HUUUGE INC. GROUP
CONSOLIDATED FINANCIAL STATEMENTS
as of and for the year ended December 31, 2022
prepared in accordance with International Financial Reporting Standards
as adopted by the European Union
Table of contents
Consolidated statement of comprehensive income
3
Consolidated statement of financial position
4
Consolidated statement of changes in equity
5
Consolidated statement of cash flows
7
1. General information
9
2. Basis for preparation of the consolidated financial statements
10
3. Adoption of new and revised Standards
16
4. Significant accounting policies
17
5. Determination of fair values
29
6. Revenue and segment information
30
7. Operating expenses
33
8. Salaries and employee-related costs
35
9. Finance income and finance expense
36
10. Income tax
37
11. Intangible assets
40
12. Financial risk management
41
13. Trade and other receivables
53
14. Cash and cash equivalents
54
15. Share capital
55
16. Share-based payment arrangements
60
17. Conversion of series C preference shares
65
18. Goodwill
65
19. Trade, other payables and deferred income
66
20. Leases
66
21. Contingencies
68
22. Pledges and collaterals
68
23. Related party transactions
69
24. Transactions with management of the Parent Company and their close family members
69
25. Audit fees
70
26. Unusual events
70
27. Impact of COVID-19
70
28. Subsequent events
71
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
2
Consolidated statement of comprehensive income
Note
Year ended
December 31, 2022
Year ended
December 31, 2021
Reclassified
Revenue
6
Cost of sales
7
(96,886 )
(112,195 )
Gross profit on sales
Sales and marketing expenses:
7
(88,814 )
(146,239 )
thereof, User acquisition marketing campaigns
7
(73,725 )
(130,031 )
thereof, General Sales and marketing expenses
7
(15,089 )
(16,208 )
Research and development expenses
7
(29,577 )
(33,128 )
General and administrative expenses
7
(39,611 )
(37,989 )
Impairment of intangible assets
11
(26,087 )
Other operating income/(expense), net
Operating result
Finance income
9
Finance expense
9
(1,726 )
(45,598 )
Profit/(loss) before tax
(1,001 )
Income tax
10
(7,046 )
(8,680 )
Net result for the year
(9,681 )
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange gains/(losses) on translation of foreign operations
(2,912 )
(1,021 )
Total other comprehensive income
(2,912 )
(1,021 )
Total comprehensive income/ (loss) for the year
(10,702 )
Net result for the year attributable to:
owners of the Parent
(9,681 )
Total comprehensive income for the year attributable to:
owners of the Parent
(10,702 )
Earnings per share (in USD)
Basic
12 (f)
(0.12 )
Diluted
12 (f)
(0.12 )
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, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
3
Consolidated statement of financial position
Note
As of December 31, 2022
As of December 31, 2021
Assets
Non-current assets
Property, plant and equipment
Right-of-use asset
20
Goodwill
18
Intangible assets
11
Deferred tax assets
10
Long-term lease receivables
20
Other long-term assets
Total non-current assets
Current assets
Trade and other receivables
13
Short-term lease receivables
20
Corporate income tax receivable
Cash and cash equivalents
14
Total current assets
Total assets
Equity
Share capital
Treasury shares
15
(20,942 )
(19,954 )
Supplementary capital
15
Employee benefit reserve
16
Foreign exchange reserve
(2,634 )
Retained earnings/(Accumulated losses)
(63,854 )
(95,862 )
Total equity
Equity attributable to owners of the Company
Non-current liabilities
Long-term lease liabilities
20
Other long-term liabilities
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
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, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
4
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, 2022
(19,954 )
(95,862 )
Net profit/(loss)
Other comprehensive income - foreign currency
exchange gains/(losses)
(2,912 )
(2,912 )
(2,912 )
Total comprehensive income for the period
(2,912 )
Shares issued/(repurchased)*
15
(20,090 )
(20,090 )
(20,090 )
Exercise of stock options
15, 16
(16,251 )
Delivery of shares to former owners of Double
Star Oy
16
(311 )
Employee share schemes – value of employee
services
15
As of December 31, 2022
(20,942
)
(63,854 )
(2,634 )
* Shares issued/(repurchased) line includes payments for the purchase of 4,989,608 own shares under the buy-back program, which were registered at Central Securities Depository as of the date of
these consolidated financial statements. On August 2, 2022, the Company suspended the purchase of its own shares.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
5
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, 16
(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 )
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, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
6
Consolidated statement of cash flows
Note
Year ended
December 31,
2022
Year ended
December 31,
2021
Cash flows from operating activities
Profit/(loss) before tax
(1,001 )
Adjustments for:
Depreciation and amortization
7, 11, 20
Finance (income)/expense, net
9, 20
(4,558 )
Impairment of intangible assets
11
(Profit)/loss on disposal of property, plant and equipment
Non-cash employee benefits expense - share-based payments
16
Remeasurement of preference shares liability – finance expense
9
Changes in net working capital:
Trade and other receivables, and other long-term assets
13
(38 )
Trade and other payables
19
(13,132 )
Deferred income
19
(446 )
(234 )
Other provisions
(54 )
(7,705 )
Other adjustments
(180 )
Cash flows from operating activities
Income tax paid
(6,200 )
(9,741 )
Net cash flows from operating activities
Cash flows from investing activities
Acquisition of IP rights
11
(29,400 )
(9,500 )
Software expenditure
11
(3,488 )
(3,860 )
Acquisition of property, plant and equipment
(1,013 )
(2,595 )
Interest received
9
Net cash flows from investing activities
(32,555 )
(15,955 )
Cash flows from financing activities
Shares issued/(repurchased)
15
(20,090 )
Lease repayment
20
(3,897 )
(3,359 )
Interest paid
9, 20
(400 )
(575 )
Exercise of stock options
15
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
15
(7,097 )
Loss on foreign exchange forward contract
9
(2,662 )
Net cash flows from financing activities
(21,847 )
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations and accrued interest
(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, 2022
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)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
7
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
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, 2022 and December 31, 2021 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, 2022
As of
December 31, 2021
Huuuge Games Sp. z o.o.
Szczecin, Poland
games development and
operations
100%
100%
Huuuge Global Ltd
Limassol, Cyprus
games distribution, user
acquisition
100%
100%
Huuuge Publishing Ltd
(formerly Fun Monkey Ltd)
Limassol, Cyprus
games distribution
100%
100%
Huuuge Block Ltd (formerly
Coffee Break Games Ltd)
Limassol, Cyprus
games distribution
100%
100%
Billionaire Games Limited
Limassol, Cyprus
games distribution
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
Helsinki, Finland
games development
100%
100%
Huuuge UK Ltd
London, United
Kingdom
corporate development
100%
100%
Huuuge Mobile Games Ltd
Dublin, Ireland
games distribution, user
acquisition, in liquidation
100%
100%
Coffee Break Games United
Ltd
Dublin, Ireland
games distribution, user
acquisition, in liquidation
100%
100%
MDOK GmbH (formerly
Huuuge Pop GmbH)
Berlin, Germany
games development, in
liquidation
100%
100%
Huuuge Labs GmbH
Berlin, Germany
games development, R&D, in
liquidation
100%
100%
Huuuge Tap Tap Games Ltd
Hong Kong
games development, user
acquisition
-
100%
On April 8, 2022, Coffee Break Ltd., a subsidiary wholly owned by Huuuge Global Ltd changed its name to Huuuge Block Ltd.
On April 29, 2022, Huuuge Tap Tap Games Ltd was successfully deregistered and dissolved.
On May 4, 2022, a new subsidiary wholly owned by Huuuge Global Ltd was registered under the name Billionaire Games Limited.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
9
The core business activities of the Group include:
development of mobile games in the free-to-play model,
●
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, 2022 and as of the date of signing of these consolidated
financial statements
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, the Company’s Board of Directors consisted of the Chief Executive Officer, who was also an executive
director,
and
non-executive
directors.
The
Chief Executive Officer and executive director was Mr. Anton Gauffin, and
non-executive directors were:
●
Henric Suuronen, director,
●
Krzysztof Kaczmarczyk, director,
●
John Salter, director,
●
On April 7, 2022 Mr. Rod Cousens was appointed as a co-CEO, and Mr. Tom Jacobsson was elected as a non-executive director.
After these changes, as of December 31, 2022, the composition of the Company’s Board of Directors was the following:
●
Anton Gauffin, executive director, President, and co-CEO,
●
Rod Cousens, executive director, co-CEO,
●
Henric Suuronen, non-executive director,
●
Krzysztof Kaczmarczyk, non-executive director,
●
John Salter, non-executive director,
●
Tom Jacobsson, non-executive director.
