FUTURE GAMING GROUP - Company description FUTURE GAMING GROUP INTERNATIONAL AB (PUBL) - Spotlight Stock Market
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FUTU
GAM
GROU
Company description
FUTURE GAMING GROUP INTERNATIONAL AB (PUBL)
PUBLISHED ACCORDING TO FIRST NORTH RULEBOOK AS A PART OF FUTURE GAMING GROUP’S
APPLICATION FOR BOND LISTING ON NASDAQ FIRST NORTH STOCKHOLM ON DECEMBER 6, 2018
Table of content
IMPORTANT INFORMATION 1
Definitions 1
Important information for investors 1
Nasdaq First North Disclaimer 1
Certified Adviser 1
SUMMARY OF KEY RISK FACTORS 2
Market specific risks 2
Risks specific to the Group 2
Risks relating to the Acquisitions 7
Risks relating to the Securities 8
BACKGROUND AND OBJECTIVES 12
Introduction to the Group 12
History of Future Gaming Group 12
THE LIABILITY STATEMENT OF THE BOARD OF DIRECTORS 13
STATEMENT FROM THE CEO 14
MARKET OVERVIEW 16
Overview of the gaming market 16
Regulatory environment 18
BUSINESS OVERVIEW 20
LEGAL, MANAGEMENT AND OWNERSHIP STRUCTURE 23
Management team 25
The Board of Directors 26
LEGAL ISSUES AND SUPPLEMENTARY INFORMATION 28
MAIN TERMS & CONDITIONS OF THE BOND 30
ARTICLES OF ASSOCIATION (IN SWEDISH) 31
FINANCIAL INFORMATION 32
Consolidated Statement of Income 33
Total Comprehensive Income 34
Consolidated Statement of financial position 35
Consolidated Statement of changes in equity 36
Consolidated cash flow statement 37
Key figures 38
Income statement Parent Company 39
Comprehensive Income Parent Company 39
Balance Sheet Parent Company 40
Comments to the financial information 41
KEY DEFINITIONS 43
TERMS & CONDITION 45
COMPANY DESCRIPTION
Important information
DEFINITIONS NASDAQ FIRST NORTH DISCLAIMER
The ”Group” refers to the group comprising Future Nasdaq First North is an alternative marketplace
Gaming Group International AB (publ) (corp. reg. no. operated by an exchange within the Nasdaq group.
556706-8720) (”Future Gaming Group”, the ”Com- Companies on Nasdaq First North are not subject to
pany”, “FGG” or the ”Issuer”) and its subsidiaries, the same rules as companies on the regulated main
Phase One Performance AB (559117-8685), the market. Instead they are subject to a less extensive
Estonian subsidiary ViisTek Media OÜ (12212380) and set of rules and regulations adjusted to small growth
the Maltese subsidiary Unlimited Media Ltd (C71067). companies. The risk in investing in a Company on
”Company Description” refers to the description of the Nasdaq First North may therefore be higher than
company in question, which has been drawn up ahead investing in a company on the main market. All Com-
of Future Gaming Group’s bond listing on First North panies with bonds traded on Nasdaq First North have
of its senior secured fixed rate bonds (the ”Bonds”). a Certified Adviser at the time of listing, who monitors
that the rules are followed. The Exchange approves
the application for admission to trading.
IMPORTANT INFORMATION FOR INVESTORS
Each investor should carefully consider information
provided in the Company Description, particularly CERTIFIED ADVISER:
the factors referred to in the section Risk Factors, Wildeco Ekonomisk Information AB
describing certain risks associated with an invest-
Trading Information
ment in Future Gaming Group International AB. The
ISIN code: SE0010547422
Company Description has been written as a result of
Trading code Nasdaq First North: FGG001
the present listing of the Company’s bonds on First
Corporate website: http://www.futuregaminggroup.com
North. No new bond will be issued in connection with
the listing and no prospectus will be registered at Financial calendar
the Financial Supervisory Authority as a result of the Full Year Report, 2018: February 19, 2019
listing. The Company Description does not constitute
an invitation to acquire, subscribe to or in some other
INFORMATION INCLUDED THROUGH REFERENCE
manner trade in shares or other securities in Future
This Company description consist of the following
Gaming Group International AB.
document including a summary of the financials.
The Company Description contains historical
The following documents attached through reference:
and future oriented information. In cases where the
information has been obtained from third parties, the Annual report 2016
Company is responsible for ensuring that the infor- Annual Report 2017
mation has been reproduced correctly. To the best of Interim Report January-March 2018
the Company’s knowledge, no information has been Interim Report January-June 2018
omitted in such a way that could make the informa- Interim Report January-September 2018
tion incorrect or misleading in relation to the original Full terms & conditions of the Bonds (included
sources. However, the Company has not verified the as Appendix).
figures, market data or other information that has
These documents are available at
been obtained from third parties. As a result, the
www.futuregaminggroup.com
Company’s Board of Directors does not accept any
responsibility for the completeness or accuracy of
such information that is presented in the Company
Description. This should be taken into consideration
when reading such information.
