Nexters Inc. (NASDAQ: GDEV), an international game development
company which strives to introduce the joy of core gaming
experiences to casual players, today announced its unaudited
financial and operational results for the third quarter of 2021.
Third Quarter 2021
HighlightsFinancial:
- Record high quarterly revenues of
$115 million, growing 77% year-over-year
- Non-cash non-recurring listing expense of $125 million caused
net loss in the third quarter of 2021 which amounted to $104
million vs. $11 million in the respective period of 2020
- Adjusted Net Profit in the amount
of $8 million in Q3 2021 vs. an Adjusted Net Loss of $11 million in
the respective period of 2020
- Сash flow generated from operating
activities of $51 million, growing 59% year-over-year
- Our cash and cash equivalents
totaled $105 million as of September 30, 2021
Operational:
- Q3 2021 bookings of $151 million,
growing 29% year-over-year
- Bookings from Asia nearly doubled
year-over-year, now constituting 26% of total bookings
- Bookings from Desktop platforms
grew 55% year-over-year, now constituting 30% of total bookings,
taking platform commissions down to 27% of revenues in Q3 2021,
declining 1 p.p. year-over-year
- Monthly paying users of 371
thousand in Q3 2021, growing 30% year-over-year
- Average Bookings per Paying User of
$128, broadly stable compared to $132 in Q3 2020
- Advertisement sales of $9 million,
more than doubling year-over-year, now constituting 6% of total
bookings
Products & M&A:
- Chibi Island, a new casual
adventure game officially released on iOS and Android with total
install base approaching 1.5 million.
- Throne Rush, a strategy game,
launched on Web
- Hero Wars mobile version recently
celebrated its 5th anniversary, with the title’s lifetime bookings
surpassing a milestone of $1 billion
- Nexters launched Boost program as
one of the M&A initiatives to provide independent developers
with expertise and funds needed to launch their games and build
successful international businesses.
Quote by CEO and Co-founder, Andrey
Fadeev:
“The third quarter has been quite significant
for Nexters as within this period we reached two milestones which
will influence our further long-term development and growth.
In accordance with our organic growth strategy,
we see casual games as an opportunity to significantly expand into
a larger audience of casual players. We’ve been quite successful
with casual titles on social; and now, with the traction we have on
mobile with Hero Wars, our plan is to use all our knowledge,
experience and best practices to deliver successful casual games on
mobile platforms. Chibi Island, a new casual adventure game which
was officially released in July this year, is the first title of
that genre with more to follow in the coming months.
On the non-organic side of our growth strategy,
in September we launched the Boost program to support the indie
game development scene. While our broader mergers and acquisitions
strategy encompasses gaming companies and studios of various size,
this program targeting the smaller indie market is our first
officially announced initiative. Boost will focus on talented teams
with innovative games and is intended to help them build a
successful international business on a global scale thanks to
Nexters’ expertise in various genres and on various platforms that
we have accumulated within our years of growth.
So besides positive financial metrics, we set
strategic vectors in the third quarter, the effects of which will,
we believe, positively contribute to Nexters’ long-term
performance.”
Third quarter 2021 financial
performance
|
US$ million |
Q32021 |
Q32020 |
Change(%) |
9M2021 |
9M2020 |
Change(%) |
|
Revenue |
115 |
65 |
77% |
312 |
187 |
67% |
|
Platform commissions |
(31) |
(18) |
72% |
(85) |
(54) |
57% |
|
Game operation cost |
(5) |
(4) |
25% |
(13) |
(11) |
18% |
|
Selling and marketing expenses |
(64) |
(53) |
21% |
(219) |
(126) |
74% |
|
G&A expenses |
(6) |
(0.3) |
n.m. |
(14) |
(1) |
n.m. |
|
Share listing expense* |
(125) |
— |
n.m. |
(125) |
— |
n.m. |
|
Net loss |
(104) |
(11) |
n.m. |
(135) |
(7) |
n.m. |
|
Adjusted Net Income/Loss |
8 |
(11) |
n.m. |
(20) |
(7) |
n.m. |
|
|
|
|
|
|
|
|
|
Cash flows generated from operating activities |
51 |
32 |
59% |
62 |
79 |
-22% |
* Non-cash non-recurring expense by nature.
In the third quarter of 2021 our revenue
increased by $50 million (or 77%) year-over-year and amounted to
$115 million, driven primarily by an increase in bookings in the
amount of $34 million (or 29%) year-over-year to $151 million.
Platform commissions increased by 72% in the
third quarter of 2021 compared with the same period in 2020, driven
primarily by the increase in revenues.
Game operation costs increased by $1 million in
third quarter 2021 vs. the same period in the prior year to reach
$5 million due to an increase in the scale of the Group’s
operations.
Selling and marketing expenses in the third
quarter of 2021 increased by $11 million, or 21% year-over-year,
and amounted to $64 million. The increase was due to growth of the
investments into the acquisition of additional players in the third
quarter of 2021 vs. the same period in prior year. Our selling and
marketing expenses came back to the normalized level in the third
quarter of 2021, driving the total 30% lower as compared to the
peak levels of the second quarter of 2021, in line with our initial
plan.
General and administrative expenses (hereinafter referred to as
“G&A expenses”) increased by $6 million in the third quarter
2021 vs. third quarter 2020. The increase was primarily driven by
an increase in personnel and other expenses resulting from: (i)
recurring and non-recurring expenses associated with listing on
NASDAQ; (ii) consolidation of the Russian subsidiaries since the
beginning of the 2021 and (iii) the increase in the scale of the
Group’s operations.
Excluding the non-recurring expenses related to our business
combination with Kismet Acquisition One Corp, G&A expenses in
Q3 2021 would have increased by approximately $4 million over the
low amount recorded in the comparative period of the prior year,
driven by an increase in personnel and other expenses resulting
from: (i) recurring expenses associated with listing on NASDAQ;
(ii) consolidation of the Russian subsidiaries since the beginning
of the 2021 and (iii) the increase in the scale of the Group’s
operations.
Share listing expense is a non-cash non-recurring expense, which
is determined as the excess of the fair value of the equity
instruments issued by the Company over the fair value of the
identified net assets contributed by Kismet Acquisition One Corp in
its business combination with Nexters (please refer to Note 11 of
the Interim Condensed Consolidated Financial Statements for the
three and nine months ended September 30, 2021 and September 30,
2020 for further details regarding the share listing expense).
Net loss in the third quarter of 2021 amounted
to $104 million vs. $11 million in the respective period of 2020.
The net loss in the third quarter of 2021 originated predominantly
from the non-cash non-recurring share listing expense in the amount
of $125 million.
We have achieved an Adjusted Net Profit in the
amount of $8 million in the third quarter of 2021, an increase of
$19 million vs. an Adjusted Net Loss of $11 million in the
respective period of 2020. This significant increase was primarily
driven by the increase in revenues partially offset by the increase
in selling and marketing expenses, platform commissions and G&A
expenses.
Cash flows generated from operating activities
amounted to $51 million in the third quarter of 2021 vs. $32
million in the same period of 2020, up 59% demonstrating the
increased efficiency and cash generation capacity of our business
in the third quarter of 2021. Our cash flows generated from
operating activities also substantially improved in comparison to
the immediately preceding quarter, when this parameter was
negative.
Third quarter 2021 operational
performance
|
|
Q3 2021 |
Q3 2020 |
Change |
9M 2021 |
9M 2020 |
Change |
|
Bookings ($ million) |
151 |
117 |
29% |
418* |
325 |
29% |
|
share of advertising |
6% |
3% |
3p.p. |
5% |
3% |
2p.p. |
|
MPU (thousand) |
371 |
286 |
30% |
361 |
285 |
27% |
|
ABPPU ($) |
128 |
132 |
(3)% |
122 |
122 |
0% |
|
Total FTE (at the end of the period) |
661 |
376 |
76% |
661 |
376 |
76% |
* Here and elsewhere in this press release the
bookings for the nine months ended September 30, 2021 have been
restated to account for the correction of an immaterial error in
respect of taxes (please refer to Note 4 of the Interim Condensed
Consolidated Financial Statements for the three and nine months
ended September 30, 2021 and September 30, 2020 for further
details).
The share of advertisement sales as percentage
of total bookings approximately doubled in the third quarter of
2021 to 6% compared to 3% in the third quarter of 2020.
Our substantial investments in marketing in 2021
resulted in a substantial increase in MPUs, which reached 371
thousand in the third quarter of 2021 vs. 286 thousand in the
respective period of 2020, a growth of 30%. In the third quarter of
2021 we have observed growth in bookings across all key platforms
and geographies, with especially strong performance in the Desktop
version of our games and in Asia, growing 55% and 95% respectively
year-over-year.
In the third quarter of 2021 ABPPU remained
relatively stable at $128 in comparison to $132 in the respective
period of 2020 as we originated a substantial number of new paying
users in 2021, who tend to have lower ABPPUs at the beginning of
their lifespans, accompanied by the fact that the share of the
paying users located in the geographies where the users tend to
spend less in online gaming increased in our number of total
MPUs.
The substantial increase in MPUs accompanied by
a relatively stable level of ABPPU resulted in quarterly bookings
of $151 million in the third quarter of 2021, which grew 29%
year-over-year from $117 million in the third quarter of 2020.
|
Split of bookings by platform |
Q3 2021 |
Q3 2020 |
Change(%) |
9M 2021 |
9M 2020 |
Change (%) |
|
Mobile |
70% |
|
75% |
|
20% |
|
68% |
|
77% |
|
14% |
|
|
Desktop |
30% |
|
25% |
|
55% |
|
32% |
|
23% |
|
79% |
|
The Desktop versions of our games enable us to
access a wider audience and expand our addressable market.
Additionally, bookings generated on this platform are subject to a
lower commission, taking the platform commissions down to 27% of
revenues in the third quarter of 2021, declining 1 p.p
year-over-year. In the mobile platforms, growth was predominantly
driven by iOS, where we continue to see attractive user acquisition
costs.
|
Split of bookings by geography |
Q3 2021 |
Q3 2020 |
Change(%) |
9M 2021 |
9M 2020 |
Change(%) |
|
US |
30% |
|
37% |
|
5% |
|
32% |
|
39% |
|
6% |
|
|
Europe |
21% |
|
23% |
|
19% |
|
22% |
|
23% |
|
23% |
|
|
Asia |
26% |
|
17% |
|
95% |
|
24% |
|
15% |
|
104% |
|
|
FSU |
13% |
|
15% |
|
11% |
|
13% |
|
15% |
|
10% |
|
|
Other |
10% |
|
8% |
|
67% |
|
9% |
|
8% |
|
46% |
|
Geographically, the strongest growth of bookings
of 95% year-over-year was demonstrated in Asia, with Japan and
South Korea being the key drivers.
In the second half of 2021 we remained on track
with our new game releases. In July 2021 we released Chibi Island
on iOS and Android. As of 30th September 2021, this new casual
adventure game accumulated ca. 1.4 million downloads on iOS and
Android. Every month it engages 280 thousand players on average and
generates between $200 to $300 thousand of bookings. Throne Rush, a
fantasy strategy and one of the Company’s earliest games, has been
launched on the Web platform in October 2021 with a view towards a
further diversification of platforms and a reduction of
commissions. Furthermore, we are in preparations to soft-launch one
more casual game in the coming weeks. The new releases are in line
with the company’s product strategy that, besides further scaling
in the mid-core market, has a strong focus on genre
diversification. Hero Wars, the Company’s largest game, proceeds to
grow – its mobile version has recently celebrated its 5th
anniversary, with the title’s lifetime bookings surpassing a
milestone of $1 billion.
Towards the end of September, Nexters launched
the Boost program – an M&A initiative for talented teams across
the world with a focus on Russian-speaking developers in Eastern
European countries. The program will provide select developers with
know-how to unlock the participants’ full potential and is designed
to help them achieve international success as well as investments
that range between approximately $500,000 and $2.5 million per
project in exchange for an equity share in the studio. Since its
launch the Boost team has reviewed dozens of projects and is
continuing to establish connections within the indie community, as
well as having started negotiations with a few potential targets.
