Condensed interim consolidated financial statement of the CD PROJEKT Capital Group for the period between 1 January and 31 March 2018 (all figures quoted in PLN thousands unless indicated otherwise) The appended information constitutes an integral part of the consolidated financial statement.

Disclaimer

This English language translation has been prepared solely for the convenience of English speaking readers. Despite all the efforts devoted to this translation, certain discrepancies, omissions or approximations may exist. In case of any differences between the Polish and the English versions, the Polish version shall prevail. CD PROJEKT, its representatives and employees decline all responsibility in this regard.

CD PROJEKT Capital Group – Selected financial highlights converted into EUR

	PLN		EUR
	01.01.2018 - 31.03.2018	01.01.2017 - 31.03.2017*	01.01.2018 - 31.03.2018	01.01.2017 - 31.03.2017*
Net revenues from sales of products, services, goods and materials	75 435	99 342	18 054	23 162
Cost of products, services, goods and materials sold	16 133	14 823	3 861	3 456
Operating profit (loss)	27 899	53 830	6 677	12 550
Profit (loss) before tax	29 157	56 835	6 978	13 251
Net profit (loss) attributable to equity holders of parent entity	22 892	45 259	5 479	10 552
Net cash flows from operating activities	37 008	64 297	8 857	14 991
Net cash flows from investment activities	(19 862)	(157 216)	(4 753)	(36 655)
Net cash flows from financial activities	(11)	(295)	(3)	(69)
Total net cash flows	17 135	(93 214)	4 101	(21 733)
Stock volume (in thousands)	96 120	96 120	96 120	96 120
Net profit (loss) per ordinary share	0.24	0.47	0.06	0.11
Diluted profit (loss) per ordinary share	0.23	0.46	0.05	0.11
Book value per share (PLN/EUR)	9.45	8.56	2.25	2.03
Diluted book value per share (PLN/EUR)	9.07	8.33	2.16	1.97
Declared or paid out dividend per share (PLN/EUR)	-	-	-	-

* adjusted data

	PLN		EUR
	31.03.2018	31.12.2017	31.03.2018	31.12.2017
Total assets	999 992	981 513	237 612	235 324
Liabilities and provisions for liabilities (less accrued charges)	84 762	93 539	20 141	22 427
Long-term liabilities	2 892	4 130	687	990
Short-term liabilities	88 472	94 484	21 022	22 653
Equity	908 628	882 899	215 903	211 681
Share capital	96 120	96 120	22 839	23 045

The financial data has been converted into EUR under the following assumptions:

Elements of the consolidated profit and loss account and consolidated statement of cash flows were converted into EUR by applying the arithmetic average of exchange rates for the final day of each month belonging to the reporting period, as published by NBP. The corresponding exchange rates were: 4.1784 PLN/EUR for the period between 1 January and 31 March 2018, and 4.2891 PLN/EUR for the period between 1 January and 31 March 2017 respectively.
Assets and liabilities listed in the consolidated statement of financial positions were converted into EUR by applying the exchange rate for the final day of the reporting period, as published by the National Bank of Poland. These exchange rates were: 4.2085 PLN/EUR on 31 March 2018 and 4.1709 PLN/EUR on 31 December 2017 respectively.

Primary financial data of the CD PROJEKT Capital Group 6
Condensed interim consolidated profit and loss account7
Condensed interim consolidated statement of comprehensive income8

Condensed interim consolidated statement of financial position9
Condensed interim statement of changes in consolidated equity11
Condensed interim consolidated cash flow statement13
Clarifications regarding the condensed interim consolidated financial statement 15

General information16
Structure of the Capital Group16
Consolidation principles 17
Entities subjected to consolidation 17
Subsidiaries 17

Basis for the preparation of the condensed interim consolidated financial statement18
Assumption of going concern18
Compliance with International Financial Reporting Standards18
Standards and interpretations approved by the IASB but not yet approved by the EU 19
Functional currency and presentation currency19
Functional currency and presentation currency 19
Transactions and balances 19
Assumption of comparability of financial statements and changes in accounting policies19

Changes in accounting policies 20
Presentation changes 25
Financial audit26

Supplementary information – CD PROJEKT Capital Group activity segments27
Activity segments28
Presentation of results by activity segment 28
Disclosure of activity segments 29
Segmented consolidated profit and loss account for the period between 01.01.2018 and 31.03.2018 30

Segmented consolidated profit and loss account for the period between 01.01.2017 and 31.03.2017 31
Segmented consolidated statement of financial position as of 31.03.201833
Segmented consolidated statement of financial position as of 31.12.201735
Segmented consolidated statement of financial position as of 31.03.2017* 37
Activity segments 39
Disclosure of the issuer's significant accomplishments and shortcomings in each activity segment in the first quarter of 2018
39
Disclosure of factors which may affect future Group results 40
Disclosure of seasonal or cyclical activities41
Disclosure of key clients43

Supplementary information – additional notes and clarifications regarding the condensed interim consolidated financial
statement44

Note 1. Description of circumstances affecting assets, liabilities, equity, net financial result and cash flows which are unusual
due to their type, size or effect 45
Note 2. Tangible fixed assets 45
Note 3. Intangibles and expenditures on development projects 46
Note 4. Goodwill 46
Note 5. Inventories47

