MindArk and its subsidiaries
MindArk is the parent company of a group with three subsidiaries. The parent company and the three subsidiaries, Entropia Universe AB, Planet Calypso AB and Green Fund Finance Sweden AB, are all located in Gothenburg.
Planet Calypso AB operated and developed Planet Calypso, the first planet in Entropia Universe. Both operations and development are now carried out from a department within the parent company. The subsidiary Entropia Universe AB previously handled much of the customer support and operation of Entropia Universe. From May 2012, the company is mainly used for marketing purposes.
Green Fund Finance Sweden AB's business concept is to be the first choice for financing innovative green technology by offering a competitive solid financing solution.
Employees
MindArk has had an average of 46 employees during the year, six of whom are women. The company's CEO since December 2017 is Henrik Nel Jerkrot. Other senior managers executives within the company are Magnus Eriksson (Deputy CEO), Mats Kling (Head of IT), David Simmonds (Business Development Manager), Malin Gustafsson (Human Resources Manager) and Gunilla Krogh (Finance Manager).
Shares
The share is unlisted and the total number of shares is 157 623 125. Ownership structure:
Shareholders | Number of shares | Voting rights
Tetiana Karunna | 55 000 000 | 34,89 %
C-G Bothén AB | 25 600 000 | 16,24 %
Other approximately 900 shares | 77 023 125 | 48,87 %
Total | 157 623 125 | 100 %
Key events during the year
MindArk has adapted its organisation and working methods in 2020 as a result of the COVID-19 pandemic. The main focus has been on continuous improvements to the gaming experience that makes the company better equipped to meet the needs of future users.
Tiersystem update: MindArk has taken notice of the feedback regarding the Tiersystem that exists in Entropia Universe. This system was updated to make the system more accessible to users. The effect of this update is that more users are engaged and using the system compared to before.
Mutant Adventure: The mutant adventure that was released and well received in the Entropia Universe in 2019 has been further developed in 2020 with the second part becoming available to users. They have been able to discover an abandoned laboratory that the mythical Calamusoid mutants have taken over. The third part of the adventure will continue to be developed in the first half of 2021.
Sound update: Both the sound and music inside Entropia Universe have been updated to increase the gaming experience for users.
Launch of Release Videos: In 2020, MindArk has produced videos in connection with new releases/updates for Entropia Universe. The clips interview various people from the company in order to give their views and thoughts on what has become available to users.
Planet Partners
Planet Next Island - In 2020, the sale of Ancient Greece, an area that Next Island is operating, each lot is sold for PED 10 (USD 1) and the owners receive revenue from the activity in Ancient Greece.
Planet Arkadia - Has continued to develop its planet and associated moon in 2020. Arkadia Moon has continued its sale of deeds to users and deed holders receive a share of revenues generated on the moon.
Planet Toulan - Beladcom, the company behind Planet Toulan, has signed a cooperation agreement with Virtualsense, which previously operated Monria. Virtualsense has taken over the development of Planet Toulan and has also started to market Planet Toulan.
Planet Cyrene - Has increased its rate of development of the planet in 2020, which has given the planet significantly more users.
Planet Rocktropia - Continues to cater to its Rock and Zombie themed customers.
Unspent user funds and player debt
The player debt, i.e. unspent user funds, increased from PED 113.9 million to PED 128.9 million, an increase of PED 15 million. However, the total debt did not increase in SEK as the SEK/USD exchange rate has decreased from 9.32 SEK/USD at the end of last year to 8.19 SEK/USD at the end of December 2020 (10 PED=1 USD). As a result, the debt decreased by 0.5 million in SEK, from SEK 106.1 million to SEK 105.6 million.
The total amount of 'assets not yet consumed by users' is a variable amount that varies with the different activities within Entropia Universe. Historical figures show that 27 - 35% (fluctuating in between over the last 17 years) of deposited funds have been taken out by users. The rest has been consumed or left in users' accounts in the form of inventory or cash in the form of the virtual currency PED.
However, it is a condition for the continuation of Entropia Universe that MindArk pays the requested withdrawals and therefore the portion of the player debt that is likely to be a withdrawal shall be indebted.
With these facts in hand, it is estimated that the real debt is 33 % of the player debt that at the time of booking. This means that the real debt at the end of 2020 is PED 42.5 million, which comes to SEK 34.8 million. Player debt provisions have therefore adjusted for this as well as currency adjusted at year-end.
Development of results and equity
Entropia Universe net cash inflows in 2020 ended at PED 97.6 million (SEK 90.7 million) compared to PED 74 million (SEK 70 million) in 2019, an increase of 32% in PED. In SEK net proceeds increased by 29.5%. If deductions are made for deposits relating to financial purchases, such as deeds, the figure for 2020 is PED 94.6 million (87.9 million SEK) compared to the 2019 figure of PED 72.2 million (SEK 68.3 million). This represents an increase of net deposits in PED of 31%. The reason why net deposits in SEK have not increased in the same rate is that the exchange rate between USD and SEK has been lower on average over the year. The exchange rate has averaged at 9.29 SEK/USD. This compares to the previous year's average exchange rate of 9.46 SEK/USD.
