases revenue that is recognized over time.
The text below summarizes the change in deferred revenue and platform commission fees for six months ended June 30, 2023 and 2022.
The Group recognized during the period of six months ended June 30, 2023 the revenue of 175,549 (six months ended June 30, 2022 – 180,322) and deferred the amount of 155,183 (six months ended June 30, 2022 – 166,948) in both cases related to the in-app purchases recorded for the six months ended June 30, 2023.
The Group recognized during the period of six months ended June 30, 2023 the platform commissions of 48,984 (six months ended June 30, 2022 - 64,080) and deferred the amount of 37,499 (six months ended June 30, 2022 – 52,987) in both cases related to the platform commissions associated with in-app purchases recorded for the six months ended June 30, 2023.
We use statistical estimation model to arrive at the average playing period of the paying users for each platform. As at June 30, 2023 and 2022 player lifespan for Hero Wars averages 29 and 26 months respectively. As at December 31, 2022 player lifespan for Hero Wars averages 28 months.
The estimated player lifespan in our other games as at June 30, 2023 and 2022 averages 11 months and 14 months respectively. The estimated player lifespan in our other games as at December 31, 2022 averages 14 months.
33
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
27. Related party transactions
As at June 30, 2023 the Company’s key shareholders are Andrey Fadeev and Boris Gertsovsky, each owning 20.2%, and Dmitrii Bukhman and Igor Bukhman, each owning 18.9% of the Company’s issued shares.
The transactions and balances with related parties are as follows:
(i) Directors and key management’s remuneration
The remuneration of Directors and other members of key management was as follows:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Directors’ remuneration | 405 | 560 | ||||||
| -short-term employee benefits | 405 | 425 | ||||||
| -share-based payments | — | 135 | ||||||
| Other members of key management’s remuneration | 841 | 1,802 | ||||||
| -short-term employee benefits | 645 | 874 | ||||||
| -share-based payments | 196 | 928 | ||||||
| Total | 1,246 | 2,362 | ||||||
(ii) Other operating income
Other operating income is presented below:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Income from technical support services from Lightmap Ltd to Castcrown Ltd | — | 119 | ||||||
| — | 119 | |||||||
(iii) Interest income
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Castcrown Ltd | 198 | 62 | ||||||
| MX Capital Ltd | 795 | 271 | ||||||
| 993 | 333 | |||||||
(iv) Trade and other receivables
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Receivable from Castcrown Ltd to Lightmap Ltd | — | 123 | ||||||
| Receivable from Castcrown Ltd to Nexters Studio Armenia LLC | — | 134 | ||||||
| — | 257 | |||||||
34
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
(v) Loan receivable
| June 30, 2023 | December 31, 2022 | |||||||
| Loan to Castcrown Ltd - net | — | — | ||||||
| Loan to MX Capital Ltd - net | — | 3,317 | ||||||
| — | 3,317 | |||||||
The amount of ECL in respect of loans receivable from related parties is 32,786 as at June 30, 2023 and is 28,475 as at December 31, 2022.
In 2022 the Company acquired from Everix Investments Ltd jointly controlled by Dmitrii Bukhman and Igor Bukhman the 48.8% of the issued share capital of MX Capital Ltd – refer to Note 16 for further details.
28. List of subsidiaries
Set out below is a list of subsidiaries of the Group. Ownership interest corresponds to voting rights.
| Ownership Interest | Ownership Interest | |||||||
| June 30, 2023 | December 31, 2022 | |||||||
| Name | % | % | ||||||
| Flow Research S.L. | 100 | 100 | ||||||
| NHW Ltd | 100 | 100 | ||||||
| Nexters Global Ltd | 100 | 100 | ||||||
| SGBOOST Limited | 100 | 100 | ||||||
| Lightmap Ltd | 100 | 100 | ||||||
| Nexters Studio Armenia LLC | 100 | 100 | ||||||
| Nexters Studio Kazakhstan Ltd | 100 | 100 | ||||||
| Nexters Studio Portugal, Unipersonal LDA | 100 | — | ||||||
| Nexters Midasian FZ LLC | 100 | — | ||||||
| Nexters Finance Ltd | 100 | — | ||||||
| Nexters Lithuania UAB | 100 | — | ||||||
| Tourish Limited | 100 | — | ||||||
| 100 | — | |||||||
Flow Research S.L.
