January June Summary

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2 January June Summary Consolidated revenue for the period is KSEK, up 89% compared to KSEK for the same period of This is in line with the previously communicated forecast of 35 MSEK. The management is seeing more pronounced seasonality in downloads and sales. In retail sales, Q4 is usually peak quarter. In digital downloads, however, such period is after holidays: January and February, and the most positively affected quarter is Q1. This effect is explained by a jump in the install base of smartphones and tablets following the holiday period. This results in increased usage, downloads, and purchases of apps. This effect cools off in Q2. Despite this seasonality, the group was able to keep Q2 revenue on the same level as Q1 revenue. Operating result for the period is KSEK, up 21% compared to KSEK for the same period of This result is in line with the previously communicated forecast of 9 MSEK. Earnings per share for the period are 0.96 SEK. Lower margins in Q2 are explained by the continuous effort of the management to build the company for the long term. As Q2 revenue was at around the same level as Q1 revenue, the group has further strengthened its development and QA work force, and increased investment in free-to-play games to be released in 2012 and The management expects that the growth of revenue in Q3 and Q4 will offset increased expenses and the group will deliver on the previously announced goal of 87 MSEK, 30 MSEK operating result, and 3.2 SEK earnings per share for full year During the period, the group had negative cash flow of KSEK. Cash reserves on June 30 th 2012 amounted to KSEK. Current assets of the group as of June 30 st 2012 were KSEK. Current liabilities: KSEK. Working capital (CA-CL): KSEK. Current ratio (CA divided by CL): The group does not have any long-term liabilities, and has strong liquidity position. The group continues aggressively investing for the long term and the management is maintaining the balance between profitability, cash flow and financing long-term growth MSEK of capital raised in August 2011 was committed to new game projects licensed and sourced from 3 rd party studios, and developed internally by the group. As these projects come to completion, recoupable royalty advances and contract payments become due in anticipation of game releases. As the group s revenue grows, the management controls the cash flow by increasing or decreasing investment in new games. The management currently plans to continue actively investing and maintaining negative cash flow during the next two quarters, then returning to being cash flow positive on increased revenue from multiple new game releases. The management maintains its goal to turn G5 into a company with 300 MSEK annual revenue and 100 MSEK operating result in a couple of years. Going forward, the management aims to keep the group s long-term average revenue growth at 2010/2011 levels. During Q2, the group has released a number of games for ios, Mac, Google Play, Kindle Fire, and Nook. ios releases included Lost Souls, Letters From Nowhere 2, Jane s Hotel 2, Cross Worlds. Kindle Fire releases included Letters From Nowhere and Spirit of Wandering. Mac releases included Royal Trouble and Spirit of Wandering. G5 started releasing its games on Nook platform in March 2012, and by the end of Q2 has released most of its Android collection of games on the platform. This interim report has not been reviewed by company s auditor. 2

3 Important Events After the End of The Period In June, the group s first free-to-play game Virtual City Playground has received a major update bringing some longexpected new features to the game. As a result, the game has set new monthly sales record in June and then again in July, 11 months after its original release in August On ipad, the game has now been Top 10 Grossing Game in 100 countries around the world. G5 is committed to developing the game further on all platforms. In addition to large number of casual games in the pipeline for release in 2012 and 2013, the group has a number of free-to-play games in development for release in 2012 and 2013, and is dedicated to increasing its portfolio of free-to-play games further. G5 now has contractual relationships with over 60 game development studios from around the world. These studios are supplying casual and free-to-play games that G5 is going to publish, in addition to games developed internally by G5. The total number of downloads of G5 games on ios and Android (not counting update downloads) surpassed 60 million. The Company G5 Entertainment AB (publ) unites a group of companies: G5 Holdings Limited (Malta), G5 UA Holdings Limited (Malta), G5 Entertainment, Inc. (USA), and G5 Holding RUS LLC (Russia), all of which are wholly owned subsidiaries of G5 Entertainment AB (publ). G5 Entertainment AB (publ) is listed on Aktietorget exchange in Stockholm since November 19 th Before that, G5 Entertainment AB was listed on NGM Nordic MTF since 2 nd October Game Development and Publishing G5 Entertainment is a developer and publisher of high quality downloadable casual games for iphone, ipad, Android, and Mac. G5 Entertainment started as one of the world s leading mobile game development studios, developing games based on popular licenses for the largest mobile game publishers, including EA and Disney. Since 2009, G5 is developing and publishing downloadable games for iphone, ipad, Android, and Mac. G5 s portfolio includes popular casual games like Supermarket Mania, Special Enquiry Detail, Virtual City, Stand O Food, and Mahjongg Artifacts. G5 also develops games based on third party licenses, and publishes games developed by third party developers in both cases, on certain revenue share terms. G5 s development studio has extensive experience of development for mobile devices, Mac, PC, and game consoles. One of the group s main competitive advantages is its proprietary Talisman cross-platform technology, which allows effective development and deployment of games across numerous platforms and devices, including iphone, ipad, Android, Blackberry, Windows Mobile, PC, Mac OS. Talisman technology, in combination with G5 s established processes for the development, porting, adaptation, and quality assurance of games, allows G5 to deploy high quality games to multiple platforms in reduced time. The creative and development teams at G5 are also capable of producing original intellectual property and best-selling casual and social games like Supermarket Mania 2, Stand O Food 3, Virtual City, and Virtual City Playground. Additional Information The forecasts in this report are based on the management knowledge of the quantity, release dates, and anticipated sales of games which were already released and which are going to be released by the group in the future. Sales for the yet unreleased games are estimated based on historical sales patterns for released games of similar genre and quality level since 2009, also taking into account current market situation and trends. The accuracy of forecasts for yet unreleased games is affected by: 3