FUTURE GAMING GROUP
1 COMPANY DESCRIPTION
Summary of Key Risk Factors
MARKET SPECIFIC RISKS downturn in the economy, which could lead to a lower
Political decisions, license requirements and disposable income, could have an impact on some
uncertainty regarding future legislation customers’ gambling activity. There is also a risk that
Gambling is, on most national markets, strictly regu- changes in customer preferences, such as e.g. types
lated by law and all gambling activities are in principle of games requested could lead to lower customer
subject to license requirements. The Group’s opera- activity should the Group not be able to meet the
tions are therefore influenced to a considerable extent new customer preferences in its operator business
by political decisions and development in legislation. or not have entered into affiliation agreements with
The legal situation for online gambling is continually the operators where the customers prefer to gamble.
changing in different geographical markets. Local Such developments will have an adverse effect on the
regulations are often in conflict with EU regulations, Group’s business, earnings or financial performance.
which creates a confused legal situation. New inter- The gambling market is a highly debated industry
pretations and changes in the application of existing and the industry as a whole is dependent on social
regulations can in combination with new laws have an acceptance. Factors contributing to the declining
adverse effect on the Group’s operations, earnings or acceptance of gambling will have a negative effect on
financial position. the whole gambling industry and thus affect the Group
There is uncertainty surrounding the future regu- adversely.
lation of the gambling market, both in Sweden and in
other jurisdictions, and the outcome of the potential Competition
legislative changes could have an adverse effect on The Group has a large number of competitors, both
the Group’s business, earnings or financial position. in the operator business and the affiliate business. If
Proposed reforms could entail changes in taxation the Group’s competitors better adapt to new technical
(including increased tax liabilities), the introduction solutions or market trends or are able to offer their
of a national license system and changes to affiliate customers better services or enter into affiliation
marketing laws. agreement with better operators, there is a risk that
Moreover, legislation that is directly applicable customers could prefer competitors’ services over the
to online consumer services is currently limited. Group’s current and future services. Furthermore, the
However, the EU is currently undertaking measures, number of competitors on the online gambling market
e.g. by issuing recommendations and improving and is increasing. The increase in competition can lead to
strengthening consumer protection for online gam- increased costs with regard to seeking out new cus-
bling. Therefore there is a risk that new legislation tomers and entering into new affiliation agreements,
could be introduced for online based operations which as well as retaining current customers and affiliation
could restrict the growth of e-commerce in general agreements. If any of these risks were to materialize,
and/or online gambling in particular. This could have this could have an adverse effect on the Group’s busi-
an adverse effect, both direct and indirect, on the ness, earnings or financial position.
Group’s business, earnings or financial position.
The economy, customer trends and negative publicity RISKS SPECIFIC TO THE GROUP
The Group’s revenues are highly dependent on the Prohibitions of gambling services in certain countries
general gambling activity, both in its operator busi- In certain countries it is prohibited to provide gambling
ness and in its affiliate business, which in turn is services, and in some cases it is prohibited for the
affected by customers’ economic situation and the customers to participate in gambling activities even
customer trends. There is a risk that a general though the gambling operator is located in another
FUTURE GAMING GROUP
2 COMPANY DESCRIPTION
country where it has legally been granted a license. technical platforms and systems) on an ongoing basis.
There is a risk that authorities or courts in various Since the Group’s operator business is held on an
jurisdictions could impose fines or other sanctions on external, third party, platform the Group is dependent
the Group. This could have an adverse effect on the on that the platform provider makes relevant update to
Group’s business, earnings or financial position. its systems.
There are changes in customer behavior and pref-
Compliance with existing laws and regulations erences over time, which requires updated offerings
The Group operates its business in several countries. by the Group and the platform provider. A challenge
An international presence can involve situations that is thus to follow the changes in customer behavior
give rise to compliance risks as the Issuer must and to adapt the services to meet the customers’
observe different regulatory systems across a number demands. Should the Group and/or the platform
of jurisdictions. The Group’s operations involve risks of provider fail to develop and/or purchase products and
failure to comply with laws, regulations and licenses services that meet the customer demands, there is
which could have an adverse effect on the Group’s a risk that the Group loses business and revenues
business, financial position and results of operation. to its competitors. Further, since the Group does not
Furthermore, it is important that the business of develop products itself, it is dependent on third parties
the Group is operated in an ethical and moral accept- to provide products that meet the customers’ changing
able manner. This means, amongst other things, that behavior and demand. If the Group is unable to enter
the Group must ensure that the marketing relating to into agreements with such third party it could have
both its affiliate business and its operator business, is an adverse effect on the Group’s business, financial
conducted through social acceptable websites. If the position or results of operations.
Group fails to do so, this will have an adverse effect on
the Group’s business, financial position and results of Preserving and enhancing brands
operation. The Group is partly dependent on its ability and efforts
to preserve and enhance the value of its brands. There
Search engine algorithms is a risk that the Group fails to build and maintain its
When search engines introduce new algorithms, brands’ perception, that any measures taken by the
affecting the ranking of websites in their search Group to preserve and enhance the value of its brands
engine results, there is a risk that the platform where will be unsuccessful and/or that the value of the
the Group’s operator business is located will have brands will be negatively affected if a third party brings
to alter its website to make it compatible with the any actions against the Group, publicizes negative
changes brought about by the algorithms or that the statements in relation to the Group or its business or
Group will have to revise its online marketing strate- otherwise acts in a way which may have an adverse
gies. While most of these changes are minor, some of effect on the Group. If the Group is unsuccessful in
the algorithmic updates affect search engine results in preserving or enhancing the value its brands, there is
significant ways. Moreover, there is a risk that search a risk that this will limit the Issuer’s ability to retain
engines could issue warnings or penalties in the and extend its customer base, which will have an
form of lower rankings for websites that strategically adverse effect on the Group’s business, financial posi-
circumvent the algorithms. If any of the above risks tion and results of operations.
materialize, this could have an adverse effect on the A decline in the market appeal of the Group
Group’s business, earnings or financial position. (including its brands) could possibly derive from,
amongst other things, a poor product offering, neg-
Technical risks associated with the market and ative publicity concerning the brands or the gaming
changes in customer behavior market in general (whether or not it is justifiable) or
In order to maintain the high popularity of the offered lack of investments in the products in order to keep
products and services, which is important for attract- them updated and attractive for the customers. This
ing and retaining customers, there is a need to update could have an adverse effect on the Group’s business,
the products and services provided (including the financial position or results of operations.