Nexters Boost is the first public step in the Company’s broader
mergers and acquisitions strategy to grow Nexters as a
consolidator. This program should diversify the Company’s product
portfolio and bring new growth opportunities in the coming
years.
Q3 and 9M 2021 conference call and webcast
Nexters will host a conference call and webcast to discuss its
results at 10:00 a.m. U.S. Eastern Time (5:00 p.m. Moscow time,
3:00 p.m. London time) the same day.
| To participate in the conference call, please use
the following details: |
| Standard
International: |
+44 (0) 2071
928000 |
| UK (toll free): |
08003767922 |
| UK (local): |
08445718892 |
| USA (toll free): |
18669661396 |
| USA (local): |
16315107495 |
| Russian Federation (toll free): |
81080023575011 |
| Russian Federation (local): |
4952499849 |
| |
|
| Conference ID: |
1467608 |
| |
|
| Webcast:
https://edge.media-server.com/mmc/p/i9c4n6nv |
About Nexters
Nexters is an international game development company which
strives to introduce the joy of core gaming experiences to casual
players. Thanks to such hit games like Hero Wars, Throne Rush, and
others the company reached over 200 million installs worldwide and
became one of the top five independent mobile game companies in
Europe. Headquartered in Cyprus, Nexters is built upon a team of
600+ inspired gaming professionals. Please find more information
about Nexters at: https://nexters.com and follow Nexters
on LinkedIn and Twitter.
Contacts:
Investor RelationsRoman Safiyulin | Chief Corporate Development
Officerr.safiyulin@nexters.com
MediaAndrey Akimov | Chief Communications
Officeraa@nexters.com
Cautionary statement regarding
forward-looking statements
Certain statements in this press release may
constitute “forward-looking statements” for purposes of the federal
securities laws. Such statements are based on current expectations
that are subject to risks and uncertainties. In addition, any
statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any
underlying assumptions, are forward-looking statements.
The forward-looking statements contained in this
press release are based on the Company’s current expectations and
beliefs concerning future developments and their potential effects
on the Company. There can be no assurance that future developments
affecting the Company will be those that the Company has
anticipated. Forward-looking statements involve a number of risks,
uncertainties (some of which are the Company’s control) or other
assumptions. You should carefully consider the risks and
uncertainties described in the “Risk Factors” section of the
registration statement on Form F-1 filed by the Company on
September 22, 2021 and other documents filed by the Company from
time to time with the Securities and Exchange Commission. Should
one or more of these risks or uncertainties materialize, or should
any of the Company’s assumptions prove incorrect, actual results
may vary in material respects from those projected in these
forward-looking statements. Forward-looking statements speak only
as of the date they are made. Readers are cautioned not to put
undue reliance on forward-looking statements, and the Company
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as may be required under applicable securities
laws.
Presentation of Non-GAAP Financial
Measures
In addition to the results provided in
accordance with IFRS throughout this press release, the Company has
provided the non-IFRS financial measure “Adjusted Net Income/Loss”
(the “Non-GAAP Financial Measure”). The Company defines Adjusted
Net Income/Loss as the net income/loss as presented in the
Company's financial statements in accordance with IFRS, adjusted to
exclude (i) share-based compensation expense, (ii) impairment of
non-current assets, (iii) any gains and losses arising as result of
business combinations (including the amortization of intangible
assets acquired in the business combinations and transaction costs
related to the business combinations) and (iv) certain
non-cash or other special items that we do not consider indicative
of our ongoing operating performance. The Company uses this
Non-GAAP Financial Measure for business planning purposes and in
measuring its performance relative to that of its competitors. The
Company believes that this Non-GAAP Financial Measure is a useful
financial metric to assess its operating performance from
period-to-period by excluding certain items that the Company
believes are not representative of its core business. This Non-GAAP
Financial Measure is not intended to replace, and should not be
considered superior to, the presentation of the Company’s financial
results in accordance with IFRS. The use of the Non-IFRS Financial
Measure terms may differ from similar measures reported by other
companies and may not be comparable to other similarly titled
measures.
Reconciliation of the Net Income/Loss to
the Adjusted Net Income/Loss
|
(US$ million) |
Q32021 |
Q32020 |
9M2021 |
9M2020 |
|
Net loss |
(104) |
|
(11) |
|
(135) |
|
(7) |
|
|
Add back: |
|
|
|
|
|
- Share based compensation expense |
- |
|
- |
|
1 |
|
|
|
- Impairment of non-current assets |
- |
|
- |
|
- |
|
- |
|
|
- Gains and losses arising as result of business combinations* |
125 |
|
- |
|
125 |
|
- |
|
|
- Other items that we do not consider indicative of our ongoing
operating performance** |
(13) |
|
- |
|
(10) |
|
- |
|
|
- Tax effect of the reconciling items |
- |
|
|
(1) |
|
|
|
Adjusted Net Income/Loss |
8 |
|
(11) |
|
(20) |
|
(7) |
|
* Consists entirely of the non-cash
non-recurring share listing expense.** Includes non-recurring
expenses related to the listing on NASDAQ and merger with Kismet
Acquisition One Corp which are added back less the gain resulting
from change in fair value of the warrant obligations.
Nexters Inc.Interim Condensed Consolidated
Financial StatementsFor the three and nine months ended September
30, 2021 and September 30, 2020
| Contents |
|
| |
|
| Independent Auditor’s Report on Review of Interim Condensed
Consolidated Financial Statements |
3 |
| INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION |
5 |
| INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME |
6 |
| INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY |
7 |
| INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
8 |
| NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
9 |
Independent Auditor’s Report on Review of Interim
Condensed Consolidated Financial Statements
Interim Condensed Consolidated Statement of
Financial PositionAs at September 30, 2021 and December 31,
2020*(in thousands of US$)
| |
NOTE |
September 30,2021 |
|
December 31,2020 |
|
| ASSETS |
|
|
|
| Non-current
assets |
|
|
|
|
Property and equipment |
14 |
1,098 |
|
171 |
|
| Intangible assets |
|
145 |
|
76 |
|
| Goodwill |
3 |
1,473 |
|
— |
|
| Long-term deferred platform
commission fees |
21 |
113,185 |
|
89,588 |
|
| Right-of-use assets |
16 |
1,430 |
|
1,044 |
|
| Deferred tax asset |
|
7 |
|
— |
|
| Total non-current
assets |
|
117,338 |
|
90,879 |
|
| Current
assets |
|
|
|
| Trade and other
receivables |
17 |
47,669 |
|
32,974 |
|
| Loans receivable |
15 |
— |
|
8 |
|
| Cash and cash equivalents |
|
105,453 |
|
84,557 |
|
| Prepaid tax |
|
3,213 |
|
3,137 |
|
| Total current
assets |
|
156,335 |
|
120,676 |
|
| Total
assets |
|
273,673 |
|
211,555 |
|
| |
|
|
|
| LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
| Equity |
|
|
|
| Share capital |
|
— |
|
27 |
|
| Other reserves |
|
163,882 |
|
8,289 |
|
| Accumulated deficit |
|
(342,496 |
) |
(110,513 |
) |
| Total
equity |
|
(178,614 |
) |
(102,197 |
) |
| Non-current
liabilities |
|
|
|
| Lease liabilities -
non-current |
16 |
541 |
|
818 |
|
| Long-term deferred
revenue |
21 |
119,398 |
|
79,221 |
|
| Share warrant obligations |
20 |
18,472 |
|
— |
|
| Total non-current
liabilities |
|
138,411 |
|
80,039 |
|
| Current
liabilities |
|
|
|
| Short-term loans |
19 |
— |
|
49 |
|
| Lease liabilities -
current |
16 |
860 |
|
293 |
|
| Trade and other payables |
18 |
30,299 |
|
17,503 |
|
| Tax liability |
|
620 |
|
306 |
|
| Deferred revenue |
21 |
282,097 |
|
215,562 |
|
| Total current
liabilities |
|
313,876 |
|
233,713 |
|
| Total
liabilities |
|
452,287 |
|
313,752 |
|
| Total liabilities and
shareholders' equity |
|
273,673 |
|
211,555 |
|
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
Interim Condensed Consolidated Statement of
Profit or Loss and Other Comprehensive IncomeFor the three and nine
months ended September 30, 2021 and September 30, 2020*(in
thousands of US$)
| |
NOTE |
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Revenue |
7 |
311,510 |
|
186,535 |
|
115,177 |
|
64,500 |
|
| Costs and expenses,
excluding depreciation
and amortization |
|
|
|
|
|
| Cost of revenue: |
|
|
|
|
|
| Platform commissions |
|
(84,707) |
|
(54,196) |
|
(30,717) |
|
(18,422) |
|
| Game operation cost |
8 |
(12,997) |
|
(11,471) |
|
(4,838) |
|
(4,220) |
|
| Selling and marketing
expenses |
9 |
(219,154) |
|
(126,392) |
|
(63,682) |
|
(53,039) |
|
| General and administrative
expenses |
10 |
(13,695) |
|
(869) |
|
(6,057) |
|
(306) |
|
| Share listing expense |
11 |
(125,438) |
|
— |
|
(125,438) |
|
— |
|
| Total
costs and expenses, excluding depreciation
and amortization |
(455,991) |
|
(192,928) |
|
(230,732) |
|
(75,987) |
|
| Depreciation and
amortization |
|
(1,713) |
|
(395) |
|
(645) |
|
(163) |
|
| Loss from
operations |
|
(146,194) |
|
(6,788) |
|
(116,200) |
|
(11,650) |
|
| Net finance income |
|
11,544 |
|
348 |
|
12,791 |
|
702 |
|
| Loss before income
tax |
|
(134,650) |
|
(6,440) |
|
(103,409) |
|
(10,948) |
|
| Income tax expense |
12 |
(845) |
|
(612) |
|
(291) |
|
(223) |
|
| Loss for the period,
net of tax |
|
(135,495) |
|
(7,052) |
|
(103,700) |
|
(11,171) |
|
| Other comprehensive
(loss)/income |
|
(392) |
|
3 |
|
(142) |
|
1 |
|
| Total comprehensive
loss for the period, net of tax |
|
(135,887) |
|
(7,049) |
|
(103,842) |
|
(11,170) |
|
| |
|
|
|
|
|
| Loss per
share: |
|
|
|
|
|
| Basic and diluted loss per share,
US$ |
6 |
(0.76) |
|
(0.04) |
|
(0.56) |
|
(0.06) |
|
These interim condensed consolidated financial statements were
approved by management on November 12, 2021 and signed on its
behalf:
| Andrey
Fadeev |
Alexander Karavaev |
|
| Chief Executive Officer |
Chief
Financial Officer |
|
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Interim Condensed Consolidated Statement of
Changes in EquityFor the nine months ended September 30, 2021 and
September 30, 2020(in thousands of US$ except number of shares)
| |
NOTE |
Number ofsharesoutstanding |
Share capital |
Other reserves |
Accumulateddeficit |
Total |
| |
|
|
|
|
|
|
|
Balance at January 1, 2020 |
|
20,000 |
27 |
|
8,106 |
|
(56,702 |
) |
(48,569 |
) |
| Loss for the period |
|
— |
— |
|
— |
|
(7,052 |
) |
(7,052 |
) |
| Other comprehensive
income |
|
— |
— |
|
— |
|
3 |
|
3 |
|
| Total comprehensive
loss for the period |
|
— |
— |
|
— |
|
(7,049 |
) |
(7,049 |
) |
| Share-based payments |
25 |
— |
— |
|
36 |
|
(538 |
) |
(502 |
) |
| Distribution and
dividends |
13 |
— |
— |
|
— |
|
(17,910 |
) |
(17,910 |
) |
| Total transactions
with shareholders |
|
— |
— |
|
36 |
|
(18,448 |
) |
(18,412 |
) |
| Balance at September
30, 2020 |
|
20,000 |
27 |
|
8,142 |
|
(82,199 |
) |
(74,030 |
) |
| |
|
|
|
|
|
|
| Balance at December
31, 2020, as previously reported |
|
20,000 |
27 |
|
8,289 |
|
(111,070 |
) |
(102,754 |
) |
| Impact of correction |
4 |
— |
— |
|
— |
|
557 |
|
557 |
|
| Balance at January 1,
2021 |
|
20,000 |
27 |
|
8,289 |
|
(110,513 |
) |
(102,197 |
) |
| Loss for the period |
|
— |
— |
|
— |
|
(135,495 |
) |
(135,495 |
) |
| Other comprehensive loss |
|
— |
— |
|
(390 |
) |
(2 |
) |
(392 |
) |
| Total comprehensive
loss for the period |
|
— |
— |
|
(390 |
) |
(135,497 |
) |
(135,887 |
) |
| Equity contribution from
shareholders |
3 |
— |
(27 |
) |
119,680 |
|
— |
|
119,653 |
|
| Issuance of shares upon the
Transaction |
3 |
196,503,101 |
— |
|
— |
|
— |
|
— |
|
| Share-based payments |
11/25 |
— |
— |
|
125,534 |
|
(486 |
) |
125,048 |
|
| Share warrant obligations |
20 |
— |
— |
|
(32,109 |
) |
— |
|
(32,109 |
) |
| Distribution and
dividends |
3/13 |
— |
— |
|
(57,122 |
) |
(96,000 |
) |
(153,122 |
) |
| Total transactions
with shareholders |
|
196,503,101 |
(27 |
) |
155,983 |
|
(96,486 |
) |
59,470 |
|
| Balance at September
30, 2021 |
|
196,523,101 |
— |
|
163,882 |
|
(342,496 |
) |
(178,614 |
) |
The accompanying notes are an integral part of these interim
condensed consolidated financial statements.