Flow Research S.L. was incorporated in Barcelona, Spain, on November 10, 2017. The registered office of the company is at CL Fontanella 4, Orihuela Alicante, 03189 Spain. The company's principal activities are creative design of online games.
NHW Ltd
On April 5, 2021, Nexters Global Ltd acquired 100% of the voting shares in NHW Ltd, a company registered in accordance with the laws of the Republic of Cyprus, for the total consideration of 24 (€20,000). The consideration was fully paid in cash. The acquisition has been accounted for using the acquisition method. NHW Ltd was incorporated in Larnaca, Republic of Cyprus on March 9, 2020. The registered office of the company is Faneromenis, 107, P.C. 6031, Larnaca, Cyprus. The company's principal activities are publication and testing of program applications.
Nexters Global Ltd
Nexters Global Ltd was incorporated in Larnaca, Republic of Cyprus on November 2, 2009. The registered office of the Company is at Faneromenis 107, 6031, Larnaca, Cyprus. The company's principal activities are game development and publishing.
35
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
SGBOOST Limited
Synergame Investment Ltd was incorporated in Limassol, Republic of Cyprus on September 1, 2021. The registered office of the company is Griva Digeni, 55, P.C. 3101, Limassol, Cyprus. The company's principal activity are game development as well as the provision of independent developers with expertise and funds needed to launch their games and build successful international businesses. The company was renamed on May 12, 2022 to SGBOOST Limited.
Lightmap Ltd
The group encompasses five legal entities, four of which – Lightmap Ltd, Cubic Games Ltd, Kadexo Ltd, Fellaway Ltd – are incorporated in Cyprus, while the fifth Lightmap LLC is incorporated in Russia, which is liquidated as at the date of these financial statements. Lightmap Ltd is the owner of intellectual property (IP) rights. Cubic Games Ltd and Kadexo Ltd are the publishers of the games Pixel Gun 3D (“PG3D”) and Block City Wars (“BCW”), respectively. The publishers pay 97% of their revenue in license fees to Lightmap Ltd. Fellaway Ltd is dormant and is in the process of liquidation. Lightmap Ltd has an investment in another subsidiary entity, Britglow Ltd, which is also liquidated.
Nexters Studio Armenia LLC
Nexters Studio Armenia LLC was incorporated in Yerevan, Armenia on April 8, 2022. The registered office of the company is Arabkir 23, Yerevan. The company's principal activities are game development and support.
Nexters Studio Kazakhstan Ltd
Nexters Studio Kazakhstan Ltd was incorporated in Astana, Republic of Kazakhstan on May 5, 2022. The registered office of the company is Dinmuhamed Konaev Street, 14, Astana. The company's principal activities are game development and support.
Nexters Studio Portugal, Unipersonal LDA
Nexters Studio Portugal, Unipersonal LDA was incorporated in Lisboa, Portugal on February 2, 2023. The registered office of the company is Avenidas Novas 1050 046 Lisboa. As of the date of these financial statements the company has not yet started its active operations.
Nexters Finance Ltd
Nexters Finance Ltd was incorporated in Limassol, Republic of Cyprus on April 7, 2023. The registered office of the Company is at 28 Oktovriou 313, 3105, Limassol, Cyprus. The company's principal activities are financial activities such as provision of intra-group loans.
Nexters Midasian FZ LLC
Nexters Midasian FZ LLC was incorporated in Ras Al Khaimah Economic Zone in UAE on January 24, 2023. As of the date of these financial statements the company has not yet started its active operations.
Nexters Lithuania UAB
Nexters Lithuania UAB was incorporated in Vilnus, Lithuania on June 27, 2023. The registered office of the company is Didžioji, 1, Vilnius. As of the date of these financial statements the company has not yet started its active operations.
