Info: Mindark Annual Report 2015

[billairboy]

Deposits down,withdrawals up, thats basically sums it all up

All that socialistic and keynesians economic ideas MA had last 2 years lead to this point. Withdrawals grew over 30% just in one year and there is no panic yet ingame.

You can't know if the withdrawals grow or not, because nowhere in the report do they say how much was withdrawn from the game. The only leave for numbers for the net-deposits, which decline with 6,1%. So before you screaming about big increased in withdrawals, show me where you got that information from? Because the withdrawals 2014 was around 25MPED and if the withdrawals increase with 30% that would mean around 7,5 MPED. But the net-deposits (deposits - withdrawals) decreased with only 4.0 MPED, so it that case the deposits increased with 3,5MPED?

More likely the withdrawals actually decline, even if I can't know that for sure, and the deposits declined. And why did the deposits decline? Well, one explanation is that the usd was a lot more expansive during 2015 compared to the average of 2014. Not a problem for an american, but for non-US players you will get less PED for the same amount of money. Players have a limited budget to spend on the game. So even if the players deposit the same, or even more, real currency the net-deposits in PED could decline because the higher price for the PED.



English version on the report is out:
http://www.mindark.se/investor-relations/financial-reports/documents/ANNUAL_REPORT_MindArk_2015.pdf

 

[San]

Maybe it's just unprocessed withdrawals piling up? Not sure if there is a way to tell but given the gross asymmetry in processing time I wouldn't be astonished if it shows.

 

[Dan59]

I also see they have bought shares in a company called "Rufoid AB". What I can see a company with Kim and an other Welter, I would guess a younger brother, in the leadership, to "develop computer games" . I wonder what that is?

An interesting observation, thank you to point it.
Do i need to wake up?

 

[AxeMurderer]

So more mobile games, not bad. I'm waiting for the tower defence deeds

 

[Norbert]

More likely the withdrawals actually decline, even if I can't know that for sure, and the deposits declined. And why did the deposits decline? Well, one explanation is that the usd was a lot more expansive during 2015 compared to the average of 2014. Not a problem for an american, but for non-US players you will get less PED for the same amount of money. Players have a limited budget to spend on the game. So even if the players deposit the same, or even more, real currency the net-deposits in PED could decline because the higher price for the PED.



English version on the report is out:
http://www.mindark.se/investor-relations/financial-reports/documents/ANNUAL_REPORT_MindArk_2015.pdf

Good point about currency fluctuation, that could be the reason indeed.

 

[sawachika]

Its something that caught my eye too.

(I'm guessing that its got something to do with paying for VAT too "early"? Perhaps in the past MA calculated VAT from its net of "deposits - withdrawals" and now they're gonna calculate it accordingly as users spend their deposited peds?)

Quoted From English Version:

Previously, user deposits were recorded as revenue, with revenues being reduced whenever users made withdrawals. VAT liability occurred at the point of the initial deposit. The company therefore paid VAT on net deposits. Starting on 2015-01-01, MindArk changed its revenue model and VAT principle and henceforth book net deposits as a debt. Revenue will occur as users consume their deposits. At the same point the company will pay VAT on consumed funds.

Guess my guess was spot-on?

Other interesting stuff to note:
Other Income - Pg 20 Note 2 (How much they've gotten from AUD sales. Their share of the pie?)
Deferred Tax - Pg 22 Note 6 (Adds in details not found in the previous MA report 2014.)
Planet Calypso Sale Back to MindArk - Pg 22 Note 7 (Don't quite get their calculations though.)
Accrued Expenses And Income - Pg 27 Note 19 (User requested reimbursements not yet settled is up slightly.)
Investment in Tangible Assets - Pg 28 Note 21 (How much it costs them to make Compets?)

Hmmm...wonder where their sales from strongboxes fall under...Net sales perhaps?

 

[billairboy]

Quoted From English Version:

Planet Calypso Sale Back to MindArk - Pg 22 Note 7 (Don't quite get their calculations though.)

Yeah, it's Mindark buying the planet back from the Planet Calypso company. Mindark bought for a price equal to the booked value at the 2014, that is 551 263. But I think they have done a bit of an accounting error in this case. Because for the group it should noting have changed between 2014 and 2015, the group owned the planet already 2014. So there should be no "purchase" and "sale" in the accounting and no change in the "amortization according to plan" which now is lower because they now started over with a new 5-year plan. In this case it does not have a huge effect, but the value should probably be decreased with -287 616 as it was in 2014 instead of -110 253 they have done this year. But it's a pretty minor error.

