this document is important and requires … made for the enlarged ordinary share capital to be...

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the

contents of this Document, you should consult your stockbroker, bank manager, solicitor, accountant or other

independent professional adviser who specialises in advising on the acquisition of shares and other securities and is

duly authorised under the Financial Services and Markets Act 2000 (as amended) (“FSMA”).

Application has been made for the entire issued and to be issued ordinary share capital of the Company to be admitted to trading

on AIM, a market operated by London Stock Exchange plc. It is expected that Admission will become effective, and dealings in

the Ordinary Shares will commence, on 21 December 2017. The Existing Ordinary Shares are not dealt on any other recognised

investment exchange and no application has been or is being made for the Ordinary Shares to be admitted to any such exchange.

AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be

attached than to larger or more established companies. AIM securities are not admitted to the Official List of the UK

Listing Authority. A prospective investor should be aware of the risks of investing in such companies and should make

the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial

adviser. Each AIM company is required, pursuant to the AIM Rules published by London Stock Exchange plc, to have a

nominated adviser. The nominated adviser is required to make a declaration to London Stock Exchange plc on

admission in the form set out in Schedule Two to the AIM Rules for Nominated Advisers. Neither the UK Listing Authority

nor London Stock Exchange plc has itself examined or approved the contents of this Document.

Prospective investors should read the whole text of this Document and should be aware that an investment in the Company is

speculative and involves a high degree of risk and prospective investors should carefully consider the section entitled “Risk

Factors” set out in Part II of this Document. All statements regarding the Company’s business, financial position and prospects

should be viewed in light of these risk factors.

This Document, which is drawn up as an AIM admission document in accordance with the AIM Rules, has been issued in

connection with the application for admission to trading on AIM of the entire issued and to be issued ordinary share capital of the

Company. This Document does not constitute an offer to the public requiring an approved prospectus under section 85 of FSMA

and, accordingly, this Document does not constitute, or contain, a prospectus, or any part of an offer, for the purposes of FSMA

and the Prospectus Rules and has not been pre-approved by the FCA pursuant to section 85 of FSMA. Copies of this Document

will be available free of charge to the public during normal business hours on any day (Saturdays, Sundays and public holidays

excepted) at the offices of Zeus Capital, 82 King Street, Manchester M2 4WQ and the registered office of the Company from the

date of this Document until one month from the date of Admission in accordance with the AIM Rules. A copy of this Document

will also be available from the Company’s website at www.sumogroupplc.com.

The Directors and the Proposed Director, whose names appear on page 8 of this Document, and the Company accept

responsibility, both individually and collectively, for the information contained in this Document. To the best of the knowledge and

belief of the Company, the Directors and the Proposed Director (having taken all reasonable care to ensure that such is the case),

the information contained in this Document is in accordance with the facts and does not omit anything likely to affect the import

of such information.

Sumo Group plc(a company incorporated in England and Wales under the Companies Act 2006 with company number 811071913)

Placing of 38,445,869 Ordinary Shares at 100 pence per Ordinary Share

Vendor Placing of 39,704,131 Ordinary Shares at 100 pence per Ordinary Share

and

Admission to trading on AIM

Nominated Adviser and Broker

Enlarged Ordinary Share Capital immediately following Admission

Number Issued and fully paid Amount £145,000,000 ordinary shares of £0.01 each 1,450,000

The Placing and the Vendor Placing are conditional, inter alia, on Admission taking place by 8.00 a.m. on 21 December 2017 (or

such later date as the Company and Zeus Capital may agree, being not later than 19 January 2018). The Placing Shares and

the Existing Ordinary Shares will, upon Admission, rank pari passu in all respects and will rank in full for all dividends and other

distributions declared paid or made in respect of the Ordinary Shares after Admission. It is emphasised that no application is

being made for the Enlarged Ordinary Share Capital to be admitted to the Official List or to any other recognised investment

exchange.

Zeus Capital, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser and broker to

the Company in connection with the proposed Placing, Vendor Placing and Admission. Its responsibilities as the Company’s

nominated adviser under the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed

to the Company or to any Director or Proposed Director or to any other person in respect of his decision to acquire shares in the

Company in reliance on any part of this Document. Zeus Capital will not be offering advice and will not otherwise be responsible

to anyone other than the Company for providing the protections afforded to clients of Zeus Capital or for providing advice in

relation to the contents of this Document or any other matter.

Without limiting the statutory rights of any person to whom this Document is issued, no representation or warranty, express or

implied, is made by Zeus Capital as to the contents of this Document. Apart from the responsibilities and liabilities, if any, which

may be imposed on Zeus Capital by FSMA or the regulatory regime established thereunder, no liability whatsoever is accepted

by Zeus Capital for the accuracy of any information or opinions contained in this Document, for which the Directors and the

Proposed Director are solely responsible, or for the omission of any information from this Document for which it is not responsible.

In accordance with the AIM Rules for Nominated Advisers, Zeus Capital has confirmed to London Stock Exchange plc that it has

satisfied itself that the Directors and the Proposed Director have received advice and guidance as to the nature of their

responsibilities and obligations to ensure compliance by the Company with the AIM Rules and that, in its opinion and to the best

of its knowledge and belief, all relevant requirements of the AIM Rules have been complied with.

This Document does not constitute an offer to sell or an invitation to subscribe for, or solicitation of an offer to subscribe for or

buy, shares to any person in any jurisdiction to whom it is unlawful to make such offer, invitation or solicitation. In particular, this

Document must not be taken, transmitted, distributed or sent, directly or indirectly, in, or into, the United States of America,

Canada, Australia, Japan, the Republic of Ireland or the Republic of South Africa or transmitted, distributed or sent to, or by, any

national, resident or citizen of such countries. Accordingly, neither the Placing Shares nor the Vendor Placing Shares may, subject

to certain exceptions, be offered or sold, directly or indirectly, in, or into, or from, the United States of America, Canada, Australia,

Japan, the Republic of Ireland or the Republic of South Africa or in any other country, territory or possession where to do so may

contravene local securities laws or regulations. The Placing Shares and the Vendor Placing Shares have not been, and will not

be, registered under the United States Securities Act of 1933 (as amended) or under the securities legislation of any state of the

United States of America, any province or territory of Canada, Australia, Japan, the Republic of Ireland or the Republic of South

Africa and may not be offered or sold, directly or indirectly, within the United States of America, or Canada, Australia, Japan, the

Republic of Ireland or the Republic of South Africa or to or for the account or benefit of any national, resident or citizen of the

United States of America, Canada, Australia, Japan, the Republic of Ireland or the Republic of South Africa or to any US person

(within the definition of Regulation S made under the United States Securities Act 1933 (as amended)).

The distribution of this Document outside the UK may be restricted by law. No action has been taken by the Company or Zeus

Capital that would permit a public offer of shares in any jurisdiction outside the UK where action for that purpose is required.

Persons outside the UK who come into possession of this Document should inform themselves about the distribution of this

Document in their particular jurisdiction. Failure to comply with those restrictions may constitute a violation of the securities laws

of such jurisdiction.

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IMPORTANT INFORMATION

In deciding whether to invest in Ordinary Shares in connection with the Placing and/or the VendorPlacing, prospective investors should rely only on the information contained in this Document. Noperson has in connection with the Placing and/or the Vendor Placing been authorised to give anyinformation or make any representations in connection with the Placing and/or the Vendor Placing otherthan as contained in this Document and, if given or made, such information or representations must notbe relied on as having been authorised by the Company, the Directors, the Proposed Director or ZeusCapital. Neither the delivery of this Document nor any subscription or purchase made in connection withthe Placing and/or the Vendor Placing, under any circumstances, create any implication that there hasbeen no change in the affairs of the Company since the date of this Document or that the informationin this Document herein is correct as at any time after its date.

Investment in the Company carries risk. There can be no assurance that the Company’s strategy willbe achieved and investment results may vary substantially over time. Investment in the Company is notintended to be a complete investment programme for any investor. The price of Ordinary Shares andany income from Ordinary Shares can go down as well as up and investors may not realise the valueof their initial investment. Prospective investors should carefully consider whether an investment inOrdinary Shares is suitable for them in light of their circumstances and financial resources and shouldbe able and willing to withstand the loss of their entire investment (see “Part II: Risk Factors” of thisDocument).

Potential investors contemplating an investment in Ordinary Shares should recognise that their marketvalue can fluctuate and may not always reflect their underlying value. Returns achieved are reliant uponthe performance of the Company. No assurance is given, express or implied, that investors will receiveback the amount of their investment in Ordinary Shares.

If you are in any doubt about the contents of this Document, you should consult your stockbroker oryour financial or other professional adviser.

Investment in the Company is suitable only for financially sophisticated individuals and institutionalinvestors who have taken appropriate professional advice, who understand and are capable ofassuming the risks of an investment in the Company and who have sufficient resources to bear anylosses which may result from such an investment.

Potential investors should not treat the contents of this Document or any subsequent communicationsfrom the Company as advice relating to legal, taxation, investment or any other matters. Potentialinvestors should inform themselves as to: (a) the legal requirements within their own countries for thesubscription, purchase, holding, transfer or other disposal of Ordinary Shares; (b) any foreign exchangerestrictions applicable to the subscription, purchase, holding, transfer or other disposal of OrdinaryShares that they might encounter; and (c) the income and other tax consequences that may apply intheir own countries as a result of the subscription, purchase, holding, transfer or other disposal ofOrdinary Shares. Potential investors must rely upon their own representatives, including their own legaladvisers and accountants, as to legal, tax, investment or any other related matters concerning theCompany and an investment in it.

This Document should be read in its entirety before making any investment in the Company orshares in it.

Forward looking statements

Certain statements contained in this Document are forward looking statements and are based oncurrent expectations, estimates and projections about the potential returns of the Company and theindustry and markets in which the Company operates, the Directors’ and the Proposed Director’s beliefsand assumptions made by the Directors and the Proposed Director. Words such as “expects”,“anticipates”, “may”, “should”, “could”, “will”, “intends”, “plans”, “believes”, “targets”, “seeks”,“estimates”, “aims”, “projects”, “pipeline”, “predicts”, “assumes”, “envisages” (or, in each case, theirnegative) and variations of such words and similar expressions are intended to identify such forwardlooking statements and expectations. These statements are not guarantees of future performance orthe ability to identify and consummate investments and involve certain risks, uncertainties, outcomes ofnegotiations and due diligence and assumptions that are difficult to predict, qualify or quantify.

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Therefore, actual outcomes and results may differ materially from what is expressed in such forwardlooking statements or expectations. Among the factors that could cause actual results to differ materiallyare: the general economic climate, competition, interest rate levels, loss of key personnel, the result oflegal and commercial due diligence, the availability of financing on acceptable terms and changes inthe legal, taxation or regulatory environment.

Such forward looking statements are based on numerous assumptions regarding the Company’spresent and future business strategies and the environment in which the Company will operate in thefuture. These forward looking statements speak only as of the date of this Document. The Companyexpressly disclaims any obligation or undertaking to disseminate any updates or revisions to anyforward looking statements contained in this Document to reflect any change in the Company’sexpectations with regard to them, any new information or any change in events, conditions orcircumstances on which any such statements are based, unless required to do so by law or anyappropriate regulatory authority.

Presentation of financial information

The financial information contained in this Document, including that financial information presented ina number of tables in this Document, has been rounded to the nearest whole number or the nearestdecimal place. Therefore, the actual arithmetic total of the numbers in a column or row in a certain tablemay not conform exactly to the total figure given for that column or row. In addition, certain percentagespresented in the tables in this Document reflect calculations based upon the underlying information priorto rounding and, accordingly, may not conform exactly to the percentages that would be derived if therelevant calculations were based upon the rounded numbers.

No incorporation of website

The contents of the Company’s website (or any other website) do not form part of this Document andinvestors should not rely on them.

General notice

This Document has been drawn up in accordance with the AIM Rules and it does not comprise aprospectus for the purposes of the Prospectus Rules. It has been drawn up in accordance with therequirements of the Prospectus Directive only in so far as required by the AIM Rules and has not beendelivered to the Registrar of Companies in England and Wales for registration.

This Document has been prepared for the benefit only of a limited number of persons all of whomqualify as “qualified investors” for the purposes of the Prospectus Directive, to whom it has beenaddressed and delivered, and may not in any circumstances be used for any other purpose or beviewed as a document for the benefit of the public. The reproduction, distribution or transmission of thisDocument (either in whole or in part) without the prior written consent of the Company and Zeus Capitalis prohibited.

Governing law

Unless otherwise stated, statements made in this Document are based on the law and practice currentlyin force in England and Wales and are subject to changes in such law and practice.

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CONTENTS

PageKEY STATISTICS 6

EXPECTED TIMETABLE OF PRINCIPAL EVENTS 7

DIRECTORS, SECRETARY AND ADVISERS 8

DEFINITIONS 9

GLOSSARY 13

EXECUTIVE SUMMARY 15

PART I INFORMATION ON THE GROUP 19

PART II RISK FACTORS 38

PART III HISTORICAL FINANCIAL INFORMATION 46

PART IV UNAUDITED PRO FORMA STATEMENT OF NET ASSETS 89

PART V ADDITIONAL INFORMATION 91

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KEY STATISTICS

Existing share capital at the date of this Document

Number of Existing Ordinary Shares 106,554,131

Placing

Placing Price 100p

Number of Placing Shares 38,445,869

Gross proceeds of the Placing £38,445,869

Net proceeds of the Placing (receivable by the Company)1 £5,000,000

Vendor Placing

Placing Price 100p

Number of Vendor Placing Shares 39,704,131

Gross proceeds of the Vendor Placing2 £39,704,131

Net proceeds of the Vendor Placing (receivable by the Selling Shareholders)3 £38,115,966

Upon Admission

Number of Ordinary Shares in issue at Admission 145,000,000

Percentage of Enlarged Ordinary Share Capital represented by the Placing Shares 26.51%

Percentage of Enlarged Ordinary Share Capital represented by the Vendor Placing Shares27.38%

Estimated market capitalisation of the Company at Admission at the Placing Price £145 million

TIDM SUMO

ISIN GB00BD3HV384

Notes

1. The Company will pay costs of approximately £3.5 million in relation to the Proposals and will repay debt and loan notes of

approximately £29.9 million.

2. The Company will not receive any of the proceeds from any sale of Vendor Placing Shares by the Selling Shareholders.

3. Costs of approximately £1.7 million will be paid by the Selling Shareholders in relation to the Proposals.

6

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

2017

Publication of this Document 15 December

Admission and commencement of dealings in the Enlarged Ordinary Share Capital on AIM 21 December

CREST accounts credited (where applicable) 21 December

Dispatch of definitive share certificates (where applicable) by 5 January 2018

Notes

1. References to time in this Document are to London (GMT) time unless otherwise stated.

2. If any of the above times or dates should change, the revised times and/or dates will be notified by an announcement on a

RIS.

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DIRECTORS, SECRETARY AND ADVISERS

Directors: Kenneth Robert Beaty (Non-Executive Chairman)Carl Cavers (Chief Executive Officer)David Charles Wilton (Chief Financial Officer)Ian Livingstone CBE (Independent Non-Executive Director)

Proposed Director: Michael Sherwin (Independent Non-Executive Director)All of whose business addresses are at:

32 Jessops RiversideBrightside LaneSheffieldS9 2RX

Registered office: 32 Jessops RiversideBrightside LaneSheffieldS9 2RX

Company secretary: Steven Webb

Company website: www.sumogroupplc.com

Nominated adviser and broker: Zeus Capital Limited

82 King Street and 10 Old Burlington StreetManchester LondonM2 4WQ W1S 3AG

Reporting accountants: Grant Thornton UK LLP

No. 1 Whitehall RiversideWhitehall RoadLeedsLS1 4BN

Auditors: Grant Thornton UK LLP

2 Broadfield CourtSheffieldSouth YorkshireS8 0XF

Solicitors to the Company: Addleshaw Goddard LLP

One St. Peter’s SquareManchesterM2 3DE

Solicitors to Zeus Capital: Eversheds Sutherland (International) LLP

70 Great Bridgewater StreetManchesterM1 5ES

Financial public relations: Belvedere Communications Limited

Enterprise House1 – 2 HatfieldsLondonSE1 9PG

Company registrars: Link Market Services Limited

The Registry34 Beckenham RoadBeckenhamKentBR3 4TU

Principal bankers: Clydesdale Bank plc

94 – 96 BriggateLeedsLS1 6NP

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DEFINITIONS

The following definitions apply throughout this Document, unless the context requires otherwise orunless defined in Part III of this Document, for the purposes of that part only:

“Act” the Companies Act 2006 (as amended)

“Admission” admission of the issued and to be issued Ordinary Shares totrading on AIM becoming effective in accordance with Rule 6 ofthe AIM Rules

this document dated 15 December 2017

“AIM” the market of that name operated by the London StockExchange

“AIM Rules” the AIM Rules for Companies (including, without limitation, anyguidance notes or statements of practice) published by theLondon Stock Exchange from time to time, which govern therules and responsibilities of companies whose shares areadmitted to trading on AIM

the rules setting out the eligibility, ongoing obligations andcertain disciplinary matters in relation to nominated advisers, aspublished by the London Stock Exchange from time to time

“Articles” the articles of association of the Company, as at the date ofAdmission, a summary of which is set out in paragraph 5 ofPart V of this Document

“Atomhawk” Atomhawk Design Limited, a company incorporated in Englandand Wales with registered number 6968171 and registered officeat Northern Design Centre Abbott’s Hill, Baltic Business Quarter,Gateshead, Tyne and Wear, NE8 3DF

“Audit Committee” the audit committee of the Board, as constituted from time totime

“Board” the board of directors of the Company from time to time, or aduly constituted committee thereof

“certificated” or “certificated form” recorded on the relevant register of the share or securityconcerned as being held in certificated form in physical paper(that is not in CREST)

“Company” or “Sumo Group plc” Sumo Group plc, a public limited company incorporated inEngland and Wales with registered number 11071913 andregistered office at 32 Jessops Riverside, Brightside Lane,Sheffield, England, S9 2RX

“CREST” the computer based system and procedures which enable title tosecurities to be evidenced and transferred without a writteninstrument, administered by Euroclear UK & Ireland inaccordance with the CREST Regulations

“CREST Regulations” the Uncertificated Securities Regulations 2001 (SI 2001/3755),including (i) any enactment or subordinate legislation whichamends those regulations and (ii) any applicable rules madeunder those regulations or such enactment or subordinatelegislation for the time being in force

“Dealing Day” a day on which the London Stock Exchange is open for thetransaction of business

“Admission Document” or“Document”

“AIM Rules for NominatedAdvisers”

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“Directors” the directors of the Company as at the date of this Document,whose details are set out on page 8 of this Document and“Director” means any one of them

“EBITDA” Operating Profit before finance costs, taxation, depreciation andamortisation

“Enlarged Ordinary Share Capital” the Ordinary Shares in issue immediately following the Placingand Admission, comprising the Existing Ordinary Shares and thePlacing Shares

“EU” the European Union

“Euroclear UK & Ireland” Euroclear UK & Ireland Limited, a company incorporated underthe laws of England and Wales with registered number 2878738and the operator of CREST

“Existing Ordinary Shares” the 106,554,131 Ordinary Shares in issue as at the date of thisDocument (which include the Vendor Placing Shares)

“FCA” the Financial Conduct Authority

“FSMA” the Financial Services and Markets Act 2000 (as amended)

“Gross Profit” a Company’s total revenue minus costs of goods sold

“Group” or “Sumo Digital” the Company and its subsidiary undertakings and “GroupCompany” means any one of them

“HMRC” HM Revenue and Customs

“ITEPA” Income Tax (Earnings and Pensions) Act 2003

“London Stock Exchange” London Stock Exchange plc

“LTIP” The Sumo Group plc Long Term Incentive Plan

“Nomination Committee” the nomination committee of the Board, as constituted from timeto time

“NorthEdge Capital LLP” NorthEdge Capital LLP, a limited liability partnership withregistered number OC345118 and with registered office at6th Floor Vantage Point, Hardman Street Spinningfields,Manchester, M3 3HF

“Official List” the official list maintained by the UK Listing Authority

“Operating Profit” total revenue minus costs of goods sold, operating expenses,depreciation and amortisation

“Ordinary Shares” ordinary shares of £0.01 each in the capital of the Company

“Panel” the Panel on Takeovers and Mergers

“Perwyn LLP” Perwyn LLP, a limited liability partnership with registered numberOC383773 and with registered office at 8 Hanover Square,London, England, W1S 1HQ

“Placees” the subscribers for Placing Shares and purchasers of VendorPlacing Shares pursuant to the Placing and Vendor Placing,respectively

“Placing” the conditional placing of the Placing Shares by Zeus Capital asagent for the Company, pursuant to the Placing Agreement

“Placing Agreement” the placing agreement dated 15 December 2017 between theCompany, the Directors, the Proposed Director, Zeus Capitaland the Selling Shareholders relating to the Placing and theVendor Placing

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“Placing Price” 100 pence per Placing Share and Vendor Placing Share

“Placing Shares” the 38,445,869 new Ordinary Shares to be issued and allottedpursuant to the Placing, such allotment being conditional uponAdmission

“Pre-Admission Reorganisation” the corporate reorganisation of the Group being undertaken inconnection with Admission and the Placing, the material detailsof which are summarised at paragraph 3 of Part V of thisDocument

“Proposals” the Placing, the Vendor Placing and Admission

“Proposed Director” Michael Sherwin, whose details are set out on page 8 of thisDocument

“Prospectus Directive” the EU Prospectus Directive 2003/71/EC, as amended

“Prospectus Rules” the Prospectus Rules made by the FCA pursuant tosections 73(A)(1) and (4) of FSMA

“QCA Corporate Governance Code” the Corporate Governance Code for Small and Mid-Size QuotedCompanies 2013 published by the Quoted Companies Alliance

“Registrars” the Company’s registrars, being Link Asset Services

“Relationship Agreement” the relationship agreement, dated 15 December 2017, between(1) Perwyn LLP, (2) Sumo Group plc and (3) Zeus CapitalLimited, details of which are set out in paragraph 12.3 of Part Vof this Document

“Remuneration Committee” the remuneration committee of the Board, as constituted fromtime to time

“Republic of Ireland” the island of Ireland excluding Northern Ireland

“RIS” a Regulatory Information Service (as defined in the AIM Rules)

“Selling Shareholders” those persons set out in paragraph 12.1 of Part V of thisDocument

“Share Plans” the LTIP and the SIP

“Shareholder(s)” holder(s) of Ordinary Shares

“SIP” The Sumo Group plc Share Incentive Plan

“Sumo Digital” Sumo Digital Ltd., a company incorporated in England andWales with registered number 4703224 and registered office at32 Jessops Riverside, Brightside Lane, Sheffield, S9 2RX

“Takeover Code” the City Code on Takeovers and Mergers

“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland

“UK Listing Authority” the FCA, acting in its capacity as the competent authority for thepurposes of FSMA

recorded on the relevant register of the share or security asbeing held in uncertificated form in CREST and title to which, byvirtue of the CREST Regulations, may be transferred by meansof CREST

“US” the United States of America and all of its territories andpossessions

“VAT” value added tax

“Vendor Placing” the conditional placing of the Vendor Placing Shares by ZeusCapital as agents for the Selling Shareholders, pursuant to thePlacing Agreement

“uncertificated” or “uncertificatedform”

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“Vendor Placing Shares” the 39,704,131 Existing Ordinary Shares to be sold pursuant tothe Vendor Placing, such sale being conditional upon Admission

“VGTR” video games tax relief, which allows UK game developers toclaim back approximately 20% of their qualifying productioncosts. To be eligible for VGTR, the game must pass the BritishFilm Institute (BFI) cultural test and the developer must beresponsible for the majority of the planning, designing,developing and testing of the game

“Zeus Capital” Zeus Capital Limited, a company incorporated in England andWales with registered number 4417845 and registered office at82 King Street, Manchester, M2 4WQ

“£” or “Sterling” British pounds sterling

“$” or “US Dollars” US dollars

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GLOSSARY

AAA-rated AAA-rated game is an informal classification given to videogames with typical investment of greater than $10 million indevelopment and production. It is the video game equivalent ofa ‘blockbuster’ movie

CAGR Compound annual growth rate, the mean annual growth rate ofan investment or metric over a specified period of time longerthan one year

Co-development Game development work undertaken by a third party contractorwhere the creative responsibility is shared between publisherand developer

eShops Charts Nintendo’s digital distribution platform

Expansion packs An expansion pack, expansion set, supplement, or simplyexpansion is an addition to an existing role-playing game,tabletop game or video game

Franchise A collection of related games in which several derivative workshave been produced following an original

FY Financial year, the period that a company uses for preparingfinancial statements

Game and/or video game A game played by electronically manipulating images producedby a computer program on a monitor or other display

Game Jam An internal Group event where ideas for own-IP games arediscussed, developed and presented

Game patches Patches to fix game compatibility problems after their initialrelease or applied to change game rules or algorithms

Gamer and/or video gamer An end-user or consumer of video games

Games as a service A business model whereby games receive significant developerpost-release support, including multiplayer hosting, communitymanagement, post-release patching, game fixes, downloadablecontent and expansions

Indie game A video game that is created without the financial support of apublisher

IP Intellectual property

Micro-transactions Micro-transaction is a business model where users canpurchase virtual goods via micro-payments. Micro-transactionsare often used in free-to-play games to provide a revenue sourcefor the developers

PC personal computer

Tent pole title A publisher or developer’s highest profile release, typicallydeveloped in-house with a very high budget

TIGA The Independent Game Developers’ Association, a network forgames developers and digital publishers and a trade associationrepresenting the video games industry

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Turnkey End to end game development work undertaken by a third-partycontractor where the creative responsibility lies with thecontractor

Vertical Slice A pre-defined part of a game, produced to a high level of qualitythat can be played and demonstrates elements of gameplay andvisuals as targeted in the finished game

Work for hire Game development work undertaken by a third party contractorwhere the contractor is given limited or no creative discretion

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EXECUTIVE SUMMARY

The following information is derived from, and should be read in conjunction with, the whole of

this Document including, in particular, the section headed “Risk Factors” in Part II of this

Document. Potential investors should read the whole of this Document and not rely on this

Executive Summary section.

INTRODUCTION

Sumo Digital is one of the UK’s largest independent developers of AAA-rated video games providingboth turnkey and co-development solutions to an international blue-chip client base. Its full-servicedevelopment solution, includes initial concept and pre-production, production and development, andpost-release support.

Sumo Digital was established in 2003 and now has studios in Sheffield, Nottingham, Newcastle, Pune(India) and Vancouver (Canada). The Company has developed deep relationships with some of theworld’s largest computer games publishers and platform manufacturers. It has relationships withinternational developers and publishers, including Microsoft, Sony, Sega, CCP Games andIO Interactive. Since 2003, Sumo Digital has provided co-development and turnkey developmentservices on more than 40 released titles, including contributions to franchises such as Outrun 2, Forza,Hitman, LittleBigPlanet, and Sega & Sonic All-Stars.

The video games industry is the largest entertainment market in the world valued in excess ofUS$113bn and growing at 8.4% per annum. The growth of digital distribution and backwardscompatibility of new hardware releases has resulted in a smoothing of console cycles seen historicallyand an increase in the demand for high quality creative output from publishers to satisfy consumerrequirements. The Directors and the Proposed Director believe that the Company is well positioned tobenefit from this growth in demand.

The Directors and the Proposed Director believe that Admission will provide a permanent source ofcapital to deleverage the balance sheet, raise the profile of the Company, provide the ability toincentivise key employees and allow the Company to execute its strategy. Admission will also providea partial exit for funds advised by Perwyn LLP, the Company’s private equity investor. On Admission,funds advised by Perwyn LLP will hold approximately 28.39 per cent of the Company’s EnlargedOrdinary Share Capital.

INFORMATION ON SUMO DIGITAL

Sumo Digital is a co-development partner to some of the world’s leading publishers, offering turnkeygame development solutions. Sumo Digital can develop games across all console platforms, PC,handheld and mobile devices.

The Directors and the Proposed Director believe the Group’s competitive advantage lies in its scale,management systems, technology and creative solutions, which enable it to offer flexible co-development and full end-to-end solutions for publishers and other developers.

Sumo Digital operates a lower risk contracting model than the majority of other developers andpublishers who are more exposed to the commercial success or failure of the game. The Directors andthe Proposed Director believe these long-term contracts de-risk the Group’s model by securing thatpayment is made in accordance with the achievement of a number of key milestones, during andfollowing release of the game, which are agreed prior to the start of the project, rather than oncompletion and/or sales performance.

The Group principally works across the following phases of the development of a computer game:

Phase 1 – Initial Concept

Prototyping key ideas and concepts with the Company’s publishing clients. At this stage, early conceptart is created to explore the visual direction of the game as well as gameplay ideas being roughlyblocked out in a basic form. The process seeks to align publishing, marketing and development with thepublisher’s vision for the game at this stage.

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Phase 2 – Pre-production

Once through the concept phase, the team will move into pre-production. The team will grow at thisstage to accommodate a wider remit. The key deliverable at this stage is often identified as a “verticalslice” of the game. This is a pre-defined part of the game, produced to a high level of quality that canbe played and demonstrates elements of gameplay and visuals as targeted in the finished game.

Phase 3 – Production

The peak of the game development process and testing with key milestones agreed with customers.Typically, production of a full game can take between 12 and 24 months and can involve large teamsof over 100 people, involved in many different disciplines, such as programming, art, design,production, depending on the size and complexity of the game.

The production phase builds on the work done in pre-production and expands the feature set createdfor the “vertical slice” into a full game experience. Mechanics, game play, level design, art andanimation, visual effects and audio are all undertaken in the production phase.

Phase 4 – Closedown

In the closedown phase, quality assurance work, user research feedback and major bug elimination arethe goals.

Phase 5 – Games as a service

Once a game has been launched, Sumo Digital can provide further support including development ofdownloadable content, development of new game features, community management, real time datamining and feedback and server operations.

Sumo Digital’s core technology

The Sumo Digital research and development team serves a number of key roles:

• Development of future game engine and tools technology. The key responsibility of the researchand development team is to enhance and maintain the Company’s existing in-house coretechnology to keep it up to date with the current state of the art along with adding support for newplatforms as they come to market.

• Development of tools to enhance the efficiency of project build processes. Systems have beendeveloped and are supported by the research and development team to improve build times andstreamline integration of external game engines.

• Provide expertise and technical support to existing game teams. The members of the R&D teamcan be deployed to give technical help to existing projects to aid optimisation, development ofnew features or simply advise on best practice with code with which they are more familiar.

As a result, Sumo Digital has an ever-growing library of tools and technology that assists to driveefficiency and helps underpin margins in the business.

Own intellectual property

In 2017, Sumo Digital successfully released its first own intellectual property title, Snake Pass. The ideafor the game was originated and developed internally using a gated process which regularly assessesthe potential of a game developed by a dedicated team at relatively low cost, making this a lower riskroute to own intellectual property and exploit these games for improved commercial terms. Snake Passhas proved successful with over 170,000 units sold since March 2017, generating a return oninvestment in excess of 83%. Snake Pass was released for PC, Xbox One, PlayStation 4 and NintendoSwitch and it reached the number one position in the eShops charts in the UK.

Metacritic scoring

Metacritic is an independent aggregator of video game reviews, which provides the ability to compareand rank the critical performance of games relative to other releases. Video games developed and co-

16

developed by Sumo Digital have achieved consistently high Metacritic scores with an average of 72.The Directors and the Proposed Director believe that this ranks Sumo Digital highly amongst its peers.

STRATEGY

Sumo Digital’s core strategy is to continue to grow organically as one of the leading co-developers ofAA/AAA-rated gaming titles in the world, primarily using its contracted development fee model tominimise risk, and taking advantage of the forecast growth in the global video games market.

Key areas of strategic focus are as follows:

Deliver and expand

• Well placed to deliver significant growth through developing new franchise titles as the demandfor creative content continues to grow;

• Develop downloadable content for existing titles that can be used to extend further the revenuegenerating capability of games for publishers; and

• Continue to recruit, retain, incentivise and develop the Group’s talent pool in order to increasethe Group’s core development capacity and capability.

New strategic partners

• Continue to win new customers and extend its publisher portfolio;

• Collaboration with other developers and publishers, extending existing co-developmentrelationships; and

• Potential to open or acquire new studios to enable recruitment from further pools of talent andgain exposure to new publishers and game genres.


• Following the successful launch of Snake Pass, which has generated a return on investment inexcess of 83% since launch, the Directors and the Proposed Director intend to continue tooperate Group-wide Game Jams and selectively develop “Indie Games”.

Acquisition of complementary revenue streams

• Consider earnings enhancing acquisitions of premium video game service providers andcomplementary video game developers.

PLACING AND VENDOR PLACING

The Placing

The Company is proposing to raise a total of approximately £38.45 million by way of a conditionalplacing by the Company of the Placing Shares, at the Placing Price, with new investors. The PlacingShares will represent approximately 26.51 per cent. of the Enlarged Ordinary Share Capital atAdmission.

The Vendor Placing

The Selling Shareholders have indicated a desire to realise a proportion of their investment in theCompany. The Vendor Placing will allow the Selling Shareholders to achieve this. Under the VendorPlacing, the Selling Shareholders have agreed to sell 39,704,131 Vendor Placing Shares at the PlacingPrice and these shall be conditionally placed with investors by Zeus Capital at the Placing Price. TheVendor Placing Shares will represent approximately 27.38 per cent. of the Enlarged Ordinary ShareCapital at Admission.

17

DIRECTORS

Kenneth Beaty (Non-Executive Chairman, aged 48)

Ken works as a Chairman and Non-Executive Director, following a 20-year private equity career. He hasextensive experience working with high growth private equity backed and entrepreneurial businesses.Ken has been a non-executive director of the Group since December 2014 and acts as a consultant toPerwyn on matters outside the Company.

Carl Cavers (Chief Executive Officer, aged 50)

Carl joined Gremlin Interactive in 1995. Following its acquisition by Infograms in 1999, he wasappointed to European Development Director with responsibility for all internal development studios inthe UK, France and Australia. Carl co-founded Sumo Digital in 2003, and led the management buy-outwith NorthEdge Capital in 2014. In 2015, he received the TIGA Most Outstanding Individual Award(TIGA is a trade association representing the video games industry). Carl holds an honorary doctoratefrom Sheffield Hallam University.

David Wilton (Chief Financial Officer, aged 55)

David was appointed Chief Financial Officer in September 2017. He is a “Big Four” qualified charteredaccountant with approximately 30 years’ post-qualification experience as Finance Director, Non-Executive Director and consultant, having previously worked in mergers and acquisitions withRothschild. David has experience of plc and private equity roles, including as Group Finance Directorof WYG plc, and as Non- Executive Director and Chair of the Audit Committee of Sweett Group plc.

Ian Livingstone CBE (Independent Non-Executive Director, aged 67)

Ian is one of the founding fathers of the UK gaming industry, with over 40 years’ of games industryexperience. He is former Executive Chairman of Eidos plc, where he was behind major franchises suchas Tomb Raider. Ian also co-founded the games company Games Workshop in 1975, responsible forthe successful Warhammer franchise, and co-created the Fighting Fantasy gamebook series in 1982.In 2002, Ian won the BAFTA Interactive Special Award for outstanding contribution to the video gamesindustry, and was appointed CBE in 2013. Ian has been a non-executive director of the Group sinceSeptember 2015.

Michael Sherwin (Independent Non-Executive Director, aged 58)

Michael is currently Chief Financial Officer of Vertu Motors plc and has extensive retail, transactionaland public market experience. From 1999 to 2008, Michael was Group Finance Director of GamesWorkshop PLC, a FTSE listed consumer goods company. Michael is a qualified Chartered Accountanthaving trained with Price Waterhouse, where he held positions in the UK, Paris and Sydney. He wasalso Non-Executive Director of Plusnet plc, an AIM listed internet business, from 2004-2007. Michaelwill be appointed to the Board conditional on Admission.

RISK FACTORS

Your attention is drawn to the risk factors set out in Part II of this Document. Your attention is also drawnto the section entitled “Important Information” of this Document and to the section entitled “Forwardlooking statements” in that section. In addition to all other information set out in this Document, potentialinvestors should carefully consider the risks described in those sections before deciding whether toinvest in the Company.

