Business
2022 Half Year Results
2022 Half Year Results.
About this update from Tinybuild Inc.
27 September 2022 tinyBuild, Inc ("tinyBuild" or the "Company") 2022 Half Year Results Proposed establishment of Employee Benefit Trust tinyBuild (AIM:TBLD), a premium video games publisher and developer with global operations, is pleased to announce its unaudited results for the six months ended 30 June 2022, slightly ahead of expectations. Financial highlights: ● Revenue of $28.8m up 54% (H1 2021: $18.6m) reflecting a strong catalogue performance ● Adj EBITDA [1] increased 25% to $9.9m (H1 2021: $7.9m) ● Adj. Operating Profit [2] increased 33% to $6.8m (H1 2021: $5.1m) ● Adj. Cash Flow from Operations² increased sharply to $8.8m (H1 2021: $3.8m) ● Strong balance sheet with a n et cash [3] position of $42.6m (Dec 2021: $48.8m) Operational highlights: ● Contribution from own IP increased further to 83% of G roup revenue [4] (H1 2021: 78%) due to strong organic performance (e.g. Hello Neighbor and Totally Reliable Delivery Service ) and recent acquisitions (e.g. Deadside ). ● Strong back catalogue sales represent 99% of total gaming revenues (H1 2021: 91%), demonstrating the Company's ability to extend the life cyc le of games and support investments in new titles. ● Not For Broadcast (version 1.0), the critically acclaimed, darkly comedic, full motion propaganda simulator, has recorded over 400,000 downloads since its launch in 2019. ● Acquihire [5] of Demagic ( development and porting studio ) and progress on the M&A pipeline le d to two deals completed post-period end. Post-Period End ● Acquihire of Konfa Games, the developer team behind Despot's Game , for a maximum consideration of up to $5.4m over three years. ● Further expansion of existing back catalogue with the acquisition of high quality titles from Bossa Studios ( Surgeon Simulator , I am fish and I am bread ) for a total consideration of $3m. ● Released new titles including SpiderHeck (PS, Xbox, Steam), Justice Sucks (PC and consoles) and tinykin (PC and consoles). ● Expanded the catalogue and announced the release dates for Despot's Game (version 1.0), The Fridge is Red (all platforms) and Asterigos (PS, Xbox and Steam), among others. ● Expanded the size of the revolving credit facility with Bank of America from $25m to $35m and extended the maturity date to three years to maintain the flexibility to fund potential M&A in the most effective way. The facility is currently undrawn. Employee Benefit Trust ● The Board has approved the establishment of an Employee Benefit Trust, known as the tinyBuild Share Incentive Trust (the " EBT "). The EBT will be for the benefit of current and future employees. ● The EBT, which will act independently of the Company once formed, is expected to conduct market purchases of the Company's common shares of $0.001 each in order to, among other things, satisfy potential future option exercises of vested options granted pursuant to the Company's share incentive arrangements and to satisfy the settlement of any other awards granted pursuant to the Company's current and future incentive award schemes. ● The EBT will be funded by way of a loan from the Company. The maximum amount of the loan made available to the EBT at any time shall be capped at $10,000,000. In effecting purchases, as a best practice measure and by analogy with the treatment of buybacks under the UK version of the Market Abuse Regulation (Regulation (EU) No 596/2014), the EBT intends to comply with customary daily price and volume parameters deemed appropriate for the level of liquidity in the Company's shares. Outlook ● The f irst episode of Hello Neighbor animated series will premiere alongside the release of Hello Neighbor 2 in December 2022 . ● The pipeline for coming months includes version 1.0 release of Hello Neighbor 2 , Despot's Game and Potion Craft , and new launches such as Eville (Xbox and PC) and Asterigos (PS, Xbox and Steam). ● While tinyBuild monitors the impact of the cost of living crisis and of the conflict in Ukraine, early indicators of traction across the pipeline of over 30 titles , including Key Performance Indicators (KPIs) for Hello Neighbor 2 , are very encouraging. ● The Board remains confident the Company is on track to deliver results at least in line with expectations, plus accretive acquisitions. Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented: "If H 1 2022 was a game, we would have been play ing it on the "Very Difficult" setting. We faced unprecedented challenges, including the war in Ukraine, having to extract staff out of Russia, a sharp increase in the cost of living and supply chain issues. Still, against all odds, the team pulled through and won. " "On one side, we have taken further steps to de-risk the business by bringing external dependencies in-house and scaling up our publishing capacity to deliver games to more platforms. On the other side we continued to invest in the future by re-establishing tinyBuild's dominant presence at consumer shows, starting development of more internal projects and delivering on our cross-media promise. We are thrilled to announce the first e pisode of the Hello Neighbor animated series will launch in December. " "Our goal is to expand our position as a leading global developer and publisher, focusing on IP ownership while creating long-term scalable franchises across multiple media formats. To date, 2022 has seen significant progress towards that ambition, and we look to the future with confidence." Enquiries : tinyBuild, Inc Alex Nichiporchik - Chief Executive Officer Antonio Jose Assenza - Chief Financial Officer Giasone (Jaz) Salati - Head of M&A and IR [email protected] Berenberg ( Sole Broker and Nom inated Adviser ) Mark Whitmore, Ciaran Walsh , Milo Bonser +44 (0)20 3207 7800 SEC Newgate (Financial PR) Robin Tozer, Bob Huxford, George Esmond [email protected] +44 (0)7540 106366 About tinyBuild: Founded in 2013, tinyBuild (AIM: TBLD) is a leading premium AA-rated and indie video games publisher and developer. tinyBuild strategically secures access to IP and partners with developers to establish a stable platform on which to build multi-game and multimedia franchises. tinyBuild has a strong portfolio of over 40 titles, and its upcoming pipeline includes over 20 new titles currently in development. Headquartered in Bellevue, Washington, USA, the Company has key operations worldwide, with employees, contractors or partners in multiple locations across five continents. tinyBuild's geographic diversity enables it to source high-potential IP, cost-effective development resources and a loyal customer base through innovative grassroots marketing. tinyBuild was admitted to AIM, a market operated by the London Stock Exchange, in March 2021. For further information, visit: www.tinybuildinvestors.com . OPERATIONAL REVIEW The first half of 2022 has been dominated by the conflict in Ukraine and by rising inflation across all geographies. In contrast with general softness in the video games market, the Board is pleased to confirm that catalogue titles are performing strongly, alongside new game launches. Sales are progressing at least in line with expectations for the financial year 2022. tinyBuild is benefitting from platform competition and is well-positioned to work with subscription services. The Company continues to engage with new platforms and experiment with new technologies. Development revenues from deals with distribution partners were above expectations and gave the Company greater visibility of future revenue growth, which in turn reduces the risk attached to the development of new games. As anticipated, the release schedule for 2022 is weighted towards the second half of the year (e.g. Potion Craft, Hello Neighbor 2, Asterigos, Despot's Game ). Still, results for the first half of the year were slightly above expectations thanks to a back catalogue contribution equal to 99 % of total gaming revenues, slightly above the average of the past five years. The share of revenues from own IP also increased to 8 3 % in H1 2022 and the acquisition of Bossa's titles (acquire d in August 2022) adds to an already strong portfolio. Current portfolio and pipeline Since the beginning of the year, tinyBuild has published four new games (including SpiderHeck in September) and expanded games already in the portfolio with version 1.0, downloadable content ("DLC") and new platform launches: ● SpiderHeck (PS, Xbox, Steam) - a physics-based brawler that's easy to pick up but difficult to master. Duel to the death or choose to team up and hold back swarms of savage enemies. ● Tinykin (PC and consoles) - an innovative 3D puzzle platformer where astronaut Milo uses hundreds of tinykin and their unique powers to go back to his home planet - and back to normal size. ● Cartel Tycoon (version 1.0) - a survival business simulation inspired by the eighties narcotics trade. Expand and conquer, fight off rival cartels and evade the authorities. ● Not for Broadcast (version 1.0) - the critically acclaimed, darkly comedic, full motion propaganda simulator which has recorded over 400,000 downloads since its launch in 2019. We have recently announced, or we are close to announcing a release date for: ● Hello Neighbor 2 (version 1.0) - the much-awaited sequel in the franchise, currently available for pre-order and scheduled for launch on 6th December, alongside two DLCs. ● Asterigos - an action RPG set in a fantasy world inspired by Greek and Roman mythologies, scheduled for release in October. ● Despot's Game (version 1.0) - a rogue-like tactics auto-battler currently available on Steam as early access, culminating in an asynchronous multiplayer mode. ● Eville - a multiplayer social deduction game set in a village riddled by a series of murders scheduled for launch in October. ● Potion Craft (version 1.0) - an