36
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Tourish Limited
Tourish Limited was acquired in Nicosia, Cyprus on May 29, 2023. The registered office of the company is Georgiou Griva Digeni, 113, Astromeritis, 2722, Nicosia, Cyprus. As of the date of these financial statements the company has not yet started its active operations.
29. Financial instruments - fair values and risk management
A. Accounting classifications
The following table shows the carrying amounts of financial assets and financial liabilities as at June 30, 2023 and December 31, 2022.
The Company’s trade and other receivables, prepaid tax, indemnification asset and related tax liabilities, cash, 1.5% treasury notes recorded at amortized cost and trade and other payables approximate their fair value due their short-term nature. Company’s investments, current and non-current (other than the 1.5% treasury notes) are accounted at fair value (either through profit and loss or through OCI). Loans receivable current and non-current are a reasonable approximation of their fair value as they have been impaired to their expected return.
Financial assets are as follows:
| June 30, 2023 | December 31, 2022 | |||||||
| Financial assets at amortized cost | ||||||||
| Trade receivables | 37,001 | 41,874 | ||||||
| Cash | 68,581 | 86,774 | ||||||
| Loans receivable | 478 | 3,834 | ||||||
| Other investments - current | 54,433 | 35,547 | ||||||
| Total | 160,493 | 168,029 | ||||||
| June 30, 2023 | December 31, 2022 | |||||||
| Financial assets measured at fair value | ||||||||
| Other investments - current - fair value through profit or loss | 14,875 | 14,818 | ||||||
| Other investments - non-current - fair value through other comprehensive income | 3,092 | 2,969 | ||||||
| Other investments - non-current - fair value through profit or loss | 15,441 | 14,934 | ||||||
| Total | 33,408 | 32,721 | ||||||
Financial liabilities are as follows:
| June 30, 2023 | December 31, 2022 | |||||||
| Financial liabilities not measured at fair value | ||||||||
| Trade and other payables | 28,253 | 30,521 | ||||||
| Total | 28,253 | 30,521 | ||||||
| June 30, 2023 | December 31, 2022 | |||||||
| Financial liabilities measured at fair value | ||||||||
| Put option liability | 28,245 | 27,475 | ||||||
| Share warrant obligations | 2,430 | 13,035 | ||||||
| Other non-current liabilities | 70 | 577 | ||||||
| Total | 30,745 | 41,087 | ||||||
37
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
B. Financial risk management
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and in the Group’s activities.
The Group has exposure to the following risk arising from financial instruments:
| (i) | Credit risk |
Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the reporting date. The Group’s credit risk arises from Trade and other receivables, Loans receivable and Other investments. As at June 30, 2023 and December 31, 2022 the largest debtor of the Group constituted 33% and 41% of the Group’s Trade and other receivables, respectively, and the 3 largest debtors of the Group constituted 70% and 72% of the Group’s Trade and other receivables respectively.
Credit risk related to trade receivables is considered insignificant, since almost all sales are generated through major companies, with consistently high credit ratings. These distributors pay the Group monthly, based on sales to the end users. Payments are made within 3 months after the sale to the end customer. The distributors take full responsibility for tracking and accounting of end customer sales and send to the Group monthly reports that show amounts to be paid. The Group does not have any material overdue or impaired accounts receivable.
Credit risk related to Other investments is also insignificant due to the fact that they are represented by government bonds and US treasury notes which are rated AAA based on Fitch’s ratings.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
| June 30, 2023 | December 31, 2022 | |||||||
| Loans receivables | 478 | 3,834 | ||||||
| Trade receivables | 37,001 | 41,874 | ||||||
| Cash | 68,581 | 86,774 | ||||||
| Other investments - current | 69,308 | 50,365 | ||||||
| Other investments - non-current | 15,441 | 17,903 | ||||||
Expected credit loss assessment for corporate customers as at June 30, 2023 and December 31, 2022
The Group allocates each exposure a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited to external ratings, audited financial statements, management accounts, and cash flows projections) and applying experienced credit judgment.