Effective on March 7, 2023, Mr. Rod Cousens, co-CEO, and the Company reached a mutual agreement to end Mr. Cousens’s
executive service with the Company. Mr. Cousens will remain a member of the Issuer’s Board of Directors. As a result, Mr. Anton
Gauffin will be the sole Chief Executive Officer of the Company. After these changes, as of the date of signing of these
consolidated financial statements the composition of the Company’s Board of Directors is the following:
●
Anton Gauffin, executive director, President, and CEO,
●
Rod Cousens, non-executive director,
●
Henric Suuronen, non-executive director,
●
Krzysztof Kaczmarczyk, non-executive director,
●
John Salter, non-executive director,
●
Tom Jacobsson, non-executive director.
Basis for preparation of the consolidated financial statements
Statement of compliance
These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
10
(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 were measured at fair value with the gains/losses recognized in profit or loss prior to its execution during the
year 2021.
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 Publishing Ltd
US dollar (“USD”)
Huuuge Block Ltd
US dollar (“USD”)
Billionaire Games Limited
US dollar (“USD”)
Huuuge Digital Ltd
Israeli shekel (“ILS”)
Huuuge Labs GmbH
Euro (“EUR”)
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 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,
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
11
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 2022 and 2021).
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 amounted to USD
2,680 thousand as at December 31, 2022 and USD 3,126 thousand as at December 31, 2021.
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
Vest majority of 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.
●
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
12
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 it expects 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 the contract, 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.
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
13
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
Financial risk management
, point (b)
Credit risk
. For carrying amounts as at December 31, 2022
and December 31, 2021 please refer to Note 14
Cash and cash equivalents
.
Impairment of intangible assets
As of December 31, 2022, the value of the IP rights associated with the Traffic Puzzle game was tested for impairment, where
the results of this test indicated a loss to the asset’s value. Accordingly, the book value of the Traffic Puzzle game assetwas
reduced by USD 26,087 thousand to the amount of USD 6,330 thousand being its value in use. The game will remain live and
available in the app stores and will continue to generate revenue. However, there are no plans to incur any further material user
acquisition and development expenses on the title as of December 31, 2022. The actual performance of the title, revised
approach to the marketing strategy and the decision regarding the sunset of Traffic Puzzle studio triggered the test for
impairment of the game’s value, which resulted in recognition of the impairment loss. Some of the studio's employees will form
a new pod focused on building new game titles.
The income approach was used to derive value by estimating reasonable future cash flows to the entity and/or equity holders
and discounting them to present value using a risk-adjusted discount rate or capitalization rate consistent with the riskiness of
the forecasts. In assessing value in use, the estimated future cash flows were discounted to their present value at a rate of
return that incorporates the risk associated with the particular asset. The discount rate used equals 13% reflecting the
Company’s weighted average cost of capital which provides an expected rate of return based on the Company’s capital
structure, the required yield on the Company’s equity, and the required yield on the interest-bearing debt. For the purposes of the
analysis discounted cash flows method was utilized based on the weighted probability of the three forecast scenarios: a base,
an upside, and a downside case.
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
14
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
.
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
Preference shares
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. For further detail please refer to Note 17
Conversion of series C preference
shares
and Note 5
Determination of fair values
, point (a)
Preference shares liability measured at fair value through profit or loss
.
Prior to conversion, the management concluded that the series C preference shares met the definition of a financial liability
because they were 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 were classified as a financial liability and measured initially
and subsequently at fair value through profit or loss. As of December 31, 2022 and as of December 31, 2021, after the
conversion, there was no such liability, however the finance expenses for the year 2021 include the valuation of preference
shares series C prior to conversion into common shares. For further details please refer to Note 9
Finance income and 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
.
Changes in the presentation of amortization of acquired titles
During the year ended December 31, 2022, the Company management analyzed the presentation of the operating expenses and
decided on a change in the presentation of the amortization of acquired titles (games). In 2021, the amortization of the acquired
game was allocated to the “General and administrative expenses” in the statement of comprehensive income.
Starting from
January 1, 2022, management decided to present the amortization of the acquired game that amounted to USD 3,890 thousand
in the line “Cost of sales” (please, refer to the Note 7
Operating expenses
).
Such a presentation is relevant to an understanding of the Group's operating expenses structure. In the management’s view, the
amended presentation enhances the presentation of the statement of the comprehensive income, and as a result the financial
statements are more comparable to the industry. The change was implemented retrospectively, i.e. the comparative figures
conform to the new presentation: in a result of this change, the amount transferred from the “General and administrative
expenses” to the line “Cost of Sales” was USD 2,594 thousand for the year ended December 31, 2021. This change did not have
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
15
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, 2023.
●
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 the EU – the
effective date was deferred indefinitely by the International Accounting Standards Board;
●
IFRS 17 Insurance Contracts (issued on May 18, 2017) including Amendments to IFRS 17 (issued on June 25, 2020):
effective 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-current –
Deferral of Effective Date and Non-current Liabilities with Covenants (issued on January 23, 2020 and July 15, 2020 and 31
October 2022, respectively): not yet endorsed by the EU at the date of approval of these consolidated financial statements
for issue – effective for financial years beginning on or after January 1, 2024;
●
Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022): not yet endorsed
by the EU at the date of approval of these consolidated financial statements for issue – effective for financial years
beginning on or after January 1, 2024;
●
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: Definition of Accounting Estimates (issued on February 12, 2021): effective for financial years
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 7,
2021): effective for financial years beginning on or after 1 January 2023;
●
Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information (issued
on 9 December 2021): 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, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
16
New International Financial Reporting Standards and Interpretations effective for the first time for financial year 2022
During the year 2022, the following IFRS and amendments to IFRS or interpretations entered into force:
●
Amendments to IFRS 3: Reference to the Conceptual Framework (issued on May 14, 2020): effective for financial years
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: Onerous Contracts – Cost of Fulfilling a Contract (issued on May 14, 2020): effective for financial
years beginning on or after January 1, 2022;
●
Annual Improvements to IFRS Standards 2018–2020 (issued on May 14, 2020): effective for financial years beginning on
or after January 1, 2022.
The amendments listed above did not have any impact on the amounts recognized in prior periods and are not expected to
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
).
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
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
Business Combinations
, including
Amendments to IFRS 3 Definition of a Business
.
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.
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
17
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,
●
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
(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
●
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.
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
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
18
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.
mostly by using the recognized distribution channels provided by the distributors, as well as direct channels (webshop) which
for the year ended December 31, 2022 did not constitute a significant portion of in-app purchases. 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.
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, as well as directly through webshop for VIP players.
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
financial
statements
,
point (d)
Key judgements and estimates – Model of 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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
19
The customer in the in-app purchases downloads the application for free and purchases virtual coins. Management concluded
that the purchased virtual coins represent 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 IFRS 15.35(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
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. In a result, the Group does not adjust any of
the transaction prices for the time value of money. A receivable 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
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
20
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.
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
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.
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
21
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.
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,
●
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
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
22
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
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.
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
23
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.
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.
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
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
Impairment
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 (“12 Months 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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
24
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
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.
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
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
Basis for preparation of the consolidated financial statements,
point (d)
Key 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)
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
25
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
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
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
Share capital and other components of the equity
As of December 31, 2022 and 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
.
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
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.
Incremental costs directly attributable to the repurchase of own shares are presented as the deduction of equity, i.e. in the line
In accordance with Delaware General Corporation Law, the Company may declare and pay dividends upon the shares of its
capital stock either:
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
26
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
,
(m)
Employee
benefits
, (i)
Share-based payment arrangements
and Note 16
Share-based payment
arrangements
.
Foreign exchange reserve results from exchange differences resulting from translating of foreign entities which functional
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
Employee benefits
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
27
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.
Share - based payment transactions with non-employees
Share-based payment transactions with non-employees include the
transactions in which non-employees provide services to
the Group in exchange for free options which entitle them to purchase the shares in the Company.
In accordance with IFRS 2, the Group measures the services received, and the corresponding increase in equity, directly, at the
fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the fair value of the services
received cannot be estimated reliably, the Group measures their value, and the corresponding increase in equity, indirectly, by
reference to the fair value of the equity instruments granted.
The Group recognizes the expense charge in the consolidated statement of comprehensive income over the vesting period for
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
(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,
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
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.
