HUUGE INC. GROUP
CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended December 31, 2021
prepared in accordance with International Financial Reporting Standards
as adopted by the European Union
Table of contents
Consolidated statement of comprehensive income 5
Consolidated statement of financial position 6
Consolidated statement of changes in equity 7
Consolidated statement of cash flows 9
1. General information 11
2. Basis for preparation of the consolidated financial statements 13
(a) Statement of compliance 13
(b) Historical cost convention 13
(c) Functional and presentation currency 13
(d) Key judgements and estimates 13
3. Adoption of new and revised Standards 18
4. Significant accounting policies 19
(a) Basis for consolidation 19
(i) Subsidiaries 19
(ii) Business combinations 19
(iii) Transactions eliminated on consolidation 20
(iv) Foreign operations 20
(b) Foreign currency transactions – transactions and balances 21
(c) Revenue 21
(d) Income tax 23
(e) Property, plant and equipment 24
(i) Recognition and measurement 24
(ii) Depreciation 24
(f) Leases 24
(g) Intangible assets 25
(h) Financial instruments 27
(i) Impairment 27
(i) Financial assets 27
(ii) Non-financial assets (other than goodwill) 27
(iii) Goodwill 28
(j) Cash and cash equivalents 28
(k) Trade and other receivables 28
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
2
(l) Trade and other payables and deferred income 29
(m) Share capital and other components of the equity 29
(n) Series C preference shares 30
(o) Earnings per share 30
(p) Interest-bearing loans and borrowings 31
(q) Employee benefits 31
(i) Share-based payment arrangements 31
(ii) Defined contribution plans – retirement benefits 32
(iii) Other employee benefits 32
(r) Provisions 32
(s) Cost of sales 32
(t) Research and development expenses 32
(u) Sales and marketing expenses 32
(v) Finance income and expense 33
5. Determination of fair values 33
(a) Preference shares liability measured at fair value through profit or loss 33
(b) Trade and other receivables measured at amortized cost 34
(c) Non-derivative financial liabilities measured at amortized cost 34
6. Revenue and segment information 34
7. Operating expenses 38
8. Salaries and employee-related costs 40
9. Finance expense 41
10. Income tax 42
11. Intangible assets 44
12. Financial risk management 46
(a) Introduction 46
(b) Credit risk 46
(c) Liquidity risk 50
(d) Market risk 52
(i) Currency risk 52
(ii) Interest rate risk 54
(e) Capital management 54
(f) Earnings per share 54
(g) Accounting classifications of financial instruments and fair values 57
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
3
13. Trade and other receivables 58
14. Cash and cash equivalents 59
15. Share capital 59
16. Share-based payment arrangements 66
17. Conversion of series C preference shares 71
18. Goodwill 72
19. Trade, other payables and deferred income 72
20. Leases 73
21. Cash flows reconciliation 75
22. Provisions 75
23. Contingencies 76
24. Pledges and collaterals 76
25. Related party transactions 76
26. Transactions with management of the Parent Company and their close family members 77
27. Audit fees 78
28. Impact of COVID-19 78
29. Subsequent events 79
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
4
Consolidated statement of comprehensive income
Note
Year ended
December 31, 2021
Year ended
December 31, 2020
Revenue
6
Cost of sales
7
(109,601 )
(99,622 )
Gross profit on sales
Sales and marketing expenses:
7
(146,239 )
(125,133 )
thereof User acquisition marketing campaigns
7
(130,031 )
(111,494 )
thereof General Sales and marketing expenses
7
(16,208 )
(13,639 )
Research and development expenses
7
(33,128 )
(29,832 )
General and administrative expenses
7
(40,583 )
(27,606 )
Other operating income/(expense), net
(344 )
Operating result
Finance income
Finance expense
9
(45,598 )
(128,509 )
Profit/(loss) before tax
(1,001 )
(76,244 )
Income tax
10
(8,680 )
(6,360 )
Net result for the year
(9,681 )
(82,604 )
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange gains/(losses) on translation of foreign operations
(1,021 )
Total other comprehensive income
(1,021 )
Total comprehensive income/ (loss) for the year
(10,702 )
(82,113 )
Net result for the year attributable to:
owners of the Parent
(9,681 )
(82,604 )
Total comprehensive income for the period attributable to:
owners of the Parent
(10,702 )
(82,113 )
Earnings per share (in USD)
Basic
12 (f)
(0.12 )
(1.46 )
Diluted
12 (f)
(0.12 )
(1.46 )
The accompanying notes are an integral part of these consolidated financial statements.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
5
Consolidated statement of financial position
Note
As of December 31, 2021
As of December 31, 2020
Assets
Non-current assets
Property, plant and equipment
Right-of-use asset
20
Goodwill
18
Intangible assets
11
Deferred tax assets
10
Other long-term assets
Total non-current assets
Current assets
Trade and other receivables
13
Corporate income tax receivable
Cash and cash equivalents
14
Total current assets
Total assets
Equity
Share capital
Treasury shares
15
(19,954 )
(33,994 )
Supplementary capital
15
Employee benefit reserve
16
Foreign exchange reserve
Retained earnings/(Accumulated losses)
(95,862 )
(86,181 )
Equity attributable to owners of the Company
(96,008 )
Total equity
(96,008 )
Non-current liabilities
Preference shares
17
Long-term lease liabilities
20
Deferred tax liabilities
10
Total non-current liabilities
Current liabilities
Trade and other payables
19
Deferred income
19
Corporate income tax liabilities
Short-term lease liabilities
20
Other provisions
22
Total current liabilities
Total equity and liabilities
The accompanying notes are an integral part of these consolidated financial statements.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
6
Consolidated statement of changes in equity
Note
Share
capital
Treasury
shares
Supplementary
capital
Employee
benefit
reserve
Retained
earnings/
(Accumulated
losses)
Foreign
exchange
reserve
Equity
attributable
to owners
Non-controlling
interest
Equity
As of January 1, 2021
(33,994 )
(86,181 )
(96,008 )
(96,008 )
Net profit/(loss)
(9,681 )
(9,681 )
(9,681 )
Other comprehensive income - foreign currency
exchange gains/(losses)
(1,021 )
(1,021 )
(1,021 )
Total comprehensive income for the period
(9,681 )
(1,021 )
(10,702 )
(10,702 )
Redemption of treasury shares
15
(33,994 )
Conversion of preference shares
15, 17
Shares issued/(repurchased)
15
(43,976 )
Exercise of stock options
15
(22,672 )
Employee share schemes - value of employee
services
16
Earn-out consideration - value of employee
services
16
(70 )
(70 )
(70 )
Transaction costs of an issuance of equity
instruments
15
(4,857 )
(4,857 )
(4,857 )
As of December 31, 2021
(19,954 )
(95,862 )
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
7
Note
Share
capital
Treasury
shares
Supplementary
capital
Employee
benefit
reserve
Retained
earnings/
(Accumulated
losses)
Foreign
exchange
reserve
Equity
attributable
to owners
Non-controlli
ng interest
Equity
As of January 1, 2020
(36,604 )
(2,052 )
(19,826 )
(19,826 )
Net profit (loss)
(82,604 )
(82,604 )
(82,604 )
Other comprehensive income - foreign currency
exchange gains/(losses)
Total comprehensive income for the period
(82,604 )
(82,113 )
(82,113 )
Shares issued/(repurchased)
15
Acquisition of a subsidiaries (payment in treasury
shares reissued)
15
Exercise of stock options
15
Employee share schemes - value of employee
services
16
Earn-out consideration - value of employee services
16
Transfer of the financial results
(1,525 )
Transaction costs in anticipation of an issuance of
equity instruments
15
(864 )
(864 )
(864 )
As of December 31, 2020
(33,994 )
(86,181 )
(96,008 )
(96,008 )
The accompanying notes are an integral part of these consolidated financial statements.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
8
Consolidated statement of cash flows
Note
Year ended
December 31,
2021
Year ended
December 31,
2020
Cash flows from operating activities
Profit/(loss) before tax
(1,001 )
(76,244 )
Adjustments for:
Depreciation and amortization
7, 11, 20
Finance (income)/expense, net
9, 20
(Profit)/loss on disposal of property, plant and equipment
(114 )
Non-cash employee benefits expense - share-based payments
8
Disposal of prepayments for intangible assets
Remeasurement and other finance expenses related to preference shares
liability
9
Changes in net working capital:
Trade and other receivables, and other long-term assets
13
(38 )
(8,038 )
Trade and other payables
19
(13,132 )
Deferred income
19
(234 )
Other provisions
22
(7,705 )
Other adjustments
(180 )
Cash flows from operating activities
Income tax paid
(9,741 )
(5,725 )
Net cash from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
(2,595 )
(2,140 )
Software expenditure
11
(3,860 )
(1,297 )
Acquisition of IP rights
(9,500 )
Acquisition of subsidiaries, net of cash
Acquired
(2,088 )
Interest received
Net cash from investing activities
(15,955 )
(5,458 )
Cash flows from financing activities
Proceeds from issue of common shares for public subscription
15
Execution of stabilization option
15
(43,976 )
Transaction costs of an issuance of equity instruments
(7,097 )
(275 )
Loss on foreign exchange forward contract
9
(2,662 )
Lease repayment
20
(3,359 )
(1,784 )
Interest paid
9, 20
(575 )
(139 )
Exercise of stock options
Proceeds from issue of common shares and
shares series A and B
15
Proceeds from issue of shares series C
15
Repurchase of own shares series A and B
15
(6,255 )
Repurchase of own shares series C
15
(1,444 )
Net cash from financing activities
(14 )
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations
(167 )
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
The accompanying notes are an integral part of these consolidated financial statements.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
9
Notes to the
consolidated financial
statement
1. General information
Company’s registered office is located in Dover, Delaware, 850 Burton Road, Suite 201, DE 19904 and the operating office is
located in Las Vegas, Nevada , 2300 W. Sahara Ave., Suite 800, NV 89102.
The Company was established with a notary deed on February 11, 2015.
As of December 31, 2021 and December 31, 2020 the Huuuge Inc. Group (the Company and its subsidiaries collectively referred
to as the “Group”) comprised the Parent Company and its subsidiaries, as listed below.
Name of entity
Registered
seat
Activities
Parent Company's share in capital
As of
December 31, 2021
As of
December 31,
2020
Huuuge Games Sp. z o.o.
Szczecin,
Poland
games development and
operations
100%
100%
Huuuge Global Ltd
Larnaca, Cyprus
games distribution, user
acquisition
100%
100%
Huuuge Publishing Ltd
(formerly Fun Monkey Ltd)
Larnaca, Cyprus
games distribution
100%
100%
Coffee Break Games Ltd
Larnaca, Cyprus
games distribution
100%
100%
Huuuge Digital Ltd
Tel Aviv, Israel
games development, R&D
100%
100%
Playable Platform B.V.
Amsterdam,
Netherlands
games advertisement
100%
100%
Double Star Oy
Vantaa, Finland
games development
100%
100%
Huuuge UK Ltd.*
London, United
Kingdom
corporate development
100%
-
Huuuge Mobile Games Ltd
Dublin, Ireland
games distribution, user
acquisition, in organization
100%
100%
Emanon Ltd (formerly
Billionaire Games Ltd)
Dublin, Ireland
games distribution, user
acquisition
- **
100%
Coffee Break Games
United Ltd
Dublin, Ireland
games distribution, user
acquisition, in organization
100%
100%
Cireneg Ltd (formerly Fun
Monkey Games Ltd)
Dublin, Ireland
games distribution, user
acquisition
- **
100%
MDOK GmbH (formerly
Huuuge Pop GmbH.)
Berlin, Germany
games development
100%
100%
Huuuge Labs GmbH
Berlin, Germany
games development, R&D
100%
100%
Huuuge Tap Tap Games
Ltd
Hong Kong
games development, user
acquisition
100%
100%
*On July 1, 2021 new entity Huuuge UK Ltd. (incorporated in the United Kingdom) was established. 100% of shares of this entity
were taken up by Huuuge Inc. The entity was established with a share capital amounting to GBP 250 thousand. This transaction
does not have an impact on the consolidated financial statements of the Group due to the fact that establishment of the
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
11
subsidiaries is eliminated in full. The new entity was established in the United Kingdom for the purposes of extension of
international presence of the Group.
On November 18, 2021, the Billionaire Games Ltd changed its name to Emanon Ltd, and Fun Monkey Games Ltd changed its
name to Cireneg Ltd.
**On December 20, 2021 100% of the shares in Emanon Ltd, and 100% of the shares in Cireneg Ltd were sold for total
consideration EUR 2. Those entities did not conduct any significant operations, thus the effect of their derecognition is
immaterial for the consolidated financial statements of the Group.
The core business activities of the Group include:
●
development of mobile games in the free-to-play model,
●
distribution and user acquisition of own mobile games.
The Group’s business activities are not subject to significant seasonal or cyclical trends.
Composition of the Company’s Board of Directors as of December 31, 2021 and as of the date of signing of these consolidated
financial statements
The Company’s Board of Directors consists of the Chief Executive Officer, who is also a director, and non-executive directors.
Directors have annual terms of duty and serve until the successors are duly elected. The preference shareholders have the right
to appoint certain directors.
As of December 31, 2021, December 31, 2020 and as of the date of signing of these consolidated financial statements, Chief
Executive Officer and director is Mr Anton Gauffin.
As of December 31, 2020 non-executive directors were:
●
Henric Suuronen, director,
●
Sang-Ho Park, director,
●
John Salter, director,
●
Rod Cousens, director.
On February 3, 2021 the following directors were elected, and after this change, as of the date of signing of these consolidated
financial statements non-executive directors were:
●
Henric Suuronen, director,
●
Krzysztof Kaczmarczyk, director,
●
John Salter, director,
●
Rod Cousens, director.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
12
2. Basis for preparation of the consolidated financial statements
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards
as adopted by the European Union (“IFRS”) and were approved on March 25, 2022 by the Board of Directors.
(b) Historical cost convention
These consolidated financial statements are prepared on the historical cost basis, except for the series C preference shares
which were measured at fair value with the gains/losses recognized in profit or loss until their redemption in February 2021 and
derivatives, which are measured at fair value with the gains/losses recognized in profit or loss.
(c) Functional and presentation currency
The functional currencies of the Parent Company and its subsidiaries are presented below:
Name of entity
Functional currency
Huuuge Inc.
US dollar (“USD”)
Huuuge Games Sp. z o.o.
Polish zloty (“PLN”)
Huuuge Global Ltd
US dollar (“USD”)
Huuuge Labs GmbH
Euro (“EUR”)
Huuuge Digital Ltd
Israeli shekel (“ILS”)
Huuuge Tap Tap Games Ltd
Hong Kong dollar (“HKD”)
Huuuge Publishing Ltd
US dollar (“USD”)
Coffee Break Games Ltd
US dollar (“USD”)
Huuuge Mobile Games Ltd
Euro (“EUR”)
Coffee Break Games United Ltd
Euro (“EUR”)
Playable Platform B.V.
Euro (“EUR”)
Double Star Oy
Euro (“EUR”)
MDOK GmbH
Euro (“EUR”)
Huuuge UK Ltd
Pound sterling (“GBP”)
The consolidated financial statements are presented in USD thousands, except where stated otherwise.
(d) Key judgements and estimates
The preparation of consolidated financial statements in accordance with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
13
income and expenses. Actual results may differ from those estimated. Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any
future periods affected.
In preparing these consolidated financial statements, the significant judgements and estimates made by management in
applying the Group’s accounting policies have been consistently applied by the Group and are consistent across the reported
periods.
Model of revenue recognition
Estimate of the progress towards complete satisfaction of the performance obligation
Management evaluates what is the most adequate model of accounting for revenue from micro-payments from customers. In
gaming applications, in-app purchases concern mostly immediate purchase of virtual coins (consumable goods), which can be
used by the players in the future. Purchase of the virtual coins by the player represents a prepayment for the gaming service.
The coins do not have expiry date and the players decide when to use them in the game. In principle, providing access to game
functionalities in exchange for the redeemed coins is a performance obligation that the Group fulfils over time. The output
method is used to measure the progress of satisfaction by the Group of its performance obligation. At the moment when the
player purchases the virtual coins, the Group recognizes the contract liability. The amounts recognized as contract liability are
transferred to revenue in line with the pattern of usage of the coins in the game by the customers. Analysis of consumption of
coins is not tracked on an individual player basis but is estimated using cumulative method to determine the average days of
usage. According to management’s assessment, supported by historical data analysis, coins are generally used within. 2 days
after purchase (consistently over the years 2021 and 2020).
The Group recognizes a contract liability for any consideration received that is attributable to player’s unused coins (i.e. player’s
unexercised rights), taking into account estimated breakage rate (i.e., percentage of coins not expected to be redeemed) at the
end of the reporting period. In management’s estimate all coins will be used, therefore the breakage rate is zero. The amount of
the contract liability is presented in Note 19
Trade, other payables and deferred income
as deferred income and amounts to USD
3,126 thousand as at December 31, 2021 and USD 3,360 thousand as at December 31, 2020.
Due to the fact that the timing of the use of the coins is at the discretion of the customer the contract does not contain a
financing component.
Accordingly, the Group defers the related portion of the platform fees paid or payable to distributors costs to fulfil the contract
and recognizes “Contract cost” asset. For further information on the accounting for the fees paid/payable to the distributors see
below “Agent vs principal considerations in selling the virtual coins and providing access to the games”.
Agent vs principal considerations in selling the virtual coins and providing access to the games
In-app purchases are sold through Application Marketplaces (“Platform Providers”) such as Apple App Store, Google Play,
Facebook and Amazon App Store. Management determines that players are the Group’s customers, and the Group acts as a
principal in its relation to the players. The conclusion that the Group acts as a principal selling virtual coins is consistent with
general industry practices and is supported mainly by the following factors:
●
The Group has the ultimate responsibility for providing the game to a customer.
●
The players sign off the Group’s terms & conditions statement.
●
All updates and modifications with respect to the game are also prepared by the Group.
●
The Group set prices for virtual coins charged to the end-user. The Group has a right to change these prices at any
time at its discretion.
●
The Group, being a game developer, takes the risk of recovering the expenditures it has incurred developing the game.
The distributors do not pay to the Group any upfront fee independently of the actual sales of the games thus do not
take any risk similar to inventory risk.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
14
●
The Platforms provide IT infrastructure (hosting service), distribution channels and marketing activities as well as
collecting and disbursing cash on behalf of Huuuge. None of the distributors have an exclusive right to operate a
game as the game is available in multiple channels. The distributors do not provide a significant service of integrating
the license with other products (features) and do not create the combined output as the installation is a very simple
process and it is performed by the end-user (player).
Being a principal, the Group presents in-app revenue on a gross basis.
Platform Providers charge usually 30% fees on the prices paid by the users only when the virtual items are purchased. If there
are no purchases of the virtual items, the distributors are not entitled to any commissions. The fees cover all services performed
by the Platform Providers, such as granting access to the sales platform, ensuring the relevant IT environment (an ongoing
service provided by the Platform Provider) and collecting sales proceeds from the users. Those fees are treated as the costs to
fulfill the contract and are recognized as an asset. Contract cost asset is presented in “Trade and other receivables” line item in
the statement of financial position. Those costs are charged to profit/loss over time matching the pattern of revenue recognition
and the charge is presented in the consolidated statement of comprehensive income in the “Cost of sales” line. Further
accounting policy applied by the Group when recognizing revenue are described in Note 4
Significant accounting policies
, point(c)
Revenue
.Agent vs principal considerations in publishing contracts
The Group distributes in-house games as well as the games developed by other companies. In most cases, the Group is the
owner of the application and is fully responsible for future upgrades and future developments of this game application.
