4J Studios Limited - Limited company accounts 20.1

REGISTERED NUMBER: SC446877 (Scotland)

Strategic Report,

Report of the Directors and

Financial Statements

for the Year Ended 31 October 2019

for

4J STUDIOS LIMITED

Page

Company Information

1

Strategic Report

2

Report of the Directors

3

Report of the Independent Auditors

4

Statement of Comprehensive Income

6

Balance Sheet

7

Statement of Changes in Equity

8

Cash Flow Statement

9

Notes to the Cash Flow Statement

10

Notes to the Financial Statements

11

Directors:

C R D van der Kuyl

P Burns

Secretary:

Blackadders LLP

Registered office:

Blackadders

30 & 34 Reform Street

Dundee

DD1 1RJ

Registered number:

SC446877 (Scotland)

Auditors:

Haines Watts Manchester Limited, Statutory Auditor

Northern Assurance Buildings

9-21 Princess Street

Manchester

M2 4DN

The directors present their strategic report for the year ended 31 October 2019.

Review of business

The business has continued to perform well and the directors are satisfied with the position at the end of the year.

The company key financial and other performance indicators during the year were turnover, profit before tax and net assets.

Principal risks and uncertainties

The company's revenue is dependent on the development and sale of computer games. The success of the company is subject to the uncertainties regarding the popularity inherent in creating new products and changes in technology. The company ensures they stay up to date with new technology, ensuring their products are developed to be used over multiple platforms and keep pace with the new platforms released.

As the company has significant levels of investments, there is a risk that investment values could decline. This is addressed by holding a diversified portfolio of investments.

As a result of trading with customers in different global markets, the Company has some exposure to exchange rate fluctuations, however, the Company maintains processes and controls in place to manage the risk.

After the balance sheet date the coronavirus epidemic has arisen and this has resulted in the slow down of trade across many sectors. Due to the industry the company operates in and its strong financial position the directors do not believe that Covid-19 will have an impact on the company's ability to continue as a going concern.

On behalf of the board:

C R D van der Kuyl - Director

27 October 2020

The directors present their report with the financial statements of the company for the year ended 31 October 2019.

Principal activity

The principal activity of the company in the year under review was that of the development of games for console systems.

Dividends

The total distribution of dividends for the year ended 31 October 2019 will be £1,400,000.

Directors

The directors shown below have held office during the whole of the period from 1 November 2018 to the date of this report.

C R D van der Kuyl

P Burns

Statement of directors' responsibilities

The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Statement as to disclosure of information to auditors

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the company's auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

Auditors

The auditors, Haines Watts Manchester Limited, Statutory Auditor, will be proposed for re-appointment at the forthcoming Annual General Meeting.

On behalf of the board:

C R D van der Kuyl - Director

27 October 2020

Opinion

We have audited the financial statements of 4J Studios Limited (the 'company') for the year ended 31 October 2019 which comprise the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and Notes to the Cash Flow Statement, Notes to the Financial Statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 October 2019 and of its profit for the year then ended;

-	have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

-	have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

-	the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

However, not all future events or conditions can be predicted. The COVID-19 viral pandemic is one of the most significant economic events for the UK with unprecedented levels of uncertainty of outcomes. It is therefore difficult to evaluate all of the potential implications on the company's trade, customers, suppliers and wider economy. The Directors' view on the impact of COVID-19 is disclosed on page 2.

Other information

The directors are responsible for the other information. The other information comprises the information in the Strategic Report and the Report of the Directors, but does not include the financial statements and our Report of the Auditors thereon.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

-	the information given in the Strategic Report and the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

-	the Strategic Report and the Report of the Directors have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Report of the Directors.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

-	adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of directors' remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page three, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a Report of the Auditors that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our Report of the Auditors.

Use of audit report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in a Report of the Auditors and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

David Fort FCA (Senior Statutory Auditor)

for and on behalf of Haines Watts Manchester Limited, Statutory Auditor

Northern Assurance Buildings

9-21 Princess Street

Manchester

M2 4DN

28 October 2020

Turnover

4

13,551,294

8,869,872

Administrative expenses

(3,464,073

)

(1,122,881

)

10,087,221

7,746,991

Other operating income

5

2,042,711

175,800

Operating profit

7

12,129,932

7,922,791

Interest receivable and similar income

272,617

187,716

12,402,549

8,110,507

Interest payable and similar expenses

8

(1,506

)

(448

)

Profit before taxation

12,401,043

8,110,059

Tax on profit

9

(1,810,912

)

(485,655

)

