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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES

ABN 36 147 193 511

ANNUAL REPORT 2016

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Contents

Corporate directory 2 Operating and financial review 3 Directors’ report 6 Auditors independence declaration 9 Financial report Statement of profit and loss and other comprehensive income 10 Statement of financial position 11 Statement of changes in equity 12 Statement of cash flows 13 Notes to the financial statements 14 Directors’ declaration 36 Independent auditor’s report to the members of VGW Holdings Limited 37

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Corporate Directory

Directors Nigel Blythe-Tinker – Executive Chairman Laurence Escalante – Executive Director Mats Johnson – Executive Director Lorenzo Escalante – Non-executive Director Kenneth Alexander – Non-executive Director,

appointed 1 January 2017 Company secretary Rointon Nugara Registered office & principal place of business

Level 8 191 St Georges Tce

Perth, WA 6000 Telephone: +61 2 8599 2507 Share register Advanced Share Registry Services 110 Stirling Hwy, Nedlands WA 6009 Auditor Grant Thornton Level 17, 383 Kent St., Sydney, NSW 2000 Solicitors DLA Piper Australia No. 22/1 Martin Pl Sydney NSW 2000 Bankers Commonwealth Bank of Australia 150 St Georges Terrace Perth, WA 6000 Website http://www.vgw.co

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Operating and Financial Review Principal Activities The principal activity of the consolidated entity during the financial year was the development and distribution of social casino games offering virtual currency gaming and cash prize contests. The majority of the Group’s customers are based in North America, but the majority of its underlying operations are conducted in Australia. As of reporting date the majority of operations are conducted in Australia. Review of Operations and Financial Results The following significant changes in the nature of the principal activities occurred during the financial year:

- The consolidated entity is in the process of implementing a Malta-licensed trading structure to execute the

Board’s strategy of mitigating operational risk and to position the business in line with other major international operators by leveraging and benefiting from the Malta licensing regime; and

- The consolidated entity commenced development of new product lines expected to be launched in the 2016/17 financial year.

There were no other significant changes in the nature of the consolidated entity’s principal activities during the financial year. Our Business Model and Objectives The development, marketing and operation of our gaming platform and delivery of multi vertical businesses to our respective player base is our primary objective. Our success in delivering this objective is determined by reference to total revenue over time, and this is compared to returns delivered in past financial years. We strive to continually improve customer acquisition and retention. Revenue increased by $34.5m to $38.3m, as restated (2015: $3.8m). The significant revenue growth can be largely attributed to significant targeted and highly effective marketing campaigns which commenced in October 2015. We rely on autonomy at management level for daily operations and short to mid-term strategic decisions within a company-wide governance framework providing accountability mechanisms at an operational level. The Board and senior management are responsible for strategic planning, budgeting and performance, risk management, executive remuneration and human resource management. Operating Results The consolidated loss of the Group amounted to $2.7m, as restated (2015: $2.7m). Targeted marketing spend, which drives strong revenue growth, and improved margin, together with a continued focus on effective cost management contributed to the improved result, before significant one off items such as the failed Reverse Take Over (RTO) and establishment of the Maltese entities. The prior year result also included the final charge for share-based payments expense. Review of operations The Group operates an online gaming platform offering virtual currency gaming and cash prize contests. A rise in social casino gaming in recent years has allowed the Group to capture a large number of customers and the specialised system has aided in retaining and monetising customers in a highly competitive environment.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Operating and Financial Review Financial Position The net assets of the consolidated entity have increased by $1.7m from 30 June 2015 to $7.0m (restated) at 30 June 2016. This increase is largely due to the improved operating performance of the Group and capital raising activities. The consolidated entity’s improved financial position and growth has enabled the Group to seek further expansion by implementing a Malta licensed trading entity structure and commence the development of new product lines. The directors believe the Group is in a stable position to expand and grow its current operations. Significant Changes in State of Affairs The following significant changes in the state of affairs of the parent entity occurred during the financial year:

i. On 14 August 2015 at an extraordinary meeting, shareholders approved a selective capital reduction

whereby 650,000,000 Ordinary Shares held by its main shareholder, Lance East Corporation, a related entity of Mr. Laurence Escalante, were cancelled. Consideration for these cancelled shares was the issue of an equal number (650,000,000) of Performance Shares to Lance East Corporation. The Performance Shares, issued in six tranches can be earned back over a maximum period of 5 years from issue, on the Company achieving certain revenue milestones.

ii. On 5 October 2015, the Company entered into a conditional Acquisition Agreement with Synergy Plus

Limited (ACN 091 126 082). The proposed merger was subject to final ASIC approval and ASX re-compliance with Chapters 1 and 2 of the ASX Listing rules. However, on 29 March 2016, ASIC unilaterally decided to place a Stop Order on the prospectus which had been issued in relation to the transaction. ASIC subsequently advised the Stop Order would not be lifted. As a result, the ASX delisted Synergy Plus Limited, bringing the Acquisition Agreement to an end.

iii. During the year, the Company raised nearly $4.8m in share capital thereby increasing its net assets to $7.0m.

iv. The Company has established six Maltese entities but these are not operational pending activation of

the corresponding gaming licenses.

v. The Company is in the process of seeking to list on the Main Board of the Australian Securities Exchange and expects this to be completed by the 4th quarter of 2016/2017 Financial Year.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Operating and Financial Review Events after the Reporting Period Performance shares

A total of 360 million Performance Shares (being the first three tranches as outlined in the terms of the Performance Shares Issue Agreement) were converted to 360 million Ordinary Shares and issued to Lance East Corporation on 27 October 2016. Consolidation of VGW Shares on a 3 for 1 Basis