In addition, this line includes amortization of the acquired titles, i.e. amortization of Traffic Puzzle game for the year ended
December 31, 2022 and December 31, 2021 which is recognized on a straight-line basis over the estimated period of the
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 costs of salaries and share-based payment arrangements of the technology department, as well as the research and
development expenses that do not meet the criteria for capitalization.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
28
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)
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 and share-based payment
arrangements of the sales and marketing departments as well as external marketing and sales services.
Finance income comprises mainly interest income on funds invested, i.e, bank deposits, money market mutual fund
investments and money market interest-bearing accounts. Interest income is recognized as it accrues in profit or loss, using the
effective interest method.
Finance expenses comprise mainly foreign exchange differences on currency translation and interest expense on leases
liabilities.
Foreign currency gains and losses are reported on a net basis as either finance income or finance expenses depending on
whether foreign currency movements are in a net gain or net loss position unless material, where separate presentation is
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
29
(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
Share capital
.
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.
(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, 2022 and December 31, 2021 the Group does not classify any assets or liabilities to be subsequently
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 allocate 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 Group. As of December 31,
2022 the co-CEOs were the Chief operating decision-makers and for this reason, the co-CEOs analyze 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 performance assessment.
The Group's revenue from contracts with clients is comprised of revenue generated by in-app purchases (gaming applications)
and in-app ads (advertising), as shown below:
Year ended
December 31, 2022
Year ended
December 31, 2021
Gaming applications
308,852
358,638
Advertising
9,770
15,101
Total revenue
318,622
373,739
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
30
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
continuation of 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 2022 (two days in
the year 2021).
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.
Below is the split of the revenue per main product groups:
Year ended
December 31, 2022
Year ended
December 31, 2021
Huuuge Casino
188,656
214,554
Billionaire Casino
99,418
113,515
Traffic Puzzle*
26,172
34,008
Other games
4,376
11,662
- including games developed by external developers based on
publishing contracts
939
578
Total revenue
318,622
373,739
* In April 2021 the Group became the owner of the Traffic Puzzle game; therefore, revenues for the year ended December 31,
2022 include revenues generated after the acquisition of the game. Traffic Puzzle revenues for the year ended December 31,
2021 include revenues based on a publishing agreement and revenues after acquisition of the game.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
31
Revenue was generated in the following countries:
Year ended
December 31, 2022
Year ended
December 31, 2021
United States
188,362
221,797
Germany
23,018
26,867
Canada
9,509
11,709
United Kingdom
9,493
11,357
Japan
8,114
10,054
France
8,114
10,105
Netherlands
7,713
8,908
Australia
6,421
7,756
Poland
6,337
7,082
Switzerland
5,257
4,978
Taiwan
3,642
3,795
Italy
3,188
3,615
Republic of South Africa
2,399
2,981
Austria
2,351
2,555
Spain
2,254
2,526
Other
32,450
37,654
Total revenue
318,622
373,739
The above is the management’s best estimate, as no geographical breakdown is available for some revenue sources. 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, 2022 and December 31, 2021. 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
.
Split of assets by geographical locations does not determine the Group’s operations. Right-of-use assets and property, plant and
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
32
Operating expenses
For the year ended December 31, 2022 the 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
91,721
91,721
-
-
-
-
External developers fees
1,285
-
-
-
1,285
-
Gaming servers expenses
1,275
1,275
-
-
-
-
External marketing and sales services
77,778
-
73,725
4,053
-
-
Salaries and employee-related costs
8
49,470
-
-
10,393
23,840
15,237
Employee stock option plan
8
3,082
-
-
587
1,605
890
Depreciation and amortization
11,080
3,890
-
-
-
7,190
Finance & legal services
6,917
-
-
-
-
6,917
Business travels expenses
1,316
-
-
-
-
1,316
Property maintenance and external services
2,231
-
-
-
-
2,231
Other costs
8,733
-
-
56
2,847
5,830
Total operating expenses
254,888
96,886
73,725
15,089
29,577
39,611
Other costs under research and development expenses include costs of gaming content. Other costs under general and administrative expenses include mainly IT services, car fleet and office
management service (including company events), and costs of recruitment and payment services.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
33
For the year ended December 31, 2021 the 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
2,594
-
-
-
5,426
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
112,195
130,031
16,208
33,128
37,989
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
34
As of December 31, 2022, the amortization of acquired titles (games) is presented within “Cost of sales”. The comparative
figures have been reclassified accordingly, i.e. the amount of USD 2,594 thousand previously presented within “General and
administrative expenses” has been reclassified to “Costs of sales”. Please, refer to Note 2
Basis for preparation of consolidated
financial statements,
point (e)
Changes in the presentation of amortization of acquired titles
.
When selling the mobile game applications of third-party developers, the Group is obliged to pay fees to 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 that need to be provided by the external developers and that 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 maintenance services. As a
result, the contracts with external developers are a 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 the contract, 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 future monthly expenditure related to the publishing contracts that were in force as at December 31, 2022 amounts to USD
120 thousand and as at December 31, 2021 USD 294 thousand. The above commitments comprise the fixed fees contracted in
the publishing arrangements 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
Salaries and employee-related costs
The
table
below
presents
the
amounts
of
salaries
and
employee-related costs, including remuneration of executive
management, for the year ended December 31, 2022 and December 31, 2021.
Year ended
Year ended
December 31, 2022
December 31, 2021
Salaries
41,963
41,866
Social security contributions
5,786
6,235
Share-based payment expense
3,082
11,760
Other employee-related costs
1,721
2,690
Total salaries and employee-related costs
52,552
62,551
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
35
The tables below present the headcount and the average headcount as of and for the year ended December 31, 2022 and
December 31, 2021 respectively.
Headcount at year-end
As of
As of
December 31, 2022
December 31, 2021
Sales and marketing
123
144
Game development
329
363
Back office
121
122
Executive management
9
9
Total number of employees
582
638
Average headcount
Year ended
Year ended
December 31, 2022
December 31, 2021
Sales and marketing
129
147
Game development
326
383
Back office
129
109
Executive management
9
11
Total average number of employees
593
650
Number of employees is calculated based on the actual persons employed, including self-employed, irrespective of full or
Finance income and finance expense
Finance income
Year ended
December 31, 2022
Year ended
December 31, 2021
Total finance income - Interest income
2,172
20
In the year ended December 31, 2022, finance income amounted to USD 2,172 thousand, which comprises mainly interest
income on deposits, money market mutual funds accounts, and money market interest bearing accounts, including interest
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
36
Finance expense
Year ended
December 31, 2022
Year ended
December 31, 2021
Foreign exchange losses, net
1,398
3,293
Interest expense
328
646
Valuation of preferred shares series C classified as non-current liabilities
-
38,997
Loss on foreign exchange forward contract
-
2,662
Total finance expense
1,726
45,598
In the year ended December 31, 2022, finance expense includes net foreign exchange losses in the amount of USD 1,398
thousand, and the interest expense in the amount of USD 328 thousand, which comprises interest expense recognized under
IFRS 16 on lease liabilities, as well as interest expense from banks.
In addition to finance income and expenses, the “Finance (income)/cost, net” line presented in the consolidated statements of
cash flows includes the effect of exchange gains and losses on translation of foreign operations to the presentation currency,
i.e. USD.
In the year ended December 31, 2021, finance expenses included 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.
On February 5, 2021 series C preference shares were converted into common shares. In addition, during the year ended
December 31, 2021, prior to the initial public offering, the Company entered into a foreign exchange forward contract contingent
upon the event of an initial public offering. Upon the occurrence of an 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 a finance income or expense
accordingly. Effectively, a loss of USD 2,662 thousand was incurred on the forward contract settlement date, presented in the
line “Finance expense” in the consolidated statement of comprehensive income for the year ended December 31, 2021.
In the year ended December 31, 2021, finance expenses additionally included 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
Income tax
As of
December 31, 2022
As of
December 31, 2021
Deferred tax assets
4,489
989
Deferred tax liabilities
-
-
Net deferred tax assets/(liabilities)
4,489
989
Year ended
December 31, 2022
Year ended
December 31, 2021
Current income tax
10,546
8,901
Change in deferred income tax
(3,500)
(221)
Income tax for the period
7,046
8,680
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
37
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, 2022
Year ended
December 31, 2021
Profit/(loss) before income tax
39,054
(1,001)
Statutory tax rate in the United States
21%
21%
Theoretical tax expense/(benefit) according to current tax rate in the United
States
8,201
(210)
Tax impact of non-deductible costs – ESOP
656
2,463
Tax impact of non-deductible costs –
series C shares valuation
-
8,189
Tax impact of non-tax costs/(income) – other
311
198
GILTI* income net of FDII** deduction, net of foreign tax credit
2,128
1,234
Adjustment for tax rates in foreign subsidiaries
(3,635)
(3,503)
Temporary differences with no deferred tax recognized
(11)
268
Previous years' income taxes
(568)
150
Tax impact of other differences
(36)
(109)
Tax charge
7,046
8,680
Effective tax rate
18%
(867%)
* 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.
