Huuuge Inc.

Interim / Quarterly Report • Sep 7, 2022

CONSOLIDATED SEMI-ANNUAL REPORT

THE HUUUGE, INC. GROUP for the six-month period ended June 30, 2022

Table of contents

	Selected financial data	5
	Management report on the activities of the capital group	6
1.	General information	7
2.	Risk factors	10
3.	Risk Management	22
4.	Significant achievements or failures	22
5.	Factors affecting our results	22
6.	Key Performance Indicators	24
7.	Results of operations	29
8.	Unusual events significantly affecting the financial statements	37
9.	Possibility of accomplishing previously published forecasts	37
10.	Significant proceedings pending in the courts	37
11.	Transactions with related parties	38
12.	Granted sureties, loans, guarantees	38
13.	Significant events after the balance sheet date	38
14.	Other information important for the assessment of the human resources, property, financial situation, financial result
	and their changes and information important for the assessment of the issuer's ability to meet its obligations	38

Board of Directors' Statement 39

Disclaimer

This constitutes the semi-annual report for the six-month period ended June 30, 2022 (the "Semi-Annual Report") prepared in accordance with the Regulation of the Minister of Finance of March 29, 2018 on current and periodic information published by issuers of securities and the conditions for recognizing information as equivalent required by the law of a non-member state. This Semi-Annual Report should be read in conjunction with the interim condensed consolidated financial statements for the six-month period ended June 30, 2022 prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Since the separate data for Huuuge, Inc. and the consolidated data for the Huuuge Group are similar (trends are maintained for individual balance sheet and result items), the Board of Directors and Management perform and present a joint analysis for the separate and consolidated data.

Unless implied otherwise in this Semi-Annual Report, the terms "we" or the "Group", refer to the Company together with all of its subsidiaries and the term the "Company" or "Issuer", refers to Huuuge, Inc.

Unless indicated otherwise, references to statements as to beliefs, expectations, estimates and opinions of the Company or its management refer to the beliefs, expectations, estimates and opinions of the Company's Board of Directors.

Certain arithmetical data contained in this Semi-Annual Report, including financial and operating information, have been rounded. Therefore, in certain instances, the sum of the numbers in a column or a row in tables contained in this Semi-Annual Report may not conform exactly to the total figure given for that column or row.

Industry and Market Data

This Semi-Annual Report may include market share and industry data that we obtained from various third-party sources, including publicly available information concerning global social gaming industries. The information in this Semi-Annual Report that has been sourced from third parties has been accurately reproduced with reference to these sources in the relevant paragraphs and, as far as we are aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information provided inaccurate or misleading. Where third-party information has been sourced in this Semi-Annual Report, the source of such information has been identified. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. To the extent these industry publications, surveys and forecasts are accurate and complete, we believe we have correctly extracted and reproduced the information from such sources. Additionally, industry publications generally state that the information contained therein has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and in some instances state that they do not assume liability for such information. We cannot therefore assure you of the accuracy and completeness of such information, and we have not independently verified such information.

In addition, in many cases, statements in this Semi-Annual Report regarding our industry and our position in the industry are based on our experience and our own investigation of market conditions. Comparisons between our reported financial or operational information and that of other companies operating in our industry using this information may not fully reflect the actual market share or position in the market, as such information may not be defined consistently or reported for all companies from our industry in line with how we define or report such information in this Semi-Annual Report.

While we are not aware of any misstatements regarding the industry data presented herein, our estimates involve certain assumptions, risks and uncertainties and are subject to change based on various factors.

Key Performance Indicators

Certain KPIs included in this Semi-Annual Report, including DAU, MAU, DPU, MPU, ARPDAU, ARPPU, Monthly Conversion, are derived from management estimates, are not part of our financial statements or financial accounting records and have not been audited or otherwise reviewed by independent auditors, consultants or experts.

Our use or computations of these KPIs may not be comparable to the use or computations of similarly titled measures reported by other companies in our industry, by research agencies or by market reports. For that reason, comparisons using this information may not be reliable. Other companies, research agencies or market reporters may include other items or factors in their calculation of similar metrics and may use certain estimates and assumptions that we do not use when calculating these metrics. These factors may cause the calculations by others of similar metrics to differ substantially from our calculations if their methodologies were used to calculate our KPIs. The KPIs are not accounting measures, but management believes that each of these measures provides useful information concerning the usage and monetization patterns of our games, as well as the costs associated with attracting and retaining our players. None of the KPIs should be considered in isolation or as an alternative measure of performance under IFRS, and their inclusion in this Semi-Annual Report does not mean that the Issuer will continue to report these KPIs in the future.

Forward-looking statements

The Semi-Annual Report includes forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or that include the words "targets," "believes," "expects," "aims," "intends," "will," "may," "anticipates," "would," "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results of operations, financial condition or prospects to materially differ from any of those expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we currently operate and will operate in the future. These forward-looking statements speak only as at the date of the Semi-Annual Report. We have no obligation and have made no undertaking to disseminate any updates of or revisions to any forward-looking statements contained in this Semi-Annual Report unless we are required to do so under the applicable laws.

Investors should be aware that several important factors and risks may cause our actual results of operations to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.

President's Letter

Dear Shareholders,

It is with pleasure that I present to you our report for the first half of 2022, which saw Huuuge performing strongly in the face of a changing market environment.

The mobile gaming sector globally has experienced a period of readjustment as pandemic lockdowns ease, resulting in lower consumer spending on mobile games. Huuuge anticipated this outcome and focused on the efficiency of its business, generating higher profits in a phase of declining revenue. We have now moved firmly into operational profitability, on the basis of effective monetization of our products. In the first six months of 2022, Huuuge recorded an adjusted net profit of USD 18.6 million, compared to USD 15.7 million reported in the first six months of 2021.

We believe that the long-term trend in mobile gaming remains highly positive and that the slowdown in growth from the pandemic peak will prove to be a temporary phenomenon. The fundamentals of our business remain strong, supported by market-leading, cash-generating games, as reflected in our solid operating cash flows and profitability, with a net cash flow from operations of USD 26.3 million. Our cash position as of the end of H1 2022 remained good, with USD 188.2 million cash at hand, despite USD 16.1 million spent on the Share Buyback program and a USD 25.0 million installment paid for Traffic Puzzle. Our strong performance is further reflected in our EBITDA results. Adjusted EBITDA for the period reached USD 28.1 million – an increase of 8.1% over the equivalent period last year. At the same time, we increased our adjusted EBITDA margin from 13.4% to 17.2%.

Our priority has been to acquire the right profile of player, and we have therefore more selectively targeted our marketing expenditure. Our reorientation of our marketing spend has also addressed the new situation created by Apple's changes to its IDFA policy.

We have successfully continued the integration of Traffic Puzzle into our portfolio, and this game now generates 10% of our revenue. We acquired Traffic Puzzle in April 2021 and completed the handover process in January this year. While the game already makes a significant contribution to our revenues, we have identified improvements to be built upon in the coming months and implemented changes to the Traffic Puzzle studio to further capitalize on the potential of this title.

Developing new games demands time and investment, and not all concepts go on to prove popular among players, but our track record shows our capacity to realize successful products. The company will continue to invest in product development, while maintaining rigorous discipline with respect to overall payback periods.

Huuuge has grown through imagination and flexibility. As we look to the next stage of our growth strategy, we are reviewing our options and are open to considering all forms of partnership. We are part of a global ecosystem of developers and operators, working effectively with independent studios from all over the world. Within this ecosystem, we are well known to other participants, some of whom have outlined strategic approaches that we may wish to explore further in the coming months. We have therefore initiated a review of our strategic options and will report back to our shareholders and other stakeholders once this has been completed.

We at Huuuge are team players. We have built a world-leading business, together with our partners, customers and shareholders. Team Huuuge looks forward to continuing to play together with you.

Best regards,

Anton Gauffin President and co-CEO of Huuuge, Inc.

Rod Cousens Co-CEO of Huuuge, Inc.

Selected financial data

	USD	USD	EUR	EUR	PLN	PLN
in thousand USD	H1 2022	H1 2021	H1 2022	H1 2021	H1 2022	H1 2021
Revenue	163,427	193,234	149,319	160,335	691,828	727,856
Operating profit (loss)	21,859	17,744	19,972	14,723	92,535	66,836
Pre-tax profit (loss)	20,715	(25,309)	18,927	(21,000)	87,692	(95,332)
Net profit (loss)	17,563	(28,435)	16,047	(23,594)	74,349	(107,106)
Net cash flows from operating activities	26,267	191	24,000	158	111,195	719
Net cash flows from investing activities	(26,722)	(11,977)	(24,415)	(9,938)	(113,121)	(45,114)
Net cash flows from financing activities	(16,217)	98,152	(14,817)	81,441	(68,651)	369,710
Total net cash flows	(16,672)	86,366	(15,233)	71,662	(70,577)	325,316
Cash and cash equivalents at the end of period	188,217	180,352	180,251	151,736	843,683	685,969

	USD	USD	EUR	EUR	PLN	PLN
	H1 2022	H1 2021	H1 2022	H1 2021	H1 2022	H1 2021
Number of shares at the end of period	84,246,697	84,246,697	84,246,697	84,246,697	84,246,697	84,246,697
Weighted average number of shares*	81,918,361	72,805,021	81,918,361	72,805,021	81,918,361	72,805,021
Earnings per share basic (EPS)*	0.21	(0.38)	0.19	(0.32)	0.89	(1.43)
Earnings per share diluted (EPS)*	0.21	(0.38)	0.19	(0.32)	0.89	(1.43)

* The weighted average number of shares has been adjusted for the split that took place on January 20, 2021.

	EUR H1 2022	PLN H1 2022	EUR H1 2021	PLN H1 2021
Annual average exchange rate	1.0945	0.2362	1.2052	0.2655
Exchange rate at the end of the reported period	1.0442	0.2231	1.1886	0.2629

Management report on the activities of the capital group

1. General information

Business profile

Huuuge, Inc. (the "Company", "Huuuge") is registered in the United States of America. Huuuge'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 680, NV 89102. The Company was established on February 11, 2015.

Huuuge is a free-to-play games developer and publisher, with a mission to empower billions of people to play together and a vision to transform mobile gaming into a massively social experience. The Group's main areas of operations are developing, publishing, scaling and operating mobile games to a broad player base. Huuuge games provide entertainment every month to millions of players from almost 200 countries and are available in 17 languages. Huuuge employs approximately 600 people at nine offices around the world. Huuuge shares have been listed on the Warsaw Stock Exchange since February 19, 2021.

Key products

Huuuge develops and publishes games that are easy to play, great for small breaks and longer sessions alike, and designed around our social-first, "play together" ethos. The social-first nature of our games is based primarily upon the ability of our players to chat, play and compete with one another in-game and in real time. The concept of playing together with others is central to the Group's approach to game design. We are one of the market leaders in implementing real-time multiplayer mechanics at scale in social casino games.

Our core franchises are Huuuge Casino and Billionaire Casino. Combined, these generate 88% of Huuuge's total revenues. Traffic Puzzle generates 10% of our revenue and our other franchises generate 2%.