FUTURE GAMING GROUP
3 COMPANY DESCRIPTION
Payment solutions effect on the Group’s business, earnings or financial
In order for customers to play online games through position.
the Group’s operator business they are required to
register with the supplier of the platform and open Intellectual property rights
an account. The supplier of the platform used by the The Group is currently offering its online gaming ser-
Group will need to have payment solutions in place vices through a number of websites which are of par-
that suit the customers’ needs and preferences, which ticular importance for the business. The trademarks
can vary in different countries and between customers SverigeKronan and SuomiVegas are also an important
of different ages. Technical standards and solutions part of the Group’s business as they attract users
can also differ between countries. It is important for and create revenue to the Group’s operator business.
the Group that it is easy for the customers to with- There is a risk that the Group does not have sufficient
draw cash from their accounts. If the supplier of the protection with regard to trademarks and domains
platform fails to offer the payment solutions and currently used in the business.
withdrawal methods preferred by existing and poten- There is a risk that competitors or other third par-
tial customers, there is a risk that the customers will ties could unlawfully seek to use or infringe the Group’s
use the services provided by the Group less frequently. intellectual property rights. There is also a risk that a
Such a development could have an adverse effect on third party could assert, and acquire, better rights to
the Group’s business, earnings or financial position. intellectual property rights used by the Group. Such
Furthermore, the Group is dependent on the actions could result in claims for damages or claims
acceptance of payments for online gambling by credit to cease using these rights being brought against the
card companies, banks and other financial institutions Group. Should the claims be successful they could have
in order to provide its services towards its customers. an adverse effect on the Group’s business, financial
The Group’s affiliate business is also dependent on position or results of operations.
that other operator can provide these services to their
customers. Should there be a breakdown in these Processing of personal data
services, even for a short period of time, or if any of the The Group processes, stores and uses personal infor-
large credit card companies, banks or other financial mation and other data in in the course of it business.
institutions were to no longer handle payments for on- Since the data privacy laws and regulations in the
line gambling in any or all of the countries in which the markets in which the Group operates have changed
Group has customers, this could have an adverse effect in May 2018, with the new EU Regulation 2016/679
on the Group’s business, earnings or financial position. entering into force, costs associated with compliance
with data privacy regulations may increase. Failure,
Risk relating to IT-systems and gaming platforms or perceived failure, to comply with data privacy laws
The Group uses suppliers to develop and provide and regulations could harm the Group’s reputation
online gaming platforms. Like all online services, and lead to sanctions from supervisory authorities or
these systems can suffer from downtime. This can claims for damages from data subjects and contract
occur for many different reasons, both within and parties, which could have a material adverse effect on
beyond the Group’s and/or the platform supplier’s the Group’s business, financial position and results of
control. In the event of downtime, the Group’s sites operation.
or products can be partially or completely inacces-
sible to end users, which will have an impact on the Affiliation revenues
Group’s earnings. Further, the Group is dependent on The revenues from the Group’s affiliate business is
the platform supplier to solve any technical problems mainly based on the revenue share-model, whereby
that may arise. Potential interference, cyber-attacks the Group is entitled to part of the revenues generated
or technical problems with the servers used by the by the relevant gambling website from customers
Group’s platform supplier could also result in a loss of directed by the Group’s marketing activities. The other
earnings, reduced confidence in the Group, and pos- revenue model used in the Group’s affiliation business
sibly claims for damages, which will have an adverse is CPA (”cost per action”) whereby the Group receives
FUTURE GAMING GROUP
4 COMPANY DESCRIPTION
a fixed fee from the operator of the gambling website of technical experience and expertise of the online
based on how many depositing customers the Group gambling industry and marketing strategies. Further,
directs to that operator’s website. and as the Group operates in a relationship driven
The Group is therefore dependent on its ability to business, retaining and recruiting the right employees
identify successful gambling websites and a marketing is important to maintain and improve good business
strategy that attracts potential customers to gamble relations. The Group currently has five key employees
on those websites. The Group must also determine that are important for the Group’s continued success.
what revenue model is best suited for the affiliation Should the Group lose key individuals or not be able
with a particular website based on the type of gam- to recruit relevant management and employees, this
bling provided at the website, the expected customer could have an adverse effect on the Group’s business,
loyalty and the amount of money the customers are earnings and financial position.
expected to spend on gambling. Further, when the Group acquires a new subsidi-
Should the Group not be successful in determin- ary or a business the seller usually has certain know-
ing what websites they should focus on, what strate- how that must be transferred to the Group. There
gies to use in their marketing and communication or is a risk that the seller, due to e.g. lack of incentive,
which revenue-model should be used, there is a risk does not transfer its know-how to the employees of
that the Group will be exposed to a decline in its affil- the Group, which could have an adverse effect on the
iation business, which will have an adverse effect on success of the relevant acquisition and the Group’s
the Group’s business, earnings and financial position. business, earnings and financial position.
Dependency on external parties Dependency on key agreement – the white label
The Group is generally dependent on suppliers of agreement
technical solutions (including third party platforms), The Group is dependent on the white label agreement
game developers and game providers, Internet entered into with Bethard Group Limited regarding the
providers, and providers of payment solutions and IT gaming operations in SverigeKronan and SuomiVegas.
services, to conduct its business and ensure that it If this agreement is terminated or if the counterparty
offers a continuous, high-quality service to its custom- is unable to perform its services thereunder, there is
ers. If one or more of these external parties fails to a risk that the Group will not be able to conduct its
perform its obligations to the Group, this could affect business as intended, at least not until the Group has
the Group’s business, which could harm the Group’s found a new appropriate supplier and entered into
brand and reputation on the market, result in losses a white label agreement with such supplier. More-
of revenues, affect the loyalty of its customers in the over, there is a risk that such new agreement may
long-term and, by extension, also the Group’s busi- be on less favorable terms than the current white
ness, financial position and results of operations. label agreement. If any of these risks materialize this
The popularity and acceptance of gambling is also will have an adverse effect on the Group’s business,
affected generally by standards in society in individual results of operation and financial position.