Loan receivables
Loan receivables are provided to associates and the Company’s employees. The Group considers that both of its loans provided to associates have increased credit risk based on the weak recent performance of associates due to general market conditions. As a result, the specific provisions for ECL were booked in respect of the loans to both associates. The ECL in respect of Loan receivables is 32,785 as at June 30, 2023 and 28,475 as at December 31, 2022. See Note 17 for the description of the methods used to estimate the ECL.
38
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
Trade and other receivables
The ECL allowance in respect of Trade and other receivables is determined on the basis of the lifetime expected credit losses (“LTECL”). The Group uses the credit rating for each of the large debtors where available or makes its own judgment as to the credit quality of its debtors based on their most recent financial reporting or the rating assigned to their country of incorporation. After assigning the credit rating to each of the debtors the Group determines the probability of default (“PD”) and loss given default (“LGD”) based on the data published by the internationally recognized rating agencies. The determined amounts of allowances for ECL for each of the debtors are then adjusted for the forecasted macroeconomic factors, which include the forecasted unemployment rate in each of the countries where the debtors are incorporated and forecasted growth rate of the global gaming market from publicly available sources. The amount of ECL in respect of trade and other receivables is 1,414 as at June 30, 2023 and is 1,512 as at December 31, 2022.
Cash
The cash are held with financial institutions, which are rated CCC- to BBB- based on Fitch’s ratings.
(ii) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s objective when managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables over the next 90 days.
Excess cash is invested only in highly liquid triple A rated securities (mainly US treasury notes, bonds and ETFs).
39
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The following are the contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted and include contractual interest payments.
| June 30, 2023 | Carrying amounts | Contractual cash flows | 3 months or less | Between 3-12 months | Between 1-5 years | |||||||||||||||
| Non-derivative financial liabilities | ||||||||||||||||||||
| Lease liabilities | 881 | 894 | 61 | 722 | 111 | |||||||||||||||
| Trade and other payables | 28,253 | 28,253 | 28,253 | — | — | |||||||||||||||
| 29,134 | 29,147 | 28,314 | 722 | 111 | ||||||||||||||||
| June 30, 2023 | Carrying amounts | Contractual cash flows | 3 months or less | Between 3-12 months | Between 1-5 years | |||||||||||||||
| Derivative financial liabilities | ||||||||||||||||||||
| Share warrant obligation | 2,430 | — | — | — | 2,430 | |||||||||||||||
| Put option liability | 28,245 | — | — | 21,560 | 6,685 | |||||||||||||||
| 30,675 | 0 | 0 | 21,560 | 9,115 | ||||||||||||||||
| December 31, 2022 | Carrying amounts | Contractual cash flows | 3 months or less | Between 3-12 months | Between 1-5 years | |||||||||||||||
| Non-derivative financial liabilities | ||||||||||||||||||||
| Lease liabilities | 1,187 | 1,183 | 309 | 437 | 437 | |||||||||||||||
| Trade and other payables | 30,521 | 30,521 | 30,521 | — | — | |||||||||||||||
| 31,708 | 31,704 | 30,830 | 437 | 437 | ||||||||||||||||
| December 31, 2022 | Carrying amounts | Contractual cash flows | 3 months or less | Between 3-12 months | Between 1-5 years | |||||||||||||||
| Derivative financial liabilities | ||||||||||||||||||||
| Share warrant obligation | 13,035 | — | — | — | 13,035 | |||||||||||||||
| Put option liability | 27,475 | — | — | — | 27,475 | |||||||||||||||
| 40,510 | — | — | — | 40,510 | ||||||||||||||||
| (iii) | Market risk |
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and/or equity prices will affect the Group’s income or the value of its financial instruments. The Company is not exposed to any equity risk.