Huuuge Casino: The game was launched in June 2015. It is Huuuge's flagship title, responsible for 58% of total Q2 2022 revenue and for over USD 900 million in lifetime revenue. Huuuge Casino was a true pioneer with its mobile-first user experience and real-time PvP-style gameplay. We believe that it was the first social casino game to introduce features such as clubs to the realm of social casino games. Huuuge Casino offers players over 100 casino slot machines, as well as card games and roulette. The game enables players to join a club and compete in a Billionaire League, with multiplayer slots where they can play with friends and compete against each other. Huuuge Casino is ranked #17 (Apple App Store) and #9 (Google Play) among social casino apps in the United States in terms of revenue as at June 30, 2022.

Billionaire Casino: The game was launched in October 2016. Its revenue has grown rapidly since its release. It has achieved over USD 430 million of lifetime revenue and constitutes 31% of our total

Q2 2022 revenues. Due to its aesthetic, which is different from that of Huuuge Casino, Billionaire Casino is targeted at a different player base in terms of demographics. Similarly to Huuuge Casino, Billionaire Casino offers players casino slot machines, as well as card games and roulette. Billionaire Casino allows players to create a club with their friends or join a club and meet new people while playing slot machines. In addition, the game allows players to participate in club events by playing slots and other casino games. Billionaire Casino is ranked #29 (App Store) and #22 (Google Play) among social casino apps in the United States in terms of revenue as at June 30, 2022.

Traffic Puzzle: The game was originally developed by Picadilla Games, a Polish developer studio based in Wrocław, and launched in May 2019 by Huuuge Publishing. In April 2021, the game was acquired by Huuuge. Traffic Puzzle is a unique match-3 game, positioned to build a top-grossing mobile title. In Traffic Puzzle, the player tries to clear a clogged road by matching three cars of the same color. The game offers different levels in which players assist vehicles such as the police, fire trucks and ambulances to reach their destinations. Traffic Puzzle's monetization model is based on in-app purchases and advertising. Traffic Puzzle was responsible for 10% of our total revenue in Q2 2022.

Other titles

In addition to our three main titles described above, we have other games at different stages of life cycle, as well as further titles in our publishing division.

Shares and shareholding structure

The Company's outstanding share capital currently consists of: (i) 84,246,695 common shares with a nominal value of USD 0.00002 each and two Preferred Shares (Preferred Shares are not admitted to trading on the WSE).

To the best of the Company's knowledge, as of the date of publication of this Semi-annual Report, the shareholders holding directly or indirectly through subsidiaries, at least 5% of the total number of votes at the Issuer's general meeting are presented in the table below.

Shareholder	Shares	% of share capital and % of votes at the General Meeting
1 Anton Gauffin (through Big Bets OÜ)	25,849,506	30.68
1 Raine Group (through RPII HGE LLC)	10,919,646	12.96
Nationale-Nederlanden FUNDS	5,688,696	6.75
2 Others	41,788,849	49.60
3 Total	84,246,697	100.00

1 Includes one Preferred Share

2 Includes 5,558,931 treasury shares, which carry no voting rights (as of September 6, 2022 )

³ 84,246,695 shares were introduced to public trading on the Warsaw Stock Exchange. Moreover, two shares of the Company are Preferred and have not been introduced to public trading.

Each holder of common shares, as such, and each holder of Preferred Shares, is entitled to one vote for each Common Share or Preferred Share, respectively. There are no restrictions on the exercise of voting rights. Unless otherwise expressly required by law or stipulated in the Certificate of Incorporation, the holders of common shares and Preferred Shares vote together as a single class on all matters submitted to a shareholder vote. The Certificate of Incorporation and the Bylaws do not stipulate any restrictions on the transfer of ownership of the Company's securities.

Treasury Shares

As at December 31, 2021, the Company held 1,556,348 treasury shares.

On February 14, 2022, the Huuuge, Inc. Board of Directors approved the allocation of up to 58,034 treasury shares (of which 57,724 have been finally exercised and allocated) for the purpose of satisfying exercise requests from participants of the share option plan.

In October 2021, 23,046 treasury shares were assigned for transfer to the sellers of Double Star Oy, as part of the Year One Earn-Out Consideration, based on the share sale and purchase agreement dated July 16, 2020, as amended by the First Amendment dated October 19, 2021. The transfer of treasury shares to the sellers of Double Star Oy was completed on February 21, 2022.

On April 19, 2022, the Huuuge, Inc. Board of Directors approved the allocation of up to 630,713 treasury shares (all of which have been exercised and allocated) for the purpose of satisfying exercise requests from participants in the share option plan.

On February 15, 2022, the Board of Directors adopted a resolution to repurchase its common shares listed for trading on the Warsaw Stock Exchange and defined certain detailed conditions and procedures for the share buyback ("SBB"). The purpose of the SBB is to satisfy the Issuer's needs related to the exercise of options under its Employee Stock Option Plans in the foreseeable future. The total number of the Company's shares to be repurchased under the original SBB resolution was up to 2,500,000 shares, and the Company will allocate a maximum amount of PLN 100 million for the repurchase of its shares. More details are described in the current report 4/2022. On March 29, 2022, the Company announced that it had started a share buyback process (current report 9/2022). On May 22, 2022, the Company announced an expansion of the share buyback from 2,500,000 shares to 6,500,000 shares, within the originally allocated budget and with other terms unchanged (current report 23/2022).

On August 9, 2022, the Huuuge, Inc. Board of Directors approved the allocation of up to 169,295 treasury shares (all of which have been exercised and allocated) for the purpose of satisfying exercise requests from participants in the share option plan.

As at June 30, 2022, the Company held 4,695,404 treasury shares.

As of September 6, the Company holds 5,558,931 treasury shares. The nominal value of all retained shares is USD 111.18. These shares represent approximately 6.60% of the share capital.

Number of shares held by the members of the Board of Directors

The table below presents, to the best of the Company's knowledge, the shares and outstanding stock options held directly or indirectly by the Company's Board of Directors as at the date of publication of this Semi-Annual Report.

Members of the Company's Board of Directors	Function	Common Shares	Outstanding Stock Options
Anton Gauffin 1 (through Big Bets OÜ)	Co-Chief Executive Officer & Executive director	25,849,505	425,000
Henric Suuronen	Non-executive director	1,673,610	-

¹ Anton Gauffin also holds one Series B Preferred Share through Big Bets OÜ.

For the period ending at the 2022 Annual General Meeting of the Company, the remuneration of Mr. Anton Gauffin, holding the positions of the President and Co-Chief Executive Officer 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 are the following:

• (i) 50,000 options with a vesting condition to provide the service continuously for about 4 years from the service commencement date. The Group's management expects Mr. Anton Gauffin to fulfill the service condition.
• (ii) 75,000 options with a vesting condition to provide the service continuously for about 4 years from the service commencement date and to meet the 2021 EBITDA target. These options were forfeited, since the performance condition was not met.
• (iii) 375,000 options with a variable vesting period due to the market condition, i.e., the condition to meet the Company's market capitalization milestones. The Group's management estimated that, in total, 6 years of continuous service from the commencement date will be required for options to vest.

Similarly to other share-based payments in the Group, for this program, staged vesting applies, i.e., each installment has a different vesting period and is treated as a separate award with a different vesting period.

Principles for the preparation of the interim condensed consolidated financial statements

The interim condensed consolidated financial statements as at and for the six-month period ended June 30, 2022 have been prepared in accordance with the IAS 34 Interim Financial Reporting as adopted by the European Union.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's consolidated financial statements as at and for the year ended December 31, 2021 prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

Changes in the organization of the Capital Group

On April, 29 2022 Huuuge Tap Games Ltd., the Group's dormant Hong Kong subsidiary, was successfully deregistered and dissolved.

On May 4, 2022, Billionaire Games Limited with its registered office in Larnaca, Cyprus was incorporated.

Moreover, Coffee Break Games HGL Limited with its registered office in Larnaca, Cyprus has changed its corporate name, and, starting from April 8, 2022, it is registered under the name Huuuge Block Limited.

2. Risk factors

Determination and concise naming of the most important occurring or possible events or phenomena threatening or affecting the implementation of the goals of Huuuge Group

Risk assessment consists in determining the probability and impact of a risk in relation to selected scenarios (based on the causes and results indicated in the risk analysis). The assessment is performed on the basis of defined scales. The descriptions included therein are of an auxiliary nature and, in the case of any doubts, the score of the assessment shall have priority.

Risk evaluation consists in comparing the risk value against previously adopted criteria, as well as identifying risks requiring the implementation of mitigation plans.

At the time of the publication of this report, the following material risk factors have been identified. However, the risk factors and uncertainties described below by the Group are not the only risk factors the Group faces. Additional risks and uncertainties that the Group is not aware of or currently considers to be insignificant may also have a significant adverse effect on the business, financial condition and operational results and prospects of the Group.

If we are unable to successfully attract new players or if we lose our current players, our business could be negatively affected. We rely on purchases from a small percentage of our players for nearly all of our revenue. If we are unable to entice players to make in-app purchases or engage with our games in ways that generate revenue, our business could be negatively affected.

Our business depends on developing and publishing mobile games that players download and spend time and money playing. The nature of our industry is that we develop and test hundreds of ideas and games, but subsequently focus only on the titles or features that exhibit the most promising key performance indicators (KPIs). Only a handful of our games make it to soft launch and even fewer progress to full launch and scaling. We cannot guarantee that high-quality games, even if favorably reviewed by players, will become "hits." Our new games may also attract players away from our existing games, especially when they provide similar gameplay features with an upgraded user interface or new social elements. Furthermore, we cannot ensure that new features or upgrades to our existing games will attract new players or allow us to retain existing ones.

The growth of our business largely depends upon our ability to attract new players to our existing and new games, as well as on retaining existing players of our games. Our success in doing so is conditional in part on unpredictable and volatile factors beyond our control, including customer preferences, competing games, the popularity of other forms of entertainment and economic conditions adversely affecting consumer spending. Achieving growth in our community of players may also require us to increasingly engage in sophisticated and costly sales and marketing efforts that may not result in additional players.

Currently, we derive 96% of our revenue from in-app purchases. As our games are available to players for free, we generate revenue from them only if they make in-app purchases above and beyond the level of free features provided as part of the game, e.g., they purchase virtual currency beyond the amount made available for free, or if they otherwise engage with our games in ways that generate revenue. Our games also contain in-app purchases relating to items other than virtual currency, such as "passes" granting players access to features such as mini games. If we fail to offer games that entice players to make in-app purchases, or if we fail to properly manage the economics of free versus paid currency, or if we fail to entice players to engage with our games in ways that generate revenue, this could materially and adversely affect our business, operating results and financial condition.

We rely on a small percentage of our players for nearly all of our revenue. However, we lose paying players in the ordinary course of business, and they may stop making purchases in our games or playing our games altogether at any time. In order to sustain or increase our revenue levels, we must attract new paying players or increase monetization across the current player base. To retain paying players, we must devote significant resources, for example in the areas of marketing and data analytics, in order to individualize offers provided to our players so that the games they play retain their interest and attract them to our other games.

Revenue concentration in a small number of games

The majority of our revenue is generated by a small number of our games, and this could negatively affect our business. We expect that this concentration will continue in the future. For example, our most popular games generating the highest revenue are Huuuge Casino and Billionaire Casino. These top two franchises historically have contributed the majority of our revenue, accounting for 88% of our revenue in H1 2022. We expect the top two franchises' share in total revenue to continue to decline over the next several years. If we are unable to diversify our portfolio of games in the long run, or to increase the popularity and improve the monetization of our existing games or the games we develop in the future, it could have a material adverse effect on our business, operating results and financial condition.