Nevertheless, in some cases, the Group publishes mobile game applications of third-party developers based on the publishing
contracts. The publishing contracts provide the Group with an exclusive right for distribution, marketing and operation of the
games developed by external developers and to benefit from selling the virtual coins to the end-users. The Group has the
ultimate responsibility for providing the game to a customer, including undertaking marketing activities and it is entitled to set
prices for virtual coins charged to the end-user as well as to authorize upgrades and modifications of games. These arguments
support the Management conclusion that in the publishing arrangements, the control over the games developed by the
third-party developers has been transferred over the Group. Therefore, in such a situation, the Group, being the customer of the
developers, acts as a principal in its relation to the players and presents in-app revenue on a gross basis, i.e. in the amount of
consideration to which itexpects to be entitled in exchange for making the games available for end-users.
Further, based on the publishing contracts signed, when selling the mobile game applications of third-party developers, the
Group is obliged to pay the fees to the external developers mostly determined as variable payments dependent on the level of
turnover and cumulative gains generated from selling the game. Although the publishing contracts provide the Group with an
exclusive right to use the games, the usage of these games is contingent on the future services which need to be provided by
the external developers and which are the subject of the Group’s authorization and consent. In accordance with the publishing
contracts, the external developers are obliged to perform the on-going development of the game and improvements to increase
its functionalities as well as the maintenance services. As a result, the contracts with external developers are partially executory
arrangement as the future developments do not exist at the contract inception and no liability to the contractor arises until the
contractor performs work under thecontract, i.e. the services specified in the contracts with external developers are performed.
However, the fees agreed by the Group and developers in these arrangements are set usually in relation to the whole bunch of
the promises included in a contract, i.e. there is no relevant split of the consideration between the purchase price paid for the
right to use a game and the future additional services (development operations and maintenance services). The Group is not
able to reliably distinguish the expenditures incurred in relation to the right to the game (i.e. the license) from the payment for
the development operations and maintenance services, therefore, the expenditures incurred by the Group in relation to the
publishing arrangements are charged to the profit and loss as incurred with no liability recognized at the date of signing the
contract. Accordingly, developers’ fees related to publishing contracts are presented in the Consolidated Statement of
Comprehensive income in the line “Research and development expenses”.
The conclusion that the Group acts as a principal is consistent with the general industry practice.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
15
Money market mutual funds
As part of its liquidity management, the Group makes overnight deposits of its daily cash surpluses in money market mutual
funds. The money market fund is an open-ended mutual fund that invests in short-term debt instruments (typically one day to
one year) such as treasury bills, certificates of deposit, bonds, government gilts and commercial paper with high ratings (mainly
A3 based on Moody’s rating). The main goals are the preservation of principal, high liquidity and a modest incremental return
over short-term interest rates or a benchmark rate.
Key judgement in applying accounting policies refers to the classification of investments in money market mutual funds as
“Cash and cash equivalents” and not as “Other financial assets”. The units of the funds held by the Group are short-term, highly
liquid, readily convertible to known amounts of cash and are subject to an insignificant risk of future changes in value, thus they
meet the critical criteria indicated in IAS 7 Statement of Cash Flows and have been considered in substance as cash
equivalents.
Investments in money market funds have a determinable market value and they are puttable, with a short notice period. The
Group can dispose the investments in funds at its discretion any time (same-day access), funds are not closed for a selected
group of participants. They are convertible into a cash and the cash amount to be received on redemption is known at the time
of the investment because at the time of the initial investment, the risk of changes in value is insignificant. The volatility of
changes in fair value, in particular the credit and liquidity risk, is limited taking into account the level of diversification of the
portfolio and its weighted average life of the underlying assets of the funds. The exposure to benchmark interest rate risk is also
assessed to be low because of short period of time until the next repricing of the assets held by the fund to current benchmark
interest rates. These facts support the view that the investment is liquid.
In addition, the Group considered the assets held by the fund to establish whether substantially all of its investments qualify
individually as cash and cash equivalents. The consideration referred to all potential investments allowed by the investment
rules set for the fund, and not only the assets that the fund holds as of the evaluation date. It was assessed that in general the
investments’ maturity is less than three months and thus, investments qualify individually as cash and cash equivalents.
Due to the above, in the management’s opinion, the Group’s investments in money market funds have the attributes to be
considered a cash equivalent. This analysis is performed at each reporting period. For details on the funds and their credit
ratings please refer to Note 12 point (b)
Financial risk management
,Credit risk
. For carrying amounts as at December 31, 2021and December 31, 2020 please refer to Note 14
Cash and cash equivalents
.Preference shares
Classification and measurement
In September 2017, the Company issued series C preference shares to several investors. The series C preference shares were
converted into ordinary shares on February 5, 2021. Details of the transaction is presented in Note 17
Conversion of series C
preference share
s.
The management has concluded that the series C preference shares meet the definition of a financial liability as of year-end
December 31, 2020 because they are effectively convertible into a variable number of ordinary shares upon occurrence of an
uncertain future events, such as share split, combination or issuance of shares which are genuine and outside of the Company's
control (IAS 32 paragraph 16(b) and 25).
Accordingly, the series C preference shares are classified as a financial liability and measured initially and subsequently at fair
value through profit or loss.
This liability was presented as a non-current liability as of year-end December 31, 2020 based on IAS 1 para 69(d) which states
that the terms of a liability that could, at the option of the counterparty, result in settlement by the issue of equity instruments do
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
16
not affect its classification. The settlement in (variable number of) ordinary shares was not result in an outflow from the entity's
working capital and hence the classification as a non-current liability under IAS 1.69(d).
The Group presented the preference shares non-current liability as of December 31, 2020 in the amount of USD 176,606
thousand, while as of December 31, 2021 there was no such liability. For further detail please refer to Note 17
Conversion of
series C preference shares
.
The further information on the fair value measurement of this liability is provided in Note 5
Determination of fair values
, point (a)
Preference shares liability measured at fair value through profit or loss
. The fair value gains/losses are presented within “Finance
expense”.
Execution of stabilization option
In relation to the initial public offering, on February 5, 2021 the Company and IPOPEMA Securities S.A. (“Stabilization Manager”)
signed Stabilization Agreement. The purpose of the Stabilization Agreement was to stabilize the price of the Huuuge Inc. shares
at a level higher than the level which would otherwise have prevailed. For the purpose of accounting for the stabilisation
transaction, the Company treated the entire stabilisation agreement as a financing transaction, i.e. repurchase of own shares
from the market in the scope of IAS 32 and IFRS 9. The remuneration of the Stabilization Manager was treated as a share-based
payment in accordance with IFRS 2 because the amount of the remuneration was based on the value of the shares. For more
details, please refer to Note 15
Share capital
.Estimation uncertainty
The assumptions made about the future and the major sources of estimation uncertainty refer to the following areas:
Deferred tax assets and liabilities, in particular the realizability of deferred tax assets
In order to determine deferred tax assets and deferred tax liabilities the management needs to make estimates and judgments,
especially in the valuation of deferred tax assets and liabilities. Significant management estimate is required to determine the
amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits,
together with future tax planning strategies. The process includes evaluation of the tax results of every Group entity, under
consideration of local tax laws and regulations, assessment of the actual tax exposure and of temporary differences as well as
assessment of the likelihood that deferred tax assets can be utilized in future periods through generation of taxable profits.
The recognition of a deferred tax asset is based on the assumption that it will be recoverable against future taxable income. The
deterioration of tax results in the future could cause that this assumption could not be justified. When accounting for
transactions the Group takes into account uncertainties as to whether its treatment will be accepted by the tax authorities.
Estimates used for the recognition of deferred tax assets are updated annually with factors such as expected tax rates and
expected future tax results of the Group.
Deferred tax liabilities and assets are not recognized for temporary differences between the carrying amount and tax bases of
investments in subsidiaries as the Parent is able to control the timing of the reversal of the temporary differences and in the
management’s assessment it is probable that the differences will not reverse in the foreseeable future.
For more details on deferred tax assets and liabilities please refer to Note 4
Significant accounting policies
, point (d) Income tax
and to Note 10
Income tax
.Provisions and contingent liabilities
Determination of provisions and contingent liabilities is based on management’s assessment of the probability of the outflow of
resources embodying economic benefits, according to guidelines included in IAS 37
Provisions, Contingent Liabilities and
Contingent Assets.
Provisions are measured at management’s best estimate of the expenditure required to settle the obligation
at the end of the reporting period and are discounted to present value where the effect is material.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
17
In 2019, a putative class action complaint was filed against the Company in the U.S. District Court for the Western District of
Washington by a player plaintiff relating to the violations for the recovery of money lost in gambling. Following the Management
assessment, as of December 31, 2019, the provision was recognized for a potential unfavourable outcome in the court case in
the amount of USD 6,500 thousand. In 2021, the Group settled the payment in accordance with the Settlement Agreement
signed by the parties.
For further details please refer to Note 22
Provisions
.3. Adoption of new and revised Standards
The IFRS include all International Accounting Standards, International Financial Reporting Standards and Interpretations as
approved by the European Union. As at the date of approving these consolidated financial statements for issue, considering the
pending process of introducing IFRSs in the EU and the operations conducted by the Group, the IFRS applicable to these
consolidated financial statements might differ from IFRS adopted by International Accounting Standards Board.
In preparing these consolidated financial statements the Group did not early adopt any new Standards which have already been
published and adopted by the European Union and which should be applied for periods beginning on or after January 1, 2022.
New International Financial Reporting Standards and Interpretations published but not yet effective:
●
IFRS 14
Regulatory Deferral Accounts
(issued on January 30, 2014) – The European Commission has decided not to
launch the endorsement process of this interim standard and to wait for the final standard – not yet endorsed by EU at
the date of approval of these consolidated financial statements for issue – effective for financial years beginning on
or after January 1, 2016;
●
Amendments to IFRS 10 and IAS 28:
Sale or Contribution of Assets Between an Investor and its Associate or Joint
Venture
(issued on September 11, 2014) – the endorsement process of these Amendments has been postponed by
EU - the effective date was deferred indefinitely by International Accounting Standards Board;
●
IFRS 17 on May 18, 2017) including Amendments to IFRS 17 (issued on June 25, 2020) -
Insurance Contracts
(issuedeffective for financial years beginning on or after January 1, 2023;
●
Amendments to IAS 1:
Presentation of Financial Statements: Classification of Liabilities as Current or Non-curren
t-
Deferral of Effective Date
(issued on January 23, 2020 and July 15, 2020) – not yet endorsed by EU at the date of
approval of these consolidated financial statements for issue – effective for financial years beginning on or after
January 1, 2023;
●
Amendments to IAS 1 and IFRS Practice Statement 2:
Disclosure of Accounting policies
(issued on February 12, 2021)– effective for financial years beginning on or after January 1, 2023;
●
Amendments to IAS 8: effective for financial years
Definition of Accounting Estimates
(issued on February 12, 2021) –beginning on or after January 1, 2023;
●
Amendments to IAS 12:
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(issued on May
6, 2021) – not yet endorsed by EU at the date of approval of these consolidated financial statements – effective for
financial years beginning on or after 1 January 2023;
●
Amendments to IFRS 3: on May 14, 2020) - effective for financial
Reference to the Conceptual Framework
(issuedyears beginning on or after January 1, 2022;
●
Amendments to IAS 16:
Property, Plant and Equipment – Proceeds before Intended Use
(issued on May 14, 2020) –
effective for financial years beginning on or after January 1, 2022;
●
Amendments to IAS 37: on May 14, 2020) – effective for
Onerous Contracts – Cost of Fulfilling a Contract
(issuedfinancial years beginning on or after January 1, 2022;
●
Annual Improvements to IFRS Standards 2018–2020 (issued on 14 May 2020) – effective for financial years
beginning on or after 1 January 2022;
●
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information
(issued on 9 December 2021) - not yet endorsed by EU at the date of approval of these consolidated financial
statements – effective for financial years beginning on or after 1 January 2023;
These standards and amendments are not expected to have a material impact on the Group in the current or future reporting
periods and on foreseeable future transactions.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
18
New International Financial Reporting Standards and Interpretations effective for the first time for financial year 2021
During the year 2021, the following IFRS and amendments to IFRS or interpretations entered into force:
●
Amendments to IFRS 16 Leases:
Covid-19-Related Rent Concessions
beyond 30 June 2021
●
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2
●
Amendments to IFRS 4 Insurance Contracts – deferral of IFRS19.
The amendments listed above did not have any impact on the amounts recognized in prior periods and are not expected to
significantly affect the current or future periods.
4. Significant accounting policies
The accounting policies applied by the Group in these consolidated financial statements have been consistently applied by the
Group and are consistent across the reported periods, unless indicated otherwise (see Note 3
Adoption of new and revised
Standards
).
(a) Basis for consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Parent Company because the Group (i) has power to direct the relevant activities of
the investees that significantly affect their returns, (ii) has exposure, or rights, to variable returns from its involvement with the
investees, and (iii) has the ability to use its power over the investees to affect the amount of the investor’s returns. Financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences (date of
acquisition or establishment) until the date that control ceases. The accounting policies of subsidiaries have been changed
when necessary to align them with the policies adopted by the Group.
(ii) Business combinations
The acquisition method of accounting is used to account for all business combinations. In order to assess whether the acquired
set of assets comprises a business, the Company analyzes the requirements of IFRS 3 including
Business Combinations
,Amendments to IFRS 3 Definition of a Business
, effective for business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on
or after the beginning of that period. In particular, the Group may perform the optional fair value concentration test. The purpose
of this test is to permit a simplified assessment of whether substantially all the fair value of the gross assets acquired is
concentrated in a single identifiable asset or group of similar identifiable assets and therefore an acquired set of activities and
assets is not a business. Applying the concentration test on a transaction-by-transaction basis is not obligatory.
If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is
required. Otherwise, or if the test was not applied, the entity shall perform the qualitative analysis of whether an acquired set of
assets and activities includes at a minimum, an input and a substantive process that together significantly contribute to the
ability to create outputs.
If the transaction is concluded to be an acquisition of the assets which is not a business, the total consideration will be
allocated to acquired assets based on their relative fair values; no goodwill is recognized in such case. The transaction costs
will be added to the cost of the assets acquired.
If the transaction is concluded to be a business combination, all identifiable assets acquired and the liabilities assumed are
recognized at the fair value; deferred tax is recognized on the temporary difference between the fair value and the tax value; the
difference between the total consideration transferred is recognized as goodwill.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
19
The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets transferred, liabilities
incurred to the former owners of the acquired business, equity interests issued by the group, fair value of any asset or liability
resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the
acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share
of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of
●
consideration transferred,
●
amount of any non-controlling interest in the acquired entity, and
●
acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of
the net identifiable assets of the business acquired, the difference is recognized directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange.
Contingent consideration is classified either as equity or a financial liability, depending on financial instruments in which it is
payable. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value
recognized in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity
interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement
are recognized in profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination
occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. During the measurement
period not exceeding one year from the acquisition date, the Group retrospectively adjusts the provisional amounts recognized
at the acquisition date. The measurement period ends as soon as the Group receives the information it was seeking about facts
and circumstances that existed as of the acquisition date or learns that more information is not obtainable.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are
eliminated in preparing these consolidated financial statements. Unrealized losses are eliminated unless the transaction
provides evidence of an impairment of the transferred asset.
(iv) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
●
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance
sheet,
●
income and expenses for each statement of comprehensive income are translated at exchange rates at the dates of
the transactions (or at average exchange rates if they are reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates), and
●
all resulting exchange differences are recognized in other comprehensive income.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
20
(b) Foreign currency transactions – transactions and balances
Transactions in foreign currencies are translated to functional currency of the respective entity (USD is the functional currency
of the Parent entity and the presentation currency of the Group) at exchange rates effective on the days of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at the applicable
closing exchange rates as of the balance sheet date. The foreign exchange rate differences arising on translation of
transactions denominated in foreign currencies are recognized in the profit or loss in the statement of comprehensive income.
Non-monetary assets and liabilities that are measured at historical cost in foreign currency are translated using the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair
value are translated at the exchange rates at the date the fair value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair value gain or loss.
(c) Revenue
The Group is a game developer who operates free-to-play multi-player games. The main source of revenue recognized by the
Group is in-app purchases in gaming applications made by the players who wish to buy additional packages of virtual coins that
can be further used in the game.
The Group operates in the most popular business model in this industry where the Group initially provides the hosted underlying
license arrangement to all mobile players for free (the player initially obtains a predetermined quantity of the virtual coins for
free and may play for free until such coins are redeemed) and generates its revenue from subsequent selling a large volume of
virtual items (i.e. coins) to the players. By entering into the free of charge play, the player does not have any commitment to
purchase any virtual coins thus free of charge use of the game does not result in recognition of revenue.
After agreeing with the terms and conditions of the hosted underlying license arrangement with the Group, players can
download the game application to their mobile devices and enjoy playing the game for free in the non-charged and the
stand-alone environment (without purchasing the virtual items) until all free of charge virtual coins held by the player are
redeemed through the play. Players can purchase the non-refundable virtual coins for a fixed fee (included in an application) in
the game environment to continue playing with a game. Coins are not returnable. The virtual coins do not allow the players to
obtain access to additional functions or enhanced environments. They are consumable items which might be immediately
consumed by a player or can be multiplied throughout the game when the player is winning. The virtual items do not have an
expiry date.
In most cases, the Group is the owner of the application and is fully responsible for future upgrades and future developments of
this game application. In some cases, the Group publishes mobile game applications of third-party developers and in such a
situation the Group also acts as a principal in its relation to the players (as described below).
The Group makes the mobile game application available on players’ mobile devices such as smart phones, iPhones, iPad, etc. by
using the recognized distribution channels provided by the distributors. The distributors act as the intermediary parties which
provides IT infrastructure/ distribution channels and marketing activities as well as collecting and disbursing cash from the
players on behalf of the Group.
In addition, the Group generates revenue on in-app advertising which are generated by broadcasting advertisements during
gameplay.
The Group recognizes revenues from contracts with clients as described below.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
21
Revenue from in-app purchases in gaming applications
Vast majority of in-app purchases are sold through Application Marketplaces (“Platform Providers”) such as Apple App Store,
Google Play, Facebook and Amazon App Store.
Players are determined to be the Group’s customers, and the Group acts as a principal in its relation to the players (further
information on the judgement in this respect is presented in Note 2
Basis for preparation of the consolidated
financialstatements
,
point (d) Key judgements and estimates – Model for revenue recognition
.
The Group presents in-app revenue on a gross basis. Platform Providers charge usually 30% commission on the prices paid by
the users. The commission covers all services performed by the “Platform Providers” such as granting access to the sales
platform, ensuring the relevant IT environment (an ongoing service provided by the Platform Provider) and collecting sales
proceeds from the users. These costs meet the definition of the costs to fulfil the contract and are recognized as an asset.
Contract cost assets are presented in the “Trade and other receivables” line item in the statement of financial position and are
amortized on a systematic basis consistent with the expected pattern of transfer of the related goods or services under the
contract (as described below). The relevant charge is presented in the consolidated statement of comprehensive income in the
“Cost of sales” line.
The game application can be used only with the virtual coins, which are either obtained by the players free of charge (at the
initial downloads of application and at regular periodical grants of free coins) or subsequently purchased. The coins do not have
any alternative use other than the use in the Huuuge’s games and also cannot be exchanged for cash.