Note 6. Trade and other receivables47
Note 7. Prepaid expenses 49
Note 8. Deferred income tax 49
Note 9. Provisions for employee benefits and similar liabilities50
Note 10. Other provisions 51
Note 11. Other liabilities 51
Note 12. Disclosure of financial instruments 52
Note 13. Sales revenues 52

Note 14. Operating costs 53
Note 15. Other operating revenues and expenses 53
Note 16. Financial revenues and expenses 54
Note 17. Issue, buyback and redemption of debt and capital securities 54
Note 18. Dividends declared or paid out 55
Note 19. Transactions with affiliates 55
Note 20. Bad loans and breaches of loan agreements not subject to remedial proceedings as of the balance sheet date . 58
Note 21. Changes in conditional liabilities and assets since the close of the most recent fiscal year 59

Note 22. Changes in the structure of the Capital Group and its member entities occurring during the reporting period 61
Note 23. Agreements which may, in the future, result in changes in the proportion of shares held by shareholders and
bondholders 61

Note 24. Fiscal settlements 61

	Note 25. Clarifications regarding the condensed interim consolidated statement of cash flows 62
	Note 26. Events occurring after the balance sheet date 63
	Supplementary information64
	Legal proceedings 65
	Shareholder structure65
	Company shares held by members of the Management Board and Supervisory Board 66
	Validation of published projections66
	Condensed interim separate financial statement of CD PROJEKT S.A67
	Condensed interim separate profit and loss account68
	Condensed interim separate statement of comprehensive income69
	Condensed interim separate statement of financial position 69
	Condensed interim statement of changes in separate equity71
	Condensed interim statement of changes in separate cash flows 73
	Assumption of comparability of financial statements and changes in accounting policies74
	Changes in accounting policies 74
	Presentation changes74
	Supplementary information concerning the separate financial statement of CD PROJEKT S.A 75
A.	Deferred income tax 75
B.	Goodwill76
C.	Business combinations 76
D.	Dividends paid out or collected76
E.	Trade and other receivables 76
F.	Disclosure of financial instruments78
G.	Transactions with affiliates 79
	Statement of the Management Board of the parent entity 81

Primary financial data of the CD PROJEKT Capital Group

Condensed interim consolidated profit and loss account

	Note	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Sales revenues		75 435	99 342
Revenues from sales of products	13	52 217	77 710
Revenues from sales of services	13	5	43
Revenues from sales of goods and materials	13	23 213	21 589
Cost of products, goods and materials sold		16 133	14 823
Cost of products and services sold	14	28	62
Value of goods and materials sold	14	16 105	14 761
Gross profit (loss) from sales		59 302	84 519
Other operating revenues	15	319	433
Selling costs	14	22 775	22 434
General and administrative costs	14	8 804	8 440
Other operating expenses	15	324	248
(Impairment losses)/Reversal of impairment losses of financial instruments		181	-
Operating profit (loss)		27 899	53 830
Financial revenues	16	1 636	3 869
Financial expenses	16	378	864
Profit (loss) before tax		29 157	56 835
Income tax	8	6 265	11 576
Net profit (loss)		22 892	45 259
Net profit (loss) attributable to equity holders of parent entity		22 892	45 259
Net earnings per share (in PLN)
Basic for the reporting period		0.24	0.47
Diluted for the reporting period		0.23	0.46

The most important contribution to CD PROJEKT Capital Group revenues in Q1 2018 was from Revenues from sales of products, which include licensing royalties corresponding to strong ongoing sales of The Witcher 3: Wild Hunt, along with its expansion packs – Hearts of Stone and Blood and Wine, as well as revenues obtained in the scope of GWENT: The Witcher Card Game. Revenues from sales of goods and materials were primarily driven by sales carried out by GOG.com, as well as – to a lesser extent – sales of physical videogame components (carrier media, boxes etc.) by CD PROJEKT RED.

Since all expenses associated with development of currently marketed CD PROJEKT RED products (including The Witcher, The Witcher 2, The Witcher 3, Hearts of Stone and Blood and Wine) had already been fully discounted, the CD PROJEKT Group – much like in the corresponding period in 2017 – reported no significant Cost of products and services sold during Q1 2018. The most important cost item affecting the Group's overall pre-tax profit was the Cost of products and materials sold, mostly related to sales of external products via the GOG.com platform, as well as – to a lesser extent – sales of physical videogame components (carrier media, boxes etc.) by CD PROJEKT RED.

Regarding operating costs, the key item was Selling costs, the bulk of which was associated with promotional activities carried out in each of the Group's activity segments, in addition to transaction costs related to digital sales on the GOG.com platform. Furthermore, this line item aggregates employee compensation and provisions for bonuses contingent upon the Group's financial result.

Compensation and provisions for bonuses contingent upon the Group's financial result also constitute the bulk of General and administrative expenses.

The aggregate value of General and administrative expenses and Selling costs in Q1 2018 was comparable to the corresponding Q1 2017 figure.

The reported surplus of Financial revenues over Financial expenses is mainly due to collection of interest on short-term bank deposits.

