znga-8ka_20200701.htm
true 0001439404 0001439404 2020-07-01 2020-07-01

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K/A

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 1, 2020

 

ZYNGA INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-35375

42-1733483

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

 

 

699 Eighth Street

San Francisco, CA 94103

 

94103

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (855) 449-9642

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock

ZNGA

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


Item 2.01. Completion of Acquisition or Disposition of Assets.

Amendment

This Form 8-K/A is filed as an amendment (the “Amendment”) to the Current Report on Form 8-K filed by Zynga Inc. (“Zynga”) on July 2, 2020 (the “Current Report”) disclosing that Zynga had completed its previously announced acquisition of all allotted and issued share capital (including all rights to acquire share capital) of Peak Oyun Yazılım ve Pazarlama Anonim Şirketi, a Turkey joint stock company (“Peak”), pursuant to the Share Sale and Purchase Agreement (the “Agreement”) dated May 31, 2020, between the shareholders (collectively, the “Sellers”) of Peak and Zynga.

This Amendment is being filed solely for the purpose of including the historical audited and unaudited financial statements of Peak and the pro forma condensed combined financial information required by Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Current Report in reliance on the instructions to such items.

Item 9.01. Financial Statements and Exhibits.

 

(a)

 

Financial statements of foreign businesses acquired. The audited consolidated financial statements of Peak as of and for the year ended December 31, 2019 and December 31, 2018 are filed herewith as Exhibit 99.1.

(b)

 

Pro forma financial information. The unaudited pro forma condensed combined financial information of Zynga and Peak as of and for the three months ended March 31, 2020 and the year ended December 31, 2019 are filed herewith as Exhibit 99.2.

(d)

 

Exhibits.

 

 

 

Exhibit Number

 

Description

23.1

 

Consent of Güney Bağımsız Denetim ve SMMM A.Ş., Independent Registered Public Accounting Firm

99.1

 

Audited consolidated financial statements of Peak as of and for the years ended December 31, 2019 and 2018

99.2

 

Unaudited pro forma condensed combined financial information of Zynga and Peak as of and for the three months ended March 31, 2020 and the year ended December 31, 2019

104

 

Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document)


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

ZYNGA INC.

 

 

 

 

Date: August 21, 2020

 

By:

/s/ Jeff Buckley

 

 

 

Jeff Buckley

 

 

 

Chief Accounting Officer

 

znga-ex231_6.htm

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the following Registration Statements:

 

(1)

Registration Statement (Form S-3ASR No. 333-193889) of Zynga Inc.,

(2)

Registration Statement (Form S-8 No. 333-229930) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(3)

Registration Statement (Form S-8 No. 333-223109) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(4)

Registration Statement (Form S-8 No. 333-217752) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(5)

Registration Statement (Form S-8 No. 333-211201) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(6)

Registration Statement (Form S-8 No. 333-206185) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(7)

Registration Statement (Form S-8 No. 333-199959) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(8)

Registration Statement (Form S-8 No. 333-193914) pertaining to the Zynga Inc. 2011 Equity Incentive Plan (as successor to the NaturalMotion Limited Option Plan and the NaturalMotion Limited Enterprise Management Incentive Scheme),

(9)

Registration Statement (Form S-8 No. 333-188282) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc.,

(10)

Registration Statement (Form S-8 No. 333-183406) pertaining to the 2011 Equity Incentive Plan and 2011

Employee Stock Purchase Plan of Zynga Inc., and

(11)

Registration Statement (Form S-8 No. 333-178529) pertaining to the 2007 Equity Incentive Plan, 2011 Equity Incentive Plan and 2011 Employee Stock Purchase Plan of Zynga Inc.

 

of our report dated August 21, 2020, with respect to the consolidated financial statements of Peak Oyun Yazılım ve Pazarlama Anonim Şirketi, appearing in this Current Report on Form 8-K/A of Zynga Inc.

 


/s/ Güney Bağımsız Denetim ve SMMM A.Ş.