alchemist simulator that topped the Steam Global Top Sellers list as early access and already passed 700k units sold. Finally, we announced a number of new titles, including: ● I am Future - a base-building game set on the ruins of a former civilization. ● Nitro Kid - roguelike deck-builder set in the neon '80s featuring 30+ Synthwave exclusive tracks. ● Broken Roads - a narrative-driven RPG set in Australia with a very distinct look. ● Farworld Pioneers - a vast colony-builder. Investing and innovating for growth I am pleased to announce today that we have finished writing Season 1 of the Hello Neighbor Animated Series. The animation is now in full progress, and we expect the first episode to premiere alongside the release of Hello Neighbor 2 in December 2022, maximising awareness of all the titles in the franchise. We have kicked off development on several internal projects, fully managed by internal studios. Our pipeline now consists of both externally developed 2nd party IP, fully internal development, and strategic 3rd party partnerships. Finally, tinyBuild came back in full swing at consumer shows sporting the brightest, most visible and fun booths at PAX West and PAX East in the US. In keeping with tinyBuild's innovative approach to the convention experience, we created a full-on carnival experience enjoyed by gamers and families alike. Acquisitions Since the beginning of the year, we have made two acquisitions. We acquihired Demagic, a development studio with 23 staff that has been working with tinyBuild for over a year on various projects including Hello Neighbor 2, unannounced titles, and more recently Deadside. We acquihired Konfa Games , whom tinyBuild has been working with for over two years . Konfa Games successfully released Despot's Game as early access (Steam only) in October 2021. Version 1.0 is scheduled for launch soon on PlayStation 5, PlayStation 4, Xbox Series X/S, Xbox One, Nintendo Switch, and PC via Steam and Epic Games Store, along with the first DLC. We acquired the top IP of Bossa Studios [6] ( Surgeon Simulator and I am bread/ fish ) to further expand tinyBuild's portfolio in the simulation and adventure segments. People As part of its effort to secure talent at a competitive cost, the Company continued to hire staff (both employees and independent contractors) in strategic geographies. The acquihire of Demagic adds a team of talented developers that can support existing studios both in terms of development and porting, and develop new IP. tinyBuild aims to offer employees the best working conditions in the industry. For example, the Company has implemented clear policies against crunching, the industry practice by which developers overwork to meet specific targets. In June 2022, tinyBuild also gifted one extra week of holiday to all direct employees in a gesture of appreciation for everybody's hard work. As a result, tinyBuild enjoys one of the lowest levels of staff turnover in its development studios, low single-digit, compared to an estimated 15.5% across the industry ( Wired ). Position and strategy tinyBuild is well-positioned with a strong pipeline of new titles and a proven ability to attract, screen and market high-quality game franchises. Our low-risk M&A strategy continues to help us increase our IP portfolio, and our multimedia franchise model allows us to extend the life of our IP, maximising our return on investment. Our medium-term strategy is to expand our position as a leading global video games developer and publisher, focussing on IP ownership while creating long-term scalable franchises across multiple media formats. 2022 has seen significant progress towards that ambition, and I would like to thank all of our shareholders for their support. Alex Nichiporchik Chief Executive Officer 27 September 2022 FINANCIAL REVIEW Results for the six months ended June 2022 were slightly ahead of expectations, and the Company closed one acquihire in the period. Revenue and Gross Margin In the six months to June 2022, tinyBuild revenues were $28.8m, or 54% increase compared to the previous year (H1 2021: $18.6m), reflecting strong organic growth across the portfolio, a solid performance of acquired businesses, and despite a release schedule skewed towards the second half of the year. Gaming revenues were up 56%, including strong contribution from development services, which now also includes Red Cerberus. Back catalogue performed strongly in the first half, supported by Hello Neighbor titles and by emerging franchises such as Totally Reliable Delivery Services, Potion Craft and Deadside. Revenue from events, primarily DevGAMM, fell to $0.15m as a result of events cancelled in Russia and Ukraine. Gross profit increased by 46% to $19.3m (2021 H1: $13.2m), as a result of strong revenue growth. Gross profit margin decreased slightly to 67% (H1 2021: 71%) due to the consolidation of lower margin businesses (Versus Evil and Red