Huuuge Inc.

Huuuge, Inc. ANNU AL REPOR T Management Repor t on the Group ’ s and the Company’ s Activities for the 12-month period ended December 31, 2021 Disclaimer This constitutes the annual report for the twelve-month period ended December 31, 2021 (“FY 2021”) prepared in accor dance with the Regulation of the Minister of Finance of March 29, 2018 on current and periodic information published b y issuers of securities and the conditions for recognizing information as equivalent requir ed by the law of a non-member state (the “Annual Report”). This Annual Report should be read in conjunction with the interim condensed consolidated ﬁnancial statements for the twelve-month period ended December 31, 2021 prepar ed in accordance with International Financial Reporting Standards as adopted by the Eur opean Union. Since the separate data for Huuuge, Inc and the consolidated data for the Huuuge Gr oup are similar (trends are maintained for individual balance sheet and result items), the Board of Dir ectors and Management performs and presents a joint analysis for the separ ate and consolidated data. Unless implied otherwise in this Annual Report, the terms “we” or the “Group”, refer to the Company t ogether with all of its subsidiaries and the term the “Company” or “Issuer”, refers to Huuuge, Inc. Unless indicated otherwise, references t o 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 Annual Repor t, including ﬁnancial and operating information, ha ve been rounded. Therefor e, in cer tain instances, the sum of the numbers in a column or a row in tables contained in this Annual Report may not conform exactly to the t otal ﬁgure given for that column or row . Industry and Market Data This 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 Annual Report that has been sourced from third parties has been accurately repr oduced with reference to these sources in the rele vant paragr aphs 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 pr ovided inaccurate or misleading. Where third-party information has been sourced in this Annual Report, the source of such information has been identiﬁed. Industry publications, surveys and forecasts gener ally state that the information contained therein has been obtained from sources believed t o be reliable. T o the extent these industry publications, sur veys and forecasts are accurate and complete, we belie ve we have correctly extracted and reproduced the information from such sour ces. Additionally, industry publications gener ally state that the information contained therein has been obtained from sources believ ed to be reliable but that the accur acy and completeness of such information is not guaranteed and in some instances state that they do not assume liability for such information. We can not therefore assure y ou of the accuracy and completeness of such information and we have not independently veriﬁed such informa tion. In addition, in many cases, statements in this 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 r eﬂect 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 as we deﬁne or report such information in this Annual Report. While we are not aware of any misstatements regar ding the industr y data presented herein, our estimates inv olve cer tain assumptions, risks and uncertainties and are subject to change based on various factors. Key Performance Indicators Certain KPIs included in this repor t, including DAU, DPU, ARPD AU, ARPPU, Monthly Conversion, are deriv ed from management estimates, are not part of our ﬁnancial statements or ﬁnancial accounting records and have not been audited or otherwise reviewed b y independent auditors, consultants or experts. Our use or computations of these KPIs may not be comparable t o 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 r eliable. Other companies, research agencies or market r epor ters 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 calcul ations if their methodologies were used to calculate our KPIs. The KPIs ar e 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 Annual Report does not mean that the Issuer will continue to report these KPIs in the future. Forward-looking statements The 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”, “belie ves”, “ expects”, “aims”, “intends”, “will”, “ma y ”, “anticipates”, “would”, “ could” or similar expressions or the negative thereof. Such forward-looking statements involve k nown and unknown risks, uncertainties and other impor tant factors beyond our contr ol that could cause our actual results of oper ations, ﬁnancial condition or prospects to materially differ from any of those expr essed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our pr esent and future business strategies and the environment in which we currently oper ate and will operate in the future. These forward-looking statements speak only as at the date of the Annual Report. We have no obligation and ha ve made no undertaking to disseminate any updates of or revisions to any forward-looking statements contained in this Annu al Report unless we are required to do so under the applicable laws. Investors should be aware that sev eral impor tant factors and risks may cause our actual r esults of operations to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward- looking statements. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 2 T able of contents PRESIDENT’S LETTER 4 2021 IN BRIEF 6 SELECTED FINANCIAL DA T A 8 BUSINESS 9 About us 10 Gaming market 14 Strategy 16 Research and develop ment 18 FINANCIALS & KPIs 19 Factors aff ecting our results 19 Key performance indicat ors 21 Results of operations (P&L) 25 Net Financial Debt 32 Statement of ﬁnancial position 33 Cash ﬂows and liquidity 35 Current and projected ﬁnanc ial situation 37 Stand-alone results of oper ations 38 Additional information 42 SUST AINABILITY 44 GOVERNANCE 51 Shares and shareholding struc ture 52 General meetings 55 Board of Direct ors 56 Executive management 60 Auditor 61 Risk factors 61 Best practices 71 Internal control and risk management 84 Related parties 85 Rules for amending the issuer’ s Certiﬁcate of Incorporation 87 Changes in the basic principles of management 87 Identiﬁcation of signiﬁcant court cases 87 GL OSSARY 88 BOARD OF DIREC TORS’ ST A TEMENT S 89 WRITTEN CONSENT OF THE BO ARD OF DIRECTORS 90 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 3 PRESIDEN T’S LE TTER Dear Shareholders, It is my pleasure to present our repor t for the full year 2021, which marked another period of growth for Huuuge, as well as some important steps in the pursuit of our strategy . 2021 has been a unique year in Huuuge ’ s history. In February we began our journey as a publicly listed company , and in April we completed the Company’ s most impor tant M&A transaction to date — the acquisition of T raﬃc Puzzle, which continues to strengthen the potential of the Buy component in our “Build & Buy” strategy . These unprecedented events were only possible thanks to the vision we had and the efforts we made long before 2021. Last year we delivered double digit revenue and adjusted EBITDA growth. Revenue reached USD 374m, 12% higher Y oY and adjusted EBITDA increased to USD 64m, also 12% up YoY . We are proud of these results as the market last year was full of challenges, including sector-wide uncertainties related to the consequences of the COVID-19 pandemic and the changes in Apple ’ s privacy policy . Summing up 2021, it is impor tant to put the spotlight on the acquisition of T raﬃc Puzzle, which we closed in April, as it demonstrates perfectly Huuuge’ s way of scaling and growing our business. Having T raﬃc Puzzle in our portfolio enables us to accelerate our revenue diversiﬁcation and expand into the high-growth casual gam es segment, as the title has already become our third most popular game, after Huuuge Casino and Billionaire Casino. We plan to fur ther scale publishing and have identiﬁed the oppor tunity to rinse & repeat and go for a larger scale – to publish systematically as part of our “Build & Buy” strategy . We are continuing to build our partnerships and select the most promising prospects for our publishing d ivision. Last year we signed four new publishing agr eements and this year we hav e ambition to sign many more. The past year also brought a continuation of investment in the development of new games and products. We added to our portfolio titles such as Rogue Land (named “Best Competitive” by Google Play’ s Best of 2021), and Brink of Mayhem (a unique mobile ﬁrst-person multiplayer shooter ga me) and Gatherers (a real-time , cross-platform social co-op shooter game) T o our continued long term success it is important to see the creation of new product concepts as the best long term investment. We are realistic when it comes to the competitive nature of the gaming market and recognise that it usually tak es multiple shots on goal and plenty of iterations befor e new amazing product greatness can be achieved, but when r eviewing and analyzing Huuuge's business with a 10 year perspective, it becomes much more clear to see that these continued product investments and expansions we do with our build & buy is what leads to systematic repe atable long term growth. Huuuge (and its predecessor – Gamelion) has now been present on the gaming market for about twenty years. Such a long, successful track record in an extremely demanding industry would not be possible without exploring and creating ever-newer ways to produce new games. Innovation and creativity is a part of our DNA. 2022 will be no different in this respect, as we continue to explore the potential of innovation in gaming, speciﬁcally Web3 and Blockchain technologies, which are gaining traction in the industry and which we ar e actively exploring. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 4 Future looks bright for the gaming market and players around the World. Mobile game revenues are expected to outperform both console and PC in the next few years, and indeed accounted for more than half of the global gaming mark et at the end of 2021. The growing popularity of smar tphones, as well as the introduction of 5G networks thr oughout the world, are expected to bolster our business in the next few years. And we continue t o beneﬁt from another macr o trend: people ’ s strong desire to play and interact with others. Playing together is just much more fun than playing alone, and it is due to that simple truth that we continue to concentrate intensely on creating social games. We base our future growth on the “Build & Buy” strategy , and we believe the combination of promising acquisitions and stellar innovation will generate signiﬁcant added value for our shareholders. Thank you for all your effor ts to help Huuuge t o succeed. We value your feedback, and hop e you will continue to enjo y and play our games. T eam Huuuge is looking forward t o playing together with you. Anton Gauﬃn President and CEO of Huuuge, Inc. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 5 2021 IN BRIEF Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 6 RESUL TS 2017–2021 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 7 SELEC TED FIN ANCIAL DA T A The following table presents the selected ﬁnancial d ata of the Group. USD USD EUR EUR PLN PLN in thousands 2021 2020 2021 2020 2021 2020 Revenue 373,739 332,721 315,842 291,886 1,442,055 1,297,158 Operating pr oﬁt (loss) 44,577 50,184 37,671 44,025 171,998 195,649 Pre-tax proﬁt (loss) (1,001) (76,244) (846) (66,887) (3,862) (297,248) Net proﬁt (loss) (9,681) (82,604) (8,181) (72,466) (37,354) (322,043) Net cash ﬂows from oper ating activities 29,769 73231 25,157 64,243 114,862 285,501 Net cash ﬂows from investing activ ities (15,955) (5,458) (13,483) (4,788) (61,562) (21,279) Net cash ﬂows from ﬁnancing activities 96,610 (14) 81,644 (12) 372,765 (55) T otal net cash ﬂows 110,424 67,759 93,318 59,443 426,066 264,168 Cash and cash equivalents at the end of period 204,415 94,158 180,442 76,682 829,925 353,844 Number of shares at the end of period 84,246,697 13,401,252 Weighted av erage number of shares (1) 77,342,078 42,385,427 Basic and diluted Earnings per share basic (EPS) (1) (0.12) (1.46) (1) The weighted a verage number of shares has been adjusted for the split tha t took place on January 20, 2021. The following table sets out the exchange r ates of our main currencies against the USD as at the end of 2020 and 2021 and the annual aver age exchange rates for those years EUR PLN EUR PLN 2021 2021 2020 2020 Annual aver age exchange r ate 1.1833 0.2592 1.1399 0.2565 Exchange r ate at the end of the reported period 1.1329 0.2463 1.2279 0.2661 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 8 BUSINESS About us 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 Bur ton Road, Suite 201, DE 19904 and the operating oﬃce is located in Las Vegas, Nevada, 2300 W . Sahara A ve., Suite 680, NV 89102. The Company was establi shed on February 11, 2015. Huuuge is a mobile free-to-pla y games developer and publisher , with a mission to empower billions of people t o 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 t o a broad player base. Huuuge games provid e entertainment every month to millions of players from almost 200 countries and are available in 17 langua ges. Huuuge employs ove r 600 people at nine oﬃces around the world. Huuuge shar es have been listed on the Warsaw Stock Ex change since February 19, 2021. Key pr oducts 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. Both generate 88% of Huuuge’ s total revenues. Our new franchises generate 12% of total revenues and their stake is increasing on a YoY basis. Our most important new title is T raﬃc Puzzle and we have many mor e titles in our por tfolio at different stages of their lif e cycle. Huuuge Casino: The game was launched in June 2015. It is Huuuge’ s ﬂagship title responsibl e for 57% of total 2021 revenue and for over USD 860 million in lifetime revenue. Huuuge Casino was a true pioneer with its mobile-ﬁrst user experience and real-time PvP-style gameplay . We believ e that it was the ﬁrst social casino game to introduce f eatures 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 o ther . Huuuge Casino is ranked #13 (Apple App Store) and #7 (Google Play) among social casino apps in the United States in terms of reve nue as at December 31, 2021. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 10 Billionaire Casino: The game was launched in October 2016. Its re venue has grown rapidly since its release. It has achieved over USD 410 million of lifetime revenue and constitutes 30% of our total 2021 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. Similar 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 par ticipate in club events by playing slots and other casino games. Billionaire Casino is ranked #24 (App Store) and #21 (Google Play) among social casino apps in the United States in terms of revenu e as at December 31, 2021. T raﬃc 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. T raﬃc Puzzle is a unique match-3 game, positioned to build a top grossing mobile title. In Tr aﬃc Puzzle, the player tries to clear a clogged road by matching thr ee cars of the same colour . The game offers different levels in which players assist the police, ﬁre trucks and ambulances to reach their destinations. T raﬃc Puzzle ’ s monetization model is based on in-app purchases and advertising. Tr aﬃc Puzzle’ s revenues increased by 247% YoY in 2021 and in Q4 2021 reached 210 thousand daily activ e users (DAU). New titles In 2021 our team responsible for new games was working on the development and soft launch of three new titles: Brink of Mayhem, Gatherers and Rogue Lan d . Brink of Mayhem is a real-time multiplayer shooter game. At the end of the year the game was in the soft launch stage in selected countries. In the game players can customize their character , weapons, weapon effects, avatars, avatar frames and hooks. During the year we added features including the ability to play with other people in real time, enhanced FPS movement, new game modes, seasons with battle pass, missions and leader boar ds and more. Gatherers is a real-time, cross-platform social co-op shooter game. Gatherers has been crafted by our amazing, very talented Helsinki team, focused on prototyping new experiences and bringing them quickly to the soft launch phase. We are working t o make the gameplay experience even more social and fun. T Rogue Land is an easy to play fast-paced game with no unnecessar y rules. It has been rank ed by Google Play’s Best of 2021 in the ‘Best Competitive’ category . The ﬁrst version of the game was released in February 2021. After this, a new major update was released every month. The main 2021 development milestones included: introducing long-term retention and monetization goals by a feature set focused on collecting and maxing out all heroes, and deliv ering new heroes at regular intervals, pursuing Ad Monetization improvements, expanding a variety of game levels, and introducing social features. In 2022 we will make Rogue Land more social and plan to introduce a multiplayer gameplay ex perience. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 11 Group structur e As of December 31, 2021, the Huuuge Group (“Group”) comprised Huuuge Inc. (the parent entity), six subsidiary companies wholly and directly controlled by Huuuge Inc. and seven subsidiaries wholly controlled by the Com pany through Huuuge Global Ltd. with its registered seat in Cyprus. All companies are consolidated using the fu ll method. Please ﬁnd below the current corporate structure of the Group, indicating the chain of ownership and the percentage shar es in the share capital of each of the entities r espectively . Information on the organizational or capital relations of the issuer with other entities and changes in the organiz ation of the Group On December 20, 2021, two of the group’ s subsidiaries registered in Ireland, Emanon Limited (formerly Billionaire Games Limited) and Cireneg Limited (formerly F un Monkey Games Limited), both hitherto inactive, were sold in their entire ty . On December 31, 2021, DoubleStars Oy (the Group’ s Finnish subsidiary) shares were transferr ed to Huuuge Global Limited (another subsidiary of the Group), as part of an internal reorganization. Huuuge T ap Games Ltd., the Gr oup’ s dormant Hong Kong subsidiary , ﬁled for voluntary liquidation in 2021. The Issuer has no other organizational and capital relations other than those indicated below . The Issuer did not make any other capital investments (except for investments in new products), in 2021, as well as from January 1, 2022, until the date of this Annual Report. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 12 Oﬃces & Locations We are a global organization with a global team located in nine oﬃces across the globe powered by a team of over 600 people and a culture of innov ation and teamwork. Our team consists of employees of more than 15 nationalities. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 13 Gaming market 2020 saw a signiﬁcant increase in the size of the global gaming market, driven by the COVID-19 pandemic. Despite the challenges with game development and hardware availability in 2021, the global market grew by 1.4% t o reach $180.3bn in total revenues (per Newzoo). The over all market growth in 2021 was abo ve Newzoo ’ s initial estimates, primarily the result of mobile games revenue surpassing expectations to grow +7.3% YoY , despite PC and Console revenues both shrinking. At $93.2bn in r evenues, the mobile market now accounts for over half the total games market. Mobile outper formance in a challenging year is testimony to how games as a whole are becoming less cyclical and hit-driven, as well as less reliant on the release of new hardware to drive revenue. The pandemic has resulted in an increased number of new players for whom mobile games have been an entry point. Mobile ’ s share of the total market is set to continue increasing over the coming years. The market is expected to reach $116.4bn in revenues by 2024, representing a CAGR of 7.7%. Structural tailwinds such as increasing smar tphone and mobile internet availability , affordability and bandwidth, shoul d continue to bring new play ers on-board, par ticularly in emerging markets. The lasting positive effects of the pandemic for gaming are also expected to apply to the Social Casino (“SC”) genre. Growth here is expected to be slowe r than the over all mobile games market, at a 3.1% CAGR from 2021 t o 2024. Unlike other genres , SC DAUs are expected to decrease, with r evenue growth instead supported by more effective mon etization, leading to higher play er conversion and higher payments per paying player . On the contrary , puzzle games – par ticularly of a hyper casual nature – are continuing to gain popularity . Per App Annie, “Puzzle (Hyper casual)” was the second most downloaded game genre in 2021. 2021 also saw the boundaries of game genres blur . Innovation in game development has led to the emergence of “hybrid” games, combining elements from different genres. We believe that this will continue to be a growth oppor tunity in the years ahead. A noteworthy market development in 2021 was Apple ’s introduction of privacy changes requiring users to opt in to IDF A tracking. This has limited the ability of mobile marketers to deliver targeted advertising and measure attribution, consequently impacting user acquisition activities. As UA budgets shifted to Android in response, unit UA costs hav e increased across both platforms, for all game genres. Acquiring a speciﬁc ‘type ’ of user has become a challenge. The extent to which these challenges abate will depend on how the developer and ad-tech ecosys tem responds over th e coming months and years. Additional clarity and innovation in this space is likely to occur in 2022. Moreover , it is yet to be seen whether Google will go much further with privacy changes following the rollout of a new Privacy Dashboard and settings in Android 12 in October 2021 (which some marketers called “ A TT -lite' ').Google did not provide an exact timeline for its changes, but said it would support existing technologies for at least two more ye ars. The emergence of ‘W eb3’ games in 2021 also deserves some discussion. Since free-to-play as a business mod el for games has emerged, perhaps only Cloud Gaming has generated a similar level of interest within the industry . Web3 games have seen the introduction of blockchain-based tokens to supplement traditional vir tual currencies, allowing players to potentially make economic gains through gameplay . Additionally, Non Fungible T okens (“NFT s”) confer ownership ov er in-game virtual items. T o date, very few games have been released and there remains signiﬁcant uncertainty over future development in this domain, as Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 14 well as over the legal and regulatory constraints that may apply to this form of gaming. However , established game developers and publishers are monitoring this space, assessing if and how best to harness the technologica l potential to the future gr owth of their businesses. Other emerging oppor tunities in the gaming market include Metaverse related opportunities, skill-based gaming (e-sports) and fur ther growth in live str eaming. Sources: Newzoo, AppAnnie, Eile rs & Krejcik Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 15 Str ategy We continue to base our plans for future growth on our two-pronged “Build & Buy” framework. We intend to combine fur ther expansion of our existing internally-develop ed games, adding new , internally-developed games t o our por tfolio (“Build” strategy), and inorganic growth of our b usiness through publishing, partnerships and M&A (“Buy” strategy). Our vision is to transform mobile gaming into a massiv ely social experience and our mission is to empower billions of people to play together . Our goal is t o achieve this mission by partnering with game creators and studios with the highest potential. We plan t o achieve our vision and mission by focusing on the following objectives: Expanding our activities in the casual games subgenr e We intend to introduce new games in the casual gaming subgenre across various categories by leveraging our strengths in social feature de velopment, player monetization, and player r etention via live-oper ation offerings within our games. We intend to offer our best-in-class social experiences t o an ever-broadening user base within the casual games subgenr e. Increasing activity in publishing We launched Huuuge Publishing in 20 19 to expand our reach int o various new mobile casual subgenres. Huuuge Publishing has already attracted strong interest from developers around the globe and has signed more than ten publish ing agreements since the business unit’ s inception. Signing a publishing agreement is a star ting point not only for a par ticular game to be published by us, but also for a par tnership between us and the developer . In addition to t he revenue str eam from the publishing function, we expect Huuuge Publishing to be an important deal-ﬂow channel for further M&A activity . The success and, in particular , the eventual acquisition of T raﬃc Puzzle, has proven the validity of the third-party publishing business model, and created the pr ecedent necessar y to double down on this pr ong of our strategy in the year ahead. Optimization of marketing and content de velopment Beyond publishing, our plans for 2022 include the rapid scaling and build-out of our new franchises. We plan to optimize our marketing and user acquisition effor ts aimed at the growth of our player base, retention of existing players and driving the monetization level of our new franchises. In addition, we plan t o develop new content for our core and new fr anchises, including Live-Ops features, such as time-limited events, new game mechanics and gameplay , and visual enhancements aimed at increasing the attr activeness of our games and improving the in-game experience of our pla yers. Continued engagement & strong live-ops efforts to entertain our player cohorts We have a consistent track record and extensive experience in monetizing our user base. We continually invest in our current portfolio of games, which drive increases in the r ate at which players transact (convert to pay ers). We believe that by continuing our proven game development approach and marketing model we can continue to improve our player monetization tr ajectory and invest a meaningful portion of our revenue into our marketing effort. We ha ve an experienced team across use r acquisition, retargeting, ad cr eative and ad monetization suppor ted by our Huuuge Data Services system. Expand and enhance our core social casino off ering We plan to enhance our offering in the social casino market through the continued introduction of new content to our two key games: Huuuge Casino and Billionaire Casino. Our experience in building proven meta-game layers and the inclusion of club systems, leagues, live events, chats and player vs player style gameplay strongly positions us to continue to succeed in this subgenre of social mobile gaming. Leverage our technology and data services to continue mar gin expansion Our business is built on a data-centric approach, focused on our Hu uuge Data Services system, which we will continue to r eﬁne and expand as we grow . We plan to continue to expand our proﬁtability margins with a focus on data driven decision-making and technology. We believe that our organizational architectur e; namely our centralized service structures, data-centricity , and operating locations, which enable us to employ ﬁrst-class human and technology resources at lower costs than our competitors, will allow us to achieve exceptional p roﬁtability levels. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 16 Accessing best-in-class talent fr om around the world Across our history , we have focused considerable time and resources on building a team with diverse experience and backgrounds and a positive, stimulating business culture. We are present in the most impor tant gaming hubs in the world and we employ people from all over the world, which allows us to create an inclusive and diversiﬁed environment, required to successfully operate in our industry. We beneﬁt from our presence in Central and Eastern Europe, a region with a deep talent pool. We hav e cultivated an ecosystem within the industry which allows us to identify leading talent globally . Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 17 Research and de velopment We believe our ability to attract new players and retain existing players depends in part on our ability to evolv e and expand our content library by continually developing differen tiated games, systems technology and functionality to enhance the quality of player entertainment. Our research and de velopment activities are centered around, among other things: ● modifying the source code of the application t o introduce new functionalities to released games; ● creating dynamic and static gr aphic elements and designing sound effects; ● creating tools and processes for testing applications and upgrades to applications before they are released on the market; ● developing server platforms necessary for the functioning of r eleased games; ● optimizing mechanisms allowing for easy and quick sear ch for games in stores; ● building an internal data warehouse that enables an alysing current sales results an d trends; ● segmentation of players as well as cr eating dynamic predictive models. Our research and development expenditures amounted to USD 33,128 thousand in 2021 compared to USD 29,83 2 thousand in 2020. The increase in expenses was driven mainly by the higher number of employ ees working on game development both o n our core games and new fr anchises, as well as salary increases for our R&D personnel. During 2021 we intensively worked on developing Huuuge Casino and Billionaire Casino. We continued investing in the development of new features and our live-ops capabilities. In the new franchise space we focused mainly on T raﬃc Puzzle: adding our own content and delivering a roadmap of features and changes in the game. We also continued working on our “Build” side of the strategy with the main focus on three new games from the casual genr e – Brink of Mayhem, Gatherers and Rogue Land. On the technology side, we have completely revamped our already sophisticated data and AI infrastructure to allow data science and machine learning to be applied much more broadly across the company in a privacy-centric manner , adapting to the changing ecosystem and setting us up for success in the upcoming y ears. We have also invested heavily in our Huuuge Fuel tech engine to technologically optimize, monetize, and scale any new or existing game. Huuuge Fuel now includes a new zero-code personalization and live-ops engine, as well as generic, plug & play AI prediction models and automation for marketing, game economy , and user experience. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 18 FIN ANCI ALS & KPIs F actors aff ecting our results T raﬃc Puzzle rem ains our fastest growing game In Januar y 2022 we ﬁnalized the handover process of T raﬃc Puzzle and are no w in a position to make the r equired changes to the product and bring the game’ s KPIs to the next level. Tr aﬃc Puzzle 2021 revenue was almost 3.5 times higher Y oY and we believe there is still signiﬁcant potential for the fur ther scaling of that title. The user base keeps growing and the number of DAUs in Q4 2021 surpassed 200 thousand and the run-rate revenue (annualized revenue based on last month ’ s sales number) exceeded USD 35 million at the end of the fourth quarter . Core franchises c ontinue to impr ove proﬁtability We hav e witnessed another quarter of QoQ decline in our core franchi ses’ user base in line with the gener al genre market trends at the end of 2021. Our strategy is to optimize our User Acquisition spend for these ﬂagship games and to further improve the proﬁtability and cash generation of our core portfolio. As evidenced by our 2021 core franchise revenue (+5% YoY) we have been able to maintain top-line growth despite a decline in DAU, while at the same time our core franchise Sales Proﬁt has improved on a Y oY basis. Mobile gaming and social casino market envir onment As far as market dynamics are concerned, Eilers & Krejcik estimate the social casino market grew 8.3% Y oY in 2021. The long term forecast has been lowered lately with the social casino market expected to gr ow at +2.7% CAGR in 2021-25E (with a USD 8.5 billion market by 2025). F or more information about the mobile gaming market please see the chapter Gaming Mark et . User Acquisition expenses and post-IDF A mobile advertising market update User acquisition expenses were adapted to support new post-IDF A reality , such that budgets have been shifted t o par tners with better post-change performance. Media-buying methods and the overall marketing strategy have not been affected, rather adapted to better performing channels and platforms. We have adjusted our reporting and internal measurements to support Facebook and TikT ok AMM changes with little to no impact on marketing reports and media-buying effor ts. We continuously test new tools and features to improve current measurement possibilities while strictly maintaining data privacy and compliance with the applicable regulations. According to Google and media reports, Google is working on privacy measures intended to limit the sharing of data on smar tphones using the Android operating system. However , those changes are not expected to be as disruptive as the changes introduced by Apple last year . Google did not provide an exact timeline for its changes, but said it would support existing technologies for at least two more years. General external fact ors External factors that could affect our performance include the impact of the Covid-19 pandemic on the over all economy and speciﬁcally on the gaming industry and our players’ beha viour , continued secular trends in the sector (higher player engagement and willingness to invest more time and money in mobile games, competition from other games and other forms of entertainment), inﬂation and the volatility of foreign exchange r ates. Expected tax reforms & changes in tax law / tax law interpretations 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 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 feder al corporate tax rate, (ii) revisions to the global intangible low-taxed income (GIL TI), and iii) lower deduction against the global minimum tax in Internal Revenue Code Section 250. The discussed changes in the GIL TI rate or the GIL TI calculation mechanism may negatively impact the Group’ s ETR. T aking into account currently available infor mation and the fact that the GIL TI mechanism is yet to be adjust ed 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 during 2022. The implementation of these rules in their curr ent form would negatively impact the global effective tax rate of the Gr oup and may have a negative impact on our ﬁnancial resu lts. On Januar y 1, 2022 a new comprehensive social and economic program, referred to as the “The New Economic Polish Deal” took effect. The rules introduce extensive changes to taxation and health insur ance contributions. The adoption of the program Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 20 results, among other things, in an increase in employment costs in Poland (the majority of our employment costs, excluding share-based compensation, ar e incurred in Poland), which will ha ve a negative impact on our ﬁnancial results. Except for events and factors described in the Financial and KPI sections there were no other unusual events with an impact on the Issuer’ s ﬁnancial results. K ey performance indicat ors When evaluating our business, we consider the key performance indicators (KPIs) presented and discussed in this section. Each of these KPIs is deﬁned below: ● Daily Active Users (DAU): DA U 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 analyse actual players rather than accounts allows for substantially greater accuracy , including better in-game targeting of offers (right offer , to the right person, at the right time), better retargeting capabilities and better predictive models. A verage DA U for a period is the average of the monthly av erage DAU for the period pres ented. ● Daily Paying Users (DPU): DPU is deﬁned as the number of players (active users) who made a purchase on a given day . ● Av erage 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 r evenue (i.e. before deduction of platform fees) for the period b y the number of days in the period and then dividing b y the average DAU fo r 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 aver age DPU for the period. ARPPU for the period is calculated by dividing IAP revenu e for the period by the number of days in the period and then dividing by the aver age DPU for the period. ● Monthly Payer Conversion (Monthly Conversion): Monthly Conversion is deﬁned as the percentage of MAU that made at least one purchase in a month during the s ame 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 2021 and 2020 for the Group and core franchises, i.e. Huuuge Casino and Billionaire Casino. All games Core franchises Huuuge Casino and Billionaire Casino KPI 2021 2020 2021 2020 DAU (in thousand) 789.8 947.2 479.0 628.1 DPU (in thousand) 25.9 27.1 20.6 24.1 ARPDAU (in USD) 1.3 1.0 1.9 1.4 ARPPU (in USD) 38.0 32.8 43.5 35.3 Monthly Conversion (%) 5.5% 4.5% 8.7% 7.4% The table below presents our KPIs for Q4 2021 and Q4 2020 for the Group and core franchises, i.e. Huuuge Casino and Billionaire Casino. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 21 All games Core franchises Huuuge Casino and Billionaire Casino KPI Q4 2021 Q4 2020 Q4 2021 Q4 2020 DAU (in thousand) 727.6 893.9 433.9 567.8 DPU (in thousand) 24.4 27.8 19.3 23.8 ARPDAU (in USD) 1.3 1.1 1.9 1.6 ARPPU (in USD) 37.7 33.7 43.4 36.9 Monthly Conversion (%) 5.8% 4.8% 9.1% 8.3% In addition, below we present a mor e detailed quar terly overview of our selected KPIs. Daily Active Users The char t below presents DAU for our core franchises and our other games (“new franchises”) for the periods indicated. The downward trend of DAU for our core franchises reﬂects the current trends seen in the social casino genre. In Q4 2021 our over all DAU decreased by 5% QoQ and by 19% YoY . The decline was driven mainly by cor e franchises (-4% QoQ and -24% Y oY ) while in new franchises the decline resulted mainly from relocating User Acquisition investment from other games to Tr aﬃc Puzzle (in Q4 2021 T raﬃc Puzzle DAU grew by 12% QoQ and 137% Y oY). In the FY 2021 total DA U decreased by 17% Y oY , and was driven mainly by core franchises (-24% YoY) while DAU for new franchises was ﬂat Y oY , with Tr aﬃc Puzzle DAU growth of 199% YoY . The decline in our core por tfolio DAU was driven b y a lower number of installs. Our new franchise DAU declined due to relocating inv estment into Traﬃc Pu zzle, a game with promising monetization metrics. The chart below presents DAU for our core and new franchises for the p eriods indicated: Daily Paying Users In Q4 2021 the number of daily paying players was ﬂat compared to the previous quar ter . There was a slight increase in DPU QoQ in core franchises despite a decrease in the overall number of players which proves our ability t o keep the most valuable players in the game. As already explained above, the decrease in new franchises was due to relocating resources from less promising titles to Traﬃc Puzzle. DPU in Tr aﬃc Puzzle increased by 9% QoQ. In 2021 DPU decreased by 5% YoY: DPU for core franchises decreased by 14% Yo Y while DPU for new franchises grew by 74%. The drop in DPU for core franchises was a consequence of falling DAU (as a consequence of lower installs) although it was partially offset by better monetization metrics (growth in ARPDA U and monthly conversion). Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 22 The chart below presents DPU for our core and new fr anchises for the periods indicated: Av erage Rev enue 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 co re games, i.e. Huuuge Casino and Billionaire Casino. These two games continued to exhibit ARPDA U rates signiﬁcantly exceeding the category aver ages and we saw this KPI stabilizing just under USD 2.0 in Q4 2021. ARPDAU for our new fr anchises has increased by 6% QoQ up to USD 0.43. In the FY 2021 ARPDAU increased by 35% Y oY , with 38% higher ARPDAU in core fr anchises and 120% higher ARPDAU in new franchises. The chart below presents ARPDAU for our cor e and new franchises for t he periods indicated: Daily Av erage Revenue per Paying User In recent years, we have been able t o consistently improve the ARPPU of our core fr anchises owing to the social features of our games as well as constant focus on live events and special offers. In Q4 2021 we saw a s light decrease on a QoQ basis, while Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 23 Y oY our ARPPU in the core franchises incr eased by 17%. In the whole of 2021 our ARPPU incr eased by 16% YoY and the ARPPU of our core franchises increased by 23% YoY . Our core ARPPU remains at the top leve ls in the social casino category . We have been focusing on the longevity of our core games, which means the slightly less aggressive monetization of our players and higher conversion r atios. The chart below presents ARPPU for our core fr anchises games for the periods indicated: Monthly conversion Monthly Conversion is an indicator of our ability to convert players into payers. In Q4 2021, the Monthly Conversion for all games grew from 5.5% in Q3 2021 to 5.8% in Q4 2021, this came from an improvement in both core franchises and new franchises QoQ. In the whol e of 2021 Monthly Conversion increas ed to 5.5% from 4.5% in 2020 ; this was also connected with an improvement both in core franchises (8.7% in 2021 vs 7.4% in 2020) and new franchises (2.9% in 2021 vs 1.6% in 2020). We believe that growing conversion is more beneﬁcial for the longevity of our por tfolio than driving revenue through increasing ARPPU. The chart below presents Monthly conversion for our core and new fr anchises for the periods indicated: Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 24 Results of oper ations (P&L) The following table presents our consolidated statement of comprehensive income for the twelve months end ed December 31, 2021 and 2020, respectively and for the three months ended December 31, 2021 and 2020, respectively (“Q4 2021” and “Q4 2020”, respectively). in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change Revenue 373,739 332,721 12.3% 88,507 89,192 -0.8% Cost of sales (109,601) (99,622) 10.0% (25,781) (26,334) -2.1% Gross pr oﬁt/(loss) on sales 264,138 233,099 13.3% 62,726 62,858 -0.2% Sales and marketing expenses (146,239) (125,133) 16.9% (29,643) (43,626) -32.1% including user acquisition marketing campaigns (130,031) (111,494) 16.6% (26,254) (39,999) -34.4% including general sales and marketing expenses (16,208) (13,639) 18.8% (3,389) (3,627) -6.6% Research and develop ment expenses (33,128) (29,832) 11.0% (7,662) (8,740) -12.3% General and administr ative expenses (40,583) (27,606) 47.0% (9,561) (9,986) -4.3% Other operating income/(ex pense), net 389 (344) -213.1% (304) (440) -30.9% Operating result 44,577 50,184 -11.2% 15,556 66 >999.9% Finance income 20 2,081 -99.0% 10 1,089 -99.1% Finance expense (45,598) (128,509) -64.5% (1,024) (109,328) -99.1% Proﬁt/(loss) befor e tax (1,001) (76,244) -98.7% 14,542 (108,173) -113,4% Income tax (8,680) (6,360) 36.5% (3,164) 814 -488.7% Net result for the period (9,681) (82,604) -88.0% 11,378 (107,359) -110.6% Exchange gains/(losses) on tr anslation of foreign operations (1,021) 491 -307.9% (285) 1,483 -119.2% T otal comprehensive income for the period (10,702) (82,113) -87.0% 11,093 (105,876) -110.5% The following tables show the Alternative Performance Measures used by us as at the dates and for the periods indicated, followed by a justiﬁcation for their use. Please see below the deﬁnitions of the measures and r atios used. in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change EBITDA 52,597 53,514 -1.7% 18,087 1,534 >999,9% EBITDA mar gin (%) 14.1% 16.1% -2pp 20.4% 1.7% 18.7pp Adjusted EBITDA 64,357 57,272 12.4% 20,727 3,065 576.2% Adjusted EBITDA Margin (%) 17.2% 17.2% 0pp 23.4% 3.4% 20pp Sales Proﬁt 134,107 121,605 10.3% 36,472 22,859 59.6% Sales Proﬁt Margin (%) 35.9% 36.5% -0.6pp 41.2% 25.6% 15.6pp User acquisition marketing campaigns as % of revenue 34.8% 33.5% 1.3pp 29.7% 44.8% -15.2pp Adjusted Net Result 41,076 48,110 -14.6% 14,018 2,056 581.8% Adjusted Net Result (%) 11.0% 14.5% -3.5pp 15.8% 2.3% 13.5pp Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 25 EBITDA , Adjusted EBITD A , EBITDA Margin , Adjusted EBI TDA Margin , Sales Pr oﬁt , Sales Proﬁt Margin , User acquisition cost as a percentage 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 be lieve they pr ovide a view of our recurring operating performance which is unaffected by our capital structure and allow us to readily view operating tr ends and identify strategies to improve operating performance as well as 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 for 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 EBITD A 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 an d other interested par ties 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 t o 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 r ationale for using the Adjusted EBITDA is an attempt t o show the EBITD A result after eliminating ev ents not related to the main activi ty of the Group and items fro m the proﬁt and loss account which ar e of a non-cash nature. - We deﬁne the EBITDA margin as the r atio of the EBITDA and Revenue. The r ationale for using the EBITDA mar gin is that it is a measure of operational proﬁtability widely used among securities analysts and investors, as well as the fact that EBITDA and the EBITDA mar gin are internal measures used by us in the pro cess 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 t he main activity of the Group and items from th e proﬁt and loss account which ar e of a non-cash nature. - We deﬁne Sales Proﬁt (previously “Return on sales”) as Gross proﬁt/(loss) fr om the sales less the user acquisition costs. The rationale for using the Sales Proﬁt is to show the proﬁtability of sal es in the value aspect after cov ering 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 adver tising 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 and Re venue. The rat ionale for using the Sales Proﬁt Margin is to show the proﬁtability of sales as a percentage after covering variable costs directly related to the revenue gener ated, mainly distribution costs (fees for owners of distribution platforms), server expenses and the user acquisition costs through paid adve rtising campaigns. - We deﬁne User Acquisition cost as the percentage of revenue as the ratio of User acquisition costs and revenue. The rationale for using the User Acquisition cost as a percentage of revenues is to show how much of our rev enue we reinvest directly in maintaining and expanding our player base. Historically , we used to include the total cost of external marketi ng and sales ser vices in that measure and beginning fr om the full year 2020 we decided to narrow the r atio 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 Gr oup, 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 y ear after eliminating events not related to the main activi ty of the Group and items fro m the proﬁt and loss account which ar e of a non-cash nature. - We deﬁne Adjusted net result margin as the ratio of the Adjusted net result and Revenue. The rationale for using the Adjusted net result margin is an attempt to show the net result for the year as a percentage after eliminating events not related to the main activity of the Group and items fr om the proﬁt and loss account which are of a non-cash nature. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 26 The measures presented may not be comparable to similarly titled measures used by other companies. We encourage y ou to review our ﬁnancial information in its entirety and not to r ely on a single ﬁnancial measure. The following table presents a r econciliation of Sales Margin for the periods pr esented: Sales Proﬁt and Sales Pr oﬁt Margin in thousand USD 12M 2021 12M 2020 Change Q4 2021 Q4 2020 Change Revenue 373,739 332,721 12.3% 88,507 89,192 -0.8% Gross proﬁt/(loss) on sales 264,138 233,099 13.3% 62,726 62,858 -0.2% User acquisition marketing campaigns 130,031 111,494 16.6% 26,254 39,999 -34.2% Sales Proﬁt 134,107 121,605 10.3% 36,472 22,859 59.6% Sales Proﬁt Mar gin 35.9% 36.5% -0.6pp 41.2% 25.6% 15.6pp The following table presents a r econciliation of Adjusted EBITD A for the periods presented: Adjusted EBITD A reconciliation in thousand USD 12M 2021 12M 2020 Change Q4 2021 Q4 2020 Change Net result for the period (9,681) (82,604) -88.3% 11,378 (107,359) -110.6% Income tax 8,680 6,360 36.5% 3,164 (814) -488.7% Finance expense 45,598 128,509 -64.5% 1,024 109,328 -99.1% Finance income (20) (2,081) -99.0% (10) (1,089) -99.1% Depreciation and amortization 8,020 3,330 140.8% 2,531 1,468 72.4% EBITDA 52,597 53,514 -1.7% 18,087 1,534 >999.9% EBITDA Mar gin 14.1% 16.1% -2pp 20.4% 1.7% 18.7pp Employee beneﬁts costs – shar e-based plan (1) 11,760 3,758 212.9% 2,640 1,531 72.4% Adjusted EBITD A 64,357 57,272 12.4% 20,727 3,065 576.2% Adjusted EBITD A Margin 17.2% 17.2% 0pp 23.4% 3.4% 20pp (1) “Employee beneﬁts costs – share-based plan ” is a non-cash expense related to the Company’ s stock option plan and recognized in accor dance with IFRS 2 Share-based Payment. The following table presents a r econciliation of Adjusted Net Result for the periods pr esented: Adjusted Net Result in thousand USD 12M 2021 12M 2020 Change Q4 2021 Q4 2020 Change Net result for the period (9,681) (82,604) -88.3% 11,378 (107,359) -110.6% Employee beneﬁts costs – shar e-based plan (1) 11,760 3,758 212.9% 2,640 1,531 72.4% Series C shares re valuation 38,997 127,768 -69.5% - 108,696 -100.0% T ax impact of the above items - (813) -100.0% - (813) -100.0% Adjusted Net Result 41,076 48,110 -14.6% 14,018 (2,056) 581.8% Adjusted Net Result Margin 11.0% 14.5% -3.5% 15.8% 2.3% 13.5pp (1) “Employee beneﬁts costs – share-based plan” is a non-cash expense related to the Company’ s stock option plans and recognized in accor dance 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 . Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 27 in thousand USD 12M 2021 12M 2020 Change Q4 2021 Q4 2020 Change Gaming applications 358,638 325,684 10.1% 84,664 86,162 -1.7% Advertising 15,101 7,037 114.6% 3,843 3,030 26.8% T otal revenue 373,739 332,721 12.3% 88,507 89,192 -0.8% Revenue increased by USD 41,018 thousand, i.e. 12.3%, from USD 332,721 thousand for FY 2020, t o USD 373,739 thousand for FY 2021. The key driver for that uplift was Tr aﬃc Puzzle (monetized largely through in-app advertising), revenue from which grew by 246.5% YoY . This was further ampliﬁed by improved user monetization in our cor e franchises, which mor e than offset a decline in DAU. In Q4 2021 t otal revenue remained substantially ﬂat compar ed to Q4 2020. Below we show the rev enue split into main produc t categories: in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change Huuuge Casino 214,554 201,919 6.3% 50,621 53,189 -4.8% Billionaire Casino 113,515 109,610 3.6% 26,552 27,837 -4.6% T otal Core Franch ises 328,069 311,529 5.3% 77,173 81,026 -4.8% T raﬃc Puzzle 34,008 9,814 246.5% 9,387 4,056 131.4% Other 11,662 11,378 2.5% 1,947 4,110 -52.6% T otal New Franchises 45,670 21,192 115.5% 11,334 8,166 38.8% T otal revenue 373,739 332,721 12.3% 88,507 89,192 -0.8% - of which originating from games de veloped by external developers with whom we ha ve publishing contracts 578 1,103 -46.6% 133 9,899 -98.7% The main driver for the revenue growth in the core franchises (USD 16,540 thousand, i.e. an incre ase of 5.3% between FY 2020 and FY 2021) was an improv ement in ARPDAU, driven by both improving conversion rates as well as ARPPU. In Q4 2021 revenue in the core franchises decreased by USD 3,853 thousand, i.e. by 4.8% (from USD 81,026 thousand in Q4 2020 to USD 77,173 thousand in Q4 2021) mainly due to the decrease in DPU as discussed in the Key Performance Indicators section of this report. With regards to Tr aﬃc Puzzle, its rapid revenue growth of USD 24,194 thousand (i.e. 246.5%) between FY 2020 and FY 2021, and of USD 5,331 thousand (i.e. 131.4%) between Q4 2020 and Q4 2021, followed the continuous DAU expansion driven by ongoing investments in marketing, resulting in a growing number of new installs. Revenue from other franchises for FY 2021 amounted to USD 11,662 thousand and remained su bstantially ﬂat compared to FY 2020 (USD 11,378 thousand for that period). In Q4 2021 revenue from other fr anchises decreased by USD 2,163 thousand (i.e. by 52.6%) from USD 4,110 thousand in Q4 2020 to USD 1,947 thousand in Q4 2021, mainly due to prioritizing marketing expenses to the highest RO AS (Return on Ad Spend) opportunity within the new franchises portfolio. It is for that reason that we have doubled down on our marketing efforts for T raﬃc Puzzle and at the same time gradually phased out most of the user acquisition marketing campaigns for new fr anchises that demonstrated lower ROAS. The geographical br eakdown of revenue is described in Note 6 t o the Consolidated Financial Statements for 2021. Operating expenses Operating expenses for the year ended December 31, 2021, increased by USD 47,358 tho usand (from USD 282,193 thousand t o USD 329,551 thousand), i.e. by 16.8%, compared to the year ended Decembe r 31, 2020. That increase resul ted primarily from an increase in (i) user acquisition marketing campaign costs of USD 18,537 thousand, i.e. 16.6%, mainly in the ﬁrst half of the y ear , (ii) general and administrative expenses of USD 12,977 thousand, i.e. 47.0%, attributable mainly to the costs associated with operating as a public company , (iii) cost of sales of USD 9,979 thousand, i.e. 10.0%, as a result of growing revenue. The operating expenses for Q4 2021 decreased vs. Q4 2020 by USD 16,039 thousand from USD 88,686 thousand to USD 72,647 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 28 thousand (i.e. by 18.1%), attributable mainly to the decrease in user acquisition marketing campaign costs (a decrease of USD 13,745 thousand, i.e. 34.4%). The table below presents a br eakdown of our oper ating expenses. in thousand USD 12M 2021 12M 2020 Change Q4 2021 Q4 2020 Change Cost of sales (109,601) (99,622) 10.0% (25,781) (26,334) -2.1% Sales and marketing expenses: (146,239) (125,133) 16.9% (29,643) (43,626) -32.1% thereof user acquisition mark eting campaigns (130,031) (111,494) 16.6% (26,254) (39,999) -34.4% thereof gener al sales and marketing expenses (16,208) (13,639) 18.8% (3,389) (3,627) -6.6% Research and develop ment expenses (33,128) (29,832) 11.0% (7,662) (8,740) -12.3% General and administr ative expenses (40,583) (27,606) 47.0% (9,561) (9,986) -4.3% T otal operating expenses (329,551) (282,193) 16.8% (72,647) (88,686) -18.1% Cost of sales Cost of sales for the year ended December 31, 2021 increased by USD 9,979 thousand from USD 99,622 thousand to USD 109,601 thousand, i.e. by 10.0%, compared to the year ended December 31, 2020, mainly due to an incr ease in platform fees to distributors, as a result of the increased scale of our sales. Cost of sales as a percentage of reve nue was on a similar level for both years and amounted to 29.3% and 29.9% for FY 2021 and FY 2020, respectively . In Q4 2021 cost of sales decreased by USD 553 thousand, i.e. 2.1%, compared to Q4 2020, greater than the sales decr ease of 0.8% in the same period. This differ ence is due to the increase in the share of advertising revenue (which does not incur platform fees) in the total revenue, combined with a slight decrease in re venue from gaming applications. Sales and marketing expenses Sales and marketing expenses for the year ended December 31, 2021 increased by USD 21,106 thousand from USD 125,133 thousand to USD 146,239 thousand, i.e. by 16.9%, compared to the year ended December 31, 2020. The change between Q4 2021 and Q4 2020 was a decrease of USD 13,983 thousand from USD 43,626 thousand to USD 29,643 thousand, i.e. by 32.1%. Sales and marketing expenses consist of: i) user acquisition marketing campaigns and ii) general sales and marketing expenses. The following trends were obs erved for these items: User acquisition marketing campaigns The cost of user acquisition marketing campaigns for the year ended December 31, 2021 increased by USD 18,537 thousand from USD 111,494 thousand to USD 130,031 thousand, i.e. by 16.6%, compared to the year ended December 31, 2020, mainly due to increased marketing spend on our New Franchises . It is also wor th highlighting that within our New Fr anchise por tfolio we have gradually decreased marketing spend on Stars Slots as well as Coffee Break Games and reallocated the budget towards Tr aﬃc Puzzle. Comparing Q4 2021 and Q4 2020 the cost of user acquisition marketing campaigns decreased b y USD 13,745 thousand from USD 39,999 thousand to USD 26,254 thousand, i.e. by 34.4%, which reﬂected the pattern of marketing spend adopted for 2021, under which - in contrast to 2020 - most of the marketing budget was allocated to the ﬁrs t half of the year . The chart below presents a quar terly view of our user acquisition marketing campaigns as a percentage of revenue. As explained above, the decrease in spending towards the second half of 2021 was driven by the decision on budget distribution and our commitment to disciplined spending base d on expected ROAS/paybacks. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 29 Quar terly UA cost vs. r evenue (%) General sales and mark eting expenses General sales and marketing expenses for the year ended December 31, 2021 increased by USD 2,569 thousand from USD 13,639 thousand to USD 16,208 thousand, i.e. by 18.8%, compared to the year ended December 31, 2020, mainly due to an increase in the costs of salaries and employee stock options allocated to the sales and marketing team, reﬂecting the continued development of our in-house marketing teams and related competences. In Q4 2021 general sales and marketing expenses decreased by USD 238 thousand, i.e. by 6.6%, from USD 3,627 thousand in Q4 2020 to USD 3,389 thousand in Q4 2021, mainly as a result of updates of the underlyin g assumptions for estimate of annual performance bonus accrual. Research and develop ment costs Research and development costs for the year ended December 31, 2021 increased by USD 3,296 thousand from USD 29,832 thousand to USD 33,128 thousand, i.e. by 11.0%, compared to the year ended Decemb er 31, 2020, mainly due to an incr ease in the cost of salaries and employee stock options of the R&D team (an increase of USD 2,132 thousand and USD 2,722 thousand, respectively), which reﬂects the growing headcount and the increasing seniority of the team. This increase was, however , partially offset by lower payments to external developers within publishing agreements (a decr ease of USD 2,225 thousand). In Q4 2021 research and development costs decreased by USD 1,078 thousand, i.e. 12.3%, from USD 8,740 thousand in Q4 2020 to USD 7,662 thousand in Q4 2021, mainly due to updates in the underlying assumptions for estimate of annual performance bonus accrual. General and administr ative expenses General and administrativ e expenses for the year ended December 31, 2021 increased by USD 12,977 thousand from USD 27,606 thousand to USD 40,583 thousand, i.e. by 47.0%, compared to the year ended December 31, 2020, mainly due to (i) higher depreciation and amortization (an increase of USD 4,690 thousand, i.e. 140.8%) mainly attributable to the amor tization of the Traﬃc Puzzle game acquired in Q2 2021, (ii) employee st ock option plan expenses (an increase of USD 4,477 thousand, i.e. 173.7%), (iii) higher costs of salaries (an increase of USD 2,261 thousand, i.e. 20.0%) driven by the higher headcount in back oﬃce teams as a consequence of operating as a public company. G eneral and administr ative expenses decreased between Q4 2020 and Q4 2021 by USD 425 thousand, i.e. 4.3%, due t o higher costs of external ﬁnance and legal services, mainly attributable to preparations for the IPO , recognized in Q4 2020, partially offset by higher costs of depreciation and amortization in Q4 2021 as discussed above. Other operating income, net Other operating income for the year ended December 31, 2021, increased by USD 733 thousand, i.e. 213.1%, to USD 389 thousand from net operating expense of USD 344 thousand in the year ended December 31, 2020, primarily due to a refund received in Q3 2021 of approximately USD 832 thousand resulting fr om sales related taxes erroneously withheld by distributio n Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 30 platforms in previous years. In Q4 2021 other operating expenses amounted to USD 304 thousand compared to USD 440 thousand in Q4 2020, due to lower sales r elated taxes. Proﬁtability Our Sales Proﬁt for FY 2021 increased by USD 12,502 thousand from USD 121,605 thousand to USD 134,107 thousand, i.e. 10.3%, compared to FY 2020 as a result of the increase in gross pr oﬁt on sales of USD 31,039 thousand, i.e. 13.3%, offset by an increase in user acquisition marketing campaign costs of USD 18,537 thousand, i.e. 16.6%. The Sales Proﬁt Mar gin in FY 2021 amounted to 35.9% and was substantially on the same level as in the prior year (36.5%). In Q4 2021 there was a notable increase in Sales Proﬁt of USD 13,613 thousand, i.e. 59.6%, compared to Q4 2020, which resulted in a corresponding improvement in the Sales Proﬁt Margin of 15.6 pp from 25.6% in Q4 2020 to 41.2% in Q4 2021, driven mostly by the decrease in user acquisition costs. Those dynamics reﬂect the phasing of our u ser acquisition marketing campaigns thr oughout 2021, with the highest spend occurring in Q1 2021, and a gr adual decrease in the following quarters. Our adjusted EBITDA for FY 2021 increased by USD 7 ,085 thousand compared to FY 2020, and the adjusted EBITDA margin for FY 2021 remained at the same level compared to FY 2020. The change in the adjusted EBITDA reﬂected the incr ease in Sales Proﬁt as discussed above, par tially offset by an increase in operating expenses. At the same time, in Q4 2021 there was an increase in adjusted EBITDA of USD 17,662 thousand, i.e. 576.2%, compared to Q4 2020, which lifted the adjusted EBITD A margin by 20.0 pp from 3.4% in Q4 2020 to 23.4% in Q4 2021 and resulted from the increased Sales Proﬁt and decreased operating expenses discuss ed in the Proﬁtability and Oper ating expenses sections of this report. Finance expenses, net The table below presents a Finance income and Fin ance expenses for the periods presented: in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change Finance income 20 2,081 -99.0% 10 1,089 -99.1% Finance expenses (45,598) (128,509) -64.5% (1,024) (109,328) -99.1% Finance expense, net (45,578) (126,428) -63.9% (1,014) (108,239) -99.1% Finance expenses, net for FY 2021 decreased by USD 80,850 thousand compared to FY 2020, mainly as a result of the remeasurement of the fair value of Series C Preferre d Shares (ﬁnance expense of USD 38,997 thousand f or FY 2021, compared to USD 127,768 thousand for FY 2020), as well as a loss of USD 2,662 thousand on a foreign exchange forward contr act entered into to ﬁx the conversion rate for proceeds from the IPO from Polish złoty to USD . It is wor th noting that the ﬁnance expenses related to the remeasurement of the fair value of Series C Preferr ed Shares reported in FY 2021 is fully attributed to the ﬁrst quarter of the ﬁnancial year as the conversion of Series C Preferred Shares into Common Shares took place on February 5, 2021, upon which those shares ar e no longer classiﬁed as a ﬁnancial liability . Finance expenses, net in Q4 2021 amounted to USD 1,014 thousand compared to USD 108,239 thousand in Q4 2020. The decline of USD 107,225 thousand, i.e. 99.1% can be mostly explained by the remeasurement of the fair value of Series C Preferr ed Shares to USD 109,176 thousand in Q4 2020. Finance expenses in Q4 2021 are almost entirely attributable to foreign exchange r ate ﬂuctuations. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 31 Net Financial Debt The table below presents the Net Financial Debt of the Group as at December 31, 2021 and December 31, 2020. We have als o presented Adjusted Net Financial Debt as at December 31, 2020, giving effect to the conversion of Series C Preferred Shares into Common Shares of F ebruary 5, 2021, upon which those shares are no longer recognized as a ﬁnancial liability . in thousand USD As at December 31, 2021 As at December 31, 2020 Cash and cash equivalents 1 204,415 94,158 Short-term lease liabilities 4,275 2,779 Net current ﬁnancial indebtedness (200,140) (91,379) Long-term lease liabilities 12,982 6,282 Preferr ed shares 2 176,606 Non-current ﬁnancial indebtedness 12,982 182,888 Net ﬁnancial debt (187,158) 91,509 Adjustment or Preferr ed shares ﬁnancial liability 3 - (176,606) Adjusted Net ﬁnancial debt (187,158) (85,097) 1. Includes cash in money market in vestment funds 2. Represents the fair value of Seri es C Preferr ed Shares 3. The effect of the conversion of Series C Preferr ed Shares into Common Shares of February 5, 2021, upon whic h such shares will no longer be recognized as a ﬁnancial liability . Net ﬁnancial debt as at December 31, 2021 amounted to negative USD 187,158 and dec reased by USD 278,667 thousand fr om positive USD 91,509 thousand as at December 31, 2020 m ainly due to: ● the conversion of Series C Preferred Shar es into Common Shares as at February 5, 2021, upon which such shar es are no longer recognized as a ﬁnancial liability , therefore decreasing the Net Debt. As the conversion took place in Q1 2021 there was no additional impact in the followin g quarters of that ﬁnancial year; and ● the completion of the Initial Public Offering, which provided the Group with net proceeds of approximately USD 1 01 million (net of costs and stabilization actions), incre asing liquidity and decreasing the Net Debt. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 32 Statement of ﬁnancial position Selected Consolidated Statements of Financial Position The following selected consolidated ﬁnancial information as at December 31, 2021 and December 31, 2020 has been derived from the Consolidated Financial Statements includ ed in this Annual Report. As at December 31, As at December 31, in thousand USD 2021 Structure 2020 Structure ASSETS T otal non-current assets, including: 67,512 22.5% 17,347 12.2% Right-of-use assets 17,479 5.8% 8,646 6.1% Goodwill 2,693 0.9% 2,838 2.0% Intangible assets 40,217 13.4% 1,459 1.0% T otal current assets, including: 232,434 77.5% 124,485 87.8% T rade and other receivables 27,671 9.2% 29,226 20.6% Cash and cash equivalents 204,415 68.2% 94,158 66.4% T otal assets 299,946 100% 141,832 100.0% EQUITY T otal equity 226,099 75.4% (96,008) -67.7% LIABILITIES T otal non-current liabilities, including: 12,982 4.3% 183,019 129.0% Preferr ed shares - 0.0% 176,606 124.5% T otal current liabilities, including: 60,865 20.3% 54,821 38.7% T rade and other payables 52,687 17.6% 37,797 26.6% T otal Liabilities 73,847 24.6% 237,840 167.7% T otal equity and liabilities 299,946 100% 141,832 100.0% Assets T otal assets increased by USD 158,114 thousand, i.e. 111.5%, from USD 141,832 thousand as at December 31, 2020, to USD 299,946 thousand as at December 31, 2021. The increase in total assets resulted fr om: (i) an increase in total current assets of USD 107,949 thousand, mainly due to a signiﬁcant increase in cash and cash equivalents related to the net pr oceeds from the IPO and (ii) an increase in total non-current assets of USD 50,165 thousand, mainly due to the acquisition of the T raﬃc Puzzle game that was recognized as an intangible asset, as well as new leases recogniz ed as right-of-use assets. The structure of total assets changed mostly as a result of an increase in intangible assets of USD 38,758 thousand (resulting from the acquisition of Traﬃc Puzzle) and cash and cash equivalents of USD 110,257 thousand (attributable to funds fr om the Company’ s IPO , as well as cash surplus generated during the year). T otal assets comprised mainly the following items: (i ) cash and cash equivalents (accounting for 68.2% and 66.4% of total assets as at December 31, 2021, and December 31, 2020, respectively); (ii) intangible assets (accounting for 13.4% and 1.0% of total assets as at December 31, 2021, and December 31, 2020, respectively); and (iii) trade and other receivables (accounting for 9.2% and 20.6% of total assets as at December 31, 2021, and December 31, 2020, respectiv ely). Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 33 Liabilities T otal liabilities decreased by USD 163,993 thousand, i.e. 69.0%, from USD 237,840 thousand as at December 31, 2020, to USD 73,847 thousand as at December 31, 2021. The level and str ucture of total liabilities chang ed primarily due to the conversion o f Series C Preferred Shares into Common Shares which is described in Note 17 Conversion of Series C Preferred Shar es to the Consolidated Financial Statements. As at December 31, 2021 total liabilities comprised mainly trade and other pa yables (accounting for 71.3% of total liabilities). As at December 31, 2020 total liabilities comprised mainly the following items: (i) Preferred Shares (accounting for 74.3% of total liabilities), and (ii) tr ade and other payables (accounting for 15.9% of total liabilities). Please refer to the Cash ﬂows and liquidity section later in this chapter for an explanation of the changes in net working capital, including trade and other pa yables. The Group has a high level of cash as at 31 December 2021. The Group companies settle their liabilities o n time. Furthermore, the Group companies do not encounter problems with the collection of receiv ables. The Issuer’s curr ent ﬁnancial situation does not require taking any addition al steps to protect its ability to settle liabilities in time. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 34 Cash ﬂows and liquidity Selected consolidated statements of cash ﬂows The following table summarizes selected net cash ﬂows from operating, investing and ﬁnancing activities for twelve months ended December 31, 2021 and December 31, 2020 and for Q4 2021 comp ared to Q4 2020. in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change CASH FL OWS FROM OPERA TING ACTIVITIES Proﬁt/(loss) befor e tax (1,001) (76,244) -98.7% 14,542 (108,173) -113,4% Adjustments for: Sum of non-cash changes in interest, depr eciation, amortization, FX differences, prepayments and proﬁts on disposal 11,043 3,748 194,6% 1,317 2,932 -55,1% Non-cash employee beneﬁts expense – share-based payments 11,760 3,758 212.9% 2,640 1,531 72.4% Non-cash remeasurement of p refer ence shares liability – ﬁnance expense 38,997 128,249 -69.6% - 109,177 -100.0% Changes in net working capital (21,289) 19,445 -209.5% (3,611) 10,916 -133.1% Cash ﬂows from oper ating activities 39,510 78,956 -50.0% 14,888 16,383 -9.1% Income tax paid (9,741) (5,725) 70.1% (4,065) (1,962) 107.2% Net cash ﬂows from oper ating activities 29,769 73,231 -59.3% 10,823 14,421 -24.9% CASH FL OWS FROM INVESTING ACTIVITIES Acquisition of property , plant and equipment and intangible assets (6,455) (3,437) 87.8% (2,249) (1,857) 21.1% Acquisition of subsidiaries, net of cash acquired - (2,088) -100.0% - - - Acquisition of IP rights (9,500) - 100.0% - 100% Net cash from inv esting activities (15,955) (5,458) 192.3% (2,259) (1,857) 21.6% CASH FL OWS FROM FINANCING ACTIVITIES Proceeds from issue of com mon shares for public Subscription 152,929 - 100.0% - - - Execution of stabilization option (43,976) - 100.0% - - - T ransaction costs of the issue of equity instruments (7,097) (275) >999.9% - - - Proceeds from issue of sha res - 9,681 -100.0% - - - Repurchase of own shares - (7,699) - - - Net cash from ﬁnancing activiti es 96,610 (14) <-999,9% (941) (672) 40.0% Net increase/(decrease) in ca sh and cash equivalents 110,424 67,759 63.0% 7,623 11,892 -35.9% Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 35 Net cash ﬂows fr om operating activities Net cash inﬂows from operating activities for FY 2021 amounted to USD 29,769 thousand and decreased by USD 43,462 thousand from cash inﬂows of USD 73,231 thousa nd for FY 2020. The changes in net cash ﬂows from operating activities are attributable primarily to an unfavour able change in net working capital of USD 40,734 thousand and an increase of income taxes paid of USD 4,016 thousand. The change in net working capital resulted mainly from: (i) a decrease in trade and other payables of USD 13,132 thousand (excluding the deferred payments related to the acquisition of the Tr aﬃc Puzzle game), during FY 2021 (mainly driven by the decrease in pay ables for user acquisition marketing campaign expenses and for expenses related to the IPO pr ocess) compared to the increase in tr ade and other payables of USD 26,087 thousand during FY 2020; (ii) the settlement of the Washingt on cour t case (USD 6,500 thousand), and (iii) utilization of other provisions (USD 1,259 thousand), explained in Note 22 Provisions to the Consolidated Financial Statements. Net cash ﬂows fr om investing activities Net cash outﬂows from investing activities for FY 2021 amounted to USD 15,955 thousand and increased by USD 10,497 thousand, from outﬂows of USD 5,458 thousand for FY 2020. The changes in net cash ﬂows from investing activities are attributable primarily to the settlement of the ﬁrst payment for the Traﬃc Puzzle g ame. Net cash ﬂows fr om ﬁnancing activities Net cash inﬂows from ﬁnancing activities for FY 2021 amounted to USD 96,610 thousand and increased by USD 96,624 thousand, from outﬂows of USD 14 thousand for FY 2020. The changes in net cash ﬂows from ﬁnancing activities are mainly attributable to: (i) proceeds from the subscribed Common Shares issued for the public offering subscription of USD 152,929 thousand offset by (ii) transaction costs incurred related to the issue of equity instruments of USD 7,097 thousand, and (iii) funds used for the execution of the stabilization op tion of USD 43,976 thousand. Credits and loans There are no signiﬁcant sur eties, loans or guarantees granted or r eceived by the Issuer in the reported ﬁnancial year . The Group has no borrowing requirements. The Group anticipates that current sources of ﬁnancing, i.e. equity and operating revenues will remain its main sources of ﬁnancing in the near future. The Group’ s operations are not ﬁnanced using debt ﬁnancing. No sureties and guarantees were granted or received by the Group in the year ended December 31, 2021, including those granted t o the Company’ s related entities. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 36 Current and pr ojected ﬁnancial situation The table below presents the k ey paramete rs for assessing the Group ’s pr oﬁtability, eﬃcie ncy and liquidity in thousand USD 2021 2020 Change Q4 2021 Q4 2020 Change Proﬁtability r atios Gross Proﬁt mar gin 70.7% 70.1% 0.6pp 70.9% 70.5% 0.4pp Adjusted EBITDA margin 17.2% 17.2% 0pp 23.4% 3.4% 20pp EBITDA mar gin 14.1% 16.1% -2pp 20.4% 1.7% 18.7pp Adjusted Net Result margin 11.0% 14.5% -3.5pp 15.6% 2.3% 124.2pp Eﬃciency ratios Debtors days 27.9 27.8 -0.1% 28.6 29.4 -2.6% Creditors da ys 50.1 31.5 59.1% 67.4 32.9 104.8% Liquidity ratio Current r atio 3.8 2.3 66.0% 3.5 2.3 53.7% Formulas for the calculation of indicat ors: Gross Pr oﬁt margin : Gross proﬁt/(loss) on sales / Rev enue Adjusted EBITD A margin: Adjusted EBI TDA / Revenue EBITDA mar gin: EBITDA / Revenue Adjusted Net Result margin: Adjusted Net Resu lt / Revenue Debtors days: (T rade and other receivables, gross, at the beginning of the period + Tr ade and other receivables, gross, at the end of the period) /2) / (Revenue / no. of da ys) Creditors days: (Trade and other payables, gr oss, at the beginning of the period + Tr ade and other payables, gross, at the end of the period) /2) / (Operating expenses / no. of days) Current ratio: T otal current assets / T otal current liabilities The Group is in very good ﬁnancial condition, with a high level of net cash (USD 187,158). Due to the fact that the Group (including the Parent Company) did n ot use external ﬁnancing in 2020-2021, no debt r atios will be presented. Proceeds fr om the Initial Public Offering In 2021, the Company obtained approximately USD 101 million from the Initial Public Offering net of costs and funds us ed for stabilization. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 37 Stand-alone results o f oper ations Stand-alone results of oper ations Y ear ended Y ear ended December 31, 2021 December 31, 2020 Change Change Revenue 3,824 2,817 1,007 36% Cost of sales - - Gross pr oﬁt 3,824 2,817 1,007 36% Sales and Marketing expenses (76) - (76) 100% Research and develop ment expenses (1,447) (906) (541) 60% General and administr ative expenses (5,206) (5,885) 679 -12% Other operating income/(ex pense), net (80) 6,536 (6,616) -101% Operating result (2,985) 2,562 (5,547) -217% Finance income 57 166 (109) -66% Finance expense (42,205) (128,309) 86,104 -67% Proﬁt/(loss) befor e tax (45,133) (125,581) 80,448 -64% Income tax (73) (96) 23 -24% Net result for the year (45,206) (125,677) 80,471 -64% Other comprehensive income - - - - T otal comprehensive income/(loss) for the year (45,206) (125,677) 80,471 -64% The Company stand-alone net loss for the year ended December 31, 2021, decreased by USD 80,471 thousand, i.e. 64.0%, compared to the y ear ended December 31, 2020, as a combined result of: (i) a decrease in ﬁnance expenses for the year ended December 31, 2021, of USD 86,104 thousand (to USD 42,205 thousand from 128,309 thousand, respectively), i.e. 67.1%, compared to the year ended December 31, 2020, mainly as a result of the remeasurement of the fair value of Series C Preferred Shares of USD 38,997 thousand for FY 2021 compared to 127,768 thousand for FY 2020, as discussed in the analysis of the consolidated F inance expenses, net; (ii) a decrease in other operating income, net, from USD 6,536 thousand for the year ended December 31, 2020, to negativ e USD 80 thousand for the year ended December 31, 2021, mainly due to one-off other operating income of USD 6,500 thousand recognized in 2020, attributable to compensation from Huuuge Global Ltd. for the costs related to the court case in the District Court for the Western District of Washingt on. Stand-alone net ﬁnancial debt The table below presents the Net Financial Debt of the Company as at December 31, 2021 and December 31, 2020. We ha ve also presented Adjusted Net Financial Debt to give effect as at December 31, 2021 and December 31, 2020 with r espect to the conversion of Series C preferred shares into common shares as at February 5, 2021, upon which those shares are no longer recognized as a ﬁnancial liability . Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 38 in thousand USD 2021 2020 Cash and cash equivalents 1 106,330 7,284 Short-term lease liabilities 78 76 Net current ﬁnancial indebtedness (106,252) (7,208) Long-term lease liabilities 66 142 Preferr ed shares 2 - 176,606 Non-current ﬁnancial indebtedness 66 176,748 Net ﬁnancial debt (106,186) 169,540 ADJ for Preferr ed shares ﬁnancial liability 3 - (176,606) Adjusted Net ﬁnancial debt (106,186) (7,066) Net ﬁnancial debt as at December 31, 2021 amounted to negative USD 106,186 and dec reased by USD 275,726 thousand fr om USD 169,540 thousand as at December 31, 2020, mainly due t o: ● the conversion of Series C Preferred Shar es into Common Shares as at February 5, 2021, upon which such shar es are no longer recognized as a ﬁnancial liability , therefore decreasing the Net Debt. As the conversion took place in Q1 2021 there was no additional impact in the followin g quarters of this ﬁnancial year; and ● the completion of the Initial Public Offering, which provided the Company with net proceeds of approximately USD 101 million (net of costs and stabilization actions), incr easing liquidity and decreasing the Net Debt. 3 The effect of the conversion of Series C Preferred Shares into Common Shares as at February 5, 2021, upon which such shares will no longer be recog nized as a ﬁnancial liability . 2 Represents the fair value of Series C Preferr ed Shares 1 Includes cash in money market inv estment funds Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 39 Selected stand-alone statements of ﬁnancial position December 31, 2021 December 31, 2020 Assets T otal non-current assets, including 27,134 15,373 Investment in subsidiaries 26,856 13,633 T otal current assets, including 110,782 23,095 T rade and other receivables 4,149 15,228 Cash and cash equivalents 106,330 7,284 T otal assets 137,916 38,468 Equity T otal Equity 134,869 (152,734) Liabilities T otal non-current liabilities, including 66 176,776 Preferr ed stock 0 176,606 T otal current liabilities 2,981 14,426 T otal equity and liabilities 137,916 38,468 Assets T otal assets increased by USD 99,448 thousand, i.e. 258.5%, from USD 38,468 thousand as at December 31, 2020, to USD 137,916 thousand as at December 31, 2021. As at December 31, 2021, and as at December 31, 2020, total assets mainly comprised the following items: i) cash and cash equivalents (accounting for 77.1% and 18.9% of total assets as at December 31, 2021, and December 31, 2020, respectiv ely); ii) investments in subsidiaries (accounting for 19.5%. and 35.4% of total assets as at Decemb er 31, 2021, and December 31, 2020, respectively), and i) trade and other receivables (accounting for 3.0%. and 39.6% of total assets as at December 31, 2021, and December 31, 2020, respectively). The change is mainly attributable to (i) an increase in investments in subsidiaries related to the allocated cost of the stock options granted to employees of the subsidiaries, (ii) a decrease in trade and other receivables resulting from the payment received from Huuuge Global for the compensation recognized as at December 31, 2020, with respect t o the cour t case in the District Court for the Western District of Washingt on, and (iii) the net proceeds from the IPO (appro ximately USD 101 million). Liabilities T otal liabilities decreased by USD 188,155 thousand, i.e. 98.4%, from USD 191,202 thousand as at December 31, 2020, to USD 3,047 thousand as at December 31, 2021, which is attributable to (i) a decrease in non-current liabilities of USD 176,710 thousand, i.e. 99.96%, from USD 176,776 thousand as at December 31, 2020 to USD 66 thousand as at December 31, 2021 caused by the fair value remeasurement of the liability relating to Series C Pr eferred Shares as discussed in the analysis of the consolidated balance sheet section of this report (ii) a decrease in current liabilities of USD 11,445 thousand, i.e. 79.3%, from USD 14,426 thousand as at December 31, 2020, to USD 2,981 thousand as at December 31, 2021 caused mainly by the utilization of the provision r elated to the cour t case in the District Court for the Western District of W ashington. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 40 Selected stand-alone statements of cash ﬂows The following table summarizes selected net cash ﬂows from operating, investing and ﬁnancing activities for the twelve months ended December 31, 2021 and December 31, 2020. December 31, 2021 December 31, 2020 Change % Change Cash ﬂows from oper ating activities Proﬁt/(loss) before tax (45,133) (125,581) 80,448 -64% Adjustments, including Non-cash remeasurement of p refer ence shares liability – ﬁnance expense 38,997 128,249 (89,252) -70% Changes in net working capital 2,355 (1,378) 3,737 -271% Cash ﬂows from oper ating activities (499) 1,344 (1,843) (137%) Income tax refund receiv ed 105 - 105 100% Net cash from oper ating activities (394) 1,344 (1,738) -129% Cash ﬂows from inv esting activities, including Purchase of shares in subsidi aries (2,485) (2,328) (157) 7% Repayment of loans receiv ed 1,400 2,000 (600) -30% Net cash from inv esting activities (1,029) (606) (423) 70% Cash ﬂows from ﬁnancing activ ities, including Proceeds from issue of com mon shares for public subscription 152,929 - 152,929 100% Execution of stabilization option (43,976) - (43,976) 100% T ransaction costs of the issue of equity instruments (7,097) - (7,097) 100% Proceeds from issue of sha res - 9,681 (9,681) -100% Repurchase of own shares - (7,699) 7,699 -100% Net cash from ﬁnancing activiti es 100,469 1,896 98,573 5199% Net increase/(decrease) in ca sh and cash equivalents 99,046 2,634 96,412 3660% Cash ﬂows from oper ating activities Negative net cash from operating activities for the year ended December 31, 2021 amounted to USD 394 thousand and decreased by USD 1,738 thousand, from positive net cash from operating activities of USD 1,344 thousand for the twelve months ended December 31, 2020. The decrease in net cash ﬂows from operating activities is mainly attributable to lower operating result in FY2021 primarily due to one-off court case compensation received from Huuuge Global Ltd. in FY2020, partially offset by the positive change in net working capital. Cash ﬂows from investing activities Net cash outﬂows from investing activities for the year ended December 31, 2021 amounted to USD 1,029 thousand and increased by USD 423 thousand compared to net cash outﬂows of USD 606 thousand for the twelve months ended December Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 41 31, 2020. In both reporting periods the negative net cash ﬂow from investing activities was driven by investment in new or existing subsidiaries of the Company , partially offset by the repayment of intercompa ny loans. Cash ﬂows from ﬁnancing activities For the twelve months ended December 31, 2021, the Company recorded net cash inﬂows from ﬁnancing activities amounting to USD 100,469 thousand and increased by 98,573 thousand from USD 1,896 thousand for the twelve-month period ended December 31, 2020 mainly due to the net pr oceeds from the IPO (approximately USD 101 million). Additional information Signiﬁcant agreements On April 27, 2021. Huuuge Global Ltd., a subsidiary of the Company , entered into an asset p urchase agreement concerning the acquisition of “Tr aﬃc Puzzle”, a match-3 game initially published by Huuuge. As par t of the transaction, Huuuge Global Ltd. acquired full ownership of the game, as well as the rights to assets related to the game (including trademarks, marketing materials, development tools, etc.). The acquisition was followed by a handover period completed in January 2022, during which the seller transferr ed the acquired assets to Huuuge and assisted Huuuge with preparing for the fur ther , self-reliant development of the game. The purchase price was USD 38,900 thousand. The Purchase Price payment schedule was divided into 3 tranches. a) USD 9,500 thousand was paid in Q2 2021, within 10 business days from the signing of the AP A, b) USD 25,000 thousand was settled in Q1 2022, within 15 business days from the completion of the handover of the acquired assets, c) USD 4,400 thousand is to be paid within 15 business days from th e ﬁrst anniversary of the completion of the handover of the acquired assets (not paid as at December 3 1, 2021 and publication of the report). For more information please see Note 11 Intangible as sets to the Consolidated Financial Statements for 2 021. Assessment of the possibility of realiz ing the investment plans The Company has a high level of cash as at December 31, 2021. Therefore the Gr oup is fully capable of developing the existing product por tfolio, creating new games and ﬁnancing any new initiatives. The Company is interested in acquiring other entities operating on the F2P games market as well as expanding its publishing division and is capable of obtaining additional ﬁnancing if there is a need to do that. Information on ke y markets and dependence on customers and suppliers Information on key markets as well as dependence on customers and suppliers is described in Note 6. of the Consolidated Financial Statements for 2021. 