The Group's consolidated Net profit in Q1 2018 was lower than the corresponding Q1 2017 figure. While operating expenses remained at a similar level, sales revenues were lower – a natural consequence of the passage of time since the release of The Witcher 3 and its expansion packs, and also of the strengthening of PLN against currencies in which the Group's conducts most of its sales (USD and EUR).

A separate commentary on the Q1 2018 result of the GOG.com segment can be found in Section 3 of this financial statement, detailing the activity segments of the CD PROJEKT Capital Group.

The Group's net profitability (share of net profit in sales revenues) in Q1 2018 was 30%.

Condensed interim consolidated statement of comprehensive income

	01.01.2018 – 31.03.2018	01.03.2017 – 31.03.2017
Net profit (loss)	22 892	45 259
Other comprehensive income which will be entered as profit (loss) following fulfillment of specific criteria	(13)	(1 444)
exchange rate differences on valuation of foreign entities	(13)	(1 444)
Other comprehensive income which will not be entered as profit (loss)	-	-
Total comprehensive income	22 879	43 815
Comprehensive income attributable to minority interests	-	-
Total comprehensive income attributable to equity holders of CD PROJEKT S.A.	22 879	43 815

Condensed interim consolidated statement of financial position

	Note	31.03.2018	31.12.2017	31.03.2017
FIXED ASSETS		279 405	255 535	188 377
Tangible assets	2	18 869	18 832	16 146
Intangibles	3	46 498	46 853	46 263
Expenditures on development projects	3	165 164	142 486	79 064
Goodwill	3,4	46 417	46 417	46 417
Shares in subsidiaries excluded from consolidation	12	452	452	-
Deferred income tax assets	8	1 504	-	-
Other long-term receivables	12	501	495	487
CURRENT ASSETS		720 587	725 978	720 358
Inventories	5	272	323	490
Trade receivables	6,12	21 453	46 261	39 963
Current income tax receivables		1 437	-	5 378
Other receivables	6	17 518	17 582	15 844
Prepaid expenses	7	17 868	14 296	12 251
Cash and cash equivalents	12	84 122	66 987	124 155
Bank deposits (maturity beyond 3 months)	12	577 917	580 529	522 277
TOTAL ASSETS		999 992	981 513	908 735

The value and structure of Fixed assets did not undergo appreciable changes in Q1 2018 except for Expenditures on development projects, which increased as a result of ongoing development of future products – including the Group's largest projects, i.e. Cyberpunk 2077, GWENT: The Witcher Card Game (which remains in open beta as of the publication date of this statement) and GWENT: Thronebreaker.

The reduction in the Group's Trade receivables compared to the end of 2017 is associated with collection of receivables outstanding at the end of Q4 2017 – a period during which the Group reported strong sales, resulting in an increase in the value of trade receivables at the end of the year.

The group's Other receivables are mostly due to withholding tax deducted at source by foreign licensees of CD PROJEKT S.A. and reportable in the Company's annual fiscal statement, in addition to advance payments remitted to suppliers and VAT receivables.

With regard to Prepaid expenses, the most important contribution to the reported figure was from minimum guarantees, i.e. licensing royalties advanced by GOG sp. z o.o. to copyright holders in association with distribution of videogames on GOG.com.

At the end of March 2018 the Group held 84 122 thousand PLN in Cash and cash equivalents and an additional 577 917 thousand PLN in Bank deposits (maturity beyond 3 months), for a total of 662 039 thousand PLN. This represents an increase by 14 523 thousand PLN compared to the end of 2017.

	CD PROJEKT

	Note	31.03.2018	31.12.2017	31.03.2017*
EQUITY		908 628	882 899	823 236
Equity attributable to equity holders of parent entity		908 628	882 899	823 236
Share capital	17	96 120	96 120	96 120
Supplementary capital		551 776	549 335	403 001
Other reserve capital		18 166	15 212	7 278
Exchange rate differences		105	118	2 474
Retained earnings		219 569	21 844	269 104
Net profit (loss) for the reporting period		22 892	200 270	45 259
LONG-TERM LIABILITIES		2 892	4 130	2 225
Other financial liabilities	12	-	148	233
Deferred income tax liabilities	8	-	1 878	1 038
Deferred revenues		2 811	2 023	897
Provisions for employee benefits and similar liabilities	9	81	81	57
SHORT-TERM LIABILITIES		88 472	94 484	83 274
Credits and loans		-	-	2
Other financial liabilities	12	233	190	234
Trade liabilities	12	31 460	37 374	18 478
Current income tax liabilities		388	3 457	484
Other liabilities	11	4 493	6 770	7 752
Deferred revenues		3 791	3 052	3 598
Provisions for employee benefits and similar liabilities	9	1	1	147
Other provisions	10	48 106	43 640	52 579
TOTAL EQUITY AND LIABILITIES		999 992	981 513	908 735

* adjusted data

The reported increase in Equity over the first quarter of 2018 is mostly due to profit obtained in the reporting period (22 892 thousand PLN).