Istanbul, Turkey

August 21, 2020

 

znga-ex991_248.htm

Exhibit 99.1

 

 

 

 

 

Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

 

 

 

Table of contents

 

 

 

Page

Independent auditors’ report

 

2

Consolidated statements of financial position

 

3

Consolidated statements of profit or loss and other comprehensive income

 

4

Consolidated statements of changes in equity

 

5

Consolidated statements of cash flows

 

6

Notes to the consolidated financial statements

 

7

 

 

 

 

 

 

 

 

 

 


 

Report of Independent Auditors

 

To the Shareholders of Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

We have audited the accompanying consolidated financial statements of Peak Oyun Yazılım ve Pazarlama Anonim Şirketi (the Company) and its subsidiary (the Group), which comprise the consolidated statements of financial position as of December 31, 2019 and 2018, and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the consolidated financial statements in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB); this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

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

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group at December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards.

 

Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi  

A member firm of Ernst & Young Global Limited

 

/s/ Güney Bağımsız Denetim ve SMMM A.Ş

 

 

August 21, 2020

İstanbul, Turkey

 

 

 

(2)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Consolidated statements of financial position

as of December 31, 2019 and 2018

(Currency – US Dollar (USD))

 

 

 

 

 

 

 

 

Audited

 

 

Audited

 

 

 

 

 

 

 

December 31,

 

 

December 31,

 

ASSETS

 

Notes

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

3

 

 

 

131,688,177

 

 

 

51,447,467

 

Trade receivables

 

 

4

 

 

 

39,589,428

 

 

 

41,979,540

 

Other receivables

 

 

5

 

 

 

577,861

 

 

 

26,944

 

Other current assets

 

 

6

 

 

 

6,684,310

 

 

 

22,435,602

 

Total Current Assets

 

 

 

 

 

 

178,539,776

 

 

 

115,889,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON CURRENT ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

7

 

 

 

7,060,283

 

 

 

711,840

 

Right-of-use-assets

 

 

9

 

 

 

4,606,649

 

 

 

-

 

Intangible assets

 

 

8

 

 

 

10,412,403

 

 

 

2,452,049

 

Other non-current assets

 

 

6

 

 

 

608,318

 

 

 

558,272

 

Deferred tax assets

 

 

23

 

 

 

835,793

 

 

 

666,338

 

Other non-current receivables

 

 

5

 

 

 

-

 

 

 

536,108

 

Total Non-Current Assets

 

 

 

 

 

 

23,523,446

 

 

 

4,924,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

 

 

 

 

202,063,222

 

 

 

120,814,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

 

12

 

 

 

25,465,186

 

 

 

20,850,174

 

Lease liabilities

 

 

10

 

 

 

2,580,664

 

 

 

-

 

Other financials liabilities

 

 

11

 

 

 

25,698

 

 

 

35,063

 

Other payables

 

 

13

 

 

 

7,110,496

 

 

 

2,752,493

 

Provisions

 

 

16

 

 

 

4,428,681

 

 

 

2,473,439

 

Current tax liability

 

 

23

 

 

 

4,632,842

 

 

 

2,286,139

 

Total Current liabilities

 

 

 

 

 

 

44,243,567

 

 

 

28,397,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Lease liabilities

 

 

10

 

 

 

2,779,907

 

 

 

-

 

Long term employee benefits

 

 

15

 

 

 

779,256

 

 

 

285,511

 

Total Non-Current Liabilities

 

 

 

 

 

 

3,559,163

 

 

 

285,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

17

 

 

 

15,793,330

 

 

 

15,793,330

 

Share premium

 

 

17

 

 

 

12,010,269

 

 

 

12,010,269

 

Remeasurement of defined benefit plan

 

 

 

 

 

 

136,662

 

 

 

137,530

 

Retained earnings

 

 

 

 

 

 

126,320,231

 

 

 

64,190,212

 

Total Equity

 

 

 

 

 

 

154,260,492

 

 

 

92,131,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

 

 

 

 

 

202,063,222

 

 

 

120,814,160

 

 

The accompanying policies and explanatory notes form an integral part of these consolidated financial statements.

