ACCOUNTS - Final Accounts
ACCOUNTS - Final Accounts
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Registered number:
FOR THE YEAR ENDED 31 DECEMBER 2021
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DIGITAL GAMING CORPORATION LIMITED
COMPANY INFORMATION
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DIGITAL GAMING CORPORATION LIMITED
CONTENTS
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DIGITAL GAMING CORPORATION LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their strategic report for the year ended 31 December 2021.
The Company is a licensor of intellectual property and is a provider of technology support services. The principal activities of its subsidiary undertakings are the provision of outsourcing services and on-line gambling activities in the United States.
During the year the Group has sold assets and the trade of its iGaming Development Division and interest in Mahi Gaming LLC. Management remains focused on its ambitious strategy for growth in regulated gaming markets in the United States with an emphasis on operational excellence and customer experience. To improve market reach, the Group continues to obtain State gaming licenses for the Group, directors and key employees. To improve the overall customer experience, further investment continues in expanding customer and operational support teams. Investment continues to be made in technical infrastructure and personnel in the USA.
The Group finances its activities with a combination of borrowings and cash. Inter-group borrowings are used to satisfy short-term cash flow requirements. Other financial assets and liabilities, such as trade debtors and trade creditors, arise directly from the Group's operating activities. The Group does not trade in financial instruments.
The main risks associated with the Group's financial assets and liabilities are interest rate risk and credit risk. The Group's strategy to minimise such risks is to create a profitable and cash generative, therefore self-financing business. The board reviews and agrees policies for managing each of these risks as shown below. Interest rate risk. The Group finances its operations through a combination of subsidiary profits, a third party loan and inter group borrowings. At 31 December 2021 $45,975,229 (2020: none) of the Group's borrowings were at fixed rates. The Group’s borrowings were exposed to the risk of increased interest rates in 2020 which was monitored by the Directors and mitigated where possible. As at 31 December 2021 all group borrowings were at fixed rates, mitigating this risk entirely. Credit risk The credit risk to the Group represents the risk of non-payment from customers. The Group ensures that the debtor position is regularly monitored and that sufficient resources are focused on credit control and collection activities. Overall the credit quality of the Group's customers is considered to be good. The Group continues to grow its customer base. Capital Management The primary objective of the Group's capital management is to ensure that net indebtedness and capital balances are managed appropriately in order to support the business and maximise shareholder value. Cash forecasts are prepared and reviewed on a regular basis.
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DIGITAL GAMING CORPORATION LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
Total revenues of $13.3m for the year (2020: $23.4m) were in line with expectations.The reduction in total revenues has been driven by the disposal of a division in March 2021 and the level of revenue generated from two new divisions as expected was comparatively low given their relative infancy.
As mentioned above the group disposed of a division (discontinued operations) during the year which generated a profit on disposal of $49m. Management continued to invest in improving and streamlining processes across the business. The Group returned a profit, after tax, of $6.7m, for the year (2020: $29.3m). The Group had net cash outflow of $1.5m (2020: net cash inflow $4m) during the year to 31 December 2021. The Group had negative net assets of $11.4m as at December 2021 (2020: negative $18.0m). The Group's key financial and other performance indicators during the year were as follows:
The number of B2C access States (subject to legislation) were as follows:
The group continues to apply for and obtain licensure in additional States as and when the board deems appropriate.
The Group will continue to focus on growing into existing and new markets by investment in operational excellence and technology.
As discussed further in note 2.3, the company is in negotiations to be acquired by it's main brand partner.
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DIGITAL GAMING CORPORATION LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
This report was approved by the board on 30 September 2022 and signed on its behalf.
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DIGITAL GAMING CORPORATION LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
The directors present their report and the financial statements for the year ended 31 December 2021.
The directors are responsible for preparing the Group Strategic Report, the Directors' Report and the consolidated 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 applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. 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 the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgments 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 Group 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 the Group and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the year, after taxation, amounted to $6,700,819 (2020 - $29,322,382).
The directors who served during the year were:
The future developments of the Group are discussed in the Strategic Report and note 2.3.
The principal risks and uncertainties associated with the Group are discussed in the Strategic Report.
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DIGITAL GAMING CORPORATION LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
The auditors, BDO LLP, Statutory Auditor, were appointed in the year and will be proposed for reappointment in the next annual general meeting.
This report was approved by the board on
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DIGITAL GAMING CORPORATION LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIGITAL GAMING CORPORATION LIMITED
We have audited the financial statements of Digital Gaming Corporation Limited (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, Consolidated and Company Balance Sheets, Consolidated and Company Statements of Changes in Equity, Consolidated Statement of Cash Flows and the associated 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).