The objective of the market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
| a. | Currency risk |
Currency risk is the risk that the values of and cash flows associated with financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Company’s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, the Russian Ruble, Armenian Dram and Kazakhstani Tenge. The Group’s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
40
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The Group’s exposure to foreign currency risk was as follows:
| June 30, 2023 | Euro | Russian Ruble | Armenian Dram | Kazakhstani Tenge | ||||||||||||
| Assets | ||||||||||||||||
| Loans receivable | 4,309 | — | 19 | — | ||||||||||||
| Trade and other receivables | 10,217 | — | — | — | ||||||||||||
| Cash | 19,749 | 92 | 61 | 161 | ||||||||||||
| 34,275 | 92 | 80 | 161 | |||||||||||||
| Liabilities | ||||||||||||||||
| Lease liabilities | (734 | ) | — | (95 | ) | — | ||||||||||
| Trade and other payables | (7,099 | ) | — | (2,210 | ) | (207 | ) | |||||||||
| (7,833 | ) | — | (2,305 | ) | (207 | ) | ||||||||||
| Net exposure | 26,442 | 92 | (2,225 | ) | (46 | ) | ||||||||||
| December 31, 2022 | Euro | Russian Ruble | Armenian Dram | Kazakhstani Tenge | ||||||||||||
| Assets | ||||||||||||||||
| Loans receivable | 476 | — | 39 | — | ||||||||||||
| Trade and other receivables | 9,411 | — | — | — | ||||||||||||
| Cash | 17,057 | 1,078 | 26 | 95 | ||||||||||||
| 26,944 | 1,078 | 65 | 95 | |||||||||||||
| Liabilities | ||||||||||||||||
| Lease liabilities | (1,053 | ) | — | (134 | ) | — | ||||||||||
| Trade and other payables | (8,017 | ) | — | (614 | ) | (33 | ) | |||||||||
| (9,070 | ) | — | (748 | ) | (33 | ) | ||||||||||
| Net exposure | 17,874 | 1,078 | (683 | ) | 62 | |||||||||||
Sensitivity analysis
A reasonably possible 10% strengthening or weakening of the United States Dollar against the following currencies as at June 30, 2023 and December 31, 2022 would have (decreased)/increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
| Strengthening of | Weakening of US$ | |||||||
| June 30, 2023 | US$ by 10% | by 10% | ||||||
| Euro | (2,644 | ) | 2,644 | |||||
| Russian Ruble | (9 | ) | 9 | |||||
| Armenian Dram | 223 | (223 | ) | |||||
| Kazakhstani Tenge | 5 | (5 | ) | |||||
| (2,425 | ) | 2,425 | ||||||
| Strengthening of | Weakening of US$ | |||||||
| December 31, 2022 | US$ by 10% | by 10% | ||||||
| Euro | (1,787 | ) | 1,787 | |||||
| Russian Ruble | (108 | ) | 108 | |||||
| Armenian Dram | 68 | (68 | ) | |||||
| Kazakhstani Tenge | (6 | ) | 6 | |||||
| (1,833 | ) | 1,833 | ||||||
41
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
| b. | Interest risk |
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates is minimal as it does not have long-term debt obligations with floating interest rates or material fixed-rate debt instruments carried at fair value.
C. Measurement of fair values
The transfer from Level 3 to Level 1 occurred in 2023 for the valuation of Public and Private warrants which were valued using Level 3 inputs (versus Level 1 in 2023) while the Company’s securities were suspended for trading.
The following table shows a reconciliation from the opening balances to the closing balances for financial liabilities based on Level 3 fair values.
| Share warrant | Put option | Other non-current | ||||||||||
| obligation (Note 4) | liability (Note 4) | liabilities | ||||||||||
| Balance at January 1, 2022 | 22,029 | — | — | |||||||||
| Purchase | — | 14,180 | 16,194 | |||||||||
| Net change in fair value | (4,764 | ) | (294 | ) | (7,123 | ) | ||||||
| Balance at June 30, 2022 | 17,265 | 13,886 | 9,071 | |||||||||
| Share warrant | Put option | Other non-current | ||||||||||
| obligation (Note 4) | liability (Note 4) | liabilities | ||||||||||
| Balance at January 1, 2023 | 13,035 | 27,475 | 577 | |||||||||
| Net change in fair value | (10,605 | ) | 770 | (507 | ) | |||||||
| Balance at June 30, 2023 | 2,430 | 28,245 | 70 | |||||||||
The following table shows a reconciliation from the opening balances to the closing balances for financial assets based on Level 3 fair values.
| Other non-current assets | ||||
| Balance at January 1, 2022 | 107 | |||
| Purchases | 11,067 | |||
| Net change in fair value | (5,013 | ) | ||
| Balance at June 30, 2022 | 6,161 | |||
There were no assets valued based on Level 3 fair values during the six months ended June 30, 2023.