 

(3)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Consolidated statements of profit or loss and other comprehensive income

for the year ended December 31, 2019 and 2018

(Currency – US Dollar (USD))

 

 

 

 

 

 

 

 

Audited

 

 

Audited

 

 

 

 

 

 

 

January 1 -

 

 

January 1 -

 

 

 

Notes

 

 

Dec 31, 2019

 

 

Dec 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

18

 

 

 

617,497,407

 

 

 

602,179,657

 

Cost of service rendered

 

 

18

 

 

 

(199,165,772

)

 

 

(189,728,346

)

Gross profit

 

 

18

 

 

 

418,331,635

 

 

 

412,451,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing, sales and distribution expenses

 

 

19

 

 

 

(321,044,423

)

 

 

(363,737,857

)

Administrative expenses

 

 

19

 

 

 

(11,958,508

)

 

 

(8,883,145

)

Other operating income

 

 

22

 

 

 

26,029

 

 

 

128,813

 

Other operating expense

 

 

22

 

 

 

(59,215

)

 

 

(172,852

)

Profit from operations

 

 

 

 

 

 

85,295,518

 

 

 

39,786,270

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

 

21

 

 

 

2,900,262

 

 

 

2,225,279

 

Financial expense

 

 

21

 

 

 

(4,381,883

)

 

 

(6,746,379

)

Profit before taxes

 

 

 

 

 

 

83,813,897

 

 

 

35,265,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax expense

 

 

23

 

 

 

(21,683,878

)

 

 

(13,470,993

)

- Income tax expense

 

 

23

 

 

 

(21,853,088

)

 

 

(13,625,244

)

- Deferred tax income / (expense)

 

 

23

 

 

 

169,210

 

 

 

154,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit

 

 

 

 

 

 

62,130,019

 

 

 

21,794,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Actuarial gain / (loss)

 

 

15

 

 

 

(1,113

)

 

 

10,202

 

- Tax effect

 

 

 

 

 

 

245

 

 

 

(2,244

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Comprehensive Income

 

 

 

 

 

 

62,129,151

 

 

 

21,802,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

24

 

 

 

2.17

 

 

 

0.59

 

 

 

 

The accompanying policies and explanatory notes form an integral part of these consolidated financial statements.

 

(4)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Consolidated statements of changes in equity

for the year ended December 31, 2019 and 2018

(Currency – US Dollar (USD))

 

 

 

Audited

 

 

Audited

 

 

Audited

 

 

Audited

 

 

Audited

 

 

Audited

 

 

Share

Capital

 

 

Share

Premium

 

 

Treasury

Shares

 

 

Remeasurement

of Benefit Plan

Gain/Loss

 

 

Retained Earnings

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2018

 

21,891,063

 

 

 

12,010,269

 

 

 

(44,246,321

)

 

 

129,572

 

 

 

80,544,623

 

 

 

70,329,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital decrease

 

(6,097,733

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,097,733

 

 

 

-

 

Treasury shares cancellation

 

-

 

 

 

-

 

 

 

44,246,321

 

 

 

-

 

 

 

(44,246,321

)

 

 

-

 

Profit for the year

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

21,794,177

 

 

 

21,794,177

 

Other comprehensive income for the year

 

-

 

 

 

-

 

 

 

-

 

 

 

7,958

 

 

 

-

 

 

 

7,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

-

 

 

 

-

 

 

 

-

 

 

 

7,958

 

 

 

21,794,177

 

 

 

21,802,135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2018

 

15,793,330

 

 

 

12,010,269

 

 

 

-

 

 

 

137,530

 

 

 

64,190,212

 

 

 

92,131,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2019

 

15,793,330

 

 

 

12,010,269

 

 

 

-

 

 

 

137,530

 

 

 

64,190,212

 

 

 

92,131,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

62,130,019

 

 

 

62,130,019

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

(868

)

 

 

-

 

 

 

(868

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

-

 

 

 

-

 

 

 

-

 

 

 

(868

)

 

 

62,130,019

 

 

 

62,129,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2019

 

15,793,330

 

 

 

12,010,269

 

 

 

-

 

 

 

136,662

 

 

 

126,320,231

 

 

 

154,260,492

 

 

 

The accompanying policies and explanatory notes form an integral part of these consolidated financial statements.