Interim Condensed Consolidated Statement of Cash
FlowsFor the three and nine months ended September 30, 2021 and
September 30, 2020 (in thousands of US$)
| |
Note |
Nine months ended September 30, |
|
Three months ended September 30, |
|
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Operating
activities |
|
|
|
|
|
| Loss for the
period, net of tax |
(135,495 |
) |
(7,052 |
) |
(103,700 |
) |
(11,171 |
) |
| Adjustments for: |
|
|
|
|
|
| Depreciation and
amortization |
1,713 |
|
395 |
|
645 |
|
163 |
|
| Share-based payments
expense |
11/25 |
126,349 |
|
36 |
|
125,644 |
|
12 |
|
| Net finance
costs/(income) excluding bank charges |
1,875 |
|
(458 |
) |
747 |
|
(731 |
) |
| Change in fair value of share
warrant obligations |
20 |
(13,637 |
) |
- |
|
(13,637 |
) |
- |
|
| Income tax expense |
12 |
845 |
|
612 |
|
291 |
|
223 |
|
| |
|
(18,350 |
) |
(6,467 |
) |
9,990 |
|
(11,504 |
) |
| Changes in working
capital: |
|
|
|
|
| Increase in deferred platform
commissions |
21 |
(23,597 |
) |
(40,686 |
) |
(7,932 |
) |
(14,736 |
) |
| Increase in deferred
revenue |
21 |
106,712 |
|
138,816 |
|
34,990 |
|
52,976 |
|
|
(Increase)/decrease in trade and other receivables |
(15,261 |
) |
(16,182 |
) |
16,341 |
|
(1,505 |
) |
|
Increase/(decrease) in trade and other payables |
12,480 |
|
3,941 |
|
(2,241 |
) |
7,476 |
|
| |
|
80,334 |
|
85,889 |
|
41,158 |
|
44,211 |
|
| Income tax paid |
|
(135 |
) |
(290 |
) |
(105 |
) |
(290 |
) |
| Net cash
flows generated from operating activities |
61,849 |
|
79,132 |
|
51,043 |
|
32,417 |
|
| |
|
|
|
|
|
| Investing
activities |
|
|
|
|
- |
|
| Acquisition of
intangible assets |
(145 |
) |
- |
|
(55 |
) |
- |
|
| Acquisition of property and
equipment |
14 |
(710 |
) |
(139 |
) |
(261 |
) |
(90 |
) |
| Acquisition of subsidiary net
of cash acquired |
3 |
(1,240 |
) |
- |
|
- |
|
- |
|
| Proceeds from repayment of
loans |
15 |
8 |
|
521 |
|
282 |
|
342 |
|
| Net cash
flows (used in)/from investing activities |
(2,087 |
) |
382 |
|
(34 |
) |
252 |
|
| |
|
|
|
|
|
| Financing
activities |
|
|
|
|
|
| Payments of lease
liabilities |
16 |
(1,367 |
) |
(246 |
) |
(427 |
) |
(13 |
) |
| Interest on lease |
16 |
(54 |
) |
(18 |
) |
(4 |
) |
(9 |
) |
| Repayment of borrowings |
19 |
(49 |
) |
(3,978 |
) |
- |
|
- |
|
| Dividends paid and
distribution to shareholders |
3/13 |
(155,684 |
) |
(17,853 |
) |
(105,150 |
) |
(9,666 |
) |
| Cash acquired in the
Transaction |
3 |
119,659 |
|
- |
|
119,659 |
|
- |
|
| Net cash
flows from/(used in) financing activities |
(37,495 |
) |
(22,095 |
) |
14,078 |
|
(9,688 |
) |
| |
|
|
|
|
|
| Net
increase in cash and cash equivalents for the period |
22,267 |
|
57,419 |
|
65,087 |
|
22,981 |
|
| Cash and cash
equivalents at the beginning of the period |
84,557 |
|
17,565 |
|
40,898 |
|
52,499 |
|
| Effect of changes
in exchange rates on cash held |
(1,371 |
) |
925 |
|
(532 |
) |
429 |
|
| Cash and
cash equivalents at the end of the period |
105,453 |
|
75,909 |
|
105,453 |
|
75,909 |
|
The accompanying notes are an integral part of
these interim condensed consolidated financial statements.
1. Reporting entity
Nexters Inc. (the “Company”) is a business
company incorporated under the laws of the British Virgin Islands
on January 27, 2021, which was formed for the sole purpose of
effectuating the Transaction contemplated by the Business
Combination Agreement (see Note 3), which was consummated on
August 26, 2021.
Prior to the Transaction, the Company had no
material assets and did not conduct any material activities other
than those incidental to its formation and the matters contemplated
by the Business Combination Agreement, such as the making of
certain required securities law filings.
The mailing address of Nexters Inc.’s principal
executive office is 55, Griva Digeni, 3101, Limassol, Cyprus.
Nexters Inc., is the direct parent of Nexters
Global Ltd (the “Subsidiary”), which was incorporated in Cyprus on
November 2, 2009 as a private limited liability company under the
Cyprus Companies Law, Cap. 113. The Subsidiary’s registered office
is at Faneromenis 107, 6031, Larnaca, Cyprus.
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 23.
The Group has no ultimate controlling party.
2. Basis of preparation
These interim condensed consolidated financial
statements for the three and nine months ended September 30, 2021
have been prepared in accordance with IAS 34 Interim Financial
Reporting as issued by the International Accounting Standards Board
(IASB), and should be read in conjunction with the Subsidiary’s
last annual consolidated financial statements as at and for the
year ended December 31, 2020 included in the Form F-4/A for the
year ended December 31, 2020 as filed with the Securities and
Exchange Commission on July 28, 2021. They do not include all the
information required for a complete set of financial statements
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the IASB. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group’s financial position and performance since the annual
consolidated financial statements for the year ended December 31,
2020.
These interim condensed consolidated financial
statements were authorized for issue by the Group’s Board of
Directors on November 12, 2021.
3. Summary of significant accounting
policies
The accounting policies and methods of
computation applied in the preparation of these interim condensed
consolidated financial statements are consistent with those
disclosed in the Subsidiary’s annual consolidated financial
statements of the Group for the year ended December 31, 2020
included in the Form F-4/A for the year ended December 31, 2020 as
filed with the Securities and Exchange Commission on July 28, 2021,
except for the adoption of new standards effective as at January 1,
2021 and described below. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is
not yet effective.
4. Specific policies applicable from
January 1, 2021 for interest rate benchmark reform and
COVID-19-related rent exemption
Interest Rate Benchmark Reform Phase 2
amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 became
effective since January 1, 2021.
These Phase 2 amendments provide practical
relief from certain requirements in IFRS Standards. These reliefs
relate to modifications of financial instruments and lease
contracts or hedging relationships triggered by a replacement of a
benchmark interest rate in a contract with a new alternative
benchmark rate.
The amendments also provide an exception to use
a revised discount rate that reflects the change in interest rate
when remeasuring a lease liability because of a lease modification
that is required by interest rate benchmark reform.
Finally, the Phase 2 amendments provide a series
of temporary exceptions from certain hedge accounting requirements
when a change required by interest rate benchmark reform occurs to
a hedged item and/or hedging instrument that permit the hedge
relationship to be continued without interruption.
The International Accounting Standards Board
(IASB) has published 'COVID-19-Related Rent Concessions beyond June
30, 2021 (Amendment to IFRS 16), that extends, by one year, the May
2020 amendment that provides lessees with an exemption from
assessing whether a COVID-19-related rent concession is a lease
modification.
These amendments had no impact on the interim
condensed consolidated financial statements of the Group.5.
Business combinations, goodwill and merger transaction
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 operating 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
recognized 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 vested share-based
payment awards of the acquiree that are replaced 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.
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. 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, 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.
Acquisition of NX Studio LLC, NX Online LLC and NHW
Ltd
On February 3, 2021, Nexters Global Ltd acquired
100% of the voting shares in NX Online LLC and NX Studio LLC, two
Russian game development studios, for the total consideration of
1,247 (RUB 93 million), which comprises the whole business
acquisition. 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.
The interim condensed consolidated financial statements include the
results of the companies for the eight-month period from the
acquisition date.
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), which comprises the whole business
acquisition. The consideration was fully paid in cash. The
Company’s management considers the acquisition of the testing
development team as a primary business purpose of the deal. The
acquisition has been accounted for using the acquisition method.
The interim condensed consolidated financial statements include the
results of the company for the six-month period from the
acquisition date.
The fair values of the identifiable assets and
liabilities of all the acquired companies as at the date of
acquisition were:
|
|
Fair value recognized onacquisition, February 3,2021,NX
Studio LLC |
Fair value recognized onacquisition, February 3, 2021,NX
Online LLC |
Fair value recognized onacquisition, April 5, 2021,NHW
Ltd |
|
Assets |
|
|
|
|
Property and equipment |
390 |
|
85 |
|
— |
|
Intangible assets |
38 |
|
14 |
|
— |
|
Right-of-use assets |
1,164 |
|
395 |
|
— |
|
Trade and other receivables |
656 |
|
80 |
|
15 |
|
Other assets |
91 |
|
27 |
|
— |
|
Cash and cash equivalents |
26 |
|
4 |
|
1 |
|
Prepaid tax |
28 |
|
— |
|
— |
|
|
2,393 |
|
605 |
|
16 |
|
Liabilities |
|
|
|
|
Deferred tax liability |
(4 |
) |
(16 |
) |
— |
|
Lease liabilities - current |
(1,164 |
) |
(395 |
) |
— |
|
Trade and other payables |
(1,415 |
) |
(218 |
) |
— |
|
Tax liability |
— |
|
(4 |
) |
— |
|
|
(2,583 |
) |
(633 |
) |
— |
|
Total identifiable net assets at fair value |
(190 |
) |
(28 |
) |
16 |
|
Goodwill arising on acquisition |
1,274 |
|
191 |
|
8 |
|
Purchase consideration transferred |
1,084 |
|
163 |
|
24 |
|
Analysis of cash flows on acquisition: |
|
|
|
Net cash acquired with the subsidiary |
|
31 |
|
|
Cash paid |
|
(1,271 |
) |
|
Net cash flow in acquisition |
|
(1,240 |
) |
Goodwill recognized in the amount of 1,473 is
attributable primarily to the expected synergies and was assigned
to the whole Group as one Cash Generating Unit. None of the
goodwill is expected to be deductible for income tax purposes. The
Company did not recognize separately from the acquisition any
acquisition related costs that should be expensed in the current
period.