At the Company’s Annual General Meeting held on 3 November 2016, the shareholders approved the consolidation of its shares on a 3 for 1 basis. This was to ensure consistency with the ASX Listing Rules as part of the Company’s process to list on the Australian Securities Exchange. IPO and Pre-IPO Capital Raise

The Company is in the process of seeking to list on the Main Board of the Australian Securities Exchange and expects this to be completed by the 4th quarter of 2016/2017 Financial Year. Relative to this, the Company was able to raise a Pre-IPO capital of $0.84m in December 2016 and $0.50m in January 2017. Establishment of Entities in Malta

As of reporting date, VGW has established six entities in Malta but these are not operational pending activation of the corresponding gaming licenses. Appointment of New Director

On 1 January 2017, Mr. Kenneth Alexander was appointed as Non-Executive Director and Chairman of the Remuneration Committee of VGW Holdings Limited. Mr. Alexander has extensive experience in the online real money gaming sector having served as Chief Executive of GVC Holdings PLC (a London Stock Exchange listed entity) since March 2007. He holds a bachelor’s degree from Glasgow University and is a Chartered Accountant with the Institute of Chartered Accountants of Scotland. Future Developments, Prospects and Business Strategies Current areas of strategic focus of the Group include the following:

- Invest in further development of the online gaming platform (including migration of the existing games portfolio from Flash to HTML5, which in turn enables games to be accessed and played on mobile devices);

- Implement a Malta-licensed trading structure, and - Expand product verticals (i.e. launch of Poker in December 2016 and Asia facing/Sports Book in 2017).

To further improve the consolidated entity’s profit and maximise shareholder wealth, the following developments are intended for implementation in the near future:

- Drive players to the company’s website through targeted advertising; and - Look for cost efficiencies through contractor relationships;

These developments, together with the current strategy of continuous improvement and adherence to quality control in existing markets, are expected to assist in the achievement of the consolidated entity’s long-term goals and development of new business opportunities. Environmental Issues The consolidated entity’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Directors’ Report

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the “consolidated entity” or “Group”) consisting of VGW Holdings Limited (referred to as the “company” or “parent entity”) and the entities it controlled at the end of, or during, the year ended 30 June 2016. Directors:

The directors of the Company at any time during or since the end of the financial year are:

Name, qualifications and independence status

Experience, special responsibilities and other directorships

Nigel BLYTHE-TINKER Executive Chairman VGW Holdings Limited

Nigel holds a Bachelor of Laws degree (LL.B) and is a Fellow of the Institute of Chartered Secretaries and Administrators (FCIS) of the United Kingdom.

He has extensive UK and international corporate experience over thirty years covering M&A, corporate finance, restructuring, AIM and FTSE 100 flotations, and corporate governance.

Nigel has held senior executive/legal and board positions within companies in the financial services, insurance, industrial and leisure and gaming sectors in mainly public listed companies. He was Group Company Secretary & Head of Legal at William Hill PLC. He was also Non-executive Chairman of Gaming VC Plc, a FTSE 100 listed company.

Prior to joining VGW, Nigel held the role of Executive Chairman of Pentasia Limited, an i-Gaming recruitment business.

Director from 15 August 2015.

Laurence ESCALANTE Executive Director VGW Holdings Limited

Laurence is an entrepreneur in the gaming sector with financial planning and advisory experience.

He studied Economics and Actuarial Studies at Macquarie University in Sydney and has 10 years financial planning experience as a technical and investment specialist, working as an advisor with AMP, ANZ, and boutique financial advisory firms.

Laurence also has 10 years executive game development experience, founding Anino Mobile, the first independent game development studio in the Philippines.

He is the founder and managing director of Lance East Corporation, an international investment company with a controlling interest in VGW Holdings Limited and business ventures in the Philippines.

Director from 4 November 2010.

Mats JOHNSON Executive Director VGW Holdings Limited

Mats is a senior technology and online gaming executive with significant experience in establishing and growing both public and private online business globally.

He has previously held roles as a Director at Coral Eurobet, General Manager at Centrebet and CEO at Playsafe.

Mats has 15 years of digital and gaming sector expertise, alongside comprehensive M&A experience, having been actively involved in several successful exits of online gaming companies, including the £2.18Bn sale of Coral Eurobet to Gala Group.

Director from 1 November 2015.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Directors’ Report Directors (continued):

Name, qualifications and independence status

Experience, special responsibilities and other directorships

Lorenzo ESCALANTE Non-executive Director VGW Holdings Limited

Lorenzo is an IT Business Intelligence specialist, with over 30 years experience in the corporate IT sector.

He has a particular specialty in the Business Objects business intelligence platform, having worked with BHP, ING, ANZ and LandCorp on their BI systems.

Director from 5 August 2014.

Kenneth ALEXANDER Non-executive Director VGW Holdings Limited

Kenneth has extensive experience in the online real money gaming sector having served as Chief Executive of GVC Holdings PLC, a London Stock Exchange listed entity, since March 2007

He holds a Bachelor’s degree from Glasgow University and is a Chartered Accountant with the Institute Chartered Accountants of Scotland.

Director from 1 January 2017

Company Secretary Mr Rointon Nugara was appointed company secretary on 24 September 2015.

Meetings of Directors

Full Board Remuneration Committee Nominations Committee Attended Held Attended Held Attended Held Nigel Blythe-Tinker 10 10 5 5 1 1 Laurence Escalante 10 10 5 5 1 1 Mats Johnson 10 10 - - - - Lorenzo Escalante 10 10 5 5 1 1

Held represents the number of meetings held during the time the director held office or was a member of the relevant committee. Dividends

No dividends were paid during the financial year. Options

A total of 97,362,112 options, issued in two tranches, exercisable at $0.05 and with an expiry date of 23 June 2017 and 14 August 2017, over issued shares or interests in the Company were granted on 23 June 2015 and 14 August 2015, respectively. All these options were outstanding at the date of this report.