jurisdictions, and changes to these standards could
therefore result in a decline in the acceptance of online Cash management, anti-money laundering and fraud
gambling solutions by end-users in these jurisdictions. The Group uses external parties to handle a large
If any of the above were to occur, this could have number of financial deposits and payments within the
an adverse effect on the Group’s business, financial ordinary course of business, and these external par-
position and results of operations. ties are therefore exposed to risks relating to money
laundering and fraud which, consequently, may have
Dependency on key employees and know-how an impact on the Group. Should the Group’s external
The Group is dependent on the knowledge, experience parties fail to detect a fraud or money laundering
and commitment of its employees for continued devel- activities by employees or customers, or be com-
opment. Therefore, there is an ongoing need to recruit pelled to make a refund to an account because of, for
and retain management and staff with a high level example, a customer’s bank or credit card is used by a
FUTURE GAMING GROUP
5 COMPANY DESCRIPTION
third party, there is a risk that such refunds or similar Match-fixing and fraudulent gaming
payments will have an adverse effect on the Group’s The Group offers sports betting as part of its oper-
business, financial position or results of operations. ator business and is therefore exposed to the risk of
customers, or others, trying to manipulate the results
Disputes and litigations of the games. Further, the Group is exposed to risks
The Group is currently not involved in any material relating to customers trying to manipulate the games
disputes. There is however a risk that the Group e.g. through multiple accounts fraud or other illegal
could become involved in disputes or subject to other methods. Should the Group or the platform supplier
litigation in the future. Disputes of different kinds can fail to detect fraudulent activities there is a risk that
be time consuming, disrupt normal operations, involve the Group will be obliged to refund the losing custom-
large amounts and result in considerable costs and ers. Such refunds, or similar payments, may lead to
reputational risks, which could have a negative effect increased costs that will not be covered by the Group’s
on the Group’s business, financial position and results insurance, which will have an adverse effect on the
of operation. Group’s earnings and financial position. Further,
There is a risk that people who suffer from an ad- fraudulent activities may cause significant reputational
diction to gambling could try to sue companies within damage to the Group, which will have an adverse effect
the Group or the platform supplier used by the Group on the Group’s business, earnings or financial position.
as a result of their gambling abuse. Even if such
claims are overruled, they could give rise to substan- Transaction and exchange rate risks in the cash flow,
tial legal costs and possibly a loss of confidence in the income statement and balance sheet
Group, which by extension could lead to a reduction in The Group reports in one currency but has other
earnings. currencies as functional currencies. As the exchange
rates fluctuates, these fluctuations lead to a trans-
Insurance coverage action exposure as the transactions made in other
The Issuer has an insurance coverage for its CEO and currencies than the reporting currency needs to be
the board of directors. There is a risk that the Group recalculated into the reporting currency. There is a
could sustain damages or incur liability claims that risk that this will have an adverse effect on the Group’s
are not covered by the insurance coverage in whole or business, earnings or financial position.
in part. Furthermore, claims against the Issuer, even if
covered by the Issuer’s insurance policies, could result Seasonality
in an increase in the Issuer’s premiums. There is a The Group is exposed to seasonal variations, mainly
risk that the Issuer will not be able to obtain new or relating to the sport events calendar. These seasonal
maintain existing insurances in the future on accept- variations are, to some extent, beyond the Group’s
able terms, or at all. Not being adequately insured control and can affect the Group’s operations, result-
or significant increases in the Issuer’s insurance ing in adverse effects on the Group’s business, earn-
premiums could have an adverse effect on the Group’s ings and financial position
business, financial position and results of operation.
Risks relating to ”unlikely winners”
Liquidity risk Through the Group’s sports betting offering, the Group is
The Group bears a liquidity risk in its online gaming exposed to risks relating to ”unlikely winners”. The bet-
business. The Group will have to hold enough cash ting on, for example, a football game is divided in differ-
reserves for possible price money, such as jackpots. ent odds, based on the probability in the result. A more
If the Group fails to hold enough reserves, it may be unlikely outcome has higher odds (i.e. higher returns)
unable to pay the customer the full amount of its price than a more probable outcome. Should an unpredictable
money which may result in disputes or other litigation number of customers bet on unlikely winners, or should
and/or negative publicity which may have an adverse an unpredictable amount of game results with unlikely
effect on the Group’s business, financial position or outcomes, and should the Group’s internal monitoring
results of operations. systems fail to detect any unusual or abnormal betting
FUTURE GAMING GROUP
6 COMPANY DESCRIPTION
patterns, the Group will be obliged to pay out higher contingent liabilities, amortization costs, impairment
prices to its customers betting on such games than of goodwill or restructuring charges, any of which
expected, resulting in an adverse effect on the Group’s could have an effect on the Group’s business, earnings
business, earnings and financial position. or financial position.
Inaccuracy of forecasts Foreign target companies
The forecasts presented in this Presentation have Several of the companies subject to the contemplated
been based on the Group’s best estimates of such acquisitions are incorporated in foreign jurisdictions
figures. Further, the forward looking figures presented where the Group has not previously operated. There is
in this Presentation are based on assumptions which a risk that cultural differences and local laws and reg-
could turn out to be wrong or which may not materi- ulations will make it difficult for the Group to operate
alize. If the projections are inaccurate or calculations in the same manner as initially intended. Should this
are incorrect, the Group may not be able to reach risk materialize, this could have an adverse effect on
estimated figures which will entail lower profits than the Group’s business, results of operation and finan-
estimated by the Group or no profits at all, which could cial position.
have an adverse effect on the Group’s results of opera-
tion or financial position. Seller-friendly terms
Certain provisions in the acquisition documents may
be ”seller-friendly” such as caps on the seller’s liabil-
RISKS RELATING TO THE ACQUISITIONS ity. If such provisions apply and the seller breach any
Undisclosed risks of its undertakings or warranties, the seller’s liability
The Group has only conducted a highly limited due will be limited to the capped amount which may have
diligences in connection with the recent acquisition of an adverse effect on the Issuer’s and, subsequently,
Phase One Performance AB and on the target compa- the Group’s financial position and results of operation.
nies in connection with the Contemplated Acquisitions.