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.
The average tax rate used for the year ended December 31, 2022 is 18%, compared to negative 867% for the year ended
December 31, 2021. The tax rate was higher in the year ended December 31, 2022 mainly due to the lower proportion of non-tax
deductible costs in comparison to the prior period, i.e., the valuation of the series C preference shares and costs related to the
employee stock option plan (“ESOP”) to profit before tax.
In addition, the higher current income tax in the year ended December 31, 2022 is due to the changes introduced to the US tax
treatment of research and development costs. Starting from 2022, US taxpayers are required to capitalize and amortize costs
related to research and development activities for tax purposes. The changes resulted in lower tax-deductible costs in the year
ended December 31, 2022 and consequently higher global intangible low-taxed income (“GILTI”).
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
38
Deferred tax reconciliation
Deferred tax assets
As of
December 31, 2022
As of
December 31, 2021
Intangible assets
7
15
Lease liabilities
2,516
3,744
Accrued expenses
1,220
1,585
Traffic Puzzle game Impairment
3,261
-
Other deductible temporary differences
145
150
Total
7,149
5,494
Tax losses
-
-
Deferred tax assets
7,149
5,494
Compensation with deferred tax liabilities
(2,660)
(4,505)
Deferred tax assets presented in the consolidated statement of
financial position
4,489
989
Deferred tax assets expected to be recovered within 12 months from the reporting date amounted to USD 2,918 thousand as of
December 31, 2022 and USD 2,677 thousand as of December 31, 2021.
Deferred tax liabilities
As of
December 31, 2022
As of
December 31, 2021
Intangible assets
-
-
Property, plant and equipment owned
15
16
Right-of-use assets
2,490
3,696
Uninvoiced receivables
135
781
Prepaid expenses
-
-
Other differences
20
12
Deferred tax liabilities
2,660
4,505
Compensation with deferred tax assets
(2,660)
(4,505)
Deferred tax liabilities presented in the consolidated statement of
financial position
-
-
Deferred tax liabilities expected to be settled within 12 months from the reporting date amounted to USD 883 thousand as of
December 31, 2022 and USD 1,734 thousand as of December 31, 2021.
As of
December 31, 2022
As of
December 31, 2021
Net deferred tax assets/(liabilities) at the beginning of the period
989
768
Net deferred tax assets/(liabilities) at the end of the period
4,489
989
Deferred tax in the net profit for the period
(3,500)
(221)
As of December 31, 2022 and December 31, 2021 there was no deferred tax asset recognized on unused tax losses in the
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
39
Intangible assets
IP rights
Software
generated
internally
Software
acquired
externally
Prepayments
for intangible
assets
Total
Gross book value as of January 1, 2022
39,695
529
2,149
2,499
44,872
Additions
-
-
1,332
2,485
3,817
Transfer from assets under construction
-
3,124
(51)
(3,073)
-
Net foreign exchange differences on
translation
-
-
(31)
(7)
(38)
Gross book value as of December 31, 2022
39,695
3,653
3,399
1,904
48,651
Accumulated amortization
as of January 1, 2022
(2,965)
(529)
(1,161)
-
(4,655)
Impairment
(26,087)
-
-
-
(26,087)
Amortization charge for the period
(4,010)
(645)
(1,176)
-
(5,831)
Disposals
-
-
(22)
-
(22)
Net foreign exchange differences on
translation
(17)
-
18
-
1
Accumulated amortization and impairment
as of December 31, 2022
(33,079)
(1,174)
(2,341)
-
(36,594)
Net book value as of January 1, 2022
36,730
-
988
2,499
40,217
Net book value as of December 31, 2022
6,616
2,479
1,058
1,904
12,057
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
Prepayments for intangible assets relate to the payments made on development of supporting tools (i.e., software).
December 31, 2022 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.
No indications for impairment were identified as of December 31, 2022 in relation to intangible assets other then IP rights as
described below. No indications for impairment were identified as of December 31, 2021.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
40
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
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 ten years.
In accordance with the payment schedule, as of the date of these financial statements, all three tranches in the amount of USD
38,900 thousand have been already paid (the first tranche in the amount of USD 9,500 thousand was paid in 2021; the second
and third tranches in the amount of USD 25,000 thousand and USD 4,400 thousand, respectively, were paid during the year
ended December 31, 2022, which resulted in the according decrease in “Trade and other payables” in the amount of USD 29,400
thousand during the period). For more details regarding the transaction, please refer to the Group’s consolidated financial
statements as of and for the year ended December 31, 2021.
The change of trade and other payables presented in the consolidated statement of financial position as of December 31, 2022
does not equal the change in the consolidated statement of cash flows for the year ended December 31, 2022. The difference is
due to the second and third tranches paid in the total amount of USD 29,400 thousand were presented in the cash flows from
investing activities line in the consolidated statement of cash flows for the year ended December 31, 2022.
Impairment of Traffic Puzzle Game
As of December 31, 2022, the value of the IP rights associated with the Traffic Puzzle game was tested for impairment, where
the results of this test indicated a loss to the asset’s value. Accordingly, the book value of the Traffic Puzzle game assetwas
reduced by USD 26,087 thousand, as a result the net book value of the Traffic Puzzle game as of December 31, 2022 amounted
to USD 6,330 thousand.
The impairment loss was recognised in the line “Impairment of intangible assets” in the Group’s consolidated statement of
comprehensive income for the year ended December 31, 2022. The Traffic Puzzle game will remain live and available to players
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
41
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, 2022
As of
December 31, 2021
Aaa
-
105
Aa3
48,581
16,032
A2
213
1,157
A3
173,129
186,623
Baa1
14
11
Ba2
308
-
B1
-
487
Total cash and cash equivalents
222,245
204,415
Investments in money market mutual funds are kept in financial institutions with A3 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.
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, 2022, the largest concentration of funds in two financial institutions was respectively 66% and 22% with the
remaining funds not being concentrated more than 12% in a single financial institution. In comparison, as at December 31, 2021,
the largest concentration in two financial institutions was respectively 84% and 8% with the remaining funds not being
concentrated more than 8% in a single financial institution.