18

PART I

INFORMATION ON THE GROUP

SUMO GROUP PLC

1. INTRODUCTION

Sumo Digital is one of the UK’s largest independent developers of AAA-rated video games, providingboth turnkey and co-development solutions to an international blue chip client base. Its full-servicedevelopment solution includes initial concept and pre-production, production and development, andpost-release support.

Sumo Digital was established in 2003 and now has studios in Sheffield, Nottingham, Newcastle, Pune(India) and Vancouver (Canada). Sumo Digital has developed deep relationships with some of theworld’s largest computer games publishers and platform manufacturers. It has relationships withinternational developers and publishers, including Microsoft, Sony, Sega, CCP Games andIO Interactive. Since 2003, Sumo Digital has provided co-development and turnkey developmentservices on more than 40 released titles, including contributions to franchises such as Outrun 2, Forza,Hitman, LittleBigPlanet, and Sega and Sonic All-Stars.

The video games industry is one of the largest entertainment market in the world valued in excess ofUS$113 billion and growing at 8.4% per annum. The growth of digital distribution and backwardscompatibility of new hardware releases has resulted in a smoothing of console cycles seen historicallyand an increase in the demand for high quality creative output from publishers to satisfy consumerrequirements. The Directors and the Proposed Director believe that the Company is well positioned tobenefit from this growth in demand.

The Directors and the Proposed Director believe that Admission will provide a permanent source ofcapital to deleverage the balance sheet, raise the profile of the Company, provide the ability toincentivise key employees and allow the Company to execute its strategy. Admission will also providea partial exit for funds advised by Perwyn LLP, the Company’s private equity investor. On Admission,funds advised by Perwyn LLP will hold approximately 28.39 per cent of the Company’s EnlargedOrdinary Share Capital.

The Placing will result in the issue of 38,445,869 Placing Shares, raising approximately £38.45 millionall of which will be used to settle existing debt within the Group, pay the Group’s costs in connectionwith the Placing and provide additional working capital. In addition, Selling Shareholders propose to sell39,704,131 Ordinary Shares under the Vendor Placing. Further details of the Placing and the VendorPlacing are set out in paragraph 11 of this Part I.

2. HISTORY AND BACKGROUND

Carl Cavers, Paul Porter and Darren Mills founded Sumo Digital in 2003, having previously workedtogether at Gremlin plc and Infogrames Studios Ltd. A studio in Pune (India) was established in 2007,providing a flexible and lower cost base with a highly skilled workforce. In 2007, Sumo Digital becamepart of a larger group of studios, when it was acquired by Foundation 9, an American entertainmentmedia company.

Sumo Digital was originally set up as a ‘work for hire’ games developer, working alongside developersand publishers on less creative sections of a game’s production. Successful delivery of co-developmentprojects enhanced the company’s experience of franchise IP, enabling it to take responsibility for fullturnkey projects.

In 2014, Carl, Paul, Darren and Chris Stockwell led a management buyout backed by NorthEdgeCapital, which enabled Sumo Digital to expand its services significantly, through investment in Sheffield,where it increased headcount by 41% to 336, and opening a new office in Nottingham.

In September 2016, Carl, Paul, Darren and Chris led a secondary buyout backed by funds advised byPerwyn LLP. Since completion of the secondary buyout, the Group has completed the acquisition of

19

Atomhawk in June 2017, David Wilton has joined as Chief Financial Officer, and total headcount hasincreased to 483 as at 30 November 2017.

The recent acquisition of Atomhawk, a premium digital art and design agency, has added studios inNewcastle and Vancouver (Canada) and further expanded Sumo Digital’s integrated videogame serviceoffering, as well as adding exposure to new sectors such as film and television concept art.

3. VIDEO GAMES MARKET

The video games market eco-system

The video games industry is made up of software providers, game developers, game publishers,platform providers, also acting as games publishers (such as Sony, Microsoft and Nintendo),distributors, retailers and service providers.

As an independent third-party developer of AAA-rated games, Sumo Digital’s customers are thepublishers and developers, from whom the Company generates development fees and incrementalroyalties. The platform manufacturers, in their role as exclusive publishers for their respective consoles,are also a key relationship for Sumo Digital.

Publishers typically outsource three types of work: turnkey (whole projects); co-development projects;and game development services. Sumo Digital typically partners with publishers on turnkey andco-development projects which require high levels of creative and technical expertise. Gamedevelopment services range from highly technical, high value-add services, such as motion capture,concept art and visual effects, to more commoditised services, such as testing, quality assurance andasset creation.

Video Games Market Ecosystem

Source: management information

AAA-rated games

AAA-rated game is an informal classification given to video games with typical investment of greaterthan $10 million in development and promotion. It is the video game equivalent of a ‘blockbuster’ movie.

AAA-rated games are important to both publishers and the major hardware providers as they help togenerate console sales and game franchise longevity. Certain ‘tent pole’ titles may be producedin-house, as publishers seek to maintain control over the intellectual property, whereas some AAA-ratedgames are outsourced to trusted developers. Sumo Digital, therefore, provides the ability for publishersto satisfy the increasing demand for creative content without the requirement to invest in growing andmaintaining internal teams.

Typically, the top 75 games released each year will generate approximately 55% of total video games’sales revenue. It is usual for the top ten releases to receive significantly more than $10 million

Specialist software providers:

Epic GamesAdobeThe FoundryAutodesk

Middleware/Tool Providers Game Developers Game Publishers Hardware

manufacturingRetail and

Distribution Consumer

Licence Fees Hardware Revenue

Software Revenue

Game sales

Prepaid Development Fees & Incremental Royalty

Vertically integrated publishers / console

manufacturers, with in-house developer

studios. Some have online distribution

platforms and their own ‘game engine’

Independent third-party developers (many have their own ‘game engine’ / tools):Sumo Digital

bEhaviour

Splash Damage

Saber Interactive

Climax Studios

Avalanche Studios

Ninja Theory

Platinum Games

Playground Games

High street and online specialists:

SteamGame

SUMO’S PRIMARY ROLE

CAPTIVE

INDEPENDENT

SUM

O’S

TAR

GET

C

UST

OM

ER B

ASE

Naughty DogRareRetro Studios

Polyphony DigitalBioWare Corp

Sony Interactive Entertainment

Microsoft Studios

Koch Media

EA

Nintendo

SEGA

PlayStation

Xbox

Nintendo

PlayStationNetwork

Xbox Live

My Nintendo

20

investment from publishers in the expectation of generating higher sales volumes. These games arereferred to as AAA+-rated and are typically developed in-house by publishers. Sumo Digital targetsgames that are positioned in the AA/AAA-rated category and these are turnkey or co-developed withpublishers. An illustrative representation of anticipated sales volumes for each category of game isshown below:


4. BUSINESS OVERVIEW

Sumo Digital is a co-development partner to some of the world’s leading publishers, offering turnkeygame development solutions. Sumo Digital develops games across all console platforms, PC, handheldand mobile devices.

The Directors and the Proposed Director believe the Group’s competitive advantage lies in its scale,management systems, technology and creative solutions, which enable it to offer flexible co-development and full end-to-end solutions for publishers and other developers.

The Group principally works across the following phases of the development of a computer game:

Phase 1 – Initial concept

The initial concept phase can vary in length but is essentially an amount of time and resource agreedbetween Sumo Digital and the customer at the start of a project to prototype key ideas and concepts.At this stage, early concept art is created to explore the visual direction of the game as well as gameplayideas being roughly blocked out in a basic form. Sumo Digital seeks to align development with thepublisher’s vision for the game at this stage.

Screenshots of early stage concept artwork for Snake Pass


SUMO POSITIONING

UNITS SOLD(ILLUSTRATIVE

GAME TYPE

IN-HOUSEvs

THIRD PARTY

NEXT TOP 30 TITLES (approximately 21% of market)AA / AAA TITLES

TYPICAL BUDGET $1-20m

TOP 10 TITLES(approximately 24% of market)

AAA+ TENT POLE TITLESTYPICAL BUDGET $10-100m

ACQUIRED (AAA) TYPICAL BUDGET $1-20m

LONG TAIL / INDIETYPICAL BUDGET <$1m

In-house teams, withsupport of third party

for some asset creation

AAA ‘whole game’ outsourced to a large,high quality third party studios

Self-published by developer

Mix of in-house and smallerthird party developers

21

The acquisition of Atomhawk in June 2017 further enhanced the Group’s ability to provide bespokeconcept art solutions for a wider range of customers.

Phase 2 – Pre-production

Once through the concept phase, the team moves into pre-production. The team will grow at this stageto accommodate a wider remit. The goals of pre-production are to refine the ideas and elementsinvestigated in the initial concept phase and de-risk these elements in preparation for full production.The key deliverable at this stage is often identified as a “vertical slice” of the game. This is a pre-definedpart of the game, produced to a high level of quality, that can be played and demonstrates elements ofgameplay and visuals as targeted in the finished game.

Screenshot of a ‘vertical slice’ of Snake Pass


Phase 3 – Production

In the production phase, Sumo Digital undertakes the peak of the game development process andtesting with key milestones agreed with customers. Typically, production of a full game takes between12 and 24 months and can involve large teams of over 100 people, in many different disciplines, suchas programming, art, design and production, depending on the size and complexity of the game.

The production phase builds on the work done in pre-production and expands the feature set createdfor the “vertical slice” into a full game experience. Mechanics, game play, level design, art andanimation, visual effects and audio are all undertaken in the production phase.

22

Screenshots of Snake Pass game in development


Phase 4 – Closedown

In the closedown phase, quality assurance work, user research feedback and major bug elimination arethe goals.

Sumo Digital has integrated, cross site project management tools for all stages of production.The approach is a flexible one to accommodate customers’ internal production systems. Sumo Digitalcan integrate with a number of production management software solutions, either off-the-shelf solutionsor bespoke management tools if customers prefer to use their own systems. Transparency at all stagesensures an agile approach is taken to development and both Sumo Digital and its customers are ableto access information for all actions on the project, from the early concept and planning phases throughto the final closedown, bug fixing and launch phase.

Phase 5 – Games as a service

Once a game has been launched, Sumo Digital is able to provide further support, includingdevelopment of downloadable content, development of new game features, community management,real time data mining and feedback and server operations.

The prevalence of connected hardware has extended game lifespans post release and providesongoing revenue streams for publishers and developers. Sumo Digital becomes more embedded infranchise knowledge by providing games as a service under separate contracts, and potentially furtherbenefits from additional royalties. Services include:

• Game patches and updates

• Developing add-on downloadable content for micro transactions and expansion packs

• Managing multiplayer servers

• Community management

Following the release of a game, Sumo Digital is well positioned to provide further franchise supportand undertake work on new titles as the publisher continues to expand its range.

23

Lower risk co-development operating model

Sumo Digital operates a lower risk contracting model than the majority of other developers andpublishers who are more exposed to the commercial success or failure of the game. The Directors andthe Proposed Director believe these long-term contracts de-risk the Group’s model by securing thatpayment is made in accordance with the achievement of a number of key milestones, during andfollowing release of the game which are agreed prior to the start of the project, rather than oncompletion and/or sales performance.

Visibility of revenue

Contract duration can last up to four years, providing visibility of future earnings based on man-monthcharge out rates specified in the contract. Staff utilisation is a key performance indicator for the Group.The Directors target approximately 95% utilisation in UK development studios, whilst maintaining lowerlevels of utilisation in Pune, providing flexibility at lower costs when required.

Royalties

Sumo Digital’s contracts increasingly include potential royalties alongside development fees. TheDirectors and the Proposed Director believe this enables Sumo Digital to align itself more closely withits customers and become further embedded into future iterations of the relevant game. Royalties arehigh margin revenue received for several years after a game has been released.

Video games tax relief

The VGTR is a tax relief to support the development of video games in the UK. It was first proposed bythe Labour government in 2010 and made policy by the Coalition Government in 2014.

The VGTR is part of a wider UK creative sector tax relief which seeks to incentivise investment into UKinventions or productions that may otherwise take place outside of the country, and promote thelong-term sustainability of technology skills and infrastructure. It is claimed by many companies in thewider UK creative sector marketplace. Similar government incentive schemes are prevalent in the videogames industry globally, most notably in the US, Canada, France and Scandinavia.

The majority of current games developed by Sumo Digital qualify for VGTR. The tax relief is at a rateof 25% on up to 80% of the core development costs of a game, subject to certain qualifying criteria. TheVGTR is a cash benefit and it may be claimed in the place of, not in addition to, the tax relief againstresearch and development costs for small to medium sized enterprises allowed under the 2007 FinanceAct.

TIGA estimates that since the introduction of VGTR, net employment in the UK video games industryhas increased by 7.1% per year on average. As of July 2017, 295 games productions have claimedVGTR, supporting in excess of £690 million of UK expenditure.

The Directors and the Proposed Director believe that the major UK political parties continue to supportthe VGTR and that there are no indications of any significant changes being contemplated for the VGTRregime.

In November 2017, the European Commission announced that the VGTR scheme in the UK willcontinue until at least 2023.


In 2017, Sumo Digital successfully released its first own intellectual property title, Snake Pass. The ideafor the game was originated and developed internally, using a gated process which regularly assessesthe potential of a game by a dedicated team at relatively low cost, making this a lower risk route to ownintellectual property and exploit these games for improved commercial terms. Snake Pass has provedsuccessful, with over 170,000 units sold since March 2017, generating a return on investment in excessof 83%. Snake Pass was released for PC, Xbox One, PlayStation 4 and Nintendo Switch, and itreached the number one position in the eShops charts in the UK.

The selection and release of own intellectual property is a controlled process involving approvalgateways with ideas submitted by staff at regular internal events known as “Game Jams”. Ownintellectual property development benefits Sumo Digital by providing motivation to staff to work on their

24

own ideas whilst taking their own AAA-rated development practices and applying them to smaller scaleand less risky “indie” titles. The illustration shows some of the creative process involved in developingSnake Pass:


Until it is decided that a game will be taken forward as a potential release, all costs relating to the titleare expensed in the income statement. Following the decision to take the project forward, direct costsof development are capitalised with regular assessment of the commercial viability of the game.Typically, all development costs are expensed in the first year following a game’s release or earlier, ifconsidered appropriate.

Customers

Sumo Digital creates content for some of the largest global video games publishers and developers.Publishers typically appoint Sumo Digital to undertake whole game projects, taking existing intellectualproperty or initial concept, and using Sumo Digital’s creative and technical talent to develop that into afull game. The publisher then releases the game through physical and digital distribution channels withSumo Digital typically credited as developer.

Examples of Sumo Digital’s current and historical customers are set out below:

Customer First engagement Games include:

Microsoft 2003

Sega 2004

Sony 2005 LittleBigPlanet 2 DLC, LittleBigPlanet 3

Koch Media 2015 Dead Island 2

IO Interactive 2016 Hitman episodic content

CCP 2017 Project Nova

Management typically looks to work on premium titles and expects to continue to work on higher budgetgames with a view to expanding Sumo Digital’s involvement in any given franchise over time. As theGroup continues to grow in scale, it will be possible for new strategic relationships to develop. Forexample, in October 2017, Sumo Digital announced a new relationship with CCP, the publisher anddeveloper of the successful EVE franchise.

Metacritic scoring

Metacritic is an independent aggregator of video game reviews, which provides the ability to compareand rank the critical performance of games relative to other releases. Video games developed andco-developed by Sumo Digital have consistently achieved high Metacritic scores with an average of 72.The Directors and the Proposed Director believe that this ranks Sumo Digital highly amongst its peers.

Atomhawk

Atomhawk, which was acquired in June 2017, is a multi-award winning visual design company thatservices the games, film and visual effects industries. Founded in 2009 by Cumron Ashtiani, Atomhawkhas studios in Newcastle and Vancouver (Canada), and employs 34 people.

Crackdown 3, Xbox Fitness, Nike+ Kinect Training,Forza Horizon 2 (Xbox 360)

Sonic & Sega All-stars Racing, Sonic All Stars RacingTransformed, Sega Superstars Tennis, Virtua TennisWorld Tour, Outrun 2

25

Key services include visual development (concept art), marketing art as well as motion graphics anduser interface design. The business is centered around helping its customers to define a visual look fortheir product from inception through development and, also, at the final point of sale through marketingimagery, videos and box packaging design. Atomhawk primarily serves the creative industries, workingwith video games studios, as well as for film and television.

Atomhawk has been involved in the creation of many high profile projects, including movies likeGuardians of the Galaxy, Thor II, Avengers II and games such as Mortal Kombat, Injustice, RYSE andKillzone. Atomhawk provides creative design and content of J.K. Rowling’s Pottermore and is a regularcreative vendor for global brands such as Lego, Microsoft, Sony, Amazon, Marvel and Warner Bros.

Atomhawk’s customers include a number of high profile video game developers, movie studios andproduct designers, including NetherRealm Studios, CCP, Rebellion, Deep Silver, Rock Steady Studios,Square Enix, Ninja Theory, BBC, Rare and Ubisoft.

The acquisition was funded through a mixture of cash and equity. Cumron continues to lead Atomhawkand will have a shareholding in the Company.

Sumo Digital’s core technology

The Sumo Digital research and development team serves a number of key roles:

• Development of future game engine and tools technology. The key responsibility of the researchand development team is to enhance and maintain the Group’s existing in house core technologyto keep it up to date with the current state of the art, along with adding support for new platformsas they come to market.

• Development of tools to enhance the efficiency of project build processes. Systems have beendeveloped and are supported by the research and development team to improve build times andstreamline integrations of external game engines.

• Provide expertise and technical support to existing game teams. The members of the researchand development team may be deployed to give technical help to existing projects to aidoptimisation, development of new features or simply advise on best practice with code with whichthey are more familiar.

As a result, Sumo Digital has an ever-growing library of tools and technology that assists to driveefficiency and helps improve margins in the business.

Locations and employees

Sumo Digital’s head office is in Sheffield, where the Group occupies several separate buildings on thesame site, facilitating the confidential development of multiple projects simultaneously.

The Indian studio in Pune provides a lower cost base and flexible capacity to the Group. The Punestudio is an extension of the UK talent pool. Its teams are integrated with the UK teams, providingsignificant timing efficiencies due to the complementary time difference to the UK. Providing theopportunity for variety of work and ownership of projects aids employee retention, versus traditionaloutsourcing often provided in this region that focuses on repetitive, lower skilled, lower margin work.

In 2016, the business opened a second UK studio in Nottingham, allowing Sumo Digital to recruit fromtwo centres and tap into a talent pool outside Sheffield.

26

The recent acquisition of Atomhawk added studios in Newcastle-upon-Tyne and Vancouver, Canada.

No. of employees at

Studio 30 November 2017

Sheffield 302Nottingham 66Pune 80Newcastle 29Vancouver 6 ––––––––Total 483 ––––––––Business development

The business development pipeline is actively managed and fully controlled utilising Pipedrive, a salesmanagement productivity tool. Sumo Digital opportunities are filtered through the following developmentstages: lead-in, contact raised, proposal made, live discussions, near contracted and contracted.

Atomhawk utilises the same tool in a different manner, in which headcount data is fed into the businessdevelopment process to ensure appropriate resources are available for escalation of an opportunity.

5. MARKET AND COMPETITION

Market and competitors

The video games industry is one of the largest entertainment sectors in the world, valued in excess of$113bn. The biggest subset is the video games software market, which was valued at $90bn in 2016and is forecast to grow at a compound annual growth rate of 9.2% to $140bn by 2021.

Source: McKinsey Global Media Report 2017, PwC Entertainment and Media Outlook, Euromonitor

Sales of consoles that offer gamers a premium experience enjoyed steady growth of 4% p.a. between2012 and 2016, with the current 8th generation Xbox and PlayStation consoles outselling the previousgeneration by over 70% in the first three years post-launch.

Source: VGChartz

Sumo Digital develops its game technology for any appropriate medium, including console, PC andmobile, although to date the focus has been primarily console and PC.

The chart below shows the expected growth of the video games software market globally by hardwareplatform category.

Global video games software market by hardware platform

Source: PwC Entertainment and Media Outlook

There are a number of important factors powering market growth in the video games industry; anexpanding demographic reach; emerging markets growth; continuous demand for better technology,graphics and functionality; and the prevalence of connected hardware extending video game lifespan.These growth factors bode well for Sumo Digital’s role in the market as a trusted development partnerto major publishers and developers.

23 26

25 3231542

75

0

20

40

60

80

100

120

140

160

FY16 FY21E

$ bi

llion

s

Console PC VR Mobile/Other

CAGR %

FY12-16 FY17-21

37% 10%

- 36%

9% 5%

4% 3%

27

Sumo Digital has the capability to develop mobile games and continually assesses opportunities in thisarea.

Shift to digital

The proliferation of online distribution platforms such as Steam, PlayStation Network, Xbox Live andNintendo E-Shop has resulted in a significant growth in the sale of digitally distributed games andadditional content through micro-transactions. Historically, games have been sold through physical retailchannels, as discrete units. By enabling digital downloads, the retailer is sometimes cut out of thisprocess, although the Directors and the Proposed Director believe physical sales will have a presence inthe foreseeable future due to the sheer data size required in complex games. This has resulted in areduced cost of distribution, greater ease of self-publishing and promotion, the potential for dynamicpricing and the potential for games to move from a product to a service. This has also enabled SumoDigital to publish its first own IP game in Snake Pass by removing any need for physical inventory andassociated stock risk. The chart below shows the historic and anticipated shift from physical to digitaldistribution of video games.

Video games sales by distribution channel


Publishers have taken advantage of the opportunity granted by digital distribution to extend the lifespanand revenue generation of a game title post-release by providing an array of additional services anddigital content.

This creates new opportunities for trusted third party developers such as Sumo Digital in a “games-as-a-service” role by taking on additional development work and managing direct end user engagement onbehalf of the publisher. This extension of developer support further embeds Sumo Digital’s role in thelife of a game and it has taken this service approach with a number of games. The chart belowillustrates the greater level of developer support required under a games as a service model.

Post launch developer support enabled by digital distribution


05

101520253035404550

2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E

Rev

enue

($bn

)

Physical Digital

DEVELOPER SUPPORT

INITIAL TITLE DEVELOPMENT GAMES AS A SERVICE

Emerging model(Physical and digital distribution)

Release date

Multiplayer hosting and community management

Downloadable content andexpansions

Post-release patching and game fixes

Historic model(Physical distribution)

DEVELOPER SUPPORT

28

Embedded user base

Historically, there was a clearly defined console hardware cycle, which in turn defined the softwarecycle. Low installed base numbers during the early stages meant that third party publishers were moreinclined to wait for the market to be in a position for them to maximise the return on investment beforeinvesting in software. Gamers would also be less inclined to purchase new games at the end of oneconsole’s life cycle, instead waiting for the next generation of console to be on sale.

The current installed console base is now beginning to benefit from backward compatibility, which is theability to play games from previous generation consoles on the new generation consoles. This is viewedas potentially transformative for the industry and has substantial benefits for the game developers,establishing an embedded user base which provides the opportunity for constant mass marketpenetration. The new Xbox One S and PS4 Pro upgrades reflect a more iterative approach to consoledesign and backwards compatibility for future console generations is the stated aim of Microsoft. Thechart below shows the cumulative sales of PlayStation 4 and Xbox One consoles achieved in the period2014-2016 and expected in the period 2017-2020.

Cumulative console sales (8th generation)

Source: VG Chartz, VG Sales Wikia and management information

Geographic expansion

The video games market is also benefiting from global emerging markets. In China, the sale of gamesconsoles was banned in 2000 by the government. However, the ban was lifted in January 2014 andMicrosoft entered the market in September 2014 and Sony in March 2015. There is also huge potentialdemand from South America (+15% CAGR for retail sales, FY16-21, the fastest of all geographies). Thechart below shows the value of the video games market by region, with year on year growth rates.

Source: Newzoo

Global video games market per region with year on year growth rates

Source: Newzoo

1937

54 5671 83 90

11

20

2841

5160

67

0

20

40

60

80

100

120

140

160

180

2014 2015 2016 2017E 2018E 2019E 2020E

Uni

ts M

illio

ns

PS4 Xbox One

4%

25%

47%

24%

2017 Total

$108.9bn+7.8% YoY

EMEA$26.2bn

+8.0% YOY

APAC$51.2bn

+9.2% YOY

North America$27.0bn+4.0% YOY

Latin America$4.4bn+13.9% YOY

China Total$27.5bn

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Broadening demographics

The age demographics of video gamers continues to broaden, as consumers remain engaged pastadolescence due to continued innovation. Video games attract a wide mix of consumers, who aretypically ‘sticky’ over time. The current average video game player is 35 years old. The video gamesmarket has also become non-gender specific with over 40% being female gamers.

Source: Entertainment Software Association Survey

Competitors

There are only a handful of independent developers with Sumo Digital’s scale that can provide fullservice to the largest game publishers. The Directors and the Proposed Director believe that thefollowing are the closest comparable developers to Sumo Digital:

Average

Number of Metacritic

Developers Staff score

Sumo Digital 483 72

Avalanche Studios, bEhaviour, Saber Interactive 200 – 400 52 – 70

Climax Studios, Ninja Theory, Platinum Studios, Playground Games 100 – 200 69 – 81

Source: Metacritic, publicly available information on staff numbers

Sumo Digital is one of the UK’s largest independent third-party video games developers, with a totalheadcount of 483.

6. STRATEGY

Growth opportunities for Sumo Digital

Sumo Digital’s core strategy is to continue to grow organically as one of the leading co-developers ofAA/AAA-rated gaming titles in the world, primarily using its contracted development fee model tominimise risk and take advantage of the forecast growth in the global gaming market.

Key areas of strategic focus are as follows:

Deliver and expand

• Well placed to deliver significant growth through developing new franchise titles as the demandfor creative content continues to grow.

• Develop downloadable content for existing titles that can be used to extend further the revenuegenerating capability of games for publishers.

• Continue to recruit, retain, incentivise and develop the Group’s talent pool in order to increasethe Group’s core development capacity and capability.

New strategic partners

• Continue to win new customers and extend its publisher portfolio.

• Collaborate with other developers and publishers, extending existing co-developmentrelationships.

• Open or acquire new studios to enable recruitment from further pools of talent and gain exposureto new publishers and game genres.


• Following the successful launch of Snake Pass, which has generated a return on investment inexcess of 83% since launch, the Directors and the Proposed Director intend to continue tooperate Group-wide Game Jams and selectively develop “Indie Games”.

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Acquisition of complementary revenue streams

• Consider earnings enhancing acquisitions of premium video game service providers andcomplementary video game developers.

7. FINANCIAL INFORMATION

Part III of this Document contains audited historical financial information of the Group for the three yearsended 31 December 2016.

The following financial information has been derived from the financial information contained in Part IIIof this Document and should be read in conjunction with the full text of this Document. Investors shouldnot rely solely on the summarised information.

Unaudited Audited Year Audited Year Audited Year Interim Ended Ended Ended Statement 31 December 31 December 31 December 30 June 2014 2015 2016 2017 £’000 £’000 £’000 £’000Revenue 16,124 21,566 24,106 14,317Gross Profit 4,793 9,703 9,005 5,267Operating Profit 711 3,826 870 431Interest (680) (1,309) (2,982) (2,410)Taxation (51) (62) 866 450Profit after tax (20) 2,455 (1,246) (1,529)

Unaudited Audited Year Audited Year Audited Year Interim ended ended ended Statement 31 December 31 December 31 December 30 June 2014 2015 2016 2017 £’000 £’000 £’000 £’000Operating Profit 711 3,826 870 431Depreciation 327 459 571 312Amortisation 407 2,379 3,692 2,582Exceptional items 1,754 142 912 95Adjusted EBITDA 3,199 6,806 6,045 3,420

The results for the year to 31 December 2015 showed an increase in revenues of £5.4 million,compared with the period ended 31 December 2014 with development fees increasing £3.6 millionacross multiple projects and customers, whilst royalties increased £1.8 million due to the successfulrelease of two games in the prior year. Revenue in the year ended 31 December 2016 increased£2.5 million with a £1.5 million reduction in royalties offset by a £4.1 million increase in developmentfees across multiple customers and projects.

EBITDA in the year to December 2015 increased to £6.8 million, compared to £3.2 million in the yearended 30 December 2014. This is reflective of the increased sales and £1.8 million of high marginroyalty revenue. EBITDA in the year ended 31 December 2016 decreased to £6.0 million, however afteradjusting for the high margin royalty revenue this reflects an increase of £0.8m.

Amortisation costs relate to fair value adjustments to goodwill and other intangible assets arising on theacquisition of Sumo Digital Entertainment Limited by Sumo Digital Group Limited in 2014 and thesubsequent acquisition of Sumo Digital Holdings Limited by Project Republica Bidco Limited in 2016.

Interest costs relate to shareholder loan notes and bank loans used to fund the management buyoutfirstly with Northedge Capital LLP and then with Perwyn LLP. It is proposed that these loans be repaidin full from the proceeds of the Placing.

In the six months to 30 June 2017, revenues increased by 29 per cent. to £14.3 million (six months to30 June 2016: £11.1 million) due to the continued delivery of multiple co-development projects.

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The Group develops games through a number of individual entities, to which certain gamedisbursements and other game costs are recharged at cost. The analysis below presents the revenueand gross margin excluding these pass through costs. The Gross Profit remains the same, however,the margin, as presented, appears artificially low.

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Revenue as presented 16,124 21,566 24,106Gross profit as presented 4,793 9,703 9,005Gross margin as presented 29.7% 45.0% 37.4%Pass through revenue/ costs 1,965 3,377 3,645Adjusted revenue 14,159 18,189 20,461Adjusted gross margin 33.9% 53.3% 44.0%

8. CURRENT TRADING AND PROSPECTS

Since the last interim review for the six month period ended 30 June 2017, the Directors and theProposed Director believe that the Group is trading in line with the Board’s expectations. Sumo Digitalhas recently secured contract extensions with 4 of its key customers for ongoing development oncurrent projects which further increase the Company’s visibility on revenues for 2018. In addition, inOctober 2017, the Company announced a new relationship with CCP Games, the publisher anddeveloper of the successful EVE franchise. Furthermore, the Board is pursuing the opportunity to opena new studio in the UK.

9. DIRECTORS, PROPOSED DIRECTOR AND KEY MANAGEMENT

The Board on Admission will comprise:

DirectorsKenneth Beaty (Non-Executive Chairman, aged 48)

Ken works as a Chairman and Non-Executive Director following a 20-year private equity career. He hasextensive experience working with high growth private equity backed and entrepreneurial businesses.Ken has been a non-executive director of the Group since December 2014 and acts as a consultant toPerwyn on matters outside the Company.

Carl Cavers (Chief Executive Officer, aged 50)

Carl joined Gremlin Interactive in 1995. Following its acquisition by Infograms in 1999, he wasappointed to European Development Director with responsibility for all internal development studios inthe UK, France and Australia. Carl co-founded Sumo Digital in 2003, and led the management buy-outwith NorthEdge Capital in 2014. In 2015, he received the TIGA Most Outstanding Individual Award(TIGA is a trade association representing the video games industry). Carl holds an honorary doctoratefrom Sheffield Hallam University.

David Wilton (Chief Financial Officer, aged 55)

David was appointed Chief Financial Officer in September 2017. He is a “Big Four” qualified charteredaccountant with approximately 30 years’ post-qualification experience as Finance Director, Non-Executive Director and consultant, having previously worked in mergers and acquisitions withRothschild. David has experience of plc and private equity roles, including as Group Finance Directorof WYG plc, and as Non-Executive Director and Chair of the Audit Committee of Sweett Group plc.

Ian Livingstone CBE (Independent Non-Executive Director, aged 67)

Ian is one of the founding fathers of the UK gaming industry, with over 40 years’ of games industryexperience. He is former Executive Chairman of Eidos plc, where he was behind major franchises suchas Tomb Raider. Ian also co-founded the games company Games Workshop in 1975, responsible forthe successful Warhammer franchise, and co-created the Fighting Fantasy gamebook series in 1982.In 2002, Ian won the BAFTA Interactive Special Award for outstanding contribution to the video games

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industry, and was appointed CBE in 2013. Ian has been a non-executive director of the Group sinceDecember 2015.

Michael Sherwin (Independent Non-Executive Director, aged 58)

Michael is currently Chief Financial Officer of Vertu Motors plc and has extensive retail, transactionaland public market experience. From 1999 to 2008, Michael was Group Finance Director of GamesWorkshop PLC, a FTSE listed consumer goods company. Michael is a qualified chartered accountanthaving trained with Price Waterhouse, where he held positions in the UK, Paris and Sydney. He wasalso Non-Executive Director of Plusnet plc, an AIM listed internet business, from 2004 to 2007. Michaelwill be appointed to the Board conditional on Admission.

Key managementPaul Porter (Co-founder and Managing Director, aged 46)

Paul has over 25 years’ experience in developing video games. Starting out as a self-taughtprogrammer, his first game was released in 1991. He joined Gremlin Interactive as Head of CoreTechnology in 1997, before co-founding Sumo Digital in 2003. As Managing Director, Paul has overallresponsibility for development across Sumo Digital.

Darren Mills (Co-founder and Studio Director, aged 47)

Darren has over 22 years’ industry experience having joined Gremlin in 1995. Working on several titlesas a Lead Artist and later, moving on to the position of Studio Art Manager advising on several key titles.Darren co-founded Sumo in 2003, and was key in setting up the studio in India. He is now the StudioDirector of the Sheffield Studio.

Cumron Ashtiani (Founder and Managing Director Atomhawk, aged 40)

Cumron founded Atomhawk in 2009, having previously worked as a creative leader and director formajor games and entertainment companies. Cumron has played a key role in the running of severalstudios, as well as having been involved in the development and creative direction of a vast range ofhigh profile projects spanning games, digital media and film. At Atomhawk, Cumron is responsible fortop line creative leadership, strategy and new business development.

Steven Webb (General Counsel and Company Secretary, aged 54)Steven was appointed as Company Secretary and General Counsel in 2017. After qualifying as asolicitor with Norton Rose, he spent a number of years in private practice specialising in corporate andcommercial matters, before moving to his first company secretary role with Kalon Group plc in 1994.He became Company Secretary and General Counsel of Yorkshire Water plc (later Kelda Group plc) in1997 and most recently spent 16 years in the same role at Premier Farnell plc during which time hewas involved in multiple acquisitions and disposals, including in the UK, US, Germany, China andEastern Europe. Steven is also a member (and Deputy Chairman) of the Board of Governors of LeedsBeckett University.

10. SHARE PLANS

In order to align the interests of Shareholders and employees of the Group following Admission, theCompany is proposing to establish the New Plans consisting of the LTIP and the SIP.

The Company intends to grant awards pursuant to the LTIP on, or shortly after, Admission to oneDirector and to two senior employees of the Group over Ordinary Shares with an aggregate marketvalue (by reference to the Placing Price) of approximately £0.95 million. Details of the award proposedto be granted to the Director are set out in paragraph 4 of Part V of this Document.

The Company is proposing to grant options to certain Directors and approximately 40 senior employeesof the Group pursuant to the LTIP so as to coincide with the commencement of its FY18.

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11. PLACING, VENDOR PLACING AND PLACING AGREEMENT

The Placing

The Company is proposing to raise a total of approximately £38.45 million by way of a conditionalplacing by the Company of the Placing Shares, at the Placing Price, with new investors.

The Placing Shares will represent approximately 26.51 per cent. of the Enlarged Ordinary Share Capitalat Admission.

The Vendor Placing

The Selling Shareholders have indicated a desire to realise a proportion of their investment in theCompany. The Vendor Placing will allow the Selling Shareholders to achieve this.

Under the Vendor Placing, the Selling Shareholders have agreed to sell 39,704,131 Vendor PlacingShares at the Placing Price and these shall be conditionally placed with investors by Zeus Capital atthe Placing Price. The Vendor Placing Shares will represent approximately 27.38 per cent. of theEnlarged Ordinary Share Capital at Admission. The Company will not receive any proceeds from thesale of the Vendor Placing Shares.

Costs

The costs of the Placing, the Vendor Placing and Admission, which are estimated to be approximately£5.2 million, will be met as to £3.5 million by the Company and as to £1.7 million by the SellingShareholders.