Thus, there is a possibility that there are unidentified Representations and warranties of the sellers
risks which are unknown to the Issuer and that such The share purchase agreements relating to the Con-
unidentified risk will have an adverse effect on the templated Acquisitions contain various representa-
Group’s business earnings or financial position. As the tions and warranties granted by each respective seller.
Issuer is a holding company, the turn-over of the Group Should any of the sellers breach such warranties,
is generated by its subsidiaries. This means that the the seller will have to indemnify the Issuer. There is
Group will be highly dependent on the future success a risk that the relevant seller does not have sufficient
of the target companies acquired in the Contemplated funds to indemnify the Issuer in full or at all. If this
Acquisition and Phase One Performance AB. Should risk materializes, it could have an adverse effect on
there be any material risks not identified and, conse- the Issuer’s and, subsequently, the Group’s business,
quently not managed in the acquisition agreements, financial position and results of operation.
this could have a material adverse effect on the Group’s
business, earnings and financial position. Earnout provisions
The Contemplated Acquisitions and recent acqui- The share purchase agreements relating to the
sition of Phase One Performance could present cer- Contemplated Acquisitions contain earnout provisions
tain financial, managerial and operational risks. If the entitling the sellers to receive earnout payments which
contemplated or future acquisitions are not success- are calculated with reference to the profit of the Con-
fully integrated or if the expected synergies between templated Acquisitions. Should there be a temporary
the new subsidiaries does not occur, there is a risk peak in profit during the reference period, the Group
that the Group’s business, financial conditions and re- may have to pay an earnout amount which is higher
sults of operations could be adversely affected. Future than the Group has calculated for, which will have an
acquisitions could also result in dilutive issuances of adverse effect on the Issuer’s and, subsequently, the
the Issuer’s equity securities, the incurrence of debt, Group’s business and financial position.
FUTURE GAMING GROUP
7 COMPANY DESCRIPTION
RISKS RELATING TO THE SECURITIES A breach of the Terms and Conditions could result
Credit risks in a default under the Terms and Conditions, which
The investor’s ability to receive payment under the could lead to inter alia an acceleration of the Bonds,
Bonds is dependent on the Issuer’s ability to meet its resulting in the Issuer has to repay the bondholders
payment obligations, which in turn is largely depen- at the applicable call premium. It is possible that the
dent upon the performance of the Group’s operations Issuer will not have sufficient funds at the time of the
and its financial position. There is a risk that a deteri- repayment to make the required redemption of Bonds.
orating financial position of the Group will reduce the
Group’s possibility to receive debt financing at the time Interest rate risks
of the maturity of the Bonds. The Bonds’ value depends on several factors, one of
the most significant over time being the level of mar-
Refinancing risk ket interest. Investments in the Bonds involve a risk
The Issuer’s ability to successfully refinance its debt that the market value of the Bonds may be adversely
depends on, among other things, the conditions of the affected by changes in market interest rates.
debt capital markets and its financial condition at such
time. Even if the debt capital markets improve, there is Liquidity risks and secondary market
a risk that the Issuer’s access to financing sources will A liquid market for trading in the Bonds might not
not be available on favorable terms, or at all. Should occur that may result in that the bondholders cannot
the Issuer be unable to refinance its debt obligations sell their Bonds when desired or at a price level which
on favorable terms, or at all, it could have a material allows for a profit comparable to similar investments
adverse effect on the Group’s business, financial con- with an active and functioning secondary market.
dition and results of operations and on the Securities Lack of liquidity in the market may have a negative
Holders’ recovery under the Bonds. impact on the market value of the Bonds.
The Warrants will not be listed on any regulated or
Risks relating to the price of the Issuer’s shares unregulated market. This may result in that the Secu-
The market price of the Issuer’s shares could be rities Holders cannot sell their Warrants when desired
subject to significant fluctuations in response to actual or at a price level which allows for a profit compared
or anticipated variations in the Group’s operating to similar investment which are listed on a regulated
results and those of its competitors, adverse business market and has an active and functionary secondary
developments, changes to the regulatory environment market. Lack of liquidity may also have a negative
in which the Group operates, changes in financial impact on the market value of the Warrants.
estimates by securities analysts and the actual or
expected sale of a large number of the Issuer’s shares, The market price of the Securities may be volatile
as well as other factors. . The market price of the Securities could be subject
The price of the Issuer’s shares affects the value to significant fluctuations in response to actual or
of the Warrants. If the price of the Issuer’s shares for anticipated variations in the Group’s operating results
any reason are less than the strike price on the expiry and those of its competitors, adverse business develop-
date of the Warrants, the Warrants may be worthless. ments, changes to the regulatory environment in which
the Group operates, changes in financial estimates by
Ability to comply with the respective Terms and securities analysts and the actual or expected sale of
Conditions a large number of Securities, as well as other factors.