Net turnover in SEK, which also includes income from inactive accounts, foreign exchange fees and change provision for player debt, amounts to SEK 80.3 million for 2020 (last year SEK 64.6 million), an increase of 24.3%. Approximately SEK 3.1 million (last year SEK 5.1 million) of net sales relate to inactive user accounts, i.e. user accounts that have not been used for at least one year. The remaining funds in these accounts have been booked off the player debt to income.
Net sales in SEK both met and exceeded the company's budget target, more than 25% above budget. There are several reasons for this. One reason is that Entropia has been optimised to handle more simultaneous users, which has made it easier and more enjoyable to spend time in Entropia. Consumption in PED has increased by 21%, as mentioned earlier, although slightly less in SEK, i.e. 18.6%. This is due to a 1.7% lower SEK/USD exchange rate on average during the year compared to the previous year. Then, more time at home due to Covid-19 has allowed many users to spend more time playing Entropia Universe than before. Another significant reason is, that some of the player debt is recovered when it increases, i.e. when users deposit more money than they consume. So is the case in 2020, and it has happened to a great extent. With only 33% of player debt (see explanation in previous paragraphs) is allocated on the balance sheet as debt, the remaining increase has been recognised as income, resulting in an increase of SEK 10.4 million.
Other income mainly includes income from the sale of land rights, so-called deeds.
Revenue sharing to CLD owners increased by as much as TSEK 800, from MSEK 4.8 to MSEK 5.6, an increase of approximately 17%. No new Calypso Land Deeds have been sold, but the increase is due to a strong increase in turnover on Planet Calypso.
Personnel costs are SEK 9 million higher than last year. There are several reasons for this. One reason is that the number of employees has increased during the year, from 41 employees at the beginning of the year to 48 employees at the end of the year. This in turn has generated higher recruitment costs. Other reasons are a provision for Mindark Group's Profit Sharing Foundation, which is the company's staff foundation, and salary increases.
Total operating costs amount to SEK 66.6 million (last year SEK 57.8 million), an increase of SEK 8.8 million. The explanation can be found in the previous paragraph. Operating profit before depreciation and amortisation amounts to plus SEK 27.8 million (last year plus SEK 15.8 million).
Depreciation, amortisation and impairment of tangible and intangible fixed assets decreased from SEK 11.3 million in 2019 to SEK 9.5 million in 2020. The decrease is due to the fact that in 2019 the previously recognised asset ComPet Game was fully depreciated. Operating profit after depreciation amounts to plus SEK 18.3 million (last year plus SEK 4.5 million).
A loan to the company's subsidiary Green Fund Finance Sweden AB (GFF) was deemed to be an unsecured receivable in the previous year, which is why a conditional shareholder contribution was given to the subsidiary to cover the impairment in the subsidiary. This led to a write-down of shares in the subsidiary of just under 2.3 MSEK. In 2020, GFF has been able to repay the loan to the parent company using shares in the company Swestep AB for a value of SEK 2,3 million. Hence a positive entry on the result from shares in group companies. Finally, financial items consist of an exchange rate difference of plus EUR 5.3 million SEK related to the player debt described in the previous paragraph.
After net financial items, but before year-end adjustments and taxes, the result amounts to plus SEK 25.3 million (last year minus SEK 381 thousand).
Cash flow and financial position
During the year, the company acquired property, plant and equipment for SEK 1.5 million. In addition SEK 11.6 million has been capitalised for development work for Entropia Universe and the Entropia Platform. The company's cash and cash equivalents have increased significantly, as in the previous year, and at the end of the year amounted to SEK 46.7 million compared to SEK 24.2 million at the previous year-end.
Listing of MindArk's share
The date for the listing of MindArk's shares has not been set, however the company still has the intention to list the company.
Annual General Meeting
The 2020 Annual General Meeting was held on 24 April digital due to Covid-19. In addition to deciding on the approval of the previous year's accounts, elections to the Board were held. All three of the current members of the Board, elected at the Extraordinary General Meeting on 21 November 2019, David Simmonds, Anders Fröjd and Jan Rasmuson, declared that they were available for re-election.
The Meeting decided that the Board would consist of three members and no deputies until the next Annual General Meeting. David Simmonds was elected Chairman of the Board and an ordinary member for the period until the next Annual General Meeting. Anders Fröjd and Jan Rasmuson were newly elected as ordinary members of the Board for the period until the next Annual General Meeting.
Final words
Flexibility has been the key word for 2020 where so many people's lives, businesses and societies have been changed as a result of the pandemic. As a result of the period of uncertainty created by the COVID-19 pandemic, in 2020 MindArk has adapted the way the organisation works to comply with the guidelines and recommendations set by the authorities without compromising its operations. The result of these adjustments has enabled continuous improvement work within Entropia Universe throughout 2020, where the company has also invested in expanded communication with the user base compared to previously.
MindArk has during the year continued with new investments in its core business Entropia Universe. In 2020, the company has hired 12 new people for the core business to meet the set ambitions that the company has for the coming years. In 2020, MindArk has also created the financial conditions to increase investments in the platform, as well as the main product Entropia Universe, in the coming years.
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