January September 2012 - Summary Consolidated revenue for the period is 60 239 KSEK, up 93% compared to 31 207 KSEK for the same period of 2011. This is in line with the previously communicated forecast of 60 MSEK. Operating result for the period is 16 224 KSEK, up 47% compared to 11 026 KSEK for the same period of 2011. This result is in line with the previously communicated forecast of 16 MSEK. Earnings per share for the period are 1.66 SEK. During the period, the group had positive cash flow of 1 635 KSEK. Cash reserves on September 30 th 2012 amounted to 19 156 KSEK. Current assets of the group as of September 30 st 2012 were 35 600 KSEK. Current liabilities: 13 796 KSEK. Working capital (CA-CL): 21 804 KSEK. Current ratio (CA divided by CL): 2.58. The group does not have any long-term liabilities, and has strong liquidity position. More than 12 months ago, the management has set a goal for 2012 as 87 MSEK revenue and 30 MSEK operating result, adding that the actual result can be both above and below this goal, as this is a forward looking statement. The group has a strong lineup of games to be released in Q4 2012, and depending on the performance of these games, the actual result can be both above and below these numbers. The management has a goal to eventually turn G5 into a company with 300 MSEK annual revenue and 100 MSEK operating result. Going forward, the management aims to keep the group s long-term average revenue growth at historic levels. 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. 12.5 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 possibly maintaining negative cash flow during the next two quarters, then returning to being cash flow positive on increased revenue from new game releases. During Q3, the group has released a number of casual games for ios, Mac, Google Play, Kindle Fire, and Nook. Virtual City Playground, the group s best-selling free-to-play game became the highlight of the quarter. The game, which has been Top 10 Grossing Game on ipad in over 100 countries, has set a new record of monthly revenue during July 2012, 11 months after it was originally released in August 2011. In some months of the quarter it accounted for over 30% of the group s revenue. This result underlines the extended lifetime and the potential of free-to-play games. G5 has a number of new free-to-play games in development for release before the end of 2012 and in 2013. This interim report has not been reviewed by company s auditor. Important Events After the End of The Period In October and November, G5 continued releasing multiple games every week. Among the games that came out after the end of Q3 were Whisper of Fear, Build-a-lot 3, Magician s Handbook II, Pilot Brothers, and multiple other games for ios, Mac, Google Play, Kindle Fire, and Nook stores. In addition to large number of casual games in the pipeline for release during the rest of 2012 and in 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 80 game 2
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 extraordinary general meeting held on 31 st October 2012 approved the board of director s proposal to issue no more than 160 000 warrants in order to establish share-based incentive program in the company. The right to acquire warrants shall, with deviation from the shareholder s preferential right, belong to executives and key employees in the group. The program shall include maximum 16 persons. Each warrant gives the holder a right to subscribe for one share in the company to a strike price amounting to 250% of the volume weighted average of the listed settled prices during the period between November 1, 2012, and November 14, 2012 - according to Aktietorget s stock exchange list for shares in G5 Entertainment AB (publ.). It will be possible to exercise warrants only after three years. In case all warrants are exercised, at the most 160 000 shares may be issued (with reservation for possible recalculation) in three years from now, which corresponds to approximately two percent of the total number of currently outstanding shares and votes. Except for the managing director, the members of the board of directors shall not have a right to subscribe for warrants. The total number of downloads of G5 games on ios and Android (not counting update downloads) surpassed 75 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 2008. Before that, G5 Entertainment AB was listed on NGM Nordic MTF since 2 nd October 2006. 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. 3
Additional Information Any forward-looking statements 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: 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