The Group is required to comply with the respective There is a risk that it will adversely affect the market
Terms and Conditions, inter alia, to pay interest under price of the Securities without regard to the Group’s
the Bonds. Events beyond the Group’s control, includ- operating results, financial condition or prospects.
ing changes in the economic and business conditions
in which the Group operates, may affect the Group’s Ability to service debt
ability to comply with, among other things, the under- The Issuer’s ability to service its debt under the Bonds
takings set out in the respective Terms and Conditions. will depend upon, among other things, the Group’s
FUTURE GAMING GROUP
8 COMPANY DESCRIPTIONfuture financial and operating performance, which was unenforceable, there is a risk that the bondhold-
will be affected by prevailing economic conditions and ers could find it difficult or impossible to recover the
financial, business, regulatory and other factors, some amounts owed to them under the Bonds. Therefore,
of which are beyond the Group’s control. If the Group’s there could be a risk that the security and the guaran-
operating income is not sufficient to service its current tees granted in respect of the Bonds might be ineffec-
or future indebtedness, the Group will be forced to tive in respect of any of the Issuer’s obligations under
take actions such as reducing or delaying its business the Bonds in the event the Issuer becomes insolvent.
activities, acquisitions, investments or capital expen- In addition, there is a risk that any enforcement
ditures, selling assets, restructuring or refinancing could be delayed due to any inability to sell the securi-
its debt or seeking additional equity capital. There is ty assets in a timely and efficient manner.
a risk that the Group will not be able to affect any of
these remedies on satisfactory terms, or at all. This Risks relating to the enforcement of the transaction
could have a negative effect on the Group’s operations, security
earnings, results and financial position. If the subsidiaries whose shares are, or will be,
pledged in favor of the bondholders are subject to
Risks relating to the transaction security any foreclosure, dissolution, winding-up, liquidation,
and the guarantees recapitalization, administrative or other bankruptcy or
Although the Group’s obligations towards the bond- insolvency proceedings, there is a risk that the shares
holders under the Bonds will be secured and, to a lim- in such subsidiaries could then have limited value
ited extent, guaranteed, there is risk that the proceeds because all of the subsidiaries’ obligations must first
of any enforcement sale of the security assets and be satisfied, potentially leaving little or no remain-
claims under the guarantees could be insufficient to ing assets in the subsidiary for the bondholders. As
satisfy all amounts then owed to the bondholders. a result, there is a risk that the bondholders will not
The bondholders will be represented by the Se- recover full or any value in the case of an enforcement
curity Agent (as defined in the Terms and Conditions sale of such pledged shares. In addition, there is a risk
for the Bonds) in all matters relating to the transac- that the value of the shares subject to the pledge could
tion security. There is a risk that the Security Agent, decline over time.
or anyone appointed by it, does not properly fulfil If the proceeds of an enforcement are not sufficient
its obligations in terms of perfecting, maintaining, to repay all amounts due under or in respect of the
enforcing or taking other necessary actions in relation Bonds, then the bondholders will only have an unse-
to the transaction security. The transaction security cured claim against the remaining assets (if any) of
is subject to certain hardening periods during which the Issuer for the amounts which remain outstanding
times the bondholders do not fully, or at all, benefit under or in respect of the Bonds.
from the transaction security. The Security Agent shall
take enforcement instructions from the bondholders. The Issuer is dependent on its subsidiaries
However, it is possible that the Security Agent will act A significant part of the Group’s assets and revenues
in a manner that is not preferable to the bondholders. relate to the Issuer’s subsidiaries. Accordingly, the
There is a risk that transaction security and guar- Issuer is dependent upon receipt of sufficient income
antees granted to secure the Bonds could be unen- and cash flow related to the operation of and the
forceable or enforcement of the security and claims ownership in the subsidiaries to enable it to make
under the guarantees could be delayed according to payments under the Bonds. Consequently, the Issuer
Swedish law or any other applicable laws. There is a is dependent on the subsidiaries’ availability of cash,
risk that the enforceability of the transaction security and their legal ability to make dividends which may
and claims under the guarantees could be subject to a from time to time be limited by corporate restric-
certain degree of uncertainty. tions and law. Should the Issuer not receive sufficient
If the Issuer were to be unable to make repayment income from its subsidiaries, the investor’s ability to
under the Bonds and a court was to render a judg- receive payment under the Terms and Conditions for
ment that the security granted in respect of the Bonds the Bonds may be adversely affected.
FUTURE GAMING GROUP
9 COMPANY DESCRIPTIONSubsidiaries, structural subordination and insolvency large amount of the matters to be decided by vote
of subsidiaries at a shareholder’s meeting. For example, a majority
A significant part of the Group’s assets and revenues shareholder will have the ability to elect the board of
relate to the Issuer’s subsidiaries. The subsidiaries are directors. According to the Terms and Conditions for
legally separated from the Issuer and the subsidiaries’ the Bonds, if a change of control event occurs, the
ability to make payments to the Issuer is restricted by, bondholders have however a right of prepayment of
among other things, the availability of funds, corpo- the Bonds (put option). There is thus a risk that the
rate restrictions and law restriction. Thus, the Bonds Issuer does not have enough liquidity to repurchase
are structurally subordinated to the liabilities of the the Bonds if the bondholders use its right of prepay-
subsidiaries. The Group and its assets may not be ment, see further under Section ”Put options” below.
protected from any actions by the creditors of any sub-
sidiary of the Group, whether under bankruptcy law, by No action against the Issuer and bondholders’
contract or otherwise. In addition, defaults by, or the representation
insolvency of, certain subsidiaries of the Group could In accordance with the Terms and Conditions for the
result in the obligation of the Group to make payments Bonds, the Agent will represent all bondholders in all
under parent company financial or performance guar- matters relating to the Bonds and the bondholders are
antees in respect of such subsidiaries’ obligations. prevented from taking actions on their own against the
Issuer. Consequently, individual bondholders do not
Security over assets granted to third parties have the right to take legal actions to declare any default
The Group may, subject to limitations, incur additional by claiming any payment from the Issuer and may there-
financial indebtedness and provide security for such fore lack effective remedies unless and until a requisite
indebtedness. In the event of bankruptcy, reorgani- majority of the bondholders agree to take such action.
zation or winding-up of the Issuer, the bondholders However, there is a risk that an individual bondholder,
will be subordinated in right of payment out of the in certain situations, could bring its own action against
assets being subject to security. In addition, if any the Issuer (in breach of the Terms and Conditions for the
such third party financier holding security provided by Bonds), which could negatively impact an acceleration of
the Group could enforce such security due to a default the Bonds or other action against the Issuer.