30.Share-based payments
In 2016 the Company adopted a Long-Term Incentive Plan (“LTIP”). Under the LTIP key employees and deemed employees (individuals providing similar personal services) rendered services to the Group in exchange for share options (further referred to as “options”). Within the LTIP several tranches of share options for Nexters Global’s Class A shares and Class B shares were issued as stated below.
In addition to the LTIP, in November 2021 the Company approved its 2021 Employee Stock Option Plan (the “ESOP”). Under the ESOP, key staff employed by the Group and our independent non-executive directors have rendered services in exchange for equity instruments.
42
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The Company granted a number of stock options under the ESOP, including:
| ● | Newly granted stock options (see section Stock options granted in 2021 further below); |
| ● | Stock options, which represent modification of the outstanding options (see Modified complex options further below). |
The common condition for both of these stock option types is that they have service condition. The Group’s management believes that all employees, which received share-based compensation will continue to contribute to the Group’s projects and/or be employed by the Group during the respective vesting periods.
Below is the descriptions of the options granted:
| Type of options | Grant Date | No. of options outstanding | Vesting period | Vesting conditions | ||||
| ESOP options | November 2021, depending on the employee | 2,180,000 | * | 2021-2026 | Service condition | |||
| LTIP - Modified Class B complex vesting options | January 1, 2019 | 2,060,150 | * | 2022-2026 | Service condition, non-market performance condition | |||
| LTIP - Modified complex conditional upon listing | November 18, 2020 | 20,000 | * | 2021 | Service condition, non-market performance condition | |||
| Total share options granted as at June 30, 2022 | 4,260,150 | — | — |
| * | Options granted refer to GDEV Inc. shares |
We classified these share-based payment transactions as equity-settled whereby the Group receives services in exchange for its own equity instruments. We recorded share-based payments expense in general and administrative expenses, game operation cost and selling and marketing expenses of our interim condensed consolidated statement of profit or loss and other comprehensive income.
The table below summarizes the share-based payments expense for the six months ended June 30, 2023 and 2022:
| Six months ended | Six months ended | |||||||
| June 30, 2023 | June 30, 2022 | |||||||
| Class B complex vesting | 256 | 398 | ||||||
| Employee stock option plan | 788 | 1,631 | ||||||
| Total recorded expenses | 1,044 | 2,029 | ||||||
| therein recognized: | ||||||||
| within Game operation cost | 30 | 64 | ||||||
| within Selling and marketing expenses | 61 | 129 | ||||||
| within General and administrative expenses | 953 | 1,836 | ||||||
In relation to the share-based payment expense for six months ended June 30, 2022 we recognized the increase in Other reserves of 2,029 as it corresponds to the equity settled portion of the share options.
In relation to the share-based payment expense for the six months ended June 30, 2023 we recognized the increase in Other reserves of 1,044 as it corresponds to the equity settled portion of the share options.
43
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The table below summarizes the number of outstanding share options at the beginning of 2022 and end of June 2023:
| Employee | Class B complex | Complex conditional | ||||||||||
| stock option | vesting - related to | upon listing – related | ||||||||||
| plan | GDEV Inc. shares | to GDEV Inc. shares | ||||||||||
| Outstanding at the end of 2022 (units) | 2,330,000 | 4,120,300 | 20,000 | |||||||||
| Granted during the period (units) | — | — | — | |||||||||
| Modification of options (units) | — | — | — | |||||||||
| Exercised during the period (units) | (50,000 | ) | (220,731 | ) | — | |||||||
| Forfeited | (100,000 | ) | (1,839,419 | ) | — | |||||||
| Outstanding at the end of June 2023 (units) | 2,180,000 | 2,060,150 | 20,000 | |||||||||
During 2023 1,839,419 Modified Class B complex vesting options (units) and 100,000 options (units) of employee stock option plan were forfeited.