Russian companies’ property and equipment
consist of office equipment purchased within 2020, so its fair
value approximates to its carrying amount.
At the date of the acquisition, the fair value
of the trade receivable of Russian companies approximates to its
carrying amount due to the fact they are represented by short-term
advances and lease deposit.
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 receivables
amount represents gross contractual amounts for the acquired
receivables.
Nexters Global Ltd and Russian companies were
parties to a pre-existing relationship with the acquirees, 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.
From the date of acquisition, NX Studio LLC and
NX Online LLC and NHW Ltd have contributed no revenue as it was
entirely intercompany and was eliminated and contributed 624, 210
and 10 respectively to the net profit before tax from the
continuing operations of the Group.
If the acquisition had taken place at the
beginning of the year, net profit from continuing operations for
the period contributed by NX Studio LLC, NX Online LLC and NHW Ltd
would have been 417, 155 and 10.
Nexters Global Ltd merger with Kismet
Acquisition One Corp
On August 26, 2021 the Company successfully
consummated the previously announced business combination with
Kismet Acquisition One Corp. (“Kismet”), which was announced on
February 1, 2021. The Company treated the Transaction as a capital
transaction equivalent to the issue of shares of the Company in
exchange for the net monetary assets of Kismet. The Transaction did
not constitute a business combination as defined under IFRS 3
Business Combinations, as Kismet is a non-operating entity that
does not meet the definition of a business under IFRS 3, as given
that it consisted predominantly of cash in the Trust Account.
As at the Closing Date, the following
transactions occurred pursuant to the terms of the Business
Combination Agreement (the “Transaction”):
-
the merger of Kismet into Nexters Inc., with Nexters Inc. surviving
the merger and the security holders of Kismet (other than security
holders of Kismet who elected to redeem their Kismet ordinary
shares) becoming security holders of Nexters Inc. (the
“Merger”),
-
the acquisition by Nexters Inc. of all the issued and outstanding
share capital of Nexters Global Ltd. from the holders of Nexters
Global’s share capital for a combination of cash and Nexters
Global’s ordinary shares, such that Nexters Global is a direct
wholly owned subsidiary of Nexters Inc. (the “Share
Acquisition”).
Prior to the Merger, a total of 21,811,242
Kismet ordinary shares were redeemed for a value of 218,190,
resulting in a total of 3,188,758 Kismet’s public ordinary shares
remaining issued and outstanding as at the time of the Merger.
Under the Business Combination Agreement, in
consideration for the purchase of Nexters Global’s share capital in
the Share Acquisition, Nexters Inc.:
-
paid to the shareholders of Nexters Global cash in an aggregate
amount of 57,122;
-
issued to the shareholders of Nexters Global a total of 176,584,343
Nexters Inc. ordinary shares; and
-
will issue to the former shareholders of Nexters Global 20,000,000
Deferred Exchange Shares, subject to certain conditions being met,
as further described in the section entitled (“Deferred Exchange
Shares”).
The cash acquired by the Group in the
Transaction (post all transaction related expenses) amounted
to 119,654.
On January 31, 2021, Kismet, Nexters Inc.
and Kismet Sponsor Limited, a British Virgin Islands business
company (the “Sponsor”) entered into an amended and restated
Forward Purchase Agreement (the “A&R Forward Purchase
Agreement”). The A&R Forward Purchase Agreement amended the
Forward Purchase Agreement, dated August 5, 2020, between
Kismet and the Sponsor by, among other things, increasing the
Sponsor’s purchase commitment thereunder from US$ 20 million to US$
50 million and replacing the Sponsor’s commitment to acquire
Kismet’s units with a commitment to acquire 5,000,000 Nexters
Inc. ordinary shares and 1,000,000 Nexters Inc. public warrants in
a private placement which occurred after the Merger and prior to
the Share Acquisition.
On July 16, 2021, Kismet, Nexters Global
Ltd and the Sponsor entered into separate subscription agreements
(each as amended, restated or supplemented from time to time, a
“PIPE Subscription Agreement”) with certain institutional investors
that are not “U.S. persons” as defined in Regulation S under
the Securities Act and with whom the Sponsor had prior business
relationships (each, a “PIPE Investor”), pursuant to which the PIPE
Investors agreed to subscribe for and purchase an aggregate of
5,000,000 Nexters ordinary shares for a purchase price of US$ 10.00
per share for an aggregate commitment of US$ 50 million in a
private placements outside the United States in reliance on
Regulation S under the Securities Act (the “PIPE”). The PIPE
was consummated concurrently with the closing of the
Transaction.
As at Closing Date, immediately subsequent to
the consummation of the Transaction, there were 196,523,101 Nexters
ordinary shares outstanding. Additionally, there were 20,250,000
Nexters warrants outstanding, each of which entitle the holder to
purchase one Nexters ordinary share at an exercise price of US$
11.50 per share. Furthermore, options to purchase 120,000 Nexters
ordinary shares at an exercise price of US$ 10.00 per share were
held by three of Kismet’s independent directors, which options
vested upon the consummation of the Transaction.
The following table sets forth information
regarding the shareholdings of Nexters ordinary shares as at the
Closing Date immediately subsequent to the consummation of the
Transaction, based on the actual number of shares held and
outstanding.
|
|
Number ofOrdinary Shares |
Percentage ofOrdinary Shares |
| Kismet’s public
shareholders |
3,188,758 |
1.6% |
| Sponsor |
11,750,000 |
6.0% |
| Nexters Global
shareholders |
176,584,343 |
89.9% |
| PIPE investors |
5,000,000 |
2.5% |
|
Total |
196,523,101 |
100% |
Deferred Exchange Shares
An aggregate of 20,000,000 Nexters Inc. deferred
exchange shares were issued to the former shareholders of Nexters
Global as part of the Transaction. The issuance has been deferred
as follows: (i) the issuance of 10,000,000 ordinary shares, in the
aggregate, is deferred until the volume weighted average trading
price of Nexters Inc. ordinary shares is US$ 13.50 or greater for
any 20 trading days within a period of 30 trading days prior to the
third anniversary of the Share Acquisition Closing; and (ii) the
issuance of an additional 10,000,000 ordinary shares, in the
aggregate, is deferred until the volume weighted average trading
price of Nexters Inc. ordinary shares is US$ 17.00 or greater for
any 20 trading days within a period of 30 trading days prior to the
third anniversary of the Share Acquisition Closing.
The arrangement is accounted for in accordance
with IFRS 2 and considered in calculation of the share listing
expense (see Note 11).
6. Use of judgements and estimates
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 and liabilities, income, and
expense. Actual results may differ from these estimates.
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, 2020 except for as described below.
Change in estimates and accounting
policy
Lifespans – changes in estimate
Since January 1, 2020 we determine the estimated
weighted average playing period of payers by game on a quarterly
basis, beginning at the time of a payer’s first purchase in the
respective game and ending on a date when that paying player is
deemed to be no longer playing. To determine when paying players
are no longer playing a given game, we analyse the entire
population of payers who made in-game payments in the relevant
periods and determine whether each payer is an active or inactive
player as at the date of our analysis. To determine which payers
are inactive, we analyse the dates that each payer last logged into
that game. We determine a player to be inactive once they have
reached a period of inactivity for which it is probable that they
will not return to a specific game. We use judgment to set a
minimum period of inactivity to distinguish between active users
and those that are deemed inactive at the date of evaluation which
is currently determined as 30 days after last login date for the
majority of platforms/games. Based on the actual expired lifespans
and projection for active players, we then project an average
expected lifespan term of the population.
We use a statistical estimation model to arrive
at the average playing period of the paying users for each
platform. As at September 30, 2021 and 2020 player lifespan for
Hero Wars averages 24 and 21 months respectively.
The estimated player lifespan in our other games
as at September 30, 2021 and 2020 averages 24 months and
38 months respectively.
Had there been no change in the estimated
players lifespans as at September 30, 2021 as compared to September
30, 2020, the revenue for the nine months ended September 30, 2021
would have been higher by an amount of 50,586 and the profit before
tax for the nine months ended September 30, 2021 (also taking into
consideration the effects of estimated players lifespans on
platform commissions) would have been higher by an amount of
36,438.
Short-term leases and leases
of low-value assets – change in accounting
policy
The standard includes two recognition exemptions
for lessees – leases of ’low-value’ assets (e.g.,
personal computers) and short-term leases (i.e., leases with a
lease term of 12 months or less).
Since January 1, 2021 the Group does not apply
the short-term lease recognition exemption to its short-term leases
of office premises (i.e., those leases that have a lease term of 12
months or less from the commencement date and do not contain a
purchase option). Lease payments on such short-term leases are
recognized as a right-of-use asset and a lease liability at the
lease commencement date.
The right-of-use asset is initially measured at
cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less any
lease incentives received.
Immaterial error
During the first quarter of 2021, the Group
identified an omission related to the calculation of withholding
tax in Brazil and Taiwan. In accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors, the Group
evaluated the materiality of the errors from both a quantitative
and qualitative perspective and concluded that the omissions were
immaterial to the Group’s prior period consolidated financial
statements. Since these revisions were not material to any prior
period interim or annual consolidated financial statements, no
amendments to previously filed reports are required, and the
comparative data for the year ended December 31, 2020 is corrected
in these interim condensed consolidated financial statements.
Consequently, as at and for the year ended December 31, 2020, the
correction of the errors resulted in an increase in Revenue from
sales of virtual goods of 463 (Taiwan withholding tax) and an
increase in Corporate income tax expense by 844 (Taiwan and Brazil
withholding tax) with the respective increase in Tax liabilities by
289 and the decrease of Trade and other payables by 97 and Trade
and other receivables by 189.
For the nine months ended September 30, 2020 the
correction of the errors resulted in an increase in Revenue from
sales of virtual goods of 253 (Taiwan withholding tax) and an
increase in Corporate income tax expense by 612 (Taiwan and Brazil
withholding tax) with the respective increase in Tax liabilities by
216 and decrease in Trade and other receivables by 210 and the
decrease of Trade and other payables by 67.
For the three months ended September 30, 2020
the correction of the errors resulted in an increase in Revenue
from sales of virtual goods of 78 (Taiwan withholding tax) and an
increase in Corporate income tax expense by 223 (Taiwan and Brazil
withholding tax).
During the third quarter of 2021, the Group
identified an immaterial error related to the calculation of
withholding tax in Japan for the periods ended on December 31, 2020
and earlier. Effective October 1, 2015, business-to-consumer
(“B2C”) sales of electronically supplied services (“ESS”) provided
to recipients in Japan are subject to Japanese Consumption Tax
(“JCT”). Based on the updated estimation the Group’s tax obligation
should be determined as 10/110% of Gross Sales of the Group in
Japan in the reporting period if Gross Sales for two years before
the reporting period exceeded 10,000,000 JPY. As such, sales
starting 2021 are subject to taxation as the threshold of
10,000,000 JPY as per JCT was exceeded in the year 2019. However,
as at December 31, 2020 it was considered all the gross bookings in
the jurisdiction should be taxed, thus, tax obligation was accrued
on those sales.
The Management of the Company retrospectively
corrected the liability previously accrued as at December 31, 2020
in the amount of 1,999. Since these revisions were not material to
any prior period interim or annual consolidated financial
statements, no restatements to previously filed reports are
required, and the comparative data for the year ended December 31,
2020 is revised in these interim condensed consolidated financial
statements. Consequently, as at and for the year ended December 31,
2020, the correction of the errors resulted in an increase in
Revenue from sales of virtual goods of 913 and a decrease in
Platform commission expense by 25 with the respective decrease of
Trade and other payables by 1,999, in an increase to Long-term
deferred revenue by 235, Deferred revenue by 851 and Long-term
deferred platform commission fees by 25.