Dependence on third parties' services

We rely, to varying degrees, on a number of third-party vendors, service providers and game developers, as well as strategic partners, to efficiently operate our business, develop games and meet the expectations of our players. In particular, some elements of the provision and distribution chain of our gaming services are operated by third parties we do not control and that it would take significant time to replace. This dependence is expected to continue.

Any adverse changes in our existing arrangements with these third parties, including an inability to fulfill their obligations in a timely manner or an inability to enter into or renew arrangements on favorable terms, if at all, could reduce the quality, revenue or availability of our games. Changes to third parties' policies or terms of service could also negatively impact our ability to offer our existing or future games or could restrict the availability of certain features.

Disruption of IT infrastructure, networks and systems and IT gaps

We rely on information technology infrastructure, networks and systems that are important to the operation of our business. We use such infrastructure, networks and systems to operate our games and to manage and secure our business and data, particularly with respect to internal communications, controls, reporting, and relations with suppliers.

Some of these infrastructure, networks and systems are managed or provided by third parties. These third parties are typically under no obligation to renew agreements relating to such infrastructure, networks and systems, and there is no guarantee that we will be able to renew these agreements on commercially reasonable terms, or at all. In addition, our information technology infrastructure, networks and systems, including those operated by third parties, may experience breaks, suspensions or stoppages of service, or we may experience system crashes in connection with system integration or migration work. Any disruption or failure in these infrastructure, networks and systems could adversely affect the availability of games, slow them down or otherwise disrupt the functionality or operations of the relevant business.

As a result of technological advancements, our IT infrastructure may become outdated or inadequate for our business needs. If we are unable to keep our systems and infrastructure current with industry standards and with evolving technologies, our operations or growth may be impeded.

Undetected errors, bugs or vulnerabilities

Our games and other software applications and systems, as well as the third-party platforms upon which they are made available, could contain undetected errors, bugs or vulnerabilities that could adversely affect the performance of our games, some of which may only be detected after the code has been released for external or internal use. For example, errors, bugs or other types of defects could prevent our players from making in-app purchases, harm the overall game-playing experience for our players, delay game introductions or enhancements, cause measurement errors, result in our games being non-compliant with applicable laws or create legal liability for us. We have experienced some of these issues in the past, including lags in gameplay, in-app purchase errors, game data corruption and problems with players' access to our games. We resolved most of these issues in a timely manner, but we cannot guarantee that we will be able to do so in the future. Moreover, resolving such errors, bugs or other vulnerabilities could disrupt our operations or cause us to divert resources from other projects.

Failure to successfully pursue or implement new business initiatives

In order to grow our business, we need to evaluate, consider and effectively implement new business initiatives. Management may not properly ascertain or assess the risks associated with these new initiatives and subsequent events may arise that would render our initial assessment of the economic merits of a particular initiative uneconomic.

Moreover, the market of new technologies is one that is developing rapidly. Therefore, we conduct ongoing monitoring of new technologies and IT solutions in order to quickly adapt to the solutions introduced to the market. The failure to analyze or implement new technologies may result in a loss of competitiveness in the market, which could have a negative impact on our operating activities and financial results.

Business acquisitions and the integrating of acquired operations, as well as the strategic options review process, could divert the attention of our management and otherwise disrupt our operations or limit our growth.

As a part of our strategy, we may in the future explore, and have in the past carried out, acquisitions to strengthen our market position in selected game genres and grow our game development talent. We intend to use the net proceeds from the new shares sold in the initial public offering, which took place in February 2021, primarily to finance extraordinary growth events such as potential acquisitions, if the opportunity arises. We cannot guarantee we will be able to identify acquisition targets that help us to achieve our growth strategy, or that the transactions we have planned will be completed or prove to be successful or accretive. In addition, acquisitions and integration processes, as well as the work related to the strategic options review, could divert our management's attention from other business concerns and also lead to the use of resources that are needed in other parts of our business.

Real or perceived inaccuracies in our performance metrics

We track certain performance metrics, such as Installs, DAU, DPU, ARPDAU, ARPPU, Monthly Conversion. Our performance metrics tools have a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including those we report. If our performance metrics are not accurate representations of our business, player base or traffic levels, if we discover material inaccuracies in our metrics, or if those we rely on to track our performance do not provide an accurate measurement of our business, we may fail to obtain an accurate understanding of the performance of our business, our reputation may be significantly harmed or we may lose the confidence of players, analysts or business partners, and this could adversely affect our business, operating results and financial condition.

Ineffective protection of our intellectual property

Intellectual property rights are an essential element of our business. We rely on a combination of different intellectual property rights, such as trademarks, patents and copyrights relating to our games, and proprietary or confidential information that is not subject to formal intellectual property protection.

While we create internally most of the intellectual property that we use, we also license intellectual property such as, in particular, games (as a whole) and software development kits ("SDKs") from third parties. In particular, our games use SDKs provided by, among others, Facebook and Google. We also purchase or license, in whole or in part, photos, videos and audio used in our games from third parties, including Shutterstock and Envato. We rely on licenses for all of our third-party publishing.

Despite our efforts to protect our owned and licensed intellectual property, unauthorized parties may attempt to copy or otherwise obtain and use our technology, games or brands. There is a risk that the actions we take will not be sufficient to protect our owned and licensed intellectual property. Furthermore, our use of third-party intellectual property may inadvertently violate the rights of third parties, and therefore we could become subject to infringement claims, which we already occasionally face.

Third-party intellectual property rights may limit our development

We need to continuously adapt our games to incorporate new technologies. If such technologies are protected by the intellectual property rights of our competitors or other third parties, we may be prevented from introducing games based on these technologies or expanding into markets or platforms created by these technologies.

We license SDKs that may be integrated into our own products and that are required to, among other purposes, allow our players to connect their game accounts with their social media ones. If the owners of these SDKs, such as Google and Facebook, change the license terms in a manner that limits our ability to use the SDKs or integrate with their platforms, our business, operating results and financial condition may be adversely affected.

We also use open-source software in our games and expect to continue to do so. Some open-source software licenses require users who distribute open-source software to publicly disclose all or part of the source code to such software or make available any derivative works of the open-source code on unfavorable terms or at no cost. In addition, provisions of various open-source licenses have not been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or limitations on our use of the open-source software. If our use of open-source software is not in compliance with a particular license, we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our games or products, discontinue distribution in the event that re-engineering cannot be accomplished in a timely manner, or take other remedial action that may entail additional expenses or limit our activities.

Ineffective protection of confidential information

Our management and key employees have access to sensitive confidential information relating to our business, such as insights about strategic developments, business case planning and core technology. In the event that competitors, third parties or the general public gain access to such confidential information, whether on purpose or by accident, our market position could be materially weakened.

We could be the target of cyber-attacks, piracy, database security breaches and hacking

Our industry is prone to – and our games, systems and networks are subject to – cyber-attacks, viruses, worms, phishing attacks, malicious software, break-ins, theft, computer hacking, employee error or malfeasance, or other security breaches that may exploit, damage or disrupt the functioning of our games, networks or technological infrastructure. Physical locations where our IT infrastructure is located, as well as our hardware, may also be subject to break-ins, theft or damage.

Any security breach or incident that we experience could result in unauthorized access to, misuse of or unauthorized acquisition of our data or that of our players, the loss, corruption or alteration of this data, interruptions to our operations, unavailability or malfunctioning of our games, or damage to our computers or systems or those of our players or third-party platforms. Furthermore, third parties, such as hosted solution providers or third-party platform operators that provide services to us, could also be a source of security risks in the event of the failure of their own security systems and infrastructure.

As threats related to cyber-attacks develop and grow, we may also find it necessary to make further investments to protect our data and infrastructure.

Unauthorized operators may develop "hacks" or other types of "cheating" software enabling players to alter the intended game play, to abuse or exploit the mechanics of our games and thereby obtain unfair advantages in our games, or otherwise obtain virtual currency or other benefits available in our games. These may have a negative impact on the volume of in-app purchases and the amount of revenue we collect from players. In addition, such "hacks" or other similar vulnerabilities may result in increased costs of developing technological measures to respond to them.

The Russian invasion of Ukraine, and the associated developments on the international arena, could result in a heightened risk of cyber-attacks, which could affect our systems. We have taken action to analyze the impact of various types of cyber-attacks and have implemented additional security measures commensurate with the potential increase of such risk.

Fluctuations in foreign exchange rates and inflationary pressures could negatively impact our business

Our activities and businesses expose us to fluctuations in currency exchange rates between USD and other currencies, such as the Polish zloty and the euro. These fluctuations may reach significant levels during periods of increased market volatility related to, for example, the Russian invasion of Ukraine, the COVID-19 pandemic, or other events increasing uncertainty in the global economy. See also "Factors affecting our results."

Our performance may also be affected by inflationary pressures and their impact on consumer spending patterns, which could result in decreased spending on leisure and entertainment and thereby negatively impact our revenues.

Our success and continued growth are heavily reliant on the experience and talent of our managers and skilled employees

The successful operation of our businesses, as well as the successful implementation of our strategy, is dependent on the experience of our managers and key personnel. Due to the specifics of the industry we operate in, we are dependent on our highly skilled, technically trained and creative employees, whose high competences and knowledge translate into the development of new technologies and the creation of innovative games. The loss of any of these individuals could harm our business. Competition for employees, particularly game designers, engineers and project managers with desirable skill sets, is intense, and we devote significant resources to identifying, hiring, training, successfully integrating and retaining these employees.

Our future success depends in part on our ability to retain highly qualified managers active in the mobile games industry who have had a significant impact on our development, as well as on our ability to attract and retain skilled employees able to effectively operate our business. We cannot guarantee that we will be able to attract and retain such managers or skilled employees in the future, and the costs associated with retaining them may impact our profitability or financial results.

Changes in tax laws or tax rulings, or the examination of our tax position, could materially affect our financial condition and results of operations

We are subject to complex tax legislation in the various countries in which we operate. In particular, given the international scope of our business and our structure, we are subject to rules on transfer pricing. Moreover, GAAR and the focus of tax regulations on real business substance may have an increasing impact on international taxation.

For example, we sell services or use intellectual property through legal entities that must necessarily procure these services or license such intellectual property within a group. Therefore, we perform numerous intercompany transactions. The jurisdictions in which we operate generally have transfer pricing regulations that require transactions involving related parties to be undertaken on properly documented arm's-length terms and conditions. If the tax authorities in a particular jurisdiction do not regard intra-group transactions as being made on a properly documented arm's-length basis and successfully challenge such transactions, or otherwise adopt a differing approach on the attribution of revenue or profits between our various group entities, the amount of tax payable by the relevant member or members of our group, in respect of both current and previous years, may increase, and we may be subject to penalties or fines or required to make interest payments.

In addition, we provide services whose price is subject to direct and indirect taxes in various countries, such as value added tax. The complexity of our business model may complicate the understanding of the legal obligations in the relevant tax application. We may also be subject to double taxation in jurisdictions with multiple tax authorities or incompatible tax regimes. In addition, applicable tax rates could increase. A significant increase in value added tax rates could negatively affect our activity, especially customer demand, which could have a material adverse effect on our business, operating results and financial condition.