Due to the fact that the player cannot benefit from gaming application on its own but only with the virtual coins (either obtained
free of charge or purchased) therefore there is only one performance obligation being providing the players with a right to play
the game. As long as the player uses only free of charge coins, the contract under IFRS 15 does not exist.
The customer in the in-app purchases downloads the application for free and purchases virtual coins. Management concluded
that the purchased virtual coins represents a prepayment for the use of the games thus the hosted underlying license to use an
application is the only performance obligation.
The Group provides the players with a right to use virtual coins in the gaming environment. The consideration obtained from the
player for the sales of the virtual coins represents a prepayment for the use of the gaming service. Through selling the virtual
items, the Group provides access to the game functionalities in exchange for virtual coins consumed by the players. In gaming
application published by the Group in-app purchases concern mostly virtual coins, which players of Group’s games can use to
play slot games and other casino-like games, as well as casual games. The Group’s management concluded that the Group
meets requirements of IFRS15.35(a) for over time recognition that players simultaneously receive and consume the benefits of
the service being access to gaming environments and a possibility to play, as the entity makes them available.
According to management’s assessment, based on data gathered, the virtual coins acquired by the customers are consumed in
most instances in several hours from the purchase moment. Revenues from in-app purchases in gaming applications are
recognized as revenue over the period of expected consumption. The Group recognizes a contract liability for any consideration
received that is attributable to the player’s estimated unused coins (i.e. player’s unexercised rights), taking into account
estimated rate of breakage. Such contract liability is presented as “Deferred income” in the statement of financial position.
Further information regarding the estimate of the revenue recognized from the contract liability is provided in Note 2
Basis for
preparation of the consolidated financial statements,
point (d)
Key judgements and estimates –
model of revenue recognition.
Revenue is recognized at the amount that reflects the price expected by the Group in exchange for the transfer of the services,
which is available in the gaming application and depends on the amount of coins being purchased.
Given the fact that the Group grants players the option to acquire additional virtual items at a price that would reflect the
stand-alone selling price for those items, the option does not provide a material right to players. For this reason, the Group
accounts for future purchases of virtual items only when players exercise the option to purchase virtual items (the contract
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
22
liability is recognized at the date of the purchase which is subsequently accounted for as explained above). When the virtual
items are granted for players for free (e.g. for promoting purposes), the Group does not recognize neither revenues, nor costs.
Revenue from the advertising activities
Revenues from advertising are generated by broadcasting advertisements during gameplay. The Group’s management identified
one performance obligation which is displaying advertisements in gaming applications. Revenue is recognized over time, in the
period in which the advertisements are broadcast. The transaction price is variable and is based on the sales of products by
advertisers. The Group recognizes the variable consideration in the month in which the sales transaction which triggers the
payment of the fee to the Group has occurred. The consideration is determined based on revenue reports from the ad network
indicating the number of products sold and the amount of the consideration due to the Group.
For both revenue streams, i.e. revenue from in-app purchases in gaming applications and revenue from the advertising activities,
management assesses that the Group does not have any contracts where the period between the transfer of the promised
goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not
adjust any of the transaction prices for the time value of money. Areceivable is recognized when the consideration is
unconditional because only the passage of time is required before the payment is due. Revenue is collected not directly from
end-users but via distribution platforms that charge their commission for the service. The payment terms with major distribution
platforms are described in Note 13
Trade and other receivables
.
(d) Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to
the extent that it relates to a business combination, or items are recognized directly in equity or in other comprehensive
income.Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. Deferred tax is not recognized for temporary differences arising on
the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss. Deferred tax liabilities and assets are not recognized for temporary differences between
the carrying amount and tax bases of investments in subsidiaries where the company is able to control the timing of the reversal
of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. In addition, deferred
tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at
the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or
their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is
probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent it is no longer probable that the related tax
benefit will be realized.
Payments received from distributors for sale of virtual items are subject to the withholding taxes paid by the distributors to the
tax authorities on behalf of the Group entities as a recipient. As a result, the Group receives the consideration net of taxes
deducted at source. The Group’s management determined that this withholding tax is an income tax in nature, and it is
recognized, measured and disclosed under the requirements of IAS 12 due to the fact that the gross amount of income received
is included in the calculation of taxable profit in the entity’s tax computation.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
23
Thus, the revenue is recognized at the amount that includes withholding taxes paid to the tax authorities on behalf of the Group,
i.e. gross including the amount of the withholding tax. The withholding tax paid is credited against income tax due in the
particular jurisdiction in accordance with local regulations.
(e) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment, except for land, are measured in the consolidated statement of financial position at cost,
increased by subsequently incurred costs, when it is expected that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliable, less accumulated depreciation and any accumulated
impairment losses. Land is measured at cost less any accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
(ii) Depreciation
Depreciation of property, plant and equipment is calculated over the depreciable amount, which is the cost of an asset, less its
residual value, commences when an asset is available for its intended use. All items of property, plant and equipment, other
than land and property under construction, are depreciated on a straight-line basis over the assets’ estimated useful lives as
follows:
Computers and other electronic devices
3 – 10 years
Furniture
5 years
Leasehold improvements (adaptation works in offices) are depreciated over their useful lives, which are equal to the lease
periods which usually vary from 1 to 5 years.
Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively if
appropriate.
(f) Leases
Management assesses at the time of entering into a contract whether the contract is a lease or contains a lease. A contract is a
lease or contains a lease if it conveys the right to control the usage of an identifiable asset for a given period in exchange for
consideration.
The Group applies a uniform approach to the recognition and measurement of all lease agreements except for short-term leases
and low value asset leases. On the commencement date of a lease, the Group recognizes a right-of-use asset and a lease
liability.
Right-of-use assets
The Group recognizes right-of-use assets on the date of commencing a lease i.e. at the date at which the leased assets are
available for use by the Group entities. The right-of-use assets are presented in a separate line in the consolidated statement of
financial position. The Group does not have any right-of-use assets that meet the definition of investment property which would
be presented in statement of financial position in a separate line as “investment property”.
Right-of-use assets are measured initially at cost comprising the following:
●
the amount of the initial measurement of the lease liability,
●
any lease payments made at or before the commencement date less any lease incentives received,
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
24
●
any initial direct costs,
●
restoration costs.
Subsequently, the right-of-use assets are measured at cost less accumulated depreciation and any accumulated impairment
losses and adjusted for remeasurement of the lease liability due to reassessment or lease modifications.
The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The
amortization periods for the right-of-use assets are as follows:
right of use for vehicles
3 years
right of use for offices
1 – 5 years
Lease liabilities
At the commencement date lease liabilities are measured at an amount equal to the present value of the following lease
payments for the underlying right-of-use assets during the lease term:
●
fixed payments (including in substance fixed payments), less any lease incentives receivable,
●
variable lease payments that are based on an index or a rate,
●
amounts expected to be payable by the Group entities under residual value guarantees,
●
the exercise price of a purchase option if the Group’s management is reasonably certain to exercise that option,
●
payments of penalties for terminating the lease, if the lease term reflects the Group would exercise that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or the
Group’s incremental borrowing rate.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The
carrying amount of liability is remeasured to reflect any reassessment, lease modification or revised in-substance fixed
payments.
The lease term includes the non-cancellable period of a lease plus periods covered by options to extend and/or terminate the
lease if it is reasonably certain that the lease will be extended or terminated.
The Group applies the exemptions for short-term leases and leases of low-value assets. Payments associated with all
short-term leases, i.e. with lease terms of 12 months or less, and certain leases of low-value assets, for which the underlying
value is settled at USD 5 thousand or less, are recognized on a straight-line basis over the lease term as an expense in profit or
loss.
(g) Intangible assets
Internally generated intangible assets
Development expenditures are recognized as an intangible asset when the Group can demonstrate all of the following:
●
the technical feasibility of completing the intangible asset so that it will be available for use or sale,
●
its intention to complete and its ability and intention to use or sell the asset,
●
how the asset will generate probable future economic benefits,
●
the availability of resources to complete the asset,
●
its ability to measure reliably the expenditure during development.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
25
The costs of internally generated intangible assets are capitalized once the technological feasibility of a product is established
by the management and such costs are determined to be recoverable. Technological feasibility of a product encompasses both
technical design documentation and game design documentation or the completed and tested product design and working
model.
For products with existing proven technology, the establishment of the technological feasibility may arise early in the product
development cycle. Technological feasibility is evaluated individually for each product.
If the criteria for capitalization are met, the development costs are recorded as intangible assets and amortized from the point at
which the asset is available for use.
The Group capitalizes software development costs which are direct costs incurred for internal software development.
Capitalized software development costs are amortized on a straight line basis over useful life which generally is from 1 to 3
years.
Research expenditure and development expenditure that do not meet the criteria described above are recognized as an expense
as incurred.
The Group does not capitalize the expenditure incurred in relation to internally generated games as the criteria for capitalization
are not met. As a consequence of focusing on mobile phone games, the life cycle of the products developed internally cannot be
determined unequivocally and the division between increase in the carrying value associated with increase of incremental
benefits and the maintenance expenditure is at times vague. The Group’s management find it questionable to demonstrate that
the technical feasibility of completing the intangible asset and the Group’s ability to measure reliably the expenditure attributable
to the intangible asset during its development due to the fact that the development phase of an internal project cannot be
reliably separated from the maintenance phase.
The nature of the Group’s operations, i.e. providing the users with multi-player games, requires from the Group the continuous
expenditure on developments and upgrades of the existing games, driven by the fast-paced changes of the software
environment. Such upgrades are necessary for the further game continuity, and the Group is not able to reliably determine if it is
probable that future economic benefits associated with the developments and upgrades will flow to the Group.
For these reasons, the Group expenses the costs borne on the maintenance of the existing games and development of the new
games and do not capitalize them. Such expenditures are charged to profit or loss in the statement of comprehensive income
when incurred and presented in a separate line “Research and development expenses”.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Software acquired externally and other intangible assets
Software licenses for software acquired externally and other intangible assets are measured in the consolidated statement of
financial position at cost less accumulated amortization and any accumulated impairment losses. Amortization commences
when the assets are available for their intended use. Software acquired externally and other intangible assets are amortized on a
straight line basis over their expected economic useful lives which generally are from 1 to 3 years. Economic useful life for
intangible asset acquired during the year 2021, Traffic Puzzle Game, was estimated for 10 years as of December 31, 2021.
The gain or loss arising on disposal or retirement of an item of intangible assets is determined as the difference between the
proceeds and the carrying amount of the asset on disposal/retirement date and is recognized in the consolidated statement of
comprehensive income in operating profit.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
26
Intangible assets recognized as part of the business combination
Intangible assets acquired in a business combination are recognized at its fair value at the acquisition date. In the subsequent
periods, intangible assets recognized as part of the business combination are amortized on a straight line basis over expected
economic useful lives which are predominantly up to 5 years.
(h) Financial instruments
The Group recognizes the non-derivative financial instruments such as other long-term financial assets (mostly long-term
deposits), trade and other receivables, cash and cash equivalents (including investments in mutual funds) and trade and other
payables.
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (“FVPL”), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
The group classifies its financial assets to the measurement category: debt instruments to be measured at amortized cost. The
classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash
flows. Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of
principal and interest (“SPPI test”), are measured at amortized cost. Interest income from these financial assets is included in
finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit
or loss.
Management assesses the Group’s expected credit losses (“ECLs”) associated with debt instruments measured at amortized
cost, regardless of whether or not there has been any indication of impairment. Please refer to Note 4
Significant accounting
policies
, point
(i) Impairment, (i) Financial assets below.
(i) Impairment
(i) Financial assets
Management assesses the Group’s ECLs associated with debt instruments measured at amortized cost, regardless of whether
or not there has been any indication of impairment.
For trade receivables, the Group applies a simplified approach and measures a loss allowance for expected credit losses at the
amount equal to the expected credit losses over the instrument's lifetime. The Group uses its historical data on credit losses,
adjusted on an as-needed basis for the impact of forward-looking statements.
For other financial assets the Group applies a three-stage model for impairment, based on changes in credit quality since initial
recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1. Financial assets in
Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible
within the next 12 months or until contractual maturity, if shorter (“12Months ECL”). If the Group identifies a significant increase
in credit risk (“SICR”) since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a
lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any (“Lifetime ECL”). The financial
assets with objective evidence of impairment are classified to Stage 3; for such assets lifetime ECL is recognized.
(ii) Non-financial assets (other than goodwill)
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists, or annual impairment
testing for an asset is required, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
27
reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).
An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognized in profit or loss.
For other assets excluding goodwill, impairment losses recognized in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if
no impairment loss had been recognized.
At the end of each reporting period, management assesses whether there is any indication that any Group’s assets may be
impaired. Intangible assets with indefinite useful lives are tested for impairment annually as at December 31 at the
cash-generating unit level, irrespective of whether there is any indication of impairment.
As at December 31, 2021 and December 31, 2020 the Group had no intangible assets with an indefinite useful life.
(iii) Goodwill
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units that are expected to benefit from the combination in which the goodwill arose, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units. At current, the entire operations of the Group are
considered to be one cash generating unit.
Goodwill is tested for impairment annually as at December 31 or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of
cash-generating units) to which the goodwill relates. When the recoverable amount of the cash-generating unit is less than its
carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.
Gains and losses on the disposal of the business operations include the carrying amount of goodwill relating to the business
sold.
(j) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and highly liquid investments (including money market funds)
with maturities at initial recognition of three months or less.
The judgement relating to the classification of the investments in money market funds as “cash and cash equivalents’ is
disclosed in Note 2 (d)
Basis for preparation of the consolidated financial statements,
pointKey judgements and estimates –
Money market mutual funds.
Cash on bank accounts and investments in money market mutual funds meets the SPPI test and the business model test “held
to collect”, therefore they are measured at amortized cost including an impairment loss determined in accordance with the
expected loss model described in Note 4
Significant accounting policies
, point (i) Impairment,
(i) Financial assets.
(k) Trade and other receivables
Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant
financing components when they are recognised at fair value. Subsequently, they are carried at amortized cost using the
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
28
effective interest method, less loss allowance. The loss allowance is determined according with the accounting policy
presented in Note 4
Significant accounting policies,
point (i)
Impairment (i)
Financial assets.
Accrued revenues included in trade and other receivables are recognized initially at the amount of consideration based on the
sales reports provided by platforms.
Other receivables include deposits made to purchase property, plant and equipment, receivables from employees and
receivables from the state budget. Other receivables that are not financial assets as at the end of the reporting period are
measured at the amount due.
(l) Trade and other payables and deferred income
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are
unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the
reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the
effective interest method.
The other payables comprise employees related liabilities, tax other than income tax liabilities and accrued expenses. The
deferred income represents a contract liability; it is recognized and measured according to the accounting policy presented in
Note 4
Significant accounting policies,
point (c) Revenue
. Other payables are measured at the amount due.
(m) Share capital and other components of the equity
Share capital is presented at the total nominal value of the registered shares of the Parent Company.
As of December 31, 2021 all ordinary shares and preference shares (series A and B) are classified as equity. Preferences
attributable to series A and B of preference shares are described in Note 15
Share capital
.As of December 31, 2020 the Group held the preference shares series C that were converted (including also series A and B) to
ordinary shares during the year 2021, details are disclosed in Note 15
Share Capital.
The accounting policy for those preference
shares is presented in Note 4
Significant accounting policies,
point (n) Series C Preference Shares.
Incremental costs directly attributable to the issue of new shares are presented as the deduction of equity, i.e. supplementary
capital. Qualifying transaction costs incurred in anticipation of an issuance of equity instruments are also deducted from the
equity, i.e. supplementary capital. If the equity instruments are not subsequently issued, the transaction costs are recognized as
an expense.
Any excess of the fair value of consideration received over the nominal value of shares issued is recorded as share premium in
equity, i.e. supplementary capital .
As of December 31, 2020, and up to February 5, 2021, i.e. the date of the conversion, the preference shares of series C were
classified as financial liability under IAS 32 – the accounting policy for those preference shares is presented in Note 4
Significant
accounting policies,
point (n)
Series C Preference Shares. The judgement regarding the classification of the preference shares as
debt or equity instrument is disclosed in Note 2 (d)
Basis for preparation of the consolidated financial statements,
pointKey
judgement and estimates
. Details regarding the conversion are disclosed in Note 17
Conversion of series C preference shares
.
In the line “Treasury shares”, the Group presents the own shares repurchased, which are recognized at cost and are deducted
from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group shares. Any
difference between the carrying amount and the consideration, if reissued, is recognized in the supplementary capital.
In accordance with Delaware General Corporation Law, the Company may declare and pay dividends upon the shares of its
capital stock either:
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
29
1. Out of its surplus, being the excess of its net assets over its capital (all or part of the consideration received by the
corporation in exchange for its capital stock, as determined by the Board of Directors); or
2. In case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year.
If the capital, as defined above, shall have been diminished by depreciation in the value of its property, or by losses, or otherwise,
to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets, the directors of such company shall not declare and pay out of such net
profits any dividends upon any shares of any classes of its capital stock until the deficiency in the amount of capital represented
by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.
Employee benefits reserve results from the share-based payment arrangements and is described in details in Note 4
Significant
accounting policies benefits payment arrangements payment
, (q)
Employee, (i)
Share-basedand Note 16
Share-basedarrangements
.
Foreign exchange reserve results from exchange differences resulting from translating of foreign entities which functional
currency is different than USD.
(n) Series C preference shares
As of December 31, 2020 and up to February 5, 2021 (i.e. the date of the conversion) series C convertible preference shares
represented a financial instrument, which was classified as the financial liability measured at fair value through profit or loss.
The judgement regarding the classification of these preference shares as debt is disclosed in Note 2
Basis for preparation of the
consolidated financial statements,
point (d)
Key judgement and estimates.On issuance of the preference shares, the liability was measured at fair value. For this instrument issued in 2017, the fair value
was determined to equal the proceeds from shares issuance. This amount was classified as a financial liability as of year-end
December 31, 2020, measured at fair value through profit or loss until it was extinguished on conversion of preference shares.
The liability was remeasured to fair value reflecting the fair value of underlying ordinary shares for which series C shares were
converted on February 5, 2021, based on contractual conversion factor. Remeasurement gains and losses are presented in profit
or loss (finance income or finance costs). Further information on the fair value measurement of this liability is presented in Note
5
Determination of the fair value.
(o) Earnings per share
Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders of the Huuuge Inc. by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is calculated by dividing the Group’s adjusted profit or loss by the after‑tax effect of:
a. any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss
attributable to ordinary equity holders of Huuuge Inc.;
b. any interest recognized in the period related to dilutive potential ordinary shares; and
c. any other changes in income or expense that would result from the conversion of the dilutive potential ordinary
shares
by the weighted average number of ordinary shares adjusted for the effect of all dilutive potential ordinary shares.
The treasury shares are excluded from the weighted average number of ordinary shares for the purpose of calculating earnings
per share (“EPS”) as they are not outstanding.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
30
(p) Interest-bearing loans and borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in
profit or loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference
between the carrying amount of a financial liability that has been extinguished or transferred to another party and the
consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as other
income or finance costs.
Modifications of liabilities that do not result in derecognition are accounted for as a change in estimate using a cumulative
catch up method, with any gain or loss recognized immediately in profit or loss, unless the economic substance of the
difference in carrying values is attributed to a capital transaction with owners.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for
at least 12 months after the reporting period.
(q) Employee benefits
(i) Share-based payment arrangements
The Group runs an award program where the employees and contractors are receiving free options which entitle them to
purchase the shares in the Company. Such a program is a share-based payment program which is classified as equity settled
due to the fact that the Company does not have an obligation to settle the obligation arising under the program by delivering
cash to the employees or contractors.