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 23 Subsequent ev ents. Possibility of accomplishing pr eviously published forecasts The Issuer does not publish ﬁnancial forecasts. Financial risk management The ﬁnancial risk management section is described in Note 12 t o the Consolidated Financial Statements. Off balance sheet positions Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 42 There were no off balance she et positions as of December 31, 2021. War in U kraine On February 24, 2022, Russian troops crossed the eastern, southern and nor thern borders of Ukr aine, attacking the country. In connection with the Russian hostilities, 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 the currently ongoing war in Ukraine should not have a material impact on Huuuge' s performance and operations. Huuuge has analysed and is contin uously monitoring the impact of the political and economic situation in Ukraine on its and the Gr oup's ope rations and ﬁnancial r esults. The Company is unable to reliably determine the impact which the situation in Ukraine will have on the state of the European economy and, consequently , on the activity of the Group. As of March 2022 Google Play due to payment system disruption info rmed about pausing Google Play' s billing system for users in Russia. This means users will not be able to purchase apps and games, make subscription payments or conduct any in-app purchases of digital goods using Google Play in Russia. Accor ding to market sources also iT unes and App Store pur chases can no longer be made by Apple device users loca ted in Russia. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 43 SUST AIN ABILI T Y Our appr oach to sustainable gr owth Our approach to business and management structures must keep pace with the dynamic growth of the organization, so that it can be managed effectively and eﬃciently . In the ﬁrst half of 2021 actions were initiated to organize and structure the management of environmental, social and corporate governance (“ESG”), including mapping stakeholders and deﬁning Huuuge ’ s key areas of responsibility and initiating a comprehensive ESG strategy . As of the date of this Annual Repor t, work on devising that str ategy is still ongoing. Respect and non-discrimination among play ers Apart from standard contacts with our players, which may concern a wide range of problems – from technic al issues with the game to incidents of unacceptable behaviour – we engage in dialogue with our players. Their opinions are particularly important to us, and understanding their viewpoint enables us to constantly improve our games. We use external suppor t to better listen to market opinions and suggestions, analyse them and make business decisions based on them. W e also engage in dialogue with the gaming community via the most popular social medi a platforms. A number of procedures have been implemented that allow us to eliminate inappropriate behaviour by gamers towards each other . Huuuge makes available a large team of Player Support professionals for gamers. In addition, in gam es where there is a possibility to interact with players (e.g. via chat), we additionally prevent the use of words commonly considered off ensive or vulgar in communications and we react t o any manifestations of hatred and harassm ent. All incidents are immediately investigated and if unacceptable practices and behaviours are conﬁrmed, steps are taken to eliminate them (e.g. by blocking the player). In 2021, we received appro ximately 1500 repor ts of in-game conduct violations of which 10% resulted in players being permanently banne d. In the previous year , i.e. in 2020, we recorded approximat ely 900 such cases. Responsible enter tainment All games offered by Huuuge are designed in a responsible manner , taking into consideration, among other things, the age of the players. W e give transparent information about the age gr oup for which each game is safe. Our games are offered on renowned platforms (e.g. Apple AppStore, Google Play , Amazon Appstore) and via F acebook. To do so, we must ensure that our products are compliant with their requirements, also in terms of responsible gaming, as well as meeting the requirements of gaming industry associations such as the Best Practices Principles of the International Social Games Association (ISGA) of which we are a memb er . The global nature of the on-line games offered by Huuuge means that we continuously monitor regulatory changes, the approach of respective authorities and market pr actices to ensure compliance with the laws of particular countries. We are al so aware that cer tain super visory authorities in some countries may place additional restrictions on interactive social games, including social casino games. In recent years Huuuge has not been a par ty to administrative proceedings or litigation that would result in a ban or restric tions on its offer to any of its markets. Data security & Personal data pr otection Matters related to security in general are regulated by Huuuge ’ s “Security Policy”. Data protection aspects are covered by our “Data Protection Policy”. The purpose of the ﬁrst document is to deﬁne the rules to be complied with and t o identify actions to: ● maintain the physical security of Huuuge ’ s oﬃces and other premises, including personnel and property protection; ● protect Huuuge ’ s tangible and intangible assets from theft, unauthorized access, damage o r disruption; ● provide security standar ds for all of Huuuge’ s oper ations and actions to support and maintain data security; ● facilitate the proper discharg e of the data inspector’ s duties: managing, securing and protecting pe rsonal data. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 45 The Security Policy also speciﬁes the rights and responsibilities of T eam Members, counterpar ties and external collaborat ors with respect to the protection of Huuuge’ s data and assets. It establishes security policies for the presence of third parties, including visitors, on Company premises. The policy also deﬁnes the process of incident management, including reporting of personal data protection violations. It systemiz es them to restore the pr oper functioning of systems and services by: ● classifying, recording and pr ocessing incidents; ● minimizing the negative impact of security incidents on op erations, assets, data, etc. All Huuuge Group team members are required to repor t all suspicious activity and potential cyber incidents, including data breaches, in accordance with the binding internal process. Security incidents can consist of: loss of data, unauthorized modiﬁcation of data, unauthorized access to data, malware, penetration, DDoS, unauthorized access to ap plications or loss of the Company ’ s assets. Huuuge takes application access ma nagement very seriously and has Identity and Access Management processes in place, including r egulations related to passwo rd policy . Aware of the consequences of potential attacks, all key resources are backed up, in accordance with our Backup Policy . The infrastructur e is protected by a number of technical solutions such as Intrusion Detection Systems or Endpoint Detection and Response. The Company also conducts extensive actions related to Security Awareness among all staff. A 24/7 Network Operations Center team obs erves all signals to minimize r esponse time. The Data Protection Policy is a framework document that determines how Huuuge processes and protects personal data and encompasses a set of principles, rules and instructions which inform how Huuuge ensures compliance with applicable data protection regulations (in par ticular GDPR). The policy describes how Huuuge performs its duties under the applicable privacy and personal data protection legislation and how personal data protection is internally organized at Huuuge. Under the Data Protection Policy , Huuuge commits to ensuring that personal data is processed in accordance with the law , in a fair and transpar ent manner in relation to the data owner , respecting the principles of limiting the purpose of processing, data retentio n minimization, data storage limitation and respecting the principles of integrity and conﬁdentiality , as well as bearing in mind the principle of accountability . In addition, the policy addresses, among other things, the exer cising of data owners’ rights, the issue of entrusting data, recording of data processing activities and their categories, conducting data impact assessments, data protection at the designing stage and default data protection, and the manner of handling data tr ansfers and data breaches. Huuuge ensures the security of all personal data, including those of our personnel, counterpar ties, partners and gamers. With respect to protecting gamers’ personal data, Huuuge complies not only with the relevant legal requirements, but also with the requirements of game distribution platforms, best practices and the recommendations of th e respective authorities. All gamers from all jurisdictions are treated equally; in effect Huuuge often offers a higher standard of data protection to players than dictated by the regulations in their r espective countries. New employees r ecruitment & turnover Huuuge is a multinational, multicultural team of teams who share a common passion. We develop our organizational culture such that it maintains an informal, ﬂexible and transpar ent working environment. This allows us to attract talents from the industry to our Company and to retain employees who have been with us for many years. T o make the working environment attractive to high quality individuals, it must be based on knowledge sharing and access to interesting projects and new technologies. These are our priorities, therefore we are constantly investing in the development of solutions in the area of Learning & Development. We also enable our employees to develop b y internal promotions – both within their own department and as part of engaging in new projects to learn and gain expertise in new areas. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 46 Group employm ent structure as of December 31, 2021 2021 Women Men T otal by region Cyprus 1 1 2 Finland 3 10 13 Germany 0 3 3 Ireland 0 1 1 Israel 35 58 93 Poland 119 291 410 United States of America 3 5 8 The Netherlands 3 4 7 UK 0 2 2 T otal employees 164 377 539 T eam members cooperating on the basis of civil-law contr acts, self-employment / B2B, etc. 23 76 99 T otal number of team members 187 453 638 Cultural diff erences, diversity , inclusion Huuuge ’ s foundations are people and the teams they create. W e differ in many ways: nationality , religion, ethnicity , the culture in which we grew up, our worldviews, not to mention our gender , sexual orientation or skin colour . What we have in common is the passion for the games we create together . It is for that passion that we play together effectively as a team – not despite the differences, but thanks t o them. We pay great attention to integrating the teams, and so arrange meetings between employees and collaborators between our different locations. W e celebrate various occasions to gether and even within the r estrictions dictated by the Covid 19 pandemic, we managed to organize almost 30 local and ﬁrm-wide events in total, such as Programmer’ s Day , a T echnology & Security Summit, a Creative Marketing Hackathon, the Halloween par ty or the Huuuge Bowling par ty , to name but a few . Some events, such as the company-wide celebrations of Hanukkah or Christmas, are also a good occasion to embrace our cultural differences and consolid ate the community of Huuuge employees . Respect and non-discrimination among employ ees In order to create a multicultural, multinational, diverse organization where everyone feels comfortable, we strive to eliminate any form of discrimination, however small. The Company does not accept any form of disrespect for the inalienable dignity of every human being. All incidents that could attest to any form of discrimination, are tak en very seriously, i nvestigated, and in the event of conﬁrmation, unconditionally repudiated. In procedural terms, this is helped by a group of policies that make up the broader Huuuge compliance system. These policies include the Code of Conduct, the Anti-Harassment Policy and the Whistleblowing Policy . Discrimination, violence and other forms of bullying, mobbing and harassment are all considered violations of Huuuge’ s internal procedures, and ar e not tolerated. The Anti-Harassment Policy reﬂects the Company’s moral obligation to counteract bullying, mobbing, discrimination and other undesirable behaviours that may potentially occur both in society and in communities, including corporate communities. The policy formalizes the possibility to report suspicious incidents and establishes a committee responsible for inv estigating issues Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 47 related to bullying, mobbing, discrimination and other undesirable behaviours. The rights, obligations and rules of conduct set out in the Anti-Harassment Policy do not affect or exclude legal solutions, including legal liability , speciﬁed in the generally applicable regulations of a given country . In recent years no incidents related to discrimination of employees or third par ties have been recor ded. T alent management & tr aining At Huuuge we believe that people are our greatest asset, therefore, we pa y special attention to creating a working environment in which they may freely develop their competences and hone their skills. Many of our employees declare in surveys that development is one of their priorities and we are committed to support them by engaging managers and HR Business Partners into tailoring training and other development programmes to the needs of particular teams. The range of such progr ammes is very diverse, from the development of soft skills to technical training related to par ticular technologies. Additionally, it goes without saying that everyone a t Huuuge can learn English and use the e-book libr ar y . Av erage hours of tr aining per year per employee – 2021 Women Men T otal Languages 8 7 7 Mandatory e-learning (Compliance, Data Protect ion, Security) 1.5 1.5 1.5 External T raining 24 23 23 TO T AL 33 32 32 Charity & volunteering The issues related to broadly deﬁned social engagement, i.e. all types of donations and sponsorship are regulated in the document Donations and Sponsorships Policy . This policy on the one hand emphasizes Huuuge ’ s commitment to good causes, and on the other puts special emphasis on the tr ansparency of these activities. In 2021, Huuuge was involved in a major industry action: “Game Stars: Wish 100 Week” initiated b y the British Make-A-Wish UK foundation. As part of the campaign it asked the key gaming compan ies to jointly r aise funds to fulﬁl the dreams of terminally ill children. Due to the restrictions related to the COVID-19 pandemic, the possibility of personal involvement of employees, including volunteer actions, was signiﬁcantly limited. Nevertheless, as an example of social involvement, at the end of 2021 the Szczecin Huuuge team joined in preparing Christmas gifts for needy families under the Poland-wide action “Szlachetna Paczka ”. The total sum of Huuuge ’ s donations in 2021 amounted to USD 5,500. Additionally , after the reporting period – in February and at the beginning of March 2022 – as an immediate response to the conﬂict in Ukraine, Huuuge decided to carr y out various charitable initiatives. Our number one priority was taking care of the health and safety of our employees, their families and our business partners from Ukraine. W e ensured relocation to Poland of those employees who live in Ukraine. Additionally , we offered transportation and accommodation to their families willing to move to Poland in the time of war . We also provided psychological and ﬁnancial suppor t. Huuuge pledged PLN 1 mln towar ds humanitarian aid for three charity organizations selected by our employ ees. These included: Polish Humanitarian Action, Return Alive and the Polish Red Cross. Furthermore, we have invited employees to an individual donations initiative. Each individual contribution made to those three charities was matched by a contribution from Huuuge. In total, we ha ve collectively donated PLN 130,000 to support humanitarian aid. Our most recent initiatives include: collection of supplies for families in need and “Play Together 4 U kraine” v olunteering action. The latter is based on individual support of our employees who receive three paid days off on top of their annual day off allowance. Th is time can be dedicated to helping those in need in our local communities. We also offered up to 3 days of paid leave for those employees who wish to fully dedicate their time towards helping the victims of the Russian invasion of Ukr aine. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 48 The envir onment The nature of Huuuge ’ s operations means that most of the energy that is directly consumed constitutes electricity used in our various oﬃces. The oﬃce buildings in which the main oﬃces are located are modern; the largest Warsaw oﬃce is a good example, as it is located in one of the state-of-the-ar t buildings constructed with energy-eﬃciency in mind. In addition to electricity , Huuuge has a very small ﬂeet of leased passenger cars. The cars are new and modern. Approximately 60% of them are hybrid. We d o not use cars with diesel engines. Huuuge ’ s inﬂuence on the water , sewage and waste management system is marginal due to the natur e of our operations. Water is used in our oﬃces exclusively for domestic purposes and comes from the municipal mains. Similarly , sewage and a small amount of rainwater are channelled to the municipal sewe rage system and ha ve no negative impact on Huuuge ’s envir onmental ratios. As a rule, Huuuge tries to promote a frugal and sustainable approach encour aging employees to handle waste pr operly. We provide containers to segregate waste and they are used in all our oﬃces. As a result of the activities in which we engage, small amounts of hazardous waste may also be produced (such as toners or used electric and electronic equipment). Depending on the country and speciﬁc equipment, these are taken awa y and treated by companies which su pply the printers, or directly by Huuuge. Ethical management The basic internal document binding on all Huuuge emplo yees and collabor ators is the Code of Conduct supplemented by other internal documents, such as, e.g., the Conﬂicts of Interest Policy . The purpose of the regulations is to ensure a workplace in which all members of the Huuuge team, representing the highest standards of professional behaviour , treat each other with courtesy , respect and dignity . All our employees and collaborators, irrespective of their position, location and personal views, are required to comply with this code of conduct to protect the interests and safety of all Huuuge members a nd the Company itself. In accordance with the adopted Whistleblowing Policy , apart from the requirement to behave in accordance with the Code of Conduct, Huuuge team members may report information on potential violations, including of the Code of Conduct or any of Huuuge ’ s basic policies, anonymously or not, using the dedicated whistleblowing tool. Each case is tr eated as conﬁdential and investigated in-depth. Prev enting corruption and bribery Huuuge ’ s Code of Conduct deﬁnes and restricts behaviours such as conﬂicts of interest, corruption or other situations which may raise ethical concerns. In addition to the general r egulations under the Code of Conduct, some are as of concern have been described in more detail in additional policies, such as: ● the Anti-Corruption Policy; ● the Gifts & Business Entertainment Policy; ● the Policy on Engaging Third Par ties Representing Huuuge in Dealings with Go vernment Oﬃcials. Huuuge attaches great importance to building business relationships, including good relationships with business partners. Offering business gifts or offering to participate in events is permissible in many situations if it has a business jus tiﬁcation (i.e. it is promotional in nature), and the activities are conducted in an open and transparent manner . However , the gifts offered or accepted cannot impact business decisions or other actions and must be within reasonable, socially acceptable standards (e.g. in terms of value and frequency). Huuuge ensures that any third party (e.g. agents, vendors, par tners, lobbyists and consultants, and all other persons acting on Huuuge ’ s behalf), which represents the Company before government institutions, acts according to the law and Huuuge ’ s anti-corruption standards. Therefore all such entities must pass a selection and evalua tion process before the comm encement of our cooperation with them. The adopted Policy on Engaging Thir d Par ties Representing Huuuge in Dealings with Go vernment Oﬃcials helps ensure that Huuuge has partners who value integrity, are transparent and represent the highest level of ethical standards, including anti-corruption solutions. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 49 With the Code of Conduct in place, Huuuge is compliant with international regulations as well as anti-corruption best pr actices. The Anti-Corruption Policy is aimed at preventing all activities within Huuuge, as a business organization, that could be considered to be a form of bribery . This policy not only identiﬁes and deﬁnes the risks associated with corruption in its most broadly-understood sense, b ut also provides t ools to counteract speciﬁc potential threats. Huuuge deﬁnes its policy vis-à-vis acts of corruption as a zero toler ance policy towards any type of bribery , kickbacks or corrupt activities. In 2021, there were no cases of corrupt behaviour in our company . A nti-competitive, anti-monopolistic and anti-market activities When Huuuge’ s Code of Conduct relates to respect for business ethics to be practised by its team and collaborat ors, this includes competing responsibly . When working with business par tners, Huuuge employees and collaborat ors should not conclude any agreements or arrangements, and should not share information with competitors, in par ticular competitors of any business partner , regarding prices, rates, terms and condition of sales, offers, costs, proﬁt margins, mark et shares, business strategies or other conﬁdential aspects of competition on the market, in a manner that is inconsistent with applicable antitrust and competition laws. Ev en if communicating with a competitor is allowed by law and justiﬁed, Huuuge team members should be especially careful not t o do so in a manner resulting in anti-competitiv e behaviour , and should restrict their discussion to the enterprise in question. There were no administrative or cour t proceedings related to the violation of anti-monopoly or anti-competitive activities at Huuuge in 2021. V alue chain management in relation t o ESG Relationships with suppliers are regulated in the document “Contract Management Policy & Procedures' ' and the “Know Y our Customer Policy”, as well as by the AML Policy and a number of other internal procedures (e.g. the Pur chase Order Policy) and guidelines. These policies and procedures are intended to protect Huuuge companies from concluding a greements which may have negative consequences in terms of the Company’s reputation, operations, ﬁnances or good standing. At the same time they help to ensure compliance with legal requirements and contract management best practices. T he policy establishes rules for the conduct of Huuuge companies, members of the Board of Directors and employees when concluding, exercising and managing contracts. It also regulates the process of pr eparing and reviewing contracts befor e their conclusion and the rules for approving and performing contr acts. A key element of the value chain imperative to Huuuge ’ s business model are the platforms through which our games are offered. These consist of several reputable and well-r ecognized international corporations which are referred to by the acr onym GAF A (Google, Apple, Facebook and Amazon). On the one hand, the social control to which they are subject limits the risk of various types of ethically unacceptable behaviour and guarantees that they will avoid such conduct. On the other hand, the scale of operations of the platforms compared to the scale of Huuuge ’ s operations minimizes Huuuge ’ s negotiating power , also in respect of ESG. At the same time, Huuuge, like any other entrepreneur , purchases various types of goods and services fr om external suppliers: it leases oﬃce space, uses legal, advisory and marketing services, purchases licenses, i ncluding software licenses, etc. Howe ver , the scale of such purchases is disproportionately smaller and is not as critical for the business model as cooperation with GAF A companies. The market is also much more competitive. Toda y Huuuge does not apply ESG criteria to its contr acts with the aforementioned suppliers of goods and services. However , at present the contracts include clauses relating to counteracting corruption, and where appropriate they include a diligence process with regard to the avoidance of corrupt practices (see: “Pr eventing corruption and bribery”). Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 50 GO VERN ANCE Shares and shar eholding structure Common and pref erred shares Basic information about the stock Name Huuuge, Inc. Short name HUUUGE WSE Ticker Bloomberg Ticker Reuters Ticker HUG HUG PW HUGP .WA ISIN US44853H1086 Number of outstanding shares 84,246,697 Effective on February 5, 2021, all Series A Preferred Shares, Series B Preferred Shares and Series C Preferr ed Shares were converted into Common Shares. On February 5, 2021 the Company also adopted the Fourth Amended and Restated Certiﬁcate of Incorporation, pursuant to which the Company has the authority to iss ue 113,881,420 shares, which shall be divided int o two classes, consisting of (i) 113,881,418 Common Shares of USD 0.00002 par value per shar e and (ii) two Preferred Shares of US D 0.00002 par value per share, which shall be divided into two series, consisting of one Series A Pre ferred Shar e of USD 0.00002 par value and one Series B Preferred Share of USD 0.00002 par value. The Company issued t wo Preferr ed Shares: one Series A Preferr ed Share to RPII HGE LLC and one Series B Preferr ed Share to Big Bets OÜ (controlled by Anton Gauﬃn). The Pr eferred Shares, respectively , give RPII HGE LLC the right to appoint one director of the Company and Big Bets OÜ the right to appoint two directors of the Company , provided that one such director , to be approved, will be Anto n Gauﬃn. Preferr ed Shares carry the same voting rights as Common Shar es, but they are not admitted t o trading on the WSE. On Januar y 27, 2021, Huuuge, Inc. published its prospectus and launched its initial public offering. The offering comprised a public subscription for 11,300,100 newly issued shares of the Company and a public sale of 22,016,586 existing shares, and also seeking the admission and introduction of 84,246,695 shares including 11,300,100 newly issued shares to trading on the regulated market of the Warsaw Stock Exchange with a nominal value of USD 0.00002 per share. The ﬁrst listing date on the Warsaw Stoc k Exchange was February 19, 2021. 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 Pref erred Shares (Pr eferred Shares are not admitted t o trading on the WSE). T o the best of the Company’ s knowledge, as at the date of publication of this 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 . Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 52 Shareholder Shares % of share capital and % of votes at the General Meeting Anton Gauﬃn (through Big Bets OÜ) 1 25,849,506 30.68 Raine Group (through RPII H GE LL C) 1 10,919,646 12.96 Kor a Management 4,300,000 5.10 The Capital Group Companies 4,223,944 5.01 Others 2 38,953,601 46.24 T otal 3 84,246,697 100.00 (1) includes one Preferr ed Share; (2) includes 1,475,578 T reasury Shares which carry no voting rights; (3) 84,246,695 shares were introduced to public trading on the Warsaw Stock Exchange. Moreover , two shares of the Company are Pref erred Shares and have not been intro duced to public tr ading. Each holder of Common Shares, as such, and each holder of Preferr ed Shares, are 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 Cer tiﬁcate of Incorpor ation, the holders of Common Shares and Preferr ed Shares vote together as a single class on all matters submitted to a shareholder vote. Th e Certiﬁcate of Incorporation and the Bylaws do not stipulate any restrictions on the tr ansfer of ownership of the Company’ s securities. T reasury shares As at December 31, 2020, the Company held 2,184,461 T reasury Shares. On January 15, 2021, the Board unanimously approved the redemption of all Common Shares and all Preferred Shares that were held in treasury as at the date of the meeting which effectively r educed the number of T reasury Shares to nil. On February 5, 2021, in connection with the IPO process, the Company entered int o a Stabilization Agreement, based on which the Stabilization Manager (Ipopema) was entitled to sell and transfer the shares it acquired in stabilization actions to the Company at the same price as that at which the Stabilization Manager acquired the shar es in the stabilization tran sactions on the WSE; such price could not exceed the Final Price for the Offer Shares. The Stabilization Manager was to transfer the Shares acquired in the stabilization actions to the Company in one or more transactions effected within a period not longer than 33 calendar days from the date of the ﬁrst listing of the Shares on the WSE. The Stabilization Option was to cover no more than 10% of the number of the Off er Shares allotted in the Offering which was 3,331,668. Within the stabilization program the Company repurchased via the Stabilization Manager 3,331,668 own shares for a total price of PLN 162,302 thousand calculated as the number of shares repurchas ed, multiplied by the price per share plus the remuner ation paid to the Stabilization Manager representing the cost of this capital transaction. The entire repurchased volume was classiﬁed as Treasury Shares and represented approximately 4.0% of the share capital. The nominal value of all purchased shares was $66.63 . On July 7, 2021, the Issuer informed in its current report RB16/2021 about the allocation of 997,796 of the Issuer’ s Treasury Shares for the exercise of employee stock options. On November 3, 2021, December 23, 2021, and February 14, 2022, the Huuuge Inc Board of Directors approv ed the allocation of up to 423,534 (all were exercis ed), 353,990 and up to 58,034 (57,724 of them were exer cised) Treasury Shares r espectively also for the purpose of satisfying exercise r equests from participants of the share option plan. In October 2021, 23,046 Treasury Shares were assigned for transf er 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 later amended by the First Amendment dated as of October 19, 2021. The tr ansfer of T reasury Shares to the seller s of Double Star Oy was completed on February 21, 2022. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 53 Accordingly , by the date of publication of this Report, the number of Treasury Shares held by the Issuer was reduced to 1,475,578. The nominal v alue of all retained shares is $29.51. These shares r epresent appro ximately 1.8% of the share capital. For more detailed information regarding share capital please see Note 13 Share Capital in the Quarterly Condensed Consolidated Financial Statements. Share option plan As at December 31, 2021 the Company had an equity-settled share option program. The ﬁrst share option program (the employee share option plan) was established by our Board of Direct ors on April 3, 2015, and the second on October 19, 2019 (both plans have been fur ther developed and amended by the Board, within its powers under the Company’ s governing documents and the terms of the respective plans). The program entitles employees and some consultants of the Company and its Subsidiaries to purchase shares in the Company at a speciﬁed price. Each option gives the right to acquire one Common Share in the Company . Generally , the vesting schedule applicable to grants under both progr ams stipulates that the ﬁrst 25% of options vest following 12 months of continuous service beginning on the vesting commencement date. Subsequently , 1/36 of the remaining op tions vest and become exercisable for each consecutive month of continuous service. For further details of the progr ams, please refer to Note 19 Share-based payment arr angements in the Consolidated Financial Statements. The Company’ s equity-settled share option progr ams are managed, approved and supe rvised by the Board of Direct ors. Dividend policy The Company has no dividend policy. The Board of Directors may from time to time declare dividends out of the Company ’ s surplus cash ﬂows and may , subject to the provisions of the Bylaws and the Certiﬁcate of Incorporation, set dates for the declaration and payment thereof. No dividend is payable other than in accordance with the applica ble provisions of Delawar e law . The Gener al Meeting does not adopt resolutions regarding the distributi on of proﬁts and the payment of d ividends. The Board of Directors has not made any decision regarding the payment of dividends or the value thereof, if any , during the reporting period. We operate in a rapidly growing industry , and in order to capitalize on this, w e need to prioritize gr owth activities, in par ticular , potential acquisitions. The payment of future dividends, if any , and the amounts thereof, will dep end upon a number of factors including, but not limited to, acquisition opportunities, the amount of our unconsolidated distributable reserves, our earnings, our level of proﬁtability and ﬁnancial condition, capital requirements, applicable restrictions on the payment of dividends under Delaware law and such other factors as our Board of Directors may deem relevant. Accordingly , our ability to pay dividends in the future may be limi ted. Our Board of Directors may decide not to pay dividends in the future. This might happen especially if unexpected even ts occur that would change the Boards’ view as to the prudent level of cash and capital conservation as well as the Company’s ﬁnancial goals and strategy . Pursuant to the Certiﬁcate of Incorporation, all common shares are treated equally , identically and rateably , on a per share basis, with respect to any dividends or distributions as may be declared and paid fr om time to time by the Board of Director s out of any of the Company’ s legally available assets. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 54 Gener al meetings Convening a General Me eting Pursuant to the Bylaws, the date and time of a General Meeting are determined by the Board, for the purpose of electing directors and for tr ansaction of other business. The President may call a Special Gener al Meeting (SGM) at the written request of the Company’ s shareholders owning shares of the Company r epresenting at least 10% of the voting rights. Upon the request to convene such a meeting, the Board of Directors determines the date, time and place, if any, of such meeting, which must be scheduled not less than thirty (30) days and not more than ninety (90) days after the Company Secretary receives the said request. The Secretary prepares the relevant notiﬁcation. No business may be discussed at a Special General Meeting oth er than that speciﬁed in the notice to the shar eholders. An SGM may only discuss such business as has been included on the agenda by the Board of Directors, Chairman of the Board of Direct ors or President, or included in the notice sent out at the shareholders’ written r equest as described above. Notice of a General Meeting Pursuant to the Bylaws, whenever shareholders are required or permitted to take any action at a meeting, a timely notice will be mailed or transmitted electronically by the C ompany Secretary to each shar eholder of record entitled t o vote in accordance with the records as at the record date for the meeting. Unless otherwise stipulated by the Certiﬁcate of Incorporation or the applicable laws, notice of a meeting should be given not less than 10 or more than 60 days before the da te of the meeting to each shareholder entitled to vote at such meeting. We intend to introduce additional procedures concerning notiﬁcation and voting at General Meetings. We will notify shareholders about the date on which the list of persons entitled to participate in a General Me eting is drawn up (r ecord date), and about the place, date and agenda of the General Meeting and will publish other rele vant information, including all details concerning the General Meeting, in the form of an announcement, on our website: ir .huuugegames.com no later than two weeks prior to the date of dr awing up the list of par ticipants. Quorum Pursuant to the Bylaws, unless otherwise stipulated by law or by the Cer tiﬁcate of Incorporation, at all meetings of shareholders, annual or special, a quorum requires the presen ce, either in person or by pro xy, of holders of at least one-third of the voting rights associated with the issued and outstanding shares entitled to vote. The majority of the v otes cast is decisive for passing or rejecting a reso lution. Voting and pr oxies As at the date of this Annual Repor t, the Company’ s outstanding share capital consists of: 84,246,695 Common Shares and two Preferr ed Shares. Each Common Share and each Preferr ed Share carries one vote. Unless otherwise expressly requir ed by law or stipulated in the Cer tiﬁcate of Incorporation, both the holders of Common Shares and of Preferred Shares shall vote together as a single class on all matters submitted to a shareholders’ v ote. Powers of the General M eeting The General Meeting has the power to elect directors (other than those directors elected by the holders of Pr eferred Shares, and notwithstanding the Board of Dir ectors’ power to ﬁll vacancies in its membership). Pursuant to the Cer tiﬁcate of Incorporation, any amendment, alteration, or repeal of the provisions in the Certiﬁcate of Incorporation or Bylaws concerning: (a) the right of the holders of 10% of the total votes t o request convening a SGM, (b) the quorum required at a General Meeting, (c) the number of Directors, their term of oﬃce, appointment and dismissal, and independence criteria; and (d) the Audit Committee (except for any amendment required under the applicable law), shall in each case be approv ed by an aﬃrmative vote of the holders of the majority of the outstanding shares carrying voting rights. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 55 Board of Dir ectors A ppointment of the Board of Direct ors Pursuant to the Certiﬁcate of Incorporation and Bylaws, the Board of Directors origi nally consisted of ﬁve Direct ors, of which (i) one Director (the “Series A Director”) is elected by holders of the majority of outstanding Series A Pr eferred Shares carrying voting rights by submitting to the Board of Directors written consent signed by holders of the majority of the Series A Preferr ed Shares, (ii) two Directors (the “Series B Directors”), will be elected by the holders of the majority of outstanding Series B Preferred Shares entitled to vote at such a meeting b y providing the Boar d of Directors with written consent, provided that one such Series B Director , to be qualiﬁed, shall be Anton Gauﬃn, and (iii) the remaining Directors will be elected b y the holders of Common Shares carrying the same voting ri ghts voting together as a single cla ss. In accordance with the Cer tiﬁcate of Incorporatio n, any Direct or elected, as stipulated above, b y holders of Series A Preferred Shares or Series B Preferred Shares may be removed without cause, exclusively by an aﬃrmative vote of the holders of the majority of the outstanding Series A Preferred Shares or Series B Preferr ed Shares respectively , acting as a separate class, either at an SGM duly called for that purpose or pursuant to the written consent of such shareholders. In addition, in accordance with the applicable law , any director so elected may be removed with cause by the majority of holders of shares carrying the respective v oting rights. The Series A Direct or or Series B Director(s) may not be appointed by shar eholders of the Company other than by holders of Series A Preferred Shar es or Series B Preferred Shares, v oting together . Any director (other than a Series A Director or Series B Director) may be remo ved at any time without cause by an aﬃrma tive vote of the holders of the majority of outstanding Common Shares entitled to vote thereon, voting together as a single class. In addition, in accordance with the applicable law , any director (other than a Series A Director or Series B Director) may be removed with cause by the majority in votes cast b y the holders of shares carrying the respective voting rights. The Board of Directors consists of ﬁve persons elected at the Annual General Meeting (AGM) for a term of oﬃce ending on the date of the following AGM or on the date of election of the next direct or or on a director’ s earlier resignation or dismissal. At least two out of the ﬁve persons must meet the independence criteria adopted or accepted by the WSE, including the criteria referred to in Annex II to the European Commission recommendation of February 15, 2005, on the role of non-executive or supervisory direct ors of listed companies and on the committees of the (supervisory) board. In accordance with the Bylaws, subject to the provisions of the Delaware General Corporation Law and the restrictions contained in the Cer tiﬁcate of Incorporation or the Bylaws themselves, relating to an act requiring the approval of the shareholders or the votes of the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by the Board of Directors or a designated entity under its direction. The Board of Directors decides on the issu ance or repurchase of shar es. The following table summarizes the most important information about acting members of the Board of Directors as at the date of this Annual Report. Name Function Y ear of appointment for the current term of oﬃce Y ear of expiry of the term of oﬃce Anton Gauﬃn Chief Executive Oﬃcer & executive dire ctor 2021 2022 Henric Suuronen Non-executive dir ector 2021 2022 John Salter Non-executive dir ector 2021 2022 Rod Cousens Non-executive dir ector (independent) 2021 2022 Krzysztof Kaczmarczyk Non-executive dir ector (independent) 2021 2022 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 56 Until February 4, 2021, the Board of Directors consisted of the following members: Anton Gauﬃn, Henric Suuronen, Sang -Ho Park, John Salter , Rod Cousens. Effectiv e February 4, 2021, the holders of all of the Company’ s outstanding Pref erred Shares and the holders of the majority of the Company’ s Common Shares adopted resolutions by written consent without a meeting in accordance with Section 228 of the Delaware General Corporation Law electing the following persons to the Company’s Board of Directors: Krzysztof Kaczmarczyk, Rod Cousens, John Salter , Anton Gauﬃn and Henric Suuronen, each to serve until the next AGM for the election of directors and until such directors’ successors are duly elected unless any of the directors dies, resigns, is dismissed or r etires earlier . Two members of the Company’ s Board of Directors, Krzysztof Kaczmar czyk and Rod Cousens, meet the statutory criteria for independence. The Board of Directors supervises the prepar ation of the Group’ s consolidated ﬁnancial statements and is r equired to ensure that the Group’ s consolidated ﬁnancial statements and the business statements comply with legal requirements. The President of the Company approves and signs the Group’ s consolidated ﬁnancial statements. Substantially the same procedures apply t o the Company’s stand-alo ne ﬁnancial statements. Committees The Board of Directors has established the following committees: the Audit Committee and the Nomination and Remuneration Committee. The Board of Direct ors has appointed from among its members the following persons to the Audit Committee: ● Mr Krzysztof Kaczmarczyk (C hair of the Audit Committee) ● Mr Rod Cousens ● Mr John Salter Krzysztof Kaczmarczyk is the member of the Audit Committee with knowledge and skills in accounting and ﬁnance and Rod Cousens is the member of the Audit Committee with knowle dge and skills in the industry in which the Company oper ates. The Company ’ s Board of Directors appointed the Audit Committee on February 5, 2021. The Audit Committee is responsible for super vising the Company’ s ﬁnancial matters and monitoring the implementation and mainte nance of internal control, risk management, compliance and internal audit systems in the Company. Its scope of activity includes advising and consulting on ﬁnancial repor ting and auditing ﬁnancial statements by a statutory auditor which constitute actions in the comp etences of the Board of Direct ors. Rod Cousens Non-executive dir ector , independent Rod Cousens is a leading games industry executive and is currently a Senior Advisor at The Raine Group. Prior t o joining The Raine Group, Rod was Chairman and Chief Executive Oﬃcer of Jagex Games Studio. Before his time at Jagex, Rod was CEO of Codemasters. Prior to Codemasters, Rod was COO and latterly CEO of international publisher Acclaim Entertainment. Rod began his career in the gaming industry in 1981 with the founding of games publisher Quicksilva. He we nt on to become UK Managing Director and later President International of Activision, now one of the lar gest publishers in the global video games industry . Rod Cousens graduated fr om Barton Peveril College, Brunel University , London and he completed ex ecutive business management courses at Stanford Business School, San Fr ancisco. Krzysztof Kaczmar czyk, Non-executive dir ector , independent Krzysztof Kaczmarczyk is an independent member of supervisor y boards of companies listed on the Warsaw Stock Exchange. He has gained over 15 years of super visory experience sitting on the supervisory boards of more than 30 companies. Simultaneously , he served as a member or chairman of audit committees of more than 20 companies listed on the WSE. In 1999–2008, he worked for Deutsche Bank in Poland, where he served as Deputy Director of the Stock Market Analysis Depar tment and Stock Market Analyst for the Central and Eastern European Region. From 2008 to 2010, he held various management positions within the TP Group (Orang e). In 2010–2011, he worked for the Swiss inv estment bank Credit Suisse in Poland. In 2012–2015, he held the position of vice-president of the Management Board for Strategy and Business Development in Emitel, a leading terrestrial radio and television network operator in Poland. Fr om 2016 to 2019, he worked as a strategy advisor to the Management Board of K GHM Polska Miedź S.A. (a leading mining company in the world). A gr aduate of the Warsaw School of E conomics with a degree in ﬁnance and accounting. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 57 In 2021, the Audit Committee of the Boar d of Directors held 6 meetin gs. The Board of Directors has appointed from among its members the following persons to the Nomination and Remuneration Committee: ● Mr Krzysztof Kaczmarczyk (C hairman of the Nomination and Remuner ation Committee) ● Mr Rod Cousens ● Mr John Salter The tasks of the Remuneration and Nomination Committee consist of (a) preparing and periodically reviewing the Group’ s compensation policy and principles, the per formance criteria related to compensation and a periodical review of their implementation as well as submitting proposals and recommendations to the Board of Directors, and (b) preparing all relevant decisions of the Board of Directors concerning the nomination of members of the Issuer’ s Board of Dir ectors as well as submitting proposals and r ecommendations to the Boar d of Directors. Agreements with the Boar d of Directors Except for the transactions mentioned below , remuneration for the year ended December 31, 2021 paid by the Issuer to members of the Board of Directors and sha re options owned by members of the Bo ard of Direct ors and the reimbursement of trav el expenses and accommodation costs incurred b y board members related t o their work, there were no other transactio ns between the Issuer and members of the Board of D irectors. Name Function Base salaries Share-based payment Anton Gauﬃn CEO & Executive dir ector 162 381 Henric Suuronen Non-executive dir ector 69 1 John Salter Non-executive dir ector 78 - Rod Cousens Non-executive dir ector (independent) 80 - Krzysztof Kaczmarczyk Non-executive dir ector (independent) 83 - Sang-Ho Park Non-executive dir ector - Amounts of r emuneration and beneﬁts in kind of members of the Board of Dir ectors Costs of remuneration (including accrued bonuses) of members of the Board of Direct ors amounted to USD 472 thousand for the year ended December 31, 2021. The Company has no formal rules for the payment of cash bonuses to members of the Board of Direct ors; all such bonuses are paid on a discretionary basis. Shares or share options held by members of the Board of Dir ectors The table below presents the number of shares and share options held by members of the Board of Direct ors at the Annual Report publication date: Name Function Common Shares Share Options Outstanding Anton Gauﬃn (through Big Bets OÜ) 1 Chief Executive Oﬃcer & Executive Dire ctor 25,849,505 500,000 Henric Suuronen Non-Executive Dir ector 1,673,610 0 1) Anton Gauﬃn also holds one Series B Pr eferred Share through Big Bets OÜ Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 58 On March 19, 2021, the Board of Direct ors adopted a recommendation from the Nomination and Remuner ation Committee on executive and non-executive compensation for Mr Gauﬃn (“Proposal”), for holding the position of President, Chief Ex ecutive Oﬃcer and Secretary of the Company. This is also the date on which Mr Gauﬃn started providing services in this respect (“ ser vice commencement date”), therefore the relev ant costs have been recognized star ting from March 19, 2021. The ﬁnal executive compensation agreement between Mr Gauﬃn and the Company was approved by the Board of Directors on September 9, 2021, and was signed by the parties on September 10, 2021. In accordance with the adopted Proposal and the compensation agreement, Mr Anton Gauﬃn’ s remuneration will consist solely of share options. All options can be exercised at a price of PLN 50, i.e. the price of the Company’ s shares in the initial public offering. The vesting conditions for the options ar e as follows: (i) 50,000 options with a vesting condition that Mr Gauﬃn provides the service continuously for approx imately 4 years from the service commencement date. The Group ’ s management expects Mr Anton Gauﬃn t o fulﬁl this vesting condition. (ii) 75,000 options with a vesting condition that Mr Gauﬃn provides the service continuously for approx imately 4 years from the service commencement date and the 2021 EBITDA target is met. The Group’ s management expects Mr Anton Gauﬃn to fulﬁl the service condition and the estimated cost reﬂects the probability of achieving the 2021 EBITD A target. (iii) 375,000 options with a variable vesting period due to market conditions, i.e., conditional on meeting the Company’ s market capitalization milestones. The Group’ s management estimates that 6 years of continuous service will be required for these options t o vest. Similar to other share-based payments in the Group, staged vesting applies to this program, i.e. each instalment is treated as a separate awar d with a different vesting period. On December 10, 2021, in its current report RB21/2021 and on February 10, 2022, in its current report RB3/2022, the Issuer informed about the exercises of 192,340 and 8,360 stock options respectively by Mr . Henric Suuronen. After completion of these two transactions, Mr . Henric Suuronen ’ s grant has been fully exercised and as at the date of the publication of this report it does not contain any other vested or unvested st ock options. The Company has not concluded any agreements with members of the Board of Dir ectors that would afford any remuner ation payable on the day of stepping down from any position in the Company . The Group has no separate or dedicated reserves against liabilities related to age or disability pensions or any other similar beneﬁts for members of the Board of Dir ectors. Information on agreements known to the Company , including those concluded after the balance sheet date, which may result in future changes in the proportion of shares held by the existing shar eholders and bondholders. The Company is not aware of any agreements which may result in future changes in the propor tion of shares held by the existing shareholders, excep t for possible changes in the proportion of shares resulting fr om: – equity-settled share option programs in the Company (one employee share option plan was established by the Board of Directors on April 3, 2015, an d the second one on October 19, 2019); and – earn-out consideration to be paid to the previous owners of Double Star Oy by the Company , based on the “Share sale and purchase agreement” dated July 16, 2020, as later amended by the “First Amendment' ' dated Oct ober 19, 2021, in the form of cash and 23,046 shares of the Company , upon satisfaction of cer tain conditions speciﬁed in the agreement relating to the EBITDA and revenue of the Double Star Oy company and the Double Star studio (being an internal, product-oriented structure within the Company’ s group), and subject to continuing employment of the sellers of Double Star Oy . The shares related to that transaction wer e transferred to the previous owners of Double Star Oy o n February 21, 2022. Information on all liabilities arising fr om pensions Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 59 In 2021, as well as from January 1. 2021, until the date of publication of the stand-alone and consolidated annual report for 2021, there were no liabilities arising from pensions and beneﬁts of a similar nature for former managing, supervising or former members of administr ative bodies and no liabilities were i ncurred in connection with those pensions. Information on agreements concluded between the issuer and board members The Issuer did not conclude any agreements with members of the Board of Direct ors providing for compensation in the event of the resignation or dismissal from the position held without an impor tant reason or if the dismissal is due to the Issuer’ s merger by acquisition. Executiv e management Composition of the executiv e management and division of responsibilities The Chief Executive Oﬃcer (CEO) is responsible for managing and co ntrolling Huuuge ’ s business and day-to-day oper ations in accordance with the guidelines and instructions of the Board of Directors . It is the duty of the CEO to ensure that Huuuge ’ s operations are in compliance with the laws and regulations applicable at the time. The CEO is the chairman of the Executive T eam. On February 12, 2015, Mr Anton Gauﬃn was appointed President and CEO of Hu uuge, Inc. and is in this position to date. As of January 18, 2022, Mr Anton Gauﬃn no longer holds the position of the Company’s Sec retary , following the appointment by the Board of Directors of the General Counsel of the Company , Mr Yehoshua Gurtler to this position. As of March 19, 2021, the T reasurer of the Company is Grzegorz Kania. Before October 2021 the executive management team consisted of four members: Anton Gauﬃn (CEO), Elad Kushnir (COO), Grzegorz Kania (CFO) and T al Shoham (CMO). On October 7, 2021, the Company announced changes in the executive management team. The cur rent composition is as follows: Anton Gauﬃn, Chief Execut ive Oﬃcer Grzegorz Kania, Chief Finance Oﬃcer Wojciech Wr onowski, Executive Vice President, Product & O perations Jon Bellamy , Executive Vice President, Str ategy & Investment Erik Duindam, Senior Vice President, Techn ology & Product Y ehoshua Gurtler , General Counsel Maciej Hebda, Vice President, Str ategy & Planning More information about the team can be found in their proﬁles which are available on our website ir .huuugegames.com. Biographies of the member s of the Executive Team ar e posted on our website. The Executive T eam assists the CEO in planning operations and their management, as well as preparing matters for discussion by the Board of Directors. Executive T eam meetings are convened by the CEO on a regular basis. The Executive T eam prepares the Huuuge Group’ s strategic and annual planning, supervises the implementation of plans and ﬁnancial reporting, and assists in processes related t o signiﬁcant investments as well as mer gers and acquisitions. The Executive T eam members have authority within their individual areas of responsibility and their dutie s are to dev elop the Company’ s operations in accordance with the targets set by the Board of Directors and the CEO. In addition to their main duties, the Executive Team members may also be members of the Boar ds of subsidiaries. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 60 Audit or The election of an independent auditor to audit the ﬁnancial statements of the Group is one of the powers of the Company’ s Board of Directors. On February 5, 2021, the Company’ s Board of Directors adopted a “Policy for selecting and appointing an audit ﬁrm to audit the ﬁnancial statements of Huuuge, Inc. and the Huuuge, Inc. Group”. Once cooperation between the Company and the appointed audit ﬁrm has ended, the selection and appointment of another audit ﬁrm will be subject to the provisions of the afor ementioned Policy . In relation to the IPO , after reviewing a few off ers and after receiving recommendations from the Company’ s CEO , the Board of Directors selected the audit ﬁrm PricewaterhouseCoopers Polska spółka z ograniczoną odpowiedzialnością Audyt sp. k. as the entity authorized to: (i) audit the Group’ s consolidated ﬁnancial information for 2017, 2018 and 2019, and (ii) review the Group’ s interim consolidated ﬁnancial s tatement for the 9 months period ended September 30, 2020. On June 24, 2021 the Board approved the appointment of PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp. k. (“PwC”) as auditor for the consolidated ﬁnancial statements and the stand-alone ﬁnancial statements of Huuuge, Inc. – both as at and for the year ended December 31, 2021. The ﬁnal contract with PwC was signed on July 30, 2021. The remuner ation of the auditor has been described in Note 27 of the Consolidated Financial Statements. Risk fact ors The identiﬁcation of risk factors tak es place on the basis of the implemented risk management system. The risk management process has been formally established in the or ganization based on the 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 ev aluation of risks; ● improvement of co herence of the approach t o risk management; ● ensuring comparability of ri sks occurring in different areas of organization; ● creating a correlation between the operational and str ategic level of risk management; ● reducing the frequency of adv erse incidents; ● better prepar ation for adverse incidents and minimization of losses caused thereby . All employees of the or ganization are involv ed in the risk management process. The most impor tant functions are performed by the Board of Dir ectors, Audit Committee, Ex ecutive Management, Risk Committee, Risk Oﬃcer , Risk Owner , Risk Coordinator (Secondary Risk Owner). Furthermore, all management areas outsour ced outside the organization should be addressed internally from a risk management perspective. In excep tional cases, it is possible to place the r esponsibility for risk management externally , with the consent of the Risk Committee. Determination and concise naming of the most important occurring or possible events or phenome na threatening or affecting the implementation of the goals of Huuuge Group. Risk assessment consists of determining the prob ability and impact of a risk in relation t o the selected scenarios (based on the causes and results indicated in the risk analysis ). The assessment is performed on the basis of deﬁned scales. The Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 61 descriptions included therein ar e of an auxiliary nature and, in the case of any doubts, the scor e of the assessment shall have priority . Risk evaluation consists of comparing th e risk value with the pre viously assumed criteria, as well as identifying risks r equiring the implementation of mitigation plans. At the time of the publication of this r epor t, the following material risk factors have been identiﬁed. However , the risk factors and uncertainties described below by the Group are not the only risk fact ors the Group faces. Additional risks and uncertainties that the Group is not aware of or currently conside rs to be insigniﬁcant, may also ha ve a signiﬁcant adverse effect on the business, ﬁnancial condition and operational r esults 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 downl oad and spend time and money playing. The nature of our industr y is that we develop and test hundr eds of ideas and games, but subsequently focus only on the titles or features which exhibit the most promising k ey performance indicators (“KPIs”). Only a handful of our games make it t o soft launch and even fewer progress to full launch and scaling. We cannot guarantee that high quality games, even if favour ably reviewed by players, will become “hits”. Our new games may also attract players away from our existing games, especially when they provide similar gameplay featur es with an upgraded user interface or new social elements. Furthermore, we cannot ensure that new featur es or upgrades to our existing games will attr act new players or allow us to retain existing ones. The growth of our business largely depends upon our ability to attra ct new players to ou r existing and new games, as well as on retaining existing players of our games. Our success in doing so is conditional in par t on unpredictable and volatile fact ors beyond our control, including customer preferences, competing games, the popularity of other forms of enter tainment and economic conditions adversely affecting consumer spending. Ach ieving growth in our community of pl ayers may also r equire us to increasingly engage in sophisticated and costly sales and marketing efforts that may not res ult in additional players. Currently , we derive 96% of our revenue from in-app purchases. As our games are available to players for free, we gener ate revenue from them only if they make in-app purchases above and beyond the level of free features provided as par t of the game, e.g., they purchase vir tual currency beyond the amount made available for free, or if they other wise engage with our games in ways generating revenue. Our games also contain in-app purchases relating to items other than vir tual 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 generating revenue, this could materially and adversely affect our business, operating r esults 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. T o 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 concentr ation in a small number of games The majority of our revenue is generated by a small number of our games which 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 2021 and 94% i n 2020. We expect the declining shar e of the top two franchises in total revenue to continue to be the case over the next several years. If we are unable t o diversify our por tfolio of games in the long run and 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 ou r business, operating r esults and ﬁnancial condition. Dependence on third parties’ services Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 62 We rely , to varying degrees, on a number of third-party vendors, service providers and game developers, as well as str ategic 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 par ties we do not control and which it would take signiﬁcant time t o replace. This dependence is expected to continue . We are highly dependent on distribution platforms when offering our games to players. Any adverse changes in our existing arrangements with these third parties, including an inability to fulﬁl their obligations in a timely manner or an ina bility to enter into or renew arrangements on favourable terms, if at all, could reduce the quality , reve nue or availability of our games. Changes to third par ties’ policies or terms of service, could also negatively impact our ability to offer our existing or future games, or restrict the av ailability of cer tain features. Disruption of IT infrastructure, networks and systems and I T gaps We rely on information technology infrastructur e, networks and systems that are important to the operation of our business. We use such infrastructur e, networks and systems to operate our games, and manage and secure our business and data, particularly with respect to internal communications, controls, reporting and relations with suppliers. Some of such infrastructure, networks and systems are managed or pro vided by third parties. These third par ties are typically under no obligation to renew agreements r elating to such infr astructure, networks and systems and there is no guar antee 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 par ties, 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, could slow them down or otherwise disrupt the functionality or oper ations of the relevant business. As a result of technological advancements, our I T infrastructure may become outda ted or inadequate for our business needs. If we are unable to keep our systems and infrastructur e current with industr y standards and with evolving technologies, our operations or gr owth may be impeded. Undetected errors, bugs or vuln erabilities 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 fr om making in-app purchases, harm the over all game-playing experience for our players, delay game introductions or enhancements, cause measur ement errors, result in our gam es 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 on a timely basis, but we cannot guarantee that we will be able t o do so in the future. Moreo ver , resolving such errors, bugs or other vulner abilities could disrupt our operations or cause us to div er t resources from other pr ojects. Failure t o successfully pursue or implement new business initiatives In order to grow our business, we need t o evaluate, consider and effectively implement new bus iness initiatives. Management may not properly ascer tain or assess the risks associated with these new initiatives and subsequent events may arise that would render our initial assessment of the economi c merits of a particular initiative uneconomic. Moreover , the market of new technologies is one that is developing r apidly . Therefore, we conduct ongoing monit oring of new technologies and IT solutions in order to quickly adapt to the solutions introduced to the market. The failure to analyse or implement new technologies may r esult in a loss of competitiveness in the mark et, which could have a negative impact on our operating activities and ﬁna ncial results. Business acquisitions and integrating acquired operations could divert the attention of our management and otherwise disrupt our operations or limit our gr owth Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 63 As a par t of our strategy , we may in the future explore, and have in the past carrie d out, acquisitions to strength en 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 extraor dinar y growth eve nts such as potential acquisitions, if the oppor tunity 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 could divert our management’ s attention from other business concerns and also lead to the use o f resources that ar e needed in other par ts of our business. Real or perceived inaccur acies in our performance metrics We track cer tain performance metrics, such as Installs, DAU, DPU, ARPDAU, ARPPU, Monthly Conversion. Our per formance 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 repor t. If our performance metrics are not accurate representations of our business, player base or traﬃc le vels, if we discover material inaccuracies in our m etrics or if those we rely on to track our performance do not provide an accur ate measurement of our business, we may fail to obtain an accur ate understanding of the performance of our business, our reputation may be signiﬁcantly harmed, we may lose the conﬁdence of players, analysts or business partners and this could adversely aff ect our business, operating results and ﬁnancial condition. Ineffective pr otection 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 t o our games, and proprietary or conﬁdential information that is not subject to formal intellectual pr oper ty protection. While we create most of the intellectual property we use internally , we also license intellectual property such as, in particular , games (as a whole) and software development kits (“SDKs”) from thir d par ties. In particular , our games use SDKs provided b y, among others, Facebook and Google. We also purchase or license, in whole or in par t, photos, videos and audio used in our games from third parties, including Shutterstock and Env ato. We rely on licenses for all of our thir d-party publishing. Despite our effor ts to protect our owned and licensed intellectual proper ty , unauthorized par ties 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 proper ty . Fur thermore, our use of third-party intellectual property may inadvertently violate the rights of third par ties, 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 proper ty rights of our competitors or other third par ties, we may be prevented fr om introducing games based on these technologies or expanding into mark ets or platforms created by these technologies. We license SDKs which may be integrated into our own products and are required, am ong other reasons, to allow o ur 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 r esults and ﬁnancial condition may be adversely affected. We also use open sour ce software in our games and expect to continue to do so. Some open sour ce software licenses require users who distribute open source software to publicly disclose all or par t of the source code to such software or make available any derivative works of the open source code on unfavourable 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 par ticular license, we may be r equired to r elease our proprietary source code, pay damages for breach of contract, re-engineer our games or products, discontinue distribution in the event that reengineering Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 64 cannot be accomplished on a timely basis, or take other remedial action that may entail additional expenses or limit our activities. Ineffective pr otection 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 tar get of cyber-attacks, piracy , database security breaches and hacking Our industr y is prone to, and our games, systems and networks are subject t o 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 hardwar e, 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 or our players’ data, 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 playe rs or third party platforms. Fur thermore, third par ties, such as hosted solution pro viders or third-par ty platform operat ors that provide services to us, could also be a source of security risks in the event of the failur e 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 infrastructur e. Unauthorized oper ators may develop “hacks” or other types of “ cheating” software enabling players t o alter the intended game play , abuse or exploit the mechanics of our games and, therefore, obtain unfair advantages in o ur 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 de veloping technological measures to respond t o them. The Russian invasion of Ukr aine, and the associated developments on the international arena, could r esult in a heightened risk of cyber-attacks, which could affect our systems. We have taken action to analyse the impact of various types of cyber-attacks and have implemented add itional security measures commensur ate with the potential increase of such risk. Fluctuations in foreign excha nge rates and inﬂationary pressur es could negatively impact our business. Our activities and businesses expose us to ﬂuctuations in currency exchange rates between USD and other curr encies, such as the Polish zloty and the euro. These ﬂuctuations may reach signiﬁcant levels during periods of increased mark et volatility related to, for example, the Russian invasion of Ukr aine, the COVID-19 pandemic, or other events increasing unc ertainty in the global economy . See also “Key F actors Affecting Our Results of Operatio ns and Market Trends”. For fur ther information on the Group’ s exposure to foreign exchange rate volatility for the most signiﬁcant currencies, see Note 7 to our Consolidated Financial Statements f or full year 2021. Our per formance may also be affected by inﬂationary pressures and their impact on consumer spending patterns, which could result in decreased spen ding on leisure and entertainment, and therefore negativ ely impact our revenues. Our success and continued grow th are heavily r eliant on the experience and talent of our managers and skilled emplo yees 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 crea tive employees, whose high competences and knowledge translates into dev eloping new technologies and creating innovative games. The loss of any of these individuals could harm our business. Competition Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 65 for employees, particularly game designers, engineers and project managers with desirable skill sets is intense, and we devote signiﬁcant re sources to identifying, hiring, training, successfully integr ating and retaining these employees. Our future success depends in par t on our ability to r etain highly qualiﬁed managers active in the mobile game s 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 futur e, and the costs associated with retaining them m ay impact our proﬁtability or ﬁnanc ial results. Changes in tax laws or tax rulings, or the examination of our tax position, could mater ially affect our ﬁnancial condition and results of operati ons We are subject to complex tax legislation in the various countries in which we operate. In par ticular , given the international scope of our business and our structure, we are subject to rules on transf er pricing. Moreover , GAAR and the focus of tax regulations on real business s ubstance may have an in creasing impact on international taxation. For example, we sell ser vices or use intellectual property through legal entities that must necessarily procur e these ser vices or license such intellectual property within a group. Therefore, we perform numerous intercompany transactions. The jurisdictions in which we operate generally hav e transfer pricing regulations that r equire transactions involving related p arties to be under taken 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 r elevant member or members of our gr oup, in respect of both current and previous years ma y increase, and we may be subject to penalties or ﬁnes, or r equired 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 an 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 r ates could increase. A signiﬁcant increase in value added ta x rates could negativ ely affect our activity, especially customer demand, which could have a material adverse effect on our business, operating result s 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 eff ect 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 effect ive 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. W e 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 adv erse effect on our business, operating r esults 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 re venue, is considered to be a highly competitive and rapidly evolving industr y 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 t o continue to emerge globally . Our operations depend on thir d-par ty platforms used to offer our games Our social gaming offerings operate mainly through Apple’ s App St ore, Google ’ s Play Store and Faceb ook, which also serve as signiﬁcant online distribution platforms for our games and provide us with valuable information and data. Consequently , our Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 66 operations depend on our continued relationships with these providers, and any emerging platform providers that are widely adopted by our target pla yer 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 discr etionary 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 A pple ’s Identiﬁer for Adver tising, or IDF A, or Google’ s Adver tising ID, or AAID , for Android de vices. Device and browser manufacturers may include or expand these features as par t 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 f rom in-game advertising (currently less than 5% of Huuuge ’ s overall r evenue). 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 requir ed to implement. W e cannot exclude the possibility that our games, in particular social casino games, will be targeted by other limitations introduced by third par ty platform providers or our advertising and marketing partners concerning, among others, user acquisition and advertising revenue. Changes in third par ty platforms classiﬁcation of or approach t owards social casino games or certain game features (such as loot boxes) 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’ ab ility to download our games, access social features or purchase vir tual currency , it could have a material adverse effect on our business, operating r esults and ﬁnancial condition. We oper ate in an industr y characteriz ed by an evolving and partially unclear regulat or y environment Generally , social gaming, including but not limited to social casino games, is not explicitly regulated in the mark ets 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, regulator s and courts, we cannot exclude the possibility that our activities could be regulated in wa ys 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, broadly or more speciﬁcally, for ex ample social gaming, or in-game featur es such as loot boxes. Alternatively , jurisdictions or regulators could seek to apply laws we do not believe are applicable t o our games to certain types of games we offer or to games co ntaining certain features or characte ristics. Courts may also interpret or apply laws in a manner adverse to us, notwithstanding the position taken by the relev ant gambling authority , and this may compromise our ability t o continue to offer our games in particular jurisdictions. We believe that our games do not constitute gambling in the jurisdictions in which we operate, par ticularly due to the free access and lack of monetary rewards; however , we cannot exclude the possibility that gambling regulat ors, judicial or similar authorities in cer tain 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. f eatures that are deemed to be “loot bo xes”) be limited or exclud ed. If any authority issues such an interpretation, we may face enforcement action on the basis of that interpretation. Mor eover , 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 differin g from the manner in which we view them, we may also be barred from pr omoting those games via third-party platforms (such as the AppStore or F acebook.) Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 67 There is a risk that fur ther legislative or regulatory developments could cur tail 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 t o adver tise our games, allow our players to claim damages related to the use of our games, raise consume r 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 repu tational damage to ourselves and t o the industry, deter pla yers from participating in our games, generate negative publicity , or deter ﬁnancial institutions and other third-party par tners and suppliers from cooper ating with us. We could be subjected t o 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 t o develop new games, off er products and features to players, and analyse 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 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 t o players or other third par ties, or any other legal obligations or regulatory requir ements 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 r eputation and business. Furthermore, the costs of compliance with, and other burdens imposed by the laws, regulations, and policies that are applicable to us may limit the adoption and use of, and reduce the over all demand for our games. Additionally , if third par ties we work with violate applicable laws, regulations or agr eements, 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 co uld result in signiﬁcant liability , cause our player s 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 go vernment agencies to enact additional regulatory requirements, or t o modify their enforcement or investigation activities, which may incr ease our costs and risks. Operating in multiple jurisdictions and locations Although the U.S. 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 A viv , Israel; Limassol, Cyprus; Las Vegas, Ne vada; 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 labour 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 U.S. persons and companies and their agents from off ering, 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 o ther 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 aff ected by such events, including T el A viv. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 68 The Russian invasion of Ukraine is likely to present obstacles to our collaboration with entities located in Ukr aine with which we have commercial relationships. We are constantly r eviewing the circumstances affecting our partners and taking available and appropriate measures to mitigate the potential impact on our operations, as well as 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 repor t 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 saf ety 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 ser vice. 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 pr otection laws and regulations, this could result in litigation, proceedings or investigations against us by g overnmental authorities, pla yers 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 par ty , any of which could have a material adverse ef fect on our business, oper ating 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 which could have a mater ial impact on our ﬁnancial results. Our shareholders’ rights under Delawar e law differ from shareholder rights under P olish law The Company is a Delaware corporation, and therefore its structure, operating procedures and the relationships between shareholders are go verned by the laws of the State of Delaware and U.S. feder al laws, including U.S. 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 inst ances different fr om those of shareholders of Polish companies. Procedure s introduced by the W SE may be insuﬃcient The Securities and Exchange Commission (SEC) may consider procedures introduced by the WSE in relation to Regulation S Category 3 securities as insuﬃcient for complying with the transf er restrictions. In 2018, the WSE established procedures designed to facilitate the trading of dematerialized Regulation S Category 3 securities in accordance with the transfer restrictions applicable to resales of such securities. Currently the WSE is working on amending its procedure to include Regulation S Category 3 securities subject to the Rule 144A r egistration exemption under the U.S. Securities Act. T o the best of our knowledge, the commissioners and staff of the SEC hav e thus far not expressed any view on the suﬃciency of the procedures introduced by the WSE for the purpose of complying with the tr ansfer restrictions. The SEC may determine such procedures t o be insuﬃcient for complying with the transfer r estrictions. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 69 Best pr actices Since February 19, 2021, the Company has been subject to and has applied WSE Best Practi ces, except for the principles that cannot be adhered to or whic h are impr acticable due to the diff erences between the U.S. and Polis h legal system or where this contradicts the pr ovisions of Delaware or U.S. feder al law . The WSE Best Practices ar e a vailable both in English and Polish on the Warsaw Stock Exchange website at https:/ /www .gpw .pl/dobre-praktyki2 021. 1. DISCL OSURE POLICY , INVESTOR COMMUNICA TIONS In the interest of all market par ticipants and their own interest, listed companies ensure quality investor communications and pursue a transpa rent and fair disclosure policy . Recommendations: 1.1. Companies maintain eﬃcient communications with capital market par ticipants and provide fair information about matters that concern them. For that purpose, companies use div erse tools and forms of communication, including in particular the corporate website where the y publish all information relevant for investors. This principle is applied. 1.2. Companies make available their ﬁnancial results c ompiled in periodic reports as soon as possible after the end of each reporting period; should that not be feasible for substantial reasons, companies publish at least preliminary ﬁnancial estimates as soon as possible. This principle is applied. 1.3. Companies integrate ESG fa ctors in their business str ategy, in cluding in particular: 1.3.1. environmental factors, including measures and risks relating to climate change and sustainable development; This principle is not applied. The Issuer is currently working on the ESG strategy and plans to present it to the Board of Directors in 2022 . Environmental factors will b e included in the strategy . 1.3.2. social and employee factors, including among others actions taken and planned to ensure equal treatment of women and men, decent working conditions, respect for employees’ rights, dialogue with local communities, customer r elations. This principle is not applied. The Issuer is currently working on the ESG strategy and plans to present it to the Board of Directors in 2022 . Social and employee fact ors will be included in the strategy . Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 70 Currently , in order to ensure the promotion of social and employee factors within the organization, the Issuer has implemented a Code of Conduct, an Anti-Harassment Policy and a Whistleblowing Policy, and has established a senior task force, led by a member of the Executive Management, to address issues of Diversity , Equity and Inclusion and, inter alia, t o adopt a Diversity Policy for the Issuer . 1.4. T o ensure quality communications with stakeholders, as a par t of the business stra tegy , companies publish on their website information concerning the framework of the strategy , measurable goals, including in particular long-term goals, planned activities and their status, deﬁned by measures, both ﬁnancial and non-ﬁnancial. ESG information concerning the str ategy should among other things: 1.4.1. explain how the decision-making processes of the company and its group members integrate climate change, including the resulting risks; This principle is not applied. The Issuer is currently working on the ESG str ategy and plans to present it to the Boar d of Directors in 2022. 1.4.2. present the equal pay index for employees, deﬁned as the percentage difference between the average monthly pay (including bonuses, awards and other beneﬁts) of women and men in the last year , and present information about actions taken to eliminate any pay gaps, including a presentation of related risks and the time horizon of the equality tar get. This principle is not applied. The Issuer does not publish equal pay index data. The Issuer hires and remunerates its emplo yees on the basis of their competences, experience and knowledge, without any gender discrimination. The Issuer is establishing an internal working group to address issues of Diversity , Equity and Inclusion, including with respect to remuner ation. 1.5. Companies disclose at least on an annual basis the amounts expensed by the company and its group in support of culture, spor ts, charities, the media, social organizations, trade unions, etc. If the company or its group pay such expenses in the r epor ting year , the disclosure presents a list of such e xpenses. This principle is applied. 1.6. Companies par ticipating in the WIG20, mWIG40 or sWIG80 index hold on a quarterly basis, and other companies hold at least on an annual basis, a meeting with investors to which they invite in par ticular shareholders, analysts, industry exper ts and the media. At such meetings, the management board of the company presents and comments on the strategy and its implementation, the ﬁnancial r esults of the company and its group, and the key events impacting the business of the company and its group, their results and outlook. At such meetings, the management board of the company publicly pr ovides answers and explanations to the questions r aised. This principle is applied. 