As of 31 March 2018 the Group's Trade liabilities comprised mainly liabilities of the GOG.com segment (including liabilities payable to CD PROJEKT S.A., associated with distribution of CD PROJEKT RED products on GOG.com and subject to consolidation eliminations), and – to a much lesser extent – trade liabilities of the CD PROJEKT RED segment.

Other liabilities were primarily related to current VAT liabilities at GOG sp. z o.o.

The bulk of Other provisions comprises provisions for future liabilities, including conditional compensation contingent upon the Group's financial result.

Condensed interim statement of changes in consolidated equity

	Share capital	Supplement ary capital	Other reserve capital	Exchange rate differences	Retained earnings	Net profit (loss) for the reporting period	Parent entity shareholders' equity	Minority interest equity	Total equity
01.01.2018 – 31.03.2018
Equity as of 01.01.2018	96 120	549 335	15 212	118	222 114	-	882 899	-	882 899
rectification of fundamental errors	-	2 441	-	-	(2 545)	-	(104)	-	(104)
Equity after adjustments	96 120	551 776	15 212	118	219 569	-	882 795	-	882 795
Cost of incentive program	-	-	2 954	-	-	-	2 954	-	2 954
Total comprehensive income	-	-	-	(13)	-	22 892	22 879	-	22 879
Equity as of 31.03.2018	96 120	551 776	18 166	105	219 569	22 892	908 628	-	908 628

GOG Sp. z o.o. rectified erroneous recognition of income tax and coverage of loss incurred in 2016 in its financial statement for 31 December 2017. As a result of this adjustment the following line items were adjusted:

Reserve capital adjusted by 2 441 thousand PLN,
Retained earnings adjusted by (2 545) thousand PLN.

The above changes resulted in a reduction in the reported equity by 104 thousand PLN.

	Share capital	Supplementa ry capital	Other reserve capital	Exchange rate differences	Retained earnings	Net profit (loss) for the reporting period	Parent entity shareholders' equity	Minority interest equity	Total equity
01.01.2017 – 31.12.2017
Equity as of 01.01.2017	96 120	403 001	4 795	3 918	269 104	-	776 938	-	776 938
Cost of incentive program	-	-	10 417	-	-	-	10 417	-	10 417
Allocation of net profit/coverage of losses	-	146 334	-	-	(146 334)	-	-	-	-
Dividend payments	-	-	-	-	(100 926)	-	(100 926)	-	(100 926)
Total comprehensive income	-	-	-	(3 800)	-	200 270	196 470	-	196 470
Equity as of 31.12.2017	96 120	549 335	15 212	118	21 844	200 270	882 899	-	882 899

	Share capital	Supplementa ry capital	Other reserve capital	Exchange rate differences	Retained earnings	Net profit (loss) for the reporting period	Parent entity shareholders' equity	Minority interest equity	Total equity
01.01.2017 – 31.03.2017
Equity as of 01.01.2017	96 120	403 001	4 795	3 918	269 104	-	776 938	-	776 938
Cost of incentive program	-	-	2 483	-	-	-	2 483	-	2 483
Total comprehensive income	-	-	-	(1 444)	-	45 259	43 815	-	43 815
Equity as of 31.03.2017	96 120	403 001	7 278	2 474	269 104	45 259	823 236	-	823 236

Condensed interim consolidated cash flow statement

	Note	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017*
OPERATING ACTIVITIES
Net profit (loss)		22 892	45 259
Total adjustments:	25	22 108	33 731
Depreciation of fixed assets and intangibles		1 186	1 183
Interest and profit sharing		(1 636)	(3 401)
Profit (loss) from investment activities		(29)	249
Change in provisions		4 466	7 401
Change in inventories		51	(89)
Change in receivables		24 866	36 016
Change in liabilities excluding credits and loans		(7 706)	(12 059)
Change in other assets and liabilities		(2 045)	3 160
Other adjustments		2 955	1 271
Cash flows from operating activities		45 000	78 990
Income tax on pre-tax profit (loss)		6 265	11 576
Income tax (paid)/reimbursed		(14 257)	(26 269)
Net cash flows from operating activities		37 008	64 297
INVESTMENT ACTIVITIES
Inflows		183 414	343 237
Disposal of intangibles and fixed assets		-	1
Closing bank deposits (maturity beyond 3 months)		181 871	339 835
Other inflows from investment activities		1 543	3 401
Outflows		203 276	500 453
Purchases of intangibles and fixed assets		2 768	2 157
Expenditures on development projects		21 249	16 019
Opening bank deposits (maturity beyond 3 months)		179 259	482 277
Net cash flows from investment activities		(19 862)	(157 216)
FINANCIAL ACTIVITIES
Inflows		93	2
Credits and loans		-	2
Other inflows from financial activities		93	-
Outflows		104	297
Payment of liabilities under financial lease agreements		104	297
Net cash flows from financial activities		(11)	(295)
Total net cash flows		17 135	(93 214)
Change in cash and cash equivalents on balance sheet		17 135	(93 214)
Cash and cash equivalents at beginning of period		66 987	217 369
Cash and cash equivalents at end of period		84 122	124 155
* adjusted data

The reported Cash flows from operating activities in Q1 2017 were 37 008 thousand PLN, chiefly as a result of sales and financial result for the current period, along with a reduction in the Group's trade receivables corresponding to Q4 2017 sales.