Changes in tax treaties, laws, rules or interpretations or the outcome of tax audits could have an adverse effect on our business. The tax laws and regulations in the jurisdictions in which we operate may be subject to change; for example, a substantial amendment may be introduced to the taxation of digitized companies. New tax laws or regulations may be introduced with or without retroactive effect and there may be changes in the interpretation and enforcement of such tax laws or regulations.

If the relevant tax authority challenges our tax position, through audits or otherwise, and is successful, our effective tax rate may increase, and we may be required to pay additional taxes, penalty charges and interest, and we may incur costs in defending litigation or reaching a settlement with the relevant tax authority. We could be liable for amounts that are either not covered by or are in excess of our established reserves. Any of the foregoing situations could have an adverse effect on our business, operating results and financial condition.

Competition in the gaming industry

The gaming industry, which includes social casino games and from which we derive the majority of our revenue, is considered to be a highly competitive and rapidly evolving industry with low barriers to entry. We are experiencing, and are likely to experience in the future, competition from other developers and publishers in the gaming category. Our competitors range from established interactive entertainment companies to emerging start-ups, and we expect new competitors to continue to emerge globally.

Our operations depend on third-party platforms used to offer our games

Our social gaming offerings operate mainly through Apple's App Store, Google's Play Store and Facebook, which also serve as significant online distribution platforms for our games and provide us with valuable information and data. Consequently, our operations depend on our continued relationships with these providers and any emerging platform providers that are widely adopted by our target player base.

We are subject to the standard terms and conditions that these platform providers have for application developers, which govern the promotion, distribution and operation of games and other applications on their platforms and which the platform providers can change on a discretionary basis and unilaterally on short notice or without notice.

Moreover, Internet-connected devices and operating systems controlled by third parties increasingly contain features that allow device users to disable functionality that allows for the delivery of advertising on their devices, including through Apple's Identifier for Advertising or IDFA or, for Android devices, Google's Advertising ID or AAID. Device and browser manufacturers may include or expand these features as part of their standard device specifications. If players elect to utilize the opt-out

mechanisms in greater numbers, our ability to deliver effective targeted advertisements would suffer, which could adversely impact our revenues from in-game advertising (currently less than 5% of Huuuge's overall revenue).

In addition, new regulations and increased focus on data protection may result in changes to the data protection policies of the platform providers, which we will be required to implement. We cannot exclude the possibility that our games, in particular social casino games, will be targeted by other limitations introduced by either third-party platform providers or our advertising and marketing partners and concerning, among other things, user acquisition and advertising revenue.

Changes in third-party platforms' classification of or approach towards social casino games or certain game features (such as "loot boxes" or similar features) could restrict the availability of our games or of certain game features on those platforms or to users in certain jurisdictions.

If similar events occur and we are unable to address them effectively, or if other similar issues arise that impact players' ability to download our games, access social features or purchase virtual currency, it could have a material adverse effect on our business, operating results and financial condition.

We operate in an industry characterized by an evolving and partially unclear regulatory environment

Generally, social gaming, including but not limited to social casino games, is not explicitly regulated in the markets where we operate; however, as the mobile and online game industry evolves, so too are regulations evolving, and, as a result of this evolution, as well as possible changes in the approach of legislators, regulators and courts, we cannot exclude the possibility that our activities could be regulated in ways that could adversely affect our business.

In some jurisdictions, there is growing opposition from regulators, public interest groups and/or media towards mobile and online gaming, including social casino games or social gaming, as well as towards specific in-game features, such as loot boxes. Such opposition could lead these jurisdictions to adopt legislation or impose or enforce an existing regulatory framework to govern mobile and online gaming more broadly (e.g., impacting social gaming) or more specifically (e.g., targeting in-game features such as loot boxes). Alternatively, jurisdictions or regulators could seek to apply laws that we do not believe are applicable to our games to certain types of games we offer or to games containing certain features or characteristics.

Courts may also interpret or apply laws in a manner adverse to us, notwithstanding the position taken by the relevant gambling authority, and this may compromise our ability to continue to offer our games in particular jurisdictions.

We believe that our games do not constitute gambling in the jurisdictions in which we operate, particularly due to the free access and lack of monetary rewards; however, we cannot exclude the possibility that gambling regulators, judicial or similar authorities in certain jurisdictions will interpret the applicable existing or new laws in a manner classifying our games as gambling or requiring that certain in-game features (e.g., features that are deemed to be "loot boxes") be limited or excluded. If any authority issues such an interpretation, we may face enforcement action on the basis of that interpretation. Moreover, if our games are considered to be gambling in jurisdictions that prohibit online gambling, we may be forced to cease offering our top-grossing games in such jurisdictions. If our games are classified, for regulatory purposes, in a manner differing from the manner in which we view them, we may also be barred from promoting those games via third-party platforms (such as the AppStore or Facebook.)

There is a risk that further legislative or regulatory developments could curtail our offering of games in certain jurisdictions, result in a prohibition on mobile or online gaming in the jurisdictions in which we operate, restrict our ability to advertise our games, allow our players to claim damages related to the use of our games, raise consumer protection claims, substantially increase the cost of complying with the applicable regulations, or subject us to fines or other regulatory actions, any of which could have an adverse effect on our business, operating results and financial condition. Finally, the increased public scrutiny of social casino games and loot boxes could result in reputational damage to ourselves and to the industry, deter players from participating in our games, generate negative publicity, or deter financial institutions and other third-party partners and suppliers from cooperating with us.

We could be subjected to sanctions or other penalties for data privacy and/or data security breaches

We collect, process, store, use and share personal information and other data in order to develop new games, offer products and features to players and to analyze the effectiveness of our marketing channels. Our business is therefore subject to a number of laws and regulations governing data privacy and security, including with respect to the collection, storage, use, transmission, sharing and protection of personal information and other consumer data, that are applicable in various jurisdictions. Such laws and regulations may be inconsistent between countries or conflict with other rules.

Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to players or other third parties – or any other legal obligations or regulatory requirements relating to privacy, data protection or information security – may result in governmental investigations or enforcement actions, litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our players to lose trust in us and otherwise materially and adversely affect our reputation and business.

Furthermore, the costs of complying with – and bearing other burdens imposed by – the laws, regulations and policies that are applicable to us may limit the adoption and use of – and reduce the overall demand for – our games. Additionally, if third parties we work with violate applicable laws, regulations or agreements, such violations may put our players' data at risk, could result in governmental investigations or enforcement actions, fines, litigation, claims or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our players to lose trust in us and otherwise materially and adversely affect our reputation and business. Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if unrelated to our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements or to modify their enforcement or investigation activities, which may increase our costs and risks.

Operating in multiple jurisdictions and locations

Although the US is our most significant market in terms of revenue, we generate revenue across multiple jurisdictions, and our users originate from a large number of jurisdictions worldwide. Our main operations, including game development operations, are located in Poland. We operate offices in different cities worldwide, including Tel Aviv, Israel; Limassol, Cyprus; Las Vegas, Nevada; Amsterdam, Netherlands; Helsinki, Finland; and London, UK.

Our operations in multiple jurisdictions could subject us to additional risks customarily associated with such operations, including: the complexity of laws and regulations in different jurisdictions and markets; ambiguity or inconsistency resulting from conflicts-of-laws; the uncertainty of enforcement of remedies in various jurisdictions; the effect of currency exchange rate fluctuations; the impact of various labor laws and disputes; the ability to attract and retain key personnel in different jurisdictions; the economic, tax and regulatory policies of local governments; compliance with applicable anti-money-laundering, anti-bribery and anti-corruption laws, including the Foreign Corrupt Practices Act and other anti-corruption laws that generally prohibit US persons and companies and their agents from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business; and compliance with applicable sanctions regimes regarding dealings with certain persons or countries. Moreover, foreign jurisdictions could impose tariffs, quotas, trade barriers and other similar restrictions on our international sales.

Our international business operations could be interrupted and negatively affected by terrorist activity, political unrest or other economic or political uncertainties. We operate in locations that are regularly affected by such events, including Tel Aviv.

The Russian invasion of Ukraine is likely to present obstacles to our collaboration with entities located in Ukraine with which we have commercial relationships. We are constantly reviewing the circumstances affecting our partners and taking available and appropriate measures to mitigate the potential impact on our operations, as well as to assist our partners where possible. The international sanctions imposed on Russia may also have an impact on our operations, which at the date of publication of this report we do not expect to be materially adverse. Finally, an escalation of the war in Ukraine could potentially impact the operations of our offices in Poland, and we are therefore constantly monitoring the situation with a view to taking any necessary mitigation steps to ensure the safety of our teams and the continuity of operations.

Legal proceedings may materially adversely affect our business and our results of operations, cash flows and financial condition

We have been party to – and in the future may become subject to – legal proceedings, including with respect to consumer protection, gambling related matters, employee matters, alleged service and system malfunctions, alleged intellectual property infringement and claims relating to our contracts, licenses and strategic investments. Legal proceedings targeting our social casino games and claiming violations of state, federal or local laws in jurisdictions where we operate could also occur based on the unique and specific laws of each jurisdiction.

Player use of our games is subject to our privacy policy and terms of service. If we fail to comply with our posted privacy policy, terms of service or similar agreements, or if we fail to comply with applicable privacy-related or data protection laws and regulations, this could result in litigation, proceedings or investigations against us by governmental authorities, players or others, which could result in fines or judgments against us, damage our reputation or goodwill, impact our financial condition and harm our business.

We cannot predict the likelihood, timing or scope of any legal proceedings to which we may be a party, any of which could have a material adverse effect on our business, operating results and financial condition.

We may incur significant expenses defending any lawsuits to which we may be a party, even if we eventually prevail in such proceedings or if they are found to be without merit, and lawsuits may result in the imposition of damages, restitution, fines or other penalties that could have a material impact on our financial results.

Our shareholders' rights under Delaware law differ from shareholder rights under Polish law

The Company is a Delaware corporation, and therefore its structure and operating procedures and the relationships between shareholders are governed by the laws of the State of Delaware and US federal laws, including US securities laws.

The principles underlying these laws differ from those underlying Polish law in many respects. Therefore, the rights of our shareholders are in many instances different from those of shareholders of Polish companies.

3. Risk Management

Risk factors are identified on the basis of the implemented risk management system. The organization's risk management process has been formally established based on its Risk Management Policy.

The risk management process includes:

• risk identification;
• risk analysis (description and assessment);
• risk evaluation;
• risk mitigation;
• risk monitoring and reporting.

The most important goals of the Risk Management System include:

• identification, analysis, assessment and evaluation of risks;
• improvement of the coherence of the approach to risk management;
• ensuring comparability of risks occurring in different areas of the organization;
• creating a correlation between the operational and strategic levels of risk management;
• reducing the frequency of adverse incidents;
• better preparation for adverse incidents and minimization of losses caused thereby.

All employees of the organization are involved in the risk management process. The most important functions are performed by the Board of Directors, Audit Committee, Executive Management, Risk Committee, Risk Officer, Risk Owner, Risk Coordinator (Secondary Risk Owner).