Investment in Tangible Assets - Pg 28 Note 21 (How much it costs them to make Compets?)

Also looks like they payed for the right to develop the game.

"Refers to the cost and amortization for MindArk and Entropia Universe web tools.
Refers also to the acquisition of the ComPet Game idea, capitalized costs and capitalized expenses
for the mobile application developement. "

I wonder what they did with the money from the Compet deeds, are they in the revenue or have they diminish the cost for the app?

 

[sawachika]

Yeah, it's Mindark buying the planet back from the Planet Calypso company. Mindark bought for a price equal to the booked value at the 2014, that is 551 263. But I think they have done a bit of an accounting error in this case. Because for the group it should noting have changed between 2014 and 2015, the group owned the planet already 2014. So there should be no "purchase" and "sale" in the accounting and no change in the "amortization according to plan" which now is lower because they now started over with a new 5-year plan. In this case it does not have a huge effect, but the value should probably be decreased with -287 616 as it was in 2014 instead of -110 253 they have done this year. But it's a pretty minor error.




Also looks like they payed for the right to develop the game.

"Refers to the cost and amortization for MindArk and Entropia Universe web tools.
Refers also to the acquisition of the ComPet Game idea, capitalized costs and capitalized expenses
for the mobile application developement. "

I wonder what they did with the money from the Compet deeds, are they in the revenue or have they diminish the cost for the app?

Thanks for your input.

Don't suppose you might know this as well, but...any idea why their "Net Sales Note 1" (Pg 19) has reimbursements at "0" this year? In the past years, they would have always had some non-zero (-ve) numbers there which would inadvertently reduced their "Net Sales" figure and brought their "Operating Profit" into a loss.

Is it a mistake there as well? Or could it be as a result of their new accounting procedures?

 

[billairboy]

Thanks for your input.

Don't suppose you might know this as well, but...any idea why their "Net Sales Note 1" (Pg 19) has reimbursements at "0" this year? In the past years, they would have always had some non-zero (-ve) numbers there which would inadvertently reduced their "Net Sales" figure and brought their "Operating Profit" into a loss.

Is it a mistake there as well? Or could it be as a result of their new accounting procedures?

As you said, it's because of their new way of accounting their net sale. Net sales now is the amount of consumed peds, so the depositing-withdrawals formula have no direct effect on the net sale, so no point to have a note for it anymore. But I wish they would give that information in an on other place, because it's a bit interesting to know.

 

[Fifth]

Previously, user deposits were recorded as revenue, with revenues being reduced whenever users made withdrawals. VAT liability occurred at the point of the initial deposit. The company therefore paid VAT on net deposits. Starting on 2015-01-01, MindArk changed its revenue model and VAT principle and henceforth book net deposits as a debt. Revenue will occur as users consume their deposits. At the same point the company will pay VAT on consumed funds.

What's your take on that guys?
Seems to me they are not referring to the decay (a mechanism that generates income for MA/PP) but also include peds lost to the lootpool (dispersed between the other players)?

Edit: Ok, no, it's prolly not calculated for every deposit separately but rather as a sum total of all deposits vs. sum total of all peds lost to the decay. If so then there's peds lost to the lootpool, dispersed between other players, cycled by other players and decay generated by them is then also included in this "consumed deposits", right?

 

[billairboy]

What's your take on that guys?
Seems to me they are not referring to the decay (a mechanism that generates income for MA/PP) but also include peds lost to the lootpool (dispersed between the other players)?

Edit: Ok, no, it's prolly not calculated for every deposit separately but rather as a sum total of all deposits vs. sum total of all peds lost to the decay. If so then there's peds lost to the lootpool, dispersed between other players, cycled by other players and decay generated by them is then also included in this "consumed deposits", right?

Why make it so complicated? Because it's not. When the number of peds in money or tt value is decreased, they are "consumed". They can be consumed by decay, fees and other activities where the player gets less peds back compared to what the player put in. It's not that hard?

 

[Fifth]

Why make it so complicated? Because it's not. When the number of peds in money or tt value is decreased, they are "consumed". They can be consumed by decay, fees and other activities where the player gets less peds back compared to what the player put in. It's not that hard?

Ok yeah, it's the same and your way is indeed simpler.

The reason I took the other route was actually an attempt to see how this new system is related to the theory that "peds are just a product sold by MA" (and not really a virtual currency as they advertise it).