Indemnification of Officers

In October 2015, the company took out indemnity insurance cover for all persons who are acting in the capacity of officer of the financial group.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES Directors’ Report

Directors’ Interests

The relevant interest of each director or their associated entities in the share capital (post 3:1 consolidation) of the Company at the date of this report is as follows:

VGW Holdings Limited Mr Nigel Blythe-Tinker 6,535,802 ordinary shares

Mr Laurence Escalante 266,666,666 ordinary shares and 96,666,666 performance shares. Mats Johnson 308,643 ordinary shares Kenneth Alexander 187,500 ordinary shares

Rounding of Amounts

The Company is a type of Company referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000, or in certain cases, to the nearest dollar.

Auditors Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2016 has been received and can be found on page 9 of the financial report.

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation.

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Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

Auditor’s Independence Declaration To the Directors of VGW Holdings Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of VGW Holdings Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the audit.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

N J Bradley Partner - Audit & Assurance Sydney, 24 April 2017

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

Consolidated entity 2016 2015 From continuing operations Note $’000 $’000 (Restated) (Restated) Revenue 3 38,299 3,809 Cost of Sales 3 (23,359) (2,286) Gross Profit 14,940 1,523 Finance income 4 20 7 Finance costs 4 (342) (34) Other income (expense) 4 - 426 Marketing and advertising fees (9,753) (483) Legal and professional fees (3,521) (590) Employee benefits expense (1,869) (1,026) Share-based payments expense - (1,298) Depreciation and amortisation expense (1,018) (916) Technology and other communication expense (383) (164) Property and occupancy expense (156) (41) General and administration expense (622) (99) Total Expenses (17,644) (4,218) Loss before income tax (2,704) (2,695) Income tax (expense)/benefit 5 - - Loss for the year attributable to members of the parent entity (2,704) (2,695) Other comprehensive income Items that will not be reclassified subsequently to profit or loss - - Other comprehensive income, net of tax - - Total comprehensive income for the year attributable to the owners of VGW Holdings Limited (2,704) (2,695)

Earnings per share Cents Cents From continuing operations:

- Basic loss per share 20 (0.26) (0.18) - Diluted loss per share 20 (0.26) (0.18)

This Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes to the financial statements.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL POSITION AS OF 30 JUNE 2016

Consolidated entity

Note 2016 2015 $’000 $’000 Assets (Restated) (Restated) Current assets Cash and cash equivalents 7 4,489 808 Trade and other receivables 8 565 501 Other 9 122 3

Total current assets 5,176 1,312

Non-current assets Property, plant and equipment 11 39 - Intangible assets 12 5,627 5,625

Total non-current assets 5,666 5,625

Total assets 10,842 6,937 Liabilities Current liabilities Trade and other payables 13 2,901 956 Provisions 14 674 35 Borrowings 15 104 - Convertible notes 17 - 400 Total current liabilities 3,679 1,391 Non-current liabilities Convertible notes 17 150 200 Total non-current liabilities 150 200

Total liabilities 3,829 1,591 Net assets 7,013 5,346

Equity Issued capital 17 19,123 14,058 Convertible notes 17 250 250 Reserves 19 - 694 Accumulated losses (12,360) (9,656)

TOTAL EQUITY 7,013 5,346

This Statement of Financial Position is to be read in conjunction with the accompanying notes to the financial statements.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

Consolidated entity

Issued Capital

Convertible Notes

Employee Share

Reserve

Accumulated Losses

Total Equity

$’000 $’000 $’000 $’000 $’000

(Restated) (Restated) (Restated) (Restated)

Balance at 1 July 2014 12,427 250 827 (6,961) 6,543 Securities issued 665 1,298 - 1,963 Employee shares vested 1,431 - (1,431) - - Transaction costs on share

issue (465)

- - - (465) Profit/(Loss) attributable to

equity holders -

- - (2,695) (2,695)

Balance as at 30 June 2015 14,058 250 694 (9,656) 5,346

Balance at 1 July 2015 14,058 250 694 (9,656) 5,346

Securities issued 4,771 - - - 4,771 Employee shares vested 694 (694) - - Transaction costs on share

issue (400) -

- - (400) Profit/(Loss) attributable to

equity holders - -

- (2,704) (2,704)

Balance as at 30 June 2016 19,123 250 - (12,360) 7,013

The Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the financial statements.

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VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

Consolidated entity

Note 2016 2015

Cash flows from operating activities $’000 $’000

Receipts from customers 36,980 3,829 Payments to suppliers and employees (35,736) (4,119) Interest received 20 6 Receipts from government subsidies 426 483 Net cash from operating activities 23 1,690 199 Cash flows from investing activities Payments for property, plant and equipment (47) - Payment for intangibles and development expenditure (1,012) (921)

Net cash from investing activities (1,059) (921) Cash flows from financing activities Proceeds from issue of shares 3,834 856 Capital raising costs (888) (270) Net proceeds from borrowings 104 - Net cash from financing activities 3,050 586 Net increase in cash and cash equivalents 3,681 (136) Cash and cash equivalents at beginning of year 808 944 Cash and cash equivalents at end of year 4,489 808

The Statements of Cash Flows are to be read in conjunction with the notes to the financial statements.