Total gross carrying amounts of cash and cash equivalents as of December 31, 2022 and December 31, 2021 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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
42
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, 2022
As of
December 31, 2021
Trade receivables from third parties
20,970
23,848
Total
20,970
23,848
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, 2022
%
As of
December 31,
2021
%
Google
9,020
43%
10,414
44%
Apple
8,079
39%
9,553
40%
Facebook
955
5%
1,578
7%
Amazon
472
2%
505
2%
Other
2,444
11%
1,798
7%
Trade receivables from third parties
20,970
100%
23,848
100%
Allowance for expected credit losses
The Group recognizes allowance for expected credit losses according to IFRS 9
Financial Instruments,
considering all
reasonable 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, 2022 and December 31, 2021) 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 andthere
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 classified to Stage 3 (based on the individual analysis, receivables
which are overdue more than 90 days are recoverable, and therefore not 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, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
43
The ageing of trade receivables at the reporting dates was as follows:
As of December 31, 2022
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
20,970
19,075
1,283
212
4
396
Allowance for expected credit losses
-
-
-
-
-
-
Trade receivables, net
20,970
19,075
1,283
212
4
396
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
44
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. 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, 2022, December 31, 2021 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, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
45
The following are the contractual maturities of financial liabilities including estimated interest payments as of respective balance sheet dates:
As of December 31, 2022
Carrying
amount
Contractual
cash flows
6 months or
less
6
–
12 months
1
–
2 years
2
–
5 years
over 5 years
Trade payables
3,297
3,297
3,297
-
-
-
-
Accrued expenses (except taxes)
17,975
17,975
17,975
-
-
-
-
Lease liabilities
13,827
13,827
2,099
1,916
3,727
6,085
-
Non derivative financial liabilities
35,099
35,099
23,371
1,916
3,727
6,085
-
As of December 31, 2021
Carrying
amount
Contractual
cash flows
6 months or
less
6
–
12 months
1
–
2 years
2
–
5 years
over 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)
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
-
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
Leases
and in Note 17
Conversion of series C preference shares
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
46
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, 2022
As of
December 31, 2021
Trade receivables
20,970
23,848
USD – foreign
559
2,923
EUR – foreign
9,085
370
Functional currencies
11,326
20,555
Cash and cash equivalents
222,245
204,415
USD – foreign
9,117
15,508
PLN – foreign
339
7,645
EUR – foreign
5,801
10,244
Functional currencies
206,988
171,018
Trade payables and accrued expenses (except taxes and
employee-related)
(21,272)
(49,830)
USD – foreign
(851)
(340)
PLN – foreign
(558)
253
EUR – foreign
(1,295)
(1,022)
ILS – foreign
(40)
(20)
JPY – foreign
(83)
(76)
GBP – foreign
(317)
(158)
Functional currencies
(18,128)
(48,467)
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
47
Net balances in foreign currencies
As of
December 31, 2022
As of
December 31, 2021
USD
8,825
18,091
PLN
(219)
7,898
EUR
13,591
9,593
ILS
(40)
(20)
JPY
(83)
(76)
GBP
(317)
(158)
Gross exposure
21,757
35,328
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, 2022
EUR/
USD
USD/
PLN
EUR/
PLN
USD/
ILS
ILS/
EUR
ILS/
PLN
PLN/
JPY
USD/
GBP
EUR/
GBP
PLN/
GBP
USD/
JPY
ILS/
GBP
Total
exposure
USD
-
4,981
-
3,977
(67)
-
-
(370)
-
-
(41)
-
8,480
EUR
12,683
-
-
-
-
-
-
-
(65)
-
-
-
12,618
PLN
-
-
771
-
-
(10)
-
-
-
(53)
-
-
708
ILS
-
-
-
-
-
-
-
-
-
-
-
(4)
(4)
JPY
-
-
-
-
-
-
(45)
-
-
-
-
-
(45)
Gross
exposure
12,683
4,981
771
3,977
(67)
(10)
(45)
(370)
(65)
(53)
(41)
(4)
21,757
Reasonabl
e shift
+10%
1,268
498
77
398
(7)
(1)
(5)
(37)
(7)
(5)
(4)
0
Reasonabl
e shift
-10%
(1,268)
(498)
(77)
(398)
7
1
5
37
7
5
4
0
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
48
(ii)
Interest rate risk
As the Group has not entered in bank loan agreements in all presented periods till December 31, 2022, 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 expose the Group to the cash
flow risk.
The Group’s interest bearing assets are cash and cash equivalents. The deposits, and the investments in money market funds
and money market accounts are at a variable interest rate. These are investments which are either readily available, or with a
short-term maturity date. Since the expected reasonable shift of the interest rate is insignificant during the maturity period of the
investments, profit or loss is not sensitive to the changes of interest rates. Therefore the interest bearing assets at variable rate
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. 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, 2022. For
the amounts please refer to respective Note 15
Share capital,
of these consolidated financial statements. 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, 2022 and December
31, 2021.
As of
December 31, 2022
As of
December 31, 2021
Equity
240,727
226,099
Total capital
240,727
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
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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
49
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, 2022
Year ended
December 31, 2021
Net result attributable to the owners of the Parent
[A]
32,008
(9,681)
Undistributed profit (loss) attributable to holders of
series A and B preference shares
[B]
-
(165)
Profit (loss) attributable to holders of ordinary
shares
[C]=[A]-[B]
32,008
(9,516)
Year ended
December 31, 2022
Year ended
December 31, 2021
Weighted average number of ordinary shares*
[D]
80,389,472
77,342,078
Basic EPS
[E] = [C] / [D]
0.40
(0.12)
* The weighted average number of shares in the year ended December 31, 2021 was adjusted for the event of the share split that
took place on January 20, 2021. In accordance with IAS 33 Earnings per share, the weighted average number of shares has to be
adjusted retrospectively; therefore the additional shares are treated as having been in issue before January 20, 2021 to give a
comparable result. As a result of the share split, each one common and preferred share was automatically reclassified as five
shares of common or preferred shares accordingly, i.e., a share split on a one-for-five basis. For more information please refer to
Note 15
Share capital
.
Diluted EPS
The effects of anti-dilutive potential ordinary shares are ignored in calculating 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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
50
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, 2022
Year ended
December 31, 2021
Profit (loss) attributable to holders of ordinary shares
[C]
32,008
(9,516)
Profit (loss) attributable to ordinary equity holders of
the parent adjusted for the effect of dilution*
[H]
32,008
(9,516)
Weighted average number of ordinary shares adjusted for the effect of dilution is presented below:
Year ended
December 31, 2022
Year ended
December 31, 2021
Weighted average number of issued ordinary shares
used in calculating basic earnings per share
[D]
80,389,472
77,342,078
Employee Stock Option Plan
197,311
-
Weighted average number of issued ordinary shares
and potential ordinary shares used in calculating
diluted earnings per share*
[I]
80,586,783
77,342,078
Diluted EPS
[J]=[H]/[I]
0.40
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
51
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, 2022
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
243,215
-
243,215
243,215
Trade receivables
20,970
-
-
-
20,970
20,970
Cash and cash
equivalents
222,245
-
-
-
222,245
222,245
Liabilities
-
-
3,297
13,827
17,124
17,124
Lease liability
-
-
-
13,827
13,827
13,827
Trade payables
-
-
3,297
-
3,297
3,297
Total financial
assets
243,215
-
3,297
13,827
260,339
260,339
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 financial
liabilities
228,263
-
32,604
17,257
278,124
278,124
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
52
As at December 31, 2022 and December 31, 2021 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 on the remeasurement of the preference shares liability in the prior periods is presented in the Group’s consolidated
Trade and other receivables
As of
December 31, 2022
As of
December 31, 2021
Trade accounts receivable and accrued revenues from third parties
20,970
23,848
Contract cost
804
938
Tax receivables other than from corporate income taxes
2,779
1,952
Other receivables
566
363
Prepaid expenses
932
782
Allowance for expected credit losses
(196)
(212)
Total trade and other receivables
25,855
27,671
Allowance for expected credit losses
As of
December 31, 2022
As of
December 31, 2021
Opening balance
(212)
(244)
- increase
-
-
- decrease – valuation
16
32
Total allowance for expected credit losses
(196)
(212)
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 196 thousand as at December 31, 2022 and USD 212
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
53
Cash and cash equivalents
As of
December 31, 2022
As of
December 31, 2021
Deposits
177,661
-
Cash at banks (current accounts)
17,921
189,163
Money market interest-bearing accounts
16,695
15,006
Money market mutual fund investments
9,968
245
Cash in hand
-
1
Total cash and cash equivalents
222,245
204,415
As of December 31, 2022, there were short-term cash deposits amounting to USD 177,661 thousand. Maturity of these
investments is three months, they are repayable on demand, thus the investments are highly liquid, readily convertible to known
amounts of cash, and are subject to an insignificant risk of changes in value, and meet the criteria indicated in IAS 7 Statement
of Cash Flows, and have been considered in substance as cash equivalents.
Money market interest bearing accounts are savings accounts which offer a competitive interest rate. Balances on these
accounts are readily available, i.e. amount of cash is known, and they are subject to an insignificant risk of changes in value, and
meet the criteria indicated in IAS 7 Statement of Cash Flows, and have been considered in substance as cash equivalents.
Money market mutual fund investments are classified as cash equivalents. For the details, please refer to Note 2
Basis for
preparation of the consolidated financial statements
, point (d)
Key judgements and estimates
.
During the year ended December 31, 2022, deposits, money market mutual fund investments and money market interest-bearing
accounts generated interest income in the total amount of USD 2,089 thousand. This includes the accrued interest from bank
deposits in the amount of USD 763 thousand (received before the date of these financial statements). For the details, please
refer to Note 9
Finance income and finance expense
.