The Placing Agreement

Pursuant to the Placing Agreement, Zeus Capital has agreed to use its reasonable endeavours toprocure subscribers for the Placing Shares and purchasers for the Vendor Placing Shares.The Company, the Directors, the Proposed Director and the Selling Shareholders have given certainwarranties (and the Company has given an indemnity) to Zeus Capital, all of which are customary forthis type of agreement.

Each of the Directors, the Proposed Director, and the Selling Shareholders who will hold OrdinaryShares following Admission, have undertaken, pursuant to the Placing Agreement:

• for a period of 12 months from Admission, not to dispose of any of the Ordinary Shares in whichthey are interested at Admission, except with the permission of Zeus Capital; and

• for a further period of 12 months, to comply with certain requirements designed to maintain anorderly market in the Ordinary Shares.

The Placing and the Vendor Placing, which are not underwritten, are conditional, amongst otherthings, on:

• the Placing Agreement becoming unconditional and not having been terminated in accordancewith its terms prior to Admission; and

• Admission occurring no later than 21 December 2017 (or such later date as Zeus Capital and theCompany may agree, being no later than 19 January 2018).

The Placing Shares being subscribed for pursuant to the Placing will, on Admission, rank pari passu inall respects with the Existing Ordinary Shares in issue (including the Vendor Placing Shares) and willparticipate in full for all dividends and other distributions thereafter declared, made or paid on theOrdinary Share capital of the Company. The Placing Shares and the Vendor Placing Shares will,immediately on and from Admission, be freely transferable.

Zeus Capital has the right under the Placing Agreement to terminate the Placing Agreement and notproceed with the Placing and the Vendor Placing if, prior to Admission, certain events occur, includingcertain force majeure events. If such right is exercised by Zeus Capital, the Placing and the VendorPlacing will lapse and any monies received in respect of the Placing and the Vendor Placing will bereturned to investors without interest.

Further details of the Placing Agreement are set out in paragraph 12.1 of Part V of this Document.

34

12. USE OF PROCEEDS

The gross proceeds of the Placing will be used by the Company to fund:

• repayment of shareholder loan notes and the repayment of bank debt, as to approximately£29.9 million;

• the costs of the Placing and Admission, as to approximately £3.5 million; and

• additional working capital, as to approximately £5 million.

In addition to enabling the Placing and the Vendor Placing, the Directors and the Proposed Directorbelieve that Admission will provide the business with increased reputation and profile and the ability toincentivise key employees.

13. TAXATION

Information regarding taxation is set out in paragraph 15 of Part V of this Document. Those details areintended only as a general guide to the current tax position in the UK.

If an investor is in any doubt as to their tax position or is subject to tax in a jurisdiction other

than the UK, they should consult their own independent financial adviser immediately.

14. ADMISSION, SETTLEMENT AND DEALINGS

Application has been made to the London Stock Exchange for the Enlarged Ordinary Share Capital tobe admitted to trading on AIM. It is expected that Admission will become effective and dealings in theOrdinary Shares on AIM will commence at 8.00 a.m. on 21 December 2017.

The Ordinary Shares will be in registered form and will be capable of being held in either certificatedform or uncertificated form (i.e. in CREST). Accordingly, following Admission, settlement of transactionsin the Ordinary Shares may take place within the CREST system if a Shareholder so wishes. In respectof Shareholders who will receive Ordinary Shares in uncertificated form, Ordinary Shares will becredited to their CREST stock accounts on 21 December 2017. Shareholders who wish to receive andretain share certificates are able to do so and share certificates representing the Ordinary Shares to beissued pursuant to the Placing or transferred pursuant to the Vendor Placing are expected to bedispatched by post to such Shareholders by no later than 5 January 2018.

CREST is a paperless settlement system enabling securities to be evidenced otherwise than bycertificate and transferred otherwise than by written instrument in accordance with the CRESTRegulations. The Articles permit the holding of Ordinary Shares in CREST. The Company will apply forthe Enlarged Ordinary Share Capital to be admitted to CREST from the date of Admission.

15. INTERESTS IN ORDINARY SHARES

Upon Admission, the Directors and the Proposed Director will in aggregate be interested in, directly andindirectly, 10,268,833 Ordinary Shares representing approximately 7.08 per cent. of the EnlargedOrdinary Share Capital. Further information is available in paragraph 6 of Part V of this Document.

16. CORPORATE GOVERNANCE

The Directors and the Proposed Director acknowledge the importance of the principles set out in theQCA Corporate Governance Code.

The Directors and the Proposed Director intend to apply the QCA Corporate Governance Code, as faras they consider appropriate for a company of the Company’s size and nature.

Immediately following Admission, the Board will comprise five directors, two of whom shall be executivedirectors and three of whom shall be non-executive directors, reflecting a blend of different experienceand backgrounds. Ian Livingstone and Michael Sherwin are considered independent.

The Board intends to meet regularly to consider strategy, performance and the framework of internalcontrols. To enable the Board to discharge its duties, all directors will receive appropriate and timelyinformation. Briefing papers will be distributed to all directors in advance of Board meetings. All directorswill have access to the advice and services of the Company Secretary, who will be responsible for

35

ensuring that the Board procedures are followed and that applicable rules and regulations are compliedwith. In addition, procedures will be in place to enable the directors to obtain independent professionaladvice in the furtherance of their duties, if necessary, at the Company’s expense.

Board committees

The Company will, upon Admission, have established Audit, Nomination and RemunerationCommittees.

The Audit Committee will have Michael Sherwin as chairman, and will have primary responsibility formonitoring the quality of internal controls, ensuring that the financial performance of the Group isproperly measured and reported on and reviewing reports from the Group’s auditors relating to theGroup’s accounting and internal controls, in all cases having due regard to the interests ofShareholders. The Audit Committee will meet at least three times a year. Ken Beaty and Ian Livingstonewill be the other members of the Audit Committee.

The Nomination Committee will have Ken Beaty as chairman, and will identify and nominate, for theapproval of the Board, candidates to fill Board vacancies as and when they arise. The NominationCommittee will meet at least once a year. Michael Sherwin and Ian Livingstone will be the othermembers of the Nomination Committee.

The Remuneration Committee will have Ian Livingstone as chairman, and will review the performanceof the executive directors and determine their terms and conditions of service, including theirremuneration and the grant of options, having due regard to the interests of Shareholders. TheRemuneration Committee will meet at least twice a year. Michael Sherwin will be the other member ofthe Remuneration Committee.

Share dealing code

The Directors and the Proposed Director understand the importance of complying with the AIM Rulesand applicable legislation relating to dealings by directors and certain other employees of the Group inthe Ordinary Shares and has established a share dealing code. The Company will take all reasonablesteps to ensure compliance by the directors and any relevant employees with that code. The Directorsand the Proposed Director believe that the share dealing code adopted by the Board is appropriate fora company quoted on AIM and is compliant with rule 21 of the AIM Rules and applicable legislationrelating to dealing policies.

17. RELATIONSHIP AGREEMENT

On Admission, Perwyn Bidco (UK) Limited will (together with interests held by related parties) holdapproximately 29.4 per cent. of the Enlarged Ordinary Share Capital. The Company, Zeus Capital andPerwyn Bidco (UK) Limited entered into the Relationship Agreement on 15 December 2017 to regulateaspects of the continuing relationship between the Company and Perwyn Bidco (UK) Limited in itscapacity as a Shareholder with the intention of enabling the Company to conduct its business affairsindependently of Perwyn Bidco (UK) Limited and to ensure that future transactions between theCompany and Perwyn Bidco (UK) Limited are on arm’s length terms and on a normal commercial basis.Perwyn have the ability to nominate a director to the Board and have nominated Ken Beaty under thisright. Certain undertakings given by Perwyn Bidco (UK) Limited in the Relationship Agreement will fallaway, amongst other things, when the voting rights attaching to Perwyn Bidco (UK) Limited’sshareholding (together with that of its associates) in the capital of the Company represent less than15 per cent. of all voting rights in the Company.

18. DIVIDEND POLICY

The Directors and the Proposed Director intend to re-invest a significant portion of the Company’searnings to facilitate plans for further growth. Accordingly, whilst the Directors and the ProposedDirector do not expect to declare any dividend in respect of the current financial year ending on31 December 2017, it is the Board’s intention, should the Group generate a sustained level ofdistributable profits, to consider a progressive dividend policy in future years.

36

Declaration of dividends will always remain subject to all applicable legal and regulatory requirementsand recommendations of final dividends and payments of interim dividends will be at the discretion ofthe Board. The Board will not exercise such discretion where it is not commercially prudent to do sotaking into account the policy set out above.

Whilst the Board considers dividends as the primary method of returning capital to Shareholders, it may,at its discretion, consider share purchases, when advantageous to Shareholders and wherepermissible.

The Company may revise its dividend policy from time to time.

19. APPLICABILITY OF THE TAKEOVER CODE

The Takeover Code is issued and administered by the Panel and governs, amongst other things,transactions involving companies to which the Takeover Code applies. The Takeover Code applies tothe Company and therefore its Shareholders are entitled to the protection afforded by the TakeoverCode. Under rule 9 of the Takeover Code, if an acquisition of interests in shares were to increase theaggregate holding of the acquirer and its concert parties to interests in shares carrying 30 per cent. ormore of the voting rights in the Company, the acquirer and, depending on circumstances, its concertparties would be required (except with the consent of the Panel) to make a cash offer for theoutstanding shares in the Company at a price not less than the highest price paid for interests in sharesby the acquirer or its concert parties during the previous 12 months. This requirement would also betriggered by any acquisition of interests in shares by a person holding (together with its concert parties)shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Company if the effectof such acquisition were to increase that person’s percentage interest in the Company’s shares.

20. RISK FACTORS

Your attention is drawn to the risk factors set out in Part II of this Document. Your attention is also drawnto the section entitled “Important Information” on pages 3 and 4 of this Document and to the sectionentitled “Forward looking statements” in that section. In addition to all other information set out in thisDocument, potential investors should carefully consider the risks described in those sections beforedeciding to invest in the Company.

21. ADDITIONAL INFORMATION

You should read the whole of this Document and not just rely on the information contained in this Part I.

Your attention is drawn to Parts II to V (inclusive) of this Document which contain further information onthe Group.

37

PART II

RISK FACTORS

Before making any investment decision, prospective investors should carefully consider all the

information contained in this Document, including the risk factors described below.

Ordinary Shares may not be a suitable investment for all recipients of this Document. If you are

in any doubt about the Ordinary Shares and their suitability for you as an investment, you

should consult a person authorised under FSMA who specialises in advising on the acquisition

of shares and other securities.

In addition to the usual risks associated with an investment in a company, the Directors and the

Proposed Director consider that the factors and risks described below are the most significant

in relation to an investment in the Company and should be carefully considered, together with

all the information contained in this Document, prior to making any investment decision in

respect of the Ordinary Shares. The list below is not exhaustive, nor is it an explanation of all

the risk factors involved in investing in the Company and nor are the risks set out in any order

of priority.

It should be noted that the risks described below are not the only risks faced by the Group and

there may be additional risks that the Directors and the Proposed Director currently consider

not to be material or of which they are currently not aware.

If any of the events described in the following risks occur, the Group’s business, financial

condition, results or future operations could be materially affected. In such circumstances, the

price of the Ordinary Shares could decline and investors could lose all or part of their

investment.

Risks specific to the Group’s business

Dependence on the games development marketThe Group has derived a significant proportion of its historical revenues from the co-development work

it carries out for games developers and publishers. The success of the Group will continue to depend

on its ability to be engaged to develop games for such third parties. There can be no assurance that

these customer relationships will continue, or that the revenue that the Directors and the Proposed

Director expect to generate from these relationships will materialise. Similarly, there is no guarantee

that any of the contracts the Directors and the Proposed Director anticipate signing with customers will

be entered into, despite initial indications from these entities that this will be the case. The Group’s

operating plan and future results could be hindered if this were to be the case and replacement work

could not be found.

Dependence on a concentrated customer baseIn the year ended 31 December 2016, the Group generated the majority of its revenue from three

customers who each accounted for at least 10 per cent. of total revenues. This included revenue from

multiple projects with different entities within each customer’s group. The loss of any of the key

customers could have a material impact on the Group’s financial results.

The Group is reliant on the long term commercial success of its customers. The performance of such

customers will have a significant bearing on the success of the Group in terms of the requirement for

future games to be developed and released, however their performance cannot be guaranteed.

Underperformance of the Group’s customers could have a material adverse effect on the Group’s

business, operations, revenues or prospects. The Group looks to mitigate such risks through having

strong relationships with some of the world’s largest publishers who have a strong track record of

launching successful games.

Loss of key managementThe Group’s performance relies heavily on the efforts and abilities of its directors and executive officers.

Their strategic guidance, experience and expertise will have a significant bearing on the success of the

38

Group. The retention of their services cannot be guaranteed. The loss of the services of any of the

directors or senior executives could have a material adverse effect on the Group’s business, operations,

revenues or prospects.

Ability to recruit and retain skilled personnelThe Company’s operational and financial performance is dependent upon its ability to attract and retain

effective personnel. The Directors and the Proposed Director believe that the Group will have the

appropriate remuneration and other incentivisation structures and processes to attract and retain the

calibre of employees necessary to ensure the efficient management and development of the Group.

However, any difficulties encountered in hiring and retaining appropriate employees and the failure to

do so may have a detrimental effect upon the trading performance of the Group. The ability to retain

and attract employees with the appropriate expertise and skills cannot be guaranteed. This risk may be

exacerbated by the uncertainty surrounding Brexit.

Frequent use by the Group of sub-contractorsThe Group uses the services of a number of sub-contractors who are often self-employed individuals

engaged by the Group on an ad-hoc basis. The terms of these engagements are not always reflected

under the terms of a legally binding agreement, however, the Directors and the Proposed Director do

not consider there to be any material exposure to the Group arising from any failure to record the terms

of engagement in such agreement.

There may be a risk that, where these individual sub-contractors provide repeat services to the Group,

they could be deemed by HM Revenue and Customs or the Pensions Regulator to be employees or

workers of the Group. This could result in additional costs to the Group for the future but could also

mean that there are historical liabilities (in terms of PAYE, NIC, holiday pay and pension costs under

auto-enrolment) which may also need to be satisfied by the Group.

Any failure of the physical infrastructure or services of the Group could lead to significant costsand disruptions that could reduce revenues, harm the Group’s business reputation and have amaterial adverse effect on financial resultsThe operation of the Group’s business depends on providing customers with services which rely upon

the Group’s infrastructure and equipment. Consequently, the Group must protect its infrastructure and

equipment located at the Group’s premises. If the Group fails to meet its customers’ requirements or to

protect the infrastructure, it may lose customers and/or may become liable to them for damages. The

quality of service provided by the Group in the event of service interruptions due to equipment damage

in the Group’s facilities may result in the termination of a customer’s relationship with the Group. In

addition, the Group’s inability to meet levels of service commitments may damage its reputation and

could reduce the confidence of the Group’s customers in its services, impairing its ability to retain

existing customers and attract new customers.

Some contracts contain unfavorable termsSome of the Group’s contracts with publishers can contain a number of unfavorable terms. In particular,

in a number of the Group’s contracts, the Group provides wide-ranging warranties and indemnities

which, in some circumstances, relate to breaches of general obligations under the contract. The

Group’s liability under these contracts is generally either uncapped or capped at a high amount. Under

some of these contracts, the Group indemnifies the publisher on behalf of itself and certain third parties.

There is a risk that the Group may not be able to reclaim the liability accruing to the Group from such

an indemnity from the relevant third party. In the event that the Group’s potential liabilities under the

warranties and/or indemnities are realised, this could have a significant adverse impact on the Group’s

profits. Additionally, a number of the Group’s contracts with publishers contain restrictive covenants,

which restrict the Group from developing a game which is in the same category as the game to be

produced under such a contract, or which has a similar look or feel as such a game, or which is in

competition with the relevant publisher. Such restrictions impact on the Group’s ability to develop

competing games and there is a risk that this may adversely impact the Group’s revenues by restricting

the Group’s ability to generate new business.

The Directors and the Proposed Director believe the contractual terms as described above are common

across the computer games industry and they seek to mitigate any potential issue under such terms by

39

developing strong relationships with key customers and delivering services on time and to the specified

quality and specification. The Group also puts in place various insurance policies when and where

required to further mitigate the potential liabilities from any breach under these contracts.

Contractual termination rightsUnder a number of the Group’s contracts with publishers, the publisher has a right to terminate for

convenience which the Directors and the Proposed Director believe is common practice in the computer

games industry. In such circumstances, under some of these contracts, the Group will be entitled to a

compensation payment but this will generally only cover the direct costs incurred by the Group on work

undertaken up to the date of termination. These payments will not compensate the Group for any

resulting loss of profits and will not provide the full amount of revenue that could otherwise have been

earned under the relevant contract. Similarly, a number of the Group’s contracts with publishers provide

the publisher with a right to terminate the contract upon a change of control of the Group. If a publisher

were to terminate its contract(s) with the Group in such a circumstance, the Group would not be entitled

to any compensation payments. The Group derives a significant proportion of its revenue from its

contracts with publishers. The termination of such contracts, or any such contract which is material to

the Group’s business, would have a significant detrimental impact on the Group’s revenues and its

ability to carry on its business.

The Group has secured change of control consent from all of its top five customers.

Development work prior to contractThe Group often begins work on developing a game before full contractual terms have been agreed

with a publisher. In the event that contractual terms are not ultimately agreed, the Group may incur

wasted costs attributable to this development time. Additionally, the full contractual terms may render

some of the Group’s development work redundant or obsolete which could increase the Group’s costs.

There is therefore a risk that this approach may have an adverse impact on the Group’s ability to

generate profits.

VGTRThe Group benefits from the VGTR regime that came into force in 2014 and to date the majority of

games the Group works on qualify for VGTR. There can be no guarantee that future games will qualify

for VGTR or that all current claims will be successful. If changes to VGTR policy were made in the

future, it could potentially restrict how the Group could work with its customers and remain eligible for

VGTR. If current or future games were not able to benefit from VGTR, this could potentially materially

impact the Group’s financial performance.

IT security risksThe video game industry is subject to the threat of IT security breaches, unauthorised copying and

software piracy. The Group’s hardware and software are typically subject to copy protection technology

or other technological protection measures intended to prevent software piracy but these measures

may not be adequate to so do. Unauthorised copying of the Group’s own intellectual property games,

or games produced by the Group for which the Group may be entitled to revenue-based royalties, could

have an adverse effect on the Group’s ability to generate revenues and profits. Complete protection

cannot be guaranteed and an IT security breach could cause significant disruption to the Group’s

operations.

Sumo relies on the ongoing stability of its IT systemsThe Group is highly dependent on the effective operation of its IT systems and infrastructure due to the

nature of the Group’s operations. This dependence is increased by the Company’s workflow structure,

which provides for work to be passed between its studios in the UK and overseas. The Group has put

in place business continuity and disaster recovery procedures in the event of failure of, or disruption or

damage to, the Group’s network or IT systems. However, such procedures may not be sufficient to

ensure that the Group is able to carry on its business in the ordinary course in the event of such a

failure, disruption or damage. Any major systems failure, including failures relating to the Group’s

network, software, internet or hardware, which causes material delay or interruption in the operation of

the Group’s systems could have a material adverse effect on the Company’s ability to fulfil its

40

obligations under its contracts with customers in addition to harming customer relationships and

diminishing the Group’s goodwill. Such an event could therefore have a material adverse effect on the

Group’s profitability, financial condition and revenue.

Risk to intellectual propertyThe Group relies on a combination of trade secret, copyright, non-disclosure laws and other contractual

agreements and technical measures to protect its own and its customers’ intellectual property. The

Group has entered into confidentiality provisions as part of its arrangements with its employees and

consultants. Despite the Group’s efforts to protect its and its customers’ proprietary rights, unauthorised

third parties may attempt to copy or use information from the games the Group is working on. If the

Group cannot successfully enforce its intellectual property rights or if a customer’s intellectual property

is damaged, this could have a material adverse effect on the Group’s business, financial condition and

prospects.

Industry regulationThe video games industry is subject to a number of laws and regulations, in particular those relating to

consumer protection, also covering but not limited to information given to consumers on the rules of use

and content of games, the classification of games in accordance with age-rating, the protection of

consumers’ personal data when this data is collected and the protection of minors (notably by setting

up parental consent procedures).

The Group, like other video games developers, is exposed to multiple prerequisites such as changes

in regulations and standards relating to data protection and the management of sensitive data. A breach

of any such laws, regulations or standards, could have a material adverse effect on the Group’s

financial performance.

Data privacy compliance breaches or failure to protect confidential information could harm theCompany’s reputation and expose the Company to litigation or other legal or regulatory actionsThe Company is subject to a number of laws relating to privacy and data protection, including the UK’s

Data Protection Act 1998 and the Privacy and Electronic Communications (EC Directive) Regulations

2003, as well as relevant non-EEA data protection and privacy laws. Such laws govern the Company’s

ability to collect, use and transfer personal information relating to its customers and others, including

the use of that information for marketing purposes and for its advertisers to focus their advertising

campaigns, as well as its employees and others. The Company relies upon third party contractors and

its own employees to collect and process personal data and to maintain its databases. Therefore, the

Company is exposed to the risk that such data could be wrongfully appropriated, lost or disclosed,

damaged or processed in breach of data protection law and regulation.

With effect from 25 May 2018, Sumo will be subject to the General Data Protection Regulation

(Regulation (EU) 2016/679) (GDPR) which will place more onerous obligations on the Company in

relation to data protection compliance. The Company will take steps to prepare for the implementation

of GDPR but there is a risk that such measures may not be deemed sufficient in order to comply with

the regulation or regulatory guidance. Additionally, there is a risk that the penalties for the Company for

any breach of the GDPR would potentially be more severe than under the current laws relating to

privacy and data protection. Despite controls to protect the confidentiality and integrity of customer

information, the Company may breach restrictions or may be subject to attack from computer

programmes that attempt to penetrate its network security and misappropriate confidential information.

If the Company or any of the third party service providers on which it relies, fails to store or transmit

information and/or payment details online in a secure manner, or if any unauthorised or unlawful loss,

disclosure or destruction of personal data were otherwise to occur, the Company may be subject to,

amongst other things, claims from third parties relating to the infringement of privacy rights and/or

investigative or enforcement action (including criminal proceedings and significant pecuniary penalties)

by the Information Commissioner’s Office in the UK or similar regulatory jurisdictions in which the Group

operates. Whilst the Company strives to comply with all applicable laws, regulations, policies and legal

obligations relating to privacy and data protection, it is possible that such requirements may be

interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict

with other rules or Sumo’s practices.

41

Any perceived or actual failure to protect confidential data may harm Sumo’s reputation and credibility,

adversely affect revenue, reduce its ability to attract and retain customers or result in litigation or other

actions being brought against the Company, or the imposition of fines and, as a result, could have a

material adverse impact on its business, operations and financial condition.

Market growth, new developments and technological trendsThe global video games market has seen consistent growth for many years. There is, however, a risk

to the Group that trends may reverse or continue at slower rates than expected.

The video games market is competitive and selective and is subject to concentration and economic

fluctuations, with rapid technological changes requiring significant research and development

investment.

The industry also faces challenges such as the shift towards digital online distribution, a second-hand

market, piracy and emerging competitors.

In order to remain competitive, the Group will need to continue to select the projects it works on and

their target format(s) carefully and adapt how it derives revenues from its games and technology. If the

Group is not successful in doing so, this could have a material adverse effect on the financial and

trading position of the Group.

Changing consumer preferencesThe Group’s business is vulnerable to changing consumer preferences. The Group released its own

intellectual property title, Snake Pass, in 2017 and intends to continue to select and release own

intellectual property games in the future. Whilst it is the Group’s intention to focus its own intellectual

property games on smaller-scale ‘indie’ games, which will reduce the Group’s exposure, the Group

incurs costs in producing such own intellectual property games. In the event that the Group misjudges

the level of demand for its games, there is a risk that the Group may not recoup its costs or may be

unable to deliver an effective return on its investment in producing such own intellectual property games

which could have an adverse impact on the Group’s profits. Additionally, a number of the Group’s

publisher contracts include potential back-end royalty payments. Whilst the terms of these payments

vary, there is a risk that changing consumer preferences may reduce revenues generated through such

royalty payments. Changing consumer and critical preferences in style or genre of game may also

impact on the metacritic scores of games produced by Sumo Digital. In such circumstances, there is a

risk that this may have an adverse impact on the Group’s revenues.

Overseas operationsThe Group currently has two overseas operations, one in Pune (India) and the other in Vancouver

(Canada). These jurisdictions have different regulatory, fiscal, and legal environments that could

change in the future and could impact how the Group conducts its business in these countries. The

Group currently has a cost benefit through its Indian operations and higher than expected wage and

rent inflation could impact the future financial results of the Group. If the Group fails to comply with the

laws and regulations applicable to its overseas operations, it could be subject to reputational and legal

risks, including government enforcement action and/or fines. Such risks, if realised, could have a

material adverse effect on the Group’s profits and financial condition.

The Group operates in a competitive environmentThe Group may face significant competition, including from domestic and overseas competitors who

may have: i) greater capital and other resources than those of the Group; ii) superior brand recognition

to that of the Group; and/or iii) more aggressive pricing policies than those of the Group. There is no

assurance that the Group will be able to compete successfully in such a competitive marketplace. The

Directors and the Proposed Director believe that the Group has a strong reputation for delivery and high

quality of service. However, were such standards not to be maintained, there is a risk that the Group’s

reputation and competitiveness would suffer which could have a material adverse effect on the Group’s

revenues, profits and financial condition.

42

Future acquisitions may have an adverse effect on the Group’s ability to manage its businessIf the Group is presented with appropriate opportunities, it may acquire complementary intellectual

property, technologies, development teams, additional studios, companies or assets. Future

acquisitions would expose the Group to potential risks, including risks associated with the assimilation

of new technologies and personnel, unforeseen or hidden liabilities, the diversion of management

attention and resources from the Group’s existing business and the inability to generate sufficient

revenues to offset the costs and expenses of acquisitions. Any difficulties encountered in the acquisition

and integration process may have an adverse effect on the Group’s ability to manage its business.

Foreign exchange movementsThe Group has certain contracts priced in foreign currencies and also has employees based overseas

paid in foreign currencies. It is therefore exposed to the risk that adverse exchange rate movements

could cause its costs to increase (relative to its reporting currency) resulting in reduced profitability. The

Group, where deemed relevant, takes steps to mitigate this risk by putting in place hedging

arrangements to reduce exposure to currency risk, however these may not always be entirely effective,

and residual currency risk may exist.

The Company may be subject to Brexit related riskOn 23 June 2016, the United Kingdom held a referendum on the United Kingdom’s continued

membership of the European Union. This resulted in a vote for the United Kingdom to exit the European

Union. There are significant uncertainties in relation to the terms and timeframe within which such an

exit will be effected, and there are significant uncertainties as to what the impact will be on the fiscal,

monetary and regulatory landscape in the UK, including inter alia, the UK’s tax system, the conduct of

cross-border business and export and import tariffs. There is also uncertainty in relation to how, when

and to what extent these developments will impact on the economy in the UK and the future growth of

its various industries and on levels of investor activity and confidence, on market performance and on

exchange rates. There is also a risk that the vote by the UK to leave could result in other member states

re-considering their respective membership of the European Union. Although it is not possible to predict

fully the effects of the UK’s exit from the European Union, any of these risks could have a material

adverse impact on the financial condition, profitability and share price of the Company.

Substantial ShareholdersFollowing Admission, Ken Beaty and funds advised by Perwyn LLP shall own approximately 29.4 per

cent. of the Enlarged Ordinary Share Capital. Funds advised by Perwyn LLP shall also have the right

to appoint a director to the Board, which, on Admission shall be Ken Beaty, for so long as it holds in

excess of 15 per cent. of the Enlarged Ordinary Share Capital. As a result, funds advised by Perwyn

LLP will be able to exercise certain control over a number of matters requiring shareholder approval.

Funds advised by Perwyn LLP have entered into a Relationship Agreement as detailed in Paragraph

12.3 of Part V of this Document.

General risks relating to the Ordinary Shares

Current operating results as an indication of future resultsThe Group’s operating results may fluctuate significantly in the future due to a variety of factors, many

of which are outside its control. Accordingly, investors should not rely on the Group’s results to date as

an indication of future performance. Factors that may affect the Group’s operating results include

increased competition, an increased level of expenses, technological change necessitating additional

capital expenditure, the success of its games and changes to the statutory and regulatory regime in

which it operates. It is possible that, in the future, the Group’s operating results may fall below the

expectations of market analysts or investors. If this occurs, the trading price of the Ordinary Shares may

decline significantly.

Quotation on AIM, liquidity and possible price volatilityFollowing Admission, the market price of the Ordinary Shares may be subject to significant fluctuations

in response to many factors, including variations in the results of the Group, divergence in financial

results from analysts’ expectations, changes in earnings estimates by stock market analysts, general

43

economic conditions, legislative changes in the Group’s sector and other events and factors outside of

the Group’s control.

In addition, stock market prices may be volatile and may go down as well as up. The price at which

investors may dispose of their Ordinary Shares may be influenced by a number of factors, some of

which may pertain to the Group and others which are extraneous. These factors could include the

performance of the Group’s business, changes in the values of its investments, changes in the amount

of distributions or dividends, changes in the Group’s operating expenses, variations in and the timing of

the recognition of realised and unrealised gains or losses, the degree to which the Group encounters

competition, large purchases or sales of Ordinary Shares, liquidity (or absence of liquidity) in the

Ordinary Shares, legislative or regulatory or taxation changes and general economic conditions. On any

disposal of their Ordinary Shares, investors may realise less than the original amount invested.

The Ordinary Shares will not be listed on the Official List and, although the Ordinary Shares will be

traded on AIM, this should not be taken as implying that there will always be a liquid market in the

Ordinary Shares. In addition, the market for shares in smaller public companies is less liquid than for

larger public companies. Therefore, an investment in the Ordinary Shares may be difficult to realise and

the price of the Ordinary Shares may be subject to greater fluctuations than might otherwise be the

case.

An investment in shares quoted on AIM may carry a higher risk than an investment in shares quoted on

the Official List.

In addition, there can be no guarantee that Ordinary Shares will continue to trade on AIM in the future

or on any other exchange. If such trading were to cease, certain investors may decide to sell their

shares, which could have an adverse impact on the price of the Ordinary Shares. Additionally, if in the

future the Company decides to obtain a listing on another exchange in addition or as an alternative to

AIM, the level of liquidity of the Ordinary Shares traded on AIM could decline.

Legislation and tax statusThis Document has been prepared on the basis of current legislation, regulation, rules and practices

and the Directors’ and the Proposed Director’s interpretation of them. Such interpretation may not be

correct and it is always possible that legislation, regulation, rules and practices may change. Any

change in legislation or regulation and, in particular, in tax status or tax residence of the Company or in

tax legislation or practice may have an adverse effect on the returns available on an investment in the

Company.

Economic, political, judicial, administrative, taxation or other regulatory mattersIn addition to the impact of the downturn of the world’s economies, the Group may be adversely affected

by other changes in economic, political, judicial, administrative, taxation or other regulatory or other

unforeseen matters.

TaxationThe attention of potential investors is drawn to paragraph 15 of Part V of this Document headed

“Taxation”.

The tax rules and their interpretation relating to an investment in the Group may change over the course

of time.

Information in this Document concerning the taxation of the Group and its investors is based upon

current tax law and practice which is subject to change.

DividendsIt is not currently the intention for the Company to pay dividends. The Company’s ability to pay

dividends in the future will depend on the level of distributions, if any, received from its operating

subsidiaries. The Company’s subsidiaries may, from time to time, be subject to restrictions on their

ability to make distributions, including foreign exchange limitations and regulatory, fiscal and other

restrictions. There can be no assurance that such restrictions will not have a material adverse effect on

the Company’s results or financial condition.

44

Future sale of Ordinary Shares and other corporate actionsThe Company is unable to predict when and if substantial numbers of Ordinary Shares will be sold in

the open market following Admission. Any such sales, or the perception that such sales might occur,

could result in a material adverse effect on the market value of Ordinary Shares. The Group may require

additional capital in the future which may not be available to it. If available, future financings to provide

this capital may dilute Shareholders’ proportionate ownership of the Company’s share capital. The

Group may raise capital in the future through public or private equity financings or by raising debt

securities convertible into Ordinary Shares or rights to acquire these securities. The Company cannot

give Shareholders any assurance that they will be provided with the opportunity to participate in any

such offering in any particular circumstance or at all. If the Group raises significant amounts of capital

by these or other means, it could cause dilution for the Company’s existing Shareholders. Moreover,

the further issue of Ordinary Shares could have a negative impact on, and increase the volatility of, the

market value of the Ordinary Shares. The Company may also issue further Ordinary Shares, or create

further options over Ordinary Shares, as part of its employee remuneration policy, which could in

aggregate create a substantial dilution in the value of the Ordinary Shares and the proportion of the

Company’s share capital in which investors are interested.

Costs of being a public companyAs a public company, the Company will be required to comply with certain additional laws, regulations

and requirements, including the requirements of AIM. Complying with these laws, regulations and

requirements will occupy a significant amount of the time of the Board and management and will

increase the Company’s costs and expenses. The Company expects that compliance with these laws,

regulations and requirements will increase its legal and financial compliance costs and is likely to

require it to hire additional personnel or consultants. The Company cannot predict or estimate the

amount of additional costs which it may incur or the timing of such costs.

In order to comply with these laws, regulations and requirements, the Company will need to:

• expand the roles and duties of its Board, its Board committees and management;

• institute more comprehensive compliance functions and add an internal audit function;

• evaluate and maintain its system of internal control over financial reporting, and report on

management’s assessment of it;

• prepare and distribute periodic public reports in compliance with the Company’s obligations

under applicable laws and regulations;

• implement more comprehensive internal policies, such as those relating to disclosure controls

and procedures and insider trading;

• involve, to a greater degree, outside counsel and accountants in the above activities; and

• hire investor relations support personnel.

If the Company fails to take some of these actions, in particular with respect to its internal audit and

accounting functions and its compliance function, its ability to report its financial results accurately and

in a timely manner could be impaired.

45

PART III

HISTORICAL FINANCIAL INFORMATION

SECTION A: ACCOUNTANTS’ REPORT ON THE GROUP’S COMBINED HISTORICAL FINANCIAL

INFORMATION OF PROJECT REPUBLICA TOPCO LIMITED AND ITS SUBSIDIARY

UNDERTAKINGS

The Directors

Sumo Group plc

32 Jessops Riverside

Brightside Lane

Sheffield

S9 2RX

15 December 2017

Dear Sirs

Project Republica Topco Limited (the Company) and its Subsidiary Undertakings (together the

Group) – Accountant’s Report on the Group’s Combined Historical Financial Information

We report on the Group’s combined historical financial information set out in Section B of Part III of

Sumo Group plc’s AIM Admission Document dated 15 December 2017 (the Admission Document),

for the three years ended 31 December 2016 (the Historical Financial Information). The Historical

Financial Information has been prepared for inclusion in the Admission Document on the basis of the

accounting policies set out in note 2 to the Historical Financial Information.

This report is required by Paragraph (a) of Schedule Two of the AIM Rules for Companies and is given

for the purpose of complying with that paragraph and for no other purpose.

Responsibilities

The directors of Sumo Group plc are responsible for preparing the Historical Financial Information in

accordance with the basis of preparation set out in note 2 to the Historical Financial Information. It is

our responsibility to form an opinion on the Historical Financial Information and to report our opinion to

you.

Save for any responsibility arising under Paragraph (a) of Schedule Two of the AIM Rules for

Companies to any person as and to the extent there provided, to the fullest extent permitted by law we

do not assume any responsibility and will not accept any liability to any other person for any loss

suffered by any such other person as a result of, arising out of, or in connection with this report or our

statement, required by and given solely for the purposes of complying with Paragraph (a) of Schedule

Two of the AIM Rules for Companies, consenting to its inclusion in the Admission Document.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the

Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant

to the amounts and disclosures in the Historical Financial Information. It also included an assessment

of the significant estimates and judgements made by those responsible for the preparation of the

Historical Financial Information and whether the accounting policies are appropriate to the entity’s

circumstances, consistently applied and adequately disclosed.