For the nine months ended September 30, 2020 the
correction of the errors resulted in an increase in Revenue from
sales of virtual goods of 429 and a decrease in Platform commission
expense by 10 with the respective decrease of Trade and other
payables by 1,154, in an increase in Long-term deferred revenue by
117, Deferred revenue by 608 and Long-term deferred platform
commission fees by 10.
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 20,250,000
warrants of the Company, 13,500,000 of which are public and
6,750,000 of which are private.
The Company accounts for the warrants in its
financial statements as liability in accordance with IAS 32 -
Financial Instruments: Presentation and IFRS 9 - Financial
Instruments. The warrants are initially recorded at fair value and
then revalued at each reporting date until exercised, with any
change in fair value to be recognized in the statement of profit or
loss and other comprehensive income.
The fair value of Public Warrants, which are
traded in active market is measured based on the quoted market
prices.
Management exercised judgement in applying
Monte-Carlo simulation for the purpose of estimating fair value of
Private Warrants disclosed in the Note 20. One of the key inputs
significantly impacting the derived fair value is the Company's
share price quote on Nasdaq. Based on management’s assessment, the
share price quote should be used as an input to the model without
any adjustments. For the key assumptions of the model see Note
20.
Seasonality
Our business experiences the effects of
seasonality. We usually experience certain decreases in the
efficiency of our marketing and user acquisition towards the end of
the year as a result of competition for those same users from
retail advertising campaigns during Halloween, Thanksgiving and
Christmas. We typically benefit from the increased efficiency in
this respect during the first quarter of each year. To address
seasonality, our strategy is to (i) decrease the intensity of our
user acquisition and marketing campaigns towards the end of the
year; (ii) only utilize those channels and instruments that we
believe are less saturated with the competing marketing campaigns;
and (iii) increase the intensity of our user acquisition and
marketing activities in the first quarter of each year.
Furthermore, we usually experience decreased retention of our users
during the summer months, as players tend to spend less time
in-game compared to other seasons.
7. Segment reporting
We operate through one operating segment with
one business activity: development and publishing of online games
for mobile, web and social platforms, including Hero Wars, Island
Experiment, Throne Rush and other. The financial information
reviewed by our Chief Operating Decision Maker, which is our Chief
Executive Officer and Board of Directors, is included within one
operating segment for purposes of allocating resources and
evaluating financial performance.
We disclose the geographical distribution of our
revenue in Note 7. We do not have the ability to track revenue
deferrals on a by country basis. Therefore, we applied average
deferral rate to in-game purchases disaggregated by geography.
8. Loss per share
Basic loss per share amounts are calculated by
dividing loss for the year net of tax attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year.
Diluted loss per share amounts are calculated by
dividing the net loss for the year net of tax attributable to
ordinary equity holders of the parent adjusted for the effect of
any potential share exercise by the weighted average number of
ordinary shares outstanding during the year 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 income and share data
used in basic and diluted loss per share computations for the three
and nine months ended September 31, 2021 and 2020:
| |
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Loss for the period
net of tax attributable to ordinary equity holders of the parent
for basic earnings |
(135,495) |
|
(7,052) |
|
(103,700) |
|
(11,171) |
|
| Weighted average number of
ordinary shares for basic and diluted earnings per share |
179,140,594 |
|
176,584,343 |
|
184,169,740 |
|
176,584,343 |
|
| Loss per
share: |
|
|
|
|
| Loss attributable to ordinary
equity holders of the parent, US$ |
(0.76) |
|
(0.04) |
|
(0.56) |
|
(0.06) |
|
The Company applies guidance on retrospective
adjustments in IAS 33 to reflect the impact of the Transaction
described in Note 3 on the earnings per share calculation. The
number of shares prior to the Transaction was determined as a
number of shares of Nexters Global Ltd multiplied by the ratio of
the Nexters Inc. shares issued to the Nexters Global Ltd
shareholders upon the Transaction to the Nexters Global Ltd shares
prior to the Transaction.
The Company does not consider the effect of the
warrants sold in the Initial Public Offering and private placement
in the calculation of diluted loss per share, since they do not
have a dilutive effect (they are not ‘in the money’). 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 were the end of the contingent period.
9. Revenue
The following table summarizes revenue from
contracts with customers for the three and nine months ended
September 30, 2021 and 2020:
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| In-game purchases |
291,758 |
175,041 |
106,277 |
60,614 |
| Advertising |
19,752 |
11,494 |
8,900 |
3,886 |
| Total |
311,510 |
186,535 |
115,177 |
64,500 |
The amount of 155,954 recognized as in-game
purchases revenue during the nine months ended September 30, 2021
(nine months ended September 30, 2020: 56,063) was included in the
balance of deferred revenue as at January 1, 2021 and 2020
respectively (for details see Note 21). The following table set
forth revenue disaggregated based on geographical location of our
payers:
| Geographic
location |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| US |
99,127 |
72,513 |
35,334 |
23,863 |
| Europe |
68,427 |
42,850 |
23,838 |
15,185 |
| FSU* |
40,972 |
27,980 |
15,433 |
9,345 |
| Asia |
75,011 |
28,072 |
29,945 |
11,037 |
| Other |
27,973 |
15,120 |
10,627 |
5,070 |
| Total |
311,510 |
186,535 |
115,177 |
64,500 |
*Former Soviet Union countries includes Russia,
Ukraine, Georgia, Belorussia, Uzbekistan, Armenia, Azerbaijan,
Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan, Tajikistan, Latvia,
Lithuania and Estonia.98% of the Group’s total revenues for the
nine months ended September 30, 2021 was generated by Hero Wars
game title (97% - for the nine months ended September 30,
2020).
98% of the Group’s total revenues for the three
months ended September 30, 2021 was generated by Hero Wars game
title (98% - for the three months ended September 30, 2020).
10. Game operation cost
Game operation cost consists mainly of employee
benefits expenses in comparison with prior periods due to the
acquisition of Russian companies, which previously provided
technical support services to the Company.
The following table summarizes game operation
cost for the three and nine months ended September 30, 2021 and
2020:
| |
Nine months ended September 30, |
|
Three months ended September 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Technical support
services |
(3,651) |
|
(10,804) |
|
(1,103) |
|
(3,957) |
|
| Employee benefits
expenses |
(9,346) |
|
(667) |
|
(3,735) |
|
(263) |
|
|
|
(12,997) |
|
(11,471) |
|
(4,838) |
|
(4,220) |
|
Technical support mainly relates to maintenance
and upgrades of the Group's software applications provided by a
third party.
11. 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 three and
nine months ended September 30, 2021 and 2020:
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Advertising costs |
(217,471) |
|
(125,796) |
|
(62,837) |
|
(52,820) |
|
| Employee benefits
expenses |
(1,683) |
|
(596) |
|
(845) |
|
(219) |
|
|
|
(219,154) |
|
(126,392) |
|
(63,682) |
|
(53,039) |
|
Advertising costs increased in 2021 in
comparison with the respective periods of 2020 as the Group’s
management decided to increase the investments into the future
growth of revenues in lieu of the favorable market conditions.
12. General and administrative expenses
The following table summarizes general and
administrative expenses for the three and nine months ended
September 30, 2021 and 2020:
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Employee benefits
expenses |
(5,720) |
|
(674) |
|
(3,024) |
|
(224) |
|
| Professional fees |
(5,338) |
|
(75) |
|
(1,937) |
|
(39) |
|
| Other operating expenses |
(2,637) |
|
(120) |
|
(1,096) |
|
(43) |
|
|
|
(13,695) |
|
(869) |
|
(6,057) |
|
(306) |
|
13. Share listing expense
In accordance with IFRS 2, the difference in the
fair value of the consideration for the acquisition of Kismet over
the fair value of the identifiable net assets of Kismet will
represent a service for listing of the Company and be accounted for
as a share-based payment expense. The consideration for the
acquisition of Kismet was determined using the fair values of the
Company´s ordinary shares and public and private warrants as at
August 27, 2021. The net assets of Kismet had a fair value of upon
closing of 111,286. The excess of the fair value of the equity
instruments issued over the fair value of the identified net assets
contributed in the amount of 125,438, represents a non-recurring
non-cash expense in accordance with IFRS 2. It is recognized as
Share listing expense presented as part of the financial result
within the interim condensed consolidated statement of profit or
loss and other comprehensive income.
Details of the calculation of the Share listing
expense are as follows:
| |
Number of Shares |
Amount |
|
| Kismet's existing public
shareholders |
3,188,758 |
|
| Sponsor |
11,750,000 |
|
| PIPE investors |
5,000,000 |
|
| Total Nexters Inc.
Shares issued to Kismet shareholders |
19,938,758 |
|
| Market value per share at
August 27, 2021 |
US$ 10.6684 |
|
|
Fair value of shares issued |
|
212,715 |
|
| Net assets of Kismet at August
27, 2021 |
|
111,286 |
|
| Effect of accounting for fair
value of warrants |
|
(24,009) |
|
|
Net assets of Kismet at August 27, 2021 including effect of fair
value of warrants1 |
|
87,277 |
|
| Difference - being
IFRS 2 charge for listing services |
|
125,438 |
|
14. Taxation
The Group recognized income tax expense in the
amount of 845 for the nine months ended September 30, 2021 (nine
months ended September 30, 2020: 612). Tax expense recognized for
the three months ended September 30, 2021 amounted 291 (three
months ended September 30, 2020: 223).
In accordance with the Cypriot tax rules the
companies shall use their financial reporting in accordance with
IFRS as tax records with certain insignificant exceptions. As a
result, Nexters Global Ltd. has no material temporary differences
between the tax and accounting bases of assets and liabilities and
consequently no material deferred tax effect resulting from such
differences. Under certain conditions interest income of 0 (7 for
the nine months ended September 30, 2020) may be subject to defence
contribution at the rate of 30%. In such cases this interest will
be exempt from corporation tax. No interest income for the three
months ended September 30, 2021 and 2020 existed. In certain cases,
dividends received from abroad may be subject to defence
contribution at the rate of 17%.
The applicable tax rate used for reconciliation
is 12.5%. The Group uses Cyprus tax rate as the applicable rate
being the most meaningful rate and also the domestic rate
of tax in the country in which Nexters Global Ltd and Nexters Inc.
are tax residents.
(a) Cyprus IP box regime
In 2012, the government of Cyprus introduced a
regime applicable to Intellectual Property (IP). The provisions of
the 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 provisions
over a 5-year period). Companies benefiting from the IP regime may
apply its provisions until June 30, 2021, if the IP assets either
generated income or their development was completed as at June 30,
2016. The effective tax rate on eligible IP income could be as low
as 2.5%. 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 IP Box regime on June 30, 2021 does not affect the
amounts of current or deferred income taxes recognized at September
30, 2021. However, this change increased the Group’s effective tax
rate accordingly.
(b) Reconciliation
of effective tax rate
The reconciliation of the effective tax rate to
a statutory tax rate is presented in a table below:
| |
Nine months ended September 30, |
|
Three months ended September 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Loss before income
tax |
(134,650) |
|
(6,440) |
|
(103,409) |
|
(10,948) |
|
| Tax calculated at the
applicable tax rates |
16,831 |
|
805 |
|
13,010 |
|
1,372 |
|
| Effect of different tax rates
in other countries |
55 |
|
9 |
|
107 |
|
13 |
|
| Tax effect of expenses not
deductible for tax purposes and non-taxable income |
(13,857) |
|
420 |
|
(14,087) |
|
158 |
|
| Tax effect of deductions under
special tax regimes |
(3,353) |
|
(1,251) |
|
— |
|
(1,264) |
|
| Tax effect of tax losses
brought forward |
267 |
|
17 |
|
942 |
|
(279) |
|
| Overseas tax in excess of
credit claim used during the period |
(788) |
|
(612) |
|
(263) |
|
(223) |
|
| Income tax
expense |
(845) |
|
(612) |
|
(291) |
|
(223) |
|
(c) Uncertainty
over the income tax treatment and unrecognized deferred tax
asset
Starting from January 1, 2019 Nexters Global
Ltd. has changed its tax reporting principles, judgements 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 Company’s consumers in 2019 being
deferred to 2020 and beyond (see Notes 4 and 21 for details).