Huuuge Mobile Games Ltd and Coffee Break Games United Ltd, which are under liquidation process (USD 19 thousand as of
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
54
Share capital
As of December 31, 2022 and December 31, 2021, the Group's share capital comprised of common shares and preference shares series A and B. Below are presented movements on different
components of equity divided in the categories of shares (nominal values presented in USD, not thousand USD):
Shares classified as equity instruments as of December 31, 2022:
Common shares
Preference shares
(series A and B)
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, 2022
82,690,347
1,655
2
0
1,556,348
31
-
-
84,246,697
1,686
12,467,461
249
96,714,158
1,935
Reduction of shares allocated
for the existing share-based
payment programs (not issued)
-
-
-
-
-
-
-
-
-
(1,459,728)
(29)
(1,459,728)
(29)
Allocation of shares to
Share-based payment program
-
-
-
-
(1,459,728)
(29)
1,459,728
29
-
-
-
-
-
-
Exercise of stock options
1,459,728
29
-
-
-
-
(1,459,728)
(29)
-
-
-
-
-
-
Delivery of shares to former
owners of Double Star Oy
23,046
0
-
-
(23,046)
0
-
-
-
-
-
-
-
-
Repurchase of common shares
under Share Buyback Scheme
("SBB")
(4,989,608)
(100)
-
-
4,989,608
100
-
-
-
-
-
-
-
-
As of December 31, 2022
79,183,513
1,584
2
0
5,063,182
102
-
-
84,246,697
1,686
11,007,733
220
95,254,430
1,906
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
55
Shares classified as equity instruments as of December 31, 2021, i.e. including preference shares series C after conversion.
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, 2021
82,690,347
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, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
56
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, 2022, 3,258,094 shares were allocated to a reserve which could be issued only with majority shareholders
approval (1,775,320 as of December 31, 2021). This is a consequence of using the treasury shares for: the Group’s ESOP
obligations in the amount of 1,459,728 shares during the year 2022 and 1,775,320 shares during the year 2021, as well as the
delivery of 23,046 treasury shares to the former owners of Double Star Oy (as presented in the tables above), which otherwise
would need to be satisfied via issuance of new shares.
As of December 31, 2022, the share capital of the Company comprised 84,246,697 shares (fully paid) with a par value of USD
0.00002 per share and the total value of USD 1,686 (not thousand), including 79,183,513 common shares held by shareholders,
two preference shares (one preference share of series A and one preference share of series B), and 5,063,182 common shares
reacquired by the Company and not redeemed (treasury shares and treasury shares allocated to the existing share-based
payment programs).
As of December 31, 2021, the share capital of the Company comprised 84,246,697 shares (fully paid) 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).
During the year 2022, the number of shares (not issued) allocated to the existing share-based payment programs was reduced
by 1,459,728 shares. This is because 1,459,728 treasury shares were delivered to employees for the options exercised during the
year ended December 31, 2022. As of December 31, 2022, 11,007,733 shares with a par value of USD 0.00002 per share were
reserved for two stock option programs established in 2015 and 2019.
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.
Holders of the two series A and series B preference shares, 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, one per each series of preference shares (series A,
B); two by the holders of common shares.
As at December 31, 2022 and December 31, 2021, 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 President, who participates in the
Company’s ordinary shares indirectly (through shares of Big Bets OU).
As of December 31, 2022, the share capital of the Company amounted to USD 1,686 (USD 1,686 as of December 31, 2021).
The supplementary capital derives mainly from the difference between nominal value and the market price on issuance of
shares, or the difference between the book value and purchase price on re-issue of treasury shares.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
57
In the year ended December 31, 2022 the following transactions in common and preference shares took place:
●
Share Buyback Scheme ("SBB")
On February 15, 2022, the Group decided to repurchase its common shares listed for trading on the Warsaw Stock Exchange.
The share buy-back started on March 29, 2022. The purpose of the Share Buyback Scheme is to satisfy the Group's needs
related to the exercise of options under its Employee Stock Option Plans in the foreseeable future. On May 22, 2022, the Board
of Directors adopted a resolution according to which the number of Company’s shares capable of being repurchased by the
Company under the SBB has been set to the 6,500,000 shares. On August 2, 2022, the Company indefinitely suspended the
purchase of its own shares.
The common shares repurchased were presented in the treasury shares line in the statement of financial position.
During the year ended December 31, 2022, 4,989,608 common shares were repurchased under the SBB program and were
registered at Central Securities Depository as of the date of these consolidated financial statements. Payments made for the
purchase of own shares in the amount of USD 20,090 thousand were recognized in Equity (Treasury shares).
●
Delivery of the treasury shares for options exercised
In the year ended December 31, 2022, 2,072,355 share options held by employees under the share-based payment program were
exercised, out of which for 1,459,728 options exercised treasury shares were delivered to employees before December 31, 2022
(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 the nominal value of the shares delivered, and the difference between the value
of treasury shares and the cash consideration received in the amount of USD 16,251 thousand was recognized in supplementary
capital. At the same time, the movement decreased the number of shares (not issued) allocated to the existing share-based
payment programs.
●
Delivery of treasury shares to the former owners of Double Star Oy
In the year ended December 31, 2022, 23,046 shares were delivered to the former owners of Double Star Oy based on the Share
Sale and Purchase Agreement, corrected by the First Amendment dated October 19, 2021. For details of the earn-out
consideration, please see Note 16
Share-based payment arrangements
. The movement resulted in an increase in share capital in
the amount of the nominal value of the shares delivered, and a decrease in supplementary capital in the amount of USD 311
thousand (amount reflects the value of treasury shares, since the shares were delivered with no cash consideration).
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
58
●
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 the period ended December 31, 2021
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). The difference between the nominal amount of newly issued shares and the cash
consideration received was recognized in the supplementary capital in the consolidated statement of changes in equity.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
59
●
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. When the Company entered the contract, the liability was
recognized in correspondence with equity. At the same time, the Company recognized a prepayment (financial asset) in the
same amount to reflect the fact that the stabilization activities were funded from the proceeds from the offering. The liability
and the assets were measured at fair value through profit or loss until the stabilization 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, which started upon the initial public offering on February 19,
2021, 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 10.35–13.51). 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 the transaction cost of this capital transaction.
●
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”). 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 the 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
Share-based payment arrangements
As at December 31, 2022 and as at December 31, 2021 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.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
60
As of December 31, 2022 there were 11,007,733 shares reserved for the ESOP that were not yet allocated to specific employees
(12,467,461 as of December 31, 2021). This is at the Group discretion whether the unallocated shares will be allocated within
the share-based program to the employees or unused or withdrawn from the program.
In 2022 the Company’s Board of Directors granted 656,971 options to its employees and consultants (4,111,765 in 2021).
Shares option expense for year 2022 amounts to USD 3,082 thousand (USD 11,830 thousand in 2021) and was booked against
equity (employee benefit reserve) which amounted to USD 22,894 thousand as of December 31, 2022 (USD 19,812 thousand as
of December 31, 2021).
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
Granted in 2021
4,111,765
February 2,2028 -
September 10, 2028
January 3, 2022
322,945
January 3, 2029
February 7, 2022
28,665
February 7, 2029
August 5, 2022
305,361
August 5, 2029
Subtotal granted in 2022
656,971
Total
6,735,945
Movements in share options since the first grant date were as follows:
Year ended December 31, 2022
Number of options
Weighted average exercise price
Balance as at January 1
8,839,097
5.80
Granted during the period
656,971
3.99
Forfeited during the period
(2,345,282)
5.46
Exercised during the period
(2,072,355)
2.70
Expired during the period
(300,331)
5.56
Balance as at December 31
4,778,100
4.46*
* The weighted average exercise price of the balance outstanding as at December 31, 2022 includes the effect of modification
of the share-based payment program as described further below in this note. The weighted average exercise price of the
balance outstanding as at January 1, 2022 is presented in the amount prior to the modification.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
61
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
The weighted average exercise prices are presented in USD, not in thousand USD.
As at December 31, 2022 1,585,019 share options were exercisable, with weighted average exercise price of USD 3.1 per share.
As at December 31, 2021 2,836,827 share options (after share split) were exercisable, with weighted average exercise price of
USD 2.89 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
Exercised in 2022
May 29, 2015 –
January 3, 2022
$0.11 – $4.13
$3.5835 – $5.6779
2,072,355
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:
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
62
As at December 31, 2022:
Exercise price in USD
Number of outstanding stock options
Weighted average remaining contractual life
(in years)
0.00004 - 0.83
268,694
4.21
2.7 - 3.92
3,448,626
5.58
4.13 - 13.51
1,060,780
6.15
Total:
4,778,100
5.63
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
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 historical volatility of a similar industry sector. Based on the analysis and the factors specific to
the Company, an equity volatility of 54.2% - 80.0% (55.4% - 80.0% for the year ended 31 December, 2021) was used in option
pricing model.