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the
equity instruments at the grant date. The grant date fair value of the awards is determined using a share option pricing model.
Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 16
Share-based payment arrangements
.
Options with the same grant date but with different periods during which all the specified vesting conditions of a share-based
payment arrangement are to be satisfied are treated as separate awards with a different vesting period (graded vesting).
The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period,
based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end
of each period the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of
the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to the equity-settled employee benefit reserve.
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as
an expense (employee benefit expense), with a corresponding increase in equity, over the vesting period of the awards. IFRS 2
Share-based Payment
does not address whether an increase in equity recognized in connection with a share-based payment
transaction should be presented in a separate component within equity or within retained earnings. Such an increase is
presented in the line “Employee benefit reserve”.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards
that meet the related service and non-market performance conditions at the vesting date.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
31
(ii) Defined contribution plans – retirement benefits
The Group has under local laws obligations to pay retirement benefits, however, as the average age of employees is low, no
provision has been recorded due to its immaterial amount.
(iii) Other employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee,
and the obligation can be estimated reliably.
(r) Provisions
A provision is recognized when the Group, as a result of a past event, has a present obligation (legal or constructive) that can be
estimated reliably, and it is probable that the Group will be required to settle that obligation (an outflow of economic benefits will
be required). Provisions are measured at management’s best estimate of the expenditure required to settle the obligation at the
end of the reporting period and are discounted to present value where the effect is material. For details regarding significant
provisions recognized as of December 31, 2021 and December 31, 2020 please refer to Note
22 Provisions
.
(s) Cost of sales
In the line “Cost of sales”, the Group recognizes platform fees to distributors, which are related to revenues from in-app
purchases and costs of using servers of external suppliers.
Platform fees to distributors are recognized over time in line with the recognition of revenues from in-app purchases. Server
costs are recognized when incurred.
(t) Research and development expenses
In the line “Research and development expenses”, the Group recognizes costs of the maintenance of the existing games and
development of the new games, and fees paid to external developers related to the publishing contracts. In addition, this line
includes the research and development expenses that do not meet the criteria for capitalization.
Fees paid to external developers include expenditures incurred in relation to the right to the game (i.e. the license), the payment
for the development operations and maintenance services. Due to the fact that the Group is not able to allocate the fees
between particular components, total fees are recognized when incurred.
These costs are recognized when incurred. Details regarding lack of capitalization of these costs are presented, respectively, in
Note 4
Significant accounting policies, point (g) Intangible assets
and in Note 2 Basis for preparation of the consolidated financial
statements, point (d) Key judgements and estimates – Agent vs principal considerations in publishing contracts.
(u) Sales and marketing expenses
The line “Sales and marketing expenses” includes two main types of sales and marketing expenses:
a) “User acquisition marketing campaigns” which mainly include variable costs of external marketing campaigns directly
attributable to acquisition of new players, and conversion of non-paying players into paying players, and
b) “General Sales and marketing expenses” which mainly include costs of salaries of the sales and marketing
departments.
These costs are recognized when incurred.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
32
(v) Finance income and expense
Finance income comprises interest income on funds invested.
Interest income is recognized as it accrues in profit or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings, leases and valuation of preferred shares series C classified as
non-current liabilities prior to conversion on February 5, 2021.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are
recognized in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether
foreign currency movements are in a net gain or net loss position unless material, where separate presentation is required.
5. Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and
non-financial assets and liabilities.
For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurring basis,
management determines whether in the Group transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
The Group’s management determines the policies and procedures for fair value measurement. External valuers are involved for
valuation of significant assets and significant liabilities. Selection criteria include market knowledge, reputation, independence
and whether professional standards are maintained. The management decides, after discussions with the Group’s external
valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the management analyses the movements in the values of assets and liabilities which are required to be
remeasured or re-assessed as per the Group’s accounting policies. For this analysis, the management verifies the major inputs
applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant
documents.
Fair values have been determined for measurement and for disclosure purposes as explained below.
(a) Preference shares liability measured at fair value through profit or loss
On February 5, 2021 series C preference shares were converted into common shares. At the date of the conversion series C
preference shares liability was measured to fair value based on the value of shares established for the Company's initial public
offering, with the loss recognized in profit or loss. For more information, please refer to Note 15 to Note 17
Share capital
andConversion of series C preference shares
.
Prior to conversion, series C preference shares liability was measured at fair value initially and after initial recognition with the
gains/loss on subsequent remeasurements being recognized in profit or loss.
The Company’s ordinary shares and preference shares as of December 31, 2020 were not yet traded on any public market. Since
the preference shares had the right to dividends and they were convertible at any time, their fair value was determined based on
the fair value of the Company’s ordinary shares on a non-marketable, minority, per share basis. At the year-end December 31,
2020, no transactions took place in its shares (e.g. repurchase of ordinary shares), the prices of which could be used by the
Group to determine the fair value at the year-end December 31, 2020. In this case, the Group’s management determined the fair
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
33
value of the non-listed common shares of the Company which were the basis for valuation of liability resulting from issuance of
series C preference shares using valuation techniques, in particular, the Option-Pricing Method.
As of December 31, 2020, the fair value measurements of series C preference shares were classified in Level 3 of the fair value
hierarchy. The significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value
hierarchy as of December 31, 2020 were the following: EBITDA multiple, discount for lack of marketability, revenue multiple,
discount rate, probability of the initial public offering.
(b) Trade and other receivables measured at amortized cost
For trade and other receivables and deposits, the Group’s management considers their carrying amounts to be the best
estimates of fair values, due to the short-term nature and high liquidity of these instruments. This fair value is determined for
disclosure purposes.
(c) Non-derivative financial liabilities measured at amortized cost
For trade accounts payable, the Group’s management considers their carrying amounts to be the best estimation of their
respective fair values, determined for disclosure purposes, due to the short-term nature of these instruments. Fair value of
non-derivative financial liabilities other than trade accounts payable, is calculated based on the present value of future principal
and interest cash flows, discounted at the market rate of interest at the reporting date. For lease liabilities an interest rate
implicit in the lease is used, if that rate can be readily determined; if that rate cannot be readily determined, the lessee's
incremental borrowing rate is used.
As of December 31, 2021 and December 31, 2020 the Group does not classify any assets or liabilities to be subsequently
measured at fair value except for the preference shares (prior to its conversion on February 5, 2021) as indicated in point (a)
above.
6. Revenue and segment information
Huuuge’s business, development and sales of casual games for mobile platforms is global and both games and sales channels
are the same, regardless of where the players (customers) are located. Management measures and monitors the Group’s
revenue in respect of each game, but does not divide all costs, assets and liabilities by game and does not measure the
operating results by game. In management’s view, the operations and the Group’s financial performance and position cannot be
divided into different segments in such a way that it improves the ability to analyze and manage the company. The CEO is the
Chief operating decision maker and for this reason, the CEO analyzes the consolidated financial position and operating results
of the Group as a whole, therefore it has been determined that the Group has only one operating segment (“online mobile
games”).
The Group’s management monitors operating results on a group-wide basis for the purpose of making decisions about resource
allocation and performan
ce assessment.
The Group's revenue from contracts with clients comprises revenue generated by in-app purchases (gaming applications) and
in-app ads (advertising), as shown below:
Year ended
December 31, 2021
Year ended
December 31, 2020
Gaming applications
358,638
325,684
Advertising
15,101
7,037
Total revenue
373,739
332,721
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
34
The Group’s revenue is recognized over time, irrespective of the product and the geographical region – for more details on
revenue recognition please refer to Note 4
Significant accounting policies
, point (c) Revenue
.
For the gaming services, the transaction price is prepaid by the customers when the virtual coins are purchased to allow
continue the game; the payments result in the recognition of the contract liability in the statement of financial position. The
amounts recognized as deferred income are recognized as revenue on average within 2 days in the year 2021 (2 days in the year
2020).
For the gaming service, the amount recognized as deferred income as at the balance sheet date also represents the aggregate
amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the
end of the reporting period.
For the advertising services, the Group does not disclose the aggregate amount of the transaction price allocated to the
performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period using the practical
expedient allowed under IFRS 15, i.e. the Group has a right to consideration from a customer in an amount that corresponds
directly with the value to the customer of the entity’s performance completed to date.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
35
Below is the split of the revenue per main product groups:
Year ended
December 31, 2021
Year ended
December 31, 2020
Huuuge Casino
214,554
201,919
Billionaire Casino
113,515
109,610
Traffic Puzzle*
34,008
9,814
Other games
11,662
11,378
- including games developed by external developers based on
publishing contracts
578
1,103
Total revenue
373,739
332,721
* In 2021, the Group became the owner of Traffic Puzzle, therefore revenues for the year ended December 31, 2021 include
revenues generated based on publishing agreement until the date of acquisition as well as the revenues generated after
acquisition of the game. Traffic Puzzle revenues for the year ended December 31, 2020 include revenues based on publishing
agreement.
Revenue was generated in the following countries:
Year ended
December 31, 2021
Year ended
December 31, 2020
United States
221,797
194,273
Germany
26,867
23,421
Canada
11,709
9,996
United Kingdom
11,357
10,496
France
10,105
10,731
Japan
10,054
8,074
Netherlands
8,908
8,163
Australia
7,756
7,396
Poland
7,082
7,087
Switzerland
4,978
4,340
Taiwan
3,795
3,327
Italy
3,615
3,722
Republic of South Africa
2,981
2,962
Russian Federation
2,880
2,676
Austria
2,555
2,772
Spain
2,526
2,438
Other
34,774
30,847
Total revenue
373,739
332,721
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
36
The above is the management’s best estimate, as for some revenue sources geographical breakdown is not available. The
allocation to regions is driven by the location of individual end-user customer.
No individual end-user customer with whom the Group concludes transactions had a share of 10% or more in the Group's total
revenues in annual reporting periods ended December 31, 2021 and December 31, 2020. Vast majority of revenues is generated
in cooperation with the several platform providers, such as Apple App Store, Google Play, Facebook and Amazon App Store as
described in Note 4
Significant accounting policies, point (c) Revenue
.
Assets by geographical locations are split as follows:
As of December 31, 2021
Property, plant and
equipment
Right-of-use asset
Intangible assets
Poland
3,006
7,931
887
Germany
-
-
-
Israel
530
9,282
-
Cyprus
14
-
38,919
United States
87
137
-
Finland
62
129
-
Ireland
2
-
-
Netherlands
30
-
411
United Kingdom
8
-
-
Total assets
3,739
17,479
40,217
As of December 31, 2020
Property, plant and
equipment
Right-of-use asset
Intangible assets
Poland
1,904
6,129
610
Germany
143
214
228
Israel
438
1,839
-
Cyprus
115
-
90
United States
36
212
-
Finland
51
252
-
Ireland
3
-
-
Netherlands
13
-
531
Total assets
2,703
8,646
1,459
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
37
7. Operating expenses
For the year ended December 31, 2021 operating expenses include:
Expenses by nature
Note
Total
Cost of sales
Sales and marketing expenses:
Research and
development
expenses
General and
administrative
expenses
thereof
User acquisition
marketing campaigns
thereof
General sales
and marketing
expenses
Platform fees to distributors
108,364
108,364
-
-
-
-
External developers fees
1,279
-
-
-
1,279
-
Gaming servers expenses
1,237
1,237
-
-
-
-
External marketing and sales services
134,309
-
130,031
4,278
-
-
Salaries and employee-related costs
8
50,791
-
-
10,646
26,631
13,514
Employee stock option plan
8
11,760
-
-
1,284
3,422
7,054
Depreciation and amortization
8,020
-
-
-
-
8,020
Finance & legal services
4,955
-
-
-
-
4,955
Business travels & expenses
543
-
-
-
-
543
Property maintenance and external services
1,689
-
-
-
-
1,689
Other costs
6,604
-
-
-
1,796
4,808
Total operating expenses
329,551
109,601
130,031
16,208
33,128
40,583
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
38
For the year ended December 31, 2020 operating expenses include:
Expenses by nature
Note
Total
Cost of sales
Sales and marketing expenses:
Research and
development
expenses
General
and administrative
expenses
thereof
User
acquisition marketing
campaigns
thereof
General sales
and marketing
expenses
Platform fees to distributors
98,640
98,395
-
-
-
245
External developers fees
3,504
-
-
-
3,504
-
Gaming servers expenses
1,227
1,227
-
-
-
-
External marketing and sales services
115,371
-
111,494
3,877
-
-
Salaries and employee-related costs
8
45,033
-
-
9,281
24,499
11,253
Employee stock option plan
8
3,758
-
-
481
700
2,577
Depreciation and amortization
3,330
-
-
-
-
3,330
Finance & legal services
5,792
-
-
-
-
5,792
Business travels & expenses
302
-
-
-
-
302
Property maintenance and external services
1,442
-
-
-
-
1,442
Other costs
3,794
-
-
-
1,129
2,665
Total operating expenses
282,193
99,622
111,494
13,639
29,832
27,606
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
39
Within the total of sales and marketing expenses, management decided to provide the further disaggregation and added a split
of sales and marketing expenses line between the user acquisition marketing campaigns and general sales and marketing
expenses. For more details about the nature of these costs, please refer to Note 4
Significant accounting policies
, point (u) Sales
and marketing expenses
.
The expenses related to the employee stock option plan and employee bonuses are allocated to the costs by function, i.e. Sales
and marketing expenses, Research and development expenses and General and administrative expenses (as presented in the
tables above).
The future monthly expenditure related to the publishing contracts that were in force as at December 31, 2021 amounts to USD
294 thousand and as at December 31, 2020 USD 195 thousand.The above commitments comprise the fixed fees contracted in
the publishingarrangements and do not include the variable payments which are based on the future cash flows from selling the
games, and the future development fees subject to the specific arrangements and agreements between parties on a scope of
services.
Other costs include mainly IT services, car fleet and office management service (including company events), and costs of
recruitment and payment services.
8. Salaries and employee-related costs
Salaries also include self-employed and remuneration of executive management.
Year ended
Year ended
December 31, 2021
December 31, 2020
Salaries
41,866
38,479
Social security contributions
6,235
4,855
Share-based payment expense
11,760
3,758
Other employee-related costs
2,690
1,699
Total salaries and employee-related costs
62,551
48,791
Headcount at year-end
As of
As of
December 31, 2021
December 31, 2020
Sales and marketing
144
142
Game development
363
371
Back office
122
92
Executive and business management
9
11
Total number of employees
638
616
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
40
Average headcount
Year ended
Year ended
December 31, 2021
December 31, 2020
Sales and marketing
147
133
Game development
383
347
Back office
109
79
Executive and business management
11
9
Total average number of employees
650
568
Number of employees is calculated based on the actual persons employed, including self-employed, irrespective of full or
part-time equivalents. In 2021, employees on long-term absences are also included in the table above.
9. Finance expense
Finance expense
Year ended
December 31, 2021
Year ended
December 31, 2020
Valuation of preferred shares series C classified as non-current liabilities
38,997
127,768
Foreign exchange losses, net
3,293
-
Loss on foreign exchange forward contract
2,662
-
Interest expense
646
222
Finance expense on repurchase of series C preference shares
-
481
Other finance expenses
-
38
Total finance expense
45,598
128,509
Finance expenses include mainly valuation of preference shares from the series C previously (prior to conversion into common
shares) classified as a non-current liability in the amount of USD 38,997 thousand in the year ended December 31, 2021 (USD
128,249 thousand in the year ended December 31, 2020, comprised of USD 127,768 thousand - valuation of preference shares
series C and USD 481 thousand - finance expense on repurchase of series C preference shares). On February 5, 2021 series C
preference shares were converted into common shares. For more information, please refer to Note 15
Share capital
and Note 17Conversion of series C preference shares
.
Prior to the initial public offering, the Company had entered into foreign exchange forward contract contingent upon the event of
initial public offering. Upon the occurrence of the initial public offering event, the Company received proceeds from the newly
issued shares converted to USD at a fixed PLN/USD exchange rate, as determined in the forward contract. The Group’s policy
choice is to present the profit or loss on forward contracts as finance income or expense accordingly. Loss of USD 2,662
thousand was incurred on the forward contract settlement date, presented in the line “Finance expense” in the statement of
comprehensive income.
In addition, finance expenses include net foreign exchange losses in the amount USD 3,293 thousand, and interest expense in
the amount of USD 646 thousand, which includes interest expense recognized under IFRS 16 on lease liabilities, as well as
interest expense from banks.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
41
10. Income tax
As of
December 31, 2021
As of
December 31, 2020
Deferred tax assets
989
899
Deferred tax liabilities
-
131
Net deferred tax assets/(liabilities)
989
768
Year ended
December 31, 2021
Year ended
December 31, 2020
Current income tax
8,901
7,248
Change in deferred income tax
(221)
(888)
Income tax for the period
8,680
6,360
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the statutory tax rate applied
to profit of the consolidated entities as follows:
Effective tax rate reconciliation
Year ended
December 31, 2021
Year ended
December 31, 2020
Profit/(loss) before income tax
(1,001)
(76,244)
Statutory tax rate in the United States
21%
21%
Theoretical tax expense/(benefit) according to current tax rate in the United
States
(210)
(16,011)
Tax impact of non-taxable revenues
-
-
Tax impact of non-deductible costs – ESOP
2,463
729
Tax impact of non-deductible costs –
series C shares valuation
8,189
26,831
Tax impact of non-deductible costs – provision for Washington court case
-
(1,365)
Tax impact of non-tax costs/(income) – other
198
(475)
GILTI* income net of FDII** deduction, net of foreign tax credit
1,234
-
Adjustment for tax rates in foreign subsidiaries
(3,503)
(4,269)
Non-deductible withholding tax and other local income tax
-
132
Elimination of remuneration for shares’ redemption***
-
582
Temporary differences with no deferred tax recognized
268
395
Previous years' income taxes
150
(206)
Tax impact of other differences
(109)
17
Tax charge
8,680
6,360
Effective tax rate
(867%)
(8%)
* GILTI – Global Intangible Low-Taxed Income ** FDII – Foreign-Derived Intangible Income. This is a reconciling item since the
Company cannot recognize tax benefit on the tax loss due to the foreign-derived intangible income.
*** Transaction between the entities in the Group.
The subsidiary companies are subject to taxes for their respective businesses in the countries of their registration at the rates
prevailing in those jurisdictions. Income tax expense is recognized based on management’s estimate of the weighted average
effective annual income tax rate expected for the full financial year, including tax effect of valuation of the series C preference
shares liability. The average tax rate used for the year ended December 31, 2021 is 867%, compared to 8% for the year ended
December 31, 2020. The tax rate was higher in 2020 due to the change of proportion of Huuuge Inc. profits in the total profit of
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
42
the Group and higher proportion of non-tax deductible costs, i.e. mainly costs related to the employee stock option plan
(“ESOP”) and the valuation of the series C preferred shares to profit before tax.
Deferred tax reconciliation
Deferred tax assets
As of
December 31, 2021
As of
December 31, 2020
Intangible assets
15
61
Lease liabilities
3,744
1,817
Accrued expenses
1,585
1,922
Other deductible temporary differences
150
106
Total
5,494
3,906
Tax losses
-
43
Deferred tax assets
5,494
3,949
Compensation with deferred tax liabilities
(4,505)
(3,050)
Deferred tax assets presented in the consolidated statement of
financial position
989
899
Deferred tax assets expected to be recovered within 12 months from the reporting date amounted to USD 2,677 thousand as of
December 31, 2021 and USD 2,651 thousand as of December 31, 2020.