Consequently, the Company has booked a substantial tax loss in 2019
and in 2021 to date as opposed to moderate profits recorded in the
prior periods and in 2020.
These new principles and estimates in respect of
the tax records have not yet been assessed or approved by the tax
authorities, therefore we have no assurance as to whether they will
be accepted by the relevant tax authorities. There also can be no
assurance that the accounting treatment of certain transactions
under IFRS as accepted by the Company like share-based payments,
indirect taxes etc. will not be challenged by the relevant tax
authorities. The Company has not recognized any tax expense in
respect of these uncertainties as it believes that its tax records
are in compliance with the existing laws and regulations and that
its accruals for tax liabilities are sufficient and adequate for
all open tax years based on its assessment of many factors,
including interpretations of tax law and prior experience.
Overseas tax in excess of credit claims used
during the year represents withholding income tax charges imposed
in respect of the Group’s bookings in certain jurisdictions where
the Group’s customers are located.
As at September 30, 2021 the Group did not
recognize a deferred tax asset of 764 resulting from the tax losses
comprised of reported in 2019 because of the uncertainties
described above as well as tax losses incurred in 2020 and during
the nine months ended September 30, 2021 (December 31, 2020 –
1,031). Tax losses for which no deferred tax asset was recognized
expire in 2025.
15. DividendsThe following dividends were
declared and paid by Nexters Global Ltd prior to the
Transaction:
| |
Nine months endedSeptember 30, |
|
Three months endedSeptember 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
| Dividends unpaid as at
January 1, (July 1) |
2,592 |
|
88 |
|
2,042 |
|
— |
|
| Dividends declared for the
nine months ended September 30, per share US$ 4,800 (2020:
896) |
96,000 |
|
17,910 |
|
46,000 |
|
9,848 |
|
| Dividends paid |
(98,562) |
|
(17,853) |
|
(48,028) |
|
(9,666) |
|
| Effect of foreign exchange
rates |
(30) |
|
212 |
|
(14) |
|
175 |
|
| Dividends unpaid as at
September 30 |
— |
|
357 |
|
— |
|
357 |
|
The Cypriot law requires companies established
under the laws of Cyprus to pay dividends out of available
distributable profits. Profits in the legal sense are construed on
principles different from IFRS. Management of the subsidiary
determined the amount of the distributable profits of the
subsidiary as at the dates of dividends declaration in accordance
with the applicable law, ensuring the availability of funds for
covering all potential and contingent liabilities and taking into
account that deferred revenue, appearing on the balance sheet as a
liability do not constitute liability in the legal sense but they
are in essence a postponement in the recognition of revenue.
16. Property and equipment
During the nine months ended September 30, 2021,
the Group acquired property and equipment with a cost of 710 (nine
months ended September 30, 2020: 139). Property and equipment with
a cost of 475 was acquired in the process of acquisition of
subsidiaries. No assets were disposed of by the Group during the
nine months ended September 30, 2021 and 2020.
17. Loans receivable
On October 1, 2018, the Company entered into a
loan agreement with its shareholder Boris Gertsovsky, for the total
amount of € 240,000 (US$ 278,000) with an annual interest rate of
2%. In December 2019 €85,000 (US$ 95,000) were repaid. The
loan was fully repaid on April 23, 2020.
On July 30, 2019, the Company entered into a
loan agreement with its shareholder, Boris Gertsovsky, for the
total amount of €300,000 (US$ 327,000). The loan was provided
interest-free and was fully repaid on July 24, 2020.
On October 30, 2019, the Company entered into a
loan agreement with its shareholder Boris Gertsovsky, for the total
amount of €10,000 (US$ 11,000). The loan was provided interest free
with outstanding balance of 8 as at December 31, 2020 and was fully
repaid on February 12, 2021.
The exposure of the Group to credit risk is
reported in Note 24 to these interim condensed consolidated
financial statements.
18. Lease
The amounts recognized in the 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:
| |
Right-of-use assets |
|
Lease liabilities |
|
|
Balance at January 1, 2021 |
1,044 |
|
1,111 |
|
| Additions |
1,712 |
|
1,712 |
|
| Depreciation |
(1,326) |
|
— |
|
| Interest expense |
— |
|
54 |
|
| Payments |
— |
|
(1,421) |
|
| Effect of foreign exchange
rates |
— |
|
(55) |
|
| Balance at September
30, 2021 |
1,430 |
|
1,401 |
|
|
|
|
|
| Lease liabilities -
current |
|
860 |
|
| Lease liabilities -
non-current |
|
541 |
|
|
|
|
|
| |
|
|
| |
Right-of-use assets |
|
Lease liabilities |
|
| Balance at January 1,
2020 |
71 |
|
70 |
|
| Additions |
1,236 |
|
1,236 |
|
| Depreciation |
(176) |
|
— |
|
| Interest expense |
— |
|
18 |
|
| Payments |
— |
|
(264) |
|
| Effect of foreign exchange
rates |
— |
|
96 |
|
| Balance at September
30, 2020 |
1,131 |
|
1,156 |
|
|
|
|
|
| Lease liabilities -
current |
|
382 |
|
| Lease liabilities -
non-current |
|
774 |
|
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| Expense relating to low-value
leases |
16 |
6 |
8 |
1 |
| Interest expense on lease
liabilities |
54 |
18 |
4 |
9 |
| |
70 |
24 |
12 |
10 |
On June 1, 2019 the Group entered into a new
lease agreement for office spaces with a new owner. The lease runs
for two years, with an option of renewal after that date subject to
the adjustment of the lease payments to the market conditions. On
May 5, 2021 the new lease agreement was concluded for the same
office spaces. The lease agreement was concluded for 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 commencement date management decided not to
account for the lease renewal option while determining the amount
of right-of-use assets and lease liabilities.
On March 24, 2020 the Group entered into a new
lease agreement over office spaces 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 for the first year of the
lease.
On February 3, 2021 Nexters Global Ltd acquired
two Russian game development studios which had several lease
agreements for different floors of the office building in Moscow.
As these contracts were entered into near the same time with the
same counterparty, the contracts are combined as a single contract.
The Company determines the commencement date as February 3, 2021,
which is considered to be acquisition date.
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.
Total cash outflow for leases recognized in the
interim condensed consolidated statement of cash flows is presented
below:
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| Сash outflow for leases |
1,367 |
246 |
427 |
13 |
| Cash outflow for short-term
and low-value leases |
— |
4 |
— |
— |
| Total cash outflow for
leases |
1,367 |
250 |
427 |
13 |
All lease obligations are denominated in € and
RUB. The rate of 3% per annum was used as the incremental borrowing
rate for the offices in Cyprus and 7.5% for the office in
Moscow.
19. Trade and other receivables as restated
|
|
September 30, 2021 |
December 31, 2020 |
As previously reported,December 31, 2020 |
| Trade receivables |
43,856 |
30,720 |
30,909 |
| Deposits and prepayments |
2,819 |
2,045 |
2,045 |
| Other receivables |
994 |
209 |
209 |
| Total |
47,669 |
32,974 |
33,163 |
The Group does not hold any collateral over the
trading receivables balances.
The fair values of trade and other receivables
approximate their carrying amounts as presented above. Trade
receivables balance as at September 30, 2021 increased
significantly in comparison with that of December 31, 2020 due to
overall increase in Group’s operating activity.
The exposure of the Group to credit risk and
impairment losses in relation to trade and other receivables is
reported in Note 24 to these interim condensed consolidated
financial statements.
The amount of expected credit losses (“ECL”) in
respect of trade and other receivables as at September 30, 2021 and
December 31, 2020 is not significant.
20. Trade and other payables as restated
|
|
September 30,2021 |
December 31,2020 |
As previously reported,December 31, 2020 |
| Trade payables |
19,353 |
9,793 |
9,793 |
| Provision for indirect
taxes |
5,871 |
1,754 |
3,850 |
| Dividends payable |
— |
2,592 |
2,592 |
| Accrued salaries, bonuses,
vacation pay and related taxes |
4,299 |
866 |
2,050 |
| Accrued professional
services |
266 |
1,184 |
— |
| Other payables |
510 |
1,314 |
1,314 |
| Total |
30,299 |
17,503 |
19,599 |
Trade payables balance as at September 30, 2021
increased in comparison with that of December 31, 2020 due to the
increased advertising expense to attract new users in 2021.
The exposure of the Group to liquidity risk in
relation to financial instruments is reported in Note 24.
21. Loans and borrowings
On August 1, 2018, Flow Research S. L. entered
into a loan agreement with Empathy International S. A., for the
total amount of €40,000 (US$ 47,000). The loan was further assigned
on October 30, 2018 to Boris Gertsovsky (as transferee). The loan
was provided interest free with a balance of 49 as at December 31,
2020 and was fully repaid in April 2021.
22. Share warrant obligations
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 20,250,000
warrants of the Company, 13,500,000 of which are public and
6,750,000 of which are private.
As disclosed in Note 4, the fair value of Public
Warrants, which are traded in active market is measured based on
the quoted market prices.
|
|
August 27,2021 |
September 30,2021 |
|
Warrant price (US$)2 |
0.93 |
0.84 |
The fair value of Private Warrants is measured
using Monte-Carlo simulation method along with Deferred Exchange
Shares because of their potential dilution effect.
Key assumptions of the model:
|
|
August 27, 2021 |
September 30, 2021 |
|
Risk free rate |
forward USD overnight index swap (OIS) rates (curve 42) |
forward USD overnight index swap (OIS) rates (curve 42) |
|
Volatility |
forward implied volatility rates based on volatilities of publicly
traded peers |
forward implied volatility rates based on volatilities of publicly
traded peers |
|
Starting share price |
10.67 |
6.64 |
|
Expected warrant life (years) |
5.0 |
4.9 |
The Company has recognized the following warrant
obligations:
|
|
Public Warrants |
|
Private Warrants |
|
Total |
|
|
Balance at August 27, 2021 |
12,606 |
|
19,503 |
|
32,109 |
|
|
Fair value adjustment |
(1,266) |
|
(12,371) |
|
(13,637) |
|
|
Balance at September 30, 2021 |
11,340 |
|
7,132 |
|
18,472 |
|
The change in fair value of share warrant
obligation is disclosed as a part of Net finance income in the
interim condensed statement of profit or loss and other
comprehensive income.
23. Deferred revenue and deferred platform commission
fees
As at September 30, 2021, deferred revenue is
expected to be recognized over a term of calculated average playing
period of the paying users (for details see Note 4).
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 the nine months ended
September 30, 2021 and 2020.
Based on the estimations described in Note 4,
the Group’s revenue recognized during the period of nine months
ended September 30, 2021 is 215,536 (nine months ended September
30, 2020 – 113,642) and deferred the amount of 322,248 (September
30, 2020 – 252,458).
The Group’s platform commission recognized
during the period of nine months ended September 30, 2021 is 63,641
(nine months ended September 30, 2020 – 35,757) and deferred the
amount of 87,238 (September 30, 2020 – 76,443).
The increase in the amounts of deferred revenue
and platform commission as at September 30, 2021 compared to
December 31, 2020 is mostly due to an increase in the in-game
purchases (for details see Note 7) and in the lifespans (for
details see Note 4).
24. Related party transactions
The table presenting the information regarding
the shareholdings of Nexters Inc.’s ordinary shares as at September
30, 2021 is disclosed in Note 3.