Furthermore, all management areas outsourced outside the organization should be addressed internally from a risk-management perspective. In exceptional cases, it is possible to place the responsibility for risk management externally, with the consent of the Risk Committee.

4. Significant achievements or failures and unusual events significantly affecting the financial statements

Traffic Puzzle handover and payments

In January 2022, we finalized the Traffic Puzzle handover process and, since then, have been making changes to the product. We believe in the potential of this unique match-3 game and that, once we have made important improvements to the product and its features, it will be ready for further scaling. Traffic Puzzle is a significant business priority for the group in 2022.

Events deemed unusual due to their nature, value or frequency and that significantly affected the Group's assets, liabilities, equity (as at June 30, 2022), net result, or cash flows for the six-month period ended June 30, 2022 included repayment of the second and third tranches for the Traffic Puzzle game, described in Note 9 "Intangible assets" and Note 22 "Subsequent events" to the Interim Condensed Consolidated Financial Statements.

Share Buy Back

Events deemed unusual due to their nature, value or frequency that significantly affected the Group's assets, liabilities, equity (as at June 30, 2022), net result, or cash flows for the six-month period ended June 30, 2022 included the Share Buyback Scheme ("SBB") (i.e., repurchase of own common shares), described in Note 13 "Share capital" to the Interim Condensed Consolidated Financial Statements. Share Buy Back is also described in the "Treasury Shares" section of this report.

Removal of Category 3 (CAT3) restrictions

In March 2022, we obtained a resolution from the Warsaw Stock Exchange Management Board on the removal of trading restrictions applicable to the Company's shares under Category 3 (CAT3) of Regulation S. The removal of restrictions on the transferability of shares allows investors qualified as US persons to acquire the Company's shares, which means there are no CAT3 restrictions on trading Huuuge shares on the Warsaw Stock Exchange. This change should also have a positive impact on the liquidity of the Company's shares, as financial institutions will no longer be obliged to comply with CAT3 regulations when trading the Company's shares.

5. Factors affecting our results

Mobile gaming and Social Casino market environment

According to Sensor Tower, consumer spending on mobile games declined 6.6% YoY to USD 41.2 billion in H1 2022, with both App Store and Google Play seeing less revenue compared to the corresponding period in the previous year. Mobile games on Apple's platform achieved USD 25.6 billion, down 0.8% YoY, while Google Play saw its mobile game revenue decline 14.8% YoY to USD 15.6 billion. Performance in the US has been impacted even more acutely, with revenues down 9.7% YoY, per Sensor Tower. As far as the future outlook is concerned, according to the most recent Newzoo Global Games Market report, the total video games market is expected to grow by 5.4% YoY in 2022, with mobile games revenue crossing the USD 100 billion mark (which would account for more than half of all games revenue for 2022).

According to Eilers & Krejcik, the social casino market declined 3.7% YoY and 2.3% QoQ in Q2 2022. The long-term forecast has been lowered lately, with the social casino market expected to decline at 0.6% CAGR from 2021–25E (resulting in a USD 7.4 billion market by 2025).

User Acquisition and post-IDFA mobile advertising market update

Measurement of marketing performance has deteriorated significantly with the depreciation of the IDFA. This has made it more challenging to acquire the right profile of player, thereby negatively affecting our ability to undertake large-scale user acquisition and maintain existing payback periods. In response, we have been actively lowering spend levels to maintain and/or improve our payback periods. This has had an impact on our revenue dynamics. Whilst IDFA changes were introduced in April 2021 with iOS 14.5, the ATT framework was present on a majority of iOS devices only from H2 2021 onwards. Therefore, its impact is particularly evident on a year-over-year basis when comparing H1 2022 vs H1 2021. We continue to adapt our user acquisition strategy to the new post-IDFA market reality, such that budgets have been shifted to partners with better post-change performance. We are continuously testing new tools and features to improve current measurement possibilities while strictly

adhering to data privacy regulations. We are also increasingly exploring the capabilities of Apple's SKAdNetwork and closely monitoring the expected introduction of new functionality and features within upcoming releases.

Completion of Traffic Puzzle integration

In January 2022, we finalized the handover process of Traffic Puzzle. On February 4, 2022, the Group made the payment of a second tranche amounting to USD 25,000 thousand for the Traffic Puzzle game according to the schedule stipulated in the purchase agreement. The last remaining tranche of USD 4,400 thousand was paid in August 2022. Having now acquired the full source code to the game, we are in a position to begin making the necessary changes to the Traffic Puzzle product to support higher levels of engagement, retention and monetization. In H1 2022, we began to restructure the studio in order to create an optimal environment within which we can execute the required product improvements. We expect to continue to invest in Traffic Puzzle, but are mindful of the macro environment and recent studio restructuring. Therefore, we will be proceeding with caution and patience, scaling investment in UA concurrently with measurable product improvements.

Core Franchises focus on profitability

Given challenges in the gaming market, a slowing macro-economic outlook and the continued impact of IDFA depreciation, we are remaining highly prudent with our approach to user acquisition. For our core franchises in particular, our strategy is to optimize User Acquisition spend and further focus on improving the profitability and cash generation of these games through improved retention, alternative distribution channels and overall opex discipline. We will continue to invest in our New Franchises, but will also be guided by the reality of the macro environment and discipline on overall payback periods.

General external factors

External factors that could affect our performance include the overall global economy (and specifically its impact on the gaming industry and our players' behavior), the ongoing impact from the easing of stay-at-home orders, continuing secular trends in the sector, inflation and the volatility of foreign exchange rates.

Expected tax reforms & changes in tax law / tax-law interpretations

A major change to the US tax treatment of R&D expenditures took effect on January 1, 2022. The change – a provision in the Tax Cuts and Jobs Act of 2017 (TCJA) – no longer allows R&D expenditures to be deducted in the year in which they are incurred (R&D expensing). Instead, these costs must be amortized over five years (or 15 years in the case of foreign expenditures) (R&D capitalization). In the case that there are no further amendments to the tax law, R&D capitalization increases our tax burden.

In 2021, the debate on international taxation focused on the concepts of digital taxation and minimum taxation. The course of debate also impacted the shape of the income tax reform in the United States that commenced in 2021. Among other things, we see the following changes in US taxation as potentially affecting the Group: (i) increase in the federal corporate tax rate; (ii) revisions to the global intangible low-taxed income (GILTI), and (iii) lower deduction against the global minimum tax in Internal Revenue Code Section 250. The discussed changes in the GILTI rate or the GILTI calculation mechanism may negatively impact the Group's effective tax rate (ETR). Taking into account currently available information and the fact that the GILTI mechanism is yet to be adjusted to the agreement reached by the OECD member states on October 8, 2021 seeking to impose a minimum tax rate, the most impactful changes may be implemented starting from 2023, according to President Biden's budget proposal. The implementation of these rules in their current form would negatively impact the global effective tax rate of the Group and may have a negative impact on our financial results.

On January 1, 2022, a new comprehensive social and economic program referred to as "The New Economic Polish Deal" took effect. The rules introduce extensive changes to taxation and health insurance contributions. The adoption of the program results in, among other things, an increase in employment costs in Poland (The majority of our employment costs, excluding share-based compensation, are incurred in Poland.), which will have a negative impact on our financial results.

War in Ukraine

On February 24, 2022, the invasion of Ukraine by the Russian Federation began. Representatives of the European Union imposed sanctions on Russia. The Company also took the decision to stop the distribution of new games in Russia and Belarus. Russia and Belarus markets were responsible for less than 1% of total revenue generated by Huuuge in 2021, which means that changes made with respect to the distribution of our games in these jurisdictions should not have a material impact on Huuuge's performance and operations. Huuuge has analyzed and is continuously monitoring the impact that the political

and economic situation in Ukraine has on its and the Group's operations and financial results. The Company is unable to reliably determine the impact that the situation in Ukraine will have on the state of the European economy and, consequently, on the Group's activity.

6. Key Performance Indicators

When evaluating our business, we consider the KPIs presented and discussed in this section. Each of these KPIs is defined below:

• Daily Active Users (DAU): DAU is defined as the number of individual users who played a game on a particular day. In order to more accurately reflect reality, we identify the users based on (human) ID (HID) rather than device ID. That allows us to eliminate the double counting of individuals playing games on multiple devices. The ability to identify and analyze actual players rather than accounts allows for substantially greater accuracy, including better in-game targeting of offers (the right offer, to the right person, at the right time), better retargeting capabilities and better predictive models. Average DAU for a period is the average of the monthly average DAU for the period.
• Daily Paying Users (DPU): DPU is defined as the number of players (active users) who made a purchase on a given day.
• Average Revenue per Daily Active User (ARPDAU): ARPDAU is defined as average revenue per daily active user. ARPDAU for a period is calculated by dividing gross revenue (i.e., before deduction of platform fees) for the period by the number of days in the period and then dividing by the average DAU for the period.
• Daily Average Revenue per Paying User (ARPPU): ARPPU is defined as average revenue per paying user on a given day. It is calculated by dividing gross revenue from in-app purchases (i.e., before deduction of platform fees) for the period by the number of days in the period and then dividing by the average DPU for the period. ARPPU for the period is calculated by dividing IAP revenue for the period by the number of days in the period and then dividing by the average DPU for the period.
• Monthly Payer Conversion (Monthly Conversion): Monthly Conversion is defined as the percentage of MAU (the number of individual users who played a game during a particular month) that made at least one purchase in a month during the same period.

Our revenue is principally driven by DAU, ARPPU and conversion rates. We monitor our user acquisition costs using measures such as ROAS (Return On Ad Spend), but, given that these metrics are commercially sensitive, we do not disclose or discuss them in this report.

The table below presents our KPIs for Q2 2022 and Q2 2021 for the Group and "core franchises," i.e., Huuuge Casino and Billionaire Casino.

		All games		Core franchises Huuuge Casino and Billionaire Casino
KPI	Q2 2022	Q2 2021	Q2 2022	Q2 2021
DAU (in thousands)	672.0	773.2	384.4	483.5
DPU (in thousands)	23.1	26.1	18.1	20.8
ARPDAU (in USD)	1.29	1.39	2.00	1.96
ARPPU (in USD)	36.11	39.52	42.39	45.38
Monthly Conversion (%)	5.5	5.7	9.2	8.4

In addition, below we present a more detailed quarterly overview of our selected KPIs.

Daily Active Users

In Q2 2022, we observed a decline YoY in DAU for our core franchises and roughly flat DAUs for our new franchises. The downward trend in DAU for our core franchises reflects the current trends that can be seen in the social casino genre but also across the whole mobile gaming sector. In the new franchises, flat DAUs on a YoY basis were the result of an increase for Traffic Puzzle and a decline for other new titles. The other titles' declines were a result of a reallocation of User Acquisition investment from other games to Traffic Puzzle. Traffic Puzzle DAU increased YoY by double digits, while other titles declined at double-digit paces. On a QoQ basis, DAUs in core franchises decreased by 10% and increased by 5% in new titles (with Traffic Puzzle having increased by 7% QoQ).

The chart below presents DAU for our core franchises and our other games ("new franchises") for the periods indicated.