Deferred tax liabilities
As of
December 31, 2021
As of
December 31, 2020
Intangible assets
-
109
Property, plant and equipment owned
16
11
Right-of-use assets
3,696
1,728
Uninvoiced receivables
781
767
Prepaid expenses
-
75
Other differences
12
491
Deferred tax liabilities
4,505
3,181
Compensation with deferred tax assets
(4,505)
(3,050)
Deferred tax liabilities presented in the consolidated statement of
financial position
-
131
Deferred tax liabilities expected to be settled within 12 months from the reporting date amounted to USD 1,734 thousand as of
December 31, 2021 and USD 1,765 thousand as of December 31, 2020.
As of
December 31, 2021
As of
December 31, 2020
Net deferred tax assets/(liabilities) at the beginning of the period
768
(120)
Net deferred tax assets/(liabilities) at the end of the period
989
768
Deferred tax in the net profit for the period
(221)
(888)
As of December 31, 2021 and December 31, 2020 there were no unused tax losses for which no deferred tax would be
recognized in the consolidated statement of financial position.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
43
11. Intangible assets
IP rights
Software
generated
internally
Software
acquired
externally
Prepayments
for intangible
assets
Total
Gross book value as of January 1, 2021
601
571
846
442
2,460
Additions
38,930
-
1,355
2,505
42,790
Transfers and Disposals
190
-
(7)
(425)
(242)
Net foreign exchange differences on
translation
(26)
(42)
(45)
(23)
(136)
Gross book value as of December 31, 2021
39,695
529
2,149
2,499
44,872
Accumulated amortization as of January 1,
2021
(70)
(563)
(368)
-
(1,001)
Amortization charge for the period
(2,934)
(19)
(816)
-
(3,769)
Disposals
-
-
6
-
6
Net foreign exchange differences on
translation
39
53
17
-
109
Accumulated amortization as of December
31, 2021
(2,965)
(529)
(1,161)
-
(4,655)
Net book value as of January 1, 2021
531
8
478
442
1,459
Net book value as of December 31, 2021
36,730
-
988
2,499
40,217
IP rights
Software
generated
internally
Software
acquired
externally
Prepayments
for intangible
assets
Total
Gross book value as of January 1, 2020
-
572
119
87
778
Additions
-
-
726
571
1,297
Acquired as part of the business combinations
601
-
-
-
601
Disposals
-
-
-
(217)
(217)
Net foreign exchange differences on translation
-
(1)
1
1
1
Gross book value as of December 31, 2020
601
571
846
442
2,460
Accumulated amortization as of January 1,
2020
-
(547)
(116)
-
(663)
Amortization charge for the period
(70)
(17)
(259)
-
(346)
Disposals
-
-
-
-
-
Net foreign exchange differences on translation
-
1
7
-
8
Accumulated amortization as of December 31,
2020
(70)
(563)
(368)
-
(1,001)
Net book value as of January 1, 2020
-
25
3
87
115
Net book value as of December 31, 2020
531
8
478
442
1,459
No indications for impairment were identified as at December 31, 2021 and December 31, 2020.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
44
Prepayments for intangible assets relate to the payments Costs made on development of supporting tools (i.e., software), .
As of December 31, 2021, December 31, 2020 and as at the date of approval these consolidated financial statements for
issue there were no pledges or collaterals on the Group’s intangible assets.
Acquisition of Traffic Puzzle game
On April 27, 2021, Huuuge Global Ltd. entered into the Asset Purchase Agreement (“APA”) under which it acquired from
PICADILLA GAMES Adziński, Porzucek, Czerenkiewicz sp. k. with its registered office in Wrocław, Poland (“Picadilla”) the
mobile game Traffic Puzzle together with the related rights and assets, for the amount of USD 38,900 thousand (“Purchase
Price”).
The Game Publishing Agreement between Huuuge Global and Picadilla was terminated.
The Purchase Price payment schedule is as follows:
a) USD 9,500 thousand was paid within 10 business days from the signing of the APA (already paid as at December 31,
2021);
b) USD 25,000 thousand within 15 business days from the completion of the handover of the acquired assets ( not paid as
at December 31, 2021);
c) USD 4,400 thousand within 15 business days from the first anniversary of the completion of the handover of the acquired
assets (not paid as at December 31, 2021).
Together with the APA, Huuuge Global and Picadilla concluded a development agreement relating to the maintenance,
support and development of Traffic Puzzle mobile game, which was concluded for the period until the completion of the
handover of the acquired assets (in any case no longer than 9 months from the date of signing of the APA).
In addition, Huuuge Global and Picadilla entered into a service agreement under which Picadilla will provide support and
advice and share knowledge regarding the Traffic Puzzle game for a period of 12 months commencing on the next day
following the completion of the handover of acquired assets. Under the service agreement, Picadilla will receive USD 100
thousand.
Taking into account the details of the transaction, i.e. the fact that one key asset (new game) was acquired, and in addition,
acquired asset does not include an organized workforce, the Group recognized the transaction as an asset acquisition (and
not as a business combination) at the date of the transaction. To be considered a business, an integrated set of activities
and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the
ability to create output. The relevant criteria of IFRS 3 for business combination have not been met, the transaction resulted
in recognition of an intangible asset in the amount of USD 38,900 thousand that has been classified as an asset with definite
useful life. Based on the analysis of all relevant factors, the useful life of the acquired asset has been estimated as 10 years.
The change of trade and other payables presented in the consolidated statement of cash flows for the period ended
December 31, 2021 excludes second tranche in the amount of USD 25,000 thousand and third tranche in the amount USD
4,400 thousand not yet paid as of December 31,2021. In the year ended December 31, 2021, there were no significant
changes in the value of other intangible assets.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
45
12. Financial risk management
(a)
Introduction
Risk management performed by the Company and its subsidiaries is aimed at reducing the impact of adverse factors on the
consolidated financial statements. This note presents information about the Group’s exposure to specific risks arising from
financial instruments as well as the Group’s objectives aimed at maintaining effective process for risk management.
The Group is exposed in particular to the following risks arising from financial instruments:
●
credit risk,
●
liquidity risk,
●
market risk.
Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management
framework. The Board of Directors continually identifies, evaluates and manages the risks faced by the Group, sets appropriate
risk limits and controls and monitors risks.
(b) Credit risk
Credit risk relating to cash and cash equivalents
The Group is exposed to credit risks mainly with regard to cash and cash equivalents, that include bank deposits and
investments in money market funds, which could arise if a counterparty becomes insolvent and accordingly is unable to return
the deposited funds or execute the obligations as a result of the insolvency. To mitigate this risk, wherever possible the Group’s
management conducts transactions and deposits funds with investment grade rated financial institutions, as well as monitors
and limits the concentration of transactions with any single party. The Group’s management uses Moody’s credit ratings.The
information about the credit risk rating grades is presented in the table below.
Moody’s Rating
As of
December 31, 2021
As of
December 31, 2020
Aaa
105
3,634
Aa3
16,032
85,699
A2
1,157
4,643
A3
186,623
-
Baa1
11
-
B1
487
-
B3
-
182
Total cash and cash equivalents
204,415
94,158
Cash equivalents (investments in money market mutual funds) are kept in financial institutions with A3 and Aa3 rating only.
According to Moody’s, the investment ratings are ratings from Aaa to Baa3. Activities in non-investment ratings are limited to the
minimum and are connected to the Group presence in the particular jurisdictions.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
46
Cash and cash equivalents are kept at a limited number of major financial institutions. The Group’s management monitors the
creditworthiness of the institutions and mitigates concentration risk by not limiting the exposure to a single counterparty,
nevertheless at each reporting date there is a significant concentration of the credit risk.
As at December 31, 2021, the largest concentration of funds in two financial institutions was respectively 84% and 8% with the
remaining funds not being concentrated more than 7% in a single financial institution. In comparison, as at December 31, 2020,
the largest concentration in two financial institutions was respectively 47% and 32% with the remaining funds not being
concentrated more than 9% in a single financial institution.
Total gross carrying amounts of cash and cash equivalents as of December 31, 2021 and December 31, 2020 were included in
Stage 1, based on assessment that credit risk has not increased significantly since initial recognition. For financial assets in
Stage 1, the Group recognizes 12 month ECL and recognizes interest income on a gross basis – interest will be calculated on
the gross carrying amount of the financial asset before adjusting for ECL.
Management has assessed that the Group’s provision for expected credit losses related to cash and cash equivalents would not
be material in any of the periods presented.
The carrying amount of cash and cash equivalents balance represents the maximum credit exposure.
Credit risk with respect to trade receivables and other receivables
The carrying amount of trade receivables represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting dates was as follows:
Carrying amount
As of
December 31, 2021
As of
December 31, 2020
Trade receivables from third parties
23,848
25,007
Trade receivables from related parties
-
-
Total
23,848
25,007
The specifics of the Group’s activity (numerous end-users worldwide, collection of cash payments via major distribution
platforms with high credit ratings) limits considerably the potential credit risk with regard to trade receivables; the credit risk is
concentrated as the Group has trade receivables from the few major distribution platforms (cash collection agents).
Below are disclosed the concentrations of main trade receivables as at the respective balance sheet dates and their share in
trade receivables from third parties:
As of
December 31, 2021
%
As of
December 31,
2020
%
Google
10,414
44%
11,581
46%
Apple
9,553
40%
9,703
39%
Facebook
1,578
7%
1,807
7%
Amazon
505
2%
596
3%
Other
1,798
7%
1,320
5%
Trade receivables from third parties
23,848
100%
25,007
100%
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
47
Allowance for expected credit losses
The Group recognizes allowance for expected credit losses according to IFRS 9 all
Financial Instruments,
consideringreasonable and supportive information (e.g. customer rating, historical recoverability).
As there are only a few important business partners, each of them with high credit ratings (Aa1 to A1 for the years ended
December 31, 2021 and December 31, 2020) the Group does not apply the portfolio approach and performs the analysis on the
individual basis instead. Taking into account that Group’s trade receivables are from a few large Platform Providers and there
were no issues with historical recoverability, the related expected credit losses had been assessed as immaterial.
All trade receivables are classified to Stage 2 as those are receivables for which the ECL is calculated using the simplified
approach allowed under IFRS 9; there are no trade receivables in Stage 3 (e.g. receivables which are overdue more than 90 days
or individually identified as impaired).
For movement in the allowance for expected credit losses please refer to Note 13
Trade and other receivables.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
48
The ageing of trade receivables at the reporting dates was as follows:
As of December 31, 2021
Total
not due and
overdue up to 1
month
over 1 month to 3
months
over 3 months to 6
months
over 6 months to 1
year
over 1 year
Trade receivables
23,848
22,371
1,426
18
33
-
Allowance for expected credit losses
-
-
-
-
-
-
Trade receivables, net
23,848
22,371
1,426
18
33
-
As of December 31, 2020
Total
not due and
overdue up to 1
month
over 1 month to 3
months
over 3 months to 6
months
over 6 months to 1
year
over 1 year
Trade receivables
25,007
24,921
86
-
-
-
Allowance for expected credit losses
-
-
-
-
-
-
Trade receivables, net
25,007
24,921
86
-
-
-
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
49
(c) Liquidity risk
Liquidity risk means the risk that the Group may encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group’s management approach to managing liquidity
is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Liquidity risk is
assessed in conjunction with the Group’s budgeted cash flows and by managing a proper current liabilities structure. In addition,
in February 2021 Huuuge Inc, has launched its initial public offering, with final listing date on the Warsaw Stock Exchange was
February 19, 2021. Net proceeds from the issuance of the newly issued shares amounted to USD 101 million after deduction of
costs and expenses associated with the offering, and after execution of the stabilization process described in Note 15
Share
capital
. Unexpected business circumstances that may lead to deteriorating liquidity position are balanced with the demand for
the Company’s debt. The method of measuring the liquidity risk consists of the analysis of the cover of current liabilities with
available cash resources.
There are no bank loan balances and bank loan agreements in force as at December 31, 2021, December 31, 2020 and as at
date of approval these consolidated financial statements for issue, thus also interest rate risk is remote from the Group’s
perspective. Moreover, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or
at significantly different amounts.
The Group’s operations, and thus its liquidity, have not been adversely affected by the global COVID-19 pandemic.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
50
The following are the contractual maturities of financial liabilities including estimated interest payments as of respective balance sheet dates:
As of December 31, 2021
Carrying
amount
Contractual
cash flows
6 months or
less
6
–
12 months1
–
2 years2
–
5 yearsover 5 years
Trade payables
3,204
2,717
2,460
255
2
-
-
Deferred payment for Traffic Puzzle Game
29,400
29,400
29,400
-
-
-
-
Accrued expenses (except taxes and
employee-related)
17,226
17,226
17,226
-
-
-
-
Lease liabilities
17,257
17,257
2,279
1,996
3,772
9,210
-
Non derivative financial liabilities
67,087
66,600
51,365
2,251
3,774
9,210
-
As of December 31, 2020
Carrying
amount
Contractual
cash flows
6 months or
less
6
–
12 months1
–
2 years2
–
5 yearsover 5 years
Trade payables
11,960
11,961
11,939
22
-
-
-
Accrued expenses (except taxes and
employee-related)
18,507
18,507
18,507
-
-
-
-
Lease liabilities
9,061
9,508
1,494
1,303
3,212
3,499
-
Non derivative financial liabilities
39,528
39,976
31,940
1,325
3,212
3,499
-
As of December 31, 2020 Series C preference shares were not included in the maturity analysis as they were settled by delivery of the Group’s own equity instruments, and, consequently, its
settlement did not impact the overall liquidity position of the Group.
There were no derivative financial instruments at the end of reported periods.
The changes in liabilities arising from financing activities are presented in Note 20
Lease
and in Note 17Conversion of series C preference shares
.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
51
(d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices may affect
the Group’s income or the value of the financial instruments held. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimizing the return. The Group does not apply hedge
accounting in order to manage volatility in profit or loss and so far neither has entered into derivatives nor incurred external
financial liabilities.
(i) Currency risk
One of the main risks to which the Group is exposed is the currency risk related to the exchange rate volatility between EUR and
USD and functional currencies of respective Group entities. The Group is exposed to the currency risks resulting from the foreign
currency balances (cash and cash equivalents, trade receivables, trade payables except taxes and employee-related payables)
and from the business operations.
The Group has not entered into derivative transactions with banks yet but is considering doing so in the future. For the time
being due to the mix of currencies for accounts receivable and accounts payable, as described above, the Group takes
advantage of a reduced currency risk due to the fact that that currency differences resulting from accounts receivable and
accounts payable have the opposite effect, i.e. exposures are netted.
The Group’s exposure to foreign currency risk for the most significant currencies is illustrated in the table below.
Foreign currency denominated
As of
December 31, 2021
As of
December 31, 2020
Trade receivables
23,848
25,007
USD – foreign
2,923
-
PLN – foreign
-
-
EUR – foreign
370
1,474
ILS – foreign
-
-
Functional currencies
20,555
23,533
Cash and cash equivalents
204,415
94,158
USD – foreign
15,508
15,731
PLN – foreign
7,645
4,452
EUR – foreign
10,244
8,407
ILS – foreign
-
-
Functional currencies
171,017
65,568
Trade payables and accrued expenses (except taxes and
employee-related)
(49,830)
(30,467)
USD – foreign
(340)
(66)
PLN – foreign
253
-
EUR – foreign
(1,022)
(407)
ILS – foreign
(20)
-
JPY – foreign
(76)
-
GBP – foreign
(158)
-
Functional currencies
(48,468)
(29,994)
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
52
Net balances in foreign currencies
As of
December 31, 2021
As of
December 31, 2020
USD
18,091
15,665
PLN
7,898
4,452
EUR
9,593
9,474
ILS
(20)
-
JPY
(76)
-
GBP
(158)
-
Gross exposure
35,328
29,591
The gross exposure is equal to the net exposure, as the Group did not enter into hedging transactions.
Sensitivity analysis
A strengthening or weakening of foreign currencies, as indicated below, against all functional currencies would have increased
or decreased, respectively, net profit or loss by the amounts shown below. This analysis is based on foreign currency exchange
rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that
all other variables, in particular interest rates, remain constant.
As of
December
31, 2021
EUR/
USD
USD/
PLN
EUR/
PLN
USD/
ILS
PLN/
JPY
USD/
GBP
EUR/
GBP
PLN/
GBP
USD/
JPY
Total
exposure
USD
-
18,783
-
7,232
-
(217)
-
-
(35)
25,763
EUR
7,165
-
-
-
-
-
(72)
-
-
7,093
PLN
-
-
2,527
-
-
-
-
(15)
-
2,512
ILS
-
-
-
-
-
-
-
-
-
-
JPY
-
-
-
-
(40)
-
-
-
-
(40)
Gross
exposure
7,165
18,783
2,527
7,232
(40)
(217)
(72)
(15)
(35)
35,328
Reasonable
shift +10%
717
1,878
253
723
(4)
(22)
(7)
(2)
(4)
Reasonable
shift -10%
(717)
(1,878)
(253)
(723)
4
22
7
2
4
As of
December
31, 2020
EUR/USD
USD/PLN
EUR/PLN
USD/ILS
ILS/EUR
ILS/PLN
PLN/JPY
Total exposure
USD
-
17,030
-
3,062
-
-
-
20,092
EUR
7,436
-
-
-
19
-
-
7,455
PLN
-
-
2,036
-
-
8
-
2,044
ILS
-
-
-
-
-
-
-
-
JPY
-
-
-
-
-
-
-
-
Gross
exposure
7,436
17,030
2,036
3,062
19
8
-
29,591
Reasonable
shift +10%
743
1 703
204
306
2
1
-
Reasonable
shift -10%
(743)
(1,703)
(204)
(306)
(2)
(1)
-
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
53
(ii) Interest rate risk
As the Group has not entered in bank loan agreements in all presented periods till December 31, 2021, the interest rate risk is
marginal. The Group has recognized the lease liability; the lease liability bears fixed interest.
The Group does not have any significant interest bearing liabilities at variable rate which would exposure the Group to the cash
flow risk.
The Group’s interest bearing assets are cash and cash equivalents. The cash at banks is on current account at variable interest
rate. The investments in money market funds are at variable interest rate. The interest bearing assets at variable rate expose the
Group to cash flow risk.
(e) Capital management
The Board of Directors manages the Group’s capital structure and makes adjustments in light of changes in economic
conditions.
The Board’s of Directors policy is to maintain a strong capital base so as to maintain investors’ and market confidence and to
sustain future development of the business. The Group’s management seeks to maintain a sufficient capital base for meeting
the Group’s operational and strategic needs, with the objective to safeguard the ability to continue as a going concern and
optimize the capital structure in order to reduce the cost of capital and maximize the return on capital to the shareholders. The
amount of capital maintained in each reporting period (see table below) met management’s objectives.
The capital managed by the Group’s management includes equity and preferences shares series C, classified as non-current
financial liabilities as of December 31, 2020 and further converted on February 5, 2021. As such, managed capital consists of
ordinary shares, preference shares of series A and B, as well as repurchased own shares and options as of year-ended
December 31, 2021. For the amounts please refer to respective Note 15 these consolidated financial
Share capital,
ofstatements. There are no externally imposed capital management requirements (such as covenants or similar).
The Group’s management monitors the return on capital on the basis of the basic and diluted earnings per share ratios. Further
information on calculation of EPS is presented in Note 12
Financial risk management
, point (f)
Earnings per share. The objective
of the Management is to maximize the return on capital to the shareholders.
No dividends were declared and paid by the Company to its shareholders in the years ending December 31, 2021 and December
31, 2020.