 

[sawachika]

What's your take on that guys?
Seems to me they are not referring to the decay (a mechanism that generates income for MA/PP) but also include peds lost to the lootpool (dispersed between the other players)?

Edit: Ok, no, it's prolly not calculated for every deposit separately but rather as a sum total of all deposits vs. sum total of all peds lost to the decay. If so then there's peds lost to the lootpool, dispersed between other players, cycled by other players and decay generated by them is then also included in this "consumed deposits", right?

I'm guessing its something simpler...called "Unconsumed User Holdings". (Pg 12 of Annual Report 2015)

They probably have this figure in PEDs -> USD, then calculate the VAT according to how much is used up.

Probably...

(But do you think they will have them tracked down to how much of those unconsumed PEDs are from which regions? Like how much is from Sweden, USA, etc etc etc.

I mean different regions have different VAT fees applied right? )

Ok yeah, it's the same and your way is indeed simpler.

The reason I took the other route was actually an attempt to see how this new system is related to the theory that "peds are just a product sold by MA" (and not really a virtual currency as they advertise it).

I've always treated PEDs as a product sold by MA...in which they have graciously applied a conversion rate of 10 PEDs : 1 USD to it.

(Which may or may not be taken away...some point in the future.)

^_^

 

[Fifth]

But do you think they will have them tracked down to how much of those unconsumed PEDs are from which regions? Like how much is from Sweden, USA, etc etc etc.

I mean different regions have different VAT fees applied right?

Right, there's that. If so they have to track it for each individual player, and the player who uses up the peds is in many cases a different person than the one who originally deposited those peds.

I've always treated PEDs as a product sold by MA...in which they have graciously applied a conversion rate of 10 PEDs : 1 USD to it.

(Which may or may not be taken away...some point in the future.)

One can certainly look at it this way. Then again, you can look at any currency as a product sold to you. Bought 100 Australian dollars, spent them to buy a jacket - a merchandise trade, my goods for your goods...

 

[sawachika]

Right, there's that. If so they have to track it for each individual player, and the player who uses up the peds is in many cases a different person than the one who originally deposited those peds.

Well...perhaps they've got some database which they can access to compile such data as and when needed I guess.

Since,
1 - They know how much TT value we've got attached to each of our accounts.
2 - They know which region we live in...based on the particulars that we've given them.

With that, they should be able to tell how much PEDs was consumed...from each region...in a given period.

However, one would question though...
1 - Whether PEDs in the "loot pool" is treated as "Unconsumed User Holdings" or not.
2 - Whether unTT-able items (stuff that has PED value but cannot be sold back for that shown value) that we have in our accounts are treated as "Unconsumed User Holdings" or not.

(Well...doesn't really matter...cause we're not the ones calculating the VAT...but just curious...on my part. Hehehe)

One can certainly look at it this way. Then again, you can look at any currency as a product sold to you. Bought 100 Australian dollars, spent them to buy a jacket - a merchandise trade, my goods for your goods...

Hahaha...true...quite true. (You can never know when that 100 Australian dollars may or may not be enough to buy you that same jacket...10...20...30 years down the line.)

 

[billairboy]

However, one would question though...
1 - Whether PEDs in the "loot pool" is treated as "Unconsumed User Holdings" or not.
2 - Whether unTT-able items (stuff that has PED value but cannot be sold back for that shown value) that we have in our accounts are treated as "Unconsumed User Holdings" or not.

I would say yes on both, if there is a "loot pool" which I think we have.

 

[Vlooe]

It does not matter from where on the world you deposit.
The Money ends up at Mindark in Sweden so they have to pay their tax there...

Would be different if they have subsidiaries in other countries.


And how it is counted is simple too:
Biggest part of a shoot/drop/craft goes into the PED pool, rest is "consumed".
The system will simply add those numbers up.

 

[Aio]

It does not matter from where on the world you deposit.
The Money ends up at Mindark in Sweden so they have to pay their tax there...

Would be different if they have subsidiaries in other countries.


And how it is counted is simple too:
Biggest part of a shoot/drop/craft goes into the PED pool, rest is "consumed".
The system will simply add those numbers up.

Correct on both.

VAT would be paid by the shop location (be it PEDs, Cars or Dildos they are selling).

If there is any more proof that a set "rake" is taken from all actions...

 

[billairboy]

Correct on both.

VAT would be paid by the shop location (be it PEDs, Cars or Dildos they are selling).

If there is any more proof that a set "rake" is taken from all actions...