The negative value of Cash flows from investment activities is mostly due to R&D expenditures – 21 249 thousand PLN in the first quarter of 2018, allocated primarily to development of Cyberpunk 2077, GWENT: The Witcher Card Game and GWENT: Thronebreaker. Additionally, the Group reported as investment outflows its cash assets allocated to bank deposits with maturity periods beyond 3 months (179 259 thousand PLN), while similar bank deposits held to maturity were reported as inflows (181 871 thousand PLN).

The balance of the Group's Total net cash flows over the first three months of 2018 was 17 135 thousand PLN. As of 31 March 2018 the Group held 84 122 in cash assets and 577 917 in bank deposits with maturity periods in excess of 3 months, for a total of 662 039 thousand PLN, which corresponds to an increase by 14 523 thousand PLN compared to the end of 2017.

Clarifications regarding the condensed interim consolidated financial statement

General information

Name:	CD PROJEKT S.A.
Legal status:	Joint-stock company
Headquarters:	Jagiellońska 74, 03-301 Warsaw
Country of registration:	Poland
Principal scope of activity:	CD PROJEKT S.A. is the holding company of the CD PROJEKT Capital Group which conducts its operations in two activity segments: CD PROJEKT RED (videogame development) and GOG.com (digital distribution of videogames).
Keeper of records:	District Court for the City of Warsaw in Warsaw – Poland; 13th Commercial Department of the National Court Register (Sąd Rejonowy dla m.st. Warszawy w Warszawie, XIII Wydział Gospodarczy Krajowego Rejestru Sądowego)
Statistical Identification Number (REGON):	492707333

The Group is established for an indefinite period. No changes in the composition of the Group occurred during the three-month period ending on 31 March 2018.

Structure of the Capital Group

Affiliates

Consolidation principles

Entities subjected to consolidation

	capital share	voting share	consolidation method
CD PROJEKT S.A.	parent entity	-	-
GOG sp. z o.o.	100%	100%	full
CD PROJEKT Inc.	100%	100%	full
CD PROJEKT Co., Ltd.	100%	100%	excluded from consolidation

In accordance with the accounting policies in force within the Group, the parent entity may elect to exclude certain subsidiaries from consolidation as long as each of these subsidiaries:

contributes not more than 2% to the parent entity's profit and loss balance,
contributes not more than 1% to the parent entity's aggregate sales and financial revenues.

Note that the above values are not inclusive of any transactions between the subsidiary and the parent company which would have otherwise been subject to consolidation eliminations.

In addition to the above, all subsidiaries excluded from consolidation must jointly:

contribute not more than 5% to the parent entity's profit and loss balance,
contribute not more than 2% to the parent entity's aggregate sales and financial revenues.

The above values are also not inclusive of any transactions between each subsidiary and the parent company which would have otherwise been subject to consolidation eliminations.

Subsidiaries

Subsidiaries are defined as all entities which fall under the Group's control. An entity is considered to fall under the Group's control if all of the following criteria are met:

executive control, i.e. possession of the required legal title to direct the entity's significant operations (operations, which significantly affect the entity's financial standing),
exposure to variation in the entity's financial results, or possession of the required legal title to adjust the Group's financial results in relation to the entity's own financial results.
possession of the required administrative apparatus to affect the Group's own financial results by exercising the right to affect financial results attributable to the Group by leveraging the Group's involvement in the entity

Subsidiaries which meet materiality criteria are subject to full consolidation from the date of acquisition of control by the Group and cease to be reported as such on the day control is lost.

Any revenues, expenses, settlements and unrealized gains on transactions between companies belonging to the Group are eliminated in full. Unrealized losses are also eliminated unless the nature of the transaction indicates impairment on any of the transferred assets. Accounting practices in use at subsidiary companies are adjusted whenever necessary to ensure compliance with accounting practices adopted by the Group.

Basis for the preparation of the condensed interim consolidated financial statement

This condensed interim consolidated financial statement is prepared in compliance with International Accounting Standard 34 (IAS 34), Interim financial reporting, approved for use within the EU.

The condensed interim consolidated financial statement does not contain all the information and disclosures which would otherwise be required in an annual financial statement. Accordingly, this statement should be read in conjunction with the Consolidated Financial Statement of the CD PROJEKT Capital Group for 2017, approved for publication on 22 March 2018.

Assumption of going concern

This condensed interim consolidated financial statement is prepared under the assumption that the Group and its parent entity intend to continue as a going concern in the foreseeable future, i.e. at least throughout the 12-month period following the balance sheet date.

The Management Board of the parent entity is not aware of any facts or circumstances which would jeopardize the assumption of going concern within said 12-month period by way of intended or forced cessation or significant reduction of continuing operations.

As of the day of preparation of this financial statement covering the period between 1 January and 31 March 2018 the Management Board is not aware of any events which should have been reflected in the accounts for that period but have not been reflected therein. Additionally, no important events have occurred in relation to the preceding years.