As at September 30, 2021 the Company’s key
shareholders are Andrey Fadeev and Boris Gertsovsky, each owning
20.3%, Dmitrii Bukhman and Igor Bukhman, each owning 18.9% and Ivan
Tavrin owning 5.9% of the issued shares.
The transactions and balances with related
parties are as follows:
(i) Directors'
remuneration
The remuneration of Directors and other members
of key management was as follows:
| |
Nine months ended September 30, |
Three months ended September 30, |
|
|
2021 |
2020 |
2021 |
2020 |
|
Directors’ remuneration |
618 |
251 |
234 |
89 |
|
Other members of key management’s remuneration |
1,819 |
161 |
728 |
58 |
|
-short-term employee benefits |
908 |
161 |
522 |
58 |
|
-share-based payments |
911 |
— |
206 |
— |
| |
2,437 |
412 |
962 |
147 |
(ii) Loans to
shareholders
|
|
September 30, 2021 |
December 31, 2020 |
| Loan to Boris Gertsovsky |
— |
8 |
|
|
— |
8 |
(iii) Loans from shareholders
|
|
September 30, 2021 |
December 31, 2020 |
| Short-term loan from Boris
Gertsovsky |
— |
49 |
|
|
— |
49 |
25. List of subsidiaries
Upon the closing of the transaction disclosed in
the Note 3, Nexters Inc. became the direct parent of, and conducts
its business through Nexters Global Ltd, a developer of mobile,
web, and social games.
Set out below is a list of subsidiaries of the
Group.
| Name |
Ownership Interest |
Ownership Interest |
| |
|
|
| |
September 30, 2021% |
December 31, 2020% |
| Topland Management Ltd |
— |
100 |
| Flow Research S.L. |
100 |
100 |
| NX Online LLC |
100 |
— |
| NX Studio LLC |
100 |
— |
| NHW Ltd |
100 |
— |
| Nexters Global Ltd |
100 |
— |
| Synergame Investments Ltd |
100 |
— |
Topland Management Ltd
Topland Management Ltd was incorporated in the
British Virgin Islands on December 7, 2010. The registered office
of the company is at Vistra Corporate Services Centre, Wickhams Cay
II, Road Town, Tortola, British Virgin Islands. The company has
been liquidated on February 19, 2021.
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.
NX Studio LLC
NX Studio LLC was incorporated in Moscow, the
Russian Federation on July 7, 2015. The registered office of the
company is Zemlyanoy lane, 50A Building 2, 109028, Moscow. The
company's principal activities are game development. NX Studio LLC
was renamed to Nexters Studio LLC in June of 2021.
NX Online LLC
NX Online LLC was incorporated in Moscow, the
Russian Federation on January 29, 2020. The registered office of
the company is Zemlyanoy lane, 50A Building 2, 109028, Moscow. The
company's principal activities are technical support for the online
gaming. NX Online LLC was renamed to Nexters Online LLC in June of
2021.
NHW Ltd
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.
Synergame Investments Ltd
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 is to provide independent
developers with expertise and funds needed to launch their games
and build successful international businesses.
26. 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 September 30,
2021 and December 31, 2020. For all the Group’s financial assets
and financial liabilities their carrying amounts are reasonable
approximations of their fair values.
The comparative data for the year ended December
31, 2020 was corrected in these interim condensed consolidated
financial statements as stated in Note 4.
Financial assets as restated are as follows:
|
|
|
September 30, |
December 31 |
As previously reported, |
|
2021 |
2020 |
December 31, 2020 |
| Financial assets at amortized
cost |
|
|
|
|
| Trade receivables |
|
43,856 |
30,720 |
30,909 |
| Cash and cash equivalents |
|
105,453 |
84,557 |
84,557 |
| Loans receivable |
|
— |
8 |
8 |
| Total |
|
149,309 |
115,285 |
115,474 |
Financial liabilities as restated are as
follows:
|
|
|
September 30, |
December 31, |
As previously reported, |
|
2021 |
2020 |
December 31, 2020 |
| Financial liabilities not
measured at fair value |
|
|
|
|
| Loans from shareholders |
|
— |
49 |
49 |
| Lease liabilities |
|
1,401 |
1,111 |
1,111 |
| Trade and other payables |
|
30,299 |
17,503 |
19,599 |
| Total |
|
31,700 |
18,663 |
20,759 |
|
|
|
September 30, |
December 31, |
As previously reported, |
|
2021 |
2020 |
December 31, 2020 |
| Financial liabilities measured
at fair value |
|
|
|
|
| Share warrant obligations |
|
18,472 |
— |
— |
| Total |
|
18,472 |
— |
— |
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 analyze 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 predominantly from
trade receivables and is concentrated around key platforms, through
which the Group is distributing online games. As at September 30,
2021 and December 31, 2020 the largest debtor of the Group
constituted 30% and 28% of the Group’s Trade and other receivables
and the 3 largest debtors of the Group constituted 65% and 73% of
the Group’s Trade and other receivable 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.
The carrying amount of financial assets
represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date as restated was:
|
|
September 30, |
December 31, |
As previously reported, |
|
2021 |
2020 |
December 31, 2020 |
| Loans receivables from related
parties |
— |
8 |
8 |
| Trade receivables |
43,856 |
30,720 |
30,909 |
| Cash and cash equivalents |
105,453 |
84,557 |
84,557 |
Expected credit loss assessment for
corporate customers as at September 30, 2021 and December 31,
2020
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 judgement.
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 judgement 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. ECL in respect of Trade and other
receivables is insignificant as at September 30, 2021 and December
31, 2020.
Cash and cash equivalents
The cash and cash equivalents are held with
financial institutions, which are rated B- to A based on Fitch's
ratings.
Impairment on cash and cash equivalents has been
measured on a 12-month expected loss basis and reflects the short
maturities of the exposures. The Group considers that its cash and
cash equivalents have low credit risk based on the external credit
ratings of the counterparties. Therefore, no impairment allowance
was recognized as at September 30, 2021 and December 31, 2020.
(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.
The following are the contractual maturities of
financial liabilities at the reporting date. The amounts are gross
and undiscounted and include contractual interest payments and
exclude the impact of netting agreements.
|
September 30, 2021 |
Carryingamounts |
Contractualcash flows |
3 months orless |
Between 3-12months |
Between 1-5years |
| Non-derivative
financial liabilities |
|
|
|
|
|
| Obligations under finance
leases |
1,401 |
1,336 |
419 |
343 |
574 |
| Trade and other payables |
30,299 |
30,299 |
30,299 |
— |
— |
|
|
31,700 |
31,635 |
30,718 |
343 |
574 |
|
December 31, 2020 |
Carrying amounts as previously reported |
Carryingamounts |
Contractualcash flows |
3 months orless |
Between 3-12months |
Between 1-5years |
| Non-derivative
financial liabilities |
|
|
|
|
|
|
| Obligations under leases |
1,111 |
1,111 |
1,167 |
32 |
288 |
847 |
| Trade and other payables |
19,599 |
17,503 |
17,503 |
17,503 |
— |
— |
| Loans from shareholders |
49 |
49 |
49 |
— |
49 |
— |
|
|
20,759 |
18,663 |
18,719 |
17,535 |
337 |
847 |
(iii) Market risk
Market risk is the risk that changes in market
prices, such as foreign exchange rates and/or equity prices will
affect the Group's income or the value of its holdings of financial
instruments.
The objective of market risk management is to
manage and control market risk exposures within acceptable
parameters, while optimizing the return.
(iv) Currency risk
Currency risk is the risk that the value of
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 Group's functional currency. The
Group is exposed to foreign exchange risk arising from various
currency exposures primarily with respect to the Euro and the
Russian Ruble. The Group's management monitors the exchange rate
fluctuations on a continuous basis and acts accordingly.
The Group's exposure to foreign currency risk
was as follows:
| September 30,
2021 |
Euro |
Russian Ruble |
| |
|
|
|
Assets |
|
|
|
Trade and other receivables |
10,701 |
|
3,910 |
|
| Cash and cash equivalents |
19,114 |
|
658 |
|
| |
29,815 |
|
4,568 |
|
|
Liabilities |
|
|
| Lease liabilities |
(862 |
) |
(539 |
) |
| Trade and other payables |
(2,214 |
) |
(3,041 |
) |
|
|
(3,076 |
) |
(3,580 |
) |
| Net exposure |
26,739 |
|
988 |
|
| December 31,
2020 |
Euro |
Russian Ruble |
| |
|
|
|
Assets |
|
|
|
Loans receivable |
8 |
|
— |
|
| Trade and other
receivables |
9,661 |
|
2,649 |
|
| Cash and cash equivalents |
11,404 |
|
741 |
|
| |
21,073 |
|
3,390 |
|
|
Liabilities |
|
|
| Lease liabilities |
(1,111 |
) |
— |
|
| Trade and other payables |
(5,811 |
) |
(3 |
) |
| Loans and borrowings |
(49 |
) |
— |
|
|
|
(6,971 |
) |
(3 |
) |
| Net exposure |
14,102 |
|
3,387 |
|
Sensitivity analysis
A reasonably possible 10% strengthening or
weakening of the United States Dollar against the following
currencies at September 30, 2021 and December 31, 2020 would have
increased (decreased) equity and profit or loss by the amounts
shown below.
This analysis assumes that all other variables,
in particular interest rates, remain constant.
| September 30,
2021 |
Strengthening ofUS$ by 10% |
Weakening ofUS$ by 10% |
| |
|
|
|
Euro |
(2,674 |
) |
2,674 |
| Russian Ruble |
(99 |
) |
99 |
| |
(2,773 |
) |
2,773 |
|
|
|
|
| |
|
|
| |
|
|
| December 31,
2020 |
Strengthening ofUS$ by 10% |
Weakening ofUS$ by 10% |
|
|
|
|
| Euro |
(1,410 |
) |
1,410 |
| Russian Ruble |
(339 |
) |
339 |
|
|
(1,749 |
) |
1,749 |
27. Share-based payments
Nexters Long-Term Incentive Plan
In 2016 we adopted a Long-Term Incentive Plan
(“LTIP”). Under this LTIP key employees of the Group and key
employees of the Group’s service provider (“non-employees”)
received remuneration in the form of share options, whereby they
render services as consideration for equity instruments. Within
current LTIP several tranches of share-based options for Class A
shares and Class B shares were issued:
|
Class of shares |
|
Grant Date |
|
No. of options granted |
|
Vestingperiod |
|
Vesting conditions |
|
Class A |
|
10.01.2016 |
|
1,100* |
|
2016-2019 |
|
Service condition |
| Class B |
|
01.01.2019 |
|
660* |
|
2019 |
|
Service condition |
| Class B complex vesting |
|
01.01.2019 |
|
1,300* |
|
2027 |
|
Service condition, performance non-market condition |
| Complex
conditional upon listing |
|
18.11.2020 |
|
-** |
|
2021 |
|
Service condition, performance non-market condition |
|
Total share options granted as at September 30,
2021 |
|
3,060 |
|
– |
|
– |
|
|
|
|
* Options granted refer to Nexters Global Ltd
shares
** Options granted refer to new entity shares
after the proposed transaction and are not considered in the
amounts in the table above (max. amount 100,000 options)
We recorded share-based payments expense in
general and administrative expenses and game operation cost of our
interim condensed consolidated statement of profit or loss and
other comprehensive income. The table below summarized the
share-based payments expense within three and nine months ended
September 30, 2021 and 2020:
| |
Nine months endedSeptember 30, |
Three months endedSeptember 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| Class B complex vesting |
— |
36 |
— |
12 |
| Complex conditional upon
listing |
911 |
— |
206 |
— |
| Total recorded
expenses |
911 |
36 |
206 |
12 |
| therein recognized: |
|
|
|
|
| within Game operation
cost |
— |
18 |
— |
6 |
| within General and
administrative expenses |
911 |
18 |
206 |
6 |
In relation to the share-based payment expense
for nine months ended September 30, 2020 we recognized the increase
in Other reserves of 36 as it corresponds to the equity settled
portion of the share options and 538 in liabilities as it
corresponds to the dividends protection feature of the share
options.