VGW HOLDINGS LIMITED AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS AS AT 30 JUNE 2016

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Note 1: Summary of Significant Accounting Policies Basis of Preparation The Group has elected to adopt the Australian Accounting Standards – Reduced Disclosure Requirements (established by AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting arising from Reduced Disclosure Requirements). These financial statements are general purposes financial statements that have been prepared in accordance with Australian Accounting Standards – Reduced Disclosure Requirements and the Corporations Act 2001. VGW Holdings Limited is a for-profit entity for the purpose of preparing financial statements. The consolidated financial statements for the year ended 30 June 2016 were approved and authorised for issue by the Board of Directors on 24 April 2017. These financial statements have been restated in line with the Company’s planned listing to the Australian Stock Exchange. The publicly available financial statements at 30 June 2016 are represented as discussed in Note 24. Significant Accounting Policies a. Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the Company and its subsidiaries. Subsidiaries are entities the Company controls. The Company controls an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Details for the subsidiaries are provided in Note 10: Controlled Entities.

The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances, unrealised gains or losses on transactions between the group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group.

b. Income Tax

The income tax expense/(income) for the year comprises current income tax expense/(income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are therefore measured at the amounts expected to be paid to/(received from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year. Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.


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Note 1: Summary of Significant Accounting Policies (continued)

b. Income Tax

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the realised asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

VGW Holdings Limited and its wholly-owned Australian controlled entity have not elected to implement tax consolidation legislation. c. Property, Plant and Equipment

Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to note 1(e) for details of impairment).

The cost of fixed assets includes the expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred.

The depreciable amount of all fixed assets is depreciated on a diminishing value basis over the assets useful life to the Group commencing from the time the asset is held ready for use. Depreciation is recognised in profit or loss.

The depreciation rate used for the class of depreciable assets are:

- Office Equipment 4 years

- Computer Equipment and Software 3 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.


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d. Financial Instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either purchase or sell the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at cost plus transaction costs, except where the instrument is classified “at fair value through profit or loss” in which case transaction costs are recognised immediately as expenses in profit or loss. Subsequent to initial recognition these instruments are measured as set out below.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at cost.

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period, which will be classified as non-current assets.

Financial Liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.

Other Other non-derivative financial instruments are measured at amortised cost using the effective interest method less any impairment losses. Derecognition

Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged or cancelled, or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

e. Impairment

All impairment losses are recognised in the statement of profit or loss and other comprehensive income. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the statement of comprehensive income. f. Intangibles other than Goodwill

Software and website development costs Software and website development costs are capitalised only when the company identifies that the project will deliver future economic benefits and these benefits can be measured reliably. Software development costs have a finite life and are initially recorded at cost and amortised on a systematic basis over eight years matched to the future economic benefits over the useful life of the asset.


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g. Employee Benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries, annual leave and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries, annual leave and sick leave are recognised as part of current trade and other payables in the statement of financial position. Equity-settled compensation The Group operates an employee share and option plan. Share-based payments are amortised over the vesting periods. The corresponding amount is recorded to the share based payment reserve. h. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. Effective 1 July 2016, the Company has adopted a policy of recognising a potential liability for cashable sweepstakes. The adoption of this policy necessitated a retrospective adjustment of FY2016 accounts for purposes of consistency and comparability. i. Cash and Cash Equivalents Cash and cash equivalents include deposits held at-call with banks. j. Revenue Facebook Revenue Revenue from Facebook is recognised on a gross basis before taking into account the service fee on revenue charged by Facebook. Chumba Revenue Revenue from player purchases on the Chumba website is recognised gross of Paypal fees. The risks and rewards of the revenue earned lie with the Company and not with Paypal. This is in line with the ‘agent vs principal’ guidance within AASB 118 – Revenues. Paypal fees are included in cost of sales. Revenue is recognised when the right to receive the revenue has been established.


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k. Trade and Other Receivables

Current Trade and other receivables include amounts due from Facebook for player purchases made through Facebook in the ordinary course of business. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, less any provision for impairment. Trade receivables are generally due for settlement within 30 days. Due to their short-term nature, they are measured at amortised cost and are not discounted. Other receivables are recognised at amortised cost, less any provision for impairment. l. Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the Group during the reporting period that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. m. Goods and Services Tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from the ATO are presented as operating cash flows included in payment to suppliers. n. Comparative Figures The consolidated entity has re-stated the 2016 comparative information in this report to reclassify certain accounts to conform to the current year classification as this provides more relevant and reliable information. Details of the reclassification are included in Note 24.

o. Critical Accounting Estimates and Judgements The preparation of the financial statement requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates may differ to actual results.


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o. Critical Accounting Estimates and Judgements In preparing this consolidated interim financial statement, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statement as at and for the year ended 30 June 2016. The policy on Cashable sweepstakes has been retrospectively applied for the financial year commencing 1 July 2015. Capitalisation of Software Development Costs Distinguishing the research and development phases of a new customised software project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. p. Going Concern Notwithstanding the net loss from operating activities, the financial statements have been prepared on a going concern basis on the following considerations:

Significant revenue growth from FY2015 to FY2016; Planned listing on the Australian Stock Exchange Board; Net cash inflows from operations; and Of the total expenses, $1.1m were incurred in relation to the failed RTO, establishment of Maltese

entities, and other one off costs.

q. Foreign Currency Transactions and Balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss r. New, revised or amended Accounting Standards and Interpretations Adopted A number of new standards. amendments to standards and interpretations are effective for annual periods beginning after 1 July 2016, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the Group are set out below:

AASB 15 Revenue from Contracts with Customers; and AASB 16 Leases

The entity is yet to undertake a detailed assessment of the impact of AASB 15 and AASB 16. However, based on the entity’s preliminary assessment, the above Standards are not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019 and 30 June 2020, respectively.