Compliance with International Financial Reporting Standards

This condensed interim consolidated financial statement has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as well as with International Financial Reporting Standards (IFRS) applicable to interim financial reporting, endorsed by the International Accounting Standard Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and approved by the EU under the relevant Regulation on the Application of International Accounting Standards (European Council 1606/2002), hereafter referred to as UE IFRS, valid for 31 March 2018.

UE IFRS comprise standards and interpretations endorsed by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), approved for use in the EU.

Where the above mentioned standards are not applicable the statement conforms to the Accounting Act of 29 September 1994 (Journal of Laws of the Republic of Poland, 2018, item. 395 as amended) and to any secondary legislation based on said Act, as well as to the directive of the Finance Minister of 29 March 2018 regarding the publication of periodic and current reports by issuers of securities and conditions for regarding as equivalent the information required under the laws of a non-member state (Journal of Laws of the Republic of Poland, 2018, item 757).

The Group intends to apply amendments to IFRS which have been published but have not yet entered into force on the publication date of this condensed interim consolidated financial statement. Information regarding standards and interpretations applied for the first time, early application of new standards, standards which have entered into force on or after 1 January 2018 and the effect of changes in IFRS upon the Group's future financial statements is provided in Section 3 of the Group's Consolidated Financial Statement for 2017.

Standards and interpretations approved by the IASB but not yet approved by the EU

In approving this financial statement the Group did not apply the following standards, amendments and interpretations which have not yet been approved for use in the EU:

Amendments to IAS 19 Employee benefits: plan amendment, curtailment or settlement applicable to reporting periods beginning on or after 1 January 2019
Amendments to IAS 28 Long-term interests in associates and joint ventures applicable to reporting periods beginning on or after 1 January 2019
Amendments to IFRS (2015-2017) adopted under the annual IFRS improvements cycle applicable to reporting periods beginning on or after 1 January 2019
IFRIC 23 Uncertainty over income tax treatments interpretation applicable to reporting periods beginning on or after 1 January 2019
Amendments to references to the Conceptual Framework in IFRS Standards applicable to reporting periods beginning on or after 1 January 2020
IFRS 17 Insurance Contractors applicable to reporting periods beginning on or after 1 January 2021

As of the date of publication of this financial statement, the Group is performing an assessment of the effect these new standards and amendments to standards upon the Group's consolidated financial statement.

Functional currency and presentation currency

The functional currency of the Group and its parent entity, and the presentation currency of this financial statement is the Polish Zloty (PLN). Unless specified otherwise, all figures are quoted in PLN thousands.

Transactions and balances

Transactions denominated in foreign currencies are converted to the functional currency according to the exchange rate on the date of the transaction. Exchange rate losses and gains on settlement of transactions and on valuation of assets and liabilities denominated in foreign currencies are reported in the profit and loss statement unless deferred in the equity capital as cash flow hedges and hedges of net investments.

Assumption of comparability of financial statements and changes in accounting policies

The accounting practices applied in preparing this condensed interim consolidated financial statement, the Management Board's professional judgment concerning the Group's accounting practices as well as the main sources of uncertainty in estimations are in all material aspects consistent with the practices applied in preparing the Consolidated Financial Statement of the CD PROJEKT Capital Group for 2017, except for changes in accounting policies and presentation-related adjustments described below. This condensed interim consolidated financial statement should be read in conjunction with the Group's consolidated financial statement for 2017.

Changes in accounting policies

IFRS 9 Financial instruments

This financial statement marks the first time the Group has applied IFRS 9 Financial instruments. The Group has opted to forgo adjusting data representing past reporting periods, except for adjustments associated with changes introduced by IFRS in relation to IAS 1 Preparation of financial statements, which mandate recognition of impairment losses (including reversal of impairment loses or gains) on financial instrument as a separate line item in the profit and loss account. As a consequence of this change, the comparative data in the profit and loss account for the three-month period between 1 January and 31 March 2017 has been adjusted accordingly. The reported adjustment concerns presentation of data only and has no impact on the Group's operating profit. Previously, all such costs had been aggregated with other operating expenses.

The Group had initially planned to aggregate the effects of initial application of IFRS 9 in its opening balance of retained earnings; however, given the fact that the loss allowances on financial assets calculated for 1 January 2018 in accordance with the new rules are not materially different from allowances already reported in the Group's financial statement for 31 December 2017, the Group has instead decided to forgo adjusting its opening balance of retained earnings in association with applying IFRS 9 for the first time.

IFRS 9 defines four categories of financial assets, differing with regard to the applied business model and the characteristics of the associated cash flows:

assets classified at amortized cost this category comprises financial assets held under a business model whose aim is to collect contractual cash flows, where the business contract concerning these assets stipulates cash flows related solely to repayment of the principal and interests; in other words, assets which pass the so-called SPPI test (solely payment of principal and interest),
assets classified at fair value reported in other comprehensive income this category comprises financial assets held under a business model whose aim is to both collect contractual cash flows and to potentially sell the relevant assets, where the business contract concerning these assets stipulates cash flows related solely to repayment of the principal and interests; in other words, assets which pass the so-called SPPI test (solely payment of principal and interest),
assets classified at fair value through profit and loss all other financial assets,
financial hedges derivative financial instruments designated as hedges.