Grant Thornton UK LLP No 1 Whitehall Riverside Leeds LS1 4BN T +44 (0)113 245 5514 F +44 (0)113 246 5055 grantthornton.co.uk

46

We planned and performed our work so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that

the Historical Financial Information is free from material misstatement, whether caused by fraud or other

irregularity or error.

Opinion on Historical Financial Information

In our opinion, the Historical Financial Information gives, for the purposes of the Admission Document,

a true and fair view of the state of affairs of the Group as at 31 December 2014, 2015 and 2016 and of

its profits, cash flows and changes in equity for the three years ended 31 December 2016 in accordance

with the basis of preparation set out in note 2 to the Historical Financial Information.

Declaration

For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies we are responsible

for this report as part of the Admission Document and declare that we have taken all reasonable care

to ensure that the information contained in this report is, to the best of our knowledge, in accordance

with the facts and contains no omission likely to affect its import. This declaration is included in the

Admission Document in compliance with Paragraph (a) of Schedule Two of the AIM Rules for

Companies.

Yours faithfully

GRANT THORNTON UK LLP

47

SECTION B: HISTORICAL FINANCIAL INFORMATION

COMBINED INCOME STATEMENT

For the years ended 31 December 2014, 2015 and 2016

Year ended Year ended Year ended 31 December 31 December 31 December Note 2014 2015 2016 £’000 £’000 £’000Revenue 4 16,124 21,566 24,106

Direct costs (net) 6 (11,331) (11,863) (15,101) –––––––– –––––––– ––––––––Gross profit 4,793 9,703 9,005

Operating expenses (2,328) (5,735) (7,223)

Operating expenses – exceptional 8 (1,754) (142) (912) –––––––– –––––––– ––––––––Operating expenses – total (4,082) (5,877) (8,135) –––––––– –––––––– ––––––––

Group operating profit 711 3,826 870

Analysed as:

Adjusted EBITDA 3,199 6,806 6,045

Amortisation (407) (2,379) (3,692)

Depreciation (327) (459) (571)

Exceptional items 8 (1,754) (142) (912) –––––––– –––––––– ––––––––Group operating profit 711 3,826 870

Finance costs 9 (692) (1,312) (2,991)

Finance income 12 3 9 –––––––– –––––––– ––––––––Net finance costs (680) (1,309) (2,982) –––––––– –––––––– ––––––––

Profit/(loss) before taxation 31 2,517 (2,112)

Taxation 10 (51) (62) 866 –––––––– –––––––– ––––––––(Loss)/profit for the year attributable to

equity shareholders (20) 2,455 (1,246)

–––––––– –––––––– ––––––––Note 1: Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, and exceptional items, is anon-GAAP metric used by management and is not an IFRS disclosure

All results derive from continuing operations.

48

COMBINED STATEMENT OF COMPREHENSIVE INCOME


Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £,000 £,000(Loss)/profit for the year (20) 2,455 (1,246)

Other comprehensive income:

Exchange differences on retranslation offoreign operations – – 43

–––––––– –––––––– ––––––––Total other comprehensive income – – 43 –––––––– –––––––– ––––––––Total comprehensive (loss)/income

attributable to equity shareholders (20) 2,455 (1,203)

–––––––– –––––––– ––––––––Items in the statement above are disclosed net of tax.

49

COMBINED BALANCE SHEET

As at 31 December 2014, 2015 and 2016

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Non-current assets

Property, plant and equipment 12 1,607 1,659 901

Goodwill and other intangibles 11 10,206 7,955 54,030 –––––––– –––––––– ––––––––Total non-current assets 11,813 9,614 54,931 –––––––– –––––––– ––––––––

Current assets

Trade and other receivables 14 2,237 4,643 4,369

Corporation tax recoverable 1,656 5,146 5,109

Cash and cash equivalents 15 2,469 4,347 4,482 –––––––– –––––––– ––––––––Total current assets 6,362 14,136 13,960 –––––––– –––––––– ––––––––Total assets 18,175 23,750 68,891

–––––––– –––––––– ––––––––Equity and liabilities

Share capital 21 – – 45

Share premium – – 352

Foreign currency translation reserve – – 43

Retained (losses)/earnings (1,156) 972 (825) –––––––– –––––––– ––––––––Total (deficit)/equity (1,156) 972 (385) –––––––– –––––––– ––––––––

Non-current liabilities

Borrowings 17 10,688 14,586 52,630

Employee related provisions 18 13 14 26

Deferred tax liabilities 19 1,395 942 4,963 –––––––– –––––––– ––––––––Total non-current liabilities 12,096 15,542 57,619 –––––––– –––––––– ––––––––

Current liabilities

Borrowings 17 4,061 985 4,088

Trade and other payables 16 3,174 6,251 7,362

Derivative financial instruments 22 – – 207 –––––––– –––––––– ––––––––Total current liabilities 7,235 7,236 11,657 –––––––– –––––––– ––––––––Total liabilities 19,331 22,778 69,276 –––––––– –––––––– ––––––––Total equity and liabilities 18,175 23,750 68,891

–––––––– –––––––– ––––––––

50

COMBINED STATEMENT OF CHANGES IN EQUITY

Foreign currency Share Share translation Retained Total capital premium reserve earnings equity £’000 £’000 £’000 £’000 £’000Balance at 1 January 2014 1 3,800 (19) (257) 3,525

––––––– ––––––– ––––––– ––––––– –––––––Loss for the year – – – (20) (20)

Other comprehensive income for the year – – – – – ––––––– ––––––– ––––––– ––––––– –––––––Total comprehensive income for the year – – – (20) (20)

Changes in ownership interest on

acquisition (1) (3,800) 19 (879) (4,661)

Total transactions with owners,

recognised directly in equity (1) (3,800) 19 (879) (4,661) ––––––– ––––––– ––––––– ––––––– –––––––Balance at 31 December 2014 – – – (1,156) (1,156)

––––––– ––––––– ––––––– ––––––– –––––––Balance at 1 January 2015 – – – (1,156) (1,156)

––––––– ––––––– ––––––– ––––––– –––––––Profit for the year 2,455 2,455

Other comprehensive income for the year – – – – – ––––––– ––––––– ––––––– ––––––– –––––––Total comprehensive income for the year – – – 2,455 2,455

Dividends – – – (327) (327) ––––––– ––––––– ––––––– ––––––– –––––––

Total transactions with owners,

recognised directly in equity – – – (327) (327) ––––––– ––––––– ––––––– ––––––– –––––––Balance at 31 December 2015 – – – 972 972

––––––– ––––––– ––––––– ––––––– –––––––Balance at 1 January 2016 – – – 972 972

––––––– ––––––– ––––––– ––––––– –––––––Loss for the year – – – (1,246) (1,246)

Other comprehensive income for the year – – 43 – 43 ––––––– ––––––– ––––––– ––––––– –––––––Total comprehensive income for the year – – 43 (1,246) (1,203)

Dividends – – – (404) (404)

Changes in ownership interest on

acquisition – – – (147) (147)

Issue of share capital 45 352 – – 397 ––––––– ––––––– ––––––– ––––––– –––––––Total transactions with owners,

recognised directly in equity 45 352 – (551) (154) ––––––– ––––––– ––––––– ––––––– –––––––Balance at 31 December 2016 45 352 43 (825) (385)

––––––– ––––––– ––––––– ––––––– –––––––

51

COMBINED CASH FLOW STATEMENT


Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Cash flows from operating activities

Profit/(loss) before taxation 31 2,517 (2,112)

Adjustments for:

Depreciation 327 459 571

Amortisation of intangible assets 407 2,379 3,692

Video game tax relief in direct costs (1,544) (4,475) (4,993)

Movement in provisions – – 13

Movement in derivative financial instruments – – 207

Profit on disposal of property, plant and equipment – – (560)

Finance costs 692 1,312 2,991

Finance income (12) (3) (9) –––––––– –––––––– –––––––– (99) 2,189 (200)

Changes in working capital:

(Increase)/decrease in trade and other receivables 1,049 (2,406) 274

Increase/(decrease) in trade and other payables 1,176 3,077 1,224 –––––––– –––––––– ––––––––Cash generated from operations 2,126 2,860 1,298

Interest paid (492) (288) (3,040)

Tax (paid)/recovered (271) 470 5,060 –––––––– –––––––– ––––––––Net cash inflow/(outflow) from operating activities 1,363 3,042 3,318 –––––––– –––––––– ––––––––

Cash flows from investing activities

Purchase of property, plant and equipment (459) (511) (885)

Purchase of intangible assets (117) (128) (227)

Proceeds on sale of property, plant and equipment – – 1,632

Net cash outflows on change of ownership (13,445) – (43,944)

Interest received 12 3 9 –––––––– –––––––– ––––––––Net cash inflow/(outflow) from investing activities (14,009) (636) (43,415) –––––––– –––––––– ––––––––

Cash flows from financing activities

Repayment of borrowings (818) (4,000) (15,571)

Proceeds from borrowings 13,500 3,798 56,719

Proceeds from issues of shares – – 397

Payment of loan arrangement fees – – (975)

Dividends paid – (327) (404) –––––––– –––––––– ––––––––Net cash inflow/(outflow) from financing activities 12,682 (529) 40,166 –––––––– –––––––– ––––––––

Net (decrease)/increase in cash and cash equivalents 36 1,877 69

Cash and cash equivalents at beginning of period 2,421 2,469 4,347

Foreign exchange 12 1 66 –––––––– –––––––– ––––––––Cash and cash equivalents at end of period 2,469 4,347 4,482 –––––––– –––––––– ––––––––

52

1. GENERAL INFORMATION

Project Republica Topco Limited (the “Company”) is a private limited company incorporated and

domiciled in England and Wales. The registered office of the Company is 32 Jessops Riverside,

Brightside Lane, Sheffield, England, S9 2RX. The registered company number is 10347606. A list of the

Company’s subsidiaries is presented in note 13.

The Group (the current group of companies headed by Project Republica Topco Limited) is principally

engaged in the development of video games.

2. ACCOUNTING POLICIES

(a) Basis of preparation

The combined financial information has been prepared on a going concern basis under the

historical cost convention except for certain financial instruments that are measured at fair value.

The combined financial information is presented in pounds sterling and all values are rounded to

the nearest thousand pounds (£’000), except where otherwise indicated. The combined financial

information does not constitute statutory accounts for the purposes of section 434 of the

Companies Act 2006.

This Historical Financial Information presents the financial track record of the Group for the three

years ended 31 December 2016 and is prepared for the purposes of admission to AIM, a market

operated by the London Stock Exchange. This combined financial information has been prepared

in accordance with the requirements of the AIM Rules for Companies, in accordance with this

basis of preparation summarised below.

This basis of preparation describes how this combined financial information has been prepared

in accordance with the recognition and measurement principles of International Financial

Reporting Standards as adopted by the European Union and the IFRS Interpretation Committee

interpretations (together “IFRS”) except for the departures below.

Departures from IFRSIFRS does not provide for the preparation of combined financial information, and accordingly in

preparing the combined and consolidated financial information certain accounting conventions

commonly used for the preparation of Historical Financial Information for inclusion in investment

circulars as described in the Annexure to SIR 2000 (Investment Reporting Standard applicable

to public reporting engagements on Historical Financial Information) issued by the UK Auditing

Practices Board have been applied. The application of these conventions results in the following

material departures from IFRS. In other respects IFRS has been applied.

• As explained above, the historical information is not prepared for all periods presented on

a consolidated basis and therefore does not comply with the requirements of IFRS 10.

• The combined financial information does not constitute a set of general purpose financial

statements under paragraph 2 of IAS 1 and consequently the Group does not make an

explicit and unreserved statement of compliance with IFRS as contemplated by paragraph

16 of IAS 1.

• The combined financial information has not been prepared in accordance with IAS 33

‘Earnings per Share’. The directors have concluded that earnings per share information is

not meaningful in respect of the combined financial information, due to the changes in

capital structure that have occurred during the three years ended 31 December 2016 and

since.

• The information contained within this combined financial information contains the financial

results of the entities that were not controlled by Project Republica Topco Limited for the

year end 31 December 2014, the year ended 31 December 2015 and the period from

1 January 2016 to 8 September 2016. The preparation of such combined financial

information is not provided for in IFRS and so the combined financial information does not

comply with IFRS in this regard.

53

• The requirements of IFRS 3 to include assets acquired at fair value has not been applied

in respect of property plant and equipment for the change in ownership on 8 September

2016 as described overleaf. This increased profit for the year ended 31 December 2016

and goodwill as at 31 December 2016 by £560,000.

The principal accounting policies that have been applied to this combined financial information

are set out below. These policies have been consistently applied to all years presented unless

otherwise stated.

The capital structure of the Group has changed during the period following the changes in

ownership of the Group, as set out below:

• On 31 August 2014, Sumo Digital Entertainment Limited acquired the entire share capital

of Sumo Video Games Private Limited, a company registered in India and under the same

ownership as Sumo Digital Entertainment Limited. Sumo Video Games Private Limited is

a company under common control of the Group and as such, it has been accounted for as

if it was a member of the Group from the start of the track-record period on 1 January 2014;

• On 7 November 2014, the Sumo Digital group of companies, then headed by Sumo Digital

Entertainment Limited, was acquired by Sumo Digital Holdings Limited through its

subsidiary Sumo Digital Group Limited; and

• On 8 September 2016, the Sumo Digital group of companies, then headed by Sumo Digital

Holdings Limited, was acquired by Project Republica Topco Limited through its subsidiary

Project Republica Bidco Limited. This business combination is discussed in further detail

in note 5.

As a result of the acquisitions, the structure of the operating group carrying out the Group’s

business has not been the same throughout the entire period covered by the Historical Financial

Information as reflected in the table following:

31 December 2014 31 December 2015 31 December 2016Parent Company Sumo Digital Holdings Sumo Digital Holdings Project Republica Topco

at year-end Limited Limited LimitedOperating

subsidiaries Sumo Digital Limited Sumo Digital Limited Sumo Digital Limited Mistral Entertainment Mistral Entertainment Mistral Entertainment Limited Limited Limited Sumo Video Games Sumo Video Games Sumo Video Games Private Limited Private Limited Private Limited Cirrus Development Cirrus Development Limited Limited Sumo Digital (Atlantis) Sumo Digital (Atlantis) Limited Limited Sumo Digital (Genus) Sumo Digital (Genus) Limited LimitedHolding companies/ Sumo Digital Group Sumo Digital Group Project Republica Bidco

non-trading Limited Limited Limitedsubsidiaries Sumo Digital Sumo Digital Sumo Digital Holdings

Entertainment Limited Entertainment Limited Limited Cirrus Development Riverside Games Sumo Digital Group Limited Limited Limited AGHOCO 1337 Limited Sumo Digital Entertainment Limited Riverside Games Limited AGHOCO 1337 Limited

Furthermore, due to the change in capital structure, the Historical Financial Information is

prepared on a combined basis. The combined basis combines the results, cash flows, assets and

liabilities of each of the companies constituting the Group through aggregation of the assets,

liabilities, revenues, expenses and cash flows of each entity. The Historical Financial Information

has therefore been prepared on the basis as described below.

54

Accounting period ended 31 December 2014This presents the Statements of Comprehensive Income and Statements of Cash Flows for the

year ended 31 December 2014 on a basis of aggregating the results and cash flows of Sumo

Digital Entertainment Limited, Sumo Digital Limited, Mistral Entertainment Limited and Sumo

Video Games Private Limited from 1 January 2014 to 7 November 2014, with the consolidated

results and cash flows of the parent entity at that time, Sumo Digital Holdings Limited from

7 November 2014 to 31 December 2014 prepared in accordance with IFRS 10 Consolidated

Financial Statements (IFRS 10). The balance sheet as at 31 December 2014 represents the

Consolidated Statements of Financial Position of the Sumo Digital Holdings Limited group by

applying the principles underlying the consolidation procedures of IFRS 10. Internal transactions

have been eliminated on combination.

Accounting period ended 31 December 2015This presents the consolidated results and balance sheet of the Sumo Digital Holdings Limited

group for the 12 months ended 31 December 2015, which have been prepared in accordance

with IFRS.

Accounting period ended 31 December 2016The Statements of Comprehensive Income and Statements of Cash Flows for the year ended

31 December 2016 have been prepared on a basis of aggregating the results and cash flows of

the Sumo Digital Holdings Limited group of companies from 1 January 2016 to 8 September

2016, with the consolidated results and cash flows of the Group from 8 September 2016 to

31 December 2016 prepared in accordance with IFRS 10 Consolidated Financial Statements

(IFRS 10). The balance sheet as at 31 December 2016 represents the Consolidated Balance

Sheet of the Group by applying the principles underlying the consolidation procedures of

IFRS 10. Internal transactions within the Group have been eliminated on combination.

The Group has applied IFRS 3 Business Combinations (IFRS 3) on the acquisition of Sumo

Digital Entertainment Limited on 7 November 2014 as detailed in note 5. The Combined

Statement of Changes in Equity includes an adjustment ‘Changes in ownership interests on

Acquisition’ in respect of the elimination of the pre-acquisition net assets of Sumo Entertainment

Limited as required under IFRS 3.

The Group has applied IFRS 3 Business Combinations (IFRS 3) on the acquisition of Sumo

Digital Holdings Limited on 8 September 2016 as detailed in note 5. The Combined Statement of

Changes in Equity includes an adjustment ‘Changes in ownership interests on Acquisition’ in

respect of the elimination of the pre-acquisition net assets of Sumo Digital Holdings Limited as

required under IFRS 3.

(b) Going concern

The Directors have reviewed the forecasts for the period ending 31 December 2018 and consider

the forecasts to be prudent and have assessed the impact of them on the Group’s cash flow,

facilities and headroom within its banking covenants. Furthermore, the Directors have assessed

the future funding requirements of the Group and compared them with the level of available

borrowing facilities. Based on this work, the Directors are satisfied that the Group has adequate

resources to continue in operational existence for the foreseeable future. For this reason they

continue to adopt the going concern basis in preparing the financial statements.

(c) New standards, amendments and interpretations

The Group has not adopted any new standards or amendments that have a significant impact on

the Group’s results or financial position.

Judgements made by the Directors in the application of these accounting policies that have a

significant effect on the Historical Financial Information together with estimates with a significant

risk of material adjustment in the next year are discussed in note 3 to the Historical Financial

Information.

55

(d) Basis of consolidation

Subsidiaries are all entities (including structured entities) over which the Group has control. The

Group controls an entity when the Group is exposed to, or has rights to, variable returns from its

involvement with the entity and has the ability to affect those returns through its power over the

entity. Subsidiaries are fully consolidated from the date on which control is transferred to the

Group and are deconsolidated from the date control ceases.

Inter-company transactions, balances and unrealised gains and losses on transactions between

group companies are eliminated.

(e) Revenue

Revenue is recognised at the fair value of the consideration received or receivable for goods and

services provided in the normal course of business, and is shown net of VAT and other sales

related taxes. The fair value of consideration takes into account trade discounts, settlement

discounts and volume rebates.

Where a contract is executed or where reasonable certainty exists that a contract will be

executed for the provision of professional services, then revenue is recognised by reference to

the stage of completion, if this can be reliably estimated. Revenue for such contracts is stated at

the costs appropriate to the stage of completion plus attributable profits, less amounts recognised

in previous years.

Where the outcome cannot be estimated reliably but the belief exists that payment will be

received for work undertaken in excess of costs incurred then costs incurred are deferred to the

balance sheet. When certainty becomes more reliable then revenue will be recognised based on

the stage of completion and costs deferred will be released to the profit and loss account.

Where the outcome cannot be estimated reliably and work is at the Group’s risk then costs will

be expensed. Royalties are recognised in the period in which they are earned as designated in

the contract.

(f) EBITDA and Adjusted EBITDA

Earnings before Interest, Taxation, Depreciation and Amortisation (“EBITDA”) and Adjusted

EBITDA are non-GAAP measures used by management to assess the operating performance of

the Group. EBITDA is defined as profit before finance costs, tax, depreciation and amortisation.

Exceptional items are excluded from EBITDA to calculate adjusted EBITDA.

The Directors primarily use the Adjusted EBITDA measure when making decisions about the

Group’s activities. As these are non-GAAP measures, EBITDA and Adjusted EBITDA measures

used by other entities may not be calculated in the same way and hence are not directly

comparable.

(g) Foreign currency

Transactions in foreign currencies are translated into the Group’s functional currency at the

foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities

denominated in foreign currencies at the balance sheet date are translated at the foreign

exchange rate ruling at that date. Foreign exchange differences arising on translation are

recognised in profit or loss.

On consolidation, the assets and liabilities of foreign operations which have a functional currency

other than sterling are translated into sterling at foreign exchange rates ruling at the balance

sheet date. The revenues and expenses of these subsidiary undertakings are translated at

average rates applicable in the period. All resulting exchange differences are recognised in other

comprehensive income and documented in a separate component of equity.

56

(h) Classification of instruments issued by the Group

Instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds)

only to the extent that they meet the following two conditions:

• they include no contractual obligations upon the Group to deliver cash or other financial

assets or to exchange financial assets or financial liabilities with another party under

conditions that are potentially unfavourable to the Group; and

• where the instrument will or may be settled in the Company’s own equity instruments, it is

either a non-derivative that includes no obligation to deliver a variable number of the

Company’s own equity instruments or is a derivative that will be settled by the Company

exchanging a fixed amount of cash or other financial assets for a fixed number of its own

equity instruments.

To the extent that this definition is not met, the items are classified as a financial liability. Where

the instrument so classified takes the legal form of the Company’s own shares, the amounts

presented in these financial statements for called up share capital and share premium account

exclude amounts in relation to those shares.

Finance payments associated with financial liabilities are dealt with as part of finance expenses.

Finance payments associated with financial instruments that are classified in equity are dividends

and are recorded directly in equity.

(i) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation.

Where parts of an item of property, plant and equipment have different useful lives, they are

accounted for as separate items of property, plant and equipment.

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of

each part of an item of property, plant and equipment. Depreciation is provided on the following

basis:

Buildings 2% straight line

Leasehold improvements Over period of lease

Fixtures and fittings 25% straight line

Computer hardware 50% straight line

It has been assumed that all assets will be used until the end of their economic life. Freehold land

is not depreciated.

(j) Intangible assets

All business combinations are accounted for by applying the purchase method. Goodwill

represents the difference between the cost of the acquisition and the fair value of the net

identifiable assets acquired. Identifiable intangibles are those which can be sold separately or

which arise from legal or contractual rights regardless of whether those rights are separable, and

are initially recognised at fair value.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to

cash-generating units and is not amortised but is tested annually for impairment.

Other intangible assets that are acquired by the Group are stated at cost less accumulated

amortisation and accumulated impairment losses.

Computer software purchased separately, that does not form an integral part of related hardware,

is capitalised at cost.

Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of

intangible assets unless such lives are indefinite and is presented within operating expenses.

Intangible assets with an indefinite useful life and goodwill are systematically tested for

57

impairment at each balance sheet date. Other intangible assets are amortised from the date they

are available for use.

The estimated useful lives are as follows:

Customer relationships 10 years

Customer contracts 5 years

Software 2 years

(k) Impairment

For goodwill that has an indefinite useful life, the recoverable amount is estimated annually. For

other assets, the recoverable amount is only estimated when there is an indication that an

impairment may have occurred. The recoverable amount is the higher of fair value less costs to

sell and value in use.

An impairment loss is recognised whenever the carrying amount of an asset or its

cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit

or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the

carrying amount of any goodwill allocated to the cash-generating unit and then to reduce

the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is

the smallest identifiable group of assets that generates cash inflows that are largely independent

of the cash inflows from other assets or groups of assets.

(l) Inventories

Work in progress is valued on the basis of direct costs plus attributable overheads based on

normal levels of activity on a first in first out basis. Provision is made for any foreseeable losses

where appropriate. No element of profit is included in the valuation of work in progress.

(m) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense

in profit or loss as incurred.

(n) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or

constructive obligation as a result of a past event, and it is probable that an outflow of economic

benefits will be required to settle the obligation. If the effect is material, provisions are determined

by discounting the expected future cash flows at a pre-tax rate that reflects current market

assessments of the time value of money and, where appropriate, the risks specific to the liability.

(o) Operating lease payments

Operating leases are leases in which substantially all the risks and rewards of ownership related

to the asset are not transferred to the Group.

Payments made under operating leases are recognised in profit or loss on a straight-line basis

over the term of the lease. Lease incentives received are recognised in profit or loss as an

integral part of the total lease expense.

(p) Net financing costs

Net financing costs comprise interest payable and interest receivable on funds invested. Interest

income and interest payable are recognised in profit or loss as they accrue using the effective

interest method. Foreign exchange differences on monetary assets and liabilities are also

presented within financing.

58

(q) Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in

profit or loss except to the extent that it relates to items recognised in other comprehensive

income or directly in equity, in which case it is recognised in other comprehensive income or in

equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates

enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable

in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes, except to

the extent that it arises on:

• the initial recognition of goodwill;

• the initial recognition of assets or liabilities that affect neither accounting nor taxable profit

other than in a business combination;

• differences relating to investments in subsidiaries to the extent that they will probably not

reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or

settlement of the carrying amount of assets and liabilities, using tax rates enacted or

substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits

will be available against which the asset can be utilised.

(r) Video Game Tax Relief

Video Game Tax Relief has only been recognised where management believe that a tax credit

will be recoverable based on their experience of obtaining the relevant certification and the

success of similar historical claims. Such credits are recognised as part of direct costs in order

to reflect the substance of these credits to the Group. The debit is recorded on the balance sheet

as “Corporation tax recoverable” within current assets.

(s) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank borrowings that are

repayable on demand and form an integral part of the Group’s cash management are included

as a component of cash and cash equivalents for the purpose only of the statement of cash flows.

(t) Trade and other receivables

Trade and other receivables are initially recorded at fair value and thereafter are measured at

amortised cost using the effective interest rate. A provision for impairment is made where there

is objective evidence (including customers with financial difficulties or in default on payments)

that amounts will not be recovered in accordance with the original terms of the agreement.

A provision for impairment is established when the carrying value of the receivable exceeds the

present value of the future cash flow discounted using the original effective interest rate. The

carrying value of the receivable is reduced through the use of an allowance account and any

impairment loss is recognised in profit or loss.

(u) Financial derivatives

The Group uses derivative financial instruments to hedge its exposure to risks arising from

operational activities, principally foreign exchange risk. In accordance with treasury policy, the

Group does not hold or issue derivative financial instruments for trading purposes. The Group

does not hedge account for these items. Any gain or loss arising from derivative financial

instruments is based on changes in fair value, which is determined by direct reference to active

market transactions or using a valuation technique where no active market exists. At certain

times the Group has foreign currency forward contracts that fall into this category.

59

(v) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction

costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost

with any difference between cost and redemption value being recognised in profit or loss over the

period of the borrowings on an effective interest basis.

(w) Trade and other payables

Trade payables are initially recorded at fair value and thereafter at amortised cost using the

effective interest rate method.

(x) Segmental reporting

The Group reports its business activities in one area: video games development, which is

reported in a manner consistent with the internal reporting to the Board of directors, which has

been identified as the chief operating decision maker. The Board of directors consists of the

Executive Directors and the Non-Executive Directors.

(y) Exceptional costs

The Group presents as exceptional costs on the face of the income statement, those significant

items of expense, which, because of their size, nature and infrequency of the events giving rise

to them, merit separate presentation to allow shareholders to understand better the elements of

financial performance in the period, so as to facilitate comparison with prior periods and assess

trends in financial performance more readily. Such costs include private-equity management fees

that will not recur post-Admission, together with costs (principally professional fees), directly

related to the various changes in ownership across the track-record period.

(z) Standards and interpretations in issue at 31 December 2016 but not yet effective

The following standards and interpretations of relevance to the Group have been issued but are

not yet effective and have not been adopted by the Group:

• IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018)

• IFRS 9 Financial Instruments (effective 1 January 2018)

• IFRS 16 Leases (effective 1 January 2019)

Management anticipates that all of the relevant pronouncements will be adopted in the Group’s

accounting policies for the first period beginning after the effective date of the pronouncement.

The Directors are in the process of reviewing the impact that IFRS 9 and IFRS 15 will have on

the Group following adoption from 1 January 2018.

The Directors have assessed the impact of IFRS 16, which is expected to increase the carrying

value of Property, Plant, and Equipment, and Lease Liabilities by a range of £3.5m to £4.5m.

(aa) Share capital

Share capital represents the nominal value of shares that have been issued.

(ab) Share premium

Share premium includes any premiums received on issue of share capital. Any transaction costs

associated with the issuing of shares are deducted from share premium, net of any related

income tax benefits.

(ac) Foreign currency translation reserve

Represents the exchange differences on retranslation of foreign operations.

(ad) Retained earnings

Retained earnings includes all current period retained profits.

60

(ae) Direct costs

Included within direct costs are all costs in connection with the development of games, including

an allocation of studio management costs. Video Games Tax Relief is presented within direct

costs as they are directly related to the level of expenditure incurred.

3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

(a) Accounting estimates

Impairment of goodwill and other intangible assetsThe carrying amount of goodwill is £19,785,000 and the carrying amount of other intangible

assets is £34,245,000 as at 31 December 2016. The Directors are confident that the carrying

amount of goodwill and other intangible assets is fairly stated, and have carried out an

impairment review. The forecast cash generation for each Cash Generating Unit (“CGU”) and the

Weighted Average Cost of Capital (“WACC”) represent significant assumptions and should the

assumptions prove to be incorrect there would be a significant risk of a material adjustment within

the next financial year.

The cash flows are based on a three year forecast with growth between 19.4% and 37.7%.

Subsequent years are based on a reduced growth rate of 2% into perpetuity.

The discount rate used was the Group’s pre-tax WACC of 9.75%.

(b) Accounting judgements

Judgements in applying accounting policies and key sources of estimation uncertainty.In the preparation of the Historical Financial Information the Directors, in applying the accounting

policies of the Group, make some judgements and estimates that effect the reported amounts in

the Historical Financial Information. The following are the areas requiring the use of judgement

and estimates that may significantly impact the financial statements.

Goodwill and Intangible assets arising on acquisition.The process estimating the value of Customer Contracts and Customer Relationships on

acquisition includes an element of forecasting and judgement. Details of the period end

impairment review of Goodwill have been disclosed in note 11 to the Historical Financial

Information.

Revenue recognition on development contracts.The recognition of revenue on development contracts requires judgement and estimates on the

overall contract margin and percentage of completion of the contract at each period end. These

judgements are based on contract value, historical experience and forecasts of future outcomes.

These include specific judgement in regards to contracts for which variations may be in the

process of being negotiated, and so the contracts are accounted for on the basis of the best

estimate of the revenue expected to be received on the contract.

Video Game Tax ReliefThe process of claiming Video Game Tax Relief requires estimates to be accrued at the period

end. Whilst the Company undertakes a detailed exercise involving external professional support

in calculating the accrual, these claims are subject to review and approval by HMRC prior to

payment. It is also in the Directors’ judgement that presenting Video Game Tax Relief as part of

direct costs best reflects the substance and nature of these tax reliefs.

4. SEGMENTAL ANALYSIS

The trading operations of the Group are only in video games development and video games services,

and are all continuing. This includes the activities of Sumo Digital Limited, Mistral Entertainment

Limited, Sumo Video Games Private Limited, Cirrus Development Limited, Sumo Digital (Genus)

Limited and Sumo Digital (Atlantis) Limited. The central activities, comprising services and assets

61

provided to Group companies, are considered incidental to the activities of the Group and have

therefore not been shown as a separate operating segment but have been subsumed within video

games development. All assets of the Group reside in the UK, with the exception of non-current assets

with a net book value of £242,000 (2015: £143,000 2014: £111,000), which were located in India.

Major customers

In 2016 there were three major customers that individually accounted for at least 10 per cent of total

revenues (2015: three customers; 2014 two customers). The revenues relating to these customers in

2016 were £13,696,000, £2,925,000 and £5,377,000 (2015: £4,089,000, £4,566,000 and £11,332,000;

2014: £9,438,000 and £5,683,000).

Included within this is revenue from multiple project with different entities within each customer.

Analysis of revenue

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000UK & Ireland 11,623 15,108 14,543

Europe – 378 7,128

Rest of the World 4,501 6,080 2,435 –––––––– –––––––– –––––––– 16,124 21,566 24,106

–––––––– –––––––– ––––––––Revenue by category

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Development Fees 16,124 19,744 23,800

Royalties – 1,822 306 –––––––– –––––––– –––––––– 16,124 21,566 24,106

–––––––– –––––––– ––––––––The Group develops games through a number of individual entities, where certain game disbursements

and other game costs are recharged at cost.

The analysis below presents the revenue and gross margin excluding these pass through costs. The

Gross Profit remains the same, however, the margin appears artificially low.

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Revenue as presented 16,124 21,566 24,106

Gross profit as presented 4,793 9,703 9,005

Gross margin as presented 29.7% 45.0% 37.4%

Pass through revenue/ costs 1,965 3,377 3,645

Alternative revenue 14,159 18,189 20,461

Alternative gross margin 33.9% 53.3% 44.0%

The above analysis represents a non-GAAP measure and has been included to assist understanding

of the Group’s business and should be used in conjunction with the relevant GAAP numbers.

5. BUSINESS COMBINATIONS

On 8 September 2016, Project Republica Topco Limited, via its wholly owned subsidiary Project

Republica Bidco Limited, acquired 100 per cent of the ordinary share capital of the Sumo Digital group

of companies for a cost of £43,944,000.

62

The fair values of the identifiable assets and liabilities at the date of the change in ownership were:

Fair value Book value Fair value recognised at acquisition adjustments at acquisition £’000 £’000 £’000Assets

Intangible assets 195 35,717 35,912

Property, plant and equipment 1,838 – 1,838

Trade and other receivables 3,848 – 3,848

Cash and cash equivalents 2,409 – 2,409

Corporation tax receivable 5,243 – 5,243

Deferred tax 989 (6,429) (5,440) –––––––– –––––––– –––––––– 14,522 29,288 43,810

Liabilities

Loans (12,139) – (12,139)

Trade and other payables (7,512) – (7,512) –––––––– –––––––– –––––––– (19,651) – (19,651) –––––––– –––––––– ––––––––Fair value of identifiable net assets acquired (5,129) 29,288 24,159 –––––––– –––––––– ––––––––Goodwill on acquisition 19,785 –––––––– 43,944

––––––––Summary of net cash outflow from acquisition

Cash paid 43,944

Cash acquired (2,409) –––––––– 41,535

––––––––Cash consideration transferred 43,944

––––––––The fair value adjustments made above are to de-recognise the original goodwill, customer contracts

and customer relationships balances that were included in the book value of assets in the consolidated

financial statements of Sumo Digital Holdings Limited at 8 September 2016 and recognise intangible

assets arising on the acquisition in relation to goodwill (£19,785,000), customer contracts (£14,285,000)

and customer relationships (£21,432,000). In addition, deferred tax liabilities of £6,429,000 have been

recognised on the customer contracts and relationship balances.

On 7 November 2014, Sumo Digital Holdings Limited, via its wholly owned subsidiary Sumo Digital

Group Limited, acquired 100 per cent of the ordinary share capital of the Sumo Digital group of

companies which was headed at that time by Sumo Digital Entertainment Limited.

63

The fair values of the identifiable assets and liabilities at the date of change in ownership were:

Fair value Book value Fair value recognised at acquisition adjustments at acquisition £’000 £’000 £’000Assets

Intangible assets – 7,750 7,750

Property, plant and equipment 1,695 – 1,695

Trade and other receivables 3,943 84 4,027

Cash and cash equivalents 1,561 – 1,561 –––––––– –––––––– –––––––– 7,199 7,834 15,033

Liabilities

Loans (1,196) – (1,196)

Deferred tax – (1,550) (1,550)

Trade and other payables (2,508) – (2,508) –––––––– –––––––– –––––––– (3,704) (1,550) (5,254) –––––––– –––––––– ––––––––Fair value of identifiable net assets acquired 3,495 6,284 9,779 –––––––– –––––––– ––––––––Goodwill on acquisition 2,681 –––––––– 12,460

––––––––Summary of net cash outflow from acquisition

Cash paid 12,460

Cash acquired (1,561) –––––––– 10,899

––––––––Cash consideration transferred 12,460

––––––––The fair value adjustments made above are to reverse the original goodwill balances that were included

in the book value of assets in the consolidated financial statements of Sumo Digital Entertainment

Limited at 7 November 2014 and recognise intangible assets arising on the acquisition in relation to

goodwill (£2,681,000), customer contracts (£3,730,000) and customer relationships (£4,020,000). In

addition, deferred tax liabilities have been recognised on the customer contracts and relationship

balances of £1,550,000.