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s. Rounding of Amounts The Company is a type of Company referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and therefore the amounts contained in this report and in the financial report have been rounded to the nearest $1,000, or in certain cases, to the nearest dollar. Note 2: Operating Segments As at the reporting date, the Group treats its operations as one business segment and reports accordingly. Management and the board of Directors view and assess the Group as one business segment. With the establishment of the Malta-licensed trading entity structure and the introduction of new product verticals, the Group will look at segment reporting accordingly. Geographical Information

Sales to external customers

Geographical non-current assets

In $’000 2016 2015 2016 2015 (Restated) Australia - - 5,555 5,625 Rest of the world 38,299 3,809 111 -

Note 3: Revenue from Continuing Operations and Cost of Sales

2016 2015

$’000 $’000

Revenue from Continuing Operations (Restated) (Restated)

Revenue from Chumba website 34,108 2,686 Revenue from Facebook 4,191 1,123

38,299 3,809

Cost of sales Sweepstakes paid 20,402 1,850 Facebook revenue share 1,257 337 Merchant fees 1,700 99

Total revenue 23,359 2,286 Gross Profit 14,940 1,523


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Note 4: Finance income (costs) and other income

2016 2015

$’000 $’000

Finance income Interest income 20 7

20 7 Finance costs Interest expense (41) (5) Bank and other financial intermediary charges (25) (4) Foreign currency gains (losses) (276) (25)

(342) (34) Other income Research and development tax incentive - 426

- 426 Note 5: Income Tax Expense

2016 2015

Current tax expense/(benefit) $’000

(Restated) $’000

Current year (689) (261) Deferred tax expense Current year (317) (521) Tax losses recognised - -

Expected income tax expense/(benefit) (1,006) (782) Income tax benefit not brought into account 1,006 782

Actual tax benefit - -

2016 2015

Numerical reconciliation between tax expense and pre-tax net profit

$’000 (Restated)

$’000

Profit/(loss) before tax (2,704) (2,695) Income tax using the domestic corporation tax rate of 30% (2015:30%)

(811) (808)

(Decrease)/increase in income tax expense/(benefit) due to: R&D Tax Rebate 128 (128) Non-allowable items (6) 675 (689) (261) Deferred Tax Asset not brought to account (317) (521) Expected income tax expense/(benefit) on pre-tax net profit (1,006) (782) Income tax benefit not brought into account 1,006 782

Actual tax benefit - -


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Note 5: Income Tax Expense (continued) The franking account balance at the end of the year was Nil (2015: Nil). All unused tax losses were incurred by Australian entities. Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. Note 6: Key Management Personnel Compensation The totals of remuneration paid to KMP of the company during the year are as follows:

2016 2015

$’000 $’000

Short-term employee benefits 1,544 577

Post-employment benefits 93 40

Total KMP compensation 1,637 617

Note 7: Cash and Cash Equivalents

2016 2015

$’000 $’000

Cash at bank 3,945 749

Paypal account 208 33

Paypal bond 336 26

4,489 808

The Paypal bond is backed by an on-demand guarantee provided through a US Dollar Bank Account into which US$250,000 has been deposited. The Paypal bond was subsequently released on 4 July 2016.


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Note 8: Trade and Other Receivables

2016 2015

$’000 $’000

CURRENT (Restated)

Trade receivables 244 41

Other receivables

Research and Development tax incentive - 426

GST Receivable 321 34

565 501

The trade receivables are current and have been fully paid or settled after balance sheet date. Note 9: Other Current Assets

2016 2015

$’000 $’000

Prepayments 73 -

Rental bond 49 3

122 3

Note 10: Controlled Entities

The subsidiary listed below has share capital consisting solely of ordinary shares which are held directly by the parent entity. The assets of the subsidiary have been consolidated on a line-by-line basis in the consolidated financial statements of the Group. Financial statements have not been prepared for the subsidiary as it has not traded since incorporation.

The proportion of ownership interests held equals the voting rights held by the Group.

Name Incorporation/

Registration Date Place of business/

country of incorporation

Ownership Interest 30 June

2016 30 June

2015 Virtual Gaming Worlds Inc. 8 Nov 2010 Belize 100.00% 100.00% VGW Malta Holding Limited 19 Apr 2016 Malta 99.93% - Wholly owned subsidiaries of VGW Malta Holding Limited: VGW Malta Limited 9 Mar 2016 Malta 99.93% -


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Note 11: Property, Plant and Equipment

2016 2015

$’000 $’000

Property, plant and equipment – at cost 50 3

Less accumulated depreciation (11) (3)

39 -

Note 12: Intangible Assets

2016 2015

License capitalisation and software development costs $’000 $’000

Balance, 1 July 5,625 4,539

Internal development 1,012 1,998

Less amortization expense (1,010) (912)

5,627 5,625

Note 13: Trade and Other Payables

2016 2015

CURRENT $’000 $’000

Trade payable 2,224 390

Other payables and accruals 677 566

2,901 956

Note 14: Provisions

2016 2015

$’000 $’000

CURRENT (Restated)

Provision for annual leave 90 35

Sweepstakes liability 584 -

674 35

The provision for Sweepstakes Liability represents cashable sweepstakes of players that are active within sixty days. Under the Sweepstakes rules, the cashable sweepstakes of players not active within sixty days expire. This policy only applied from 1 July 2015.


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Note 15: Loans Payable During the year, the Company obtained a short-term loan from Spotcap to the amount of $250,000. The loan bears a variable interest rate and is repayable within one year. The proceeds of the loan were used to bolster the cash position and meet short-term expenditure needs. As of balance sheet date, the Company’s credit limit has been increased to $400,000 of which $296,000 is undrawn. Outstanding balance of $104,000. Note 16: Financial Instruments Accounting classification and fair values The following table shows the carrying amount and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value

Carrying amount

Note

Fair

Value

Amortised

Cost

Other Financial Liabilities

Fair value level 30 June 2016

1

2

3

Total

Financial assets not measured at fair value Cash and cash equivalents 7 4,489 Trade and other receivable 8 565 5,054 Financial liabilities not measured at fair value Trade and other payables 13 2,901 Loans payable 15 104 Convertible note 150 3,155

Carrying amount

Note

Fair

Value

Amortised

Cost

Other Financial Liabilities

Fair value level 30 June 2015

1

2

3

Total

Financial assets not measured at fair value Cash and cash equivalents 7 808 Trade and other receivable 8 501 1,309 Financial liabilities not measured at fair value Trade and other payables 13 956 Loans payable - Convertible note 600 1,556

There were no transfers between Level 1 and level 2 during the period. There were also no changes during the period in the valuation techniques used by the Group to determine Level 2 fair values.