As of
December 31, 2021
As of
December 31, 2020
Equity
226,099
(96,008)
Preference shares series C (non-current liability)
-
176,606
Total capital
226,099
80,598
(f) Earnings per share
Basic EPS is calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity by the weighted
average number of ordinary shares outstanding.
Diluted EPS is calculated by adjusting the earnings per share for the effects of dilutive employee share options, preference
shares classified as equity. Convertible preference shares classified as equity are dilutive if the amount of dividend declared on
such share per ordinary share obtainable on conversion is below basic EPS. Convertible preference shares classified as debt are
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
54
dilutive if the fair value measurement change recorded in profit and loss, net of tax per ordinary share obtainable on conversion,
is lower than basis EPS.
Series A and B preference shares are non-cumulative equity instruments – a dividend on ordinary shares can only be declared if
the dividend on preference shares is also declared in the amount that is at least the same but the Group otherwise does not
have an obligation to declare preferred dividends. Thus series A and B shares are treated as participating equity instruments
(IAS 33 A13(a)). Therefore, in the calculation of basic EPS the amount of undistributed earnings is allocated to both ordinary
shareholders and participating preference shareholders irrespective of whether any dividends were declared during the period.
Although, no dividends were declared in the presented periods, the numerator for basic EPS is adjusted for the effects of those
instruments (i.e. the amount of dividend attributable to those shareholders).
Options granted to employees under the ESOP are considered to be potential ordinary shares. They have been included in the
determination of diluted earnings per share. The options have not been included in the determination of basic earnings per
share. Details relating to the options are set out in Note 16
Share-based payment arrangements.
Treasury shares represent the repurchased own shares and they are excluded from the calculation of earnings per share as they
are not outstanding.
Basic EPS
Year ended
December 31, 2021
Year ended
December 31, 2020
Net result attributable to the owners of the Parent
[A]
(9,681)
(82,604)
Undistributed profit (loss) attributable to holders of
series A and B preference shares*
[B]
(165)
(20,537)
Profit (loss) attributable to holders of ordinary
shares
[C]=[A]-[B]
(9,516)
(62,067)
* Series A and B preference shares are treated as participating equity instruments due to the fact that the preference shares series A and
B participate in the dividend together with the ordinary shares thus reducing the entitlement of an ordinary shareholder to the net profit
or loss. The numerator for basic EPS is adjusted for the effects of those instruments (i.e. the amount of dividend attributable to those
shareholders).
Year ended
December 31, 2021
Year ended
December 31, 2020
Restated
Weighted average number of ordinary shares**
[D]
77,342,078
42,385,427
Basic EPS
[E] = [C] / [D]
(0.12)
(1.46)
**The weighted average number of shares was adjusted for the event of share split which took place on January 20, 2021. In accordance
with IAS 33 weighted average number of shares has to be adjusted retrospectively for all periods presented,
Earnings per share
thetherefore the additional shares are treated as having been in issue during the year ended December 31, 2020 to give a comparable result.
In the result of the share split each one of common and preferred shares was automatically reclassified as five shares of common or
preferred shares accordingly, i.e. share split on a one for five basis
.
For more information please refer to Note 15 Share Capital
.
Diluted EPS
Series C preference shares, classified as debts as of year-end December 31, 2020, are anti-dilutive considering the effect of the
fair value measurement recognized in profit and loss (please refer to Note 9 the number of ordinary
Finance expense)
andshares that was transferred for these instruments. The effects of anti-dilutive potential ordinary shares are ignored in calculating
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
55
diluted EPS. Consequently, profit (loss) attributable to ordinary equity holders of the parent adjusted for the effect of dilution is
equal to profit (loss) attributable to holders of ordinary shares.
Profit (loss) attributable to holders of ordinary shares and profit (loss) attributable to ordinary equity holders of the parent
adjusted for the effect of dilution is presented below:
Year ended
December 31, 2021
Year ended
December 31, 2020
Profit (loss) attributable to holders of ordinary shares
[C]
(9,516)
(62,067)
Profit (loss) attributable to ordinary equity holders of
the parent adjusted for the effect of dilution*
[H]
(9,516)
(62,067)
Series A, B and C, as well as employee stock option plan do not have dilutive effect. Consequently, weighted average number of
ordinary shares equals weighted average number of ordinary shares adjusted for the effect of dilution, and diluted EPS equals
basic EPS as presented below:
Year ended
December 31, 2021
Year ended
December 31, 2020
Weighted average number of issued ordinary shares
used in calculating basic earnings per share*
[D]
77,342,078
42,385,427
Weighted average number of issued ordinary shares and
potential ordinary shares used in calculating diluted
earnings per share*
[I]
77,342,078
42,385,427
Diluted EPS
[J]=[E]
(0.12)
(1.46)
*The weighted average number of shares is adjusted for the event of share split which took place on January 20, 2021, In accordance
with IAS 33 weighted average number of shares has to be adjusted retrospectively for all periods presented,
Earnings per share
thetherefore the additional shares are treated as having been in issue during the year ended December 31, 2020 to give a comparable result.
In the result of the share split each one of common and preferred shares was automatically reclassified as five shares of common or
preferred shares accordingly, i.e. share split on a one for five basis
.
For more information please refer to Note 15 Share capital
.
** In addition to the Employee Stock Option Plan, the Group accounts, in accordance with IFRS 2, for the earn-out consideration related to
the acquisition of Double Star Oy, which is payable in ordinary shares of Huuuge Inc. and is dependent on Double Star’s financial
performance and the continuing employment of the sellers of Double Star Oy. The shares which would be potentially payable to the
sellers of Double Star Oy after meeting the performance and service conditions, are contingently issuable ordinary shares. As of
December 31, 2021 the Group’s management assessed how many ordinary shares would be issuable if the reporting date was the end of
the contingency period, i.e. the Group’s management assesses that both performance and continuing employment conditions were met.
As of December 31, 2021 23,046 shares would be issuable if the reporting date was the end of the contingency period, nevertheless no
dilutive effect has been identified regarding the earn-out consideration in the year ended December 31, 2021. No dilutive effect has been
identified regarding the earn-out consideration in the year ended December 31, 2020 due to the fact that the performance condition has
not been met, assuming December 31, 2020 was the end of the contingency period.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
56
(g) Accounting classifications of financial instruments and fair values
The fair values of financial assets and liabilities, together with the carrying amounts presented in the statement of financial position are as follows:
As of December 31, 2021
Financial assets measured
at amortized cost
Financial liabilities
measured at fair value
Financial liabilities at
amortized cost
Financial liabilities out
of scope of IFRS 9
Total carrying amount
Fair value
Assets
228,263
-
-
-
228,263
228,263
Trade receivables
23,848
-
-
-
23,848
23,848
Cash and cash equivalents
204,415
-
-
-
204,415
204,415
Liabilities
-
-
32,604
17,257
49,861
49,861
Lease liability
-
-
-
17,257
17,257
17,257
Trade payables
-
-
32,604
-
32,604
32,604
TOTAL
228,263
-
32,604
17,257
278,124
278,124
As of December 31, 2020
Financial assets measured
at amortized cost
Financial liabilities
measured at fair value
Financial liabilities at
amortized cost
Financial liabilities out
of scope of IFRS 9
Total carrying amount
Fair value
Assets
119,165
-
-
-
119,165
119,165
Trade receivables
25,007
-
-
-
25,007
25,007
Cash and cash equivalents
94,158
-
-
-
94,158
94,158
Liabilities
-
176,606
11,960
9,061
197,627
197,627
Preference shares
-
176,606
-
-
176,606
176,606
Lease liability
-
-
-
9,061
9,061
9,061
Trade payables
-
-
11,960
-
11,960
11,960
TOTAL
119,165
176,606
11,960
9,061
316,792
316,792
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
57
As at December 31, 2021 and December 31, 2020 the Group’s management did not identify any financial assets measured at fair
value – neither through profit or loss nor through other comprehensive income.
The Group’s management believes that the fair values of financial instruments do not differ significantly from their carrying
amounts.
Series C preference shares
Prior to conversion on February 5, 2021 series C preference shares liability was measured at fair value initially with gains/losses
on subsequent remeasurements being recognized in profit or loss at each reporting period. The fair value measurements of
series C preference shares was classified as Level 3 of the fair value hierarchy.
Further information regarding the gain/loss recognized in presented period on the remeasurement of the preference shares
liability is presented in Note 17
Conversion of series C preference shares
.
13. Trade and other receivables
As of
December 31, 2021
As of
December 31, 2020
Trade accounts receivable and accrued revenues from third parties
23,848
25,007
Contract cost
938
1,008
Tax receivables other than from corporate income taxes
1,952
1,276
Other receivables
151
1,268
Prepaid expenses
782
911
Allowance for expected credit losses
-
(244)
Total trade and other receivables
27,671
29,226
The whole amount of the credit loss in 2020 relates to “Other receivables’ which are a non-financial assets and specifically
relates to the receivable from an employee.
Allowance for expected credit losses
As of
December 31, 2021
As of
December 31, 2020
Opening balance
(244)
(171)
- increase
-
(73)
- decrease – use
244
-
Total allowance for expected credit losses
-
(244)
The majority of trade accounts receivable from main customers (platform distributors) are due within 30 days.
Prepaid expenses include advance payments for services that will be received in the future. Main types of prepayments are:
subscription of Internet services, expenses from cloud computing arrangements which do not include an intangible asset
(software as a service contracts) and domain costs.
Allowance for expected credit losses is recognized in other operating expenses or finance costs (accrued interest) in the
consolidated statement of comprehensive income, based on the nature of the underlying balance. The allowance for expected
credit losses referred solely to “Other receivables” in the amount of USD 244 thousand as at December 31, 2020. There was no
allowance for expected credit losses recognised as at December 31, 2021.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
58
14. Cash and cash equivalents
As of
December 31, 2021
As of
December 31, 2020
Cash in hand
1
2
Cash at banks (current accounts)
204,414
86,887
Money market mutual fund investments
-
7,269
Total cash and cash equivalents
204,415
94,158
Money market mutual fund investments have been classified as cash equivalents. For the reasoning please refer to Note 2
Basis
for preparation of the consolidated financial statements
, point (d)
Key judgements and estimates.
As of December 31, 2021 there was restricted cash of USD 19 thousand (USD 15 thousand as of December 31, 2020).
15. Share capital
Starting from February 5, 2021, Group's share capital comprised of common shares and preference shares series A and B.
Before February 5, 2021, Group's share capital comprises of common and preferred shares series A, B and C. Below are
presented movements on different components of equity divided in the categories of shares (nominal values presented in USD,
not thousand USD):
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
59
Shares classified as equity instruments as of December 31, 2021, i.e. including preference shares of series C after conversion (see Note 12
Financial risk management
point (e) Capital management)
Common shares
Preference shares (incl
series C)
Treasury shares
Treasury shares allocated
for the existing share-based
payment programs
Sub-total (issued)
Shares allocated for the
existing share-based
payment programs (not
issued)
Grand total
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
As of January 1, 2021
8,618,959
863
5,963,949
596
1,390,019
139
794,442
80
16,767,369
1,678
881,071
88
17,648,440
1,766
Redemption of treasury shares
-
-
-
-
(1,390,019)
(139)
(794,442)
(80)
(2,184,461)
(219)
-
-
(2,184,461)
(219)
Exercise of stock options
6,411
1
-
-
-
-
-
-
6,411
1
(6,411)
(1)
-
Allocation of shares to
Share-based payment program
-
-
-
-
-
-
-
-
-
-
794,442
80
794,442
80
All shares before share split
8,625,370
864
5,963,949
596
-
-
-
-
14,589,319
1,460
1,669,102
167
16,258,421
1,627
All shares after share split
43,126,850
864
29,819,745
596
-
-
-
-
72,946,595
1,460
8,345,510
167
81,292,105
1,627
Conversion of preference shares
29,819,745
596
(29,819,745)
(596)
-
-
-
-
-
-
-
-
-
-
Shares issued
11,300,100
226
-
-
-
-
-
-
11,300,100
226
-
-
11,300,100
226
Stabilization option
(3,331,668)
(67)
-
-
3,331,668
67
-
-
-
-
-
-
-
-
Preference shares issued
-
-
2
0
-
-
-
-
2
0
-
-
2
0
Reduction of shares allocated
for the existing share-based
payment programs (not issued)
-
-
-
-
-
-
-
-
-
-
(1,775,320)
(36)
(1,775,320)
(36)
Allocation of treasury shares to
share-based payment program
-
-
-
-
(1,775,320)
(36)
1,775,320
36
-
-
5,897,271
118
5,897,271
118
Exercise of stock options
1,775,320
36
-
-
-
-
(1,775,320)
(36)
-
-
-
-
-
-
As of
December
31, 202182,690,347
1,655
2
0
1,556,348
31
-
-
84,246,697
1,686
12,467,461
249
96,714,158
1,935
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
60
Shares classified as equity instruments as of December 31, 2020 (i.e. excluding preference shares of series C prior to conversion):
Common shares
Preference shares
(excl series C)
Treasury shares
Treasury shares
allocated for existing
share-based payment
program
Sub-total (issued)
Shares allocated for the
share-based payment
program(not issued)
Grand total
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
As of January 1, 2020
8,396,921
840
2,532,450
253
1,890,872
189
405,000
41
13,225,243
1,323
1,057,080
106
14,282,323
1,429
Shares reissued/
(repurchased)
-
-
192,802
19
(192,802)
(19)
-
-
-
-
-
-
-
-
Acquisition of subsidiaries
46,029
5
-
-
(46,029)
(5)
-
-
-
-
-
-
-
-
Allocation of shares to Share-based payment program
-
-
-
-
(389,442)
(39)
389,442
39
-
-
-
-
-
-
Exercise of stock options
176,009
18
-
-
-
-
-
-
176 ,009
18
(176,009)
(18)
-
-
As of December 31, 2020
8,618,959
863
2,725,252
272
1,262,599
126
794,442
80
13,401, 252
1,341
881,071
88
14,282,323
1,429
All shares managed as capital as of December 31,2020 (see Note 12 (e) thus comprising the equity and liability instruments (i.e. including
Financial risk management
pointCapital management
),preference shares of series C):
Common shares
Preference shares
(incl series C)
Treasury shares
Treasury shares
allocated for existing
share-based payment
program
Sub-total (issued)
Shares allocated for the
share-based payment
program (not issued)
Grand total
Number of
shares
Nominal
value
Number
of shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
Number of
shares
Nominal
value
As of January 1, 2020
8,396,921
840
5,749,621
575
2,039,818
204
405,000
41
16,591,360
1,660
1,057,080
106
17,648,440
1,766
Shares reissued/
(repurchased)
-
-
214,328
21
(214,328)
(21)
-
-
-
-
-
-
-
-
Acquisition of subsidiaries
46,029
5
-
-
(46,029)
(5)
-
-
-
Allocation of shares to Share-based payment
program
-
-
-
-
(389,442)
(39)
389,442
39
-
-
-
-
-
-
Exercise of stock options
176,009
18
-
-
-
-
-
-
176,009
18
(176,009)
(18)
-
-
As of December 31, 2020
8,618,959
863
5,963,949
596
1,390,019
139
794,442
80
16,767,369
1,678
881,071
88
17,648,440
1,766
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
61
The Company is authorized to issue up to 113,881,420 shares with a par value of USD 0.00002 (113,881,418 of common shares
and 1 share of series A preferred share and 1 share of series B preferred share). As of December 31, 2021, 1,775,320 shares
were allocated to a reserve which could be issued only with majority shareholders approval. This is a consequence of using
1,775,320 treasury shares for the Group’s ESOP obligations (as described below), which otherwise would need to be satisfied via
issuance of new shares.
As of December 31, 2021, the share capital of the Company comprised 84,246,697 shares with a par value of USD 0.00002 per
share and the total value of USD 1,686 (not thousand), including 82,690,347 common shares held by shareholders, 2 preference
shares (one preference share of series A and one preference share of series B), and 1,556,348 of common shares reacquired by
the Company and not redeemed (treasury shares and treasury shares allocated for the existing share-based payment
programs).
As of December 31, 2020 there were ordinary and preference shares, including shares reacquired by Huuuge Inc. and not
redeemed (so-called treasury shares) of the nominal value of USD 0.0001 per share and the total value of USD 1,598 (not
thousand). 9,226,810 ordinary shares include: 8,618,959 ordinary shares held by shareholders and 607,851 of ordinary shares
reacquired by the Company and not redeemed.
As of December 31, 2020 there were 6,746,117 preference shares, out of which 782,168 were reacquired by Huuuge Inc. and not
redeemed (treasury stock), including 257,103 preference shares of series A, 397,645 preference shares of
series B and 127,420 shares of series C (presented in the consolidated financial statements within financial liabilities).
During the year 2021, the number of shares (not issued) allocated for the existing share-based payment programs was reduced
by 1,775,320 shares. This is because the treasury shares were delivered to employees for the part of options exercised during
the year ended December 31, 2021. On August 9, 2021 the number of shares allocated (not issued) for employee stock option
plan was extended by additional 5,897,271 shares. After the changes, as of December 31, 2021 12,467,461 shares with a par
value of USD 0.00002 per share were reserved for two stock option programs established in 2015 and 2019 years.
As of December 31, 2020 1,675,513 shares were reserved for two stock option programs: 881,071 shares for the stock option
program established in year 2015 and 794,442 shares for the stock option program established in 2019.
In 2021 and 2020, some share options held by the employees under the share based payment program were exercised, resulting
in the issue of ordinary shares or the delivery of treasury shares with the difference between the exercise price paid by the
employee and the nominal amount of shares recognized as share premium (presented within “Supplementary capital”), as
described below in this note. Further information on the share-based program is presented in Note 16
Share-based payment
arrangements
.
In the year ended December 31, 2021 the following transactions in preference shares took place:
●
Redemption of treasury shares
On January 15, 2021 the Board of Directors of the Company approved to retire all of the Company’s common and preferred
shares that were held as treasury shares, which were as follows:
●
common shares – 1,402,293 shares
●
series A preference shares – 257,103 shares
●
series B preference shares – 397,645 shares
●
series C preference shares – 127,420 shares.
Common shares were reverted to the status of authorized but unissued shares, preferred shares were eliminated to no longer be
issued or outstanding shares.
Redemption of treasury shares has been recognized as a decrease in supplementary capital in the consolidated statement of
changes in equity in the amount of USD 33,994 thousand.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
62
●
Share split
On January 18, 2021 the Board of Directors approved the split of all of the Company’s existing common and preferred shares.
The Certificate of Incorporation of Huuuge Inc. was amended as following:
The total number of shares of all classes of stock which Huuuge Inc. has authority to issue is 118,063,540 shares, which shall
be divided into:
(i) 88,243,795 common shares, with a par value of USD 0.00002 per share, and
(ii) 29,819,745 preferred shares series consisting of:
a) 8,714,485 series A preferred shares, with a par value of USD 0.00002 per share,
b) 4,911,775 series B preferred shares, with a par value of USD 0.00002 per share, and
c) 16,193,485 series C preferred shares, with a par value of USD 0.00002 per share.
After this amendment each one common and each one preferred share, with a par value of USD 0.0001 per share, issued and
outstanding or held by Huuuge Inc. as treasury shares was automatically reclassified as five shares of common or preferred
shares accordingly, with a par value of USD 0.00002 per share.
Split of shares required weighted average number of shares presented in Note 12
Financial risk management
, point (f) Earnings
per share
to be adjusted in the calculation of both basic and diluted earnings per share for all periods presented in accordance
with IAS 33 Earnings per share.