Stock options granted in 2021 (ESOP options)
The ESOP stock options have only the service condition.
We have estimated the fair value of granted awards using Black-Scholes-Merton pricing model taking into account the terms and conditions on which the options were granted.
The following table presents fair value per one option and related assumptions used to estimate the fair value at the grant date:
| Evaluation date (grant date) | November 16-30, 2021 | |
| Vesting period | 60-90 months, depending on the employee | |
| Share market price, US$ | From 7.86 to 8.71 | |
| Strike (exercise) price, US$ | 0 or 10 depending on the grant | |
| Expected volatility | 36.15-37.88% | |
| Dividend yield | 0.0% | |
| Risk-free interest rate | 1.18-1.27% | |
| Average grant-date FV of one option, US$ | 3.57 |
As at June 30, 2023 two of the Group’s employees exercised first tranche of their ESOP option plan of 50,000 shares. One of Group’s employees left the company, so 100,000 of his options forfeited. The amount of income reflected in this interim condensed consolidated statement of profit or loss is 31.
Modified complex options
Under the LTIP adopted in 2016, the Company granted Class B share options on January 1, 2019 with a service condition and a performance-based non-market vesting condition (net income thresholds per management accounts). The contractual term of the options was ten years. The fair value of granted awards was calculated as fair value of 100% share capital of the Company (Equity Value – “EV”) at the grant date adjusted for the discount for lack of marketability (DLOM) and multiplied by the respective share of ownership of the respective tranche. The EV was estimated based on comparable companies’ EV/OCI multiples. Monte-Carlo Simulation method was used for the probability determination, based on which the judgment about the recognition was made.
For the purposes of the valuation each performance condition threshold was treated as a separate option with a separate valuation of the vesting period.
44
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
The following table presents fair value of options and related parameters used to estimate the fair value of our options at the grant date and probability of vesting:
| Evaluation date (grant date) | January 1, 2019 | |
| Equity value, US$ mln | 132 | |
| Expected volatility | 41.00% | |
| Dividend yield | 6.80% | |
| Proxy net income indicator | 0.041201 | |
| Discount for Lack of Marketability* | 8.40% | |
| Total FV for 1,300 complex options** | 7,856.12 |
| *- | applied to the result of fair value estimation. |
| **- | total FV of 1,300 complex options related to Nexters Global shares that in November of 2021 were modified into 4,414,608 complex options related to the shares in GDEV Inc. |
Strike price for the above-mentioned option at the beginning of 2021 was US$0.00
As part of the new ESOP, the Company modified the complex options in November 2021. Under the modified program for a portion of the options the non-market performance condition was eliminated and they include only the service condition. For the remaining options the performance conditions were modified such that only the non-market performance targets were modified. The Company considered the modification to be beneficial to the recipients.
As at December 31, 2022 and June 30, 2023 management reviewed the assessment of future achievement of non-market performance targets and the remaining grant-date fair value was applied to the revised number of share options.
As at June 30, 2023 one of the Group’s employees exercised two tranches of 220,731 of his modified complex options. After the exercise the employee left the company and, therefore, 1,839,419 of the options forfeited. The amount of income reflected in this interim condensed consolidated statement of profit or loss is 128.
31. Commitments and contingencies
Taxation
Although we generally are not responsible for indirect taxes (VAT and withholding sales taxes) generated on games accessed and operated through third-party platforms, we are responsible for collecting and remitting applicable sales, value added, use or similar taxes for revenue generated on games accessed and operated on our own platforms and/or in countries where the law requires the game publishers to pay such taxes even if games are made available for users through third-party platforms. Furthermore, an increasing number of U.S. states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. This is also the case in respect of the European Union, where value added taxes or digital services taxes were or may be imposed on companies making digital sales to consumers within the European Union. In addition, as taxation of IT industries is rapidly developing there is a risk that various tax authorities may interpret certain agreements or tax payment arrangements differently than the Company (including identification of the taxpayer and determination of the tax residency).