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Note 16: Financial Instruments (continued) Financial management policies The directors' overall risk management strategy seeks to assist the Company in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Risk management policies are approved and reviewed by the Board of Directors on an annual basis. Specific financial risk exposure and management The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange risk fluctuations. The biggest exposure is in United States Dollar (USD) as the Group’s revenue is one hundred percent generated in USD. This is however minimised as the Group’s largest service provider also bills in USD. The Group also enters into forward contracts to hedge its foreign currency risk exposure. Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The source and nature of this risk arise from operations, capital expenditures and translation risks. The carrying amount of the Company’s foreign currency denominated financial assets and financial liabilities at the reporting date was as follows:

Assets Liabilities 2016 2015 2016 2015 $’000 $’000 $’000 $’000 US dollars 885 107 1,944 162 Pounds Sterling - - 22 - Euro - 16 6 885 107 1,982 168

The following significant exchange rates have been applied during the year Base currency (AUD 1)

Year-end spot rates 2016 2015 US dollars 0.743 0.768 Pounds Sterling 0.552 0.487 Euro 0.669 0.687

The Company is also exposed to interest rate risk. As of reporting date, the following variable rate deposits and borrowings are outstanding:

2016 2015 Weighted average

interest rate Balance

$’000 Weighted average

interest rate Balance

$’000 Interest bearing cash 0.75% 3,848 - 742 Loans payable 15.60% 104 - -


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Note 17: Issued Capital

Consolidated entity

2016 2015 2016 2015

Shares Shares $’000 $’000

Fully paid ordinary shares, net of share issue cost 962,141,464 1,499,922,910 19,123 14,058 Movements in ordinary share capital

Number Value ($’000) Opening balance, 1 July 2014, net of share issue cost 1,456,196,491 12,427 Issuance of shares 43,726,419 2,096 Share issue cost - (465) Balance, 30 June 2015 1,499,922,910 14,058 Opening balance, 1 July 2015, net of share issue cost 1,499,922,910 14,058 Issuance of shares to external parties as part of capital raise 89,168,778 4,425 Issuance of shares to employees and contractors as part of share based payment and cost savings initiatives

23,049,776 1,040

Cancellation of shares (650,000,000) - Share issue cost - (400) Closing balance, 30 June 2016 962,141,464 19,123

On 14 August 2015 at an extraordinary meeting held by the shareholders, it was approved that the Company cancel 650,000,000 shares held by its main shareholder, Lance East Corporation, a related entity of Mr. Laurence Escalante, by way of a selective capital reduction, on the condition that it would be issued 650,000,000 performance shares subject to the Company meeting certain financial performance hurdles. Approval has been given for the 650,000,000 performance shares to be converted into ordinary shares upon the following performance milestones being achieved within five years and the assessment of the performance milestones is subject to the annual audit of the Company’s financial statements:

Performance Shares Number of shares Performance Milestones Class A 120,000,000 Achievement of $10m in audited annual net revenue Class B 120,000,000 Achievement of $20m in audited annual net revenue Class C 120,000,000 Achievement of $30m in audited annual net revenue Class D 120,000,000 Achievement of $40m in audited annual net revenue Class E 120,000,000 Achievement of $50m in audited annual net revenue Class F 50,000,000 Achievement of $100m in audited annual net revenue

As each tranche will convert to a fixed number of ordinary shares and the issue of the Performance Shares are in consideration for the cancellation of Ordinary Shares the Directors have determined the Performance Shares be treated as equity instruments in accordance with AASB 132 “Financial Instruments: Presentation”. At the time of granting the performance shares on 14 August 2015 the Directors concluded that the probabilities of the performance hurdles being met based on the historical financial performance of the Company at that date was unknown, as such no measurement is able to be made for the initial recording of the performance shares. As no initial measurement was made and the performance shares are treated as equity instruments, no subsequent re-measurement is required.


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Note 17: Issued Capital (continued) Following completion of the audit of the Company’s financial statements for the year ended 30 June 2016, the performance milestones for Class A, B and C will have been met and accordingly 360,000,000 Performance Shares will convert to Ordinary Shares. As of 30 June 2016, $400,000 credit notes are outstanding of which $150,000 is classified under liability as this possess more characteristics of a debt rather than an equity instrument. The convertible note classified as liability was redeemed in full in February 2017. The convertible notes classified as equity were issued in November 2010. These convertible notes bear no interest, can be converted at $0.02 per security on liquidity event and have no maturity date. Note 18: Related Party Transactions

The group’s main related parties are as follows: a. Parent entity and controlled entities

VGW Holdings Limited (“the parent”) exercises control over Virtual Gaming Worlds Inc. The parent and the subsidiaries are collectively referred to as the “consolidated entity” and are constituent parts of the consolidated financial statements. Accordingly, the subsidiaries are considered as related parties in the separate financial statements of the parent entity rather than in the consolidated financial statements.

b. Key management personnel Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity is considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 6: Key Management Personnel Compensation.

c. Other related parties Other related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel individually or collectively with their close family members.

Shares in VGW Holdings Limited The following office holders and/or their related entities hold an interest in the company. The shares held are as follows.