 

(5)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Consolidated statements of cash flows

for the year ended December 31, 2019 and 2018

(Currency – US Dollar (USD))

 

 

 

 

 

 

Audited

 

 

Audited

 

 

 

 

 

January 1 -

 

 

January 1 -

 

 

 

Notes

 

Dec 31, 2019

 

 

Dec 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

 

 

83,813,897

 

 

 

35,265,170

 

Adjustments reconcile net income/(loss) before tax to net

   cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expenses

 

7, 8, 9, 20

 

 

4,040,690

 

 

 

1,319,523

 

Retirement pay liability expense

 

15, 20

 

 

1,884

 

 

 

8,164

 

Unused vacation liability

 

15, 20

 

 

490,748

 

 

 

75,293

 

Interest income

 

21

 

 

(2,900,262

)

 

 

(2,225,279

)

Interest expense for lease liability

 

21

 

 

487,460

 

 

 

-

 

Provisions

 

16

 

 

1,955,242

 

 

 

2,473,439

 

Net cash generated by operating activities

 

 

 

 

87,889,659

 

 

 

36,916,310

 

 

 

 

 

 

 

 

 

 

 

 

Changes in working capital

 

 

 

 

 

 

 

 

 

 

Trade and other receivables, net

 

 

 

 

2,375,303

 

 

 

(8,081,586

)

Other current and non-current assets

 

 

 

 

15,701,246

 

 

 

8,516,670

 

Trade and other payables, net

 

 

 

 

8,973,015

 

 

 

(4,784,272

)

Other liabilities

 

 

 

-

 

 

 

(113,754

)

Tax paid

 

23

 

 

(19,506,385

)

 

 

(30,495,428

)

Net changes in working capital

 

 

 

 

7,543,179

 

 

 

(34,958,370

)

 

 

 

 

 

 

 

 

 

 

 

Cash flow (used in) / provided from operating activities

 

 

 

 

95,432,838

 

 

 

1,957,940

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

Purchases property, plant and equipment and intangibles

 

7, 8, 9

 

 

(16,117,229

)

 

 

(1,746,179

)

Proceeds from sale of tangible and intangible assets

 

 

 

 

71,067

 

 

 

1,510

 

Interest received

 

 

 

 

2,804,061

 

 

 

2,293,631

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow (used in) / provided from investing activities

 

 

 

 

(13,242,101

)

 

 

548,962

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

Net change in borrowings

 

 

 

 

(9,365

)

 

 

1,983

 

Payments of lease liabilities

 

 

 

 

(2,036,863

)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) / provided from financing activities

 

 

 

 

(2,046,228

)

 

 

1,983

 

 

 

 

 

 

 

 

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

 

 

 

 

80,144,509

 

 

 

2,508,885

 

Cash and cash equivalent beginning at the period

 

3

 

 

51,403,167

 

 

 

48,894,282

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

3

 

 

131,547,676

 

 

 

51,403,167

 

 

 

 

 

The accompanying policies and explanatory notes form an integral part of these consolidated financial statements.

 

(6)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

1.

Organization and nature of activities

 

Peak Oyun Yazılım ve Pazarlama Anonim Şirketi (“Peak” or “the Company”) was established in 2010 and registered in Istanbul, Turkey, under the Turkish Commercial Code. The Company develops, markets and operates online mobile games on multiple platforms.

 

The registered office address of the Company: Omer Avni Mahallesi, Inebolu Sokak, No:39 Kat:3 34427 Kabatas Beyoglu Istanbul Turkey

 

The Company established Peak Games Inc. operating in USA on May 17, 2016.

 

Herein after the Company and its Subsidiary together will be referred to as “the Group”.

 

The average number of personnel of the Group is 91 for the year ended December 31, 2019 (2018, 57).

 

2.

Basis of preparation of consolidated financial statements

 

2.1

Basis of presentation of consolidated financial statements

 

Consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.

 

The Group maintains its books of accounts and prepares its statutory financial statements in Turkish Lira (TRY) in accordance with the regulations on accounting and reporting framework and Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. Peak Games Inc maintains its books of accounts in accordance with the laws and regulations in force in USA. The financial statements are based on the statutory records with adjustments and reclassifications for the purpose of fair presentation in accordance with IFRS.

 

Consolidated financial statements have been prepared under the historical cost conversion.

 

The consolidated financial statements of the Group for the year ended 31 December 2019 and 2018 were authorized by the Company Management on 21 August 2020. Although there is no such intention, the General Assembly and certain regulatory bodies have the power to amend the statutory financial statements (which form the basis of these consolidated financial statements) after issue.

 

Functional and presentation currency

 

The Company maintains its books of account in accordance with accounting principles set by Turkish Commercial Code ("TCC") and tax legislation. The subsidiary in USA prepares its accounting and financial tables in its currency and according to the laws and regulations of USA.