6. DIRECT COSTS (NET)

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Direct costs 12,875 16,338 20,094

Video Games Tax Relief (1,544) (4,475) (4,993) –––––––– –––––––– –––––––– 11,331 11,863 15,101

–––––––– –––––––– ––––––––

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7. EMPLOYEES AND DIRECTORS

Key management compensation

Key management of the Group is considered to be the Board of Directors. Remuneration paid to the

Directors is as follows:

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Short term benefits:

Salaries including bonuses 337 614 558

Social security costs 46 84 76 –––––––– –––––––– ––––––––Total short-term benefits 383 698 634

Post-employment benefits:

Defined contribution pension plan 82 125 40 –––––––– –––––––– ––––––––Total remuneration 465 823 674

–––––––– –––––––– ––––––––8. EXPENSES BY NATURE

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Exceptional items – monitoring fees 538 75 103

Exceptional items – acquisition related 1,079 5 1,298

Exceptional items – profit on disposal – – (560)

Exceptional items – other 137 62 71 –––––––– –––––––– –––––––– 1,754 142 912

Employee benefit expense (note 7) 9,183 10,153 12,610

Amortisation (note 11) 407 2,379 3,692

Depreciation (note 12) 327 459 571

Operating lease payments 187 171 289

Other expenses 3,555 4,436 5,162 –––––––– –––––––– ––––––––Total direct costs and operating expenses 15,413 17,740 23,236

–––––––– –––––––– ––––––––Exceptional items

Exceptional items include:

• Monitoring fees charged by private equity owners that will not recur post-IPO and are considered

non-recurring in nature,

• Incremental external costs related to the changes in ownership in 2014 and 2016 which primarily

relate to professional fees,

• A material gain on disposal of land and buildings during 2016. Further details are set out in the

basis of preparation (Note 2).

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9. FINANCE COSTS

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Fair value movement on foreign exchange

forward contracts – – 207

Foreign exchange losses on financing activities 359 – 564

Bank charges 30 19 –

Debt refinancing costs release – 27 183

Interest 303 1,266 2,037 –––––––– –––––––– –––––––– 692 1,312 2,991

–––––––– –––––––– ––––––––10. TAXATION

Analysis of charge/(credit) in year

Year ended Year ended Year ended 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Current period tax

Current taxation charge for the year 136 515 (146)

Origination and reversal of temporary differences 1 – 116 –––––––– –––––––– ––––––––Total current tax 137 515 (30) –––––––– –––––––– ––––––––Deferred tax

Origination and reversal of timing differences (86) (523) (836)

Adjustments in respect of prior periods – 70 – –––––––– –––––––– ––––––––Total deferred tax (86) (453) (836) –––––––– –––––––– ––––––––Tax on profit/(loss) on ordinary activities 51 62 (866)

–––––––– –––––––– ––––––––Reconciliation of total tax charge/(credit):

Profit/(Loss) on ordinary activities before tax 31 2,517 (2,112) –––––––– –––––––– ––––––––Loss on ordinary activities multiplied by the rate of

corporation tax in the UK of 20% (2015: 20.25%,

2014: 21.5%) 7 510 (422)

Effects of:

Non-deductible expenses 260 470 384

Relieved tax losses in the period 93 – –

Effects of different tax rates in overseas jurisdictions 18 26 18

Non-taxable income (332) (906) (999)

Effect of change in rates 4 (108) 37

Adjustments in respect of previous periods 1 70 116 –––––––– –––––––– ––––––––Total taxation charge/(credit) 51 62 (866)

–––––––– –––––––– ––––––––Factors that may affect future tax charges

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 (on

26 October 2015) and Finance Bill 2016 (on 7 September 2016). These included reductions to the main

rate to reduce the rate to 19% from 1 April 2017 and to 17% from 1 April 2020, and this has been

reflected in these financial statements.

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11. GOODWILL AND OTHER INTANGIBLES

Customer Customer Software contracts relationships Goodwill Total £’000 £’000 £’000 £’000 £’000COST

As at 1 January 2014 452 – – 4,749 5,201

Additions 117 – – – 117

Arising on the acquisition on

7 November 2014 – 3,730 4,020 2,681 10,431

Eliminated on the acquisition on

7 November 2014 (459) – – (4,749) (5,208) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 110 3,730 4,020 2,681 10,541

Additions 128 – – – 128 –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 238 3,730 4,020 2,681 10,669

Additions 227 – – – 227

Arising on the acquisition on

8 September 2016 – 14,285 21,432 19,785 55,502


8 September 2016 (216) (3,730) (4,020) (2,681) (10,647) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 249 14,285 21,432 19,785 55,751 –––––––– –––––––– –––––––– –––––––– ––––––––

AMORTISATION

As at 1 January 2014 387 – – – 387

Charge for the period 72 276 59 – 407


7 November 2014 (459) – – – (459) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 – 276 59 – 335

Charge for the period 112 1,865 402 – 2,379 –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 112 2,141 461 – 2,714 –––––––– –––––––– –––––––– –––––––– ––––––––Charge for the period 159 2,541 992 – 3,692


8 September 2016 (216) (3,730) (739) – (4,685) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 55 952 714 – 1,721 –––––––– –––––––– –––––––– –––––––– ––––––––

NET BOOK VALUE

As at 1 January 2014 65 – – 4,749 4,814

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 110 3,454 3,961 2,681 10,206

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 126 1,589 3,559 2,681 7,955

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 194 13,333 20,718 19,785 54,030

–––––––– –––––––– –––––––– –––––––– ––––––––The cost of customer relationships was determined as at the date of the respective changes in

ownership by reference to expected future contracts. The valuations used the discounted cash flow

method. The discount rate applied at that time to the future cash flows was 9.75%.

The customer contracts represent contracted revenues. The valuation used the discounted cash flow

method, based on estimated profit margins considered on a contract by contract basis. A discount rate

was applied which took into account both the time factor of future cash flows and their certainty, and

therefore ranged from 100% to 25%.

Goodwill and other intangible assets have been tested for impairment. The method, key assumptions

and results of the impairment review are detailed below:

Goodwill is attributed to the only CGU within the Group, video games development. Goodwill and other

intangible assets have been tested for impairment by assessing the value in use of the cash generating

unit. The value in use calculations were based on projected cash flows in perpetuity. Budgeted cash

flows for 2017 to 2019 were used. These were based on a three year forecast with growth rates of

67

19.4% to 37.7% applied for the following years. Subsequent years were based on a reduced rate of

growth of 2.0% into perpetuity.

These growth rates are based on past experience and market conditions and discount rates are

consistent with external information. The growth rates shown are the average applied to the cash flows

of the individual cash generating units and do not form a basis for estimating the consolidated profits of

the Group in the future.

The discount rate used to test the cash generating units was the Group’s pre-tax WACC of 9.75%.

On the basis of this review, it has been concluded that there is no need to impair the carrying value of

these intangible assets.

12. PROPERTY, PLANT AND EQUIPMENT

Land and Leasehold Fixtures Computer buildings improvements and fittings hardware Total £’000 £’000 £’000 £’000 £’000COST

As at 1 January 2014 1,050 80 384 1,854 3,368

Additions 25 48 68 318 459

Transfer between categories – – (32) 32 –

Effect of acquisition* (21) (58) (355) (1,720) (2,154) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 1,054 70 65 484 1,673

Additions – 27 35 449 511 –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 1,054 97 100 933 2,184

Additions – 144 80 661 885

Disposals (1,054) – – (65) (1,119)

Transfer between categories – 2 30 (32) –

Effect of acquisition* – (56) (96) (689) (841) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 – 187 114 808 1,109

DEPRECIATION

As at 1 January 2014 – 41 317 1,535 1,893

Charge for the period 25 21 44 237 327

Effect of acquisition* (21) (58) (355) (1,720) (2,154) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 4 4 6 52 66

Charge for the period 23 33 45 358 459 –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 27 37 51 410 525

Charge for the period 20 38 61 452 571

Eliminated on disposals (47) – – – (47)

Effect of acquisition* – (56) (96) (689) (841) –––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 – 19 16 173 208

NET BOOK VALUE

As at 1 January 2014 1,050 39 67 319 1,475

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2014 1,050 66 59 432 1,607

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2015 1,027 60 49 523 1,659

–––––––– –––––––– –––––––– –––––––– ––––––––As at 31 December 2016 – 168 98 635 901

–––––––– –––––––– –––––––– –––––––– ––––––––* These adjustments reflect the resetting of the gross cost and accumulated depreciation as a result of the changes in

ownership throughout the track record period.

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13. INVESTMENTS

Details of the investments in which the Group holds 20 per cent. or more of the nominal value of any

class of share capital are as follows:

Proportion held Class of share By Parent By the capital held Company Group Nature of BusinessProject Republica Bidco Limited Ordinary 100% 100% Holding company

Sumo Digital Holdings Limited Ordinary – 100% Holding company

Sumo Digital Group Limited Ordinary – 100% Holding company

Sumo Digital Entertainment Limited Ordinary – 100% Holding company

Sumo Digital Limited Ordinary – 100% Video game development

Sumo Digital (Genus) Limited Ordinary – 100% Video game development

Sumo Digital (Atlantis) Limited Ordinary – 100% Video game development

Cirrus Development Limited Ordinary – 100% Video game development

Aghoco 1337 Limited Ordinary – 100% Dormant

Mistral Entertainment Limited Ordinary – 100% Video game development

Sumo Video Games Private Limited Ordinary – 100% Video game development

Riverside Games Limited Ordinary – 100% Dormant

All the companies listed above are incorporated in England and Wales, and have a registered address

of 32 Jessops Riverside, Brightside Lane, Sheffield, S9 2RX, with the following exceptions:

Country ofCompany Incorporation AddressSumo Video Games Private Limited India MCCIA Trade Tower, B Building

205-206, Senapati Bapat Rd,

Chattushringi, Gokhalenagar

Pune Maharashtra, 411016

14. TRADE AND OTHER RECEIVABLES

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Amounts falling due within one year:

Trade receivables not past due 741 1,379 825

Trade receivables past due 83 1,305 585

Trade receivables past due and impaired 169 – –

Less provision for trade receivables (168) – – –––––––– –––––––– ––––––––Trade receivables net 825 2,684 1,410

Prepayments and accrued income 413 1,409 1,193

Amounts recoverable on contracts 999 550 1,299

Work in progress on self-published titles – – 467 –––––––– –––––––– –––––––– 2,237 4,643 4,369

–––––––– –––––––– ––––––––Trade and other receivables are all current and any fair value difference is not material. Trade and other

receivables are considered past due once they have passed their contracted due date. Trade

receivables are reviewed for impairment if they are past due beyond 30 days.

69

The carrying amounts of the Group’s trade and other receivables are denominated in the following

currencies:

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Euro – – 372 –––––––– –––––––– –––––––– – – 372

–––––––– –––––––– ––––––––Movements on the Group’s provision for impairment of trade receivables are as follows:

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000At 1 January 168 168 –

Provision for receivables impairment – – –

Receivables written off during the year as uncollectible – (161) –

Unused amounts reversed – (7) – –––––––– –––––––– ––––––––At 31 December 168 – –

–––––––– –––––––– ––––––––The creation and release of provision for impaired receivables have been included in ‘other expenses’

in the income statement (note 8). Amounts charged to the allowance account are generally written off,

when there is no expectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

15. CASH AND CASH EQUIVALENTS

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Cash and cash equivalents

Cash at bank and in hand 2,469 4,347 4,482

–––––––– –––––––– ––––––––The following amounts were held in foreign currencies:

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000United States Dollar – 2 134

Indian Rupee 162 394 122 –––––––– –––––––– –––––––– 162 396 256

–––––––– –––––––– ––––––––16. TRADE AND OTHER PAYABLES

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Trade payables 916 1,619 764

Tax and social security 481 630 961

Other payables, accruals and deferred income 1,777 4,002 5,637 –––––––– –––––––– –––––––– 3,174 6,251 7,362

–––––––– –––––––– ––––––––The fair value of financial liabilities approximates their carrying value due to short maturities.

70

The carrying amounts of the Group’s trade and other payables are denominated in the following

currencies:

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000British Pound 3,174 6,211 7,302

Euro – – 8

Indian Rupee – 40 52 –––––––– –––––––– –––––––– 3,174 6,251 7,362

–––––––– –––––––– ––––––––17. BORROWINGS

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Current

Bank loans and overdrafts 61 985 –

Term loan – – 4,088

Loan notes 4,000 – – –––––––– –––––––– –––––––– 4,061 985 4,088

–––––––– –––––––– ––––––––Non-current

Bank loans and overdrafts 1,188 3,761 –

Term loan – – 18,305

Loan notes 9,500 10,825 34,325 –––––––– –––––––– –––––––– 10,688 14,586 52,630

–––––––– –––––––– –––––––– As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Amount repayable

Within one year 4,061 985 4,088

In more than one year but less than two years 65 985 1,610

In more than two years but less than three years 65 985 1,633

In more than three years but less than four years 65 11,686 1,657

In more than four years but less than five years 9,565 186 47,730

In more than five years 928 744 – –––––––– –––––––– –––––––– 14,749 15,571 56,718

–––––––– –––––––– ––––––––The above carrying values of the borrowings equate to the fair values. Borrowings are secured against

the assets of the Group.

As at As at As at 31 December 31 December 31 December 2014 2015 2016 % % %Average interest rates at the balance sheet date

Term loan – – 4.25

Bank loan 2.00 4.00 –

Loan notes – Series A 10.00 10.00 –

Loan notes – Series B 10.00 – –

Loan notes – Other – 10.00 –

Loan notes – – 10.00

71

18. EMPLOYEE RELATED PROVISIONS

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Non-current provisions

At the start of the period 13 13 14

Additional provisions – 1 12 –––––––– –––––––– –––––––– 13 14 26

–––––––– –––––––– ––––––––At 31 December 2016 a provision of £26,000 was recognised for post-employment benefits payable to

certain employees in India. The provision has been estimated based on the contracts in place with

these employees and are based on an actuarial valuation. There are no significant uncertainties about

the amount or timing.

19. DEFERRED TAX

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Asset/(liability) at start of year 69 (1,395) (942)

Credit to income statement 86 453 836

Arising on change in investment (1,550) – (4,857) –––––––– –––––––– ––––––––(Liability) at end of year (1,395) (942) (4,963)

The deferred tax asset/(liability) relates to the following:

Accelerated capital allowances on property, plant

& equipment 88 (16) 7

On intangible assets (1,483) (926) (6,095)

On losses – – 1,125 –––––––– –––––––– –––––––– (1,395) (942) (4,963)

–––––––– –––––––– ––––––––20. COMMITMENTS AND CONTINGENCIES

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Operating lease commitments

Within 1 year 67 156 625

Later than 1 year and less than 5 years 35 442 2,168

After 5 years – – 1,797 –––––––– –––––––– –––––––– 102 598 4,590

–––––––– –––––––– ––––––––The Group leases various office units under non-cancellable operating lease agreements. The lease

terms are between 1 month and 15 years.

The Group also leases various plant and machinery and vehicles, with terms between 4 months and

3 years.

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21. SHARE CAPITAL

A B1 B2 C Ordinary Ordinary Ordinary Ordinary Ordinary shares shares shares shares shares £1 £0.0125 £0.0160 £0.0160 £0.00001 TotalNominal value Number Number Number Number Number £Issued on incorporation 1 – – – – 1

Converted during the period (1) 80 – – – –

Issued during the period – 2,285,340 734,137 313,499 637,892 45,335 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––At 31 December 2016 – 2,285,420 734,137 313,499 637,892 45,336 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

The Company was incorporated on 26 August 2016 with 1 Ordinary share issued at its nominal value

of £1. This was converted during the period to 80 A Ordinary shares. During the period a further share

issue was undertaken, with all shares issued for £0.10. A, B1 and B2 shares afford full dividend rights

and vary only by voting rights assigned to each class. C shares have no voting or dividend rights.

22. FINANCIAL RISK MANAGEMENT

The Group uses various financial instruments. These include loans, cash, forward foreign exchange

contracts, issued equity investments and various items, such as trade receivables and trade payables

that arise directly from its operations. The main purpose of these financial instruments is to raise finance

for the Company’s operations.

The existence of these financial instruments exposes the Group to a number of financial risks, which

are described in more detail below.

The main risks arising from the Group’s financial instruments are market risk, cash flow interest rate

risk, credit risk and liquidity risk. The Directors review and agree policies for managing each of these

risks and they are summarised below.

Market risk

Market risk encompasses three types of risk, being currency risk, interest rate risk and price risk. In this

instance price risk has been ignored as it is not considered a material risk to the business. The Group’s

policies for managing interest rate risk are set out in the subsection entitled “interest rate risk” below.

Currency risk

The Group contracts with certain customers in Euros and US Dollars and manages this foreign currency

risk using forward foreign exchange contracts which match the expected receipt of foreign currency

income. As at 31 December 2016, this covers the period up to June 2018.

Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet

foreseeable needs by closely managing the cash balance and by investing cash assets safely and

profitably.

The Group policy throughout the period has been to ensure continuity of funding. Short-term flexibility

is achieved by revolving working capital facilities. The maturity of borrowings is set out in note 17 to the

Historical Financial Information.

The table below analyses the Group’s non-derivative and derivative financial liabilities into relevant

maturity groupings based on the remaining period at the balance sheet date to the contractual maturity

date. Derivative financial liabilities are included in the analysis if their contractual maturities are

essential for an understanding of the timing of cash flows. The amounts disclosed in the table are the

contractual undiscounted cash flow.

73

At 31 December 2016

Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years £’000 £’000 £’000 £’000Borrowings 4,088 1,610 51,020 –

Forward foreign exchange contracts 207 – – -

Provisions for liabilities – – – 26

Trade and other payables 7,362 – – –

At 31 December 2015

Less than 1 year Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years £’000 £’000 £’000 £’000Borrowings 985 985 12,857 744

Forward foreign exchange contracts – – – –



At 31 December 2014

Less than Between 1 Between 2 Over 1 year and 2 years and 5 years 5 years £’000 £’000 £’000 £’000Borrowings 4,061 65 9,695 928

Forward foreign exchange contracts – – – –



Interest rate risk

The Group finances its operations through a mixture of retained profits, bank borrowings and loan

notes. The Directors’ policy to manage interest rate fluctuations is to regularly review the costs of capital

and the risks associated with each class of capital, and to maintain an appropriate mix between fixed

and floating rate borrowings.

Sensitivity to interest rate fluctuations

If the average interest rate payable on the net financial asset/net financial liabilities subject to a floating

interest rate during the period had been 1% higher than reported on the average borrowings during the

period, then profit before tax would have been £220,000 lower, and if the interest rate on these liabilities

had been 1% lower, profit before tax would have improved by £220,000.

Credit risk

The Group’s principal financial assets are cash and trade receivables. The credit risk associated with

cash is limited, as the counterparties have high credit ratings assigned by international credit-rating

agencies. The principal credit risk arises therefore from the Group’s trade receivables. In order to

manage credit risk the Directors set limits for customers based on a combination of payment history and

third party credit references. Credit limits are reviewed on a regular basis in conjunction with debt

ageing and collection history.

The Directors consider that the Group’s trade receivables were not impaired for the period ended

31 December 2016 and a provision for £nil has been provided accordingly. See note 14 for further

information on financial assets that are past due.

74

Summary of financial assets and liabilities by category

The carrying amount of financial assets and liabilities recognised at the balance sheet date of the

reporting periods under review may also be categorised as follows:

As at As at As at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Financial assets

Trade and other receivables 825 2,684 1,410

Cash and cash equivalents 2,469 4,347 4,482 –––––––– –––––––– –––––––– 3,294 7,031 5,892

Financial liabilities

Financial liabilities measured at fair value throughprofit or loss

Forward foreign exchange contracts – – (207)

Financial liabilities measured at amortised costNon-current:Borrowings (10,688) (14,586) (52,630)

Provisions for liabilities (13) (14) (26)

Current:Borrowings (4,061) (985) (4,088)

Trade and other payables (3,174) (6,251) (7,362) –––––––– –––––––– –––––––– (17,936) (21,836) (64,313) –––––––– –––––––– ––––––––Net financial assets and liabilities (14,642) (14,805) (58,421)

Non-financial assets and liabilities

Plant, property and equipment 1,607 1,659 901

Goodwill 2,681 2,681 19,785

Other intangible assets 7,525 5,274 34,245

Prepayments and accrued income 413 1,409 1,193

Amounts recoverable on contracts 999 550 1,299

Work in progress on self-published titles – – 467

Taxation recoverable 1,656 5,146 5,109

Provisions for deferred tax (1,395) (942) (4,963) –––––––– –––––––– –––––––– 13,486 15,777 58,036 –––––––– –––––––– ––––––––Total (deficit)/equity (1,156) 972 (385)

–––––––– –––––––– ––––––––Capital management policies and procedures

The Group’s capital management objectives are:

• To ensure the Group’s ability to continue as a going concern; and

• To provide an adequate return to shareholders by pricing products and services commensurately

with the level of risk.

This is achieved through close management of working capital and regular reviews of pricing. Decisions

on whether to raise funding using debt or equity are made by the board based on the requirements of

the business.

Capital for the reporting period under review is shown as total equity in the table above.

23. RELATED PARTY TRANSACTIONS

The Directors consider there to be no ultimate controlling party during the track record period. Related

parties include representatives of major shareholders across the track record period, and parent and

75

intermediate parent entities ultimately owned by the same shareholders. Related party balances with

the Company are as follows:

Purchases made from Balance due to To 31 To 31 To 31 As at 31 As at 31 As at 31 December December December December December December 2014 2015 2016 2014 2015 2016 £’000 £’000 £’000 £’000 £’000 £’000

Related party

Foundation 9 Entertainment Inc 22 33 – 22 – –

NorthEdge Capital LLP 77 91 68 – – –

Perwyn LLP – – 141 – – 13

PIF Republica S.a.r.l – – 8 – – 2

Cragg Wood Limited 8 44 41 4 3 6

In addition to the above, interest on loans from related parties was charged throughout the track record

period.

To/as at To/as at To/as at 31 December 31 December 31 December 2014 2015 2016 £’000 £’000 £’000Related party

Other Loan Notes – Ken Beaty interest charge – – 5

Other Loan Notes – Ken Beaty balance – 75 –

Other Loan Notes – Ian Livingstone interest charge – 1 9

Other Loan Notes – Ian Livingstone balance – 126 –

NorthEdge – Loan Note A – interest charge 143 978 550

NorthEdge – Loan Note A – balance 9,643 10,621 –

Perwyn – A1 Loan Note – interest charge – – 516

Perwyn – A1 Loan Note – balance – – 18,688

Perwyn – PIF Loan – interest charge – – 274

Perwyn – PIF Loan – balance – – 7,374

24. POST BALANCE SHEET EVENTS

Acquisition of Atomhawk Design Limited

Under an agreement dated 29 June 2017, the Group acquired the share capital of Atomhawk Design

Limited and its subsidiary Atomhawk Canada, a video games development company registered in the

United Kingdom for consideration of £2.9m.

The book and fair values of the assets and liabilities acquired are set out below:

Book and fair values recognised at acquisition £’000Assets

Property, plant and equipment 17

Trade and other receivables 346

Cash and cash equivalents 613 ————— 976Liabilities

Corporation tax payable (146)

Trade and other payables (56) ————— (202) —————Book value of net assets acquired 774 —————Provisional goodwill on acquisition 2,126 ————— 2,900

—————

76

Book and fair values recognised at acquisition £’000Summary of net cash outflow from acquisition

Cash paid 2,900

Cash acquired (613) ————— 2,287

—————Cash consideration transferred 2,900

—————The directors are yet to finalise the fair value exercise and the above fair values are provisional.

Pre-admission reorganisation

In connection with Admission and the Placing, the Group undertook a reorganisation, the material steps

of which are summarised in paragraph 3 of Part V of the Admission Document and in relation to which

Project Republica Topco Limited issued shares to existing shareholders, which were subsequently

exchanged for shares in Sumo Digital plc to enable that company to become the parent company of the

Sumo Digital Group.

Adoption of share incentive plans

On 15 December 2017, a discretionary executive share plan, the Group Long Term Incentive Plan

(“LTIP”), was adopted by the Board. Under the LTIP, the Board may, within certain limits and subject to

any applicable performance conditions, grant to eligible employees (i) nil cost options over Ordinary

Shares and/or (ii) a conditional right to acquire Ordinary Shares. Participation in the LTIP will be at the

discretion of the Board.

Revolving Credit Facility Agreement

On 15 December 2017, the Group entered into a revolving credit facilities agreement with Clydesdale

Bank plc in respect of a revolving credit facility of £13,000,000. Interest is payable on amounts drawn

down at the rate of one to two per cent. above LIBOR. The term of the agreement is 5 years from the

date of the agreement.

77

SECTION C: ACCOUNTANTS’ REVIEW REPORT ON THE GROUP’S COMBINED UNAUDITED

INTERIM FINANCIAL INFORMATION OF PROJECT REPUBLICA TOPCO LIMITED AND ITS

SUBSIDIARY UNDERTAKINGS

The Directors

Sumo Group plc

32 Jessops Riverside

Brightside Lane

Sheffield

S9 2RX

15 December 2017

Dear Sirs

Project Republica Topco Limited (the Company) and its Subsidiary Undertakings (together the

Group) – Review Report on the Group’s Combined Unaudited Interim Financial Information

We have been engaged by Sumo Group plc to review the Group’s combined unaudited interim financial

information for the six months ended 30 June 2017, which comprises the combined income statement,

the combined statement of comprehensive income, the combined balance sheet, the combined

statement of changes in equity, the combined cashflow statement and the notes to the unaudited interim

historical financial information (the Unaudited Interim Financial Information) set out in Section D of

Part III of Sumo Group plc’s AIM admission document dated 15 December 2017 (the Admission

Document). We have read the other information contained in the Admission Document dated

15 December 2017 (the Admission Document) and considered whether it contains any apparent

misstatements or material inconsistencies with the information in the Unaudited Interim Financial

Information.

This report is made solely to Sumo Group plc in accordance with guidance contained in Independent

Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information

performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board. Our review

work has been undertaken so that we might state to Sumo Group plc those matters we are required to

state to them in an independent review report and for no other purpose. To the fullest extent permitted

by law, we do not accept or assume responsibility to anyone other than Sumo Group plc, for our review

work, for this report, or for the conclusion we have formed or consenting to its inclusion in the Admission

Document.

Directors’ responsibilities

The Admission Document and the Unaudited Interim Financial Information are the responsibility of, and

have been approved by, the directors of Sumo Group plc. The AIM Rules for Companies of the London

Stock Exchange require that the accounting policies and presentation applied to the Unaudited Interim

Financial Information in the Admission Document are consistent with those which will be adopted in the

Group’s next published annual financial statements having regard to the accounting standards

applicable for such annual financial statements and the requirements of paragraph 20.6 of Annex I of

Appendix 3.1.1 of the Prospectus Rules as applied by Paragraph (a) of Schedule Two of the AIM Rules

for Companies.

As disclosed in Note 1 to the Unaudited Interim Financial Information, the next annual financial

statements of Sumo Group plc will be prepared in accordance with International Financial Reporting

Standards as adopted by the European Union (IFRS). The Unaudited Interim Financial Information has

been prepared in accordance with the basis of preparation in Note 1 to the Unaudited Interim Financial

Information.

Grant Thornton UK LLP No 1 Whitehall Riverside Leeds LS1 4BN T +44 (0)113 245 5514 F +44 (0)113 246 5055 grantthornton.co.uk

78

Our responsibility

Our responsibility is to express to Sumo Group plc a conclusion on the Unaudited Interim Financial

Information for the six months ended 30 June 2017 based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and

Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the

Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of unaudited

interim financial information consists of making enquiries, primarily of persons responsible for financial

and accounting matters, and applying analytical and other review procedures. A review is substantially

less in scope than an audit conducted in accordance with International Standards on Auditing (UK and

Ireland) and consequently does not enable us to obtain assurance that we would become aware of all

significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Unaudited

Interim Financial Information is not prepared, in all material respects, in accordance with the basis of

accounting described in Note 1 to the Unaudited Interim Financial Information.

Declaration

For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies we are responsible

for this report as part of the Admission Document and declare that we have taken all reasonable care

to ensure that the information contained in this report is, to the best of our knowledge, in accordance

with the facts and contains no omission likely to affect its import. This declaration is included in the

Admission Document in compliance with Schedule Two of the AIM Rules for Companies.

GRANT THORNTON UK LLP

79

SECTION D: UNAUDITED INTERIM FINANCIAL INFORMATION

UNAUDITED COMBINED INCOME STATEMENT

For the half year ended 30 June 2017

6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2017 2016 2016 Note (Audited) £’000 £’000 £’000Revenue 14,317 11,092 24,106

Direct costs (net) 3 (9,050) (6,737) (15,101) ———— ———— ————Gross profit 5,267 4,355 9,005

Operating expenses (4,741) (3,060) (7,223)

Operating expenses – exceptional (95) (102) (912) ———— ———— ————Operating expenses – total (4,836) (3,162) (8,135) ———— ———— ————Group operating profit 431 1,193 870

Analysed as:

Adjusted EBITDA 3,420 2,760 6,045

Amortisation (2,582) (1,194) (3,692)

Depreciation (312) (271) (571)

Exceptional items (95) (102) (912) ———— ———— ————Group operating profit 431 1,193 870

Finance costs 4 (2,410) (1,053) (2,991)

Finance income – – 9 ———— ———— ————Net finance costs (2,410) (1,053) (2,982) ———— ———— ————(Loss)/profit before taxation (1,979) 140 (2,112)

Taxation 450 32 866 ———— ———— ————

(Loss)/profit for the period attributable

to equity shareholders (1,529) 172 (1,246)

———— ———— ————Note 1:Adjusted EBITDA, which is defined as profit before finance costs, tax, depreciation, amortisation, and exceptional items, is a non-GAAP metric used by management and is not an IFRS disclosure

All results derive from continuing operations.

80

UNAUDITED COMBINED STATEMENT OF COMPREHENSIVE INCOME


6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2017 2016 2016 (Audited) £’000 £’000 £’000(Loss)/profit for the period (1,529) 172 (1,246)

Other comprehensive income:

Exchange differences on retranslation of foreign operations – 70 43 ———— ———— ————Total other comprehensive income – 70 43 ———— ———— ————Total comprehensive income/(expense)

attributable to equity shareholders (1,529) 242 (1,203)

———— ———— ————Items in the statement above are disclosed net of tax.

81

UNAUDITED COMBINED BALANCE SHEET

As at 30 June 2016, 2017, and 31 December 2016

As at As at As at 30 June 30 June 31 December 2017 2016 2016 (Audited) £’000 £’000 £’000Non-current assets

Property, plant and equipment 1,026 2,011 901

Goodwill and other intangibles 53,573 6,761 54,030 ———— ———— ————Total non-current assets 54,599 8,772 54,931 ———— ———— ————

Current assets

Trade and other receivables 3,941 4,434 4,369

Corporation tax recoverable 6,149 5,157 5,109

Cash and cash equivalents 2,363 1,283 4,482 ———— ———— ————Total current assets 12,453 10,874 13,960 ———— ———— ————Total assets 67,052 19,646 68,891

———— ———— ————Share capital 46 – 45

Share premium 356 – 352

Foreign currency translation reserve 43 70 43

Retained (losses)/earnings (2,354) 740 (825) ———— ———— ————Total (deficit)/equity (1,909) 810 (385) ———— ———— ————

Non-current liabilities

Borrowings 55,289 11,023 52,630

Employee related provisions 26 13 26

Deferred tax liabilities 4,545 690 4,963 ———— ———— ————Total non-current liabilities 59,860 11,726 57,619 ———— ———— ————

Current liabilities

Borrowings 1,599 985 4,088

Trade and other payables 7,253 5,603 7,362

Derivative financial instruments 249 522 207 ———— ———— ————Total current liabilities 9,101 7,110 11,657 ———— ———— ————Total liabilities 68,961 18,836 69,276 ———— ———— ————

Total equity and liabilities 67,052 19,646 68,891

———— ———— ————

82

UNAUDITED COMBINED STATEMENT OF CHANGES IN EQUITY


Foreign currency Share Share translation Retained Total capital premium reserve earnings equity £’000 £’000 £’000 £’000 £’000Balance at 1 January 2016 – – – 972 972

Profit for the year – – – 172 172

Other comprehensive income

for the year – – 70 – 70 ———— ———— ———— ———— ————Total comprehensive income

for the year – – 70 172 242

Dividends – – – (404) (404) ———— ———— ———— ———— ————Total transactions with owners,

recognised directly in equity – – – (404) (404) ———— ———— ———— ———— ————Balance at 30 June 2016 – – 70 740 810

———— ———— ———— ———— ————Balance at 1 January 2017 45 352 43 (825) (385)

Loss for the year – – – (1,529) (1,529) ———— ———— ———— ———— ————Other comprehensive income

for the year – – – – – ———— ———— ———— ———— ————Total comprehensive loss

for the year – – – (1,529) (1,529)

Issue of share capital 1 4 – – 5 ———— ———— ———— ———— ————Total transactions with owners,

recognised directly in equity 1 4 – – 5 ———— ———— ———— ———— ————Balance at 30 June 2017 46 356 43 (2,354) (1,909)

———— ———— ———— ———— ————Balance at 1 January 2016 – – – 972 972

Loss for the year – – – (1,246) (1,246)

Other comprehensive income

for the year – – 43 – 43 ———— ———— ———— ———— ————Total comprehensive loss

for the year – – 43 (1,246) (1,203)

Dividends – – – (404) (404)

Changes in ownership interest

on acquisition – – – (147) (147)

Issue of share capital 45 352 – – 397 ———— ———— ———— ———— ————Total transactions with owners,

recognised directly in equity 45 352 – (551) (154) ———— ———— ———— ———— ————Balance at 31 December 2016 45 352 43 (825) (385)

———— ———— ———— ———— ————

83

UNAUDITED COMBINED CASH FLOW STATEMENT


6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2017 2016 2016 (Audited) £’000 £’000 £’000Cash flows from operating activities

(Loss)/profit before taxation (1,979) 140 (2,112)

Adjustments for:

Depreciation 312 271 571

Amortisation of intangible assets 2,582 1,194 3,692

Video game tax relief in direct costs (3,068) (1,913) (4,993)

Movement in provisions (1) – 13

Movement in derivative financial instruments 42 – 207

Profit on disposal of property, plant and equipment – – (560)

Finance costs 2,410 1,053 2,991

Finance income – – (9) ———— ———— ———— 298 745 (200)

Changes in working capital:

Decrease in trade and other receivables 774 209 274

(Decrease)/increase in trade and other payables (167) (618) 1,224 ———— ———— ————Cash generated from operations 905 336 1,298

Interest paid (693) (531) (3,040)

Tax recovered 1,882 1,682 5,060 ———— ———— ————Net cash inflow from operating activities 2,094 1,487 3,318 ———— ———— ————

Cash flows from investing activities

Purchase of property, plant and equipment (420) (623) (885)

Purchase of intangible assets – – (227)

Proceeds on sale of property, plant and equipment – – 1,632

Purchase of subsidiary/change of ownership (2,287) – (43,944)

Interest received – – 9 ———— ———— ————Net cash (outflow) from investing activities (2,707) (623) (43,415) ———— ———— ————

Cash flows from financing activities

Repayment of borrowings (3,800) (3,563) (15,571)

Proceeds from borrowings 2,295 – 56,719

Proceeds from issues of shares – – 397

Payment of loan arrangement fees – – (975)

Dividends paid – (404) (404) ———— ———— ————Net cash (outflow)/inflow from financing activities (1,505) (3,967) 40,166 ———— ———— ————

Net (decrease)/increase in cash and cash equivalents (2,118) (3,103) 69

Cash and cash equivalents at beginning of period 4,482 4,347 4,347

Foreign exchange (1) 39 66 ———— ———— ————Cash and cash equivalents at end of period 2,363 1,283 4,482 ———— ———— ————

84

NOTES TO THE UNAUDITED INTERIM HISTORICAL FINANCIAL INFORMATION

1. BASIS OF PREPARATION

The interim historical financial statements of the Group for the six months ended 30 June 2017, which

is unaudited, have been prepared in accordance with the International Financial Reporting Standards

(‘IFRS’) accounting policies adopted by the Group and set out in this Section D of Part III to this

Admission Document which are consistent with the annual report and accounts for Project Republica

Topco Limited for the year ended 31 December 2016 except as stated below. The Group does not

anticipate any change in these accounting policies for the year ending 31 December 2017. As

permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and

not in accordance with IAS 34 “Interim financial reporting.” While the financial figures included in this

unaudited interim financial information have been computed in accordance with IFRS’s applicable to

interim periods, this announcement does not contain sufficient information to constitute an interim

financial report as that term is defined in IFRS’s.