Officeholder Interests %

Holding 2016

No. of shares

Lance East Corporation 45.73 440,000,000

Nigel Blythe-Tinker 1.27 12,200,000

Kevin Brown 2.13 20,472,500

Rointon Nugara 2.08 20,000,000


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Note 19: Share-based payments

There were no shares granted to key management personnel and employees as share-based payments during the financial year (2015: 27,350,900). The shares are exercised upon vesting date and are paid for via non-recourse loans. The loans will be repaid to the Company when the shares are sold. The shares have voting and dividend rights but are not transferable. Unvested shares are forfeited if the employee is no longer employed by the Company. During the financial year, 13,875,000 shares vested (2015: 28,381,200) and NIL were forfeited (2015: 2,053,916).

A summary of the movements of all Company shares issued is as follows:

Number Weighted average exercise price

Shares outstanding as at 1 July 2014 16,959,216 $0.04

Granted 27,350,900 $0.06

Vested (28,381,200) $0.05

Forfeited (2,053,916) $0.04

Shares outstanding as at 30 June 2015 13,875,000 $0.05

Granted - -

Vested (13,875,000) $0.05

Forfeited - -

Shares outstanding as at 30 June 2016 - -

As at the date of exercise, the weighted average share price of shares exercised during the year was $0.05 (FY 2015: $0.05). The weighted average remaining contractual life of shares outstanding at year-end was NIL (FY 2015: 9.33 months). The fair value of the shares granted to employees is considered to represent the value of the employee services received over the vesting period.

Note 20. Earnings per Share 30 June 2016 30 June 2015

$’000 $’000

(Restated)

Loss after income tax attributable to the owners of VGW Holdings Limited 2,704 2,695

Number of

shares

Number of

shares

Weighted average number of shares used in calculating basic and diluted earnings per share

1,028,557,068 1,457,589,214

Cents Cents

Basic loss per share 0.26 0.18

Diluted loss per share 0.26 0.18


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Note 21: Commitments

Lease commitments – operating

2016 2015

Lease Commitments - operating $’000 $’000

Committed at reporting date but not recognized as liabilities

Within one year 285 31

One to five years 98 -

383 31

Operating lease commitments includes contracted amounts for various office space under non-cancellable operating leases expiring within one, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

Note 22: Parent entity information

Set out below is the supplementary information about the parent entity.

Parent 2016 2015 Statement of profit or loss and other comprehensive income $’000 $’000 Loss for the year (2,588) (2,695) Total comprehensive income (2,588) (2,695) Gross Profit Statement of financial position Total current assets 5,176 1,312 Total assets 10,958 6,935 Total current liabilities 3,829 1,591 Total liabilities 3,829 1,591 Equity 7,129 5,346

The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in

Note 1.


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Note 23: Cash Flow Information

Reconciliation of Cash Flow from Operations with Profit after Income Tax

2016 2015

$’000 $’000

(Restated) (Restated)

Profit after income tax (2,704) (2,695)

Non-cash flows in profit:

Amortisation 1,009 916

Depreciation 8 -

Share-based payments expense - 1,298

Cost relating to share issue cost 611 -

Write-off of other receivable 119 -

Professional fees settled via issuance of shares 160 -

Interest expense settled via issuance of shares 10 -

Changes in assets and liabilities, net of the effects of purchase and

disposal of subsidiaries:

(increase)/decrease in trade and other receivables (72) 276

(increase)/decrease in prepayments (119) 175

increase/(decrease) in trade payables 1,969 118

increase/(decrease) in provisions 639 93

increase/(decrease) in accrued expenses 60 18

Cash flow from operations 1,690 199


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Note 24: Restatement of 30 June 2016 Financial Position and Statement of Profit and Loss for the year ended 30 June 2016.

Throughout the financial statements, the consolidated entity has restated its 30 June 2016 Financial Position, and the Statement of Profit and Loss for the year ended 30 June 2016 in line with the Company’s planned listing to the Australian Stock Exchange.

a. Revenue Recognition Effective 1 July 2016, VGW recognises revenue from player purchases gross of Paypal fees as this is a more appropriate method of revenue recognition in line with “agent vs principal” guidance within AASB 118 – Revenue. Consequently, the corresponding Paypal fees are included within cost of sales. Prior to 1 July 2016, VGW recognises revenue, net of the Paypal fees.

The impact of this adjustment is to increase revenue and cost of sales by the $1.116m for the year-ended 30 June 2016. There is no impact on the gross margin, net loss for the period ended 30 June 2016 and on the statement of financial position as of 30 June 2016.

b. Sweepstakes Liability Effective 1 July 2015, the Company has adopted a policy of recognising a potential liability for cashable sweepstakes. The adoption of this policy necessitated a retrospective adjustment of FY2016 accounts for purposes of consistency and comparability.

The impact of this adjustment is to increase cost of sales and currently liabilities by $0.584m for the year-ended 30 June 2016.

c. Share Issue Cost The Company had previously charged certain share issue cost relating to the Reverse Take-Over (RTO) of Synergy Plus Limited to equity. On review, it was determined that as the RTO has been aborted, these costs should be expensed.