1.7. If an investor requests any information about a company , the company replies immediately and in any ev ent no later than within 14 days. This principle is applied. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 71 2. MANAGEMEN T B OARD , SUPERVISOR Y BOARD T o ensure top standards of the responsibilities and effective performance of the management board and the supervisory board of a company , only persons with adequate competences, skills and experience are appointed to the management board and the supervisory board. Management Board members act in the interest of the company and are responsible for its activity . The management board is responsible among other things for the company’ s leadership, engagement in setting and implementing its strategic objectiv es, and ensuring the company’ s eﬃciency and safety . Supervisory board members acting in their function and to the extent of their responsibilities on the supervisory board follow their independent opinion and judgement, including in decision making, and act in the inter ests of the company . The supervisory board functions in the spirit of debate and analyses the position of the company in the context of the sector and the market on the basis of information provided by the management board of the company and via the company’ s internal systems and functions and obtained from external sources, using the output of its committees. The supervisor y board in par ticular issues opinions on the company’ s strategy , veriﬁes the work of the management board in pursuit of deﬁned str ategic objectives, and monitors the company’ s performance. 2.1. Companies should have in place a diversity policy applicable to the management board and the supervisory board, approved by the supervisory board and the general meeting, respectively . The diversity policy deﬁnes diversity goals and criteria, among others including gender , education, exper tise, age, professional experience, and speciﬁes the target dates and the monit oring systems for such goals. With regard to the gender div ersity of corporate bodies, the participation of the minority group in ea ch body should be at least 30%. This principle is not applied. The Issuer has established a senior task force, led by a member of the Executive Management, to address issues of Diversity , Equity and Inclusion and, inter alia, to adopt a Diversity Policy for the Issuer . One of the goals of the task force is to ensure that all genders are equitably repr esented at all levels of the company . The Issuer exercises a policy of employing persons who are competent, creative and have the professional experience and education necessary to perform their duties, and does not base its employment decisions on gender . The Issuer employs approximately 60% men an d 40% women, a distribution that is relativ ely consistent at different levels of seniority . However , the Issuer is aware of the fact that at present, the composition of the Issuer’ s Board is not balanced in terms of the par ticipation of men and women, recognizing also that giv en the relatively infrequent changes to the structure of the Board, rectiﬁcation of this imbalance ma y take longer than imbalances at other levels of the company . 2.2. Decisions to elect members of the management board or the supervisory board of companies should ensure that the composition of those bodies is diverse by appointing persons ensuring divers ity , among other things in order to achieve the target minimum par ticipation of the minority group of at least 30% according t o the goals of the established diversity policy ref erred to in principle 2.1. This principle is not applied. See explanation to point 2.1. abo ve. 2.3. At least two members of the supervisory board meet the criteria of being independent as r eferred to in the Act of May 11, 2017, on Auditors, Audit Firms and Public Super vision, and have no actual and material relations with any shareholder who holds at least 5% of the t otal votes in the company . This principle is applied. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 72 The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly to the Issuer . The Issuer is incorpor ated in Delaware and has one governing body , the Board of Dir ectors. At least two members of the Board of Directors meet the criteria of being independent as ref erred to in the Act of May 11, 2017, on Auditors, Audit Firms and Public Super vision, and have no actual and material relations with any shareholder who holds at least 5% of the t otal votes in the company . 2.4. The supervisory board and the management board vo te in an open ballot unless otherwise required b y law . This principle is applied. The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly to the Issuer . The Issuer is incorpor ated in Delaware and has one governing body , the Board of Dir ectors. Voting in the Board of Dir ectors is done by an open ballot. 2.5. Members of the supervisory board and members of the management board who v ote against a resolution may have their dissenting vot e recorded in the minutes. This principle is applied. Votes of all members of the Board of Direct ors are recorded in the Board’ s minutes. 2.6. Functions on the management board of a company are the main area of the professional activity of management board members. Management board members should not engage in additional professional activities if the time devoted t o such activities prevents their proper performance in the company . This principle is applied. The Board of Directors in the Issuer is a one-tier management structure. Th is principle is applied in relation t o the Issuer’ s President, who as a Chief Executive Oﬃcer is also an oﬃcer of the Issuer and forms its management. The remaining Directors are not oﬃcers of the Issuer and most of them have other professional activities in addition to the Issuer . 2.7. A company ’ s management board member may sit on the corporate bodies of companies other than members of its group subject to the a pproval of the sup ervisory board. This principle is not applied. According to the Issuer ’ s Certiﬁcate of Incorporation, the consent of the Board of Directors is not require d for the President (or any Director) to sit on the management or supervisory board of companies other than members of the Issuer’ s group. The Issuer maintains a Conﬂict of Inte rests policy designed to pr event conﬂicts of interest at all levels . 2.8. Supervisory board members should be able to dev ote the time necessary to perform their duties. This principle is applied. The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly t o the Issuer . The Issuer is incorporated in Delaware and has Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 73 one governing body , the Board of Directors. Members of the Board undertake to devote the time necessary to perform their duties in compliance with the law and the Company’ s statutory documents. 2.9. The chair of the supervisory board should not combine this function with that of chair of the audit committee of the supervisory board. This principle is applied. The Issuer is a Delaware corporation and does not presently have a chairman of the supervisory board (or Board of Directors). The Chairman of the Audit Committee meets the independence criteria established by th e company and by applicable regulations . 2.10. Companies allocate the administrative and ﬁnancial resources necessary to ensure the eﬃcient functioning o f the supervisory board in a manner adequate to their siz e and ﬁnancial standing. This principle is applied. 2.11. In addition to its responsibilities laid down in the legislation, the supervisor y board prepares and presents an annual report to the annual general mee ting once per year . Such report includes at least the following: The Issuer does not have a super visory board, operates in a one-tier management structure and presents information on the members of the Board of Directors. Relevant information listed below is included in the Annual Repor t of the Company prepared by the Board of D irectors and pr esented to all shareholders and to the market. 2.11.1. information about the members of the supervisory board and its committees, including an indication of those super visory board members who fulﬁl the criteria of being independent referred to in the Act of May 11, 2017 on Auditors, Audit Firms and Public Supervision and those supervisory board members who have no actual and material relations with any shareholder who holds at least 5% of the total vote in the company , and information about the members of the supervisory board in the context of diversity; This principle is applied. 2.11.2. summary of the activity of the supervisory board and its committees; This principle is applied. 2.11.3. assessment of the company’ s standing on a consolidated basis, including an assessment of the internal control, risk management and compliance system s and the internal audit function, and information about measures taken by the supervisory board to perform such assessment; such assessment should cover all signiﬁcant controls, in particular reporting and operational controls; This principle is applied. 2.11.4. assessment of the company’ s compliance with the corporate governance principles and the manner of compliance with the disclosure obligations concerning compliance with the corporate governance principles deﬁned in the Exchange Rules and the regulations on current and perio dic reports published by issuers of securities, and information about measures taken by the supervisor y board to perform such assessment; This principle is applied. 2.11.5. assessment of the rationa lity of expenses referr ed to in principle 1.5; Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 74 This principle is applied. 2.11.6. information regarding the degree of implementation of the div ersity policy applicable to the management board and the supervisory board, including the achiev ement of goals referred to in principle 2.1. This principle is not applied. The Issuer exercises a policy of employing persons who are competent, creative and have the professional experienc e and education necessary to perform their duties. The Issuer does not ensur e the balanced par ticipation of men and women on the Issuer’s Board of Direct ors. The Issuer is establishing an internal working group to address issues of Diversity , Equity and Inclusion, and to determine the diversity policy of the Issuer . 3. INTERNAL SYSTEMS AND FUNC TIONS Eﬃcient internal systems and functions are an ind ispensable tool of ex ercising supervision over a company . The systems cover the company and all areas of activity of its group which have a signiﬁcant impact on the position of the company . 3.1. Listed companies maintain eﬃcient internal control, risk management and compliance systems and an eﬃcient internal audit function adequate to the size of the company and the type and scale of its activity; the management board is respon sible for their functioning. This principle is applied. 3.2. Companies’ organization includes units responsible for the tasks of individual systems and functions unless it is not reasonable due to the size of the company or the type of its activity . This principle is applied. 3.3. Companies participating in the WIG20, mWIG40 or sWIG80 index appoint an internal auditor to head the internal audit function in compliance with generally accepted international standards for the professional practice of internal auditing. In other companies which do not appoint an internal auditor who meets such requirements, the audit committee (or the supervisor y board if it performs the functions of the audit committee) assesses on an annual basis whether such a person should b e appointed. This principle is applied. 3.4. The remuneration of persons responsible for risk and compliance management and of the head of internal audit should depend on the performance of delegated tasks r ather than the shor t-term results of the company . This principle is applied. 3.5. Persons responsible for risk and compliance management repor t directly to the president or other member of the management board. This principle is not applied. The Issuer has a one-tier management structure, therefore the principles regarding members of the management board do not apply directly to the Issuer . The Issuer is incorporated in Delaware and has one governing body , the Board of Dir ectors. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 75 Person responsible for risk management reports to the EVP Product & Operations, a member of the executive management team. Person responsi ble for compliance management reports to the Gener al Counsel, a member of the executive management team . 3.6. The head of internal audit repor ts organizationally to the president of the management board and functionally to the chair of the audit committee or the chair of the supervisory board if the supervisory board performs the functions of the audit committee. This principle is not applied. The Issuer has a one-tier management structure, therefore the principles regarding members of the management board do not apply directly to the Issuer . The Issuer is incorporated in Delaware and has one governing body , the Board of Dir ectors. The Head of Internal Audit was appointed by and reports to the Audit Committee of the Board of Dir ectors, and administrativ ely reports to the Tr easurer and Chief Financial Oﬃcer , who is a member of the executive management team. 3.7. Principles 3.4 to 3.6 apply also to members of the company’ s group which are material to its activity if they appoint persons to perform such tasks. This principle is applied. 3.8. The person responsible for internal audit or the management board if such function is not performed separately in the company reports to the supervisory board at least once per year with their assessment of the eﬃciency of the systems and functions ref erred to in principle 3.1 and tables a relev ant repor t. This principle is applied. The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly to the Issuer . The Issuer is incorpor ated in Delaware and has one governing body , the Board of Directors. The Head of In ternal Audit reports routinely to the Aud it Committee of the Board of Directors with their assessment of the eﬃciency of the systems and functions referr ed to in principle 3.1 and tables a relevant report. Since the internal audit function was implemented only in Q4 2021 and the Head of IA was engaged only on December 1, 2021, the ﬁrst such report will be compiled for the year ended December 31, 2022. 3.9. The super visory board monitors the eﬃciency of the systems and functions referred to in pr inciple 3.1 among others on the basis of repor ts provided periodically by the persons responsible for the functions and the company’ s management board, and makes an annual assessment of the eﬃciency of such systems and functions according to principle 2.11.3. Where the company has an audit committee, the audit committee monitors the eﬃciency of the systems and functions referred to in principle 3.1, which however does not release the supervisory board from the annual a ssessment of the eﬃciency of such systems and functions. This principle is applied. The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly to the Issuer . The Issuer is incorpor ated in Delaware and has one governing body , the Board of Dir ectors. The Board of Directors together with the President of the Company are responsible for o verseeing the ﬁnancial reporting process of the Group, including monitoring of the eﬃciency of the systems and functions referr ed to in principle 3.1 Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 76 The Issuer has an Audit Committee that reports to the Board of Dir ectors. The Audit Committee is r esponsible for supervising the adequacy of the internal control system and for monitoring its effectiveness in the prepar ation of the consolidated ﬁnancial statements. 3.10. Companies par ticipating in the WIG20, mWIG40 or sWIG80 index have the internal audit function reviewed at least once every ﬁve years b y an independent auditor appointed with the participation of the audit committee. This principle is applied. 4. GENERAL MEETING, SHAREHOLDER RELA TIONS The management board and the super visory board of listed companies should encourage the engagement of shareholders in matters of the company , in par ticular through active participation in the general meeting, either in person or through a pr oxy . The general meeting should proceed by respecting the rights of all shareholders and ensuring that passed resolutions do not infringe on the legitimate inter ests of different groups of shar eholders. Shareholders who participate in a general meeting exercise their rights in accordance with the rules of good conduct. Participants of a general meeting should come prep ared to the gener al meeting. 4.1. Companies should enable their shareholders to par ticipate in a general meeting by means of electronic communication (e-meeting) if justiﬁed by the expectations of shareholders notiﬁed to the company , provided that the company is in a position to provide the technical infrastructur e necessary for such general meeting t o proceed. This principle is applied. 4.2. Companies set the place and date and the form of a general meeting so as to enable the participation of the highest possible number of shareholders. Fo r that purpose, companies strive to ensure that the cancellation of a general meeting, change of its date or break in its proceedings tak e place only if justiﬁed and do not pre vent or limit the exercising of the shareholders’ rights to participate in the gener al meeting. This principle is applied. 4.3. Companies provide a public r eal-life broadcast of the general mee ting. This principle is applied. 4.4. The presence of repr esentatives of the media is allowed at general meetings. This principle is applied. 4.5. If the management board becomes aware of a general meeting being convened pursuant to Ar ticle 399 § 2 – 4 of the Commercial Companies Code, the management board immediately takes steps which it is required to take in order to organize and conduct the general m eeting. The foregoing applies also wher e a general meeting is convened under authority granted by the registration cour t according to Ar ticle 400 § 3 of the Commercial Companies Code. This principle is applied. The Issuer is a Delaware corporation and, therefore, Section 399.2 – Section 399.4 of the Commercial Companies Code does not apply to the Issuer . However , in accordance with the Bylaws, the Pr esident shall call a Special General Meeting (SGM) at the written request of the Company’ s shareholders owning shares of the Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 77 Company representing at least 10% of the voting rights. In a situation where a shareholder or shareholders make such a request, the board will take prompt and effective action to convene the SGM. According to the Bylaws of the Company , the Board shall convene such a meeting no less than 30 days and no more than 90 days after a valid written request. If the Board fails to do so, notice of the meeting may be given by the shareholders requesting the meeting. In addition, in accordance with the Cer tiﬁcate of Incorporat ion the SGM may be called at any time by or at the direction of the Board of Directors (by resolution appr oved by a vote of the majority of the Directors eligible to vote) or the Chairman of the Board of Direct ors. 4.6. T o help shareholders par ticipating in a general meeting to vote on resolutions with adequate understanding, draft resolutions of the general meeting concerning matters and decisions other than points of order should contain a justiﬁcation, unless it follows from documentation tabled t o the general meeting. If a matter is put on the agenda of the general meeting at the request of a shareholder or shareholders, the management board requests a presentation of the justiﬁcation for the proposed resolution, unless previously presented by such shareholder or shareholders This principle is applied. 4.7. The super visory board issues opinions on draft resolutions put b y the management board on the agenda of the general meeting. This principle is applied. The Issuer has a one-tier management structure, therefore principles regarding members of the management board and supervisory board do not apply directly to the Issuer . Draft resolutions are r eviewed and discussed by the Board of Direct ors . 4.8. Draft resolutions of the general meeting on matters put on the agenda of the general meeting shoul d be tabled by shareholders no later than thr ee days before the general meeting. This principle is applied. 4.9. If the general meeting is to appoint members of the supervisory board or memb ers of the supervisory board for a new term of oﬃce: 4.9.1. candidates for members of the supervisor y board should be nominated with a notice necessar y for shareholders present at the general meeting to make an informed decision and in any case no later than three days before the general meeting; the names of candidates and all related documents should be immediately published on the company’ s website; This principle is applied. 4.9.2. candidates for members of the super visory board make a declaration concerning the fulﬁlment of the requirements for members of the audit committee referred to in the Act of May 11, 2017, on Auditors, Audit Firms and Public Supervision and having actual and material relations with any shareholder who holds at least 5% of the total vote s in the company . This principle is applied. 4.10. Any exercise of the rights of shareholders or the way in which they exercise their rights must not hinder the proper functioning of the gov erning bodies of the company . This principle is applied. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 78 4.11. Members of the management board and members of the supervisory board participate in a general meeting, at the location of the meeting or via means of bilateral real-time electr onic communication, as necessary to speak on matters discussed by the general meeting and answer questions asked at the general meeting. The management board presents to participants of an annual general meeting the ﬁnancial r esults of the company and other relevant information, including non-ﬁnancial information, contained in the ﬁnancial statements to be approved by the general meeting. The management board presents key events of the last ﬁnancial year , compares presented data with previous years, and presents the degree of implementation of the plans for the last year . This principle is applied. The Issuer is a Delaware corporation and, accordingly , the provisions of the Commercial Companies Code do not apply and therefore, the ﬁn ancial statements do not have t o be approved by the shareholders. 4.12. Resolutions of the general meeting concerning an issue of shares with subscription rights should specify the issue price or the mechanism of setting the price or authorize the competent body to set the price pr ior to the subscription right record date within a timeframe necessary for inv estors to mak e decisions. This principle is not applied. The Issuer is a Delaware corporation and, accordingly , the provisions of the Commercial Companies Code do not apply . The shares ar e issued by the Board of Directors. 4.13. Resolutions concerning a new issue of shares with the exclusion of subscription rights which gr ant pre-emptive rights for new issue shares to selected shareholders or other e ntities may pass subject at least t o the following three criteria: a) the company has a rational, economically justiﬁed need to urgently raise capital or the share issue is related to rational, economically justiﬁed transactions, among other things such as a merger with or the take-over of another company , or the shares are t o be taken up under an incentive sc heme established by the company; b) the persons gr anted the pre-emptive right are to be selec ted according to objectiv e general criteria; c) the purchase price of the shares is in a rational relation with the current share price of the company or is to be determined in book-building on the market. This principle is applied. The Issuer is a Delaware corpor ation and, accordingly , the provisions of the Commercial Companies C ode do not apply . The shares are issued by the Board of Directors. The Issuer's Certiﬁcate of Incorporation provides for limited pre-emptive rights of the Com pany' s shareholders. 4.14. Companies should strive to distribute their proﬁts by paying out dividends. Companies may retain all their earnings subject to any of the following criteria: a) the earnings are minimal and consequently the dividend would be immaterial in relation to the value of the shares; b) the company r eports uncovered losses from pr evious years and the earnings ar e used to reduce such losses; c) the company can demonstrate that investment of the earnings will generate tangible beneﬁts for the shareholders; Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 79 d) the company gener ates insuﬃcient cash ﬂows to pay out dividends; e) a dividend payment would substantially increase the risk to covenants under the company’ s binding credit facilities or terms of bond issue; f) retention of the company’ s earnings follows recommendations of the authority which supervises the company by virtue of its business activity . This principle is applied. 5. CONFLICT OF INTEREST , RELA TED P ARTY TRANSACTIONS For the purpose of this section, “related party” is deﬁned within the meaning of the International Accounting Standards approved in Regulation No (EU) 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the application of international accounting standar ds. Companies and their groups sh ould have in place tr ansparent procedures for managing conﬂicts of inter est and for related party transactions where a conﬂict of interest may occur . The procedures should provide for ways to identify and disclose such cases and the course of action in the event that they occur . Members of the management board and members of the supervisory board should refra in from professional or other activities which might cause a conﬂict of interest or adversely aff ect their reputation as members of the corpor ate body , and where a conﬂict of interest ar ises, they should immediately disclose it. 5.1. Members of the management board and members of the supervisory board notify the management board or the super visory board, respectively , of any conﬂict of interest which has arisen or may arise, and refrain from discussions on the issue which may give rise to such a conﬂict of inter est in their case. This principle is applied. 5.2. Where a member of the management board or a member of the supervisory board concludes that a dec ision of the management board or the super visory board, respective ly , is in conﬂict with the interest of the company , he or she should request that the minutes of the management board or supervisory board meeting show his or her dissenting opinion. This principle is applied. 5.3. No shareholder should have preference over other shareholders in related party transactions. The foregoing also concerns transactions concluded by the company’ s shareholders with members of the company’ s group. This principle is applied. 5.4. Companies may buy back their own shar es only in a procedure which respects the rights of all shar eholders. This principle is applied. 5.5. If a transaction concluded by a company with its related par ty requires the consent of the supervisory board, before giving its consent the supervisory board assesses whether to ask a prior opinion of a third party which can provide valu ation of the transaction and review its economic impact. This principle is applied. The Issuer is a Delaware corpor ation and in its corporate structure ther e is no Supervisory Board. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 80 The Company ’ s Board of Directors has adopted a “Related Party Tr ansaction Policy”. According to this Policy material related party transactions are su bject to appro val by the Board of D irectors. The market terms of the related par ty transactions shall be asses sed based on the information prov ided to the Audit Committee by an exper t third par ty or market evidence. In order to perform the duties and obligations resulting from this Policy , the Audit Committee may also retain the services of external advisors, exper ts or consultants. According to the “Related Par ty Transactio n Policy” the Company shall disclose information on all material transactions concluded with related parties on its website. Full text of the Policy is av ailable on the Company’s website in the Governance section. 5.6. If a related party transaction requires the consent of the general meeting, the supervisor y board issues an opinion on the rationale of such transaction. In that case, the supervisory board assesses whether to ask a prior opinion of a third party referred t o in principle 5.5. This principle is applied. The Issuer ' s Cer tiﬁcate of Incorporation, which is in accordance with Delaware law as applicable to the Issuer , does not require general meeting approval for the transactions in question. The manner in which consent to related party transactions is gr anted is described in section 5.5. 