Cerberus), only partly offset by the positive impact of higher share of revenues deriving from own IP titles (83% in H1 2022 vs 78% in H1 2021). Adjusted EBITDA and Operating Profit Adjusted EBITDA is presented net of amortisation of development costs, net of expenses related to the conflict in Ukraine, excluding share-based compensation expenses and exceptional costs (e.g. IPO expenses in 2021), giving a clear, yet conservative, picture of the business progression. Adjusted EBITDA grew 25% to $9.9m in H1 of 2022. Margins decreased to 34% (H1 2021: 43%) primarily due to the consolidation of structurally lower-margin services unit Red Cerberus and third-party publisher Versus Evil, both acquired in November 2021, plus an increase in marketing spend. Adjusted EBITDA would increase to $10.9m (38% margin), if we exclude the $1.0m expenses related to the conflict in Ukraine. Operating profit for H1 2021 was $6.8m (H1 2021: $0.7m). Excluding the $4.4m one-off IPO costs in 2021, Adjusted Operating Profit increased 33% in 2022, reflecting an increase in amortisation of purchased IP ($1.7m in H1 2022 vs $0.5m in H1 2021), partly offset by lower share-based compensation ($0.9m in H1 2022 vs $2.2m in H1 2021). Finance costs and taxation Finance costs were immaterial in H1 2022, and taxation charges were $2.3m (H1 2021: $1.0m) reflecting the higher taxable income and a normalisation of timing issues that benefited H1 2021. Exceptional Costs In H1 2021, tinyBuild incurred one-off costs ($4.4m) related to the IPO on the London Stock Exchange's AIM market. In H1 2022, the C ompany incurred $1.0m expenses relating to the conflict in Ukraine, costs that have not been considered one-off due to the continuation of the war. Cash Flow Adjusted cash flows from operating activities (excluding exceptional costs relating to the IPO) increased 57 % from $3.8m to $ 8.8 m in H1 2022, also due to a normalisation of timing differences that impacted results in the first half of 2021. Software development costs, mainly consisting of developer salaries, advances, localisation and porting, increased from $5.6m to $14. 2 m, reflecting the increase in investment for upcoming pipeline releases. Financial Position The net cash position decreased from $48.8m, as of December 2021, to $42.6m as of June 2022, with the majority of the variation driven primarily by higher organic investments. Contract liabilities decreased from $2.6m at 31 December 2021 to nil due to the timing of contractual payment terms and the H2 heavy release schedule. Events after the reporting date In August 2022, tinyBuild announced the acquihire of Konfa, for a maximum consideration of up to $5.4m, consisting of upfront and deferred payments over the next three calendar years, split approximately in 40% cash and 60% newly issued tinyBuild shares, subject to stretched operational targets being met. Also in August 2022, we announced the acquisition of Bossa Studios' IP catalogue. The consideration includes an upfront payment of $2.55m in cash and the equivalent of $0.45m in tinyBuild shares. The franchise delivered total revenues of $6.0m in the year ending 31 December 2021. 2021 revenues were boosted by the launch of new titles. Finally, tinyBuild announced today it increased the existing credit facility with Bank of America from $25m to $35m and extended the tenure from twelve months to three years, on similar terms. The new credit facility has been designed to expand tinyBuild's financial capacity in the event of larger M&A deals while having minimal impact on P&L and cash flow if not used. Antonio Jose Assenza Chief Financial Officer 27 September 2022 TINYBUILD INC. INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 TINYBUILD INC. CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME / (LOSS) Note 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Revenue 4 28,750 18,626 52,153 Cost of sales (9,058) (5,449) (18,112) Gross profit 19,692 13,177 34,041 Administrative expenses: - General administrative expenses (12,000) (5,920) (14,469) - Share-based payment expenses (887) (2,159) (2,452) - IPO transaction costs - (4,409) (4,588) Total administrative expenses (12,887) (12,488) (21,509) Operating profit 6,805 689 12,532 Finance costs (24) (9) (8) Finance income 8 4 - Profit before tax 6,789 684 12,524 Income tax expense (2,306) (981) (4,281) Profit/(loss) and total comprehensive income/(loss) for the year 4,483 (297) 8,243 Attributable to: Owners of the parent company 4,457 (225) 8,268 Non-controlling interests 26 (72) (25) 4,483 (297) 8,243 Earnings per share ($) 5 0.022 (0.001) 0.043 Diluted earnings per share ($) 5 0.022 (0.001) 0.042 Adjusted EBITDA 6 9,882 7,905 22,239 TINYBUILD INC. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION 30 June 2022 31 December 2021 Unaudited Audited ASSETS Note $'000 $'000 Non-current assets Intangible assets 7 69,019 57,156 Property, plant and equipment: - owned assets 524 41 - right-of-use assets 374 528 Trade and other receivables 266 266 Total non-current assets 70,183 57,991 Current assets Trade and other receivables 14,431 15,569 Cash and cash equivalents 42,612 48,832 Total current assets 57,043 64,401 TOTAL ASSETS 127,226 122,392 EQUITY AND LIABILITIES Equity Share capital 9 204 203 Share premium 65,143 63,546 Warrant reserve 1,920 1,920 Retained earnings 35,983 30,639 Equity attributable to owners of the parent company 103,250 96,308 Non-controlling interest 15 137 Total equity 103,265 96,445 LIABILITIES Non-current liabilities Lease liabilities 201 277 Contingent consideration 6,336 6,336 Deferred tax liabilities 2,716 2,345 Total non-current liabilities 9,253 8,958 Current liabilities Trade and other payables 9,645 9,290 Contingent consideration 4,793 4,793 Contract liabilities - 2,645 Lease liabilities 270 261 Total current liabilities 14,708 16,989 Total liabilities 23,961 25,947 TOTAL EQUITY AND LIABILITIES 127,226 122,392 TINYBUILD INC. CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY Note Share capital Share premium Warrant reserve Retained earnings Total equity attributable to owners of the parent Non-controlling interest Total equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 January 2021 1 18,674 - 19,919 38,594 162 38,756 Loss and total comprehensive expense for the year - - - (225) (225) (72) (297) Transactions with owners in their capacity as owners: Share split 178 (178) - - - - - Issue of shares, net of transaction costs 22 44,147 - - 44,169 - 44,169 Issue of shares on exercise of options 1 154 - - 155 - 155 Issue of warrants - (1,920) 1,920 - - - - Share-based payments - - - 2,159 2,159 - 2,159 Total transactions with owners 201 42,203 1,920 2,159 46,483 - 46,483 Balance at 30 June 2021 202 60,877 1,920 21,853 84,852 90 84,942 Share capital Share premium Warrant reserve Retained earnings Total equity attributable to owners of the parent Non-controlling interest Total equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 January 2022 203 63,546 1,920 30,639 96,308 137 96,445 Profit and total comprehensive income for the year - - - 4,457 4,457 26 4,483 Transactions with owners in their capacity as owners: Issue of shares, net of transaction costs 9 1 1,569 - - 1,570 - 1,570 Issue of shares on exercise of options 9 - 28 - - 28 - 28 Dividends paid 11 - - - - - (148) (148) Share-based payments - - - 887 887 - 887 Total transactions with owners 1 1,597 - 887 2,485 (148) 2,337 Balance at 30 June 2022 204 65,143 1,920 35,983 103,250 15 103,265 TINYBUILD INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited Note $'000 $'000 $'000 Cash flows from operating activities Cash generated from operations 10 8,811 (570) 13,290 Net cash generated by/(used in) operating activities 8,811 (570) 13,290 Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired - - (11,784) Software development (14,245) (5,636) (15,085) Purchase of intellectual property - (2,089) (10,832) Proceeds on disposal of intangible assets - - 45 Purchase of property, plant and equipment (554) - - Interest received 8 4 - Net cash used in investing activities (14,791) (7,721) (37,656) Cash flows from financing activities Repayment of borrowings - (13) (13) Proceeds from issuance of ordinary shares, net of issuance costs - 43,570 46,839 Proceeds on exercise of share options - 154 155 Payment of principal portion of lease liabilities (92) (91) (96) Dividends paid to non-controlling interests (148) - - Net cash (used in)/generated by financing activities (240) 43,620 46,885 Cash and cash equivalents Net (decrease)/increase in the year (6,220) 35,329 22,519 At beginning of period 48,832 26,313 26,313 At end of period 42,612 61,642 48,832 Non-cash investing activities The Group purchased the intellectual property rights to one development studio, for consideration which included non-cash consideration of $1,570,000 (see note 7). TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 1 GENERAL INFORMATION tinyBuild Inc. ("the Company") is a public company limited by shares, and is registered, domiciled and incorporated in Delaware, USA. The address of the registered office is 1100 Bellevue Way NE, STE 8A #317, Bellevue, WA 98004, United States. The Group ("the Group") consists of tinyBuild Inc. and all of its subsidiaries. The Group's principal activity is that of an indie video game publisher and developer. The Board of Directors approved this interim financial information on 27 September 2022. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These condensed, consolidated financial statements for the interim half-year reporting period ended 30 June 2022 have been prepared in accordance with IAS 34 'Interim Financial Reporting'. These interim financial statements do not constitute full financial statements and do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 31 December 2021. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The Annual Report and Financial Statements for 2021 have been issued and are available on the Group's investor relations' website: https://www.tinybuildinvestors.com/documents-and-presentations. The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 31 December 2021 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2022 and have been adopted in the 2022 financial statements. There are no new and amended standards and/or interpretations that will apply for the first time in the next annual financial statements that are expected to have a material impact on the Group. Tax charged within the 6 months ended 30 June 2022 has been calculated by applying the effective rate of tax which is expected to apply to the Group for the year ending 31 December 2022 as required by IAS 34. The financial statements have been prepared on the historical cost basis except for, where disclosed in the accounting policies, certain financial instruments that are measured at fair value. The financial statements are prepared in US Dollars, which is the functional currency and presentational currency of the Company and all entities within the Group. Monetary amounts in these financial statements are rounded to the nearest thousand US Dollars (US$'000). 3 SEGMENTAL REPORTING IFRS 8 'Operating Segments' requires that operating segments be identified on the basis of internal reporting and decision-making. The Group identifies operating segments based on internal management reporting that is regularly reported to and reviewed by the Chief Executive Officer, which is identified as the chief operating decision maker. Management information is reported as one operating segment, being revenue from self-published franchises and other revenue streams such as royalties, licensing, development and events. Whilst the chief operating decision maker assessed there to be only one segment, the Company's portfolio of games is split between those based on IP owned by the Group and IP owned by a third party and hence to aid the readers' understanding of our results, the split of revenue from these two categories is shown below. TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 3 SEGMENTAL REPORTING (CONTINUED) Game and merchandise royalties 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Owned IP 13,107 14,100 30,640 Third-party IP 4,359 4,050 9,231 17,466 18,150 39,871 Three customers were responsible for approximately 70% of the Group's revenues (30 June 2021: five - 80%, 31 December 2021: three - 67%). The Group has six right-of-use asset located overseas with a carrying value of $374,000 (30 June 2021: one - $39,881, 31 December 2021: five - $528,000). The Group also has tangible fixed assets located overseas with a total carrying value of $212,000 (30 June 2021: none, 31 December 2021: none). All other non-current assets are located in the US. 4 REVENUE 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited An analysis of the Group's revenue is as follows: $'000 $'000 $'000 Revenue analysed by class of business Game and merchandise royalties 17,466 18,150 39,871 Development services 11,134 224 11,477 Events 150 252 805 28,750 18,626 52,153 TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 5 EARNINGS PER SHARE The Group reports basic and diluted earnings per common share. Basic earnings per share is calculated by dividing the profit attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit attributable to common shareholders by the weighted average number of common shares outstanding, taking into account the effects of all potential dilutive common shares, including options. 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Total comprehensive income attributable to the owners of the company 4,457 (225) 8,268 Weighted average number of shares 203,119,680 192,047,223 191,241,890 Basic earnings per share ($) 0.022 (0.001) 0.043 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Total comprehensive income attributable to the owners of the company 4,457 (225) 8,268 Weighted average number of shares 203,119,680 192,047,223 191,241,890 Dilutive effect of share options 2,135,640 - 2,484,523 Dilutive effect of warrants 149,130 - 149,130 Dilutive effect of restricted stock awards 954,654 - 954,654 Weighted average number of diluted shares 206,359,104 192,047,223 194,830,197 Diluted earnings per share ($) 0.022 (0.001) 0.042 Pursuant to IAS 33 'Earnings per Share', options whose exercise price is higher than the value of the Company's security were not taken into account in determining the effect of dilutive instruments. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share. 