The combined unaudited interim financial information has been prepared on a going concern basis

under the historical cost convention except for certain financial instruments that are measured at fair

value. The combined and consolidated financial information is presented in pounds sterling and all

values are rounded to the nearest thousand pounds (£’000), except where otherwise indicated. The

combined financial information, including for the year ended 31 December 2016, does not constitute

statutory accounts for the purposes of section 434 of the Companies Act 2006.

This unaudited interim Historical Financial Information presents the financial track record of the Group

for the interim periods ended 30 June 2016 and 2017 and is prepared for the purposes of admission to

AIM, a market operated by the London Stock Exchange. This combined unaudited interim financial

information has been prepared in accordance with the requirements of the AIM Rules for Companies,

in accordance with this basis of preparation summarised below.

This basis of preparation describes how this combined financial information has been prepared in

accordance with the recognition and measurement principles of International Financial Reporting

Standards as adopted by the European Union and the IFRS Interpretation Committee interpretations

(together “IFRS”) except for the departures below.

Departures from IFRSIFRS does not provide for the preparation of combined financial information, and accordingly in

preparing the combined and consolidated financial information certain accounting conventions

commonly used for the preparation of unaudited interim Historical Financial Information for inclusion in

investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standard

applicable to public reporting engagements on Historical Financial Information) issued by the UK

Auditing Practices Board have been applied. The application of these conventions results in the

following material departures from IFRS. In other respects IFRS has been applied.

• As explained above, the historical information is not prepared for all periods presented on a

consolidated basis and therefore does not comply with the requirements of IFRS 10. The

combined income statements include pre-acquisition results of acquired entities.

• The combined financial information does not constitute a set of general purpose financial

statements under paragraph 2 of IAS 1 and consequently the Group does not make an explicit

and unreserved statement of compliance with IFRS as contemplated by paragraph 16 of IAS 1.

• The combined financial information has not been prepared in accordance with IAS 33 ‘Earnings

per Share’. The directors have concluded that earnings per share information is not meaningful

in respect of the combined financial information, due to the changes in capital structure that have

occurred during the year ended 31 December 2016 and since.

• The information contained within this combined financial information contains the financial results

of the entities that were not controlled by Project Republica Topco Limited for the period from 1

January 2016 to 8 September 2016. The preparation of such combined financial information is

not provided for in IFRS and so the combined financial information does not comply with IFRS in

this regard.

85

• The requirements of IFRS 3 to include assets acquired at fair value has not been applied in

respect of property plant and equipment for the change in ownership on 8 September 2016 as

described overleaf. This increased profit for the year ended 31 December 2016 and goodwill as

at 31 December 2016 by £560,000.

On 8 September 2016, the Sumo Digital group of companies, then headed by Sumo Digital Holdings

Limited, was acquired by Project Republica Topco Limited through its subsidiary Project Republica

Bidco Limited.

As a result of the acquisition, the structure of the operating group carrying out the Group’s business has

not been the same throughout the entire period covered by the unaudited interim Historical Financial

Information which therefore is prepared on a combined and consolidated basis. The combined basis

combines the results, cash flows, assets and liabilities of each of the companies constituting the Group

through aggregation of the assets, liabilities, revenues, expenses and cash flows of each entity. The

unaudited interim Historical Financial Information has therefore been prepared on the basis as

described below.

Accounting period ended 31 December 2016 The basis of preparation for this period is set out in Section B of Part III to this Admission Document.

Accounting period ended 30 June 2016 The Statements of Comprehensive Income and Statements of Cash Flows for the six months ended

30 June 2016 and the balance sheet as at 30 June 2016 have been prepared by applying the principles

underlying the consolidation procedures of IFRS 10 in respect of the Sumo Digital Holdings Limited

group of companies.

Accounting period ended 30 June 2017 The Statements of Comprehensive Income and Statements of Cash Flows for the six months ended

30 June 2016 and the balance sheet as at 30 June 2017 have been prepared by applying the principles

underlying the consolidation procedures of IFRS 10 in respect of the Project Republica Topco Limited

group of companies.

86

2. BUSINESS COMBINATIONS

Under an agreement dated 29 June 2017, Project Republica Topco Limited acquired the entire share

capital of Atomhawk Limited, a company registered in the United Kingdom. The book values of the

assets and liabilities acquired are set out below:

Book and fair values recognised at acquisition £’000Assets

Property, plant and equipment 17

Trade and other receivables 346

Cash and cash equivalents 613 ———— 976Liabilities

Corporation tax payable (146)

Trade and other payables (56) ———— (202) ————Book value of net assets acquired 774 ————Provisional goodwill on acquisition 2,126 ———— 2,900

————Summary of net cash outflow from acquisition

Cash paid 2,900

Cash acquired (613) ———— 2,287

————Cash consideration transferred 2,900

————The directors are yet to finalise the fair value exercise and the above fair values are provisional.

3. DIRECT COSTS (NET)

6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2017 2016 2016 (Audited) £’000 £’000 £’000Direct costs 12,118 8,650 20,094

Video Games Tax Relief (3,068) (1,913) (4,993) ———— ———— ———— 9,050 6,737 15,101

———— ———— ————

87

4. FINANCE COSTS

6 months 6 months 12 months ended ended ended 30 June 30 June 31 December 2017 2016 2016 (Audited) £’000 £’000 £’000Fair value movement on foreign exchange forward contracts 43 522 771

Debt Refinancing Costs release 98 21 183

Interest 2,269 510 2,037 ———— ———— ———— 2,410 1,053 2,991

———— ———— ————5. POST BALANCE SHEET EVENTS

Pre-admission reorganisation

In connection with Admission and the Placing, the Group undertook a reorganisation, the material steps

of which are summarised in paragraph 3 of Part V of the Admission Document and in relation to which

Project Republica Topco Limited issued shares to existing shareholders, which were subsequently

exchanged for shares in Sumo Digital plc to enable that company to become the parent company of the

Sumo Digital Group.

Adoption of share incentive plans

On 15 December 2017, a discretionary executive share plan, the Group Long Term Incentive Plan

(“LTIP”), was adopted by the Board. Under the LTIP, the Board may, within certain limits and subject to

any applicable performance conditions, grant to eligible employees (i) nil cost options over Ordinary

Shares and/or (ii) a conditional right to acquire Ordinary Shares. Participation in the LTIP will be at the

discretion of the Board.

Revolving Credit Facility Agreement

On 15 December 2017, the Group entered into a revolving credit facilities agreement with Clydesdale

Bank plc in respect of a revolving credit facility of £13,000,000. Interest is payable on amounts drawn

down at the rate of one to two per cent. above LIBOR. The term of the agreement is 5 years from the

date of the agreement.

88

PART IV

UNAUDITED PRO FORMA STATEMENT OF NET ASSETS

The unaudited pro forma statement of net assets set out below has been prepared by the Directors and

the Proposed Director to illustrate the effect on the Company’s net assets of the Placing proceeds

(‘Proceeds’); the costs of the Placing, Vendor Placing and Admission (‘Costs’); the repayment of debt;

other adjustment as if they had taken place on 30 June 2017.

The unaudited pro forma statement of net assets is compiled on the basis set out in the notes below

from the consolidated statement of financial position of the Group as at 30 June 2017, as set out in

section D of Part III (“Unaudited Interim Financial Information”). This unaudited pro forma statement of

net assets has been prepared for illustrative purposes only and, because of its nature, addresses a

hypothetical situation and, therefore, does not represent the Company’s actual financial position or

results. It may not, therefore, give a true picture of the Company’s financial position or results nor is it

indicative of the results that may or may not be expected to be achieved in the future. Prospective

investors should read the whole of this Document and not rely solely on the summarised financial

information contained in this Part IV.

Pro Forma Net Assets Statement

Net proceeds of the primary Repayment As at placing of existing 30 June Pre-Admission receivable by bank debt and 2017 Reorganisation the Company other loans Total £’000 £’000 £’000 £’000 £’000 (Note 1) (Note 2) (Note 3) (Note 4) (Note 5)Assets

Non-current assets

Property, plant and equipment 1,026 – – – 1,026

Goodwill and other intangibles 53,573 – – – 53,573 ————– ————– ————– ————– ————–Total non-current assets 54,599 – – – 54,599

————– ————– ————– ————– ————–

Current assets

Trade and other receivables 3,941 – – – 3,941

Corporation tax recoverable 6,149 – – – 6,149

Cash and cash equivalents 2,363 – 34,914 (29,901) 7,376 ————– ————– ————– ————– ————–Total current assets 12,453 – 34,914 (29,901) 17,466 ————– ————– ————– ————– ————–Total assets 67,052 – 34,914 (29,901) 72,065

————– ————– ————– ————– ————–Non-current liabilities

Borrowings 55,289 (27,851) – (27,438) –

Employee related provisions 26 – – – 26

Deferred tax liability 4,545 – – – 4,545 ————– ————– ————– ————– ————–Total non-current liabilities 59,860 (27,851) – (27,438) 4,571

————– ————– ————– ————– ————–Current liabilities

Borrowings 1,599 – – (1,599) –

Trade and other payables 7,253 137 – – 7,390

Derivative financial instruments 249 – – – 249 ————– ————– ————– ————– ————–Total current liabilities 9,101 137 – (1,599) 7,639 ————– ————– ————– ————– ————–Total liabilities 68,961 (27,714) – (29,037) 12,210

————– ————– ————– ————– ————–Net assets (1,909) 27,714 34,914 (864) 59,855

————– ————– ————– ————– ————–

89

Explanatory notes

1. The net assets of the Group as at 30 June 2017 have been extracted without adjustment from the unaudited interim

financial information contained in section D of Part III of this document.

2. This column reflects the following adjustments relating to the Pre-Admission Reorganisation as summarised in

paragraph 3 of Part V of the Admission Document:

(a) Loan notes and other borrowings totalling £27.714 million were issued in exchange for the issue of new shares

in Project Republica Topco Limited; and

(b) the Company was incorporated on 28 November 2017 through the issue of 39 million £0.00001 Ordinary Shares

paid in cash. It will become the parent and ultimate holding company of the Group through the issue of 3,900

£0.00001 Ordinary Shares in exchange for shares in the Group held by Perwyn Bidco, PW Republica Ltd,

management and Atomhawk shareholders, including the shares issued at step (2a).

3. The adjustment represents the receipt by the Company of the net primary proceeds from the Placing of £34.914

million, which comprises gross proceeds from the primary Placing of £38.446 million through the issue of new

ordinary shares less the fees and expenses of the Placing expected to be approximately £3.532 million (net of

recoverable VAT). The costs attributable to the issue of new ordinary shares will be deducted from share premium

and the other costs attributable to the Admission will be expensed.

4. This column reflects the cash repayment of external debt of £20.379 million and PIF loan notes of £7.443 million, PW

Republica loan notes of £1.975 million plus accrued interest of £104,000 and the accelerated amortisation charge to

the income statement for debt transaction costs of £864,000.

5. This column comprises the sum of the preceding columns and represents the pro forma net assets of the Group as

at 30 June 2017 assuming Admission, the Placing and repayment of the Loan Notes had occurred on that date. No

adjustment has been made to take account of trading results, cash movements, or other transactions undertaken by

the Group since 30 June 2017.

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PART V

ADDITIONAL INFORMATION

1. Responsibility

The Directors and the Proposed Director, whose names and functions appear on page 8 of this

Document, and the Company accept responsibility, both individually and collectively, for the information

contained in this Document. To the best of the knowledge of the Company, the Directors and the

Proposed Director (having taken all reasonable care to ensure that such is the case), the information

contained in this Document is in accordance with the facts and does not omit anything likely to affect

the import of such information.

2. The Company

2.1 The Company was incorporated and registered in England and Wales on 20 November 2017

under the Act with registered number 11071913 as a private company limited by shares with the

name Aghoco 1611 Limited. The Company was re-registered as a public limited company with

the name Sumo Group plc on 14 December 2017. The Company, and the Group, trade under the

names “Sumo Digital” and “Atomhawk”.

2.2 The Company’s legal name as at the date of this Document is Sumo Group plc.

2.3 The governing document of the Company is its Articles, which are summarised in paragraph 5 of

this Part V. The primary company legislation under which the Company operates is, and the

share capital of the Company was created under, the Act and regulations made under it.

2.4 The registered office of the Company is at 32 Jessops Riverside Brightside Lane, Sheffield,

England S9 2RX (telephone number +44(0)114 242 6766). The Company is domiciled in the UK

for tax purposes.

2.5 The liability of the members of the Company is limited by shares.

2.6 The Company is the ultimate holding company of the Group. The following table contains details

of the Company’s principal subsidiaries and joint venture companies:

Company name Country of incorporation Percentage ownershipProject Republica Topco Limited England & Wales c. 84.4% by the Company

Project Republica Bidco Limited England & Wales

Sumo Digital Holdings Limited England & Wales

Sumo Digital Group Limited England & Wales

Sumo Digital Entertainment Limited England & Wales

Sumo Digital Ltd. England & Wales

Riverside Games Limited England & Wales

Mistral Entertainment Limited England & Wales

Sumo Video Games Private Limited India 99.99% by Sumo Digital

Entertainment Limited

0.01% by Sumo Digital Ltd.

(nominee of Sumo Digital

Entertainment Limited)

Atomhawk Design Ltd England & Wales 100% by Sumo Digital Ltd.

Sumo Digital (Genus) Limited England & Wales 100% by Sumo Digital Ltd.

100% by Project Republica

Topco Limited

100% by Project Republica

Bidco Limited

100% by Sumo Digital

Holdings Limited


Holdings Limited







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Company name Country of incorporation Percentage ownershipSumo Digital (Atlantis) Limited England & Wales 100% by Sumo Digital Ltd.

Aghoco 1337 Limited England & Wales 100% by Sumo Digital Ltd.

Cirrus Development Limited England & Wales 100% by Sumo Digital Ltd.

Atomhawk Canada Limited Canada

2.7 Save for the principal subsidiaries and joint venture companies referred to in paragraph 2.6 of

this Part V, the Company has no significant investments.

2.8 The Directors and the Proposed Director believe that there are currently no environmental issues

that may affect the Group’s utilisation of its tangible fixed assets.

2.9 Save for entering into the material contracts to which the Company is party and which are

summarised in paragraph 12 of this Part V, since its incorporation, the Company has not carried

on significant business and no accounts have been made up.

2.10 The address of the Company’s website, which, from Admission, will disclose information required

by rule 26 of the AIM Rules, is www.sumogroupplc.com.

3. Share capital of the Company

3.1 The authorised and issued share capital of the Company as at the date of this Document is:

IssuedClass of shares Nominal value (per share) (fully paid)Ordinary Shares £0.01 106,554,131

3.2 The authorised and issued share capital of the Company immediately following the Placing and

Admission is expected to be as follows:

IssuedClass of shares Nominal value (per share) (fully paid)Ordinary Shares £0.01 145,000,000

The issued share capital of the Company immediately following the Placing and Admission will

consist of the Existing Ordinary Shares (which includes the Vendor Placing Shares) and the

Placing Shares.

3.3 It is intended that, on or shortly after Admission, awards of options will be granted pursuant to the

LTIP over Ordinary Shares with an aggregate market value (measured by reference to the

Placing Price) of approximately £950,000 (the “Admission Awards”), including £500,000 to David

Wilton. The exercise of these awards may be satisfied by the Company issuing and allotting new

Ordinary Shares or by transferring Ordinary Shares held by the Company in treasury or by an

employee benefit trust established by the Company, to the holder of such awards. These awards

are outside of the dilution limits noted in paragraph 4.1.2.10 of this Part V.

3.4 The Placing Shares will rank in full for all dividends or other distributions declared, paid or made

on the Ordinary Shares from Admission.

3.5 The history of the Company’s share capital from incorporation is as follows:

(a) on incorporation, the issued capital of the Company was £390 divided into 39,000,000

ordinary shares of £0.00001 each;

(b) on 13 December 2017, the Company issued, credited as fully paid, 3,900 ordinary shares

of £0.00001 each;

(c) on 13 December 2017, the Company issued, credited as fully paid, 720 ordinary shares of

£0.00001 each;

(d) on 13 December 2017, the Company issued, credited as fully paid, 106,521,617,220

ordinary shares of £0.00001 each;

100% by Atomhawk

Design Ltd

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(e) on 13 December 2017, the Company passed a resolution to consolidate its share capital

from 106,560,621,840 ordinary shares of £0.00001 each to 106,554,131 ordinary shares

of £0.010000609158926 each; and

(f) on 13 December 2017, the Company passed a resolution to cancel the nominal value of

its shares from £0.010000609158926 each to £0.01 each and to cancel its share premium

account.

3.6 The Placing Shares will be issued pursuant to resolutions of the Company passed on

13 December 2017 which:

(a) generally and unconditionally authorise the directors in accordance with section 551 of the

Act to allot Ordinary Shares up to an aggregate nominal amount of:

(i) £39,895,869 in respect of the Placing Shares and the Warrants (as defined in

paragraph 4.2.2 of this Part V); and

(ii) generally following Admission up to £48,333,333 (representing one third of the

issued Ordinary Share capital on Admission)

such authority to expire 15 months after the passing of the resolution or, if earlier, at the

conclusion of the next annual general meeting of the Company; and

(b) empower the directors pursuant to section 570 of the Act to allot equity securities (as

defined in section 560 of the Act), pursuant to the authority referred to in paragraph 3.6(a)

above, as if section 561(1) of the Act did not apply to any such allotment, provided that this

power:

(i) is limited to the allotment of equity securities with an aggregate nominal value of:

(A) £39,895,869 in respect of the Placing Shares and the Warrants (as defined in

paragraph 4.2.2 of this Part V); and

(B) otherwise £14,500,000 (representing one tenth of the issued Ordinary Share

capital on Admission); and

(ii) shall expire 15 months after the passing of the resolution or, if earlier, at the

conclusion of the next annual general meeting of the Company.

3.7 Application has been made for the Enlarged Ordinary Share Capital to be admitted to trading on

AIM. The Ordinary Shares are not listed or traded on, and no application has been or is being

made for the admission of the Ordinary Shares to listing or trading on, any other stock exchange

or securities exchange or market.

3.8 Save as disclosed in this paragraph 3 and paragraph 4 below, as at the date of this Document:

(a) the Company does not hold any treasury shares (i.e. shares in the Company held by the

Company) and no Ordinary Shares were held by, or on behalf of, any member of

the Group;

(b) the Company has no outstanding convertible securities, exchangeable securities or

securities with warrants;

(c) the Company has granted no acquisition rights or obligations over authorised but unissued

capital and given no undertaking to increase its share capital; and

(d) no capital of any member of the Group is under option or is agreed, conditionally or

unconditionally, to be put under option

3.9 The Existing Ordinary Shares will be diluted by the allotment and issue of the Placing Shares.

The Placing Shares represent 26.51 per cent. of the Enlarged Ordinary Share Capital.

3.10 The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of

Ordinary Shares increases the aggregate holding of the acquirer and its concert parties to shares

carrying 30 per cent. or more of the total voting rights in the Company, the acquirer (and,

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depending on the circumstances, its concert parties) would be required, except with the consent

of the Panel, to make a cash offer for the outstanding shares in the Company at a price not less

than the highest price paid for any interests in the Ordinary Shares by the acquirer or its concert

parties during the previous 12 months. This requirement would also be triggered by an

acquisition of shares by a person holding (together with its concert parties) shares carrying

between 30 and 50 per cent. of the total voting rights in the Company if the effect of such

acquisition were to increase that person’s percentage of the total voting rights.

3.11 Under the Act, if an offeror acquires 90 per cent. of the Ordinary Shares not already held by the

offeror within four months of making the offer, it could then compulsorily acquire the remaining

10 per cent. It would do so by sending a notice to outstanding shareholders telling them that it

will compulsorily acquire their shares and then, six weeks later, it would execute a transfer of the

outstanding shares in its favour and pay the consideration to the Company, which would hold

the consideration on trust for outstanding shareholders. The consideration offered to the

shareholders whose shares are compulsorily acquired under the Act must, in general, be

the same as the consideration that was available under the takeover offer.

3.12 The Act also gives minority shareholders in the Company a right to be bought out in certain

circumstances by an offeror who has made a takeover offer. If a takeover offer relates to all

Ordinary Shares and, at any time before the end of the period within which the offer could be

accepted, the offeror held or had agreed to acquire not less than 90 per cent. of the Ordinary

Shares not already held by the offeror, any holder of shares to which the offer relates who has

not accepted the offer can require the offeror to acquire his shares. The offeror would be required

to give any shareholder notice of his right to be bought out within one month of that right arising.

The offeror may impose a time limit on the rights of minority shareholders to be bought out, but

that period cannot end less than three months after the end of the acceptance period. If a

shareholder exercises its rights, the offeror is bound to acquire those shares on the terms of the

offer or on such other terms as may be agreed.

3.13 The Ordinary Shares are denominated in Sterling.

3.14 The expected issue date of the Placing Shares is 21 December 2017.

4. Share options, warrants and awards

4.1 Employee share plans

4.1.1 Overview of the New PlansFollowing Admission, the Company intends to operate a discretionary executive share

plan, the LTIP. The Company intends to also operate an all-employee share incentive plan,

the SIP. The LTIP and the SIP are, together, the “New Plans”.

A reference in this section 4 to the Board includes any designated committee of the Board

including the Remuneration Committee.

Information on certain awards to be made on, or shortly after, Admission (the “Admission

Awards”) is set out at paragraph 3.3 of this Part V and the principal features of the New

Plans are summarised below.

4.1.2 The LTIPThe LTIP is to be adopted by the Company on, or shortly prior to, Admission.

The LTIP is a discretionary executive share plan. Under the LTIP, the Board may, within

certain limits and subject to any applicable performance conditions, grant to eligible

employees (i) nil cost options over Ordinary Shares (“LTIP Nil-Cost Options”) and/or (ii)

conditional awards (i.e. a conditional right to acquire Ordinary Shares) (“LTIP Conditional

Awards”) and/or (iii) Ordinary Shares which are subject to restrictions and the risk of

forfeiture (“LTIP Restricted Shares”). The Company has also established a sub-plan to the

LTIP which permits the grant of options with a market value exercise price (“LTIP CSOP

Options”, and together with LTIP Nil-Cost Options, “LTIP Options”) over Ordinary Shares

meeting the requirements of a company share option plan (“CSOP” ) for the purposes of

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the Income Tax (Earnings and Pensions) Act 2003. The provisions of the LTIP apply to

LTIP CSOP Options subject to and insofar as permitted by the applicable requirements of

the CSOP legislation. For the purpose of this section, LTIP Options, LTIP Conditional

Awards and LTIP Restricted Shares are together referred to as “LTIP Awards”.

No payment is required for the grant of an LTIP Award.

4.1.2.1 Eligibility

All employees (including Executive Directors) of the Group are eligible for selection

to participate in the LTIP at the discretion of the Board.

Apart from the Admission Awards noted above, the Board intend to grant the first

LTIP awards shortly after the beginning of the FY18 financial year on the basis set

out in the table below:

Number of shares under Exercise PerformanceName option Price ConditionsCarl Cavers 1,200,000 Nil See paragraph 4.1.2.3

David Wilton 885,000 Nil See paragraph 4.1.2.3

• The awards to Carl Cavers and David Wilton together with certain senior

management members will be on the following basis:

• Part a: 35% of the award will be subject to EPS targets, with a

maximum payout only being provided for stretch performance;

• Part b: 35% of the award will vest subject to annualised TSR

performance over the 3 year performance period on a straight line

basis between 10% and 20% per annum; and

• Part c: 30% of the award will vest subject to annualised TSR

performance over the 3 year performance period on a straight line

basis between 20% and 30% per annum.

In addition, up to a further 5,000,000 LTIP Options are intended to be granted to

senior employees of the Group shortly after the beginning of the FY18 financial

year together with certain performance conditions.

4.1.2.2 Grant of LTIP Awards

LTIP Awards may be granted at any time subject to the application of any dealing

restrictions. However, no LTIP Awards may be granted more than 10 years from

the date when the LTIP was adopted.

4.1.2.3 Performance and other conditions

The Board may impose performance conditions on the vesting of LTIP Awards.

Where performance conditions are specified for LTIP Awards, the underlying

measurement period for such conditions will ordinarily be three years. The

proposed performance conditions for the first grant of LTIP Awards are to be based

on performance against earnings per share targets and shareholder return targets

based on (i) share price growth and (ii) the actual dividends paid over the

performance period. Further grants of LTIP Awards are to be subject to

performance conditions set out at the time of grant.

Any performance conditions applying to LTIP Awards may be varied, substituted or

waived if the Board considers it appropriate, provided the Board considers that the

new performance conditions are reasonable and are not materially less difficult to

satisfy than the original conditions (except in the case of waiver).

The Board may also impose other conditions on the vesting of LTIP Awards.

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4.1.2.4 Holding period

At its discretion, the Board may grant LTIP Awards subject to a holding period of a

maximum of two years following vesting.

4.1.2.5 Malus and Clawback

The Board may decide, at the vesting of LTIP Awards or at any time before and in

the two years following vesting, that the number of Ordinary Shares subject to an

LTIP Award shall be reduced (including to nil) or, where such Ordinary Shares have

been acquired by the participant, recovered from him on such basis that the Board

in its discretion considers to be fair and reasonable in the following circumstances:

• discovery of a material misstatement resulting in an adjustment in the

audited accounts of the Group or any Group company; or

• action or conduct of a participant which, in the reasonable opinion of the

Board, amounts to fraud or gross misconduct.

Clawback may be effected, among other means, by requiring the transfer of

Ordinary Shares, payment of cash or reduction of awards.

4.1.2.6 Vesting and exercise

LTIP Awards will normally vest, and LTIP Options will normally become

exercisable, on the third anniversary of the date of grant of the LTIP Award to the

extent that any applicable performance conditions have been satisfied and to the

extent permitted following any operation of malus or clawback. LTIP Options will

normally remain exercisable for a period determined by the Board at grant which

shall not exceed 10 years from grant.

4.1.2.7 Cessation of employment

Except in certain circumstances, set out below, an LTIP Award will lapse

immediately upon a participant ceasing to be employed by or holding office with the

Group.

If a participant so ceases because of his ill-health, injury, disability, redundancy,

retirement with the agreement of his employer, the participant being employed by

a company which ceases to be a Group company or being employed in an

undertaking which is transferred to a person who is not a Group company or in

other circumstances at the discretion of the Board (each an “LTIP Good Leaver

Reason”), his LTIP Award will ordinarily vest on the date when it would have vested

if he had not so ceased to be a Group employee or director, subject to the

satisfaction of any applicable performance conditions measured over the original

performance period and the operation of malus or clawback. In addition, unless the

Board decides otherwise, vesting will be pro-rated to reflect the reduced period of

time between grant and the participant’s cessation of employment as a proportion

of the normal vesting period.

The Board can alternatively decide that the LTIP Award of a participant who has

ceased to be a Group employee or director for an LTIP Good Leaver Reason will

vest early when he leaves. If a participant dies, a proportion of his LTIP Award will

vest on the date of his death. The extent to which an LTIP Award will vest in these

situations will be determined by the Board at its absolute discretion taking into

account the extent to which any applicable performance conditions have been

satisfied at the date of cessation of employment and the operation of malus or

clawback. In addition, unless the Board decides otherwise, vesting will be pro-

rated to reflect the reduced period of time between grant and the participant’s

cessation of employment as a proportion of the normal vesting period.

To the extent that LTIP Options vest for an LTIP Good Leaver Reason, they may

be exercised for a period of six months following vesting (or such longer period as

the Board determines) and will otherwise lapse at the end of that period. To the

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extent that LTIP Options vest following death of a participant, they may be

exercised for a period of 12 months following death and will otherwise lapse at the

end of that period.

4.1.2.8 Corporate events

In the event of a takeover, scheme of arrangement, or winding-up of the Company,

LTIP Awards will vest early. The proportion of an LTIP Award which vests shall be

determined by the Board taking into account, among other factors, the extent to

which any applicable performance conditions have been satisfied at that time.

To the extent that LTIP Options vest in the event of a takeover, scheme of

arrangement, or winding-up of the Company they may be exercised for a period of

six months measured from the relevant event (or in the case of takeover such

longer period as the Board determines) and will otherwise lapse at the end of that

period.

In the event of a demerger, distribution or any other corporate event, the Board

may determine that LTIP Awards shall vest. The proportion of an LTIP Award which

vests shall be determined by the Board taking into account, among other factors,

the extent to which any applicable performance conditions have been satisfied at

that time. LTIP Options that vest in these circumstances may be exercised during

such period as the Board determines and will otherwise lapse at the end of that

period.

If there is a corporate event resulting in a new person or company acquiring control

of the Company, the Board may (with the consent of the acquiring company)

alternatively decide that LTIP Awards will not vest or lapse but will be replaced by

equivalent new awards over shares in the new acquiring company.

4.1.2.9 Awards not transferable

LTIP Awards are not transferable other than to the participant’s personal

representatives in the event of his death provided that awards and Ordinary

Shares may be held by the trustees of an employee benefit trust as nominee for

the participants.

4.1.2.10Limits

The LTIP may operate over new issue Ordinary Shares, treasury Ordinary Shares

or Ordinary Shares purchased in the market. The rules of the LTIP provide that, in

any period of 10 calendar years, not more than 10% of the Company’s issued

ordinary share capital may be issued under the LTIP and under any other

employees’ share scheme operated by the Company. Ordinary Shares issued out

of treasury under the LTIP will count towards these limits for so long as this is

required under institutional shareholder guidelines. Awards which are renounced

or lapse shall be disregarded for the purposes of these limits, as will the Admission

Awards.

4.1.2.11 Variation of capital

If there is a variation of share capital of the Company or in the event of a demerger

or other distribution, special dividend or distribution, the Board may make such

adjustments to LTIP Awards, including the number of Ordinary Shares subject to

LTIP Awards and the option exercise price (if any), as it considers to be fair and

reasonable.

4.1.2.12 Dividend equivalents

In respect of any LTIP Award, the Board may decide that participants will receive

a payment (in cash and/or additional Ordinary Shares) equal in value to any

dividends that would have been paid on the Ordinary Shares which vest under that

LTIP Award by reference to the period between the time when the LTIP Award was

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granted and the time when it vested. This amount may assume the reinvestment

of dividends and exclude or include special dividends or dividends in specie.

4.1.2.13Alternative settlement

At its discretion, the Board may decide to satisfy LTIP Awards with a payment in

cash or Ordinary Shares equal to any gain that a participant would have made had

the relevant award been satisfied with Ordinary Shares.

4.1.2.14Rights attaching to Shares

Ordinary Shares issued and/or transferred under LTIP Awards will not confer any

rights on any participant until the relevant LTIP Award has vested or the relevant

LTIP Option has been exercised and the participant in question has received the

underlying Ordinary Shares. Any Ordinary Shares allotted when an LTIP Option is

exercised or an LTIP Award vests will rank equally with Ordinary Shares then in

issue (except for rights arising by reference to a record date prior to their issue).

4.1.2.15Amendments

The Board may, at any time, amend the provisions of the LTIP in any respect.

Amendments may not normally materially adversely affect the rights of participants

except where participants are notified of such amendment and the majority of

participants approve such amendment.

4.1.2.16Overseas plans

The Board may, at any time, establish further plans based on the LTIP for overseas

territories. Any such plan shall be similar to the LTIP but modified to take account

of local tax, exchange control or securities laws. Any Ordinary Shares made

available under such further overseas plans must be treated as counting against

the limits on overall participation under the LTIP.

4.1.2.17Benefits not pensionable

The benefits received under the LTIP are not pensionable.

4.1.3 The SIPThe SIP is to be adopted by the Company on, or shortly prior to, Admission.

4.1.3.1 Status

The SIP is an all-employee share ownership plan which has been designed to

meet the requirements of Schedule 2 of the Income Tax (Earnings and Pensions)

Act 2003 so that Ordinary Shares can be provided to UK employees under the SIP

in a tax-efficient manner.

Under the SIP, eligible employees may be: (i) awarded up to £3,600 worth of free

Ordinary Shares (“Free Shares”) each year; (ii) offered the opportunity to buy

Ordinary Shares with a value of up to the lower of £1,800 and 10% of the

employee’s pre-tax salary a year (“Partnership Shares”); (iii) given up to two free

Shares (“Matching Shares”) for each Partnership Share bought; and/or (iv) allowed

or required to purchase Ordinary Shares using any dividends received on Ordinary

Shares held in the SIP (“Dividend Shares”). The Board may determine that

different limits shall apply in the future should the relevant legislation change in this

respect.

4.1.3.2 SIP Trust

The SIP operates through a UK-resident trust (the “SIP Trust”). The trustee of the

SIP Trust purchases or subscribes for Ordinary Shares that are awarded to or

purchased on behalf of participants in the SIP. A participant will be the beneficial

owner of any Ordinary Shares held on his behalf by the trustee of the SIP Trust.

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Any Ordinary Shares held in the SIP Trust will rank equally with Ordinary Shares

then in issue.

If a participant ceases to be in relevant employment, he will be required to withdraw

his Free Shares, Partnership Shares, Matching Shares and Dividend Shares from

the SIP Trust (or the Free Shares, Partnership Shares, Matching Shares may be

forfeited as described below).

4.1.3.3 Eligibility

Each time that the Board decides to operate the SIP, all UK resident tax-paying

employees of the Company and its subsidiaries participating in the SIP must be

offered the opportunity to participate. Other employees may be permitted to

participate. The Board may decide that employees invited to participate must have

completed a minimum qualifying period of employment before they can participate,

as determined by the Board in relation to any award of Ordinary Shares under the

SIP which may be different for each type of award from time to time. In the case of

Free Shares (and, in certain circumstances, Partnership Shares and Matching

Shares) that period must not exceed 18 months or, in certain other circumstances

and only in the case of Partnership Shares or Matching Shares, 6 months.

4.1.3.4 Limits

The SIP may operate over new issue Ordinary Shares, treasury Ordinary Shares

or Ordinary Shares purchased in the market. The rules of the SIP provide that, in

any period of 10 calendar years, not more than 10% of the Company’s issued

ordinary share capital may be issued under the SIP and under any other

employees’ share scheme operated by the Company. Ordinary Shares issued out

of treasury for the SIP will count towards this limit for so long as this is required

under institutional shareholder guidelines. Ordinary Shares issued or to be issued

pursuant to awards granted on or before Admission will not count towards these

limits. In addition, awards which are renounced or lapse shall be disregarded for

the purposes of these limits.

4.1.3.5 Free Shares

Up to £3,600 worth of Free Shares may be awarded to each employee in a tax

year. Free Shares must be awarded on the same terms to each employee, but the

number of Free Shares awarded can be determined by reference to the

employee’s remuneration, length of service, number of hours worked and, if the

Company so chooses, the satisfaction of performance targets based on business

results or other objective criteria. There is a holding period of between three and

five years (the precise duration to be determined by the Board) during which the

participant cannot withdraw the Free Shares from the SIP Trust (or otherwise

dispose of the Free Shares) unless the participant leaves relevant employment.