●
Conversion of preference shares series A, B and C
On February 5, 2021 all preference shares series A, B and C were converted into common shares, as shown in the table below:
Before the conversion
After conversion
Series A preference
shares
Series B preference
shares
Series C preference
shares
Common shares
Number of shares
8,714,485
4,911,775
16,193,485
29,819,745
Conversion of preference shares A,B and C has been recognized as an increase in supplementary capital in the consolidated
statement of changes in equity in the amount of USD 215,603 thousand.
●
Issuance of series A and series B preference shares
On February 5, 2021 the Board of Directors, issued one series A preference share to RPII HGE LLC (Raine Group), with a par value
of USD 0.00002 per share for cash consideration of USD 50 and one series B preference share to Big Bets OU, with a par value of
USD 0.00002 per share, for cash consideration of USD 50, for which total cash consideration amounting to USD 100 was
received in February 2021. The difference between the nominal amount and the consideration received was recognized in the
supplementary capital in the consolidated statement of changes in equity.
●
Initial public offering
On January 27, 2021 Huuuge Inc. published its prospectus and launched its initial public offering. The offering comprised a
public subscription for 11,300,100 newly issued shares. The final share price for offering shares was determined as PLN 50 per
share (approx. USD 13.53 per share). Difference between the nominal amount of newly issued shares and the cash
consideration received was in the supplementary capital in the consolidated statement of changes in equity. Proceeds from
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
63
issue of common shares for public subscription amounted to USD 152,929 thousand. Net proceeds from the issuance of the
newly issued shares amounted to USD 101,434 thousand after deduction costs and expenses associated with the offering, and
after execution of the stabilization process as described below.
Funds obtained from issuance of shares are planned to be spent on acquisition of entities and assets to expand the Group’s
offer and competences. Prior to the offering, Huuuge, Inc. has entered into foreign exchange forward contract contingent upon
the event of initial public offering. In accordance with the agreement, upon the occurrence of the initial public offering event, the
amount of PLN 379,000 thousand (out of net proceeds from the newly issued shares) will be converted to the USD at a fixed rate
at the date of settlement of the contract. The Group recognized the finance costs resulting from this transaction in the amount
of 2,662 thousand USD. Please refer to Note 9
Finance expense
for details.On April 6, 2021 current Report 11/2021 was issued about the information on the costs of the offering and stabilization actions
incurred by Huuuge Inc. The total costs incurred in connection with the offering amounted to USD 7,372 thousand. The total cost
of the public offering has been accounted for by:
- a charge to current period expenses of USD 1,651 thousand of which USD 1,526 thousand was recorded in the year 2020 and
USD 125 thousand was recorded in the year 2021, and
- a decrease in equity of USD 5,721 thousand of which USD 864 thousand decreased equity in the year 2020, and USD 4,857
thousand decreased equity in the year 2021, which reflects the portion of costs associated with obtaining a funding form new
issuance.
●
Execution of stabilization option
In relation to the initial public offering, on February 5, 2021 the Company and IPOPEMA Securities S.A. (“Stabilization Manager”)
signed Stabilization Agreement. The purpose of the Stabilization Agreement was to stabilize the price of the Huuuge Inc. shares
at a level higher than the level which would otherwise have prevailed.
In accordance with the Stabilization Agreement, the Stabilization Manager withhold a portion of the proceeds from the Huuuge,
Inc. IPO., i.e. PLN 166,583 thousand (calculated as 3,331,668 shares x PLN 50/ per share). At the same time, based on the
Stabilisation Agreement the Company was obliged to buy from the Stabilization Manager the shares purchased by the
Stabilization Manager as a result of the conducting the Stabilization transactions. In addition, the parties agreed on split of the
profit in respect of the Stabilization transactions (resulted from the difference between the offer price per share and the price
actually paid by the Stabilization Manager for each share, after deducting the transaction costs).
For the purpose of accounting for the stabilisation transaction, the Company treated the entire stabilisation agreement as a
financing transaction, i.e. repurchase of own shares from the market in the scope of IAS 32 and IFRS 9.
Accordingly, at inception of the stabilisation transactions, the Company recorded a prepayment to reflect the fact that the
stabilisation activities were funded from the proceeds from the offering. The prepayment represented a financial asset in the
scope of IFRS 9 because it could be settled either in cash or in a variable number of own shares, at discretion of the Stabilisation
Manager.
At the same time, when the Company entered the contract, the liability was recognised in correspondence with equity resulted
from the obligation to repurchase own shares (the put option) at the amount that is the present value of the redemption amount.
The liability and the assets were measured at fair value through profit or loss until the stabilisation transactions were completed.
As such, these transactions had no net impact on profit or loss.
On February 26, 2021 the Company ended the stabilization process, and the above-mentioned liability and asset have been
derecognized. The Company repurchased via Stabilization Manager its own shares in the total number of 3,331,668 in the price
range PLN 38.4000 – 49.9850 (USD 10.35 – USD 13.51). The remuneration of the Stabilization Manager was treated as a
share-based payment in accordance with IFRS 2 because the amount of the remuneration was based on the value of the shares.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
64
Nevertheless, the remuneration incurred was directly attributable and incremental to repurchase of own shares (a capital
transaction); therefore, it was recorded directly in equity.
As a result of the Stabilization Agreement, the repurchased shares were recognized as a decrease in equity (treasury shares) in
the total amount of USD 43,976 thousand, calculated as the number of shares repurchased, multiplied by the price per share
plus the remuneration paid to Stabilization Manager representing transaction cost of this capital transaction. The transaction
did not have impact on profit and loss.
●
The issuance of common shares for options exercised
In the year ended December 31, 2021, before share split 6,411 share options (equivalent of 32,055 options after share split) held
by the employees under the share-based payment program were exercised, resulting in the issuance of common shares with the
difference between the exercise price paid by the employee and the nominal amount of shares recognized as share premium
(presented within “Supplementary capital”) of USD 3 thousand (USD 202 thousand in the year ended December 31, 2020). The
exercise price was paid by the employees in cash.
●
Delivery of the treasury shares for options exercised
In the year ended December 31, 2021, after share split 1,851,622 share options held by the employees under the share-based
payment program were exercised, out of which for 1,775,320 options exercised treasury shares were delivered to employees
before December 31, 2021 (the difference is due to cashless exercises). The delivery of treasury shares was presented as a
movement from treasury shares to common shares. The movement resulted in an increase in share capital in the amount of
nominal value of the shares delivered, and difference between the value of treasury shares and the cash consideration received
in the amount of USD 22,672 thousand was recognized in supplementary capital. At the same time, the movement decreased
the number of shares (not issued) allocated for the existing share-based payment programs.
Holders of the 2 preference shares series A and series B, which may be converted for a fixed number of common shares, have
several rights additional to the ones of the common shareholders which may vary for series A and B). These rights are stipulated
in the corporate documents of Huuuge Inc., in particular in the Fifth Amended and Restated Certificate of Incorporation.
Essentially, the rights refer to:
●
protective provisions in case of liquidation, dissolution, winding up, certain mergers, consolidations and sale of assets
of Huuuge Inc. or conversion to common shares – the holders of series A or B preference shares shall be entitled to
be paid out of the assets of the Company available for distribution to its shareholders before the holders of common
shares,
●
election of a director for every separate class of preference shares 1 per each series of preference shares (series A,B);
2 by the holders of common shares.
As at December 31, 2021 and December 31, 2020 no shareholder owned over 50% of the Company’s equity or had more than
50% of voting rights. The Company's major shareholder is Mr Anton Gauffin, CEO and the Founder, who participates in the
Company’s ordinary shares indirectly (through shares of Big Bets OU).
The supplementary capital derives mainly from the share premium gained on issuance of shares, or re-issue of treasury shares.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
65
16. Share-based payment arrangements
As at December 31, 2021 and as at December 31, 2020 the Group had an equity incentive plan, i.e. ESOP. The first stock option
program (the employee stock option plan or “ESOP 2015”) was established by the Company’s Board of Directors on April 3, 2015,
the second one on October 19, 2019 (“ESOP 2019”), the grant dates were determined at the dates when the contracts with
eligible employees were signed. Additionally, during the period ended December 31, 2021 stock option plan was granted to Mr.
Anton Gauffin as described below in this note. The program entitles employees and some consultants to purchase shares in the
Company. Each option stands for one common or treasury share of the Company.
The vesting condition of both ESOP 2015 and 2019 programs is to provide the service continuously for at least 4 years from the
grant date and the following vesting schedule is applicable depending on the particular grant:
●
about 25% of the shares options vest and become exercisable on a 12-month anniversary of the vesting
commencement date and then after end of each consecutive month 1/36 of the remaining shares options vest and
become exercisable; or
●
the options vest and become exercisable with respect to 1/48th of the total option shares when the optionee
completes each full month of continuous service after the grant date.
For such share-based payments staged vesting applies i.e. each instalment with different vesting period is treated as a separate
award with a different vesting period.
As of December 31, 2020 there were 1,675,513 shares reserved for the ESOP, out of which 239,929 were not yet allocated to
specific employee and 1,435,584 attributed to specific option holders. This is at the Group discretion whether the unallocated
shares will be allocated within the share-based program to the employees or unused or withdraw from the program. As of
December 31, 2021 there were 12,467,461 shares reserved for the ESOP that were not yet allocated to specific employees.
In 2021 the Company’s Board of Directors granted 4,111,765 options to its employees and consultants (738,024 in 2020). Each
option can be exercised at a weighted exercise price of USD 9.70 (not in thousand). Shares option expense for year 2021
amounts to USD 11,830 thousand (USD 3,469 thousand in 2020) and was booked against equity (employee benefit reserve)
which amounted to USD 19,812 thousand as of December 31, 2021 (USD 8,052 thousand as of December 31, 2020).
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
66
Details of the grants are presented in the table below:
Grant date
Number of instruments granted
Expiry date
Granted in 2015
293,292
June 1, 2025
Granted in 2016
175,058
June 1, 2026 –
December 1, 2026
Granted in 2017
386,310
February 1, 2027 –
December 1, 2027
Granted in 2018
131,000
December 1, 2024
Granted in 2019
243,525
December 1, 2024 –
November 6, 2025
Granted in 2020
738,024
April 1, 2027–
November 11, 2027
February 2, 2021
235,000
February 2, 2028
August 9, 2021
3,376,765
August 9, 2028
September 10, 2021
500,000
September 10, 2028
Subtotal granted in 2021
4,111,765
Total
6,078,974
Movements in share options since the first grant date were as follows:
Year ended December 31, 2021
Number of options
Weighted average exercise price
Balance as at January 1
1,435,584
12.01
Exercised during the period
(6,411)
0.45
Forfeited during the period
(2,056)
4.15
All options before share split
1,427,117
All options after share split
7,135,585
Granted during the period
4,111,765
9.70
Forfeited during the period
(518,371)
7.44
Exercised during the period
(1,851,622)
1.02
Expired during the period
(38,260)
2.03
Balance as at December 31
8,839,097
5.80
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
67
Year ended December 31, 2020
All options before share split
Number of options
Weighted average exercise price
Balance as at January 1
919,010
6.21
Granted during the period
738,024
16.75
Forfeited during the period
(25,066)
9.81
Exercised during the period
(176,009)
1.15
Expired during the period
(20,375)
5.83
Balance as at December 31
1,435,584
12.01
The weighted average exercise prices are presented in USD, not in thousand USD. As at December 31, 2021 2,836,827 share
options were exercisable, with weighted average exercise price of USD 2.89 per share. As at December 31, 2020 565,508 share
options were exercisable, with weighted average exercise price of USD 6.33 per share.
The below table presents a summary of share prices at the exercise dates:
Exercise date
Grant date
Exercise price
Fair Market Value on
exercise date
Number of stock
options exercised
Exercised in 2020
May 29, 2015
–
November 6, 2019
$0.0002 – $13.500
$15.0300 – $18.6200
176,009
Exercised in 2021
(before share split)
May 29, 2015 –
December 1, 2016
$0.0002 – $0.79
$54.53
6,411
Exercised in 2021
(after share split)
May 29, 2015 –
November 20, 2020
$0.00004 – $3.72402
$6.2348 – $12.0319
1,851,622
For share options outstanding at the end of the reporting periods, the range of exercise prices and weighted-average remaining
contractual life was as follows:
As at December 31, 2021:
Exercise price in USD
Number of outstanding stock options
Weighted average remaining contractual life
(in years)
0.00004 - 0.83
495,579
4.18
2.7 - 3.72
4,776,838
2.85
9.55 - 13.51
3,566,680
6.18
Total:
8,839,097
4.27
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
68
As at December 31, 2020:
Exercise price in USD
Number of outstanding stock options
Weighted average remaining contractual life
(in years)
0.0002 – 0.79
196,744
5.27
4.15
184,160
6.91
13.5 – 18.62
1,054,680
5.86
Total:
1,435,584
5.91
The fair value of the employee share options has been measured using the Black-Scholes formula by an independent appraiser,
assuming no dividends and using the valuation assumptions summarized below. The underlying price of the common stock was
determined using the fair value as of the option grant dates. The exercise prices of the options were determined by the Board of
Directors of the Company in the contract with the employee. The risk-free rate is based on the U.S. Treasury yield curve in effect
at the time of each grant date and corresponding to expiration. In assessing the appropriate time to expiration, the appraiser
examined the expiration period, the vesting period and the option grant dates.
Expected volatility was based on historic volatility of a similar industry sector. Based on the analysis and the factors specific to
the Company, an equity volatility of 55.4% - 80.0% (60.0% – 80.0% for the year ended 31 December, 2020) was used in option
pricing model.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plan are as
follows:
Year ended
December 31, 2021
Year ended
December 31, 2020
Fair value at grant date
0.00002 – 8.66
0.0001 – 31.64
Share price at grant date
0.00004 – 10.91
0.0002 – 44.26
Exercise price
0.00004 – 13.5146
0.0002 – 18.62
Expected volatility (weighted average)
55.4 % – 80%
60% – 80%
Expected life (weighted average)
3.00 – 7.30
3.00 – 7.30
Risk-free interest rate
0.21% – 2.80%
0.27% – 2.80%
The effect of the fair value measurement is reflected in the profit and loss against equity (USD 11,830 thousand was expensed
in 2021 and USD 3,469 thousand in 2020) – for details on the related employee benefit expenses please refer to Note 8
Salaries
and employee-related costs
and to the consolidated statement of changes in shareholders’ equity.
During the year ended December 31, 2021, before share split, 6,411 common shares were issued (equivalent of 32,055 common
shares after share split) and 1,775,320 treasury shares were delivered from the share-based payment program as described in
Note 15 During the year ended December 31, 2021, the Group received cash payments for the shares that were
Share capital
.delivered to employees as of December 31, 2021. During the year ended December 31, 2020, i.e. before share split – 176,009
common shares were issued resulting from the equity-settled stock option program.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
69
Other than the share-based payment arrangements described above, as a result of the acquisition that took place on July 16,
2020, the Group accounts for the earn-out consideration payable in shares dependent on performance condition and the
continuing employment condition as a share-based payment for the sellers of Double Star Oy.
As at December 31, 2020 the total number of shares to be vested during the period of 3 years after the transaction was
estimated at 46,213 shares. As at December 31, 2021 the total number of shares to be vested during the period of 3 years after
the transaction is estimated at 23,046 shares as at December 31, 2021. After December 31, 2021, 23,046 treasury shares were
delivered to former owners of Double Star Oy, as described in Note 29
Subsequent events.
The sensitivity of the total numbers of shares to be transferred to the sellers, during the period of 3 years after the transaction, to
the change of the fair value of the share price in future or estimated amount of earn-out consideration is presented below (all
other inputs remain constant):
Input
Assumptions
Rational change +10%/(-10%)
Share price
The estimated future fair value of the share
price (calculated based on the Sale and
Purchase Agreement and referring to the USD
value of Huuuge Inc.) which will be used as a
basis for calculation of the number of shares
to be vested.
As at December 31, 2021 share price of USD
9.52 is used as a basis for calculation of the
number of shares to be vested.
+10% = (2,096) shares – decrease in
number
-10% = 2,562 shares – increase in
number
Estimated amount of earn-out
consideration
Based on the estimation as at December 31,
2021 the future earn-out consideration is
estimated at USD 219 thousand.
+10% = 2,304 shares – increase in
number
-10% = (2,304) shares – decrease in
number
Total expense related to share-based payment arrangements for the year ended December 31, 2021 comprises ESOP in the
amount of USD 11,830 thousand (this expense includes USD 381 thousand related to Mr Anton’s Gauffin options which are
explained in detail further below) and earn-out consideration expense reversal in the amount of USD 70 thousand.
Total expense related to share-based payment arrangements for the year ended December 31, 2020 comprises ESOP in the
amount of USD 3,469 thousand and earn-out consideration in the amount of USD 289 thousand. These costs were allocated to
Sales and marketing expenses, Research and development expenses and General and administrative expenses lines in
consolidated statement of comprehensive income.
In addition, on March 19, 2021 the Board of Directors adopted recommendation from the Nomination and Remuneration
Committee on executive and non-executive compensation (“Proposal”). This date is the date when Mr. Gauffin started rendering
the services in respect of that grant (“service commencement date”), thus relevant costs have been recognized starting from
March 19,2021.
The final executive compensation agreement between Mr. Gauffin and the Company was approved by the Board of Directors on
September 9, 2021 and was executed by the parties on September 10, 2021.
In accordance with the adopted Proposal and the compensation agreement, the remuneration of Mr Anton Gauffin, holding the
positions of the President, Chief Executive Officer and Secretary of the Company, will consist solely of share options. All options
can be exercised at a price of PLN 50, i.e., the price of the Company’s shares in the initial public offering.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
70
The vesting conditions for the options is the following:
●
50,000 options with a vesting condition to provide the service continuously for about 4 years from service
commencement date. The Group’s management expects Mr Anton Gauffin to fulfil the service condition.
●
75,000 options with a vesting condition to provide the service continuously for about 4 years from service
commencement date and to meet 2021 EBITDA target. The Group’s management expects Mr Anton Gauffin to fulfil
the service condition, and the estimated cost reflects the 2021 EBITDA target realisation.
●
375,000 options with a variable vesting period due to the market condition, i.e., condition to meet the Company’s
market capitalization milestones. The Group’s management estimates that 6 years of continuous service will be
required for options to vest.
Similar to other share-based payments in the Group, for this program staged vesting applies, i.e., each instalment has different
vesting period and is treated as a separate award with a different vesting period.
17. Conversion of series C preference shares
The series C preference shares were classified as liability and presented in the separate line item in the statement of financial
position within non-current liabilities as of December 31, 2020. Changes in financial liability arising from preference shares,
including both changes arising from cash flows and non-cash changes, presented as a reconciliation between the opening and
closing balances in the consolidated statement of financial position:
As at January 1, 2020
48,354
Repurchase of series C preference shares
(1,444)
Finance expense recognized on repurchase of series C preference shares
481
Reissue of series C preference shares
1,447
Remeasurement recognized in statement of profit or loss during the period in (finance
income)/finance expense
127,768
As at December 31, 2020
176,606
Further information about the classification and the measurement of this liability is provided in Note 2
Basis for preparation of
the consolidated financial statements judgement and estimates – preference shares risk
, point (d)
Keyand Note 12
Financialmanagement,
point (g)
Accounting classifications of financial instruments and fair values - series C preference shares.On January 29, 2020, RP II HGE LLC (Raine) purchased from Huuuge Inc. 73,265 series C preference shares for total amount of
USD 1,447 thousand. These shares had been earlier purchased and not redeemed by Huuuge Inc. from the Korean funds in
December 2019 by the same price USD 19.75.