6 ADJUSTED EBITDA The Directors of the Group have presented the performance measure 'Adjusted EBITDA' as they monitor this performance measure at a consolidated level and they believe this measure is relevant to an understanding of the Group's financial performance. Adjusted EBITDA is calculated by adjusting profit from continuing operations to exclude the impact of taxation, net finance costs, share-based payment expenses, depreciation, amortisation of purchased intellectual property, acquisition costs and IPO transaction costs. Adjusted EBITDA is not a defined performance measure in IFRS. The Group's definition of Adjusted EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities. Amortisation of $3.8m (30 June 2021: $1.0m, 31 December 2021: $3.5m) of software development costs has been included in arriving at Adjusted EBITDA as they are a primary cost in the company's ordinary course of business. TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 6 ADJUSTED EBITDA (CONTINUED) 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Profit/(loss) for the period 4,483 (297) 8,243 Income tax expense 2,306 981 4,281 Finance costs 24 9 8 Finance income (8) (4) - Share-based payment expenses 887 2,159 2,452 Amortisation of purchased intellectual property, brands and customer relationships 1,754 547 1,662 Depreciation of property, plant and equipment 224 101 117 IPO transaction costs - 4,409 4,588 Acquisition costs 212 - 888 Adjusted EBITDA 9,882 7,905 22,239 7 INTANGIBLE ASSETS Goodwill Brands Customer relationships Purchased intellectual property Software development costs Total $'000 $'000 $'000 $'000 $'000 $'000 Cost: As at 1 January 2021 - - - 6,170 17,127 23,297 Additions - internally generated - - - - 15,084 15,084 Additions - separately acquired - - - 10,832 - 10,832 Additions through business combinations 13,202 1,815 4,261 2,356 - 21,634 Transfers - - - 1,962 (1,962) - Disposals - - - - (90) (90) As at 31 December 2021 13,202 1,815 4,261 21,320 30,159 70,757 Additions - internally generated - - - - 14,245 14,245 Additions - separately acquired - - - 3,195 - 3,195 As at 30 June 2022 13,202 1,815 4,261 24,515 44,404 88,197 Amortisation and impairment: As at 1 January 2021 - - - 1,086 7,070 8,156 Amortisation charge for the year - 10 51 1,601 3,500 5,162 Impairment charge for the year - - - - 283 283 As at 31 December 2021 - 10 51 2,687 10,853 13,601 Amortisation charge for the period - 61 304 1,389 3,823 5,577 As at 30 June 2022 - 71 355 4,076 14,676 19,178 Carrying amount: As at 30 June 2022 13,202 1,744 3,906 20,439 29,728 69,019 As at 31 December 2021 13,202 1,805 4,210 18,633 19,306 57,156 TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 7 INTANGIBLE ASSETS (CONTINUED) During the period, the Group purchased the intellectual property rights to one development studio for total consideration of $3,195,000, which included non-cash consideration for 621,006 ordinary shares totalling $1,570,000. Management concluded that this did not meet the definition of a business combination. Accordingly, it has been accounted for as an asset acquisition. Amortisation of purchased intellectual property is recognised within general administrative expense in the Statement of Comprehensive Income. Amortisation of software development costs is recognised within cost of sales in the Statement of Comprehensive Income. 8 SHARE-BASED PAYMENTS The Group operates two share-based plans, the Equity Incentive Plan and a Stock Restriction Agreement, which are detailed as follows: The Stock Restriction Agreement is a plan that provides for grants of Restricted Stock Awards (RSA) for the founders of the company and acquired employees. The awarded shares are made in the Company's ordinary share capital. The fair value of the RSAs is estimated by using the Black-Scholes valuation model on the date of grant, based on certain assumptions, and is charged on a straight-line basis over the required service period, normally two to three years. The fair value of the 2017 grant is $8.98 per share, the 2019 grant is $40.21 per share and the 2021 grant is $2.095 per share. The 2017 and 2019 RSAs vest in instalments every three months over the service period and fully vested on IPO. The 2021 RSAs vest over 3 years in a 50:25:25 ratio. Each instalment has been treated as a separate share option grant because each instalment has a different vesting period. This plan is equity-settled. A reconciliation of RSAs is as follows: 30 June 2022 31 December 2021 Opening RSA outstanding 954,654 191,220 RSA granted - 954,654 RSA vested - (191,220) Closing RSA outstanding 954,654 954,654 Weighted average remaining contractual life in years 2.38 2.88 The company has an Equity Incentive Plan that provides for the issuance of non-qualified stock options to officers and other employees that have a contracted term of 10 years and generally vest over four years. The stock options are granted on shares issued by the company. A reconciliation of share option movements is shown below: Number of options outstanding Weighted average exercise price ($) Number of options exercisable Weighted average exercise price ($) Weighted average remaining contractual life (years) At 1 January 2022 3,767,365 0.87 1,474,928 0.54 7.68 Exercised during