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 Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group and the Parent 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.
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DIGITAL GAMING CORPORATION LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIGITAL GAMING CORPORATION LIMITED (CONTINUED)
We draw attention to note 2.3 to the financial statements, which indicates that the ability of the Group and Parent Company to continue as a going concern is subject to a material uncertainty in relation to additional funding.
The directors state in note 2.3 to the financial statements that, having considered and approved both a base and stress case scenario covering a period at least twelve months following the date of this report, the Group and Parent Company will be able to meet their day-to-day trading obligations for that period. However, both scenarios are predicated on obtaining further funding to meet a working capital shortfall projected to arise in the middle of 2023. The directors are confident that the funding will be secured through either a) the acquisition of the group by its brand partner (the progress of which is at an advanced stage) or b) the extension its existing loan facility with their banking partners. Whilst the former option is the most likely scenario for the Group, and the requirement for further funding falls due in the middle of 2023, at the date of this report the Directors have nevertheless commenced formal discussions with the Group’s banking partner to extend the existing facility .
As stated in note 2.3, and notwithstanding the confidence of the directors that any capital requirements will be met without significant difficulty, this indicates that a material uncertainty exists that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Group Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
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DIGITAL GAMING CORPORATION LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIGITAL GAMING CORPORATION LIMITED (CONTINUED)
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group Strategic Report or the Directors' Report.
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DIGITAL GAMING CORPORATION LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIGITAL GAMING CORPORATION LIMITED (CONTINUED)
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 an auditor’s report 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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: • We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by understanding where there was a susceptibility of fraud; • We obtained an understanding of the procedures and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk; • We tested manual journal entries, including those to revenue, focusing on journal entries containing characteristics of audit interest; and • We tested and challenged the key estimates and judgements made by management in preparing the financial statements for indications of bias or management override when presenting the results and financial position of the Group’s. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it.
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 Auditors' 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 an Auditors' Report 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.
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DIGITAL GAMING CORPORATION LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIGITAL GAMING CORPORATION LIMITED (CONTINUED)
for and on behalf of
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
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DIGITAL GAMING CORPORATION LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
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DIGITAL GAMING CORPORATION LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
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DIGITAL GAMING CORPORATION LIMITED
REGISTERED NUMBER: 08761407
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 20 to 45 form part of these financial statements.
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DIGITAL GAMING CORPORATION LIMITED
REGISTERED NUMBER: 08761407
COMPANY BALANCE SHEET
AS AT 31 DECEMBER 2021
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements. The profit after tax of the parent Company for the year was $8,741,623 (2020: $769,683).
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DIGITAL GAMING CORPORATION LIMITED
REGISTERED NUMBER: 08761407
COMPANY BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf on
The notes on pages 20 to 45 form part of these financial statements.
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DIGITAL GAMING CORPORATION LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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DIGITAL GAMING CORPORATION LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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DIGITAL GAMING CORPORATION LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
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DIGITAL GAMING CORPORATION LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE YEAR ENDED 31 DECEMBER 2021
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Digital Gaming Corporation Limited is a private company limited by share capital, incorporated in England and Wales, registration number 08761407. The address of the registered office 14th Floor, 33 Cavendish Square, London, W1G 0PW.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of Comprehensive Income in these financial statements.
In preparing the separate financial statements of the parent Company, advantage has been taken of the disclosure exemption available in FRS 102 to present a statement of cash flows and related notes.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Balance Sheet, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated Statement of Comprehensive Income from the date on which control is obtained. They are deconsolidated from the date control ceases.
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Accounting standards require that Directors satisfy themselves that it is reasonable for them to conclude whether it is appropriate to prepare financial statements on a going concern basis. In assessing the going concern position of the Digital Gaming Corporation group (“the Group”), the Directors have taken into account the Group’s principal risks and uncertainties, cash flows, solvency and liquidity positions and its borrowings. The Directors have reviewed financial projections to 30 September 2023, and have considered projections for a base case and a stress case.