Each financial asset is assigned to one of the above categories on initial recognition. This assignment may change only if the associated business model changes. Essential classes of business models are as follows: assets held to collect contractual cash flows; assets held to collect contractual cash flows and potentially sell the asset; assets held for reasons others than those listed previously (as a rule, this is construed as holding assets for trading). The Group has adopted a rule stating that the sale of a financial asset prior to its maturity does not, in itself, cause the underlying business model to shift from holding assets to collect contractual cash flows to holding assets to collect contractual cash flows and potentially sell the assets or to holding assets for other purposes.

As the Group does not engage in hedge accounting, the corresponding IFRS 9 provisions do not apply to the Group's activities.

IFRS 9 does not result in a change in the classification of the Group's financial liabilities, which will continue to be recognized at amortized cost.

The following table illustrates changes in the classification of financial instruments as of 1 January 2018 which is the date of initial application of IFRS 9 at the Group. Applying the new standard in place of IAS 39 has not resulted in a methodological change in the appraisal of financial assets and liabilities. The default appraisal method continues to be the amortized cost method; consequently, the balance of financial assets and liabilities on the initial application day of IFRS 9 remains unchanged in comparison with IAS 39.

	Classification according to:	Balance sheet value
Financial asset	IAS 39	IFRS 9	under IAS 39 and IFRS 9 as of 1 January 2018
Other long-term receivables	Loans and receivables recognized at amortized cost	Financial assets recognized at amortized cost	495
Trade receivables	Loans and receivables recognized at amortized cost	Financial assets recognized at amortized cost	46 261
Cash and cash equivalents	Loans and receivables recognized at amortized cost	Financial assets recognized at amortized cost	66 987
Bank deposits (maturity beyond 3 months)	Loans and receivables recognized at amortized cost	Financial assets recognized at amortized cost	580 529
Shares in subsidiaries excluded from consolidation	Assets held for trading recognized at purchase price (adjusted for impairment losses – according to IFRS 10)	Assets held for trading recognized at purchase price (adjusted for impairment losses – according to IFRS 10)	452

Financial liability	Classification according to:	Value under IAS 39 and IFRS 9 as of 1 January
	MSR 39	MSSF 9	2018
Liabilities associated with delivery of goods and services	Financial liabilities recognized at amortized cost	Financial liabilities recognized at amortized cost	37 374
Other financial liabilities	Financial liabilities recognized at amortized cost	Financial liabilities recognized at amortized cost	338

Another major change introduced by IFRS 9 concerns recognition of credit risk in association with assets which constitute financial instrument. The existing present losses model has been replaced by a new expected losses model.

The basis for determining loss allowances in the ECL (expected credit loss) model is a procedure under which the Group monitors changes in credit risk associated with each financial asset since its initial recognition, and assigns each financial asset to one of the following three stages (this method is applicable to financial assets held at amortized cost which are not trade receivables):

Stage 1 performing (applicable to financial assets which show no significant deterioration in credit quality since initial recognition)
Stage 2 under-performing (applicable in cases of significant deterioration in credit quality when there are no objective reasons to suspect impairment)
Stage 3 impaired (applicable in cases where objective reasons to suspect impairment exist)

With regard to Stage 1 assets the Group calculates ECL over the upcoming 12 months and recognizes the appropriate allowance, whereas with regard to Stages 2 and 3 the Group recognizes a loss allowance corresponding to the ECL over the entire lifetime of the given financial asset.

For each balance sheet date the Group performs an assessment of its financial assets with respect to the presented ECL stages. In doing so, the Group acknowledges changes in the risk of default during the expected lifetime of the financial asset rather than the corresponding changes in expected credit losses. The procedure requires the Group to compare the risk of default for a given financial instrument on the balance sheet date with the corresponding risk on its initial recognition, taking into account all rational and documented information which may be acquired without undue cost or effort, and which suggests a significant increase in credit risk since initial recognition. Such information may include changes in the debtor's credit rating, awareness of the debtor's financial distress or of detrimental changes in the debtor's economic, legal, technological or market environment. When assessing ECLs the Group relies primarily on credit ratings and the corresponding likelihood of insolvency.

With regard to trade receivables the Group applies the simplified approach provided for by the standard and recognizes a loss allowance corresponding to the ECL over the entire lifetime of the given receivable. This approach is a consequence of the fact that the Group's receivables do not involve a significant financing element as defined by IFRS 15. When calculating the relevant loss allowances the Group applies the provision matrix method under which allowances are calculated separately for each overdue period bracket. This method acknowledges historical credit losses as well as identifiable future factors and (e.g. market or macroeconomic projections).

The likelihood of credit default is estimated on the basis of historical data concerning overdue receivables. In order to calculate non-performance coefficients the Group has decided upon five overdue period brackets:

1. Not overdue,
1. Overdue by 1-60 days,
1. Overdue by 61-90 days,
1. Overdue by 91-180 days,
1. Overdue by 181-360 days,
1. Overdue by more than 360 days.

For each of the above brackets the Group estimates a non-performance coefficient which acknowledges historical data concerning failure to settle invoices on the part of the Group's business partners throughout three years prior to the reporting period covered by the given financial statement. The expected credit loss is then computed by multiplying the aggregate receivables in a given bracket by the non-performance coefficient corresponding to that bracket.