 

Nevertheless, US Dollar (USD) is the currency that the Group’s operations are denominated and has a significant impact on the Group’s operations. USD reflects the economic basis of events and situations that are important to the Group.  In accordance with the analysis done by the Group’s Management and current economical and operational conditions, the management has concluded that USD is the functional and reporting currency of the Company.

If the legal records are kept in a currency other than the functional currency, the financial statements are initially translated into the functional currency. Peak books legal records in TRY, currency translation from TRY to the functional currency USD is made under the framework described below:

 

Monetary assets and liabilities have been converted to the functional currency with The Central Bank of Turkish Republic (CBRT) foreign exchange buying rate at the financial position date.

 

Non-monetary items have been converted into the functional currency at the exchange rates prevailing at the transaction date.

 

Profit or loss accounts have been converted into the functional currency using the exchange rates at the monthly average rates.

 

The capital is followed according to historical costs.

 

The reconciling differences resulting from the above cycles are recorded as foreign exchange gain/losses in the financial income /expenses account group in the statement of profit or loss.

 

(7)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

Basis of consolidation

 

The consolidated financial statements comprise the financial statements of Peak and its subsidiary as of December 31, 2019.

 

Subsidiary in which the Group owns directly or indirectly more than 50% of the voting rights or has power to govern the financial and operating policies under a statute or agreement are consolidated. Intra-group balances, income and expenses and unrealized gains and losses resulting from intra-group transactions are eliminated. Consolidated financial statements are prepared using uniform accounting policies for similar transactions and events. Consolidated financial statements of the subsidiaries are prepared for the same reporting period as the parent company.

 

Subsidiary is fully consolidated from the date of acquisition, being the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

 

The subsidiary included in consolidation and its shareholding percentage at December 31, 2019 and December 31, 2018 is as follows:

 

 

Direct/indirect ownership 

 

Company name

December 31,

2019

 

December 31,

2018

 

 

 

 

Peak Games Inc.

100%

 

100%

 

The new standards, amendments and interpretations

 

The accounting policies adopted in preparation of consolidated financial statements as at December 31, 2019 are consistent with those of the previous financial year, except for the adoption of new and amended IFRS and IFRIC interpretations effective as of January 1, 2019. The effects of these standards and interpretations on the Group’s financial position and performance have been disclosed in the related paragraphs.

 

i)

The new standards, amendments and interpretations which are effective as at 1 January 2019 are as follows:

 

IFRS 16 Leases

 

The IASB has published a new standard, IFRS 16 'Leases'. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 'Leases' and related interpretations and is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted.

 

Lessees have recognition exemptions to applying this standard in case of short-term leases (i.e., leases with a lease term of 12 months or less) and leases of ’low-value’ assets (e.g., personal computers, office equipment, etc.). At the commencement date of a lease, a lessee measures the lease liability at the present value of the lease payments that are not paid at that date (i.e., the lease liability), at the same date recognizes an asset representing the right to use the underlying asset (i.e., the right-of-use asset) and depreciates it during the lease term. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee’s incremental borrowing rate. Lessees are required to recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset separately.

 

Lessees are required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). Under these circumstances, the lessee recognizes the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

 

(8)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

Transition to IFRS 16

 

The Group applied IFRS 16 “Leases” as of January 1, 2019 which replaces IAS 17 “Leases”. The Group has not restated comparable amounts for the previous year using the simplified transition application. With this method, all right of use assets are measured at the amount of the lease payables during the transition to application (adjusted for prepaid or accrued rental costs).

 

During the initial application, the Group recognized a lease obligation for leases previously classified as operational leases in accordance with IAS 17. These liabilities are measured at the present value of the remaining lease payments discounted using the alternative borrowing interest rates as of January 1, 2019. As of January 1, 2019 the weighted average borrowing rate used by the Group is annual 7.2% (US Dollars).