Daily Paying Users

In Q2 2022, we saw a 12% YoY and 7% QoQ decrease in the overall number of DPUs. Core franchise DPUs declined by 13% YoY and 9% QoQ. Our new franchise (Traffic Puzzle and other titles) DPUs decreased by 5% YoY and 2% QoQ, while Traffic Puzzle DPUs increased YoY and slightly declined QoQ. Overall DPU decline was connected with decreasing DAUs.

Average Revenue per Daily Active User

ARPDAU indicates how well we monetize our games taking into account our whole player base. Thanks to our competences in marketing, as well as our technology, we have seen sustained growth in the monetization of our core games, i.e., Huuuge Casino and Billionaire Casino. These two games continued to exhibit ARPDAU rates exceeding the category averages, and we saw further improvement in this KPI in Q2 2022, both QoQ and YoY. At the same time, the ARPDAU of new titles declined both YoY and QoQ. We are in the process of reorganizing Traffic Puzzle studio in order to improve KPIs going forward.

Daily Average Revenue per Paying User

In recent years, we have been able to consistently improve the ARPPU of our core franchises owing to the social features of our games, as well as constant focus on live events and special offers. Core franchises ARPPU declined 7% YoY and increased 2% QoQ. In Q2 2022, we observed a QoQ stabilization of overall ARPPU and a 2% QoQ uplift in our core portfolio. High ARPPU observed last year, in particular in 2Q21, was driven by the calendar of live events and promotional offers in our Core games.

Monthly Conversion

Monthly Conversion is an indicator of our ability to convert players into payers. In Q2 2022, our core franchises' monthly conversion increased from 8.4% in Q2 2021 to 9.2% in Q2 2022, driven largely by our focus on paying players and non-payers churning at a faster rate. Total monthly conversion for the whole portfolio declined slightly from 5.7% in Q2 2021 to 5.5% in Q2 2022 as the share of our non-core games as % of total MAU slightly increased.

The chart below presents Monthly Conversion for our core and new franchises for the periods indicated.

7. Results of operations

The following table presents our consolidated statement of comprehensive income for the six-month periods ended June 30, 2022 and June 30, 2021.

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Revenue	163,427	193,234	-15.4%	79,426	97,543	-18.6%
Cost of sales	(49,499)	(57,455)	-13.8%	(24,026)	(29,384)	-18.2%
Gross profit/(loss) on sales	113,928	135,779	-16.1%	55,400	68,159	-18.7%
Sales and marketing expenses	(57,270)	(82,538)	-30.6%	(27,373)	(39,299)	-30.3%
user acquisition marketing campaigns	(49,433)	(73,914)	-33.1%	(23,148)	(34,816)	-33.5%
general sales and marketing expenses	(7,837)	(8,624)	-9.1%	(4,225)	(4,483)	-5.8%
Research and development expenses	(16,839)	(15,867)	6.1%	(7,857)	(8,048)	-2.4%
General and administrative expenses	(18,233)	(19,485)	-6.4%	(9,182)	(9,451)	2.8%
Other operating income/(expense), net	273	(145)	-288.3%	198	(120)	-265.0%
Operating result	21,859	17,744	23.2%	11,186	11,241	-0.5%
Finance income	145	-	100.0%	(20)	(120)	-83.3%
Finance expense	(1,289)	(43,053)	-97.0%	(1,194)	529	-325.7%
Profit/(loss) before tax	20,715	(25,309)	-181.8%	9,972	11,650	-14.4%
Income tax	(3,152)	(3,126)	0.8%	(1,335)	(2,546)	-47.6%
Net result for the period	17,563	(28,435)	-161.8%	8,637	9,104	-5.1%
Exchange gains/(losses)	(3,349)	(42)	>999,9%	(2,277)	374	-708.8%
Total comprehensive income for the period	14,214	(28,477)	-149.9%	6,360	9,478	-32.9%

The following tables show the Alternative Performance Measures used by us as at the dates and for the periods indicated, with a justification for their use. Please see below the definitions of the used measures and ratios.

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
EBITDA	27,073	20,888	29.6%	13,770	13,250	3.9%
EBITDA margin (%)	16.6%	10.8%	5.8pp	17.3%	13.6%	3.7pp
Adjusted EBITDA	28,092	25,979	8.1%	13,700	15,589	-12.1%
Adjusted EBITDA margin (%)	17.2%	13.4%	3.8pp	17.2%	16.0%	1.2pp
Sales Profit	64,495	61,865	4.3%	32,252	33,343	-3.3%
Sales Profit margin (%)	39.5%	32.0%	7.5pp	40.6%	34.2%	6.4pp
User acquisition marketing campaigns as % of revenue	30.2%	38.3%	-8pp	29.1%	35.7%	-6.5pp
Adjusted Net Result	18,582	15,653	18.7%	8,567	11,443	-25.1%
Adjusted Net Result (%)	11.4%	8.1%	3.3pp	10.8%	11.7%	-0.9pp

EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, Sales profit, Sales profit margin, User acquisition cost as % of revenue are supplemental measures of the financial and operating performance used by us that are not required by, or prepared in accordance with IFRS. These measures are prepared by us because we believe they provide a view of our recurring operating performance that is unaffected by our capital structure and allow us to readily view operating trends and identify strategies to improve operating performance and to assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are critical to our core operating performance. In evaluating these measures, you should be aware that, in the future, we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our use of each of these measures is as follows:

• We define EBITDA as the net result for the year adjusted for income tax, finance costs, finance income, and depreciation and amortization. The rationale for using the EBITDA is that it is a measure widely used by securities analysts, investors and other interested parties to evaluate the profitability of companies. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting finance costs and finance income), tax positions (such as the availability of net operating losses which offset taxable profits), the cost and age of property, plant and equipment (affecting the depreciation expense level) and the extent to which intangible assets are identifiable (affecting the amortization expense level).

• We define Adjusted EBITDA as EBITDA adjusted for events not related to the main activity of the Group and share-based payment expense. The rationale for using the Adjusted EBITDA is an attempt to show the EBITDA result after eliminating events not related to the main activity of the Group and items from the profit and loss account that are of a non-cash nature.

• We define EBITDA margin as the ratio of the EBITDA and Revenue. The rationale for using the EBITDA margin is that it is a measure of operational profitability widely used among securities analysts and investors, as well as the fact that EBITDA and EBITDA margin are internal measures used by us in the process of budgeting and management accounting.

• We define Adjusted EBITDA margin as the ratio of Adjusted EBITDA and Revenue. The rationale for using the Adjusted EBITDA margin is that it shows a measure of operating profitability after eliminating events not related to the main activity of the Group and items from the profit and loss account that are of a non-cash nature.

• We define Sales Profit (previously "Return on sales") as Gross profit/(loss) from the sales less the user acquisition costs. The rationale for using the Sales Profit is to show the profitability of sales in the value aspect after covering costs directly related to the generated revenue – mainly distribution costs (fees for owners of distribution platforms), server expenses and the user acquisition costs through paid advertising campaigns. Historically, we used to include in this measure the Cost of external marketing and sales expenses, but, beginning from the full year 2020, we decided to narrow the ratio to track profitability of revenue after covering User acquisition costs only, which is a narrower category than the previously used Cost of external marketing and sales expenses. For comparative purposes, the values presented for prior periods have been recalculated accordingly.

• We define Sales profit margin (previously "Sales margin") as the ratio of Sales profit to Revenue. The rationale for using the sales profit % is to show the profitability of sales as a percentage after covering variable costs directly related to the revenue generated – mainly distribution costs (fees for owners of distribution platforms), server expenses and the user acquisition costs through paid advertising campaigns.

• We define User Acquisition cost as % of revenue as the ratio of User acquisition costs to Revenue. The rationale for using the User Acquisition cost as % of revenues is to show how much of our revenue we reinvest directly in maintaining and expanding our player base. Historically, we used to include the total cost of external marketing and sales services in that measure, and, beginning from the full year 2020, we decided to narrow the ratio to track the reinvestment of user acquisition costs only. For comparative purposes, the values presented for prior periods have been recalculated accordingly.

• We define Adjusted net result as the net result for the year adjusted for events not related to the main activity of the Group, share-based payment expense and financial expenses related to the revaluation of the liability related to Series C preferred shares. The rationale for using the Adjusted net result is an attempt to show the Net result for the year after eliminating events not related to the main activity of the Group and items from the profit and loss account that are of a non-cash nature.

• We define Adjusted net result % as the ratio of the Adjusted net result to Revenue. The rationale for using the Adjusted net result % is to attempt to show the Net result for the year in percentage after eliminating events not related to the main activity of the Group and items from the profit and loss account that are of a non-cash nature.

The measures presented are not comparable to similarly titled measures used by other companies. We encourage you to review our financial information in its entirety and not to rely on a single financial measure.

Sales Profit and Sales Profit Margin

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Revenue	163,427	193,234	-15.4%	79,426	97,543	-18.6%
Gross profit/(loss) on sales	113,928	135,779	-16.1%	55,400	68,159	-18.7%
User acquisition marketing campaigns	49,433	73,914	-33.1%	23,148	34,816	-33.5%
Sales profit	64,495	61,865	4.3%	32,252	33,343	-3.3%
Sales profit %	39.5%	32.0%	7.5pp	40.6%	34.2%	6.4pp

Adjusted EBITDA reconciliation

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Net result for the period	17,563	(28,435)	-161.8%	8,637	9,104	-5.1%
Income tax	3,152	3,126	0.8%	1,335	2,546	-47.6%
Finance expense	1,289	43,053	-97.0%	1,194	(529)	-325.7%
Finance income	(145)	-	100%	20	120	-83.3%
Depreciation and amortization	5,214	3,144	65.8%	2,584	2,009	28.6%
EBITDA	27,073	20,888	29.6%	13,770	13,250	3.9%
EBITDA Margin	16.6%	10.8%	5.8pp	17.3%	13.6%	3.7pp
1 Employee benefits costs – share-based plan	1,019	5,091	-80.0%	(70)	2,339	-103.0%
Adjusted EBITDA	28,092	25,979	8.1%	13,700	15,589	-12.1%
Adjusted EBITDA Margin	17.2%	13.4%	3.8pp	17.2%	16.0%	1.2pp

1 "Employee benefits costs – share-based plan" is a non-cash expense related to the Company's stock option plan and recognized in accordance with IFRS 2 Share-based Payment.

Adjusted Net Result

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Net result for the period	17,563	(28,435)	-161.8%	8,637	9,104	-5.1%
1 Employee benefits costs – share-based plan	1,019	(5,091)	-80.0%	(70)	2,339	-103.0%
Series C revaluation		38,997	-100.0%	-	-	-
Tax impact of the above items
Adjusted Net Result	18,582	15,653	18.7%	8,567	11,443	-25.1%
1

"Employee benefits costs – share-based plan" is a non-cash expense related to the Company's stock option plan and recognized in accordance with IFRS 2 Share-based Payment.

Revenue

Our revenue consists of revenue generated by in-app purchases in gaming applications and in-app advertising, as shown in the table below for the periods under review together with the percentage change over such periods.

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Gaming applications	156,955	185,851	-15.5%	76,387	94,034	-18.8%
Advertising	6,472	7,383	-12.3%	3,039	3,509	-13.4%
Total revenue	163,427	193,234	-15.4%	79,426	97,543	-18.6%

Revenue decreased by USD 29,807 thousand – i.e., 15.4%, from USD 193,234 thousand for the six months ended June 30, 2021, to USD 163,427 thousand for the six months ended June 30, 2022.