VAT rules are very complicated, even more complicated for services and online services. The basic rule is that the VAT should be taxed in the country where the buyer is located, if they buyer is not an enterprise. So if the buyer is from an other EU-country, the VAT should be payed in that country. If MA is following this basic rule i don't know. And if they sale to countries outside of EU there is other rules. So it's no easy.... that is why they also got some money back, if it was easy it would not happen it the first place.

 

[sawachika]

Back to the topic at hand...

Before we digress too far (thinking about the VAT), here's some other stuff that caught me eyes...

Consolidated Income Statement (Pg 10)

Point		2015	2014
1.	Net Sales	52 855 408	40 998 202
2.	Other income	1 179 457	178 656

Point 1 - Net Sales seems to have improved about 12 mil SEK. (I'm guessing due to sales from Strongboxes? )

Point 2 - This other income (2015) also comprises of 748 565 SEK gotten from the sale of AUDs...which is a one-off thing. Discount that and the "Operating Profit" & "Net Profit" falls to about under 3 mil SEK & 2 mil SEK respectively.

Consolidated Balance Sheet (Pg 11)

Point		2015	2014
1.	Other intangible assets	7 800 748	4 293 305
2.	Deferred tax	6 985 600	10 398 700
3.	Other receivables	11 373 990	718 830

Point 1 - Increased about 3.5 mil SEK. (This increase seems mostly as a result of acquiring Compets. But since its intangible, not sure how the value is derived...and where they got that cash from. Hehehe.)

Point 2 - Consumed about 3.4 mil SEK since last year and now they're only left with roughly 7 mil SEK of this deferred tax "asset". Take the 7 mil out of the equation and total non-current assets (aka "fixed assets" in Pg 9 summary) falls to about 14 mil SEK.

Point 3 - An increase from 700k SEK to 11 mil SEK. Sounds impressive at first, but from Note 15, you would realize that out of that 11.3 mil SEK, 9 429 285 SEK is from the VAT refund that they've gotten back from the tax agency. Meaning...its also a one-off thing which you can't really count on...in the future to come. (Hope that they put it to good use. )

Overall, I guess they did better than last year...but still cutting it too close imo.

* Disclaimer - I'm just another newb (off the street)....that you can find anywhere around the world. I've got no accounting knowledge (at all) and am just picking apart the annual report according to whatever "logic" that my brain has acquired for me.

In other words...take plenty of salt with what I've concluded here.

 

[AxeMurderer]

It will be easy if they just make the background red when we have te sellout and green if everything is OK.
All that reading

 

[billairboy]

Before we digress too far (thinking about the VAT), here's some other stuff that


Point 1 - Net Sales seems to have improved about 12 mil SEK. (I'm guessing due to sales from Strongboxes? )

I think it's mostly an effect of the increase of the dollar and the change in how they account the revenue. But what confusing me a bit is that on page 6 they compare the numbers between the years, they say the net deposits was 60.4M Ped, that is 4.0M PED lower in 2015 compared to 2014. They also say the unconsumed peds decreased with 1.7M PED. They also are saying the net revenue was 77.1M PED in 2015. But should it not have been net deposited + the decrease in unconsumed peds = 60,4+1,7= 62,1M? The numbers don't add for me.

Point 1 - Increased about 3.5 mil SEK. (This increase seems mostly as a result of acquiring Compets. But since its intangible, not sure how the value is derived...and where they got that cash from. Hehehe.)

It's the cost they have had for the people working with the project during the year and the price for they payed for the rights for the game. If you look at the income statement you will see an item called "Capitalized work
1 388 300". That is the cost they have had for the intangible asset. But the change was around 3.5 which would suggest they spent around 2.0MSEK to buy the rights to the game.


Overall I get the felling they actually did a bit worse compared to 2014, but it's a bit hard the tell when it's so different many variables.

 

[sawachika]

I think it's mostly an effect of the increase of the dollar and the change in how they account the revenue. But what confusing me a bit is that on page 6 they compare the numbers between the years, they say the net deposits was 60.4M Ped, that is 4.0M PED lower in 2015 compared to 2014. They also say the unconsumed peds decreased with 1.7M PED. They also are saying the net revenue was 77.1M PED in 2015. But should it not have been net deposited + the decrease in unconsumed peds = 60,4+1,7= 62,1M? The numbers don't add for me.

Don't think you should discount the AUDs/Compet Sales. (Since they're still a form of revenue which doesn't involve in increasing the unconsumed user holdings.)

63.3 mil + 1.7 mil = 65 mil PEDs.