 

The reconciliation of operating lease commitments followed under IAS 17 before the first implementation date and the lease obligations are accounted in the consolidated financial statements under IFRS 16 as of 1 January 2019 are as follows:

 

Operational lease commitments

 

 

-  Short-term leases

 

40,866

-  Long – term leases evaluated under IFRS 16

 

7,829,281

 

Total lease obligation undiscounted

 

7,870,147

Total lease obligation discounted

 

6,909,974

 

Discounted lease obligation with alternative borrowing rate (USD Equivalent)

 

 

- Short term lease liability

 

1,549,403

- Long term lease liability

 

5,360,571

 

The details of the right of use asset on the basis of asset are as follows:

 

 

 

 

The Right of Use Assets

1 January 2019

Depreciation Expense

31 December 2019

Properties

6,909,974

2,303,325

4,606,649

 

Amendments to IAS 28 “Investments in Associates and Joint Ventures” (Amendments)

 

In December 2017, the IASB issued amendments to IAS 28 Investments in Associates and Joint Ventures. The amendments clarify that a company applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture.

 

IFRS 9 Financial Instruments excludes interests in associates and joint ventures accounted for in accordance with IAS 28 Investments in Associates and Joint Ventures. In this amendment, Public Oversight Board of Turkey (POA) clarified that the exclusion in IFRS 9 applies only to interests a company accounts for using the equity method. The company applies IFRS 9 to other interests in associates and joint ventures, including long-term interests to which the equity method is not applied and that, in substance, form part of the net investment in those associates and joint ventures.

 

These amendments are applied for annual periods beginning on or after January 1, 2019.

 

The amendments did not have a significant impact on the financial position or performance of the Group.

 

(9)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

IFRIC 23 Uncertainty over Income Tax Treatments

 

The interpretation clarifies how to apply the recognition and measurement requirements in “IAS 12 Income Taxes” when there is uncertainty over income tax treatments.

 

When there is uncertainty over income tax treatments, the interpretation addresses:

 

(a)

whether an entity considers uncertain tax treatments separately;

(b)

the assumptions an entity makes about the examination of tax treatments by taxation authorities;

(c)

how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and

(d)

how an entity considers changes in facts and circumstances.

 

The interpretation is effective for annual reporting periods beginning on or after 1 January 2019.

 

The interpretation did not have a significant impact on the financial position or performance of the Group.

 

Annual Improvements – 2015–2017 Cycle

 

In December 2017, the IASB announced annual Improvements to IFRS Standards 2015–2017 Cycle, amending the following standards:

 

 

IFRS 3 Business Combinations and IFRS 11 Joint Arrangements — The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

 

IAS 12 Income Taxes — The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognized in profit or loss, regardless of how the tax arises.

 

IAS 23 Borrowing Costs — The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.

 

The amendments are effective from annual periods beginning on or after January 1, 2019.

 

The amendments did not have a significant impact on the financial position or the performance of the Group.

 

Plan Amendment, Curtailment or Settlement” (Amendments to IAS 19)

 

On February 7, 2018 the IASB published Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” The amendments require entities to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after a plan amendment, curtailment or settlement occurs. These amendments are applied for annual periods beginning on or after January 1, 2019.

 

The amendments are not applicable for the Group and did not have an impact on the financial position or performance of the Group.

 

 

 

(10)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

Prepayment Features with Negative Compensation (Amendments to IFRS 9)

 

In October 2017, the IASB issued minor amendments to IFRS 9 Financial Instruments to enable companies to measure some pre-payable financial assets at amortized cost.

 

Applying IFRS 9, company would measure a financial asset with so-called negative compensation at fair value through profit or loss. Applying the amendments, if a specific condition is met, entities will be able to measure at amortized cost some pre-payable financial assets with so-called negative compensation.

 

These amendments are applied for annual periods beginning on or after 1 January 2019.The amendments are not applicable for the Group and did not have an impact on the financial position or performance of the Group.

 

ii)

Standards issued but not yet effective and not early adopted

 

Standards, interpretations and amendments to existing standards that are issued but not yet effective up to the date of issuance of consolidated financial statements are as follows. The Group will make the necessary changes if not indicated otherwise, which will be affecting the consolidated financial statements and disclosures, when the new standards and interpretations become effective.

 

IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments)

 

In December 2015, the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. Early application of the amendments is still permitted. The Group will wait until the final amendment to assess the impacts of the changes.

 

IFRS 17 - The new Standard for insurance contracts

 

The IASB issued IFRS 17, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. IFRS 17 model combines a current balance sheet measurement of insurance contract liabilities with the recognition of profit over the period that services are provided. IFRS 17 will become effective for annual reporting periods beginning on or after 1 January 2023; early application is permitted.