Following the trends described in the KPI section above (i.e., decline in DAU and DPU), revenue generated by in-app purchases in gaming applications decreased by 15.5% for the six months ended June 30, 2022 compared to the corresponding period of 2021, while revenue generated by advertising decreased by 12.3% for the six months ended June 30, 2022 compared to the corresponding period of 2021.

Below, we show the revenue analyzed in main product groups:

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Huuuge Casino	94,371	111,309	-15.2%	45,964	56,302	-18.4%
Billionaire Casino	49,867	59,073	-15.6%	24,304	29,778	-18.4%
Total Core Franchises	144,238	170,382	-15.3%	70,268	86,080	-18.4%
Traffic Puzzle	16,452	15,887	3.6%	7,867	8,294	-5.1%
Other	2,737	6,965	-60.7%	1,291	3,169	-59.3%
Total New Franchises	19,189	22,852	-16.0%	9,158	11,463	-20.1%
Total revenue	163,427	193,234	-15.4%	79,426	97,543	-18.6%
- including games developed by external developers based on publishing contracts	392	340	15.3%	96	158	-39.2%

Revenue generated by our core games (i.e., Huuuge Casino and Billionaire Casino) decreased by 15.3% for the six months ended June 30, 2022 compared to the corresponding period of 2021 and decreased by 18.4% for Q2 2022 compared to the corresponding quarter of 2021. This is related to the decline observed in DAU and DPU discussed in the Key Performance Indicators section of this report.

With regard to Traffic Puzzle, revenue increased by 565 thousand (i.e., by 3.6% between the six months ended June 30, 2022 and the six months ended June 30, 2021) but decreased by 5.1% for Q2 2022 compared to the corresponding quarter of 2021. This follows the trend of DPU described in the KPI section.

The significant decrease in Other revenue of 60.7% for the six months ended June 30, 2022 compared to the corresponding period of 2021 is a result of reallocation of User Acquisition investment from other games to Traffic Puzzle and the corresponding drop in DAU of these games.

Operating expenses

The table below presents a breakdown of our operating expenses.

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Cost of sales	(49,499)	(57,455)	-13.8%	(24,026)	(29,384)	-18.2%
Sales and marketing expenses:	(57,270)	(82,538)	-30.6%	(27,373)	(39,299)	-30.3%
thereof, User acquisition marketing campaigns	(49,433)	(73,914)	-33.1%	(23,148)	(34,816)	-33.5%
thereof, General sales and marketing expenses	(7,837)	(8,624)	-9.1%	(4,225)	(4,483)	-5.8%
Research and development expenses	(16,839)	(15,867)	6.1%	(7,857)	(8,048)	-2.4%
General and administrative expenses	(18,233)	(19,485)	-6.4%	(9,182)	(9,451)	-2.8%
Total operating expenses	(141,841)	(175,345)	-19.1%	(68,438)	(86,182)	-20.6%

Operating expenses for the six months ended June 30, 2022, decreased by USD 33,504 thousand (i.e., by 19.1% compared to the six months ended June 30, 2021). This change resulted primarily from the decrease in User Acquisition Marketing Campaigns constituting a dominant part of the Sales and Marketing expenses, and it reflected our user acquisition strategy discussed in the User Acquisition and post-IDFA mobile advertising market update section.

The second-largest operating expenses item (i.e., cost of sales for the six months ended June 30, 2022) decreased by USD 7,956 thousand (i.e., 13.8% compared to the corresponding period of 2021) and by USD 5,358 thousand (i.e., 18.2% for Q2 2022 compared to the corresponding quarter of 2021). As the cost of sales is mostly driven by commissions to distributors (platform fees), the 15.5% decrease in revenue generated by in-app purchases resulted in a similar decrease in cost of sales. The difference in the decrease ratio (13.8% vs 15.5%) was primarily due to Traffic Puzzle game amortization amounting to USD 1,945 thousand in the six months ended June 30, 2022 compared to USD 648 thousand for the corresponding period of 2021.

General Sales and Marketing expenses for the six months ended June 30, 2022 decreased by USD 787 thousand (i.e., 9.1%, compared to the corresponding period of 2021) and by USD 258 thousand (i.e., 5.8% for Q2 2022 compared to the corresponding quarter of 2021), which can be attributed primarily to a decrease in external services, as well as in salaries and related costs and ESOP.

Research and Development expenses for the six months ended June 30, 2022 increased by USD 972 thousand (i.e., 6.1%, compared to the corresponding period of 2021). The increase was mainly driven by an increase in salaries and employee-related costs. However, Research and Development expenses for Q2 2022 show the opposite trend and decreased by USD 191 thousand (i.e., 2.4% compared to the corresponding quarter of 2021).

Our General and Administrative expenses for the six months ended June 30, 2022 decreased by USD 1,252 thousand (i.e., 6.4%, compared to the corresponding period of 2021) and by USD 269 thousand (i.e., 2.8% for Q2 2022 compared to the corresponding quarter of 2021). The overall decrease can be attributed mainly to a decrease in employee stock option plan expenses and lower finance & legal services costs, which in Q1 2021 were particularly high as a consequence of the efforts related to becoming and operating as a public company, though these were partially offset by an increase in business travel expenses and other costs as a consequence of post-pandemic reality.

Profitability

Despite the decrease in revenue, our sales profit increased by USD 2,630 thousand and the sales profit margin by 7.5pp for the six months ended June 30, 2022 compared to the corresponding period of 2021, mostly as a result of a lower user acquisition spend level. Our sales profit in Q2 2022 decreased by USD 1,091 thousand (i.e., 3.3% in Q2 2022) compared to the corresponding quarter of 2021. The opposite trend in sales profit in Q2 2022 relates mostly to the high revenue and sales profit generated in Q2 2021. Sales profit margin generated in Q2 2022 increased by 6.4pp compared to Q2 2021.

The adjusted EBITDA increased by USD 2,113 thousand and the adjusted EBITDA margin by 3.8pp in the six months ended June 30, 2022 compared to the corresponding period of 2021, mostly as a result of a similar increase in Sales Profit (as discussed above). However, in Q2 2022, the adjusted EBITDA decreased by USD 1,889 thousand (i.e., 12.1%) compared to the corresponding quarter of 2021. These trends reflected changes in the sales profit, as well as in the operating expenses discussed in the Profitability and Operating expenses sections of this report.

Finance expenses, net

in thousand USD	H1 2022	H1 2021	Change	Q2 2022	Q2 2021	Change
Finance income	145	-	100.0%	(20)	(120)	-83.3%
Finance expense	(1,289)	(43,053)	-97.0%	(1,194)	529	-325.7%
Finance expense, net	(1,144)	(43,053)	-97.3%	(1,214)	409	-396.8%

Finance expenses, net for the six months ended June 30, 2022 decreased by USD 41,909 thousand, i.e. by 97.3% (to USD 1,144 thousand for H1 2022 from USD 43,053 thousand for H1 2021). Finance expenses, net for the six months ended June 30, 2022 are mainly attributable to foreign-exchange-rate fluctuations, while Finance expenses, net for the six months ended June 30, 2021 were affected by the remeasurement of the fair value of Series C preferred shares (financial expense of USD 38,997 thousand for the six-month period ended June 30, 2021), as well as a loss of USD 2,662 thousand on a foreign exchange forward contract. Foreign exchange rate fluctuations during H1 2022 varied from quarter to quarter and intensified in Q2 2022 mainly driven by the unfavorable trend in the EUR/USD exchange rate.

Net Financial Debt

The table below presents the Net Financial Debt of the Company as at June 30, 2022 and December 31, 2021.

in thousand USD	As at June 31, 2022	As at December 31, 2021
1 Cash and cash equivalents	188,217	204,415
Short-term lease liabilities	3,995	4,275
Net current financial indebtedness	(184,222)	(200,140)
Long-term lease liabilities	10,999	12,982
Non-current financial indebtedness	10,999	12,982
Net financial debt	(173,223)	(187,158)

1 Includes cash in money market investment funds

Net financial debt of the Group between December 31, 2021 and June 30, 2022 increased by USD 13,935 thousand (to negative USD 173,223 thousand from negative USD 187,158 thousand), which resulted from:

• the decrease in cash and cash equivalents by USD 16,198 thousand discussed in the Cash Flows and Liquidity section of this report;
• the decrease in the short-term and long-term lease liabilities in total by USD 2,263 thousand.

Statement of Financial Position

Selected Consolidated Statements of Financial Position

	As at June 30		As at December 31
in thousand USD	2022	Structure	2021	Structure
ASSETS
Total non-current assets, incl.:	63,182	22.9%	67,512	22.5%
Right-of-use assets	15,061	5.4%	17,479	5.8%
Goodwill	2,413	0.9%	2,693	0.9%
Intangible assets	39,281	14.2%	40,217	13.4%
Other items	6,427	2,3%	7,123	2,4
Total current assets, incl.:	213,247	77.1%	232,434	77.5%
Trade and other receivables	24,101	8.7%	27,671	9.2%
Cash and cash equivalents	188,217	68.1%	204,415	68.2%
Other items	929	0,3%	348	0,1%
Total assets	276,429	100%	299,946	100.0%
EQUITY
Total equity	227,361	82.2%	226,099	75.4%
LIABILITIES
Total non-current liabilities, incl.:	10,999	4.0%	12,982	4.3%
Long-term lease liabilities	10,999	4.0%	12,982	4.3%
Total current liabilities, incl.:	38,069	13.8%	60,865	20.3%
Trade and other payables	28,340	10.3%	52,687	17.6%
Other items	9,729	3,5%	8,178	2,7%
Total equity and liabilities	276,429	100%	299,946	100.0%

Assets

Total assets decreased by USD 23,517 thousand – i.e., 7.8% from USD 299,946 thousand as at December 31, 2021 to USD 276,429 thousand as at June 30, 2022.

The structure of total assets mostly remained unchanged and comprised the following items: (i) cash and cash equivalents (accounting for 68.1% and 68.2% of total assets as at June 30, 2022 and December 31, 2021, respectively); (ii) intangible assets (accounting for 14.2% and 13.4% of total assets as at June 30, 2022 and December 31, 2021, respectively) and (iii) trade and other receivables (accounting for 8.7% and 9.2% of total assets as at June 30, 2022 and December 31, 2021, respectively).

The decrease in total assets resulted from: (i) a decrease in total current assets of USD 19,187 thousand (i.e., 8.3%, from USD 232,434 thousand as at December 31, 2021 to USD 213,247 thousand as at June 30, 2022), mainly due to a change in cash and cash equivalents related to the repurchase of common shares under the Share Buyback Scheme and a decrease in trade receivables (resulting mainly from the decline in revenue) and (ii) a decrease in total non-current assets of USD 4,330 thousand (i.e., 6.4%, from USD 67,512 thousand as at December 31, 2021 to USD 63,182 thousand as at June 30, 2022).

Liabilities

Total liabilities decreased by USD 24,779 thousand – i.e. 33.6%, from USD 73,847 thousand as at December 31, 2021 to USD 49,068 thousand as at June 30, 2022.