The Board, at its discretion, may provide that the Free Shares will be forfeited if the

participant leaves relevant employment other than in the circumstances of injury,

disability, redundancy, retirement, by reason of a relevant transfer within the

meaning of the Transfer of Undertakings (Protection of Employment) Regulations

2006 or if the relevant employment is employment by an associated company by

reason of a change of control or other circumstances ending that company’s status

as an associated company (each a “SIP Good Leaver Reason”) or on death.

Forfeiture can only take place within three years of the Free Shares being

awarded.

4.1.3.6 Partnership Shares

The Board may allow an employee to use pre-tax salary to buy Partnership

Shares. The maximum limit is the lower of £1,800 or 10% of pre-tax salary in any

tax year. The minimum salary deduction permitted, as determined by the Board,

must be no greater than £10 on any occasion. The salary allocated to Partnership

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Shares can be accumulated for a period of up to 12 months (the “Accumulation

Period”) or Partnership Shares can be purchased out of deductions from the

participant’s pre-tax salary when those deductions are made. A participant and the

Company may agree to vary the amount of salary deductions and the intervals of

those deductions. If there is an Accumulation Period, the number of Ordinary

Shares purchased shall be determined by dividing the participant’s aggregate pay

deducted during the Accumulation Period by the market value of the Partnership

Shares.

Once acquired, Partnership Shares may be withdrawn from the SIP by the

participant at any time.

4.1.3.7 Matching Shares

The Board may, at its discretion, offer Matching Shares free to an employee who

has purchased Partnership Shares. If awarded, Matching Shares must be awarded

on the same basis to all participants up to a maximum of two Matching Shares for

every Partnership Share purchased (or such other maximum as may be provided

by statute). There is a holding period of between three and five years (the precise

duration to be determined by the Board) during which the participant cannot

withdraw the Matching Shares from the SIP Trust unless the participant leaves

relevant employment.

The Board, at its discretion, may provide that the Matching Shares will be forfeited

if the participant leaves relevant employment other than for a SIP Good Leaver

Reason or on death. Forfeiture can only take place within three years of the

Matching Shares being awarded.

4.1.3.8 Re-investment of dividends

The Board may allow or require a participant to re-invest the whole or part of any

dividends paid on Ordinary Shares held in the SIP. Dividend Shares must be held

in the SIP Trust for no less than three years.

4.1.3.9 Corporate events

In the event of a general offer for the Company (or a similar takeover event taking

place) during a holding period, participants will be able to direct the trustee of the

SIP Trust as to how to act in relation to their Ordinary Shares held in the SIP. In the

event of a corporate re-organisation, any Ordinary Shares held by participants may

be replaced by equivalent shares in a new holding company.

4.1.3.10Variation of capital

Ordinary Shares acquired on a variation of share capital of the Company will

usually be treated in the same way as the Ordinary Shares acquired or awarded

under the SIP, in respect of which the rights were conferred and as if they were

acquired or awarded at the same time.

4.1.3.11 Rights attaching to Ordinary Shares

Any Ordinary Shares allotted under the SIP will rank equally with Ordinary Shares

then in issue (except for rights arising by reference to a record date prior to their

allotment).

4.1.3.12Amendments

The Company may at any time amend the rules of the SIP by resolution of the

Board and may amend the SIP trust deed by way of a supplemental deed. No

modification can be made which would alter, to the disadvantage of any participant,

the rights he accrued under the SIP.

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4.1.3.13Overseas plans

The Board may, at any time, establish further plans for overseas territories, any

such plan to be similar to the SIP but modified to take account of local tax,

exchange control or securities laws. Any Ordinary Shares made available under

such further overseas plans must be treated as counting against the limits on

individual and overall participation in the SIP.

4.1.3.14Benefits not pensionable

The benefits received under the SIP are not pensionable.

4.2 Warrants4.2.1 Save as disclosed in this paragraph 4.2, the Company does not have any outstanding

warrants.

4.2.2 On 15 December 2017, the Company executed a warrant instrument pursuant to which it

created, conditional upon Admission, warrants to subscribe, at the Placing Price, for

1,450,000 Ordinary Shares (representing approximately one per cent. of the Enlarged

Ordinary Share Capital), exercisable from the date of Admission until the tenth anniversary

of Admission (“Warrants”). Under the Placing Agreement, the Company has agreed to

grant all of the Warrants to Zeus Capital.

5. Articles of Association

The Articles, which were adopted by the Company on 14 December 2017, contain provisions to the

following effect. For the purposes of this paragraph 5:

(a) “Director” means a director of the Company;

(b) “Member” means a member of the Company; and

(c) “Share” means a share in the capital of the Company.

5.1 ObjectsThe Articles do not provide for: (i) any objects of the Company and accordingly the Company’s

objects are unrestricted; or (ii) any purposes for which the Company was established.

5.2 Share class rightsThe rights attached to any class of Shares may be varied with the consent in writing of the

holders of not less than three-quarters in nominal value of the issued Shares of the class or with

the sanction of a special resolution passed at a separate meeting of the holders of Shares of the

class.

5.3 Share transfers5.3.1 Subject to the Articles, a Member may transfer all or any of his Shares:

(i) in the case of certificated Shares, by an instrument of transfer in writing in any usual

form or in another form approved by the Board signed by or on behalf of the

transferor and (in the case of a transfer of a Share which is not fully paid) by or on

behalf of the transferee; or

(ii) in the case of uncertificated Shares, without a written instrument in accordance with

the CREST Regulations.

5.3.2 The Company may refuse to register a transfer of certificated Shares unless:

(i) the instrument of transfer is properly stamped or is certified or otherwise shown to

the Board’s satisfaction to be exempt from stamp duty and is presented for

registration to the Company at its registered office or such other place as the Board

may decide, accompanied by the certificate for the Shares to which it relates (except

in the case of a transfer by a person to whom the Company was not required to

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issue a share certificate and has not issued one in respect of the Share concerned)

and any other evidence as the Board may require to show the right of the person

signing the instrument to make the transfer or, if the instrument is signed by some

other person on his behalf, the authority of such person to do so;

(ii) all the Shares to which it relates are fully paid and of the same class; and

(iii) it is in favour of a single transferee or not more than four joint transferees, in each

case being a natural or legal person.

5.4 DividendsAll dividends on Shares are to be paid according to the amounts paid up (otherwise than in

advance of calls) on their nominal value, or otherwise in accordance with the terms concerning

entitlement to dividends on which Shares were issued. All unclaimed dividends may be made use

of by the Board for the Company’s benefit until claimed. Any dividend unclaimed for twelve years

from the date the dividend was declared or became due for payment will be forfeited and shall

revert to the Company.

5.5 General meetings5.5.1 Every Member who is present at a general meeting in person or by proxy is entitled to one

vote on a resolution put to the meeting on a show of hands (except that a proxy has one

vote for and one vote against the resolution if he has been duly appointed by more than

one Member entitled to vote on the resolution and has been instructed (or exercises a

discretion given) by one or more of those Members to vote for it and by one or more other

of those Members to vote against it) and to one vote for every Share of which he is the

holder on a resolution put to the meeting on a poll. The vote of the senior of joint holders

who tenders a vote will be accepted to the exclusion of the votes of the other joint holders.

Seniority is determined by the order in which the names of the holders appear in the

Company’s register of Members in respect of the joint holding.

5.5.2 The Articles require the Board to convene annual general meetings in accordance with

company legislation. The Board may convene a general meeting which is not an annual

general meeting whenever and wherever it considers appropriate. The Company is

required to give notice of a general meeting to each Member (other than one who, under

the Articles or any restrictions imposed on any Shares, is not entitled to receive it or to

whom the Company has not sent and is not required to send its latest annual accounts and

reports) at a time and date selected by the Board in accordance with the Articles and

company legislation, to the Directors on the date of the notice and to the Auditors on that

date.

5.5.3 A Member who is entitled to attend and vote at a general meeting is entitled to appoint

another person, or two or more persons in respect of different Shares held by him, as his

proxy to exercise all or any of his rights to attend and to speak and to vote at the meeting.

5.5.4 A corporation which is a Member may, by resolution of its directors or other governing

body, authorise one or more persons as it thinks fit to act as a representative for it at any

general meeting of the Company. The Company may require such a representative to

produce a certified copy of the authorising resolution or such other reasonable evidence of

his authority before permitting him to exercise any powers on the corporation’s behalf at

the meeting.

5.6 Interests in Shares not disclosed to the CompanyIf the Company gives notice under section 793 of the Companies Act in relation to any Shares to

a Member or another person appearing to be interested in such Shares and the recipient fails to

give the Company the information required within fourteen days afterwards, the holder of such

Shares is not entitled to attend or vote at a general meeting or exercise any other rights in respect

of them in relation to a general meeting or a poll. Where such Shares represent at least 0.25 per

cent. of the issued Shares of their class (i) the Company may withhold payment of any dividend

or other distribution or amount payable in respect of them, (ii) the Member is not entitled to elect

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to receive Shares instead of a dividend, and (iii) the Board may refuse to register the transfer of

any such Shares unless (1) the Member is not himself in default in supplying the information

required and proves to the satisfaction of the Board that no person in default of supplying the

information required is interested in any Shares which are the subject of the transfer or (2) the

transfer is shown to the Board’s satisfaction to be made by a Member to a third party

unconnected with that Member or with any other person appearing to be interested in the Shares

and made pursuant to (A) an acceptance of a takeover offer, (B) a sale through a recognised

investment exchange or any other securities investment exchange outside the United Kingdom

on which (in either case) such Shares have been admitted to trading on the Company’s

application or (C) a sale of the whole of the beneficial interest in the Shares.

5.7 Return of capitalOn a winding up of the Company and subject to company legislation, the Company’s assets

available for distribution shall be divided among the Members in proportion to the nominal

amounts of capital paid up on their Shares, subject to the terms of issue of or rights attached to

any Shares.

5.8 Lien and forfeiture5.8.1 The Company has a first and paramount lien on each partly paid Share for all amounts

payable to the Company (whether due or not) in respect of such Share. The Board may

sell any Share on which the Company has a lien if a sum in respect of which the lien exists

is presently payable and is not paid within 14 days after notice has been sent to the holder

of the Share demanding payment and stating that if the notice is not complied with the

Share may be sold.

5.8.2 Subject to the terms on which Shares are allotted, the Board may make calls on Members

in respect of any money unpaid on their Shares. Each Member shall (subject to receiving

at least 14 days’ notice) pay to the Company the amount called on his Shares. If a call or

any instalment of a call remains unpaid in whole or in part after it has become due and

payable, the Board may give the person from whom it is due not less than 14 days’ notice

requiring payment of the amount unpaid together with any interest which may have

accrued and any costs, charges and expenses incurred by the Company by reason of such

non-payment. The notice shall name the place where payment is to be made and shall

state that if the notice is not complied with the Shares in respect of which the call was

made will be liable to be forfeited.

5.9 Board powers5.9.1 The Company’s business is to be managed by the Board. The Board may exercise all the

Company’s powers and may do on the Company’s behalf all such acts as may be done by

it or on its behalf and which are not required to be exercised or done by the Company in

general meeting subject (in all cases) to company legislation, the Articles and any direction

that the Company gives to the Board by passing a special resolution.

5.9.2 The Board may delegate any of its powers under the Articles and any other of its powers

that can be delegated:

(i) to such person or persons or to any Board committee;

(ii) to such an extent (including in relation to any matter or any territory, region or

country);

(iii) on such terms and subject to such conditions;

(iv) for such period or indefinitely; and

by such means, as the Board considers appropriate.

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5.9.3 The Board may:

(i) grant to any person or persons or to any Board committee to whom it delegates any

power the power to sub-delegate that power (with or without a power of further sub-

delegation) to one or more persons or to a sub-committee;

(ii) retain or exclude the right of the Board to exercise any delegated power collaterally

with the person or persons or the Board committee to whom it has been delegated;

and

(iii) revoke the delegation or alter its terms or conditions.

5.10 Directors – appointment, retirement and removal5.10.1 At any one time the total number of Directors may not be less than two. This limit may be

changed by ordinary resolution of the Company. The Company may by ordinary resolution

appoint as a Director a person who is willing to act as such provided that:

(i) notice is given of the resolution identifying the person concerned by name; and

(ii) if that person is not recommended for appointment by the Board, the Company

receives at the Registered Office that person’s written confirmation of his willingness

to be appointed as a Director at least seven days before the date appointed for the

holding of the general meeting at which the resolution is to be considered.

The Board may appoint as a Director any person who is willing to act as such.

5.10.2 At each annual general meeting:

(i) each person who is a Director on a date selected by the Board in relation to an

annual general meeting that is not more than 14 days before, and no later than, the

date of the notice of that meeting (the “selection date”) and was appointed as such

after the previous annual general meeting is to be proposed for election as a

Director;

(ii) each other person who is a Director on the selection date and has remained as such

without being appointed or elected or re-elected as such at one of the two previous

annual general meetings is to be proposed for re-election as a Director; and

(iii) if the Board so decides, any other person selected by the Board who is a Director

on the selection date can be proposed for re-election as a Director,

(iv) provided that, in each case, the person concerned is a Director immediately before

the commencement of the meeting and has confirmed to the Board that he is willing

to continue as a Director.

5.10.3 If a resolution for the election or re-election as a Director of any person who was a Director

at the commencement of an annual general meeting is put to vote at that meeting but not

passed, that person will remain in office until the meeting appoints someone in his place

or (if it does not do so) until the end of the meeting, when (subject to the next paragraph)

he will cease to be a Director.

5.10.4 If at the end of an annual general meeting there would otherwise be no Directors, each

person to whom the previous paragraph applies:

(i) shall remain in office as a Director until someone else who was not a Director at the

commencement of that meeting is appointed as a Director by the Company in

general meeting, when he will cease to be a Director; and

(ii) may, in his capacity as a Director for so long as he remains in office in accordance

with this paragraph, act (with any other persons to whom this paragraph applies as

the Board) only:

(A) for the purposes of convening and holding a general meeting to appoint

Directors; and

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(B) as he considers necessary or appropriate in order to comply with any legal or

regulatory requirement applicable to the Company or the Directors or to him

as a Director.

5.10.5 The Company may by special resolution, or by ordinary resolution of which special notice

has been given in accordance with company legislation, remove any Director before the

expiration of his period of office.

5.11 Directors – fees and remuneration5.11.1 The maximum aggregate amount of fees that the Company may pay to all the Directors

who do not hold executive office for their services as such is £500,000 per annum, or such

larger amount as the Company may by ordinary resolution decide. These fees are to be

divided among the Directors as the Board decides or, if no decision is made, equally. An

executive Director may receive from the Company, in addition to or instead of such fees,

salary or other remuneration.

5.11.2 The Directors are entitled to be repaid all reasonable travelling, hotel and other expenses

properly incurred by them in connection with the discharge of their duties as Directors,

including any professional fees incurred by him.

5.11.3 The Board may provide pensions, other retirement or superannuation benefits, death or

disability benefits or other allowances for persons who are or were directors of the

Company and their relatives and dependants.

5.12 Directors’ interests5.12.1 A Director is not required (provided he has disclosed his interest in the matter to the other

Directors in accordance with the Companies Act (if that act obliges him to do so)) to

account to the Company for any profit, remuneration or other benefit which he derives from

or in connection with (i) being a party to or otherwise interested in any arrangement or

transaction with the Company or in which the Company is otherwise interested, (ii) holding

any other office or place of profit with the Company (except that of auditor) in conjunction

with his office of Director for such period and on such terms, including as to remuneration,

as the Board may decide, (iii) acting by himself or through a firm with which he is

associated in a professional capacity for the Company or any body corporate in which the

Company is interested (other than as auditor), or (iv) being a director or other officer of, or

employed by or otherwise interested in any body corporate in which the Company or any

other undertaking in the group comprising the Company and its subsidiary undertakings

(not including any parent undertaking of the Company) (a “Group Undertaking”) is

interested or which has an interest in the Company or in any other Group Undertaking. A

Director or former Director will not be accountable to the Company for any benefit provided

to him or his dependants in accordance with any provision in the Articles.

5.12.2 A Director shall not vote or be counted in the quorum on any resolution of the Board

concerning any contract in which he has an interest (and, if he votes on it, his vote is not

to be counted) unless that interest cannot reasonably be regarded as likely to give rise to

a conflict of interest or only arises from or relates to one or more of the following matters:

(i) the giving of any security, guarantee or indemnity to him in respect of money lent or

obligations incurred by him or by any other person at the request of or for the benefit

of any Member of the Group (a “Group Undertaking”);

(ii) the giving of any security, guarantee or indemnity to a third party in respect of a debt

or obligation of a Group Undertaking for which he himself has assumed

responsibility in whole or in part under a guarantee or indemnity or by the giving of

security;

(iii) an offer of securities by a Group Undertaking in which he is or may be entitled to

participate as a holder of securities or in the underwriting or sub-underwriting of

which he is to participate;

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(iv) a contract with or relating to another company in which he does not have to his

knowledge an interest (as that term is used in Part 22 of the Companies Act) in

Shares representing one per cent. or more of either any class of the equity share

capital, or the voting rights in, such company;

(v) an arrangement for the benefit of employees of any Group Undertaking which does

not award him any privilege or benefit not generally awarded to the employees to

whom such arrangement relates;

(vi) insurance which the Company proposes to maintain or purchase for the benefit of

Directors or for the benefit of persons including any Director; or

(vii) a proposal for the Company (1) to provide him with an indemnity permitted by

company legislation, (2) to provide him with funds in circumstances permitted by

company legislation to meet his defence expenditure in respect of any civil or

criminal proceedings or regulatory investigation or other regulatory action or in

connection with any application for any category of relief permitted by company

legislation, or (3) to do anything to enable him to avoid incurring any such

expenditure.

5.12.3 The Board may authorise any situation or matter relating to a particular Director to which

section 175 of the Companies Act (on “Duty to avoid conflicts of interest”) applies (each a

“Conflict Matter”) on such terms as they think fit. For the Board to do so, a Director must

propose to the Board that the Conflict Matter concerned be so authorised. The Board may

terminate or withdraw any such authorisation by giving notice to the Director concerned.

Any terms to which such an authorisation is made subject may include that the Director

concerned (i) is not obliged to disclose to the Company confidential information obtained

by him (other than in his capacity as its Director or as its employee or agent or, if the

Directors so decide, in any other capacity that would otherwise oblige him to disclose it to

the Company) in any situation to which such authorisation applies, nor to use any such

information directly or indirectly for the Company’s benefit, where to do so would amount

to a breach of a duty of confidence to any third party, where the Director concerned has

previously disclosed to the Board the existence of the conflict and the third party’s identity,

and (ii) may absent himself from any Board discussions, and make arrangements not to

receive documents and information, relating to the Conflict Matter concerned for so long

as he reasonably believes that he has or may have a conflict of interest in respect of it.

5.13 Directors’ indemnity and insuranceSubject to company legislation, the Company may:

5.13.1 indemnify any Director or any director of any associated company against any liability

pursuant to any qualifying third party indemnity provision or any qualifying pension scheme

indemnity provision, or on any other basis as is lawful, in each case on such terms as the

Board may decide; and

5.13.2 purchase and maintain for any Director or any director of any associated company

insurance against any liability.

5.14 Borrowing powersThe Board may exercise all the Company’s powers to borrow money and to mortgage or charge

all or part of its undertaking, property and assets (present or future) and uncalled capital and to

issue debentures and other securities and to give security, whether outright or as collateral for a

debt, liability or obligation of the Company or of a third party.

5.15 Untraced ShareholdersSubject to the Articles, the Company may sell any Shares registered in the name of a Member

remaining untraced for 12 years who fails to communicate with the Company following

advertisement of an intention to make such a disposal and, on those Shares, no dividend is

cashed and no dividend is paid on them through a completed funds transfer following such

advertisement. Until the Company can account to the Member, the net proceeds of sale will be

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available for use in the business of the Company or for investment, in either case at the discretion

of the Board. The proceeds will not carry interest.

6. Directors’ and Proposed Director’s interests in the Company

6.1 Save as disclosed in this paragraph 6, none of the Directors nor the Proposed Director nor any

other member of their respective families:

(a) is, or following Admission will be, interested in any share capital of the Company; or

(b) has a financial product whose value in whole or in part is determined directly or indirectly

by reference to the price of securities in the Company or other securities which are, or

being, admitted to trading on AIM, including a contract for difference or a fixed odds bet.

In this paragraph 6, family has the meaning given in the glossary to the AIM Rules.

6.2 As at the date of this Document and immediately following Admission, the beneficial and non-

beneficial interests in Ordinary Shares of the Directors and the Proposed Director, and of other

members of their respective families, are and will be as follows:

As at the date On Admission of this Document Percentage Percentage Number of of Enlarged Number of of issued Ordinary OrdinaryName Ordinary Shares share capital Shares Share CapitalCarl Cavers* 11,003,328 10.33 6,601,907 4.55

David Wilton** Nil – 50,000 0.03

Kenneth Beaty 2,439,398 2.29 1,463,639 1.01

Ian Livingstone 3,588,812 3.37 2,153,287 1.49

Michael Sherwin Nil – 20,000 0.01

* The interests of Carl Cavers in Ordinary Shares set out above include his interests in 6,601,907 Ordinary Shares

held by Aghoco 1337 Limited (as trustee of the Sumo Group plc Employee Benefit Trust).

** The interests of David Wilton in Ordinary Shares set out above include his interests in 19,000 Ordinary Shares held

in the name of his wife, Helen Wilton.

It is intended that the following award, structured as an option over Ordinary Shares, will be

granted to the Director identified in the table below on, or shortly after, Admission pursuant to the

LTIP. The award will have an exercise price per Ordinary Share equal to its nominal value:

Number of Ordinary SharesName to be placed under Award Earliest Vesting DateDavid Wilton 500,000 18 months from

date of grant

6.3 Related party transactions

(a) Consultancy Agreement – Cragg Wood Limited

Project Republica Bidco Limited was party to a consultancy agreement dated 8 September

2016 with Cragg Wood Limited (in which Ken Beaty is interested and of which he is a

director) for the provision by Cragg Wood Limited of the services of Ken Beaty as a

consultant. That consultancy agreement was novated from Project Republica Bidco

Limited to Project Republica Topco Limited with effect from 27 November 2017 pursuant

to a novation agreement of that date between those three parties and will be terminated,

conditional on and with effect from Admission provided that it becomes effective by

19 January 2018, pursuant to a letter of termination dated 15 December 2017 between

Project Republica Topco Limited and Cragg Wood Limited.

(b) Consultancy Agreement – Gealka Limited

Sumo Digital Ltd. was party to a consultancy agreement dated 19 June 2017 with Gealka

Limited (in which David Wilton is interested and of which he is a director) for the provision

by Gealka Limited of the services of David Wilton as a consultant. That consultancy

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agreement was terminated, with effect from 1 September 2017, on 28 September 2017

pursuant to a letter of termination dated that date between those parties.

(c) Relationship Agreement – Perwyn

Perwyn Bidco (UK) Limited is party to a relationship agreement with the Company. See

paragraph 12.3 of this Part V for details of that relationship agreement.

(d) Placing Agreement

Carl Cavers, David Wilton, Ken Beaty, Ian Livingstone, Michael Sherwin and Perwyn Bidco

(UK) Limited are amongst others, party to the Placing Agreement with the Company. See

paragraph 12.1 of this Part V for details of the Placing Agreement.

(e) Investment Agreement – NorthEdge

Sumo Digital Holdings Limited and Sumo Digital Group Limited were party to an

investment agreement dated 7 November 2014 with Carl Cavers, Christopher Stockwell,

Paul Porter, Darren Mills, NorthEdge Capital Fund I LP, NorthEdge Capital I GP LLP and

NorthEdge Capital LLP relating to, amongst other things, certain investments in Sumo

Digital Holdings Limited. That investment agreement was terminated on 8 September 2016

pursuant to a deed of termination and release dated that date between those parties.

(f) Sale and Purchase Agreement

Sumo Digital Group Limited was party to an agreement dated 7 November 2014 with

Foundation 9 Entertainment, Inc., pursuant to which Sumo Digital Group Limited acquired

from Foundation 9 Entertainment, Inc. the entire issued share capital of Sumo Digital

Entertainment Limited. The consideration under that agreement was £12,250,000.

(g) Loan Notes – NorthEdge 2014

On 7 November 2014, NorthEdge Capital Fund I LP and NorthEdge Capital I GP LLP

subscribed for certain loan notes issued by Sumo Digital Group Limited in the following

amounts:

Name Value of loan notesNorthEdge Capital Fund I LP £13,197,011

NorthEdge Capital I GP LLP £302,989

All of those loan notes accrued interest at the rate of 10 per cent. per annum on a

compounding basis and have since been redeemed.

(h) Loan Notes – NorthEdge 2016

On 8 September 2016, NorthEdge Capital Fund I LP and NorthEdge Capital I GP LLP

subscribed for certain loan notes issued by Project Republica Bidco Limited in the

following amounts:

Name Value of loan notesNorthEdge Capital Fund I LP £4,887,755

NorthEdge Capital I GP LLP £112,245

All of those loan notes accrued interest at the rate of 3 per cent. per annum and have since

been redeemed.

(i) Advisory Fee Arrangement

Sumo Digital Group Limited was party to an agreement dated 7 November 2014 with

NorthEdge Capital LLP, pursuant to which NorthEdge Capital LLP provided certain

advisory services to Sumo Digital Group Limited. That agreement was terminated on

8 September 2016 pursuant to a deed of termination dated that date between those

parties.

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(j) Investment Agreement – Perwyn

Project Republica Topco Limited and Project Republica Bidco Limited are party to an

investment agreement dated 8 September 2016 with Carl Cavers, Christopher Stockwell,

Paul Porter, Darren Mills, Perwyn Bidco (UK) Limited, Ken Beaty, Ian Livingstone,

NorthEdge Capital Fund I LP and NorthEdge Capital I GP LLP relating to, amongst other

things, certain investments in Project Republica Topco Limited.

Project Republica Topco Limited is party to a deed of variation of that investment

agreement dated 21 December 2016 and pursuant to which:

(i) that investment agreement was varied;

(ii) certain loan notes held by NorthEdge Capital Fund I LP and NorthEdge Capital I GP

LLP were redeemed;

(iii) NorthEdge Capital Fund I LP and NorthEdge Capital I GP LLP ceased to be parties

to that investment agreement; and

(iv) P W Republica Limited was issued A shares in Project Republica Topco Limited and

A1 loan notes of Project Republica Topco Limited and agreed to adhere to that

investment agreement.

That investment agreement will be terminated conditional on, and with effect from,

Admission.

(k) Management Services Agreement

Project Republica Bidco Limited is party to an agreement dated 8 September 2016 with

Sumo Digital Holdings Limited, pursuant to which Project Republica Bidco Limited

provides certain management services to Sumo Digital Holdings Limited, Sumo Digital

Group Limited, Sumo Digital Entertainment Limited, Sumo Digital Limited, Riverside

Games Limited, Mistral Entertainment Limited, Sumo Digital (Genus) Limited, Cirrus

Development Limited, Sumo Digital (Atlantis) Limited, Aghoco 1337 Limited and Sumo

Video Games Private Limited. That agreement was terminated on 8 September 2016

pursuant to a deed of termination dated that date between those parties.

(l) Sale and Purchase Agreement

Project Republica Bidco Limited was party to an agreement dated 8 September 2016 with

Carl Cavers, Paul Porter, Darren Mills, Christopher Stockwell, Ian Livingstone, Ken Beaty,

NorthEdge Capital Fund I LP and NorthEdge Capital I GP LLP, pursuant to which Project

Republica Bidco Limited acquired the entire issued share capital of Sumo Digital Holdings

Limited. The consideration under that agreement was as follows:

• Initial cash purchase price on completion – £28,614,159

• Vendor loan notes – £5,000,000

• Rollover loan notes – £7,826,665

That consideration was divided among the selling shareholders as follows:

Entitlement to Entitlement to Entitlement to initial cash Vendor loan Rollover loanSeller purchase price (£) notes (£) notes (£)NorthEdge Capital Fund I LP 25,513,944 4,887,755 –

NorthEdge Capital I GP LLP 585,915 112,245 –

Carl Cavers 778,412 – 2,367,015

Paul Porter 700,439 – 2,223,669

Darren Mills 236,359 – 1,367,167

Christopher Stockwell 310,844 – 571,437

Ian Livingstone 305,980 – 810,035

Kenneth Beaty 182,267 – 487,342

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Those Rollover loan notes were then sold to Project Republica Topco Limited in

consideration for the issue of certain shares in Project Republica Topco Limited.

The liability of the above-named individual sellers under the warranties contained in that

agreement was waived by Project Republica Bidco Limited on 15 December 2017

pursuant to a deed of waiver dated 15 December 2017 between those parties.

(m) Side Agreement to the Share Purchase Agreement dated 8 September 2016

Project Republica Bidco Limited is party to an agreement dated 8 September 2016 with

NorthEdge Capital Fund I LP, NorthEdge Capital I GP LLP, Carl Cavers, Paul Porter,

Darren Mills, Christopher Stockwell, Ian Livingstone, Ken Beaty, Sumo Digital Ltd.,

Clydesdale Bank Plc, Perwyn LLP and Project Republica Topco Limited pursuant to which

the Sellers (as defined therein) agreed to repay Project Republica Bidco Limited an

aggregate amount equal to £1,647,500 following the entry into a sale and leaseback

agreement in respect of Unit 32 Jessops Riverside, Brightside Lane, Sheffield.

(n) Option Agreement

Project Republica Topco Limited is party to an agreement dated 8 September 2016 with

the Holders (as defined therein) pursuant to which the Holders granted Project Republica

Topco Limited an option to purchase certain loan notes issued by Project Republica Bidco

Limited and held by them and Project Republica Topco Limited granted to them an option

to require Project Republica Topco Limited to purchase those loan notes. Those loan notes

were subsequently purchased from them by Project Republica Topco Limited in

consideration for the issue to them of certain shares in Project Republica Topco Limited.

(o) Loan Notes – Perwyn

On 8 September 2016, Perwyn Bidco (UK) Limited and those individuals set out below

subscribed for certain loan notes issued by Project Republica Topco Limited in the

following amounts:

Name Value of loan notesPerwyn Bidco (UK) Limited £16,196,307

Carl Cavers £2,367,015

Christopher Stockwell £571,437

Darren Mills £1,367,167

Paul Porter £2,223,669

Ian Livingstone £810,035

Kenneth Beaty £487,342

On 21 December 2016, PW Republica Limited subscribed for loan notes issued by Project

Republica Topco Limited in the amount of £1,975,159.

All of those loan notes accrue interest at the rate of 10 per cent. per annum on a

compounding basis.

The proceeds of the Placing will be used by Project Republica Topco Limited to repay all

of those loan notes, including all interest accrued on them.

(p) Deeds of termination

(i) Sumo Digital Holdings Limited, Sumo Digital Group Limited, Carl Cavers,

Christopher Stockwell, Paul Porter and Darren Mills are party to a deed of

termination and release dated 8 September 2016, pursuant to which the investment

agreement referred to in paragraph 6.3(e) of this Part V was terminated.

(ii) Sumo Digital Group Limited is party to a deed of termination dated 8 September

2016, pursuant to which the agreement referred to in paragraph 6.3(i) of this Part V

was terminated.

110

(iii) Sumo Digital Group Limited and Sumo Digital Entertainment Limited are party to a

deed of termination dated 8 September 2016, pursuant to which the management

services agreement referred to in paragraph 6.3(k) of this Part V was terminated.

(q) Service Agreements

(i) Project Republica Bidco Limited is party to:

(A) a service agreement dated 7 November 2014 with Carl Cavers in relation to

his role as Chief Executive Officer and Managing Director of the Group, which

will be replaced by the new service agreement with him referred to in

paragraph 8.1 of this Part V conditional on, and with effect from, Admission

provided that Admission occurs by 19 January 2018;

(B) a service agreement dated 7 November 2014 with Paul Porter in relation to

his role as Chief Operating Officer and Studio Director of Sumo Digital Group

Limited;

(C) a service agreement dated 7 November 2014 with Christopher Stockwell in

relation to his role as Chief Finance Officer of Sumo Digital Group Limited;

and

(D) a service agreement dated 7 November 2014 with Darren Mills in relation to

his role as Executive Art Director of Sumo Digital Group Limited.

(ii) Sumo Digital Ltd. is party to a service agreement dated 3 August 2017 with David

Wilton in relation to his role as Chief Financial Officer of Sumo Digital Limited, which

will be replaced by the new service agreement with him referred to in paragraph 8.1

of this Part V conditional on, and with effect from, Admission provided that

Admission occurs by 19 January 2018.

(iii) Atomhawk Design Ltd is a party to a service agreement dated 29 June 2017 with

Cumron Ashtiani in relation to his role as Managing Director of Atomhawk Design

Ltd.

(iv) The Company is party to the service agreements referred to in paragraph 8.1 of this

Part V.

(r) Letters of Appointment

(i) Project Republica Bidco Limited is party to:

(A) a letter of appointment dated 8 September 2016 with Ian Livingstone in

relation to his role as Non-executive Chairman, which will be replaced by the

new letter of appointment with him referred to in paragraph 8.2 of this Part V

conditional on, and with effect from, Admission provided that Admission

occurs by 19 January 2018; and

(B) a letter of appointment dated 8 September 2016 with Ken Beaty in relation to

his role as Non-executive Director of Project Republica Bidco Limited, which

will be replaced by the new letter of appointment with him referred to in

paragraph 8.2 of this Part V conditional on, and with effect from, Admission

provided that Admission occurs by 19 January 2018.

(ii) The Company is party to the letters of appointment referred to in paragraph 8.2 of

this Part V.

(s) Spouse Sale and Purchase Agreements

Project Republica Bidco Limited was a party to three agreements dated 8 September 2016

with each of Karen Cavers, Lisa Harrison and Joanne Mills, pursuant to which Project

Republica Bidco Limited acquired shares in Sumo Digital Holdings Limited. The

consideration under such agreements was as follows:

111

Karen Cavers – £503,321;

Lisa Harrison – £503,321; and

Joanne Mills – £503,301.

(t) Management Services Agreement

The Company is party to an agreement dated 13 December 2017 with Project Republica

Topco Limited and Sumo Digital Ltd., pursuant to which Project Republica Topco Limited

provides certain management services to the Company, Sumo Digital Ltd. and other group

companies.

6.4 Save as disclosed elsewhere in this paragraph 6, no Director or the Proposed Director has any

interest, whether direct or indirect, in any transaction which is or was unusual in its nature or

conditions or significant to the business of the Company taken as a whole and which was effected

by the Company during the current or immediately preceding year or during any earlier financial

year which remains in any respect outstanding or unperformed.