Profit for the financial year

10,590,131

7,624,404

Other comprehensive income

-

-

Total comprehensive income for the year

10,590,131

7,624,404

Fixed assets

Tangible assets

11

535,505

360,000

Investments

12

2,518,533

-

3,054,038

360,000

Current assets

Debtors

13

12,458,998

7,752,702

Investments

14

16,636,847

14,631,369

Cash at bank and in hand

8,434,893

8,235,787

37,530,738

30,619,858

Creditors

Amounts falling due within one year

15

699,461

414,209

Net current assets

36,831,277

30,205,649

Total assets less current liabilities

39,885,315

30,565,649

Provisions for liabilities

17

171,535

42,000

Net assets

39,713,780

30,523,649

Capital and reserves

Called up share capital

18

100

100

Fair value reserve

19

386,630

-

Retained earnings

19

39,327,050

30,523,549

Shareholders' funds

39,713,780

30,523,649

The financial statements were approved by the Board of Directors and authorised for issue on 27 October 2020 and were signed on its behalf by:

C R D van der Kuyl - Director

P Burns - Director

Called up

Fair

share

Retained

value

Total

capital

earnings

reserve

equity

£

£

£

£

Balance at 1 November 2017

100

20,396,030

3,125,115

23,521,245

Changes in equity

Dividends

-

(622,000

)

-

(622,000

)

Total comprehensive income

-

10,749,519

(3,125,115

)

7,624,404

Balance at 31 October 2018

100

30,523,549

-

30,523,649

Changes in equity

Dividends

-

(1,400,000

)

-

(1,400,000

)

Total comprehensive income

-

10,203,501

386,630

10,590,131

Balance at 31 October 2019

100

39,327,050

386,630

39,713,780

Cash flows from operating activities

Cash generated from operations

1

8,023,201

8,559,871

Interest paid

(1,506

)

(448

)

Tax paid

(1,582,858

)

(1,481,730

)

Net cash from operating activities

6,438,837

7,077,693

Cash flows from investing activities

Purchase of tangible fixed assets

(300,542

)

(90,372

)

Purchase of fixed asset investments

(1,095,244

)

-

Net outflow of listed investments

(3,428,792

)

(1,037,357

)

Net outflow of unlisted investments

-

(1,423,314

)

Interest received

272,617

187,716

Net cash from investing activities

(4,551,961

)

(2,363,327

)

Cash flows from financing activities

Amount introduced by directors

1,330,737

120,000

Amount withdrawn by directors

(1,618,507

)

(256,494

)

Equity dividends paid

(1,400,000

)

(622,000

)

Net cash from financing activities

(1,687,770

)

(758,494

)

Increase in cash and cash equivalents

199,106

3,955,872

Cash and cash equivalents at beginning of year

2

8,234,474

4,278,602

Cash and cash equivalents at end of year

2

8,433,580

8,234,474

1.	Reconciliation of profit before taxation to cash generated from operations

2019

2018

£

£

Profit before taxation

12,401,043

8,110,059

Depreciation charges

125,035

78,229

Finance costs

1,506

448

Finance income

(272,617

)

(187,716

)

12,254,967

8,001,020

(Increase)/decrease in trade and other debtors

(4,324,974

)

558,601

Increase in trade and other creditors

93,208

250

Cash generated from operations

8,023,201

8,559,871

2.	Cash and cash equivalents

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of these Balance Sheet amounts:

Year ended 31 October 2019

31/10/19

1/11/18

£

£

Cash and cash equivalents

8,434,893

8,235,787

Bank overdrafts

(1,313

)

(1,313

)

8,433,580

8,234,474

Year ended 31 October 2018

31/10/18

1/11/17

£

£

Cash and cash equivalents

8,235,787

4,279,919

Bank overdrafts

(1,313

)

(1,317

)

8,234,474

4,278,602

1.	Statutory information

4J Studios Limited is a private company, limited by shares , registered in Scotland. The company's registered number and registered office address can be found on the Company Information page.

2.	Statement of compliance

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006.

3.	Accounting policies

Basis of preparing the financial statements

The financial statements have been prepared under the historical cost convention.

After the balance sheet date the coronavirus epidemic has arisen and this has resulted in the slow down of trade across many sectors. Due to the industry the company operates in and its strong financial position the directors do not believe that Covid-19 will have an impact on the company's ability to continue as a going concern.

The financial statements have therefore been prepared on a going concern basis.

Significant judgements and estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. There are not considered to be any critical judgements in applying the company's accounting policies. The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. There are no estimates or assumptions which give a significant risk of causing a material adjustment to the carrying amounts of assets or liabilities within the next financial year.

Turnover

Turnover represents royalties receivable and development services provided during the year. Income is recognised when games are sold.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off the cost less estimated residual value of each asset over its estimated useful life.