We believe that these interim condensed consolidated financial statements reflect our best estimate of tax liabilities and uncertain tax positions, which are appropriately accounted for and/or disclosed in these interim condensed consolidated financial statements. In respect of the above risks, we consider them to be reasonably possible of being materialised, however, the potential financial effects thereof cannot be presently reliably estimated.
45
GDEV Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US$ unless stated otherwise)
32. Russian Geopolitical and Economic Risks
As a result of the military actions in Ukraine, a number of governments, including those of the United States, United Kingdom and European Union, imposed unprecedented sanctions on specified persons and entities in Russia. While the situation remains highly fluid and additional sanctions are possible, neither we, nor any of our subsidiaries are currently subject to any sanctions that have been imposed. Nevertheless, as result of the ongoing conflict in Ukraine, many U.S. and other multi-national businesses across a variety of industries, including consumer goods and retail, food, energy, finance, media and entertainment, tech, travel and logistics, manufacturing and others, have indefinitely suspended their operations and paused all commercial activities in Russia and Belarus. For example, Apple and Google, two of the primary platforms that distribute our games, have suspended their respective digital wallet and mobile payment services, Apple Pay and Google Pay, in relation to credit cards issued by Russian financial institutions that are the subject of sanctions. Players who access our games via these platforms in Russia may therefore be disconnected from the primary means to make in-game purchases. Based on our current geographical distribution of Bookings, management believes that the latest geopolitical developments will have certain residual negative effects on GDEV Inc.’s future financial performance, limited to the share of Bookings deriving from the markets of the former Soviet Union (FSU), which stood at 11% of our total Bookings for 2022 and which, as a percentage of our total Bookings, has been declining over the past few years. The exact effects cannot currently be reliably estimated due to the constantly changing environment.
Our board of directors determined that it is in the best interests of the Company, our player community and our investors to eliminate – to the maximum extent possible within the Company’s control – our exposure to country risks related to Russia. To this end, in 2022 we disposed of our Russian subsidiaries, relocated or laid-off all employees in Russia, and moved all our former Russian business operations to other countries and discontinued offering of our games through Russian social networks however players from Russia continue accessing our games through other platforms.
We do not expect these measures to have a material impact on the Company, as none of the divested subsidiaries represented a material revenue-generating asset. The divestment has no effect on the Company’s ability to continue to offer its full suite of games through its primary third-party platforms which are not based in Russia: Apple, Facebook, Google, Xsolla and Huawei. We have recorded losses on disposal in respect of our divestment of our (former) Russian based subsidiaries in the amount of 4,969. For further details please refer to Note 8.
Additionally, the Company has incurred additional expenses as a consequence of the Russian military conflict in Ukraine. For example, we have incurred costs related to the relocation of critical personnel from Russia, Ukraine and Belarus to Cyprus, Armenia, Kazakhstan and certain other “safe-harbor” countries. Furthermore, prior to the disposition of our Russian-based subsidiaries, we supplemented the compensation paid to our employees located in Russia with additional amounts designed to safeguard these employees against the devaluation of the Russian Ruble and high inflation of consumer prices in Russia that was seen since March of 2022. As of the date of these financial statements, we have largely completed the relocation program and therefore do not expect any impact of the relocation expenses further in 2023 and beyond, though we expect a certain increase in labor costs per employee resulting from our policy of providing salary increases and various compensations on an ongoing basis to our employees to support them during the relocation process and to assist them with settling in their new locations.
33. Events after the reporting period
On August 25, 2023 the Group authorized the acquisition of unsecured convertible notes of Castcrown Ltd in the amount of 600. The convertible notes bear an interest of 7 per cent p.a. and are due on March 31, 2025. The notes were acquired on August 31, 2023.
46