Given the global economic uncertainty driven by the Covid-19 pandemic, the conflict in Ukraine and the recent inflationary pressures, and considering the recent guidance issued by the FRC, the Directors have factored into their forecasts the estimated impact of these macroeconomic factors. In addition, they have considered the regulatory factors specific to its operations in the US market and their impact on the Group’s core business. The Directors believe that the DGC will continue to develop in its core growth market of the US and as part of their growth strategy. To continue to achieve this the Directors acknowledge the need to continue to invest in their product. The Group had USD $4.9 million of cash and cash equivalents and USD $3.8 million of net current assets as at 31 December 2021. The Group forecasts its liquidity requirements and, working capital position to maintain of sufficient headroom against it's cash position. At the reporting date, outstanding borrowings were USD $46 million, with a further USD $104 million available to draw down on agreed facilities. Since the reporting date, the Group has drawn down on this facility as planned to finance its expansion into key markets. This facility is guaranteed by the Group’s main brand partner, with whom they are also in advanced negotiations to enter an arrangement through which the Group is acquired. In the Group’s base case forecast, the Group expects to continue to generate an operating lossfor for the 12 months ended 30 September 2023 as the Group continues to invest in its core operations in the US. The Group’s working capital requirements will be met by existing cash until mid-2023, by which point the Directors expect to have closed on the transaction whereby the Group’s main brand partner acquires it. If this transaction does not complete, then the Directors have every expectation that procuring finance to meet the Group’s working capital and investment needs will be forthcoming – whether through a further guaranteed facility or through other third-party lending. Whilst in a stress case the Group would able to curtail certain controllable cash flows, such as marketing, this would be a short term measure and a cash injection would still be required before the end of the 12 month going concern period of outlook. However, in either scenario outlined above the Directors acknowledge that their execution is dependent on a third party and is thus outside of the Group’s control. As such, the Directors have concluded that the conditionality of the procurement of financing to meet the mid-2023 requirements represents a material uncertainty which may cast considerable doubt on the Group’s ability to continue as a going concern and to realise its assets and discharge its liabilities in the normal course of business. The Board is however confident, noting that negotiations with its main brand partner for its acquisition are at an advanced stage, that there is a reasonable probability of funding being secured, and therefore has a reasonable expectation that the Group will have adequate resources to continue in
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
operational existence for the period at least twelve months from the date of approval of this report.
On this basis, the Directors continue to adopt the going concern basis in preparing these accounts. Accordingly, these accounts do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group were unable to continue as a going concern.
Functional and presentation currency
The functional currency of the Head Office operations is GBP.
Transactions and balances
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Sportsbook or sports betting involves a user wagering money on an outcome or series of outcomes occurring. When a user’s wager wins, the Group pays the user a pre-determined amount known as fixed odds. Sportsbook revenue is generated by setting odds such that there is a built-in theoretical margin in each sports wagering opportunity offered to users. Sportsbook revenue is generated from users’ wagers net of payouts made on users’ winning wagers and incentives awarded to users. Online casino typically includes digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Group functions similarly to land-based casinos, generating revenue through hold, as users play against the house. Online casino revenue is generated from user wagers net of payouts made on users’ winning wagers and incentives awarded to users. Sportsbook and online gaming create a single performance obligation for the Group to operate contests or games and award prizes or payouts to users based on results. Revenue is recognised at the conclusion of each contest, wager, or wagering game hand. Incentives can be used across online gaming products. Additionally, certain incentives given to customers create material rights and represent separate performance obligations. User incentives in certain cases create liabilities when awarded to players and in those cases are generally recognised as revenue upon redemption. Usage Fees The Group contracts with business customers to provide access to online casino content through its software platform. The Group’s usage fees are generally calculated as a percentage of the wagering revenue generated by the business customer using our software and is recognised in the periods in which those wagering and related activities conclude. Developed Gaming Software Prior to the sale of Mahi in 2021, the Group's sales of developed software were evaluated to determine whether the individual components to the software were distinct. Management determined that the sale of software consisted of a single distinct performance obligation. The Group recognised revenue from the sale of developed software upon transfer of control for each performance obligation. Turnover from royalties on the Group's Intellectual Property is recognised in the period to which the royalty relates.
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Page 25
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The Group’s intangible assets consist of market access fees, gaming licenses, game development costs, developed software costs, and a collaboration fee. The related amortisation expense is classified as an operating expense in the Consolidated Statement of Comprehensive Income.