The inputs used in the measurement of the fair values at the grant dates of the equity-settled share-based payment plan for the
options outstanding as of December 31, 2022 and as of December 31, 2021, were as follows:
As of
December 31, 2022
As of
December 31, 2021
Fair value at grant date
0.00002 – 8.66
0.00002 – 8.66
Share price at grant date
2.5 – 10.91
0.00004 – 10.91
Exercise price
0.00004 – 13.5146
0.00004 – 13.5146
Expected volatility (weighted average)
54.2% – 80%
55.4% – 80%
Expected life (weighted average)
2.42 – 6.60
3.00 – 7.30
Risk-free interest rate
0.21% – 3.27%
0.21% – 2.80%
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
63
The effect of the fair value measurement is reflected in the profit and loss against equity (USD 3,082 thousand was expensed in
2022 and USD 11,830 thousand in 2021) – 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, 2022, 2,072,355 options were exercised in total under the share-based payment program,
out of which 1,459,728 treasury shares were delivered for all options exercised (the difference of 612,627 options is due to
cashless exercises). Cash payments received for the shares delivered to employees before December 31, 2022 amounted to
USD 2,540 thousand.
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
Share capital
. During the year ended December 31, 2021, the Group received cash payments for the shares that were
delivered to employees as of December 31, 2021.
Other than the share-based payment arrangements described above, in a result of the acquisition that took place on July 16,
2020, the Group accounted for the earn-out consideration payable in shares dependent on a performance condition and a
continuing employment condition as a share-based payment for the sellers of Double Star Oy.
On February 21, 2022, 23,046
treasury shares were delivered to the former owners of Double Star Oy as presented in Note 15
Share capital
. As at December
31, 2022, it is not expected that additional shares, except for those delivered, would vest under earn-out consideration.
Total expense related to share-based payment arrangements for the year ended December 31, 2022 amounted to USD 3,082
thousand. This expense includes Mr. Anton Gauffin’s options and the options payable to a consultant under the advisory
agreement in the total amount of USD 557 thousand, which are both explained in detail further below.
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.
These costs were allocated to Sales and marketing expenses, Research and development expenses and General and
administrative expenses lines in the consolidated statement of comprehensive income.
Modification of the share-based payment program
On July 25, 2022, the Company’s Board of Directors adopted a resolution on the voluntary modification of the terms of the
grants that took place between August 2021 and February 2022.
Effectively, for 1,633,702 options under the Company’s employee stock option plan, i.e., “ESOP 2019,” the vesting schedule was
extended and the exercise price was decreased. For 713,713
options under the Company’s employee stock option plan, i.e.
“ESOP 2019,” the exercise price was decreased without changes to the vesting schedule.
As of the date of approval of these consolidated financial statements, the process of the voluntary choice by the employees was
finalized and resulted in the modification for 2,347,415 options in total. Total expense related to modification of options for the
year ended December 31, 2022 amounted to USD 552 thousand.
CEO options
The remuneration of Mr. Anton Gauffin, holding the positions of the President and Chief Executive Officer of the Company , for
the period ending at the 2022 Annual General Meeting of the Company, consisted 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.
The vesting conditions for the options is the following:
●
50,000 options with a vesting condition to provide the service continuously for about four years from the service
commencement date. The Group’s management expects Mr. Anton Gauffin to fulfill the service condition.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
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64
●
75,000 options with a vesting condition to provide the service continuously for about four years from the service
commencement date and to meet 2021 EBITDA target. These options were forfeited since the performance condition
was not met.
●
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 estimated that a total of six years of continuous service
from the service commencement date 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 a different
vesting period and is treated as a separate award with a different vesting period.
Advisory agreement
Based on the contract executed on September 27, 2021, beginning from January 3, 2022 until October 31, 2024, the advisor shall
provide to the Company’s CEO consulting services for the consideration payable in options, i.e., options to purchase 206,250
shares in total vesting on a straight-line basis during the period of the agreement. This is a transaction with a non-employee, and
the Group measures the fair value of the services received and the corresponding increase in equity indirectly, by reference to
17.
Conversion of series C preference shares
On February 5, 2021, all preference shares series C were converted into common shares. For more information, please refer to
Note 15
Share capital.
As a result of the conversion, financial liability arising from preference shares was decreased with the
corresponding increase in supplementary capital as presented in the consolidated statement of changes in equity as of
December 31, 2021.
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, 2022
As of
December 31, 2021
Amount as the beginning of the period
2,693
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
(144)
87
Impairment
-
-
Amount as the end of the period
2,462
2,693
The recoverable amount of the net assets of the Group has been determined based on their fair value (Level 1) as at December
31, 2022. The test results show no goodwill impairment as at December 31, 2022.
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
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
65
Trade, other payables and deferred income
As of
December 31, 2022
As of
December 31, 2021
Trade accounts payable to third parties
3,297
3,204
Deferred payment for Traffic Puzzle Game
-
29,400
Tax payables other than from corporate income taxes
2,463
2,339
Other accounts payable
567
518
Accrued expenses
17,975
17,226
Trade and other payables
24,302
52,687
As of December 31, 2022 and December 31, 2021 accrued expenses mainly include marketing and advertising expenses,
Deferred income, presented in a separate line of the statement of the financial position, amounting to USD 2,680 thousand as at
December 31, 2022 (USD 3,126 thousand as at December 31, 2021), is a contract liability related to players' unused coins at the
end of the reporting period as described in Note 2
Basis for preparation of the consolidated financial statements
, point (d)
Key
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.
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 2022 and
2021:
Offices
Cars
Total
as at January 1, 2022
17,229
250
17,479
additions (new leases)
663
-
663
transfer to lease receivables *
(749)
-
(749)
lease modifications
1,266
(12)
1,254
foreign exchange differences on translation
(1,619)
(29)
(1,648)
Depreciation
(3,931)
(103)
(4,034)
as at December 31, 2022
12,859
106
12,965
* Transfer to the lease receivables line reflects the derecognition of the remaining right-of-use balance of the original lease
agreement, for which the Group has entered into the sublease agreement classified as finance leases in accordance with IFRS
16. Group’s sublease arrangements are described further below.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
66
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
During the year ended December 31, 2022, lease agreement for new office building in London was signed, where lease payments
denominated in British pound sterling and lease term is 2 years.
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 the 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.
The table below presents the book values of lease liabilities and movements over the year 2022 and 2021.
Year ended
December 31, 2022
Year ended
December 31, 2021
as at January 1
17,257
9,061
additions (new leases)
663
11,110
lease modifications
1,268
(853)
Remeasurement due to indexation and other
-
894
interest expense on lease liabilities
288
162
lease payments
(4,185)
(2,952)
foreign exchange differences on translation to local currency
218
63
foreign exchange differences on translation to USD
(1,682)
(228)
as at December 31
13,827
17,257
long-term
9,812
12,982
short-term
4,015
4,275
In the consolidated statements of cash flows, the Group classifies:
●
cash payments of the capital component of lease liabilities in the year 2022 amounting to USD 3,897 thousand (USD
2,790 thousand in the year 2021) – as part of financing activities (lease repayment),
●
cash interest payments on leases in the year 2022 amounting to USD 288 thousand (USD 162 thousand in the year
2021) – 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 2022
amounting to USD 492 thousand (USD 402 thousand in the year 2021) as part of operating activities.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
67
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 2022 and 2021.
Year ended
December 31, 2022
Year ended
December 31, 2021
Depreciation expense of right-of-use
assets
4,034
3,034
Interest expense on lease liabilities
288
162
Foreign exchange differences
218
63
Total amount recognized in the consolidated statement of
comprehensive income
4,540
3,259
Sublease agreements
The Group entities have entered several arrangements to sublease leased office spaces to a third party while the original lease
contract is in effect. In these arrangements, the Group entities act as both lessee and lessor of the same underlying asset. For
the sublease arrangements classified as an operating lease in accordance with the criteria of IFRS 16, the Group continues to
account for the lease liability and right-of-use asset on the head lease like any other lease. For the sublease arrangements
qualified as a finance lease in accordance with the criteria of IFRS 16, the Group derecognizes the right-of-use asset on the head
lease at the sublease commencement date, recognises lease receivable from sublease, and continues to account for the
original lease liability in accordance with the lessee accounting model.