the period (400,000) 0.07 Forfeited during the period (103,164) 0.33 At 30 June 2022 3,264,201 0.99 1,254,042 0.51 7.11 TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 8 SHARE-BASED PAYMENTS (CONTINUED) During the period covered by the financial statements, no options expired. Options granted are valued using the Black-Scholes option-pricing model. The fair value per option granted during the period covered by the financial statements and the assumptions used in the calculation are as follows: Grant date 17 November 2021 27 September 2021 3 March 2021 3 February 2021 Share price at grant date $2.77 $3.38 $2.35 $1.59 Exercise price $2.77 $3.54 $2.35 $1.59 Option life 2.5 10 6.25 6.25 Expected volatility 60.00% 60.00% 60.00% 60.00% Expected dividends 0.00% 0.00% 0.00% 0.00% Discount rate 0.25% 0.25% 0.25% 0.25% Weighted average fair value per option $0.52 $1.35 $0.49 $0.66 Expected volatility is estimated based on the historic volatility (based on the expected term) and the historical volatility of comparable public peers over the same period. 9 SHARE CAPITAL 30 June 2022 31 December 2021 Unaudited Audited Number Number Class of share Ordinary shares of $0.001 each 203,528,087 202,507,081 30 June 2022 31 December 2021 Unaudited Audited $'000 $'000 Class of share Ordinary shares of $0.001 each 204 203 204 203 On 28 January 2022, 400,000 share options were exercised at a weighted average exercise price of $0.07, totalling $28,000. On 11 April 2022, 621,006 shares were issued as partial consideration for the acquisition of intellectual property totalling $1,571,289. TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 10 CASH GENERATED FROM OPERATIONS 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Profit/(loss) for the year 4,483 (297) 8,243 Adjustments for: Share-based payments 887 2,159 2,452 Amortisation of intangible assets 5,577 1,532 5,162 Impairment of intangible assets - - 283 Depreciation of tangible fixed assets 224 101 117 Foreign exchange losses - (2) - Finance costs 24 9 8 Finance income (8) (4) - Income tax expense 2,306 - 3,599 Movements in working capital: Increase in receivables (737) (2,927) (8,160) (Decrease)/increase in payables (3,914) (1,141) 5,204 Increase in deferred tax liability 371 - 682 Income tax paid (402) - (4,300) Cash generated from/(used in) operations 8,811 (570) 13,290 11 RELATED PARTY TRANSACTIONS An analysis of key management personnel remuneration is set out below: Key management personnel remuneration 6 months ended 30 June 2022 6 months ended 30 June 2021 Year ended 31 December 2021 Unaudited Unaudited Audited $'000 $'000 $'000 Aggregate emoluments 802 758 3,037 Equity-settled share-based payments 61 2,001 2,159 863 2,759 5,196 Transactions with other related parties The wife of the Company's CEO is a member and manager of DevGAMM LLC. During the period, DevGAMM LLC paid dividends totalling $148,000 to this related party. There were no other related party transactions during the period which require disclosure. TINYBUILD INC. NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2022 12 SUBSEQUENT EVENTS On 26 August 2022, the Company completed the acquisition of Konfa Games for initial consideration of $1.4m, including amounts previously advanced. The agreement contains performance based earn-outs over the next three calendar years, subject to operational targets being met. The Company also acquired Bossa's IP Catalogue for consideration of $3m. Henrique Olifiers, Non-executive Chairman of the Company, is the Founder and CEO of Bossa. As a result of this relationship, the IP Catalogue acquisition represents a related party transaction in accordance with the AIM Rules for Companies. The Directors of tinyBuild, excluding Henrique Olifiers, consider, having consulted with Berenberg, tinyBuild's nominated adviser, that the terms of the transaction are fair and reasonable in so far as shareholders of tinyBuild are concerned. After the year end, the company expanded the size of the revolving credit facility with Bank of America from $25m to $35m and extended the maturity date to three years to maintain the flexibility to fund further potential M&A in the most effective way. There are currently no amounts drawn on this facility. [1] Includes amortisation of Development costs and expenses related to the conflict in Ukraine. Excludes expenses related to the IPO (2021) and share-based compensation expenses. [2] Includes expenses related to the conflict in Ukraine. Excludes expenses related to the IPO (2021). [3] Cash and cash equivalents minus debt. [4] Excludes Red Cerberus, a development services entity [5] An informal term used in connection with the process of acquiring a developer via a transfer or an engagement as independent contractors of the employees of an external developer, and selectively acquiring relevant target IP via an asset purchase, rather than a corporate acquisition. [6] Related party transaction