7. Additional information on the Directors and the Proposed Director

7.1 Excluding the Company and the Group’s 100 per cent. owned subsidiaries (which are listed in

paragraph 2.6 of this Part V), the names of the companies and partnerships of which the

Directors and Proposed Director have been directors or partners in the last five years or of which

they continue to be directors or partners are as follows:

Current directorships andName partnerships Past directorships and partnerships

Infogrames Studios Limited

Uniquestatus Limited

(a) Carl Cavers

Gealka Limited HGS Ventures Limited

Red Kite Learning Trust

Red Kite Alliance Limited

Sweett Group plc (now named

Sweett Group Limited)

Bellrock Topco Limited

Bellrock Midco Limited

Bellrock Bidco Limited

Bellrock Workplace Management

Limited

Bellrock Property & Facilities

Management Limited

SGP Property Services Limited

Macrocom (840) Limited

Balfron Schools Services Limited

Barnhill School Services Limited

Cardinal Heenan School Services

Limited

Colfox School Services Limited

Dundee Healthcare Services Limited

Bellrock Education (New London)

Limited

East Ren Schools Services Limited

Workplace Management

(Westminster) Limited

Workplace Management

(Healthcare) Limited

(b) David Wilton

112


Aspirations Academies TrustCreative Skillset – Sector Skills

Council LimitedAntstream LimitedThe Secret Police LimitedCreative England LimitedThe Livingstone FoundationPlaymob LimitedMidoki LimitedTangentix LimitedThe UK Interactive Entertainment

Association LimitedFlavourworks LtdCreative Industries FederationSentinel Studios LimitedYoung Rewired State LimitedLightneer Inc

London Digital Games LimitedShopvolution LimitedPlaydemic LimitedGames AidMediatonic Limited

(d) Ian

Livingstone

The Froebelian School (Horsforth)Limited

I&C Holdings LimitedI&C LimitedCragg Wood Limited

Kilfrost Group LimitedHigh Seat Holdings LimitedShopbox Systems LimitedEnterprise Group Holdings LimitedA.E.S. Engineering LimitedHobbs Fashion Holdings Limited

(c) Kenneth

Beaty

Vertu Motors plc

Aceparts Limited

Albert Farnell Limited

All Car Parts Limited

Blacks Autos Limited

Blake Holdings Limited

Boydslaw 103 Limited

Bristol Street (No.1) Limited

Bristol Street (No.2) Limited

Bristol Street Commercials (Italia)

Limited

Bristol Street Fifth Investments

Limited

Bristol Street First Investments

Limited

Bristol Street Fleet Services Limited

Bristol Street Fourth Investments

Limited

Bristol Street Group Limited

Bristol Street Limited

Brookside (1998) Limited

Compare Click Call Limited

Dobies (Carlisle) Limited

Dunfermline Autocentre Limited

Easy Vehicle Finance Limited

Gordon Lamb Group Limited

Gordon Lamb Holdings Limited

Gordon Lamb Limited

Grantham Motor Company Limited

Greenoaks (Maidenhead) Limited

Hillendale Group Limited

Hillendale LR Limited

International Concessionaires

Limited

(e) Michael

Sherwin

113


7.2 Except as stated above, as at the date of this Document, no Director or the Proposed Director:

(a) has any unspent conviction in relation to any indictable offence;

(b) has been a director of any company or a partner of any firm which, at the time of or within

12 months after his ceasing to be a director or a partner (as the case may be), has been

placed in receivership, compulsory liquidation, creditors’ voluntary liquidation or

administration or been subject to a voluntary arrangement or any composition or

arrangement with its creditors generally or any class of its creditors whilst he was a director

of that company or a partner of that firm (as the case maybe) or within the 12 months after

he ceased to be a director of that company or a partner of that firm;

(c) is bankrupt or has had any bankruptcy order served upon him or entered into any individual

voluntary arrangement;

(d) has had his assets placed in receivership or has been a partner of a partnership at the time

of, or within the twelve months preceding, any assets of that partnership being placed into

receivership; or

(e) has had any public criticism of him by any statutory or regulatory authority (including any

recognised professional body) or has been disqualified by a court from acting as a director

of a company or from acting in the management or conduct of the affairs of any company.

KC Mobility Solutions Limited

Macklin Property Limited

Merifield Properties Limited

Motor Nation Car Hypermarkets

Limited

National Allparts Limited

Newbolds Garage (Mansfield)

Limited

Peter Blake (Clumber) Limited

Peter Blake Limited

Peter Blake(Chatsworth)Limited

SHG Holdings Limited

Sigma Holdings Limited

South Hereford Garages Limited

The Taxi Centre Limited

Tyne Tees Finance Limited

Typocar Limited

Vertu Fleet Limited

Vertu Motors (AMC) Limited

Vertu Motors (Chingford) Limited

Vertu Motors (Durham) Limited

Vertu Motors (Finance) Limited

Vertu Motors (Knaresborough)

Limited

Vertu Motors (Pity Me) Limited

Vertu Motors (Property 2) Limited

Vertu Motors (Property) Limited

Vertu Motors (Retail) Limited

Vertu Motors (VMC) Limited

Vertu Motors Property 2 Holdings

Limited

Vertu Motors Third Limited

Why Pay More For Cars Limited

Widnes Car Centre (1994) Limited

Widnes Car Centre Limited

(e) Michael

Sherwin

(continued)

114

8. Directors’ and Proposed Director’s service agreements and letters of appointment

8.1 The following is a summary of the executive Directors’ service agreements:

SalaryDirector Date of agreement (per annum)Carl Cavers 15 December 2017 (conditional on, and effective from, Admission) £240,000

David Wilton 15 December 2017 (conditional on, and effective from, Admission) £177,000

(a) The service agreements for all of the executive Directors’ are between the relevant

Director and the Company. All of the executive Directors are employed on a full time basis.

(b) The salary of each executive Director will be reviewed annually by the Remuneration

Committee without any obligation to increase such salary. At the discretion of the

Remuneration Committee, an executive Director may be entitled to an annual discretionary

bonus on such terms and subject to such conditions as may be decided from time to time

by the Remuneration Committee. The Remuneration Committee may amend, vary or

withdraw the bonus scheme, however, it may not do so part way through the bonus year.

In the event that the executive Director serves notice on the Company before the relevant

bonus payment date, no bonus shall be payable to the executive Director. In the event that

the Company serves notice on the executive Director before the relevant bonus date, the

executive Director shall be entitled to receive a bonus pro-rated to the date notice is served

by the Company. For the purposes of the current financial year ending 31 December 2017,

notwithstanding entry into new service agreements by each of Carl Cavers and David

Wilton on Admission, each of them will be entitled to receive his accrued bonus on their

current terms equating to 50 per cent. of annual salary for Carl Cavers and 25 per cent. of

annual salary for David Wilton (based on a pro-rated amount for the period from 1 July

2017 to 31 December 2017 given David’s start date with the Group) except that Carl

Cavers has waived his entitlement to a non-discretionary fixed annual bonus of £13,000,

payable each November.

(c) Ancillary benefits include private medical expenses insurance, life assurance cover (at four

times basic salary), and the provision of a car allowance will also maintain and renew

appropriate director’s and officer’s liability insurance for the benefit of each executive

Director.

(d) The Company makes employer pension contributions, at the rate of 5 per cent. of basic

salary, to the Group’s pension scheme on behalf of Carl Cavers. David Wilton has chosen

not to become a member of Group’s pension scheme. Instead, the Company shall pay a

cash allowance equal to 5 per cent. of basic salary in lieu of pension contributions.

(e) Each of the executive Directors’ service agreements may be terminated by either party

serving 12 months’ written notice. At its discretion, the Company may make a payment in

lieu of notice or place the executive Director on garden leave.

(f) The service agreements also contain provisions for summary termination in the event of:

(i) any material breach of the service agreement, gross misconduct, gross incompetence,

or wilful neglect in the discharge of the duties of the executive Director; (ii) repeated or

continued breach of the service agreement or Articles of the Company (iii) any fraud

bringing the Company or any group company into disrepute; (iv) bankruptcy; (v) being

convicted of any criminal offence (other than minor offences under road traffic legislation

for which a fine or non-custodial penalty is imposed); (vi) being prohibited by law from

being a director of a company; or (vii) voluntary resignation from directorship of any group

company. The service agreement also contains a provision for early termination, on three

months’ written notice from the Company, in the event of the executive Director’s

incapacitation due to illness, for a period of at least 130 working days in any 12

consecutive months.

(g) Each executive Director’s service agreement contains typical restrictive covenants for a

period of 6 months following the termination of employment in consideration of the

payment of £500.

115

8.2 The following is a summary of the non-executive Directors’ and Proposed Director’s letters of

appointment:

Director/ Fee Proposed Director Date of letter (per annum)Ken Beaty 15 December 2017 (conditional on, and effective from, Admission) £95,000

Ian Livingstone 15 December 2017 (conditional on, and effective from, Admission) £55,000

Michael Sherwin 15 December 2017 (conditional on, and effective from, Admission) £40,000

(a) The appointment of each non-executive Director or Proposed Director is terminable by

either the Company or the relevant non-executive Director or Proposed Director on one

month’s notice. Each appointment is contingent on satisfactory performance. The Board of

the Company may require the non-executive Director or Proposed Director to resign his

directorship in the event that his position becomes untenable due to a conflict of interest

or for any other reason.

(b) Ian Livingstone and Michael Sherwin are, respectively, expected to devote a minimum of

24 and 20 working days per annum to their roles. Ken Beaty is expected to devote a

minimum of 40 working days per annum to his role.

(c) The Company will also maintain and renew appropriate director’s and officer’s liability

insurance for the benefit of each non-executive Director and Proposed Director.

8.3 Save as disclosed in paragraphs 8.1 and 8.2 above, there are no existing or proposed service

agreements or consultancy agreements between any of the Directors or Proposed Director and

the Company which cannot be terminated by the Company without payment of compensation

within 12 months.

8.4 There are no arrangements under which any Director or Proposed Director has waived or agreed

to waive future emoluments nor have there been any such waivers of emoluments during the

financial year immediately preceding the date of this Document.

9. Employees

9.1 The number of the Group’s employees, broken down by main category of activity and geographic

location, at the end of the last three financial years, and at the date of this Document, was as

follows:

30 November 2017 (being latest practicable date Year ended Year ended Year ended prior to theMain category 31 December 31 December 31 December date of thisof activity Location 2014 2015 2016 Document)

Sheffield 11 14 16 21

Nottingham 0 0 2 3

India 0 0 0 3

Atomhawk UK 0 0 0 3

0 0 0 1

Development Sheffield 174 188 243 254

Nottingham 0 0 36 61

India 33 47 61 73

Atomhawk UK 0 0 0 25

0 0 0 5

Management

(Directors)

Atomhawk

Vancouver

Atomhawk

Vancouver

116

30 November 2017 (being latest practicable date Year ended Year ended Year ended prior to theMain category 31 December 31 December 31 December date of thisof activity Location 2014 2015 2016 Document)Administration Sheffield 15 22 19 27

Nottingham 0 0 1 2

India 2 3 4 4

Atomhawk UK 0 0 0 1

0 0 0 0

–––––––– –––––––– –––––––– ––––––––Total 235 274 382 483

–––––––– –––––––– –––––––– ––––––––9.2 The average number of temporary employees employed by the Group during the financial year

to 31 December 2016 was 26.

10. Major Shareholders

10.1 Save as disclosed in paragraph 10.3 of this Part V, the Directors and the Proposed Director are

not aware of any person (other than the persons referred to in paragraph 6.2 of this Part V) who,

directly or indirectly, jointly or severally, at the date of this Document is interested in three per

cent. or more of the issued share capital of the Company as at that date.

10.2 Save as disclosed in this paragraph 10, the Directors and the Proposed Director are not aware

of any person (other than the persons as set out in paragraph 6.2 of this Part V) who, directly or

indirectly, jointly or severally, immediately following Admission will be interested in three per cent.

or more of the Enlarged Ordinary Share Capital.

10.3 The following Shareholders will own three per cent. or more of the Ordinary Shares immediately

following Admission:

Percentage of EnlargedShareholder Number of Ordinary Shares Share CapitalPerwyn Bidco (UK) Limited 41,170,961 28.4%

Aghoco 1337 Limited (as trustee of the

Sumo Group plc Employee Benefit Trust)(1) 16,617,198 11.5%

BlackRock Investment Management (UK) Limited 14,000,000 9.7%

Liontrust Investment Partners LLP 8,000,000 5.5%

Schroder Investment Management 6,500,000 4.5%

(1) These shares are beneficially owned by Carl Cavers (as to 6,601,907), Paul Porter (as to 6,202,091) and Darren Mills

(as to 3,813,200).

10.4 Perwyn Bidco (UK) Limited has agreed to certain voting restrictions applicable to itself and its

“Associates” (as described further in paragraph 12.3 of this Part V).

10.5 Subject to paragraph 10.4 of this Part V, persons interested, directly or indirectly, in three per

cent. of more of the Company’s issued share capital do not, and will not, have different voting

rights from those holding less than three per cent of such share capital.

10.6 Save as disclosed in this paragraph 10 and paragraph 6 of this Part V, the Directors and the

Proposed Director are not aware of any:

(a) person who, directly or indirectly, jointly or severally, exercises or could exercise control

over the Company; or

(b) arrangements the operation of which could at a subsequent date result in a change of

control of the Company.

Atomhawk

Vancouver

117

11. Litigation

There are, and have been, no governmental, legal or arbitration proceedings in which any Group

Company is, or was in the twelve months immediately preceding the date of this Document,

involved or (so far as the Directors and the Proposed Director are aware) which are pending or

threatened by or against any Group Company, in each case which may have, or have had in the

twelve months immediately preceding the date of this Document, a significant effect on the

Company’s and/or the Group’s financial position or profitability.

12. Material contracts

Set out below is a summary of each material contract entered into by the Group, either (i) within

the two years immediately preceding the date of this Document or (ii) which contains any

provision under which a Group Company has any obligation or entitlement which is material to

the Group as at the date of this Document, in each case other than those entered into in the

ordinary course of business:

12.1 Placing AgreementZeus Capital has agreed, pursuant to the Placing Agreement and conditional, inter alia, on

Admission, to use its reasonable endeavours to place the Placing Shares and the Vendor Placing

Shares at the Placing Price with institutional and other investors. The Placing Shares will

represent 26.51 per cent. of the Enlarged Ordinary Share Capital following Admission. The

Placing will raise gross proceeds of approximately £38.45 million for the Company (before

commissions and expenses) and the Vendor Placing will raise gross proceeds of approximately

£39.7 million for the Selling Shareholders (before commissions and expenses).

Each of the Directors, the Proposed Director and the Selling Shareholders has undertaken,

pursuant to the Placing Agreement:

• for a period of 12 months following Admission, not to dispose of any of the Ordinary Shares

in which they are interested at Admission, except with the permission of Zeus Capital and

in certain customary circumstances; and

• for a further period of 12 months, to comply with certain requirements designed to maintain

an orderly market in the Ordinary Shares.

The Placing and the Vendor Placing are conditional, amongst other things, upon:

• the Placing Agreement becoming unconditional and not having been terminated in

accordance with its terms prior to Admission;

• the Placing Shares having been unconditionally allotted and issued; and

• Admission becoming effective not later than 21 December 2017 or such later date as Zeus

Capital and the Company may agree, being not later than 19 January 2018.

The Placing and the Vendor Placing have not been underwritten. The Company will pay to Zeus

Capital, subject to Admission, a commission of 4 per cent. of the aggregate value of the Placing

Shares at the Placing Price, together with certain costs and expenses and VAT where

appropriate. Each Selling Shareholder will pay to Zeus Capital, subject to Admission, a

commission of 4 per cent. of the aggregate value of his Vendor Placing Shares at the Placing

Price, together with certain costs and expenses and VAT where appropriate.

Pursuant to the Placing Agreement, upon Admission, the Company will grant to Zeus Capital the

warrants referred to in paragraph 4.2 of this Part V.

The Placing Agreement contains certain warranties, undertakings and indemnities given by the

Company, the Directors, the Proposed Director and the Selling Shareholders in favour of Zeus

Capital. Zeus Capital may terminate the Placing Agreement in specified circumstances prior to

Admission, including in the event of a material breach of the warranties contained in the Placing

Agreement. The liability of the Directors, the Proposed Director and the Selling Shareholders is

limited in certain customary respects.

118

It is intended that the allotment of the Placing Shares and the transfer of the Vendor Placing

Shares will take place on 20 December 2017, such allotment and transfer being conditional on

Admission. Investors should be aware that Admission might not take place.

The following table contains details of the Selling Shareholders and the Vendor Placing Shares

to be sold by them pursuant to the Vendor Placing:

Position, office or other material Number of relationship Vendor with the Group Business Placing within theName address Shares past 3 yearsCarl Cavers Note 1 4,401,421 Chief Executive Officer

Kenneth Beaty Note 1 975,759 Non-Executive Chairman

Ian Livingstone Note 1 1,435,525 Non-Executive Director

Chris Stockwell Note 1 1,062,525 Finance Director

Paul Porter Note 1 4,134,717 Managing Director

Darren Mills Note 1 2,542,126 Studio Head (Sheffield)

Cumron Ashtiani Note 2 954,476 Managing Director

Perwyn Bidco (UK) Limited Note 3 17,674,381 Investor with representation

on the Board

PW Republica Note 3 4,939,228 Investor with representation

on the Board

Tim Wilson Note 2 31,812 Head of Operations

Ashley Darren Bennett Note 1 194,016 Studio Technical Director

Gary Edwards Note 1 114,417 Production Director

Philip Rankin Note 1 75,914 Programmer

Christopher Rea Note 1 75,914 Programmer

Sean Davies Note 1 75,914 Former Technical Director

Dominic Hood Note 1 75,914 Head of Art

Andrew Ritson Note 1 75,914 Artist

John Hackleton Note 1 12,645 Artist

Steven Lycett Note 1 43,599 Executive Producer

Sean Millard Note 1 61,200 Creative Director

Gary Moore Note 1 54,678 Development Director

Steven Zalud Note 1 54,678 Development Director

Gareth Wilson Note 1 27,852 Design Director

Antony Crowther Note 1 61,200 Technical Consultant

Stephen Robinson Note 1 61,200 Technical Director

Karen McLoughlin Note 1 23,931 HR Manager

Marc Critchley Note 1 18,291 IT Director

Ian Deary Note 1 21,083 Art Manager

Ian Richardson Note 1 26,801 Business Development Director

Karl Hilton Note 4 56,428 Studio Director (Nottingham)

Kelvin Tuite Note 4 19,748 Art Director

Craig Wright Note 1 26,523 Technical Director

Steven Pritchard Note 1 18,339 Executive Producer

Peter Harrap Note 1 26,523 Technical Director

Peter Ellacott Note 1 21,163 Programmer

David Blewett Note 1 17,376 Art Manager

Patrick Phelan Note 1 17,376 Audio Director

Edward Waterhouse Note 1 17,376 Design Director

Michael Hirst Note 1 17,376 Artist

Stewart Neal Note 1 17,376 Development Manager

Roger Woods Note 1 17,376 Group Financial Controller

Katsuhisa Sato Note 1 22,460 Development Director

Alexis Madinier Note 5 11,284 Studio Director (India)

Ranjan Basu Note 5 11,284 Production Manager

119

Position, office or other material Number of relationship Vendor with the Group Business Placing within theName address Shares past 3 yearsAsit Ghadge Note 5 11,284 Art Manager

Derek Littlewood Note 4 11,284 Design Director

Maurice Kimball Note 6 16,932 Creative Director

Charlene Bowater Note 2 11,284 Principal Concept Artist

Daniel Gilmore Note 2 11,284 Lead UI/UX Designer

Andrew Whitmore Note 2 8,462 Principal Concept Artist

Rebecca Jackson Note 2 8,462 Account Manager

Where:

Note 1 Unit 32 Jessops Riverside, 800 Brightside Lane Sheffield, S9 2RX

Note 2 Northern Design Centre Baltic Business Quarter Abott's Hill, Gateshead, NE8 3DF

Note 3 8 Hanover Square, London, England, W1S 1HQ

Note 4 14 Kirtley Drive, Nottingham, NG7 1LD

Note 5 B-205/206, 2nd Floor, Wing B of MCCIA Trade Towers, Senapati Bapat Road, Pune-

411016, Maharashtra, India

Note 6 8th Floor, 543 Granville Street, Vancouver, British Colombia, V6 C 1XB

12.2 Nominated adviser and broker agreementOn 15 December 2017, the Company, the Directors, the Proposed Director and Zeus Capital

entered into a nominated adviser and broker agreement pursuant to which the Company has

appointed Zeus Capital to act as nominated adviser and broker to the Company for the purposes

of the AIM Rules. The Company has agreed to pay Zeus Capital an annual fee of £75,000

(exclusive of VAT and disbursements) for its services as nominated adviser and broker under this

agreement. The agreement contains certain undertakings and indemnities given by the Company

and the Directors and the Proposed Director. The agreement is terminable on 3 months’ notice

provided that such notice expires no earlier than the first anniversary of the date of the agreement

(or forthwith upon written notice in certain circumstances).

12.3 Relationship AgreementOn Admission, Perwyn Bidco (UK) Limited will (together with interests held by related parties)

hold approximately 29.4 per cent. of the Enlarged Ordinary Share Capital. The Company, Zeus

Capital and Perwyn Bidco (UK) Limited entered into the Relationship Agreement on

15 December 2017 to regulate aspects of the continuing relationship between the Company and

Perwyn Bidco (UK) Limited in its capacity as a Shareholder with the intention of enabling the

Company to conduct its business affairs independently of Perwyn Bidco (UK) Limited and to

ensure that future transactions between the Company and Perwyn Bidco (UK) Limited are on

arm’s length terms and on a normal commercial basis. Perwyn have the ability to nominate a

director to the Board and have nominated Ken Beaty under this right. Certain undertakings given

by Perwyn Bidco (UK) Limited in the Relationship Agreement will fall away, amongst other things,

when the voting rights attaching to Perwyn Bidco (UK) Limited’s shareholding (together with that

of its associates) in the capital of the Company represent less than 15 per cent. of all voting rights

in the Company.

12.4 BankingOn 15 December 2017, the Company, Sumo Digital Limited and Atomhawk Design Ltd (the

“Borrowers”) entered into a sterling revolving credit facility agreement with Clydesdale Bank Plc

(trading as Yorkshire Bank) (“Clydesdale”) in respect of a revolving credit facility of £13,000,000

120

(the “RCF Facility”) (the “RCF Agreement”). Pursuant to the terms of the RCF Agreement, each

Borrower can drawdown individual loans to be used for the purpose of general working capital

purposes and the acquisition of companies, businesses and/ or undertakings. Interest is payable

on the amounts drawn at a rate ranging from one to two per cent. above the London Interbank

Offered Rate (with the margin linked to the leverage test). In addition, a commitment fee is

payable at the rate of 35 per cent. of the applicable margin per annum of any undrawn

commitment. The RCF Agreement term ends on 22 November 2022 (the last date of term being

the “Termination Date”). The RCF Facility shall be available, subject to the terms and conditions

of the RCF Agreement from the date of Admission until the date falling 30 days prior to the

Termination Date. The RCF Facility is available to be utilised in any number of ancillary facilities

available to each Borrower. The RCF Agreement contains representations and warranties which

are usual for an agreement of this nature, together with a leverage and an interest cover financial

covenant. An arrangement fee of £75,000 is payable pursuant to the RCF Agreement. Each

Borrower and Project Republica Topco Limited, Project Republica Bidco Limited, Sumo Digital

(Atlantis) Limited and Cirrus Development Limited have entered into a guarantee and security in

favour of Clydesdale, which shall remain in respect of all liabilities arising under the RCF

Agreement.

12.5 Sale and leasebackSumo Digital Ltd. is a party to a lease agreement dated 24 November 2016 with Bronze

Investments Limited pursuant to which Sumo Digital Ltd. agreed to lease Unit 32, Jessops

Riverside, Brightside Lane, Sheffield S9 2RX from Bronze Investments Limited, immediately

following the sale by Sumo Digital Ltd. of the same property to Bronze Investments Limited.

13. Working capital

The Directors and the Proposed Director are of the opinion, having made due and careful enquiry, that,

taking into account the net proceeds of the Placing of the Placing Shares receivable by the Company

and available bank and other facilities, the working capital available to it and the Group will be sufficient

for its present requirements, that is for at least twelve months from the date of Admission.

14. No significant change

Other than as disclosed in this Document, there has been no significant change in the trading or

financial position of the Group since 30 June 2017, being the latest date to which the financial

information set out in Part III of this Document was prepared.

15. Taxation

United Kingdom tax treatment of Shareholders

15.1 IntroductionThe statements set out below are intended only as a general guide to certain aspects of current

UK tax law and the published practice of HM Revenue & Customs (“HMRC”) as at the date of

this Document and apply only to certain Shareholders who are resident and domiciled for tax

purposes in the UK (save where express reference is made to non-UK resident persons). The

summary does not purport to be a complete analysis or listing of all the potential tax

consequences of acquiring, holding or disposing of Ordinary Shares and does not constitute tax

advice. Prospective purchasers of Ordinary Shares are advised to consult their own independent

tax advisers concerning the consequences under UK tax law of the acquisition, ownership and

disposition of Ordinary Shares.

The following paragraphs relate only to certain limited aspects of the United Kingdom taxation

treatment of dividends paid by the Company, and disposals of Ordinary Shares. The statements

are not applicable to all categories of Shareholders, and in particular are not addressed to

(i) Shareholders who do not hold their Ordinary Shares as capital assets or investments or who

are not the absolute beneficial owners of those shares or dividends in respect of those shares,

(ii) special classes of Shareholders such as dealers in securities, broker-dealers, insurance

companies, trustees of certain trusts and investment companies, (iii) Shareholders who hold

Ordinary Shares as part of hedging or commercial transactions, (iv) Shareholders who hold

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Ordinary Shares in connection with a trade, profession or vocation carried on in the UK (whether

through a branch or agency or permanent establishment or otherwise), (v) Shareholders who

hold Ordinary Shares acquired by reason of their employment, (vi) Shareholders who hold

Ordinary Shares in an individual savings account or a self invested personal pension or

(vii) Shareholders who are subject to UK taxation on a remittance basis, or (viii) Shareholders

who are not resident in the UK for tax purposes (save where express reference is made to non-

UK resident shareholders).

The following statements are based on current UK tax law as applied in England and Wales and

current published practice of HMRC (which may not be binding on HMRC) as at the date of this

document. Please note, Finance (No. 2) Act 2017 was enacted into UK tax law on 16 November

2017.

15.2 UK taxation of dividendsThe Company is not required to withhold tax when paying a dividend (whether in cash or in the

form of a stock dividend).

Shareholders who are individualsWith effect from 6 April 2016, the previous system of dividend tax credits was abolished and was

replaced with a new tax free allowance for individuals of £5,000 (the ‘dividend allowance’) in

dividend income per tax year. This dividend allowance is to reduce to £2,000 from 6 April 2018.

Dividends received from the Company up to the amount of the dividend allowance (in aggregate)

will not be subject to income tax for Shareholders who are UK resident individuals. To the extent

that dividends received in a tax year exceed that dividend allowance, they will be taxed at a rate

of 7.5 per cent., 32.5 per cent. or 38.1 per cent., for basic, higher and additional income tax rate

payers respectively. Dividend income that is within the allowance will count towards an

individual’s basic or higher rate limits. Dividend income will still be treated as the top slice of a

Shareholder’s income.

Corporate ShareholdersShareholders who are within the charge to UK corporation tax will be subject to corporation tax

at the prevailing rate applicable to dividends paid by the Company, unless the dividends fall within

an exempt class and certain other conditions are met. Whether an exemption applies and

whether the other conditions are met will depend on the circumstances of the particular

Shareholder, although it is expected that the dividends paid by the Company would normally be

exempt.

15.3 UK taxation of chargeable gains in respect of Ordinary SharesIf a Shareholder disposes (or is treated as disposing) of all or some of his Ordinary Shares, a

liability to tax on chargeable gains may arise depending on the relevant Shareholder’s

circumstances and any reliefs to which they are entitled. A chargeable gain or allowable loss is

generally calculated by reference to the consideration received for the disposal less the allowable

cost to the Shareholder of acquiring the Ordinary Shares.

Shareholders who are UK tax resident individualsSubject to the availability of any exemptions, reliefs and/or allowable losses, a gain on disposal

of Ordinary Shares by individuals will generally be subject to capital gains tax at a rate of 10 per

cent. (for basic rate taxpayers) or 20 per cent. (for higher or additional rate taxpayers) (2017/18).

Indexation allowance is not available. Each individual has an annual exempt amount each tax

year (£11,300 for 2017/18): chargeable gains realised by that individual up to (in aggregate) that

amount are not subject to UK capital gains tax.

UK tax resident corporate ShareholdersSubject to the availability of any exemptions, reliefs and/or allowable losses, a gain on disposal

of Shares by a Shareholder within the charge to UK corporation tax will generally be subject to

corporation tax at the current rate of 19 per cent. (2017/18). The UK government has announced

that the main rate of UK corporation tax will reduce to 17 per cent. from 1 April 2020. Indexation

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allowance may be available to reduce any chargeable gain arising on a disposal or deemed

disposal, but not to create or increase the amount of any allowable loss.

In the Autumn Budget 2017 it is proposed that the government will legislate to freeze indexation

on corporate capital gains for disposals on or after 1 January 2018. The indexation allowance for

subsequent disposals will be frozen at the amount that would be based on the Retail Price Index

for December 2017 (this change to the law has not yet been enacted).

Shareholders who are not resident in the UK for tax purposesShareholders who are not resident in the UK for tax purposes may not, depending on their

personal circumstances, be liable to UK taxation on chargeable gains arising from the sale or

other disposal of their Ordinary Shares (unless they carry on a trade, profession or vocation in

the UK through a branch or agency or in the case of a non-UK resident corporate Shareholder,

a permanent establishment to which their Ordinary Shares are attributable).

Individual Shareholders who are temporarily not UK resident and who dispose of all or part of

their Ordinary Shares during that period may nonetheless be liable to UK capital gains tax on

chargeable gains realised on their return to the UK, subject to any available exemptions or reliefs.

Shareholders who are resident for tax purposes outside the UK may be subject to foreign taxation

on capital gains depending on their circumstances.

15.4 Stamp Duty and Stamp Duty Reserve Tax (“SDRT”) on transfers of Ordinary SharesThe following paragraphs are intended only as a general and non-exhaustive guide to the UK

stamp duty and SDRT position in relation to Ordinary Shares under current UK law. They apply

in relation to Ordinary Shares irrespective of the residence or domicile of the relevant

Shareholder or prospective Shareholder. They do not apply in relation to any issue or transfer of

New Ordinary Shares to, or to a nominee or agent for, a depositary receipt issuer or clearance

service operator, or to persons such as market makers, brokers, dealers or intermediaries.

Transactions in shares such as the Ordinary Shares are exempt from stamp duty and SDRT

where those shares are admitted to trading on a recognised growth market but they are not listed

on a recognised stock exchange. AIM is a recognised growth market. As a result, it is expected

that purchases of Ordinary Shares following Admission should not be subject to either stamp duty

or SDRT so long as the shares are admitted to trading on AIM, but they are not listed on any

recognised stock exchange and AIM continues to be a recognised growth market.

Where this growth market exemption does not apply:

(a) Transfers on sale of Ordinary Shares in certificated form will generally be subject to UK

stamp duty at the rate of 0.5 per cent. of the amount or value of the consideration given

for the transfer, rounded up if necessary to the nearest multiple of £5.00. The purchaser

generally pays the stamp duty. An exemption from stamp duty will be available on an

instrument transferring the Ordinary Shares where the amount or value of the

consideration is £1,000 or less, and it is certified on the instrument that the transaction

effected by the instrument does not form part of a larger transaction or series of

transactions for which the aggregate consideration exceeds £1,000.

(b) An unconditional agreement to transfer Ordinary Shares will normally give rise to a charge

to SDRT at the rate of 0.5 per cent. of the amount or value of the consideration payable

for the transfer. However, if a duly stamped or exempt transfer in respect of the agreement

is produced within six years of the date on which the agreement is made (or, if the

agreement is conditional, the date on which the agreement becomes unconditional), any

SDRT paid is repayable, generally with interest, and otherwise the SDRT charge is

cancelled. SDRT is the liability of the purchaser.

(c) Agreements to transfer Ordinary Shares within the CREST system will generally be liable

to SDRT (rather than stamp duty) at the rate of 0.5 per cent. of the amount or value of the

consideration payable. CREST is obliged to collect SDRT on relevant transactions settled

within the CREST system. Deposits of Ordinary Shares into CREST will not generally be

subject to SDRT, unless the transfer into CREST is itself for consideration in money or

money’s worth.

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15.5 Inheritance Tax (“IHT”)Shares in AIM listed trading companies or a holding company of a trading group may, after a

2 year holding period, qualify for Business Property Relief for United Kingdom IHT purposes,

subject to the detailed conditions for the relief.

Investors should note that Business Property Relief would cease to be available certain

circumstances; for example, in the event that the Company’s Shares were to become listed on

another stock exchange, such as the Main Market of the London Stock Exchange or the Channel

Islands Securities Exchange.

Prospective purchasers of Ordinary Shares should consult their own tax advisers with

respect to the tax consequences to them of acquiring, holding and disposing of Ordinary

Shares.

16. Consents

16.1 Grant Thornton UK LLP has given and not withdrawn its consent to the inclusion herein of its

reports set out in Sections A and C of Part III of this Document in the form and context in which

they are included and has accepted responsibility for such reports.

16.2 Zeus Capital has given and not withdrawn its consent to the issue of this Document with the

inclusion herein of reference to its name in the form and context in which it appears.

17. General

17.1 Grant Thornton UK LLP of 2 Broadfield Court, Sheffield S8 0XF are the auditors of the Company

and were the auditors of the Company for the financial year ended 31 December 2016. Grant

Thornton UK LLP is a member of, and is regulated by, the Institute of Chartered Accountants in

England and Wales.

17.2 Grant Thornton UK LLP is a limited liability partnership registered in England and Wales with

number OC307742 and with its registered office at 30 Finsbury Square, London EC2A 1AG.

Grant Thornton UK LLP is a member of, and is regulated by, the Institute of Chartered

Accountants in England and Wales.

17.3 KPMG LLP of 1 Sovereign Square, Sovereign Street, Leeds LS1 4DA were the auditors of the

Group for the financial years ended 31 December 2014 and 31 December 2015. KPMG LLP is a

member of, and is regulated by, the Institute of Chartered Accountants in England and Wales.

17.4 The gross proceeds of the Placing of the Placing Shares are expected to be approximately

£38.45 million. The total costs and expenses relating to Admission and the Placing of the Placing

Shares payable by the Company are estimated to amount to approximately £3.5 million

(excluding VAT to the extent applicable).

17.5 The gross proceeds of the Vendor Placing of the Vendor Placing Shares are expected to be

approximately £39.70 million. The total costs and expenses relating to the Vendor Placing of the

Vendor Placing Shares payable by the Selling Shareholders are estimated to amount to

approximately £1.7 million (excluding VAT to the extent applicable).

17.6 Other than the current application for Admission, the Ordinary Shares have not been admitted to

dealings on any recognised investment exchange nor has any application for such admission

been made nor are there intended to be any other arrangements for dealings in Ordinary Shares.

17.7 The Company has made firm commitments in respect of the fit-out and refurbishment of certain

premises, the cost of which the Directors and the Proposed Director estimate will amount to

approximately £1,222,718.

17.8 Save as disclosed in this Document, the Group has no significant investments in progress and

no significant future investments on which the Directors and Proposed Director have already

made firm commitments.

17.9 The Company’s financial period ends on 31 December annually, with its latest set of audited

financial statements being made up to 31 December 2016.

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17.10 Save as disclosed in this Document, no person (other than the professional advisers referred to

in this Document and trade suppliers) has received, directly or indirectly, from the Group within

the 12 months immediately preceding the date of this Document, or entered into contractual

arrangements to receive, directly or indirectly, from the Group on or after Admission, fees totalling

£10,000 or more, securities in the Company with a value of £10,000 or more calculated by

reference to the Placing Price or any other benefit with a value of £10,000 or more at the date of

Admission.

17.11 Within the 12 months immediately preceding the date of this Document:

(a) Project Republica Topco Limited has agreed to pay an aggregate of £105,000 to Bennett

Brooks & Co Ltd;

(b) PricewaterhouseCoopers LLP has been paid an aggregate of £109,495 by Project

Republica Topco Limited;

(c) Saffery Champness have been paid an aggregate of £97,494 by Members of the Group;

(d) DRD Partnership Limited has been paid an aggregate of £12,000 by Project Republica

Topco Limited;

(e) Swan Partners have been paid an aggregate of £94,325 by Project Republica Topco

Limited;

(f) Sheridans Solicitors have been paid an aggregate of £114,010 by Sumo Digital Ltd.;

17.12 Where information in this Document has been sourced from a third party, the Company confirms

that it has been accurately reproduced and, as far as the Company is aware and is able to

ascertain from the information published by that third party, no facts have been omitted which

would render the reproduced information inaccurate or misleading.

18. Availability of documents

Copies of this Document will be available free of charge to the public at the offices of the Company at

32 Jessops Riverside, Brightside Lane, Sheffield, S9 2RX during normal business hours on any

weekday (Saturdays, Sundays and public holidays excepted) for a period of one month from Admission.

The date of this Document is 15 December 2017.

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sterling 170226

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