by any Group Company under the relevant finance To enable the Agent to represent bondholders in
documents, such enforcement could have a material court, the bondholders and/or their nominees may
adverse effect on the Group’s assets, operations and have to submit a written power of attorney for legal
ultimately the position of the bondholders. proceedings. The failure of all bondholders to submit
such a power of attorney could negatively affect the
Currency risks legal proceedings. Under the Terms and Conditions
The Bonds will be denominated and payable in SEK. for the Bonds, the Agent will in some cases have the
If bondholders in the Bonds measure their invest- right to make decisions and take measures that bind
ment return by reference to a currency other than all bondholders. Consequently, there is a risk that
SEK, an investment in the Bonds will entail foreign the actions of the Agent in such matters will impact a
exchange-related risks. As a result, there is a risk that bondholder’s rights under the Terms and Conditions
investors may receive less interest or principal than for the Bonds in a manner that is undesirable for
expected, or no interest or principal. some of the bondholders.
Majority owner The rights of bondholders depend on the Agent’s
Following any potential change of control in the Issuer, actions and financial standing
the Issuer may be controlled by majority shareholder By subscribing for, or accepting the assignment
whose interest may conflict with those of the bond- of, any Bond, each holder of a Bond will accept the
holders, particularly if the Group encounters diffi- appointment of the Agent (being on the issue date
culties or is unable to pay its debts as they fall due. Nordic Trustee & Agency AB (publ)) to act on its behalf
A majority shareholder has legal power to control a and to perform administrative functions relating to
FUTURE GAMING GROUP
10 COMPANY DESCRIPTIONthe Bonds. The Agent shall have, among other things, the Securities in the United States. The Issuer has
the right to represent the bondholders in all court and not undertaken to register the Securities under the
administrative proceedings in respect of the Bonds. U.S. Securities Act or any U.S. state securities laws or
However, the rights, duties and obligations of the Agent to effect any exchange offer for the Securities in the
as the representative of the holders of the Bonds will future. Furthermore, the Issuer has not registered the
be subject to the provisions of the Terms and Condi- Securities under any other country’s securities laws.
tions for the Bonds, and there is no specific legislation It is each potential investor’s obligation to ensure
or market practice in Sweden (under which laws the that the offers and sales of Securities comply with all
Terms and Conditions for the Bonds are governed) applicable securities laws. Due to these restrictions,
which could govern the Agent’s performance of its there is a risk that a Securities Holder cannot sell
duties and obligations relating to the Bonds. There is a its Securities as desired. Restrictions relating to the
risk that a failure by the Agent to perform its duties and transferability of the Bonds could have a negative
obligations properly or at all will adversely affect the effect for some of the bondholders.
enforcement of the rights of the bondholders.
The Agent may be replaced by a successor Agent Risks relating to the clearing and settlement in
in accordance with the Terms and Conditions for the Euroclear Sweden AB’s book-entry system
Bonds. Generally, the successor Agent has the same The Securities will be affiliated to Euroclear Sweden
rights and obligations as the retired Agent. It may be AB’s account-based system, and no physical notes
difficult to find a successor Agent with commercially will be issued. Clearing and settlement relating to the
acceptable terms or at all. Further, there is a risk that Securities is carried out within Euroclear Sweden AB’s
the successor Agent breaches its obligations under book-entry system as well as payment of interest and
the above documents or that insolvency proceedings repayment of the principal. Investors are therefore
could be initiated against it. dependent on the functionality of Euroclear Sweden
A materialization of any of the above risks will AB’s account-based system and any problems thereof
have a material adverse effect on the enforcement of could have an adverse effect on the payment of inter-
the rights of the holders of the Bonds and the rights est and repayment of principal under the Bonds and
of the holders of the Bonds to receive payments under the ability to subscribe for shares under the Warrants.
the Bonds.
Amended or new legislation
Bondholders’ meetings This document is and the respective Terms and Condi-
The Terms and Conditions for the Bonds include certain tions will be based on Swedish law in force at the date
provisions regarding bondholders’ meetings. Such of issuance of the Bonds. There is a risk that amended
meetings may be held in order to resolve on matters or new legislation and administrative practices may
relating to the bondholders’ interests. The Terms and adversely affect the investor’s ability to receive pay-
Conditions for the Bonds allow for stated majorities to ment under the Terms and Conditions for the Bonds
bind all bondholders, including bondholders who have or subscribe for shares in accordance with the Terms
not taken part in the meeting and those who have voted and Conditions for the Warrants.
differently to the required majority at a duly convened
and conducted bondholders’ meeting. Consequently, Conflict of interests
there is a risk that the actions of the majority in such The Sole Bookrunner may in the future engage in
matters will impact a bondholder’s rights in a manner investment banking and/or commercial banking or
that is undesirable for some of the bondholders. other services for the Group in the ordinary course of
business. Accordingly, conflicts of interest may exist
Restrictions on the transferability of the Securities or may arise as a result of the Sole Bookrunner having
The Securities have not been and will not be registered previously engaged, or will in the future engage, in
under the U.S. Securities Act of 1933, as amended, transactions with other parties, having multiple roles
or any U.S. state securities laws. Subject to certain or carrying out other transactions for third parties with
exemptions, a Securities Holder may not offer or sell conflicting interests.