 

The standard is not applicable for the Group and will not have an impact on the financial position or performance of the Group.

 

Amendments to IAS 1- Classification of Liabilities as Current and Non-Current Liabilities

 

23 January 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements. The amendments issued to IAS 1 which are effective for periods beginning on or after 1 January 2023, clarify the criteria for the classification of a liability as either current or non-current. Amendments must be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Early application is permitted.

 

Overall, the Group expects no significant impact on its balance sheet and equity.

 

 

 

 

 

(11)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

Amendments to IFRS 3 – Reference to the Conceptual Framework

 

In May 2020, the IASB issued amendments to IFRS 3 Business combinations. The amendments are intended to replace a previous version of the IASB’s Conceptual Framework (the 1989 Framework) with a reference to the current version issued in March 2018 (the Conceptual Framework) without significantly changing requirements of IFRS 3. At the same time, the amendments add a new paragraph to IFRS 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. The amendments issued to IFRS 3 which are effective for periods beginning on or after 1 January 2022 and must be applied retrospectively. Earlier application is permitted if, at the same time or earlier, an entity also applies all of the amendments contained in the Amendments to References to the Conceptual Framework in IFRS standards (March 2018).

 

The amendments are not applicable for the Group.

 

Definition of a Business (Amendments to IFRS 3)

 

In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

 

The amendments:

 

 

-

clarify the minimum requirements for a business;

 

-

remove the assessment of whether market participants are capable of replacing any missing elements;

 

-

add guidance to help entities assess whether an acquired process is substantive;

 

-

narrow the definitions of a business and of outputs; and

 

-

introduce an optional fair value concentration test.

 

The amendments to IFRS 3 are effective for annual reporting periods beginning on or after 1 January 2020 and apply prospectively. Earlier application is permitted.

 

Overall, the Group expects no significant impact on its statement of financial position.

 

Amendments to IFRS 9, IAS 39 and IFRS 7- Interest Rate Benchmark Reform

 

The amendments issued to IFRS 9 and IAS 39 which are effective for periods beginning on or after 1 January 2020 provide reliefs which enable hedge accounting to continue. For these reliefs, it is assumed that the benchmark on which the cash flows of hedged risk or item are based and/or, the benchmark on which the cash flows of the hedging instrument are based, are not altered as a result of IBOR reform.  in connection with interest rate benchmark reform.

Reliefs used as a result of amendments in IFRS 9 and IAS 39 is aimed to be disclosed in financial statements based on the amendments made in IFRS 7.

 

The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

 

Amendments to IFRS 16 – Covid-19 Rent Related Concessions

 

In May 2020, the IASB issued amendments to IFRS 16 Leases to provide relief to lessees from applying IFRS 16 guidance on lease modifications to rent concessions arising a direct consequence of the Covid-19 pandemic. A lessee that makes this election accounts for any change in lease payments related rent concession the same way it would account for the change under the standard, if the change were not a lease modification.

 

The practical expedient applies only to rent concessions occurring as a direct consequence of the Covid-19 pandemic and only if all of the following conditions are met:

 

 

(12)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

 

-

The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change.

 

-

Any reduction in lease payments affects only payments originally due on or before 30 June 2021

 

-

There is no substantive change to other terms and conditions of the lease.

 

A lessee will apply the amendment for annual reporting periods beginning on or after 1 June 2020. Early application of the amendments is permitted.

 

The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

 

Amendments to IAS 16 – Proceeds before intended use

 

In May 2020, the IASB issued amendments to IAS 16 Property, plant and equipment. The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment (PP&E), any proceeds of the sale of items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and costs of producing those items, in profit or loss. The amendments issued to IAS 16 which are effective for periods beginning on or after 1 January 2022. Amendments must be applied prospectively only to items of PP&E made available for use on or after beginning of the earliest period presented when the entity first applies the amendment.

 

There is no transition relief for the first-time adopters.

 

The amendments are not applicable for the Group.

 

Amendments to IAS 37 – Onerous contracts – Costs of Fulfilling a Contract

 

In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent assets.  The amendments issued to IAS 37 which are effective for periods beginning on or after 1 January 2022, to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making and also apply a “directly related cost approach”. Amendments must be applied retrospectively to contracts for which an entity has not fulfilled all of its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and must be disclosed.