The impact of this adjustment is to increase expenses and net loss by $0.611m for the year ended 30 June 2016.

d. Convertible Notes A further analysis of the features of the convertible note disclosed that some of them possess more characteristics of a debt rather than an equity instrument. The impact of this reclassification is to increase liability by $0.150m and decrease equity by the same amount as of 30 June 2016. The impact on FY 2015 accounts is to increase liability by $0.600m and decrease equity by the same amount os of 30 June 2015. e. Other Receivables Relative to the proposed RTO of Synergy Plus Limited, the Company paid for the former’s ASX annual listing fee in the amount of $0.119m. Due to the failure of the RTO and a further evaluation of the account suggests that this should be written off as of 30 June 2016. The impact of this adjustment is to increase net loss by $0.119m for the year ended 30 June 2016 and decrease net assets by the same amount as at 30 June 2016.

f. Share Capital During the preparation of the FY 2016 accounts, it was discovered that 666,667 VGW shares representing referral and finders’ fee in in relation to capital raising activities in the previous years were not issued. To rectify this, the shares were issued and backdated to 31 December 2013 at $0.03 per share as share issue cost. The impact is to increase beginning share capital by $20,000 and share issue cost by the same amount. Throughout the financial statements, the consolidated entity has restated its FY 2015 financial position in line with the above matter.


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Note 24. Restatement of 30 June 2016 Financial Position and Statement of Profit and Loss for the half year ended 31 December 2015 (continued)

The effect of the above adjustments are as follows:

Statement of Profit and Loss 30 June 2016 as

previously reported Adjustment for

FY 2016 30 June 2016

Adjusted $000 Reference $000 $000 Revenue 37,183 a 1,116 38,299 Cost of sales (21,659) a (1,116) b (584) (23,359) Gross profit 15,524 (584) 14,940 Total expenses (16,914) c (611) (17,644) e (119) Net loss (1,390) (1,314) (2,704) Financial Position

30 June 2016 as previously reported

Adjustment for FY 2016

30 June 2016 Adjusted

$000 $000 $000 Current assets 5,295 e (119) 5,176 Non-current assets 5,666 - 5,666 Total assets 10,961 (119) 10,842 Current liabilities 3,095 b 201 3,829 - b 383 - - d 150 - Total liabilities 3,095 734 3,829 Equity 7,866 (584) 7,013 - d (150) - - e (119) -


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Note 25: Re-presentation of prior comparatives

A re-presentation is required in the 2015 financial statements to reclassify certain expenses to conform to the current year classification as this provides more relevant and reliable information. The effect of the restatement is as follows:

2015 2015 In $’000

As Previously reported Change Restated

Research and development tax offset income 426 (426) - Interest income 7 (7) - Administration expense (a) (34) 34 - Other income (expense) - (399) 399 Advertising expenses (481) 481 - Administration expense (b) (2) 2 - Marketing and advertising - 483 (483) Consultant fees (214) 214 - Legal fees (46) 46 - Website and computer systems expense (2) 2 - Administrative expense (c) (328) 328 - Professional fees - 590 (590) Employee benefits (1,014) 1,014 - Administrative expense (d) (12) 12 - Employee benefits expense - 1,026 (1,026) Website and computer systems expense (104) 104 - Administrative expense (e) (60) 60 - Technology and other communication expense - 164 (164) Administrative expense – (f) (41) 41 - Property and occupancy cost - 41 (41) Administration expense (554 less 476, which are the amount reclassed (a to f as above)

(78) 78 -

Website and computer systems expense (21) 21 - General and administration cost - 99 (99)

The above restatement has no impact on the overall net consolidated loss and comprehensive income for the year, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year ended 30 June 2015; and the consolidated statement of financial position at 30 June 2015.


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Note 26: Auditors Remuneration

Fees paid or payable to the Company’s auditors are as follows: 2016 2015

$’000 $’000

Audit of financial statements – Sothertons LLP Chartered Accountants, Melbourne (now Hall Chadwick). 2015 audit fee

covers three financial years (FY2015, FY2014 and FY2013) 13 26

Audit of financial statements – Grant Thornton Audit Pty Ltd 37 -

Note 27: Events After the Reporting Period Performance shares

A total of 360 million Performance Shares (being the first three tranches as outlined in the terms of the Performance Shares Issue Agreement) were converted to 360 million Ordinary Shares and issued to Lance East Corporation on 27 October 2016. Consolidation of VGW Shares on a 3 for 1 Basis

At the Company’s Annual General Meeting held on 3 November 2016, the shareholders approved the consolidation of its shares on a 3 for 1 basis. This was to ensure consistency with the ASX Listing Rules as part of the Company’s process to list on the Australian Securities Exchange. IPO and Pre-IPO Capital Raise

The Company is in the process of seeking to list on the Main Board of the Australian Securities Exchange and expects this to be completed by the 4th quarter of 2016/2017 Financial Year. Relative to this, the Company was able to raise a Pre-IPO capital of $0.84m in December 2016 and $0.50m in January 2017. Establishment of Entities in Malta

As of reporting date, VGW has established six entities in Malta but these are not operational pending activation of the corresponding gaming licenses. Appointment of New Director

On 1 January 2017, Mr. Kenneth Alexander was appointed as Non-Executive Director and Chairman of the Remuneration Committee of VGW Holdings Limited. Mr. Alexander has extensive experience in the online real money gaming sector having served as Chief Executive of GVC Holdings PLC (a London Stock Exchange listed entity) since March 2007. He holds a bachelor’s degree from Glasgow University and is a Chartered Accountant with the Institute of Chartered Accountants of Scotland.

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. 37

Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E [email protected] W www.grantthornton.com.au

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VGW HOLDINGS LIMITED Report on the Financial Report We have audited the accompanying financial report of VGW Holdings Limited (the Company), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s

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judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s Opinion In our opinion the financial report of VGW Holdings Limited is in accordance with the Corporations Act 2001, including:

a giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

b complying with Australian Accounting Standards and the Corporations Regulations 2001.

Other Matter The financial report of the Company for the year ended 30 June 2016 was audited by another auditor who expressed an unmodified opinion on that financial report on 10 October 2016. The financial statements are presented as restated, details of these restatements are disclosed in Note 24 of the financial statements.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

N J Bradley Partner - Audit & Assurance Sydney, 24 April 2017

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