On July 2, 2020 Huuuge Inc. entered into an agreement to repurchase shares from the Kiwoom Cultural Venture Fund 1 for the
cash consideration of USD 1,444 thousand (USD 27.91 per share). Under the agreement Huuuge Inc. repurchased 51,739 series
C preference shares.
As at January 1, 2021
176,606
Remeasurement recognized in statement of profit or loss during the period in (finance
income)/finance expense
38,997
As at February 5, 2021 before conversion
215,603
Conversion of preference shares into common shares
(215,603)
As at December 31, 2021
-
On February 5, 2021 all preference shares series C were converted into common shares with the price per share of 13.31 USD
(share price for initial public offering as PLN 50 per share). For more information, please refer to Note 15 As a
Share capital
.HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
71
result of the conversion, financial liability arising from preference shares decreased with the corresponding increase in
supplementary capital as presented in the consolidated statement of changes in equity.
18. Goodwill
For the purpose of impairment testing, the whole Group is determined to be one cash-generating unit, to which goodwill resulting
from business combinations is allocated in full. Reconciliation of the carrying amount of goodwill in each of the reporting
periods was as follows:
As of
December 31, 2021
As of
December 31, 2020
Amount as the beginning of the period
2,838
-
Goodwill arising from the acquisition of Playable Platform B.V.
1,098
1,098
Goodwill arising from the acquisition of Double Star Oy
1,508
1,508
Foreign exchange differences
87
232
Impairment
-
-
Amount as the end of the period
2,693
2,838
The recoverable amount of the net assets of the Group has been determined based on their fair value (Level 1) as at December
31, 2021. The test results show no goodwill impairment as at December 31, 2021.
When performing the test for impairment, the recoverable amount of a cash-generating unit is determined based on the fair
value less costs of disposal, and then compared to the cash-generating unit’s carrying amount. Once the fair value of the
cash-generating unit falls below its carrying amount an additional value in use calculation is performed.
19. Trade, other payables and deferred income
As of
December 31, 2021
As of
December 31, 2020
Trade accounts payable to third parties
3,204
11,960
Deferred payment for Traffic Puzzle Game
29,400
-
Tax payables other than from corporate income taxes
2,339
686
Other accounts payable
518
2,724
Accrued expenses
17,226
22,427
Other payables
-
-
Trade and other payables
52,687
37,797
As of December 31, 2021 accrued expenses mainly include marketing and advertising expenses, expenses related to bonuses
for employees and consultants, unused vacation and the audit.
As of December 31, 2020 accrued expenses mainly include marketing and advertising expenses, expenses related to the initial
public offering and bonuses for employees and consultants.
Deferred income, presented in a separate line of the statement of the financial position, amounting to USD 3,126 thousand as at
December 31, 2021 (USD 3,360 thousand as at December 31, 2020), is a contract liability related to players' unused coins at the
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
72
end of the reporting period as described in Note 2 Basis for preparation of the consolidated financial statements, point (d)
Key
judgement and estimates – estimate of the progress towards complete satisfaction of the performance obligation.
20. Leases
The Group is committed to make payments for leases based on car fleet agreements, office space rental agreements and
short-term apartment rental agreements. The Group entities have also concluded contracts regarding low value office
equipment, such as coffee machines.
There were two significant lease agreements signed during the year ended December 31, 2021, new office building in Tel Aviv
and additional floor space in Warsaw. Lease payments for Tel Aviv office are denominated in israeli shekel. Lease payments for
additional floor space in Warsaw are denominated in euro, subject to indexation. The minimum lease terms are 5 years each,
and as of today the Group does not intend to extend them. The contracts do not contain variable payments and no material
lease improvements have been made to December 31, 2021.
Lease agreements are usually concluded for definite periods of time, varying according to the class of the underlying asset and
specific needs. Some of the contracts include extension or termination options – the Group’s management exercises judgement
in determining whether these options are reasonably certain to be exercised.
The table below presents the carrying amounts of recognized right-of-use assets and the movements over the year 2021 and
2020:
Offices
Cars
Total
as at January 1, 2021
8,501
145
8,646
Remeasurement due to indexation and other
833
-
833
additions (new leases)
11,462
233
11,695
lease modifications
(660)
3
(657)
foreign exchange differences on translation
17
(21)
(4)
Depreciation
(2,924)
(110)
(3,034)
as at December 31, 2021
17,229
250
17,479
Offices
Cars
Total
as at January 1, 2020
2,773
44
2,817
Remeasurement due to indexation and other
(107)
-
(107)
additions (new leases)
7,823
142
7,965
lease modifications
(165)
10
(155)
foreign exchange differences on translation
305
-
305
Depreciation
(2,128)
(51)
(2,179)
as at December 31, 2020
8,501
145
8,646
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
73
The table below presents the book values of lease liabilities and movements over the year 2021 and 2020.
Year ended
December 31, 2021
Year ended
December 31, 2020
as at January 1
9,061
2,869
additions (new leases)
11,110
7,919
lease modifications
(853)
(163)
Remeasurement due to indexation and other
894
(171)
interest expense on lease liabilities
162
139
lease payments
(2,952)
(1,923)
foreign exchange differences on translation to local currency
63
143
foreign exchange differences on translation to USD
(228)
248
as at December 31
17,257
9,061
long-term
12,982
6,282
short-term
4,275
2,779
In the consolidated statements of cash flows, the Group classifies:
●
cash payments of the capital component of lease liabilities in the year 2021 amounting to USD 2,790 thousand (USD
1,784 thousand in the year 2020) – as part of financing activities (lease repayment),
●
cash payments of interest on a lease liability in the year 2021 amounting to USD 162 thousand (USD 139 thousand in
the year 2020) – as part of financing activities (interest paid),
●
leases of low-value assets and short-term leases not included in the measurement of lease liabilities in the year 2021
amounting to USD 402 thousand (USD 50 thousand in the year 2020) as part of operating activities.
The table below presents the amounts of income, costs, gains and losses resulting from leases which are recognized in the
consolidated statement of comprehensive income for year 2021 and 2020.
Year ended
December 31, 2021
Year ended
December 31, 2020
Depreciation expense of right-of-use
assets
3,034
2,179
Interest expense on lease liabilities
162
139
Foreign exchange differences
63
143
Expense related to short-term leases (included in general and
administrative expenses)
-
47
Expense related to leases of low-value assets (included in general and
administrative expenses)
-
3
Total amount recognized in the consolidated statement of
comprehensive income
3,259
2,511
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
74
21. Cash flows reconciliation
The change of trade and other payables presented in the consolidated statement of financial position as of December 31, 2021
does not equal the change in the consolidated statement of cash flows for the year ended December 31, 2021. The difference is
due to:
●
deferred payments for the acquisition of Traffic Puzzle game which amounted to USD 29,400 thousand. For details,
please refer to Note 11
Intangible assets
●
transaction costs of an issuance of equity instruments which amounted to USD 2,240 thousand, presented in the cash
flows from financing activities in the consolidated statement of cash flows for the year ended December 31, 2021
●
reclassification between trade payables and corporate income tax liabilities which amounted to USD 630 thousand
22. Provisions
The movements of provisions are presented below:
Court case provision
JCT provision
Other provisions
Total
As of January 1, 2020
6,500
535
-
7,035
Utilized during the year
-
(535)
-
(535)
Arising during the year
-
1,173
86
1,259
As of December 31, 2020
6,500
1,173
86
7,759
Utilized during the year
(6,500)
(1,173)
(86)
(7,759)
Arising during the year
-
-
54
54
As of December 31, 2021
-
-
54
54
long-term
short-term
54
54
Court case provision
As of December 31, 2019 the Group recognized provision for a potential unfavourable outcome in the court case, presented in
the line “Other provisions” in the consolidated statements of financial position. On or about April 6, 2018, a putative class action
complaint was filed against the Company in the U.S. District Court for the Western District of Washington by a player plaintiff.
The complaint sought damages for alleged violations of Washington law associated with plaintiff’s alleged in-app purchases
within one or more of the Company’s games. Specifically, the plaintiff alleged violations for the recovery of money lost in
gambling and for violations of the Washington Consumer Protection Act. The plaintiff additionally sought damages for unjust
enrichment. The Company denied the plaintiff’s allegations, denied that it violated any laws or regulations, denied that the suit
should be treated as a class action, denied the plaintiff’s damages claims, and has been vigorously defending itself against the
plaintiff’s claims. The Company filed a motion to compel arbitration on July 2, 2018, which the District Court denied on
November 13, 2018. The Company timely filed a notice of appeal on December 6, 2018, and filed its opening brief in the Ninth
Circuit Court of Appeals on March 6, 2019. The Company also filed a motion to stay the district court proceedings pending a
decision on its appeal, which was granted on March 1, 2019. The provision of USD 6,500 thousand was recognized in 2019 in the
separate line item in the statement of the financial position as “Other provisions” and in the “Other operating income/(expense),
net” line item in the statement of comprehensive income. The Group’s management estimated that the costs would be realized
within a period for which the discounting effect would not be material and accounts for the provision in an undiscounted
amount. The parties mediated on June 15, 2020 and reached agreement on a term sheet on a class action basis on June 16,
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
75
2020. On August 23, 2020, a class action settlement agreement was concluded between the class representatives, including the
plaintiff, and filed with the court, intending to fully, finally and forever resolve, discharge and settle the claims related to this suit.
The United States District Court finally approved the Settlement Agreement on February 11, 2021. The Court finds that the
settlement is fair, reasonable and adequate and it is a result of extensive, arm’s-length negotiations. Subsequently the Court
ordered the Group to settle final claims determinations, including payment and prospective relief. Payment was made on March
26, 2021, with the corresponding utilization of the provision.
Consumption tax from the revenues from Japan
As of December 31, 2020 additional provision recognized related to the collected Japan Consumption Tax (“JCT”) applicable to
sales to customers purchasing content on the App Store in Japan. The provision for JCT was estimated based on the applicable
tax rate multiplied by the amount of sales to customers in Japan, with a further delayed payment of the tax in the following
period. Starting from January 2021, prepayments of the collected JCT are made to the tax authorities on a quarterly basis,
therefore no additional provision is recognized as of December 31, 2021.
23. Contingencies
Tax contingent liabilities
Tax settlements are subject to review and investigation by tax authorities, which are entitled to impose severe fines, penalties
and interest charges. Tax regulations in the United States and in Poland and Israel, which apart from Cyprus constitute the main
operating environments of the Group, have been changing recently, which may lead to lack of their clarity and integrity.
Furthermore, frequent contradictions in tax interpretations in Poland, both within government bodies and between companies
and government bodies create uncertainties and conflicts. These facts create tax risks that are substantially more significant
than those typically found in countries with more developed tax systems.
Tax authorities may examine accounting records retrospectively: for 3 years in the United States (and up to 6 years in case of
substantial errors), 5 years in Poland, 7 years in Cyprus (and up to 12 years in case of substantial errors) and 7 years in Israel.
Consequently, the Parent Company and subsidiaries may be subject to additional tax liabilities, which may arise as a result of
tax audits. The Board of Directors of the Parent Company believes that there was no need to record any provisions for known
and quantifiable risks in this regard as in their assessment there are no such uncertain tax positions for which it would be
probable that the taxation authority will not accept the tax treatment applied by the Group.
24. Pledges and collaterals
During the reporting periods and till the date of issuing these consolidated financial statements neither the Group nor individual
subsidiaries entered in a pledge or collateral agreement on the Group’s assets.
25. Related party transactions
On February 5, 2021 one series A preference share was issued to RP II HE LLC - the Group’s shareholder holding 12,69% of the
Company’s shares and exercising the significant influence as at the date of approval of these consolidated financial statements
for issue, with a par value of USD 0.00002 per share for cash consideration of USD 50, and one series B preference share was
issued to Big Bets OU - the Group’s shareholder, with a par value of USD 0.00002 per share, for cash consideration of USD 50.
Based on shares purchase agreement dated January 29, 2020 RP II HGE LLC – the Group’s shareholder purchased from Huuuge
Inc. 490,167 preference shares for a cash consideration of USD 9,681 thousand (USD 19.75 per share) which had been
previously acquired by Huuuge Inc. from the Korean funds in December 2019 (for details on the December 2019 transaction
please refer to Note 15
Share capital
of the Group’s consolidated financial statements as of and for the year ended December 31,2020). RP II HGE LLC purchased 248,897 series A preference shares, 168,005 series B preference shares and 73,265 series C
preference shares. Due to the fact that the share price of treasury shares reissued was equal to their purchase price no amount
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
76
was recognized in Supplementary capital on this subsequent sale of treasury shares. The cash consideration was transferred in
February 2020.
In August 2020, a Finnish entity Big Bets Finland Holding Oy controlled by the CEO bought from the Polish subsidiary of the
Company a used car for the total consideration of PLN 149thousand (approx. USD 40 thousand). The purchase price has been
established at fair market price.
There is no ultimate controlling party.
26. Transactions with management of the Parent Company and their close
family members
Compensation of key management personnel of the Group is comprised of the compensation of key management personnel of
the Parent Company and its subsidiaries.
Year ended December 31, 2021
Board of Directors of
Huuuge Inc.
Executive
Management
team
Total
Base salaries
310
2,973
3,283
Bonuses and compensation based on the Group’s financial
result for the previous year
-
988
988
Share-based payments
1
6,870
6,871
Total
311
10,812
11,142
Year ended December 31, 2020
Board of Directors of
Huuuge Inc.
Group Global
Management
Total
Base salaries
-
2,369
2,369
Bonuses and compensation based on the Group’s financial
result for the previous year
-
1,737
1,737
Share-based payments
1
1,919
1,920
Total
1
6,025
6,026
The amounts presented for the year ended December 31, 2021 reflect the change in composition of the executive management
team during the year.
The remuneration of Executive Management Team (“Group Global Management” during the financial year 2020) presented in the
tables above includes base salary and accrued bonuses of Mr Anton Gauffin, Chief Executive Officer and director, in the amount
of USD 162 thousand for the year ended December 31, 2021 (USD 417 thousand for the year ended December 31, 2020), as well
as USD 381 thousand related to Mr Anton’s Gauffin options.
During the year ended 31 December 2021, members of the Board of Directors and Executive Management team exercised
395,877 options.
There were no benefits in kind (company cars, healthcare, life insurance, social fund benefits, electronic devices) provided to Mr
Anton Gauffin in the year ended December 31, 2021. Total benefits in kind (company cars, healthcare, life insurance, social fund
benefits, electronic devices) provided to Mr Anton Gauffin amounted to USD 54 thousand for the year ended December 31,
2020).
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
77
The non-executive directors are remunerated with a fixed annual salary and an additional salary for holding a position of
president of the Audit Committee or the Remuneration and Nomination Committee or being a member of the Audit Committee
or the Remuneration and Nomination. For additional information about recommendation from the Nomination and
Remuneration Committee on executive and non-executive compensation, please refer to Note 16
Share-based payment
arrangements.
During the years ended December 31, 2021 and December 31, 2020 there was no additional compensation for the Board of
Directors of Huuuge Inc. except for the remuneration of Mr Anton Gauffin as described above.
27. Audit fees
Year ended
December 31, 2021
Year ended
December 31, 2020
Audit of financial statements
255
221
Voluntary audit of financial statements
130
195
Remuneration for additional services performed
-
289
Total
385
705
For the year ended December 31, 2021 audit of financial statements relates to the audit of standalone financial statements of
Huuuge Inc., and the audit of the Group’s consolidated financial statements prepared in accordance with IFRS. The voluntary
audit of financial statements relates to the audit of the Group’s consolidated financial statements prepared in accordance with
Generally Accepted Accounting Principles in the United States.
For the year ended December 31, 2020 audit of financial statements relates to the audit of separate financial statements of the
Group’s subsidiaries. The voluntary audit of financial statements relates to the audit of the Group’s consolidated financial
statements under US GAAP .
28. Impact of COVID-19
On March 11, 2020 WHO declared global COVID-19 coronavirus pandemic and recommended preventive measures such as the
physical social distancing. Consequently, governments worldwide implemented unprecedented restrictions. The impacts of the
COVID-19 outbreak have evolved from mid-March 2020 up to the day of issuing these consolidated financial statements. The
Group’s management constantly monitors specific facts and circumstances and the financial results. Neither the video game
industry as a whole, nor the Group’s operations in particular, have been adversely affected by the pandemic and there is no going
concern issue. The Group proved to be resilient to the lockdown, the operations have been maintained with employees working
remotely and online gaming’s popularity is on the rise with many people globally adhering to social distancing guidelines.
A significant increase of the Group’s revenues and operating result for the year ended December 31, 2021 compared to the year
ended December 31, 2020 indicates that COVID-19 pandemic had no negative impact on the Group’s business.
Based on the analysis performed by the Group’s management as of December 31, 2021, COVID-19 pandemic has no negative
impact on the Group’s liquidity. Due to the fact that the Group’s receivables are settled by the large platform providers, such as
Apple App Store, Google Play, Facebook and Amazon App Store, the Group’s management assessed the risk of receivables
irrecoverability as minimal. The Group’s management has not identified any evidence to modify the assumptions used to assess
expected credit losses.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
78
29. Subsequent events
After December 31, 2021 and up to the date of approval of these consolidated financial statements for issue no significant
events except the following have occurred.
Repayment of the second tranche to PICADILLA for Traffic Puzzle game
On February 4, 2022 the Group made the payment of second tranche in amount of USD 25,000 thousand for Traffic Puzzle game
according to schedule settled in Purchase Price agreement with PICADILLA GAMES Adziński, Porzucek, Czerenkiewicz sp. k. For
details of the acquisition, please see Note 11
Intangible assets.
Notification on Share Buyback Scheme ("SBB")
On February 15, 2022, the Group`s Board of Directors adopted a resolution for the Group to repurchase its common shares listed
for trading on the Warsaw Stock Exchange. The purpose of the SBB is to satisfy the Group's needs related to the exercise of
options under its Employee Stock Option Plans in the foreseeable future. Total number of the Group’s shares to be repurchased
under the SBB will be up to 2,500,000 shares.
There were no shares repurchased yet as of date of approval of these consolidated financial statements for issue.
Delivery of the treasury shares to former owners of Double Star Oy
As of 31 December 2021, 23,046 shares vested under earn-out consideration payable in shares to former owners of Double Star
Oy based on the Share Sale and Purchase Agreement, corrected by the First Amendment dated October 19, 2021. Consequently,
on February 21, 2022, 23,046 treasury shares were delivered to former owners of Double Star Oy. For details of the earn-out
consideration, please see Note 16
Share-based payment arrangements.
War in Ukraine
On February 24, 2022, Russian troops crossed the eastern, southern and northern borders of Ukraine, attacking Ukraine. In
connection with the hostilities of Russia, the representatives of the European Union imposed sanctions on Russia. The Company
had also made a decision to stop distribution of new games in Russia and Belarus. Russia and Belarus markets were
responsible for less than 1% of total revenue generated by Huuuge in 2021 which means the currently ongoing war in Ukraine
should not have a material impact on Huuuge's performance and operations. Huuuge has analyzed and is continuously
monitoring the impact of the political and economic situation in Ukraine on its and the Group's operations and financial results.
The Company is not able to reliably determine the impact which the situation in Ukraine will have on the state of the European
economy and, consequently, on the activity of the Group.
As of March 10th 2022 Google Play due to payment system disruption informed about pausing Google Play's billing system for
users in Russia. This means users will not be able to purchase apps and games, make subscription payments or conduct any
in-app purchases of digital goods using Google Play in Russia.
Electronically signed
Anton Gauffin
President of Huuuge Inc., CEO
March 28, 2022
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2021
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousand USD, except where stated otherwise)
79