4 a) game release delays due to 3 rd party (Apple, Google, Amazon, etc) reviews and approvals on the way to the market; b) game release delays due to group s when it s done approach to game development crucial to create high quality games with long tail of sales; c) low prediction accuracy when it comes to forecasting sales of games in new genres or on new platforms, when there is no accumulated statistics from similar previously released games; d) general difficulty with predicting sales of a particular game precisely; e) changes in the development plans because of new business opportunities, like new platform announcements, new API releases, and such other important events requiring immediate action and change of development plans. Accounting Principles During the period, G5 group applied international accounting standards IFRS according to EU regulations. G5 Entertainment AB holding company is applying Annual Accounts Act, RFR 2.0 accounting for legal entities and RFR 1.0 has been used for the group accounts. Revenue Recognition Revenues are license payments, advances and royalties paid by customers. Advances payments are accounted as revenue at the date when corresponding work was actually complete and approved by customer. License payments are accounted as revenue at the date when license rights are actually transferred to customer. Royalties are accounted as revenue at the date when royalty report was received from customer. Interest income is reported continuously and dividends received are reported after the right to the dividend is deemed secure. In the consolidated accounts, intragroup sales are eliminated. 4

5 Consolidated Group Income Statement January-June 2012 GROUP INCOME STATEMENT 2012-Q Q2 Net turnover (revenue) Production cost * Gross Profit General and administrative expenses Other operating losses Operating Result before financial items Financial income - 64 Financial expenses Operating Result after financial items Taxes NET RESULT FOR THE PERIOD STATEMENT OF COMPREHENSIVE INCOME 2012-Q Q2 Income for the period Recalculation Difference Total other comprehensive income for the period TOTAL COMPREHENSIVE INCOME FOR THE PERIOD * Production cost consists of: Production expenses Royalty to developers Capitalized development costs Depreciation of Capitalized development costs ** Total production cost ** Capitalized development costs for the game are evenly depreciated over 2 years period following the day of commercial release of the game 5

6 Consolidated Group Balance Sheet January-June 2012 GROUP BALANCE SHEET Fixed Assets Intangible fixed assets Capitalized development costs Goodwill Tangible fixed assets Equipment Total fixed assets Current assets Accounts receivable Developer Royalty Advance Other receivables Cash at bank Total Current assets TOTAL ASSETS Equity Share capital Other capital contribution Other reserves Profit\Loss Brought Forward Total equity Current liabilities Accounts payable Other liabilities Tax liabilities Accrued expenses Total current liabilities TOTAL EQUITY AND LIABILITIES

7 Consolidated Group Cash Flow Statement January-June 2012 GROUP CASH FLOW Operating activities Profit after financial items Adjusting items not included in cash flow Taxes paid Cash flow before changes in working capital Cash flow from changes in working capital Decrease in operating receivables Increase in operating liabilities Developer Royalty Advance Cash flow from operating activities Investing activities Purchase of property and equipment Capitalized development costs Cash flow from investing activities CASH FLOW Cash at the beginning of the year Cash flow Exchange Rate diff CASH AT THE END OF THE PERIOD

8 Consolidated Group Changes in Equity Statement January-June 2012 GROUP CHANGES IN EQUITY Share Capital Other Capital Contribution Other Reserves Proft/loss brought forward Shareholders equity Shareholder s Equity as of Total comprehensive income Shareholder's Equity as of The Shares The number of outstanding shares at the end of the period: shares. The average number of outstanding shares during the period: shares. There are no outstanding convertibles or options in G5 Entertainment AB (publ). This interim report has not been reviewed by company's auditor. Insiders Name Shares Change since Dec 2011 VLADISLAV SUGLOBOV (through company) SERGEY SHULTS (through company) ALEXANDER TABUNOV (through company) EIN STADALNINKAS 0 0 JOHAN WRANG 0 0 ÅSA ANDERSSON ENEBERG 0 0 PÄR SUNDBERG JEFFREY ROSE 0 0 8

9 Stockholm 15 August 2012 G5 Entertainment AB (publ) With the questions regarding this report please make contact by at G5 Entertainment will be publishing Q report on 15 th November 2012, Q report on 25 th February

10 G5 Entertainment AB (publ) unites a group of companies: G5 Holdings Limited (Malta), G5 UA Holdings Limited (Malta), G5 Entertainment, Inc. (USA), G5 Holding RUS LLC (Russia). G5 Entertainment Group is a developer and publisher of high quality downloadable casual games for iphone, ipad, Android, and Mac. G5 Entertainment started as one of the world s leading mobile game development studios, developing games based on popular licenses for the largest mobile game publishers. Since 2009, G5 is developing and publishing downloadable games for iphone, ipad, Android, and Mac. G5 s portfolio includes popular casual games like Supermarket Mania, Special Enquiry Detail, Virtual City, Stand O Food, and Mahjongg Artifacts. G5 also develops games based on third party licenses, and publishes games developed by third party developers. G5 ENTERTAINMENT AB (publ) BOX 5339, STOCKHOLM SWEDEN PHONE: FAX: , CONTACT@G5E.SE ORG.NR