In relation to the share-based payment expense
for nine months ended September 30, 2021 we recognized the increase
in Other reserves of 96 as it corresponds to the equity settled
portion of the share options and 815 in liabilities as it
corresponds to non-share-based cash alternative and 486 in
liabilities as it corresponds to the dividends protection feature
of the share options.
Class B complex vesting
(performance-based awards)
Under the current LTIP Class B share options
were granted to one employee and one non-employee on January 1,
2019 with a service condition and a special performance-based
non-market vesting condition (net income thresholds per management
accounts). The contractual term of the options is 10 years. We
estimate the fair value of granted awards using a Monte-Carlo
Simulation method, which takes into account assumptions such as the
expected volatility, the risk-free interest rate based on the
contractual term of the award and expected dividend yield.
The options were accounted for in the current
year according to a vesting period and the assessment of
performance conditions achievement. For the purposes of the
valuation each performance condition threshold is treated as a
separate option with a separate valuation of the vesting period.
Based on the evaluation at the grant date the respective options
that have nil FV and are not projected as to be reachable we
consider it unlikely that these options will vest.
The following table presents fair value per one
option and related parameters used to estimate the fair value of
our options at the grant date:
| 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 |
|
1,157.20 |
|
*- applied to the result of fair value
estimation
The table below summarizes the expenses
recognized in relation to the above-mentioned options:
| |
Nine months endedSeptember 30, |
Three months endedSeptember 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| Expenses in relation to
fulfilled condition |
— |
36 |
— |
12 |
| Total recorded
expenses |
— |
36 |
— |
12 |
Complex conditional upon
listing
Under the current LTIP share options in the
entity surviving the proposed Transaction as described in Note 3
were granted to one employee on November 18, 2020 with a service
condition and a series of special performance-based non-market
vesting conditions related to the listing. The contractual term of
the options is 2 years. Since the agreement contains a clause that
grants an employee the discretion of receiving cash consideration
or options we treat the following agreement as a compound financial
instrument that includes both a liability and an equity
component.
We estimate the fair value of cash consideration
first and estimate the fair value of the equity component
consequently. The fair value of cash consideration is estimated as
nominal value of related cash payments at assumed vesting date. We
estimate 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 and accounted for
in the current year.
The following table presents fair value per one
option and related assumptions used to estimate the fair value of
equity component of our options at the grant date:
|
Evaluation date (grant date) |
|
November 18, 2020 |
|
November 18, 2020 |
|
| Vesting period |
|
12m |
|
8m |
|
| Market price, US$ |
|
9.91 |
|
9.91 |
|
| Strike price, US$ |
|
10.00 |
|
10.00 |
|
| Expected volatility |
|
34.8% |
|
34.8% |
|
| Dividend yield |
|
0.0% |
|
0.0% |
|
| Risk-free interest rate |
|
0.11% |
|
0.11% |
|
| Discount for Lack of
Marketability |
|
N/A |
|
N/A |
|
| FV of option, US$ |
|
1.34 |
|
1.11 |
|
The options were accounted for in current year
according to the vesting period and the assessment of performance
conditions achievement. For the purposes of the valuation each
performance condition threshold is treated as a separate option
with a separate valuation of vesting period.
The table below summarizes the expenses
recognized in relation to the abovementioned options:
|
|
Nine months endedSeptember 30, |
Three months endedSeptember 30, |
|
|
2021 |
2020 |
2021 |
2020 |
| Expenses in relation to
fulfilled performance conditions |
911 |
— |
206 |
— |
| Total recorded
expenses |
911 |
— |
206 |
— |
28. Commitments and contingencies
Taxation
Though we generally are not responsible for
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 may be imposed on companies making digital
sales to consumers within the European Union. Additionally, the
Supreme Court of the United States recently ruled in South Dakota
v. Wayfair, Inc. et al, or Wayfair, that online sellers can be
required to collect sales and use tax despite not having a physical
presence in the state of the customer. In response to Wayfair, or
otherwise, a number of U.S. states have already begun imposing such
obligations, and other U.S. states or local governments may adopt,
or begin to enforce, laws requiring us to calculate, collect and
remit taxes on sales in their jurisdictions. 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). A successful assertion by one or more U.S. states or
other countries or jurisdictions requiring us to collect taxes
where we presently do not do so, or to collect more taxes in a
jurisdiction in which we currently collect some taxes, could result
in substantial liabilities, including taxes on past sales, as well
as interest and penalties, and could create significant
administrative burdens for us or otherwise harm our business.
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.
Insurance
The Group holds no insurance policies in
relation to its operations, or in respect of public liability or
other insurable risks like risks associated with cybersecurity.
There are no significant physical assets to insure. Management has
considered the possibility of insurance of various risks but the
cost of it outweighs the benefits in management’s view.
Data privacy and security
We collect, process, store, use and share data,
some of which contains personal information, including the personal
information of our players. Our business is therefore subject to a
number of federal, state, local and foreign laws, regulations,
regulatory codes and guidelines governing data privacy, data
protection and security, including with respect to the collection,
storage, use, processing, transmission, sharing and protection of
personal information. Such laws, regulations, regulatory codes, and
guidelines may be inconsistent across jurisdictions or conflict
with other rules.
The scope of data privacy and security
regulations worldwide continues to evolve, and we believe that the
adoption of increasingly restrictive regulations in this area is
likely within the United States and other jurisdictions. Further,
the European Union, Cyprus, and United Kingdom have adopted
comprehensive data protection and security laws. The European
Union’s Regulation (EU) 2016/679 of the European Parliament and of
the Council of April 27, 2016 on the protection of natural
persons with regard to the processing of personal data and on the
free movement of such data, and repealing Directive 95/46/EC
(General Data Protection Regulation), or the GDPR, which became
effective in May 2018, and the U.K. GDPR, each as supplemented by
national laws, (collectively, Applicable Data Protection Laws)
impose strict requirements on controllers and processors of
personal data in the European Economic Area, or EEA, and the United
Kingdom, including, for example, higher standards for obtaining
consent from individuals to process their personal data, more
robust disclosures to individuals and a strengthened individual
data rights regime, and shortened timelines for data breach
notifications. Applicable Data Protection Laws create new
compliance obligations applicable to our business and some of our
players, which could require us to self-determine how to interpret
and implement these obligations, change our business practices and
expose us to lawsuits (including class action or similar
representative lawsuits) by consumers or consumer organizations for
alleged breach of data protection laws and the risk of significant
reputational damage. Applicable Data Protection Laws increase
financial penalties for noncompliance (including possible fines of
up to 4% of global annual revenues for the preceding financial year
or €20 million, or £17.5 million in the United Kingdom,
(whichever is higher) for the most serious violations).
Any failure or perceived failure by us to comply
with our posted privacy policies, our privacy-related obligations
to players or other third parties, or any other legal obligations
or regulatory requirements relating to privacy, data protection, or
information security may result in governmental investigations or
enforcement actions, litigation, claims (including class actions),
or public statements against us by consumer advocacy groups or
others and could result in significant liability, cause our players
to lose trust in us, and otherwise materially and adversely affect
our reputation and business.
Cybersecurity
Our information technology may be subject to
cyber-attacks, viruses, malicious software, break-ins, theft,
computer hacking, employee error or malfeasance or other security
breaches. Hackers and data thieves are increasingly sophisticated
and operate large-scale and complex automated attacks. Our systems
and the data stored on those systems may also be vulnerable to
security incidents or security attacks, acts of vandalism or theft,
coordinated attacks by activist entities, misplaced or lost data,
human errors, or other similar events that could negatively affect
our systems and the data stored on those systems, and the data of
our business partners. We do not maintain insurance policies
covering losses relating to cybersecurity incidents, which may
increase any potential harms that the business may suffer from a
cyber-attack. We may be unable to cover all possible claims
stemming from security breaches, cyberattacks and other types of
unlawful activity, or any resulting disruptions from such events,
and we may suffer losses that could have a material adverse effect
on our business.
Regulatory environment
In December 2017, Apple updated its terms of
service to require publishers of applications that include “loot
boxes” to disclose the odds of receiving each type of item within
each loot box to customers prior to purchase. Google similarly
updated its terms of service in May 2019. Loot boxes are a commonly
used monetization technique in free-to-play mobile games in which a
player can acquire a virtual loot box, but the player does not know
which virtual item(s) he or she will receive (which may be a
common, rare or extremely rare item, and may be a duplicate of an
item the player already has in his or her inventory) until the loot
box is opened.
In addition, there are ongoing academic,
political and regulatory discussions in the United States, Europe,
Australia and other jurisdictions regarding whether certain game
mechanics, such as loot boxes, should be subject to a higher level
or different type of regulation than other game genres or mechanics
to protect consumers, in particular minors and persons susceptible
to addiction, and, if so, what such regulation should include.
Additionally, after being restricted in Belgium and the
Netherlands, the United Kingdom House of Lords has recently issued
a report recommending that loot boxes be regulated within the remit
of gambling legislation and regulation.
In some of our games, certain mechanics may be
deemed to be loot boxes. New regulations by the international
jurisdictions, which may vary significantly across jurisdictions
and with which we may be required to comply, could require that
these game mechanics be modified or removed from games, increase
the costs of operating our games due to disclosure or other
regulatory requirements, impact player engagement and monetization,
or otherwise harm our business performance. It is difficult to
predict how existing or new laws may be applied to these or similar
game mechanics. If we become liable under these laws or
regulations, we could be directly harmed, and we may be forced to
implement new measures to reduce our exposure to this liability.
This may require us to expend substantial resources or to modify
our games, which would harm our business, financial condition, and
results of operations. In addition, the increased attention focused
upon liability issues because of lawsuits and legislative proposals
could harm our reputation or otherwise impact the growth of our
business. Any costs incurred because of this potential liability
could harm our business, financial condition or results of
operations.
Implications of COVID-19
On March 11, 2020, the World Health Organization
declared the Coronavirus COVID-19 outbreak to be a pandemic in
recognition of its rapid spread across the globe. Many governments
have taken and continue to take stringent steps to help contain
and/or delay the spread of the virus, including: requiring
self-isolation/ quarantine by those potentially affected,
implementing social distancing measures, and controlling or closing
borders and ''locking-down'' cities/regions or even entire
countries. These measures slowed down and will likely continue to
impact both the Cyprus and world economies. As at the date of
issuance of the financial statements, the Company is not aware of
any specific event or circumstance related to COVID-19 that would
require it to update its estimates or judgments or adjust the
carrying value of its assets or liabilities. Our liquidity analysis
based on our recent performance and current estimates shows that we
have adequate resources to finance our operations for the
foreseeable future.
29. Events after the reporting period
Grant of options
On November 16, 2021 the Company approved the
option plan for its directors, officers, employees and contractors
in a total amount of up to 9,826,155 options, each over one share
of the Company with vesting conditions and exercise prices to be
determined by the Board of Directors at the time of grant.
_________________
* Reflects a correction to the amount reported
in Nexters Global’s (subsidiary) audited consolidated statement of
financial position as at December 31, 2020 due to the
identification of an immaterial error relating to the calculation
of withholding taxes. For further information, see Note 4 (Use of
judgements and estimates—Immaterial error).* Reflects a correction
to the amount reported in Nexters Global’s (subsidiary) audited
consolidated statement of profit or loss and other comprehensive
income for the year ended December 31, 2020 due to the
identification of an immaterial error relating to the calculation
of withholding taxes. For further information, see Note 4 (Use of
judgements and estimates—Immaterial error).
1 Includes the effects of i.) US GAAP to IFRS conversion
adjustment and ii.) effect of difference in fair values between
Kismet warrants and Nexters Inc. warrants2 Volume-weighted average
price as at August 27, 2021 and closing price as at September 30,
2021, source: Bloomberg.
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