The
income
from
the
operating
lease
amounted
to
USD
1,679
thousand
is
presented in the line “Other operating
income/(expense), net” in the consolidated statement of comprehensive income during the year ended December 31, 2022. The
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, 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 three years in the United States (and up to six years in case
of substantial errors), five years in Poland, seven years in Cyprus (and up to 12 years in case of substantial errors) and seven
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
Pledges and collaterals
During the reporting periods and till the date of issuing these consolidated financial statements neither the Group nor individual
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
68
Related party transactions
On March 7, 2023 the loan agreements were signed between subsidiaries wholly owned by Huuuge Inc. and the two members of
the Group Executive Management team. Based on the agreements, the two members of the Group Executive Management team
received the loans in the total amount equivalent to USD 213 thousand, both for a six-month period at a market interest rate.
On February 5, 2021, one series A preference share was issued to RP II HE LLC - the Group’s shareholder holding 12.96 % 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 Anton Gauffin (through Big Bets OU) – the Group’s shareholder holding 30.68% of the Company’s shares, with a par
value of USD 0.00002 per share, for cash consideration of USD 50.
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.
Board of Directors of Huuuge Inc. and Executive Management
Year ended
December 31, 2022
Year ended
December 31, 2021
Base salaries
3,215
3,283
Bonuses and compensation based on the Group’s financial result
for the previous year
1,706
988
Share-based payments
438
6,871
Total
5,359
11,142
The amounts presented for the year ended December 31, 2022 and December 31, 2021 reflect the change in composition of the
executive management team during the year.
Share-based payment remuneration includes cost recognized during the period in accordance with the vesting schedule, as well
as cost derecognition when the member of the executive management team ends the tenure with the Company, i.e., when the
service condition is not met. During the year ended December 31, 2022, the cost recognized amounted to USD 1,627 thousand
and the cost reversal amounted to USD 1,189 thousand.
During the year ended 31 December 2022, members of the Board of Directors and Executive Management team exercised 8,360
options (395,877 options during the year ended 31 December 2021).
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.
On March 7, 2023 the agreement was concluded between the Company and Mr. Rod Cousens, governing his board service and
executive service as co-Chief Executive Officer of the Company during the current board term, providing for a 12-month early
notice period for termination. This agreement terminated Mr. Rod Cousens’s executive service by mutual agreement, the
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
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69
Audit fees
Year ended
December 31, 2022
Year ended
December 31, 2021
Audit of financial statements
311
255
Voluntary audit of financial statements
-
130
Remuneration for additional services performed
-
-
Total
311
385
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, as well as the audit of separate financial statements of the
Group’s subsidiaries prepared in accordance with local generally accepted accounting principles, to the extent performed by the
Group Auditor.
For the year ended December 31, 2021 the voluntary audit of financial statements relates to the audit of the Group’s
26.
Unusual events
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 by Russia, the representatives of the European Union imposed sanctions on Russia. The
Company also made the decision to stop distribution of new games in Russia and Belarus. The Russian and Belarusian markets
were responsible for less than 1% of total revenue generated by Huuuge in 2022, which means that the 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 that 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, due to payment system disruption, Google Play informed about a pause in 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.
27.
Impact of COVID-19
On March 11, 2020, the WHO declared a global COVID-19 coronavirus pandemic and recommended preventive measures such
as 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; 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.
The positive operating result for the year ended December 31, 2022 and for the year ended December 31, 2021 indicates that the
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, 2022 and December 31, 2021, the COVID-19 pandemic has had no negative impact on the
Group’s liquidity.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
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70
Due to the fact that the Group’s receivables are settled by 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.
Subsequent events
After December 31, 2022 and up to the date of approval of these consolidated financial statements for issue no significant
events except the following have occurred.
Delivery of treasury shares for the options exercised
After December 31, 2022 and up to the date of approval of these consolidated financial statements for issue the Company
delivered to its employees 439,835 treasury shares for 839,748 options exercised after December 31, 2022.
Any difference between shares delivered and options exercised is due to the cashless exercises. The delivery took place under
the stock option plan presented in Note 16
Share-based payment arrangements
.
The delivery of shares will be presented as a movement from treasury shares to common shares. The movement will result in an
increase in share capital in the amount of nominal value of the shares delivered, and any difference between the value of
treasury shares delivered and the cash consideration received will be recognized in supplementary capital. At the same time, the
movement will decrease the number of shares (not issued) allocated for the existing share-based payment programs.
Completion of review of strategic options
On February 15,
2023,
the Board of Directors decided to conclude the previously announced review of strategic options for the
future of the Company. The Board has concluded that a portion of the Company’s cash reserves should be distributed to its
stockholders while leaving adequate cash reserves for the Company’s ongoing and anticipated operational needs and to support
publishing projects and future growth plans.The Company’s Board has resolved to allocate a maximum amount of USD 150
million from the Company’s reserves for the purpose of purchasing the Company’s common shares listed for trade on the
Warsaw Stock Exchange (the “SBB”), subject to the Board’s discretion to increase or decrease the aforementioned amount.
Exposure to Silicon Valley Bank and cash balance of the Group
On March 10, 2023, the Federal Deposit Insurance Corporation (“FDIC”) announced that the Silicon Valley Bank (“SVB”) was
closed by the California Department of Financial Protection and Innovation, and the FDIC was appointed as receiver. To protect
insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC
as receiver immediately transferred to the DINB all the insured deposits of Silicon Valley Bank.
On March 12, 2023, a joint statement was released by the US Secretary of the Treasury, Federal Reserve Board Chair and the
FDIC Chairman informing that the US Secretary of the Treasury approved actions enabling the FDIC to complete its resolution of
Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors.
On March 13, 2023, The FDIC transferred all deposits, both insured and uninsured, and substantially all the assets of the former
Silicon Valley Bank of Santa Clara, California, to a newly created, full-service FDIC-operated ‘bridge bank’ in an action designed to
protect all depositors of Silicon Valley Bank. Depositors and borrowers automatically became customers of Silicon Valley Bridge
Bank, N.A.
This event does not have any impact on the cash and cash equivalents balance of the Group as of December 31, 2022. This
event after the reporting period is only indicative of a condition that arose after the end of the reporting period and is considered
as a non-adjusting event after the reporting period.
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
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71
As of December 31, 2022, USD 26,764 thousands of cash and securities were held at SVB, out of which USD 16,796 thousand
were held in operating and money market accounts and USD 9,968 thousand were held in money market funds. Please, refer to
Note 14
Cash and cash equivalents
.
As of the date of signing of these consolidated financial statements for issue USD 556 thousand is still held in SVB, out of which
USD 226 thousand is held in operating accounts and USD 330 thousand is held in money market funds.
Decision on the intention to carry out collective redundancies
On March 20 2023, in accordance with the provisions of the Act on specific rules for terminating employment relationships with
employees for reasons not related to employees dated March 13, 2003 (i.e. Journal of Laws of 2003 no 90 item 844), the
Management Board of Huuuge Games sp. z o.o. (the "Subsidiary") adopted a resolution on the intention to carry out collective
redundancies and to start the consultation procedure regarding the collective redundancies.
The collective redundancies in the Subsidiary are intended to be completed by the end of April 2023 and to cover approximately
10% of the Issuer’s Group headcount in total (as of December 31, 2022). In accordance with the requirements under law,
following the adoption of a resolution on the intention to carry out collective redundancies and the commencement of the
consultation procedure by the Management Board of the Subsidiary, the Subsidiary will notify the employee representative. In
addition, the Subsidiary will notify the relevant labour offices about the intention to carry out the collective redundancies.
Filed complaint
On March 8, 2023, a plaintiff filed a complaint in the Circuit Court of Franklin County Alabama as a private attorney general to
recover money for Alabama residents who made purchases in the Company’s “slot machine, other casino-style games, card
games and other games of chance.” The complaint alleges that those games violate Alabama state laws.
The Company intends to defend itself in this matter vigorously and believes that there are meritorious legal and factual defenses
against the plaintiff's allegations and requests for relief. As the case is in preliminary stages, the Company is unable to
reasonably estimate the loss or range of loss, if any, arising from this litigation. As of the date of signing of these consolidated
financial statements, to the best of the Company's knowledge, this litigation is not expected to have a material impact on the
Company's operations, financial condition or cashflows.
Electronically signed
Anton Gauffin
President of Huuuge Inc., CEO
HUUUGE INC. GROUP CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2022
prepared in accordance with International Financial Reporting Standard as adopted by the European Union
(all amounts in tables presented in thousands USD, except where stated otherwise)
This version is a pdf of executed xHTML Consolidated financial statements as of and for the year ended December 31, 2022. In case of any discrepancies xHTML version shall prevail.
72