Consolidated Group Income Statement January-September 2012 GROUP INCOME STATEMENT 2012-01-01 2012-09-30 2011-01-01 2011-09-30 Net turnover (revenue) 60 239 31 207 Production cost * -31 277-15 143 Gross Profit 28 962 16 064 General and administrative expenses -12 714-5 038 Other operating losses -24 - Operating Result before financial items 16 224 11 026 Financial income - 442 Financial expenses -23 - Operating Result after financial items 16 201 11 468 Taxes -2 916-2 072 NET RESULT FOR THE PERIOD 13 285 9 396 STATEMENT OF COMPREHENSIVE INCOME 2012-01-01 2012-09-30 2011-01-01 2011-09-30 Income for the period 13 285 9 396 Recalculation Difference -185-81 Total other comprehensive income for the period -185-81 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 13 100 9 315 * Production cost consists of: 2012-01-01 2012-09-30 2011-01-01 2011-09-30 Production expenses -27 602-12 687 Royalty to developers -17 182-7 975 Capitalized development costs 21 061 9 107 Depreciation of Capitalized development costs ** -7 554-3 588 Total production cost -31 277-15 143 ** Capitalized development costs for the game are evenly depreciated over 2 years period following the day of commercial release of the game 5
Consolidated Group Balance Sheet January-September 2012 GROUP BALANCE SHEET 2012-09-30 2011-09-30 ASSETS Fixed Assets Intangible fixed assets Capitalized development costs 30 893 14 247 Goodwill 2 322 2 272 33 215 16 519 Tangible fixed assets Equipment 2 376 1 277 2 376 1 277 Total fixed assets 35 591 17 796 Current assets Accounts receivable 7 297 2 951 Developer Royalty Advance 7 363 1 777 Other receivable 1 784 832 Cash at bank 19 156 20 398 Total Current assets 35 600 25 958 TOTAL ASSETS 71 191 43 754 Equity Share capital 800 800 Other capital contribution 19 872 19 930 Other reserves -104 14 Profit\Loss Brought Forward 36 827 18 817 Total equity 57 395 39 561 Current liabilities Accounts payable 5 853 634 Other liabilities 100 121 Tax liabilities 6 915 3 421 Accrued expenses 928 17 Total current liabilities 13 796 4 193 TOTAL EQUITY AND LIABILITIES 71 191 43 754 6
Consolidated Group Cash Flow Statement January-September 2012 GROUP CASH FLOW 2012-01-01 2012-09-30 2011-01-01 2011-09-30 Operating activities Profit after financial items 16 201 11 468 Adjusting items not included in cash flow 8 273 3 648 24 474 15 116 Taxes paid -2 458-771 Cash flow before changes in working capital 22 016 14 345 Cash flow from changes in working capital Decrease in operating receivables 2 254 2 225 Increase in operating liabilities 2 966-2 174 Developer Royalty Advance -3 640-1 777 Cash flow from operating activities 23 596 12 619 Investing activities Purchase of property and equipment -900-568 Capitalized development costs -21 061-9 107 Cash flow from investing activities -21 961-9 675 Financial activities New share issue - 12 479 Cash flow from financial activities - 12 479 CASH FLOW 1 635 15 423 Cash at the beginning of the year 17 541 4 892 Cash flow 1 635 15 423 Exchange Rate diff -20 83 CASH AT THE END OF THE PERIOD 19 156 20 398 7
Consolidated Group Changes in Equity Statement January-September 2012 GROUP CHANGES IN EQUITY Share Capital Other Capital Contribution Other Reserves Proft/loss brought forward Shareholders equity Shareholder s Equity as of 2012-01-01 800 19 872 80 23 542 44 294 Total comprehensive income -184 13 285 13 101 Shareholder's Equity as of 2012-09-30 800 19 872-104 36 827 57 395 The Shares The number of outstanding shares at the end of the period: 8 000 000 shares. The average number of outstanding shares during the period: 8 000 000 shares. There were no outstanding convertibles or options in G5 Entertainment AB (publ) at the end of the period. The extraordinary general meeting held on 31 st October 2012 approved the board of director s proposal to issue no more than 160 000 warrants in order to establish share-based incentive program in the company. The right to acquire warrants shall, with deviation from the shareholder s preferential right, belong to executives and key employees in the group. The program shall include maximum 16 persons. Each warrant gives the holder a right to subscribe for one share in the company to a strike price amounting to 250% of the volume weighted average of the listed settled prices during the period between November 1, 2012, and November 14, 2012 - according to Aktietorget s stock exchange list for shares in G5 Entertainment AB (publ.). It will be possible to exercise warrants only after three years. In case all warrants are exercised, at the most 160 000 shares may be issued (with reservation for possible recalculation) in three years from now, which corresponds to approximately two percent of the total number of currently outstanding shares and votes. Except for the managing director, the members of the board of directors shall not have a right to subscribe for warrants. This interim report has not been reviewed by company's auditor. 8
Insiders Name Shares Change since Dec 2011 VLADISLAV SUGLOBOV (through company) 721 000 0 SERGEY SHULTS (through company) 675 000 + 2 000 ALEXANDER TABUNOV (through company) 660 000 0 EIN STADALNINKAS 0 0 JOHAN WRANG 0 0 ÅSA ANDERSSON ENEBERG 0 0 PÄR SUNDBERG 2 000 + 2 000 JEFFREY ROSE 0 0 Stockholm 15 November 2012 G5 Entertainment AB (publ) With the questions regarding this report please make contact by email at investors@g5e.se G5 Entertainment will be publishing Q4 2012 report on 25 th February 2013. 9
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, 102 47 STOCKHOLM SWEDEN PHONE: +7 495 210 97 94 FAX: +46-8 545 075 49, +7 495 637 62 98 E-MAIL: CONTACT@G5E.SE ORG.NR. 556680-8878 HTTP://WWW.G5E.SE