Media and Games Invest : MGI Consolidated financial statements 31 12 2019

168 St. Christopher Street Valletta VLT1467 / Malta

Consolidated Financial Statements for the year ended 31 December 2019

Consolidated Financial Statements - 31 December 2019

Content
Page
Directors' Report	1- 5
Consolidated Financial Statements
Consolidated Statement of Financial Position	6- 7
Consolidated Statement of Profit or Loss	8
Consolidated Statement of Comprehensive Income	9
Consolidated Statement of Changes in Shareholders' Equity	10
Consolidated Statement of Cash Flows	11
Notes to the Consolidated Financial Statements	12 - 90
Independent Auditors' Report	91 - 97

1 General information and principal activity

Media and Games Invest plc, ("MGI" or "the Company"), Malta, is a public limited liability company incorporated on 21 March 2011 in Malta. The Company is the parent company of the entities disclosed in Note 2.5.2 to these consolidated financial statements (to be referred collectively as "the MGI-Group" or "the Group"). As of 31 December 2019, Bodhivas GmbH, Düsseldorf, owns 62.38% of the Group.

The Company's shares are listed in the open market segment of Frankfurt Stock Exchange and XETRA in Germany. In October 2019, MGI has a public bond listed in the open market segment of Frankfurt Stock Exchange.

The subsidiary, gamigo AG, has a public bond listed in the open market segment of Frankfurt Stock Exchange and in the regulated segment of the Nasdaq Stockholm in Sweden.

The Company is registered with the Malta Business Registry with registration number C 52332 and registered office at 168 St. Christopher Street, Valletta, VLT1467, Malta.

The Company is a strategic investment holding company focusing on a 'buy-integrate-build-and- improve' strategy, creating fast-growing companies within the media and games segments through acquisitions and growth in operations. New and proven technologies are actively being implemented to create efficiency improvements and competitive advantages.

Furthermore, the Company acquires, holds, and sell other investments (e.g. shares, stocks, bonds, securities and other assets of companies as well as investments in funds and assets) that support the above stated business purpose and as deemed appropriate by the Board of Directors.

2 Performance review, result and dividends

During the year, net revenues amounted to EUR 83.9 million (2018: EUR 32.6 million), which is an increase of 157% compared to 2018. In 2019, the gaming segment was consolidated for the full 12 months (previous year: 8 months) and for the first-time showed its full revenue and EBITDA effect. In addition, the synergetic media segment was considerably strengthened through several value-generating bolt-on acquisitions which contributed in the second half year of 2019.

EBITDA amounted to EUR 15.5 million (2018: EUR 8.7 million), which is an increase of 80% due to the successful realization of synergy effects in the course of the integration of the acquired gaming assets of Trion and WildTangent. In the media segment, where our buy-and-build strategy started later, we are earlier in the process of integrations and building critical mass, leading to strong revenue growth while not yet showing the full cost and revenue efficiency advantages. As a result of that margins, the media part is still lower, although already positive with 7%. Overall the EBITDA-margin of MGI is strong with 19%.

In the media segment, we completed the acquisitions of ReachHero, AppLift and PubNative, and have thus considerably expanded the media segment. MGI covers now the entire value chain in online advertising and has hereby also extended its value chain for gaming.

We were able to double organic growth in 2019 to 10% (2018: 5%). This was done through successful game launches like ArcheAge Unchained, the relaunch of Desert Operations, more efficient customer acquisition, as well as regular content updates and events in the games in connection with an optimized game/user support system where we were able to reduce the number and processing time of open tickets considerably.

Furthermore, we acquired within the Gaming segment, WildTangent in Q2 2019, including a portfolio of 5,000 casual games and strong partnerships with computer and laptop manufacturers which includes more than 80 million pre-installs of the WildTangent Games on PCs.

The result for the period from 1 January to 31 December 2019 is shown in the consolidated statement of comprehensive income. No dividends are recommended during the reporting period.

3 Post balance sheet events and likely future business developments

After 31 December 2019 the following events occurred:

Acquisition of Verve

On 22 January 2020, gamigo AG took over the assets of the business operations and liabilities of Verve Wireless Inc. via its wholly owned subsidiary newly established for this purpose, Verve Wireless Inc. (Verve). Verve Wireless Inc. was a leading marketing provider of programmatic and open market traffic in Carlsbad, California, USA.

With the takeover, the Group is continuing its series of successful acquisitions and using the consolidation potential of the market. Furthermore, the acquisition will be used to build up the B2B area in the USA in line with the European set up. This results in strategic synergies for the B2B and B2C segment in the USA. These synergy effects are expected to contribute to the Group's further profitable growth.

Increase of the gamigo stake

On 9 March 2020, MGI executed its earlier announced plan to acquire additional gamigo shares, increasing its stake in gamigo AG from 53% to 99%. It is planned to also acquire the remaining gamigo shares. The purchase price of EUR 16.5 million in cash and up to 18.2 million MGI shares represents a valuation of seven times EV/EBITDA based on the 12-month period ending 30 September 2019. The selling gamigo shareholders will receive up to 18.2 million new MGI shares. In return, the company's share capital will be increased by 18.2 million new MGI shares. A lock-up period of around 25 months will apply to approximately 98% of these new shares. The cash portion of the purchase price is financed with a term loan from UniCredit Bank in the amount of EUR 10 million at an interest rate of 5.5% p.a. as well as via free liquidity from MGI.

Increase of the MGI Bonds

Until 6 June 2020, MGI increased its MGI 2019/2024 bond (ISIN DE000A2R4KF3), by a further EUR 8.3 million, as part of a subsequent selective placement, to a total volume of EUR 23.9 million. The free funds from the placement are to be used amongst others for M&A. The bond has a total volume of up to EUR 25 million. The company plans to place further tranches if M&A opportunities arise.

Board of Directors

Elizabeth Para has joined the Board of Directors in January 2020. Elizabeth Para has a 20+ years career in financial markets, with substantial experience in public and private debt as well as equity markets. She worked in investment and client facing roles in both the banking and the investment management industry. Elizabeth holds a master's degree in economics and is a Chartered Financial Analyst [CFA]. Elizabeth was one of the earliest investors in gamigo and is also an MGI shareholder.

As a long-time shareholder in both gamigo and MGI she has built up both a strong company specific and sector knowledge on the digital games and media sector. The Board of Directors now consists of Remco Westermann (Executive Chairman), Tobias M. Weitzel and Elizabeth Para. With the completion of the gamigo transaction, René Müller resigned from the Board of Directors as planned.

Capital Increase

On 23 June 2020, a capital increase of EUR 3.9 million was passed. The capital increase is not entered the Maltese Commercial Register yet.