FUTURE GAMING GROUP
11 COMPANY DESCRIPTIONBackground and Objectives
INTRODUCTION TO THE GROUP Future Gaming Group has also expanded its product
Future Gaming Group International AB is a Spotlight offering within gaming operators through the acquisi-
Stock Market listed company that invests in and tions of Sverigekronan and Soumivegas.
develops services in online gaming and lead gener- In order to pursue its acquisitive growth strategy,
ation (also known as affiliate marketing or perfor- the Group spent the first half of 2017 reorganizing
mance-based marketing). Future Gaming Group owns its business and clearing all debt. Focus was then to
and operates through the subsidiary lead genera- consolidate aforementioned acquisitions. The Group
tion operations Phase One Performance, Unlimited is continuously evaluating interesting add-on op-
Media and ViisTek Media, as well as the gaming sites portunities. During June 2018 Future Gaming Group
SverigeKronan.com and SuomiVegas.com. implemented changes in the Group Management. The
Thanks to its bond issue, Future Gaming Group company’s CFO Alexander Pettersson was assigned as
had the opportunity to grow rapidly. The Board has set new CEO, and former CEO Björn Mannerqvist was as-
the goal of continuing to grow profitably, both organi- signed to be the Group’s Operational Manager (COO).
cally and through acquisitions. Future Gaming Group’s Maltese subsidiary Unlim-
ited Media Ltd also acquired the assets of IPG Internet
HISTORY OF FUTURE GAMING GROUP Capital Limited (”IPG”) during June 2018. IPG is active
Future Gaming Group was founded in 2006 and is a in performance-based marketing, so-called lead
holding company operating online marketing assets generation. The acquisition included IPG’s operations,
within gaming and finance. During 2017 the Group customer database and customer agreements. Future
remodeled the business to also focus on affiliates Gaming Group is consolidating the revenues from the
and has since entered into acquisition agreements acquisition from June 1, 2018. IPG’s management
with affiliate companies Phase One Performance and team remains active in the business.
ViisTek Media.
FUTURE GAMING GROUP
12 COMPANY DESCRIPTIONThe liability statement of the Board of Directors
We declare that, to the best of our knowledge, the information provided in the Company
Description is accurate and that, to the best of our knowledge, the Company Description is not
subject to any omissions that may serve to distort the picture the Company Description is to
provide, and that all relevant information in the minutes of board meetings, auditors’ records
and other internal documents are included in the Company Description.
Stockholm
December 6, 2018
Tobias Fagerlund
Chairman of the Board of Directors
Richard Woodbridge
Board Member
Stefan Vilhelmsson
Board Member
Björn Mannerqvist
COO and Board Member
Alexander Pettersson
CEO
FUTURE GAMING GROUP
13 COMPANY DESCRIPTIONStatement from the CEO
I assumed the position of CEO for Future Gaming Group in June this year, and I’m very excit-
ed about the journey ahead. First, I would like to thank my predecessor, Björn Mannerqvist,
for his successful leadership of the group. During his tenure, the group initiated an acquisi-
tion-driven transformation from a fighting gaming operator into becoming one of the lead-
ing companies within lead generation. I myself have an extensive background in the gaming
industry, which I hope Future Gaming Group will benefit from. Previously, I have been running
my own gaming companies, as well as working for companies such as Betsson and Cherry,
where I served as CFO for the latter.
OPERATIONS GOING FORWARD
During the third quarter, our lead generation busi- Future Gaming Group is still at the beginning of its
nesses Phase One and ViisTek Media continued to transformation and the work with extracting the full
deliver impressive results. potential of the acquired businesses has just started.
Our operator businesses, SverigeKronan and There is potential for substantial synergies between
SuomiVegas, earlier delivered below expectations. the businesses within the group in terms of econo-
A consequence of this was that the sellers of these mies of scale, deal bargaining power and knowledge
businesses did not reach their earnout target, mean- transfer. My vision is to build strong subsidiaries
ing that Future Gaming Group saved up to SEK 22 which benefit from each other and deliver long-term
million in earnout payments. We have now taken over value and stable cash flows for our owners and bond-
the responsibility for the marketing of these brands holders.
and have added operational resources to them. We’re
already seeing positive effects from these operational Alexander Pettersson
efforts, and in the third quarter the operator brands CEO, Future Gaming Group
delivered their best quarter so far.
In June we acquired the assets of IPG Internet
Capital. IPG is active within lead generation, focusing
mainly on the finance vertical. I’m very happy with
this acquisition, which opens new revenue pools and
brings talented entrepreneurs into the group. IPG
performed slightly above our estimates during the
third quarter.
FUTURE GAMING GROUP
14 COMPANY DESCRIPTIONMy vision is to build strong
subsidiaries which benefit from
each other and deliver long-term
value and stable cash flows for
our owners and bondholders.
FUTURE GAMING GROUP
15 COMPANY DESCRIPTIONMarket Overview
OVERVIEW OF THE GAMING MARKET
Global market (2016)
EUR 385.3 billion
European market (2016)
EUR 98.3 billion
Landbased gaming (2016) Online iGaming (2016)
EUR 78.0 billion EUR 20.3 billion
4% 7% 5% 12% 40% 33%
Skill Poker Bingo Lotteries Sports and
Casino
EUR 0.9 EUR 0.9 EUR 0.9 EUR 0.9 Horse betting
EUR 6.6 billion
billion billion billion billion EUR 8.0 billion
Source: H2GC, Third-party consultancy firm.
The total gaming market can be divided into land Geographical breakdown by focus market
based gaming and online gaming, also referred to as
iGaming. Landbased gaming remain far larger than 32% UK
iGaming, with a total global value of EUR 343 billion in
2016 vs. EUR 42 billion for iGaming.
The European market for landbased gaming had a
Betting 15% Nordics
total value of EUR 78 billion in 2016 vs. EUR 20 billion
for iGaming. 53% Rest of Europe
The iGaming market, Online Gaming, can be
divided into different verticals including (i) poker, (ii)
sports betting, (iii) casino, (iv) lottery and (v) bingo. The
52% UK
Group’s two major focus areas (betting and casino)
constitute by far the largest parts of the European
online gaming market collectively being valued to EUR Casino 11% Nordics
14.6 billion. Going forward, online gaming is expected
to exhibit strong growth, reaching a total market size
of EUR ~25 billion in 2020.
37% Rest of Europe
FUTURE GAMING GROUP
16 COMPANY DESCRIPTIONYou can also read