So, still 12.1 mil PEDs of revenue unaccounted for.

Hmmmm....some form of PEDs which isn't obtained from depositing (as it does not show up in net deposits)...doesn't affect "unconsumed user holdings"...and yet is counted as a kind of "net revenue"?

I give up...

Can't think of anything like that.

Unless...

Could they be PEDs (payouts) which we've gotten from say...CLDs, AUDs, etc...which are then locked up in stuff like "Universal Ammo" (converted from Shrapnels) and "UnTTable Unlimited Items" (such as when we repair our Ark armors, bukin's blade, etc)?

Maybe those PEDs aren't considered as "Unconsumed User Holdings"? (As we can't really retrieve them apart from using them up.)

What about those "item quests" which MA have recently invented (Mission Galactica, Adjusted/Imp. Armors, Melee Amps, etc)? Could they have been the culprit here?

 

[Count Joe]

Well...perhaps they've got some database which they can access to compile such data as and when needed I guess.

Since,
1 - They know how much TT value we've got attached to each of our accounts.
2 - They know which region we live in...based on the particulars that we've given them.

With that, they should be able to tell how much PEDs was consumed...from each region...in a given period.

However, one would question though...
1 - Whether PEDs in the "loot pool" is treated as "Unconsumed User Holdings" or not.
2 - Whether unTT-able items (stuff that has PED value but cannot be sold back for that shown value) that we have in our accounts are treated as "Unconsumed User Holdings" or not.

(Well...doesn't really matter...cause we're not the ones calculating the VAT...but just curious...on my part. Hehehe)



Hahaha...true...quite true. (You can never know when that 100 Australian dollars may or may not be enough to buy you that same jacket...10...20...30 years down the line.)

As i wrote before - you dont pay VAT on currency exchange. You pay VAT on products.

I hope that all of you tinfoilhats that thinks PED is something else then just a product finaly got it!

 

[billairboy]

As i wrote before - you dont pay VAT on currency exchange. You pay VAT on products.

I hope that all of you tinfoilhats that thinks PED is something else then just a product finaly got it!

Well... with your logic the PED actually is not a product, because they don't pay the VAT when the player buys the PED, but when the PED are used to buy something inside the game. If the PED itself was the product they should have payed VAT when the player bought the product, the PED.

 

[AtamiKiangola]

Well... with your logic the PED actually is not a product, because they don't pay the VAT when the player buys the PED, but when the PED are used to buy something inside the game. If the PED itself was the product they should have payed VAT when the player bought the product, the PED.

It is not a product, it is a purchase of financial currency stuff (can't recall the exact correct name) ... but MA even issues a document if you ask for it.

Atami

 

[Count Joe]

Well... with your logic the PED actually is not a product, because they don't pay the VAT when the player buys the PED, but when the PED are used to buy something inside the game. If the PED itself was the product they should have payed VAT when the player bought the product, the PED.

Just by changing modells it becomes something else?

They change modell som PEDs are considerd giftcards.
This is how u book giftcards in accounting:

The income from the sale of gift certificates relate not rendered and is recognized as a liability in the balance sheet up until the performance has been carried out in the form of goods delivered or services rendered. When performance has become so transferred a debt of not rendered to an income statement.

En inkomst från försäljning av presentkort avser ej utförda prestationer och redovisas därför som en skuld i balansräkningen fram tills dess att prestationer har utförts i form av levererade varor eller utförda tjänster. När prestationerna har utförts så omförs en skuld av ej utförda prestationer till en intäkt i resultaträkningen.

This is exactly how Mindark does now.

And about the VAT:

A sale of gift cards and gift certificates are not counted as an advance payment subject to VAT if it is not clearly seen the goods or services referred.

En försäljning av presentkort och presentcheckar räknas inte som en momspliktig förskottsbetalning om det inte klart och tydligt framgår vilken vara eller tjänst som avses.

 

[Acro]

in laymen terms: is the sky falling or the bubble still growing?

 

[atomicstorm]

in laymen terms: is the sky falling or the bubble still growing?

All is fine.. for now.

Looks like they posted a profit finally. This was something that was required for me to continue playing.

The sky isn't falling and is not in dire straights as the chicken Littles of pcf would have you believe.

 

[Norbert]

in laymen terms: is the sky falling or the bubble still growing?

Well being in profit is better than where they were, deposits are showing down 6% but as someone pointed out is most probably due to currency fluctuation.

The sky isn't falling for sure, and as for the bubble i think in game liabilities are lower but would have to ask accountant friend to be sure.