Leasehold improvements

-

10% straight line

Fixtures and fittings

-

25% straight line and 15% straight line

Motor vehicles

-

25% on reducing balance

Computer equipment

-

25% straight line

Tangible assets are stated at cost less accumulated depreciation and accumulated impairment losses.

Investments in associates

Investments in associate undertakings are recognised at cost.

Financial instruments

The company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

Financial assets

Basic financial assets, including trade and other debtors and cash and bank balances, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Such assets are subsequently carried at amortised cost using the effective interest method.

Other financial assets, including investments in equity instruments are initially measured at fair value, which is normally the transaction price.

Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss. Fair value is based on quoted market prices in an active market.

Financial liabilities

Basic financial liabilities, including trade and other creditors, bank loans, loan notes that are classified as debt, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future receipts discounted at a market rate of interest.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Hire purchase and leasing commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of the lease.

Pension costs and other post-retirement benefits

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends

Dividends and other distributions to company's shareholder are recognised as a liability in the financial statements in the period in which the dividends and the other distributions are approved by the company's shareholders. These amounts are recognised in the statement of changes in equity.

4.

Turnover

Included within current year turnover is £928,238 in respect of royalties underpaid by customers in prior periods.

5.	Other operating income

2019

2018

£

£

Profit on disposal of current asset investments

562,846

1,172,231

Fair value adjustment on

listed investments

1,478,196

(996,431

)

Other interest receivable

1,669

-

2,042,711

175,800

6.	Employees and directors

2019

2018

£

£

Wages and salaries

1,509,726

1,390,906

Social security costs

189,683

176,711

Other pension costs

23,468

19,149

1,722,877

1,586,766

The average number of employees during the year was as follows:

2019

2018

Directors

2

2

Employees

40

33

42

35

2019

2018

£

£

Directors' remuneration

-

-

7.	Operating profit

The operating profit is stated after charging/(crediting):

2019

2018

£

£

Other operating leases

54,516

42,801

Depreciation - owned assets

125,037

78,228

Auditors' remuneration

9,750

6,800

Foreign exchange differences

316,888

(1,336,434

)

8.

Interest payable and similar expenses

2019

2018

£

£

Interest payable

1,506

448

9.

Taxation

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2019

2018

£

£

Current tax:

UK corporation tax

1,681,377

1,321,354

(Over)/under provision PY

-

(115,399

)

Total current tax

1,681,377

1,205,955

Deferred tax

129,535

(720,300

)

Tax on profit

1,810,912

485,655

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

2019

2018

£

£

Profit before tax

12,401,043

8,110,059

Profit multiplied by the standard rate of corporation tax in the UK of 19% (2018 - 19%)

2,356,198

1,540,911

Effects of:

Expenses not deductible for tax purposes

68,277

4,004

Income not taxable for tax purposes

(27,065

)

(15,529

)

Capital allowances in excess of depreciation

(30,278

)

(5,422

)

Fair value (gains) / losses

(280,857

)

189,322

Enhanced expenditure relief

(404,898

)

(391,932

)

Deferred tax

129,535

(720,300

)

R&D rebate

-

(115,399

)

Total tax charge

1,810,912

485,655

10.

Dividends

2019

2018

£

£

Ordinary shares of £1 each

Final

1,400,000

622,000

11.	Tangible fixed assets

Fixtures

Leasehold

and

Motor

Computer

improvements

fittings

vehicles

equipment

Totals

£

£

£

£

£

Cost

At 1 November 2018

253,580

87,022

65,705

171,515

577,822

Additions

4,835

60,183

186,078

49,446

300,542

At 31 October 2019

258,415

147,205

251,783

220,961

878,364

Depreciation

At 1 November 2018

67,786

25,632

34,325

90,079

217,822

Charge for year

25,407

21,491

37,466

40,673

125,037

At 31 October 2019

93,193

47,123

71,791

130,752

342,859

Net book value

At 31 October 2019

165,222

100,082

179,992

90,209

535,505

At 31 October 2018

185,794

61,390

31,380

81,436

360,000

12.	Fixed asset investments

Interest

in

Unlisted

associate

investments

Totals

£

£

£

Cost

Additions

-

1,095,244

1,095,244

Reclassification/transfer

290,370

1,132,919

1,423,289

At 31 October 2019

290,370

2,228,163

2,518,533

Net book value

At 31 October 2019

290,370

2,228,163

2,518,533

The company's investments at the Balance Sheet date in the share capital of companies include the following:

Associated company

Puny Astronaut Limited

Registered office: 30 & 34 Reform Street, Dundee, United Kingdom, DD1 1RJ

Nature of business: Game development

%

Class of shares:

holding

A Ordinary

40.12

2019

2018

£

£

Aggregate capital and reserves

(208,010

)

109,336

Loss for the year

(317,376

)

(187,492

)