As at June 30, 2022, total liabilities mainly comprised (i) trade and other payables (accounting for 57.8% of total liabilities compared to 71.3% as at December 31, 2021) and (ii) long-term lease liabilities (accounting for 22.4% of total liabilities compared to 17.6% as at December 31, 2021). The decrease in trade and other payables of USD 24,347 thousand (i.e., 46.2%) is mostly related to settlement of the second tranche for the Traffic Puzzle game for the amount of USD 25,000 thousand.

Cash Flows and Liquidity

The following table summarizes selected net cash flows from operating, investing and financing activities for the six-month period ended June 30, 2022 compared to the six-month period ended June 31, 2021.

in thousand USD	H1 2022	H1 2021	Change
Cash flows from operating activities
Profit/(loss) before tax	20,715	(25,309)	-181.8%
Adjustments for:
Total of non-cash changes in depreciation, amortization, profits or losses on disposal	5,304	4,007	32.4%
Non-cash employee benefits expense – share-based payments	1,019	5,088	-80.0%
Non-cash remeasurement of preference shares liability – finance expense	-	38,997	-100.0%
Finance (income)/cost – net	(2,811)	3,105	-190.5%
Changes in net working capital	3,168	(23,414)	-113.5%
Other items	(69)	124	-155.6%
Cash flows from operating activities	27,326	2,598	951.8%
Income tax paid	(1,059)	(2,407)	-56.0%
Net cash flows from operating activities	26,267	191	>999,9%
Cash flows from investing activities, incl.:
Acquisition of property, plant and equipment and intangible assets	(1,785)	(2,477)	-27.9%
Acquisition of IP rights	(25,000)	(9,500)	163.2%
Other items	63	-	100,0%
Net cash from investing activities	(26,722)	(11,977)	123.1%
Cash flows from financing activities, incl.:
Shares issued/(repurchased)	(16,133)	-	100.0%
Proceeds from issue of common shares for public subscription	-	152,929	-100.0%
Execution of stabilization option	-	(43,976)	-100.0%
Transaction costs of the issue of equity instruments	-	(7,097)	-100.0%
Other items	(84)	(3,704)	-97,7%
Net cash from financing activities	(16,217)	98,152	-116.5%
Net increase/(decrease) in cash and cash equivalents	(16,672)	86,366	-119.3%

Cash and cash equivalents at the end of the period	188,217	180,352	4.36%

Net cash flows from operating activities

Net cash inflows from operating activities for the six-month period ended June 30, 2022 amounted to USD 26,267 thousand and increased by USD 26,076 thousand compared to cash inflows of USD 191 thousand for the six-month period ended June 30, 2021.

The changes in net cash flows from operating activities are primarily attributable to a favorable change in net working capital of USD 3,168 thousand for the six-month period ended June 30, 2022 compared to negative 23,414 thousand USD for the six-month period ended June 30, 2021. The change in net working capital during the six-month period ended June 30, 2022 mainly resulted from a decrease in trade and other receivables amounting to USD 3,556 thousand, while in the six-month period ended June 30, 2021 the change in net working capital was mostly affected by a decrease in trade and other payables of USD 7,793 thousand related to the settlement of User Acquisition expenses, the settlement of the Washington court case (USD 6,500 thousand) and utilization of other provisions (USD 1,259 thousand).

Net cash flows from investing activities

Net cash outflows from investing activities for the six-month period ended June 30, 2022 amounted to USD 26,722 thousand and increased by USD 14,745 thousand compared to outflows amounting to USD 11,977 thousand for the six-month period ended June 30, 2021. The changes in net cash flows from investing activities are mainly attributable to the second tranche for the Traffic Puzzle game of USD 25,000 thousand paid during the six-month period ended June 30, 2022 compared to the first tranche in the amount of USD 9,500 thousand paid during the six-month period ended June 30, 2021.

Net cash flows from financing activities

Net cash outflows from financing activities for the six-month period ended June 30, 2022 amounted to USD 16,217 thousand and decreased by USD 114,369 thousand, compared to net cash inflows amounting to USD 98,152 thousand for the six-month period ended June 30, 2021. The changes in net cash flows from financing activities are mainly attributable to:

• repurchase of common shares under the Share Buyback Scheme started on March 29, 2022 in the amount of USD 16,133 thousand;
• proceeds from the subscribed common shares issued for the public offering subscription in the amount of USD 101 million (net of transaction costs and funds used for execution of stabilization option) recognized in the six-month period ended June 30, 2021.

8. Possibility of accomplishing previously published forecasts

The Issuer does not publish financial forecasts.

9. Significant proceedings pending in the courts

Neither the Issuer nor any of its subsidiaries were, as at June 30, 2022, or as at the date of issuing the financial statements, a party to any significant court or arbitration proceedings or before any public authority.

10. Transactions with related parties

Information regarding transactions with related entities is provided in Note 18 "Related Party Transactions" to the Interim Condensed Consolidated Financial Statement.

11. Granted sureties, loans, guarantees

There are no significant sureties, loans or guarantees granted by the Issuer.

12. Significant events after the balance sheet date

Significant events that occurred after the balance sheet date are presented in the Interim Condensed Consolidated Financial Statement for the period in Note 22 "Subsequent events."

13. Other information important for the assessment of human resources, property, financial situation, financial result and their changes and information important for the assessment of the issuer's ability to meet its obligations

As of H1 2022, the Company holds a high balance of USD 188.2 million in Cash and Equivalents. This not only secures our ability to meet our obligations but also gives us significant capacity to execute on our "Build & Buy" strategy and pursue potential further acquisitions.

Following a recommendation by the Remuneration and Nominations Committee of the Board and in accordance with Article V of the Bylaws, on April 7, 2022, Mr. Rod Cousens was appointed as co-CEO of the Company (Executive Director) alongside Mr. Anton Gauffin. At the same time, the Board expanded to six members by electing Mr. Jacobsson as an independent non-executive member of the Board (Non-executive Director). All members of the Board were reelected for an additional term at the Annual General Meeting of Stockholders held on June 6, 2022.

On June 15, 2022, Grzegorz Kania, the Group's Chief Financial Officer, and the Issuer reached a mutual agreement to end Grzegorz Kania's tenure with the Issuer. Concurrently, Mr. Kania's tenure as the Issuer's Treasurer came to an end. The function of the Chief Financial Officer is being performed by Marek Chwałek, Executive Vice President Finance.

On August 2, 2022, the Board of Directors decided to commence a review of strategic options for the future of the Company to evaluate alternative courses of action intended to maximize value for the Issuer's shareholders. The Company has not set a timetable for the review; nor has it made any decisions related to strategic alternatives at this time. The Special Committee of the Board of Directors has engaged financial and legal advisers to support it in undertaking the review.

There is no other significant information of the above nature in the Issuer's Capital Group as at June 30, 2022.

Board of Directors' Statement

Board of Directors' Statement

Pursuant to the requirements of the Regulation of the Minister of Finance of 29 March, 2018 on current and periodic information provided by issuers of securities and on conditions under which information required by legal regulations of a non-member state may be recognized as equivalent, the Board of Directors of Huuuge, Inc. hereby represents that:

• 1) to the best of its knowledge, the semi-annual condensed consolidated and stand-alone condensed financial statements and the comparative information were prepared in accordance with accounting principles currently in effect;
• 2) they reflect, in a true, fair and clear manner, the financial position results of the Company and the Group, and the semi-annual Board of Directors' report on activities contains a true image of the Company's and the Group's development, achievements and standing, including a description of the basic risks and threats.

On behalf of the Board of Directors,

Anton Gauffin

President and co-CEO of Huuuge, Inc.

Unanimous Written Consent Of The Board Of Directors Of Huuuge, Inc.

September 7, 2022

The undersigned, being all of the members of the Board of Directors (the "Board") of HUUUGE, INC., a Delaware corporation (the "Company"), following diligent review of the facts and related documents, have not uncovered any information to indicate that the Company should not execute the measures covered by this consent and, therefore, do hereby adopt the following resolutions by unanimous written consent (the "Board Consent") in lieu of a meeting in accordance with Section 141(f) of the Delaware General Corporation Law ("DGCL") and the Bylaws of the Company, and further waive any and all notices that may be required to be given with respect to a meeting of the directors of the Company:

Whereas, the Company's President, Anton Gauffin and Huuuge Capital Group EVP Finance and the currently acting CFO, Marek Chwałek, have presented to the Board the interim consolidated financial statements of the Company for the six-month period ended June 30, 2022 ("Consolidated Financial Statements"), the interim standalone financial statements of the Company for the six-month period ended June 30, 2022 ("Standalone Financial Statements") and the consolidated interim report for the six-month period ended June 30, 2022 (including certain representations of the Board to this report which are included herein in the document titled "Board of Directors' statements") ("Semi-Annual Report" and together with the Consolidated Financial Statements and Standalone Financial Statements, the "Reports") as attached herein as Exhibit A to this Board Consent; and

Whereas, the Company desires to approve and publish the Reports;

Whereas, the Board is required to make certain representations under the Semi-Annual Report;

Whereas, the Board has reviewed the Reports and intends with this Board Consent to give Anton Gauffin authorization to issue and execute the Reports on behalf of the Company.

Now, Therefore, it being in the best interest of the Company, it is hereby:

Resolved, that the Reports substantially in the form attached herein as Exhibit A to this Board Consent are hereby approved and Mr. Anton Gauffin is authorized to issue and execute the Reports on behalf of the Company as the Company's President and co-CEO;

Resolved further, that Mr. Anton Gauffin is authorized to execute on behalf of the Company the Reports substantially in the form attached herein as Exhibit A to this Board Consent, but with such changes and additions as Mr. Marek Chwałek or Mr. Anton Gauffin may deem to be in the best interests of the Company (such determination that a change or addition is in the best interests of the Company to be conclusively evidenced by Mr. Anton Gauffin's or Mr. Marek Chwałek's or his or their designee's execution of the modification, provided that notice is provided to the Board of any changes to the Reports that deviate from Exhibit A in a reasonable time after the Reports have been executed);

Resolved further, that Mr. Anton Gauffin, or his designee, as an authorized representative of the Company, is individually further authorized and directed to file the Reports, with all exhibits thereto, and other documents in connection therewith, with the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego) and to take all such further actions and to execute and deliver all such instruments and documents in the name and on behalf of the Company, and under corporate seal or otherwise, as in the individual's judgment shall be necessary, proper, or advisable in order to fully carry out the intent and to accomplish the purposes of the foregoing resolutions; and

Finally resolved, that any and all actions of Mr. Anton Gauffin and any of his agents or designees in pursuant to, or in furtherance of the intent and purposes of the foregoing resolutions, including prior to the date of the foregoing resolutions adopted hereby that are within the authority conferred thereby are hereby ratified, confirmed and approved as the acts and deeds of the Company.

The undersigned constituting all of the members of the Board do hereby consent to and approve the adoption of the foregoing resolutions effective as of the date first written above. This consent may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. This consent may be executed by way of either digital or electronic signatures.

Board Of Directors Anton Gauffin Rod Cousens Henric Suuronen John Salter Krzysztof Kaczmarczyk Tom Jacobsson

HUUUGE, INC.

2300 W Sahara Ave., Suite #680, Mailbox #32, Las Vegas, NV 89102 United States of America

Contact for Investors

investor@huuugegames.com https://ir.huuugegames.com http://huuugegames.com