Domains Fees and costs incurred with the acquisition of web domain names are capitalised and amortised using the straight-line method over an estimated useful life. Market Access Fees In certain arrangements, the Group enters into agreements to access markets by operating under a business partner’s license in exchange for upfront market access and collaborative fees. These fees are capitalised and amortised over the shorter of their expected benefit under the partnership agreement or estimated useful life. Gaming Licenses Fees incurred in connection with the application and subsequent renewals in connection with obtaining licenses for online casino gaming and sports betting are capitalised and amortised using the straight-line method over an estimated useful life. Game Development Costs The Group developed casino style games and the software and tools to operate them (IP) which are marketed in the United States, subject to obtaining the required regulatory and licensing approvals. The Group capitalises these costs and commences amortisation once the IP is placed in service. Internal Use Software Software that is developed or obtained for internal use. Qualifying costs incurred to develop internal-use software are capitalised in accordance with section 18.8H of FRS 102 when the Group can demonstrate all of the following: (a) The technical feasibility of completing the intangible asset so that it will be available for use or sale. (b) Its intention to complete the intangible asset and use or sell it. (c) Its ability to use or sell the intangible asset. (d) How the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset. (e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
(f) Its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Capitalisation of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Internal use software is amortised using the straight-line method over an estimated useful life. All other expenditures, including those incurred in order to maintain an intangible asset’s current level of performance, are expensed as incurred. Collaboration Fee Fees incurred in connection with obtaining the right to access certain markets as and when those markets legislate for online casino gaming and/or sports betting. Fees are capitalised and amortised using the straight-line method over an estimated useful life once DGC has entered the market. Intangible fixed assets consist of costs of the internal development of online slot games and the software tools to operate them, costs to acquire the rights to software along with capitalised patent and trademark costs as well as other intangible assets, which are stated at cost less amortisation. Amortisation is provided at rates calculated to write off the cost of fixed assets, less their estimated residual value, over their expected useful lives.
The estimated useful lives range as follows:
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Receivables for user deposits not yet received are stated at the amount the Group expects to collect from a payment processor, which includes an impairment if appropriate. These receivables arise, primarily, due to process timing between when a user deposits and when the Group receives that deposit from the payment processor. Receivables also arise due to the securitisation policies of certain payment processors. Accounts receivable are customer obligations due under normal trade terms for the industry and are stated at amounts due less an allowance for doubtful accounts. The Group performs ongoing credit evaluations of its customers and does not require collateral. The Group maintains an allowance for doubtful accounts on receivables for estimated losses resulting from the inability of its customers to make required payments. The allowance is estimated based on the level of past-due amounts and information known about specific customers with respect to their ability to make payments. When management determines that it is probable that an account will not be collected, it is charged against the allowance for doubtful accounts. The Group records liabilities for user account balances. User account balances consist of user deposits, converted promo and cash user winnings less user withdrawals, tax withholdings and user losses. Cash reserved for users and receivables reserved for users equal or exceed the Group’s liabilities to users at all times.
Page 28
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
The group makes estimates and assumptions concerning the future. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods. Significant Judgments around Revenue Arrangements Identifying performance obligations: Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct, (i.e., the customer can benefit from the goods either on its own or together with other resources that are readily available), and are distinct in the context of the contract (i.e., it is separately identifiable from other goods or services in the contract). To the extent a contract includes multiple promises,management must apply judgment to determine whether those promises are separate and distinct performance obligations. If these criteria are not met, the promises are accounted for as a combined performance obligation. Determining the transaction price: The transaction price is determined based on the consideration that the Company will be entitled to receive in exchange for transferring our goods and services to the customer. Determining the transaction price often requires significant judgment, based on an assessment of contractual terms and business practices. Allocating the transaction price: Allocating the transaction price requires that management determines an estimate of the relative stand-alone selling price for each distinct performance obligation. Determining the relative stand-alone selling price is inherently subjective. The results of management’s analysis resulted in a specific percentage of the transaction price being allocated to each performance obligation on a per-unit basis to the total contract value. Determining the Estimated Offering Period: This provision is not applicable, as the Company is obligated to deliver a fixed number of games, and the revenues are recognised at a point in time (upon digital delivery of product). Significant Judgments around Intangible Fixed Assets The carrying value of the intangible fixed assets includes judgments relating to the costs incurred in
Page 29
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
3.Judgments in applying accounting policies (continued)
Analysis of turnover by country of destination:
Page 30
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 31
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 32
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
There were no factors that may affect future tax charges.
Page 33
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 34
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 35
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
14.Intangible assets (continued)
Page 36
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 37
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
15.Tangible fixed assets (continued)
Page 38
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 39
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 40
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
During the year the Group executed a loan agreement with the U.S. Small Business Administration (SBA) to participate in the Paycheck Protection Program (PPP) under Division A, Title I of the CARES Act, which was enacted in March 2020. The Company received $1,521,637 from the SBA in April 2020. The note accrued interest at the rate of 1%. The Company was to pay monthly principal and interest payments beginning six months from the date of the Note with the SBA and maturity date in March 2022. On August 4, 2021 the SBA waived the outstanding balance in full. This was recognised as Other Operating income in the year.
Page 41
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 42
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
22.Deferred taxation (continued)
Foreign exchange reserve
Profit and loss account
Page 43
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Page 44
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DIGITAL GAMING CORPORATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
The Group has entered into agreements which are dependent upon the Group obtaining proper licensure and operating status. The maximum liability under these agreements at the year end was $75 million due over a period of up to 14 years.
The ultimate controlling party is Charles Bernitz due to his shareholding in the company.
Page 45
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