 

The amendments are not applicable for the Group.

 

Definition of Material (Amendments to IAS 1 and IAS 8)

 

In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The new definition states that, ’Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements.  

 

The amendments to IAS 1 and IAS 8 are required to be applied for annual periods beginning on or after 1 January 2020. The amendments must be applied prospectively, and earlier application is permitted.

 

Overall, the Group expects no significant impact on its statement of financial position.

 

 

 

 

 

(13)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.1

Basis of presentation of consolidated financial statements (continued)

 

Annual Improvements – 2018–2020 Cycle

 

In May 2020, the IASB issued Annual Improvements to IFRS Standards 2018–2020 Cycle, amending the followings:

 

 

-

IFRS 1 First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter: The amendment permits a subsidiary to measure cumulative translation differences using the amounts reported by the parent. The amendment is also applied to an associate or joint venture.

 

-

IFRS 9 Financial Instruments – Fees in the “10 per cent test” for derecognition of financial liabilities: The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either borrower or lender on the other’s behalf.

 

-

IAS 41 Agriculture – Taxation in fair value measurements: The amendment removes the requirement in paragraph 22 of IAS 41 that entities exclude cash flows for taxation when measuring fair value of assets within the scope of IAS 41.

 

Improvements are effective for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted for all.

 

The Group is in the process of assessing the impact of the amendments on financial position or performance of the Group.

 

2.2

Summary of significant accounting policies

 

Revenue

 

Sale of services

 

Substantially all of the Group’s revenue are driven from the sale of virtual items and advertising associated with the Company’s online games. Revenue is measured at the fair value of the consideration received or receivable. In-application purchases (IAP) are made through App Stores such as Facebook Platform, Apple App Store, Google Play Store and Amazon App Store. In the light of the industry practice and IFRS 15 the Group presents in-application revenue on gross basis and accounts for the variable consideration by deducting possible discounts, returns, rebates, other similar allowances, value-added tax (“VAT”) and sales taxes from the revenue. App Store revenue share is presented as commission expenses within cost of sales account.

 

The Group started to use five-stage model to recognize the revenue according to IFRS 15 “Revenue From Contracts With Customers” as of 1 January 2018.

 

According to this model, the goods or services undertaken in each contract with the customers are evaluated and each commitment to transfer the goods or services is determined as a separate performance obligation. Then, it is determined whether the performance obligations will be fulfilled in time or at a certain time. If the Group transfers the control of a good or service over time and thus fulfils its performance obligations with respect to the relevant sales over time, it measures the progress of the fulfilment of the performance obligations and takes the proceeds to the consolidated financial statements. If it is probable that the economic benefits associated with the transaction will flow to the entity, and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

 


 

(14)


Peak Oyun Yazılım ve Pazarlama Anonim Şirketi

 

Notes to the consolidated financial statements

December 31, 2019 and 2018

(Amounts expressed in US Dollar (USD) unless otherwise indicated)

 

 

2.

Basis of presentation of consolidated financial statements (continued)

 

2.2

Summary of significant accounting policies (continued)

 

Online Game revenue

 

The Group develops, markets and operates online social and mobile games on Facebook and mobile platforms such as Apple App Store, Google Play and Amazon App Store. The games are free to play. The revenue source is the sale of virtual currency that players use to buy in-game virtual items. These third-party platforms collect the relevant revenue on behalf of the Group and they are entitled to a pre-determined percentage of platform fees (as part of “cost of services”). Payments from players for virtual items are non-refundable and relate to non-cancellable contracts that specify the Group’s our obligations. Such costs are withheld and deducted from the gross online revenue collected by these platforms from the users, with the net amounts remitted to the Group. The Group recognizes online game revenue on a gross basis, given it acts as the principal in these transactions and when there is persuasive evidence of an arrangement, the service has been provided, the price paid is fixed or determinable, and the collection of fees is reasonably assured.

 

Advertising revenue

 

The Group engages with ad networks for advertising within the games. Advertising revenue may include branded virtual goods, engagement ads and offers, mobile and display ads. Advertising revenue is recognized if there is persuasive evidence of an arrangement, the service has been provided, the price paid is fixed or determinable, and the collection of fees is reasonably assured.

 

Taxes collected from customers