5.7. If a decision concerning the company ’ s signiﬁcant transaction with a related party is made by the general meeting, the company should give all shareholders access to information necessary to assess the impact of the transaction on the interest of the company before the decision is made, including an opinion of the supervisory board referr ed to in principle 5.6. This principle is applied. The Issuer ' s Cer tiﬁcate of Incorporation, which is in accordance with Delaware law as applicable to the Issuer , does not require general meeting approval for the transactions in question. The manner in which consent to related party transactions is gr anted is described in section 5.5. 6. Remuneration Companies and their groups protect the stability of their management teams, among others by transparent, fair , consistent and non-discriminatory terms of r emuneration, including equal pay for women and men. Companies’ remuneration policy for members of corporate bodies and key managers should in particular determine the form, structure, and method of dete rmining and payment of the remune ration . 6.1. The remuneration of members of the management board and members of the supervisory board and key managers should be suﬃcient to attract, retain and motivate persons with skills necessary for proper management and supervision of the company . The level of remuneration should be adequate to the tasks and responsibilities delegated to individuals and their resulting accountability . This principle is applied. 6.2. Incentive schemes should be constructed in a way necessary among others to tie the level of re muneration of members of the company’ s management board and key managers to the actual long-term standing of the Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 81 company measured by its ﬁnancial and non-ﬁnancial results as well as long-term shareholder value creation, sustainable development and the company’ s stability . This principle is applied. 6.3. If companies’ incentive schemes include a stock option programme for managers, the implementation of the stock option programme should depe nd on the beneﬁciaries’ achievement, o ver a period of at least three years, of pre-deﬁned, realistic ﬁnancial and non-ﬁnancial targets and sustainable development goals adequate t o the company , and the share price or option exercise price for the beneﬁciaries cannot differ from the v alue of the shares at the time when such pr ogramme was appr oved. This principle is not applied. The Company has two option plans. The ﬁrst option program (employ ee stock option plan) was established by the Board of Directors on April 3, 2015, and the second on October 19, 2019. The plans entitle employees and certain consultants of the Issuer and its subsidiaries to purchase shar es of the Company's stock at a speciﬁed price upon vesting of the option and provided that the option has not expired. Each option entitles the holder to purchase one common share of the Company . Both option plans allow stock options to be exercised (at least in part) prior to three years after gr ant, but both plans typically have a vesting cliff of twelve months, followed by 36 monthly vesting periods, which spans the total plan over the period of four years. 6.4. As the supervisor y board performs its responsibilities on a continuous basis, the remuneration of super visory board members cannot depend on the number of m eetings held. The remuner ation of members of committees, in particular the audit committee, should take into account the additional workload o n the committee. This principle is not applied. The Issuer does not have a supervisory board. The non-executive directors are remunerated with (i) a ﬁxed annual salary , (ii) an additional salary for holding the position of president of the Audit Committee or the Nomination and Remuneration Committee or being a member of the Audit Committee or the Nomination and Remuneration Committee a nd (iii) remuner ation for the par ticipation in every meeting held. 6.5. The level of remuner ation of supervisory board members should not depend on the company’ s shor t-term results. This principle is applied. Internal contr ol and risk management The Company ’ s President is responsible for the Company’ s and Group’ s internal control system and the Board of Directors is responsible for supervision over the ade quacy of the internal control system and o ver monitoring its effectiveness. In addition, the Board of Directors and the President of the Company are responsible for supervision over the prepar ation of the Group’ s consolidated ﬁnancial statements in accordance with IFRS, as well as the Company’ s stand-alone ﬁnancial statements which will also be prepared inaccor dance with IFRS. The purpose of an effective internal control system over ﬁnancial reporting is to ensure the adequacy and correctness of the ﬁnancial information contained in the ﬁnancial statements and interim r epor ts. During the preparation of the Group’ s consolidated ﬁnancial statements, the veriﬁcation of the ﬁnancial statements by an independent auditor is one of the main elements of the audit. The responsibilities of the auditor i nclude, in particular , an audit of the annual consolidated ﬁnancial statements. Substantially the same principles apply to the Company’ s stand-alone ﬁnancial statements. In addition to the audit of the annual consolidated and stand-alone ﬁnancial statements, the auditor’ s responsibilities include a re view of the semi-annual stand-alone and consolidated ﬁnancial statements. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 82 The Board of Directors elects an independent auditor . Upon the auditor’ s completion of the audit, the consolidated ﬁnancial statements are sent to the members of the Board of Directors, which assesses the Company’s consolidated ﬁnancial statements with regard to their compliance with the books and documents as well as with the facts. Substantially the same procedures apply t o the Company’s stand-alo ne ﬁnancial statements. The Board of Directors supervises the preparation o f the Group’ s consolidated ﬁnancial statements. The Board of Directors is required to ensure that the Group’ s consolidated ﬁnancial statements and business statements meet the legal requirements. The President of the Company approves and signs the Group ’ s consolidated ﬁnancial statements. Substantially the same procedures apply t o the Company’s stand-alo ne ﬁnancial statements. The supervision over the preparation of the stand-alone ﬁnancial statements of the Subsidiaries is conducted by their respective corporate bodies. The Company oversees such processes based on the available corporate powers and monthly reporting used by the Group. Additionally, the Issuer ensures the existence and effectiveness of such internal controls within the Group, including the Subsidiaries, as it determines necessary to enable the preparation of consolidated ﬁnancial statements that are free fr om material misstatement, whether due to fraud or err or . The Group’ s consolidated ﬁnancial statements are prepared by the ﬁnance team and reviewed by the Board of Directors before receiving approval from the President of the Company and the issuance of an independent auditor’ s opinion. The ﬁnancial data used in the annual and interim consolidated ﬁnancial statements as well as the monthly reporting used by the Group derive from the Group’ s ﬁnancial and accounting system and the ﬁnancial systems used b y external accounting teams. After all the predeﬁned processes concerning the closing of the books have been completed at the end of each month, detailed ﬁnancial and operational reports are prepared, and at the end of each quarter , additional consolidated IFRS reports. The Company applies consistent accounting principles when presenting ﬁnancial data in ﬁnancial statements and periodic ﬁnancial reports. The Company ’ s stand-alone ﬁnancial statements are prepared by the ﬁnance team and reviewed by the Board of Directors before their approval by the President of the Company and the issue of an independent auditor’s opin ion. The ﬁnancial data used in the annual and interim stand-alone ﬁnancial statements as well as the monthly r epor ting used by the Company derive from the Company’ s ﬁnancial and accounting system. The Company reviews the quality of its internal control and risk management systems with regard to the preparatio n of the consolidated ﬁnancial statements. Substantially the same practice applies to the internal control and risk management systems with regard t o the preparation of the Company’ s stand-alone ﬁnancial statements. Diversity policy In 2021 the Company had not developed or implemented a diversity policy with respect to its governing bodies and key managers. In 2022 the Company established an internal working group to address issues of Diversity , Equity and Inclusion, including with respect to remuneration. One of the matters to be addressed by the working group is the preparation of a group-wide diversity policy . Related par ties T ransactions between the Company a nd its subsidiaries T ransactions between the Company an d Huuuge Global Limited The Company buys some marketing services from third-party vendors, (primarily Facebook) and later recharges them to Huuuge Global Limited. There is no value added by Huuuge, Inc. in this process but changing the billing party by Facebook to Huuuge Global Limited would require setting up new accounts and would result in the need to optimize all user acquisition campaigns once again. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 83 In the year ended December 31, 2021, these tr ansactions amounted to USD 28,435 thousand and interest accrued on o verdue receivables amounted to USD 0. As at December 31, 2021, unpaid marketing inv oices amounted to USD1,694 thousand, and unbilled revenue amounted to USD 1,216 thousand. In the year ended December 31, 2020 these transactions amounted to USD 30,486 thousand and interest accrued on overdue receivables amounted to USD 0. As at December 31, 2020, unpaid marketing invoices amounted t o USD 5,174 thousand, and unbilled revenue amounted t o USD 580 thousand. At the same time, the Company provided services to Huuuge Global Limited in the area of legal services, stewardship activities and game development. The international character of the Group requires its legal department to hire people with high competences in this area. The decision to begin providing game maintenance and de velopment services was related to the intention to establish a new oﬃce in Las V egas. In the year ended December 31, 2021, these transactions amounted to USD 3,824 thousand. As at December 31, 2021, the respective unpaid invoices amounted to USD 983 thousand, and unbilled revenue amounted to USD 0 thousand. In the year ended December 31, 2020, these tr ansactions amounted to USD 9,317 thousand. T ransactions between the Company an d Huuuge Games sp. z o.o. and other subsidiaries In 2021 Huuuge Games sp. z o.o. and Coffee Break Games United Ltd. provided Huuuge, Inc. with some administrative services such as back-oﬃce services. In 2020 Huuuge Games sp. z o.o. provided Huuuge, Inc. with some administrative services such as the organization of Board of Dir ectors meetings. The value of such transactions in the year ended December 31, 2021, amounted to USD 878 thousand in total. As at December 31, 2021, the balance of unpaid invoices from such transactions amounted to USD 426 thousand. The value of such transactions in the year ended December 31, 2020, amounted to USD 9 thousand. As at Decem ber 31, 2020, the balance of unpaid invoices from such tr ansactions amounted to USD 0.2 thousand. Loan ﬁnancing tr ansactions in the Gr oup During the year ended December 31, 2021, there have been no loan ﬁnancing transaction s either from Huuuge, Inc. to any party related to Huuuge, Inc. or from Huuuge Gr oup to any par ty related to the Huuuge Gr oup. Loan granted by Huuuge G lobal Ltd. to Huuuge Mobile Games Ltd . In 2021, Huuuge Global Ltd, a subsidiary of the Company , granted Huuuge Mobile Games Ltd. with its registered oﬃce in Ireland a revolving loan totalling up to EUR 200.000,00 (two hundred thousand Euro) with a n interest r ate of 1.1% per annum. The purpose of the loan was to allow fur ther growth of Huuuge Mobile Games Ltd. by accelerating business oper ations. The loan was intended to cover operating expenses regarding, among others: proper ties, HR, payrolls, business travels, game hosting, IT hardware and software, or any other expenses required to ensure business co ntinuity and development. As of the date hereof, there ar e no outstanding amounts due under the loan. Loan granted by Huuuge G lobal Ltd. to Ciren eg Limited (formerly Fun Monk ey Games Limited) In 2021, Huuuge Global Ltd, a subsidiary of the Company , granted Cireneg Limited with its registered oﬃce in Ireland a revolving loan in a totalling up to EUR 50.000,00 (ﬁfty thousand euro) with an interest r ate of 1.1% per annum. The purpose of the loan was to allow further growth of Huuuge Mobile Games Ltd. by accelerating business operations. The loan was intended to cover operating expenses regarding, among oth er things: properties, HR, payrolls, business trips, game hosting, I T hardware and software, or any other expenses required for ensuring business continuity and development. The loan was repaid in full as of December 9, 2021 , and later term inated as of December 16, 2021. Loan granted by Huuuge G lobal Ltd. to Coff ee Break Games United Ltd. In 2021, Huuuge Global Ltd, a subsidiary of the Company, gr anted Coffee Break Games United Ltd. with its r egistered oﬃce in Ireland a revolving loan totalling up to EUR 200.000,00 (two hundred thousand euro) with a n interest r ate of 1.1% per annum. The purpose of the loan was to allow fur ther growth of Coffee Break Games United Ltd. by accelerating business oper ations. The loan was intended to cover operating expenses regarding, among other things: properties, HR, payrolls, business trips, Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 84 game hosting, IT hardware and software, or any other expenses required for ensuring business continuity and development. As of the date hereof, there ar e no outstanding amounts due under the loan. Loan granted by Huuuge G lobal Ltd. to Emanon Limited (formerly Billionaire Games Limited) In 2021, Huuuge Global Ltd, a subsidiary of the Company , granted Emanon Limited with its registered oﬃce in Ireland a revolving loan in totalling up to EUR 50.000,00 (ﬁfty thousand euro) with an interest rate of 1.1% per annum. The purpose of the loan was to allow further growth of Emanon Limited. by acceler ating business operations. The loan was intended to cov er operating expenses regarding, among other things: properties, HR, payrolls, business trips, game hosting, IT hardware and software, or any other expenses required for ensuring business continuity and development. The loan wa s repaid in full as of December 9, 2021 , and later terminated as of December 16, 2021. T ransactions between the Company a nd its shareholders In 2021, there were no tr ansactions between the Company and its shareholders. T ransactions between the Company a nd the Board of Dir ectors Except for the transactions mentioned above in the section “ Agreements with Board of Direct ors”, i.e., the remuneration paid by the Issuer to members of the Board of Directors and shares and shar e options held by members of the Board of Directors, there were no other tr ansactions between the Issuer and the members of the Board of Direc tors. The Company has not concluded any tr ansactions with related par ties of other members of the Board of D irectors. T ransactions concluded between the Subsidiaries and related parties Except for the transactions mentioned below , in the year ended December 31, 2021, the Subsidiaries did not conclude any transactions with r elated par ties of the Company other than the Subsidiaries. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 85 Rules for amending the issuer’ s Cer tiﬁcate of Incorporation The Cer tiﬁcate of Incorporation can be amended or repealed in the manner prescribed by the laws of the State of Delaware and all rights conferred upon shareholders are granted subject to this reservation. Under the Certiﬁcate of Incorporation, the following provisions in the Cer tiﬁcate of Incorporation may be amended, altered, repealed or rescinded, in whole or in part, directly or indirectly , only by an aﬃrmative vote of the holders of at least 66 and 2/3% of the voting rights of the Company’ s outstanding shares: Article V , Article VI, Ar ticle VII, Ar ticle VIII, Article IX, Ar ticle X and Article XI. The Company ’ s Board of Directors is authorized to adopt, amend or repeal the Bylaws without the assent or vote of the shareholders. The aﬃrmative vote of the holders of at least 66 and 2/3% of the voting power of the Company’ s outstanding shares shall be required in order for the Company’ s shareholders to alter , amend, repeal or rescind, in whole or in par t, any provision of the Bylaws or t o adopt any provision inconsistent therewith. As long as at least one Series A Preferr ed Share or one Series B Preferred Share is issued and outstanding, the Corporation shall not amend, alter , or repeal any provisions of the Certiﬁcate of Incorporation or Byla ws concerning rights of the holders of the Series A Preferr ed Shares or holders of the Series B Preferr ed Shares, without the written consent or aﬃrmati ve vote of the holders of at least a majority of the then outstanding Series A Pr eferred Shares and Series B Pref erred Shares. Changes in the basic principles of management The Issuer did not make any changes t o the basic principles of management of the Issuer’ s enterprise and its Group. Identiﬁcation of signiﬁcant cour t cases There are no signiﬁcant court cases pending. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 86 GL OSSAR Y ARPDAU Av erage r evenue per daily active user . ARPPU Av erage r evenue per paying user . DAU The number of individual users who playe d a game on a particular day . DPU The number of players (activ e users) who made a purchase on a giv en day . eCPI Cost of one Install in a given period (including installs acq uired from paid channels as w ell as installs not directly related to paid user acquisition channels). Free-t o-play A games sales model where the game is download ed by the user for free, and its cr eators earn money through in-app adv er tising or in-app purchases (players pur chase in-game items, skills, experience points, etc.). Casual games A type of game designed for players with the following features: (i) as a general rule, not feeling the need or not being able t o spend a signiﬁcant amount of time playing, (ii) not needing to impro ve their gaming skills in a signiﬁcant way , iii) preferring relativ ely simple and easy to learn game mechanisms. Social casino games The type of games in which a player can play a certain number of slot machines. The play er also has the opportunity to participate in other casino games Live events Real-time events, pro motions and special offers enabling pla yers to win additional prizes or to improv e gameplay . Live Ops Activities aimed at increasing the pla yer engagement, among others, by adding ne w features to games, recurring and one- off virtual events in which players can participate, and active management of promotions within the game. L TV Life-Time V alue – estimated total revenue gener ated from a model player . MAU The number of individual users who playe d a game during a particular month. Monthly Conversion The percentage of MAU that made at least one pur chase in a month during the same period. In-app purchases Pay ments made by users after downloading a game, in connectio n with the purchase of additional game f eatures. In-app purchases can be made through various non-cash payment instruments (e.g. payment card, transf er), various electronic channels (e.g. e-banking, mobile phone) or using payment service providers (e.g. Pa yPal). Monetization The process of generatin g revenue from games through, among other things, in-app purchases and in-app advertising. MPU MPU is deﬁned as the number of players (active users) who made a purchase at least once in a given month. Retention The number of users who continued to use the game after a cer tain period of time after downloading the application. User acquisition Process of the acquisition of users thr ough paid campaigns or promotional offers. Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 87 BOARD OF DIR EC TORS’ ST A TEMENTS Pursuant to the requirements of the Regulation of the Minister of Finance of March 29, 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 recogni zed as equivalent, the Boar d of Directors of Huuuge, Inc. hereby rep resents that: ● to the best of its knowledge the annual ﬁnancial statements and the comparative information were prepared in accordance with the currently effective accounting principles, and they reﬂect in a true, fair and clear way the ﬁnanc ial position results of the Company and the Board of Dir ectors’ report on activities contains a true image of the Company’ s development, achiev ements and standing, including description of basic risks and threats; ● within the scope of its competences, the Board of Directors supervised the process of preparing the annual ﬁnancial statements and the comparative information and the Board of Directors’ report on activities for the year ended December 31, 2020; ● the selection of the audit ﬁrm conducting the audit of the annual ﬁnancial statements has been made in accordance with the applicable regulations, including the select ion and procedure for the sele ction of an audit ﬁrm; ● the audit ﬁrm and the members of the audit team met the conditions for preparing an impartial and independent audit report on the annual ﬁnancial statements in accordance with applicable regulations, professional standards and professional ethics; ● it adopted a policy governing the selection of an audit ﬁrm and a policy governing the pr ovision of additional non-audit services to the issuer by an audit ﬁrm, its related parties and members of its network, including services conditionally exempt from the pr ohibition on being provided by an audit ﬁrm; ● the Company complies with the applicable regulations related to the rotation of the audit ﬁrm and the key statutory auditor and mandatory gr ace periods; ● the Company observes regulations which govern the appointment, co mposition and operations of the Audit Committee, including in par ticular the fulﬁlment of independence criteria by its members and requirements c oncerning knowledge and skills related to the industry in which the issuer operates, as well as to accounting or the audit of ﬁnancial statements; ● the audit committee performed the tasks of the audit committee provided for in the applicable r egulations; ● because of the Company' s monistic corporate governance system, the Company does not hav e a separate supervisory body within the meaning of § 70 (1) (14) and § 71 (1) (12) of the Regulation of the Minister of Finance of March 29, 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 (Journal of Laws of 2018, item 757). The Board of Directors has positively evaluated the ﬁnancial statements and the consolidated statements in terms of their conformity with the books and documents as well as with the facts. The Company's Boar d of Directors assessed the aforementioned statements after reviewing their content, as well as information from the Company’ s independent auditor and the Audit Committee of the Board of Directors, which included i/ the independent auditor’ s report on the audit of the Company’ s ﬁnancial statements for the ﬁscal year 2021, ii/ the independent auditor’ s report on the audit of the Company's cons olidated ﬁnancial statements for ﬁscal year 2021 and iii/ pr esentation of the auditor to the Audit Committee of the Board of Directors and the meetings of the Audit Committee with the representativ es of the auditor , including the key registered auditor , followed by a recommendation of the Audit Committee of the Board of Directors with respect to an ev aluation of the ﬁnancial statements and the consolidated ﬁnancial stat ements. In view of the above, the Board of Directors has made a positive assessment of the said ﬁnancial statements. Due to the Company’ s monistic corporate go vernance system, the Board of Dir ectors cannot make the declarations r eferred to in § 70 (1) (14) and § 71 (1) (12) of the Regulation of the of the Minister of Finance of March 29, 2018, on current and periodic information provided by issuers of securities and on conditions, regarding the issuer' s management report and the issuer's group management report, as the Board of Directors is itself responsible for the equivalent of the aforementioned reports (Board of Directors’ report on activities), which was prepared jointly for the Company and the Group; ● the Company being a Delaware-incorporated company is not subject to the obligation to prepare a statement of non-ﬁnancial information designated by Section 49b (1) of the Polish Accounting Act (Journal of Laws of 2021, item 217) and § 70 paragr aph 1 point 8) of the Regulation of the Minister of Finance of March 29, 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 ma y be recognized as equiv alent (Journal of Laws of 2018, item 757). On behalf of the Board of Dire ctors of Huuuge, Inc. ________ Anton Gauﬃn Chief Executive Oﬃcer & ex ecutive director Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 88 WRI T TEN CONSENT OF THE BOARD O F DIREC TORS Unanimous written consent of the Board of Dir ectors of Huuuge, Inc. The undersigned, being all of the members of the Board of Directors (the “Board”) of HUUUGE, INC., a Delaware corpor ation (the “Company ”), following diligent review of the facts and related documents, ha ve not uncover ed 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 a ccordance with Section 141(f) of the Delaware Gener al Corporation Law (“DGCL ”) and the Bylaws of the Company , and fur ther waive any and all notices that may be required t o be given with respect t o a meeting of the directors of the Company: Whereas , the Company’ s President, Anton Gauﬃn and the Company’ s Treasurer , Grzegorz Kania have presented to th e Board the consolidated ﬁnancial statements of the Company for the full year period ended December 31, 2021 (“Consolidated Financial Statements”), the standalone ﬁnancial statements of the Company for the full year period ended Decem ber 31, 2021 “Standalone Financial Statements”) and the consolidated and stand-alone annual report for the full year ended December 31, 2021 (including cer tain representatio ns of the Board to this report which are included therein in the document title d “Board of Directors’ Statements”) (“ Annual Repor t” and together with the Consolidated Financial Statements and Standalone Financial Statements, the “Reports”) as attached herein as Exhibit A to this Boar d Consent; and Whereas , the Company desire s to approv e and publish the Repor ts; Whereas , the Board is r equired to make certain representations within the Annual Report; Whereas , the Board has reviewed the Repor ts and intends with this Board Consent to give to Anton Gauﬃn authorization t o issue and execute the Reports on behalf of the Company . Now , Ther efore, it being in the best inter est of the Corporation, it is hereby: Resolved , that the Reports substantially in the form attached herein as Exhibit A to this Board Consent are her eby approv ed and Mr. Anton Gauﬃn is authorized to issue and execute the Repor ts on behalf of the Company as the Company’ s President and CEO; Resolved fur ther , that Mr . Anton Gauﬃn is authorized to execute on behalf of the Company the Repor ts substantially in the form attached herein as Exhibit A to this Board Consent, but with such changes and additions as Mr. Grzegorz Kania 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 . Grzegorz Kania’ s or his or their designee ’ s execution of the modiﬁcation, provided that notice is provided to the Board of any changes to the Repor ts that deviate from Exhibit A in a r easonable time after the Repor ts have been executed ); Resolved further, that Mr . Anton Gauﬃn, or any of his designee, as an authorized r epresentative of the Company , is individually further authorized and directed to ﬁle the Reports, with all exhibits thereto, and other documents in connection ther ewith, with the Polish Financial Supervision Authority (Komisja Nadzoru Finansoweg o) and to take all such further actions and to ex ecute 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 r esolutions; and Finally resolved , that any and all acti ons of Mr . Anton Gauﬃn and any of his agents or designees p ursuant 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 Boar d do hereby consent to and approv e the adoption of the foregoing resolutions effective as of the date ﬁrst written above. This consent may be execute d 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 DIREC TORS : Anton Gauﬃn John Salter Krzysztof Kaczmarczyk Henric Suuronen Rod Cousens Huuuge, Inc. Management Report for the twelve-month period ended December 31, 2021 89 HUUUGE, INC. 2300 W Sahara A ve., Suite #680, Mailbox #32, Las Vegas, NV 89102 United States of America Contact for Invest ors [email protected] https:/ /ir .huuugegames.com http:/ /huuugegames.com

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