With regard to trade receivables the Group also allows for custom appraisal of the expected credit losses. In particular this applies to:

receivables from debtors undergoing liquidation or insolvency proceedings,
receivables contested by the debtor or cases where the debtor is in arrears,
other past-due receivables as well as receivables which are not overdue, but whose default risk is, in the Board's opinion, significant (in particular case where the expected litigation and enforcement costs exceed the amount in controversy).

In the above cases the Group may recognize loss allowances corresponding to 100% of the given receivable.

The Group may refrain from recognizing loss allowances on receivables which are overdue by more than 360 days if, following individual analysis, the Group concludes that it is in possession of a credible and documented declaration of payment issued by the debtor.

Financial assets are written off in full once the Group has exhausted all practical enforcement options and concludes that there are no longer any rational grounds to expect collection of the receivable. This is usually the case when a receivable is overdue by more than 360 days.

As of 31 December 2017 and as of 31 March 2018 the Group has not identified any financial assets for which it would be permitted to apply recognition at fair value through financial result so as to reduce or eliminate accounting mismatch (i.e. inconsistency between recognition and evaluation) which would otherwise arise as a result of recognition of financial assets at amortized cost or at fair value through other comprehensive income.

The Group has also not availed itself of the option to recognize financial liabilities at fair value. In such cases, changes in fair value which correspond to changes in credit risk would be aggregated with other comprehensive income while – once the given financial liability is derecognized – the value previously aggregated with other comprehensive income would not be allocated to the financial result.

IFRS 15 and clarifications regarding IFRS 15 – Revenues from contracts with customers

This financial statement marks the Group's initial application of IFRS 15 Revenues from contracts with customers. This standard institutes the so-called Five Step Model when recognizing revenues from contracts with customers. According to IFRS 15, the revenue is recognized at the transaction price, which – in line with the entity's expectations – is payable in exchange for the products or services delivered to the customer. The new standard supersedes all existing requirements concerning recognition of revenues under IFRS.

Licensing royalties associated with distribution of videogames

Under the new regulation, entities which grant customers licenses to use their intellectual property must determine whether the license is transferred to the customer over a period of time or at a specific point in time. Licenses transferred at a point in time give the customer the right to use the entity's intellectual property as it existed at the moment the license was transferred. In order to recognize the corresponding revenue, the customer must possess the means to direct the use of the corresponding intellectual property, and gain all other essential benefits associated with its use. A license transferred over a period of time permits the client to use the intellectual property throughout the license period. During this period the client may expect that the entity will undertake actions which significantly affect the relevant intellectual property (i.e. significantly alter its form or content, with the client's ability to gain the benefits of its use dependent on actions undertaken by the owner). In such cases the revenue is recognized over the license period.

With regard to videogame licensing royalties, which represent the Group's main source of revenues, the actual value of revenues depends the sales volume reported by the distributor during a given period. In light of this, revenues from sales of a specific product will be recognized over time once the distributor obtains all materials required in order to commence distribution. Consequently, no changes in the Group's accounting practices are necessary compared to IAS 18 (previously applied at the Capital Group).

Revenues from sales of virtual goods via microtransactions

In the Group's view, IFRS 15 may affect recognition of revenues from sales of virtual goods in the framework of online F2P games with optional microtransactions, including GWENT: The Witcher Card Game. This conclusion indicates the need to conduct an analysis (mandated by IFRS 15) whether such products and services concerned are delivered to customers over time or at a specific point in time.

As a rule, virtual goods offered in videogames are divided into two categories: durable virtual goods (where the user gains the right to use an item indefinitely and the item is not consumed during its use) and consumable virtual goods. With regard to the former category, revenues are recognized over time, based on in-game statistics (such as the usage period of a given item), while for the latter category, revenues are recognized either at the moment of use or in proportion to the amount of goods consumed.

With regard to revenues from sales of virtual currencies, the Group will recognize them at the moment the currency is consumed by the user.

In light of the above the Group has conducted an analysis of the structure of virtual goods sold, their corresponding usage statistics and the turnover of the game's virtual currency (meteorite dust). It was concluded that application of IFRS 15 does not produce a material change in the reported financial data. Consequently, the Board has opted not to recognize revenues from sales of virtual goods over time.

During the assessment of the impact of the new standard on the Group's financial statement it was determined that IFRS 15 does not materially alter the recognition of revenues by the Capital Group given the existing mechanics and usage statistics of GWENT. Nevertheless, it should be noted that GWENT remains in its development and testing phase and, consequently, the presented assessment may not hold during future reporting periods.

Should the Group determine that, as a result of changes in game mechanics, recognition of revenues from microtransactions over time has become necessary, the corresponding values will be aggregated with deferred revenues.

Principal compensation vs. agent compensation in the GOG.com segment

In line with the new standard, when delivery of goods or services to the client involves a third party, it is necessary to determine whether the vendor's obligation is to ensure that certain goods or services are provisioned (in which case the vendor is the principal) or to subcontract delivery of goods or services to another party (in which case the vendor is an agent).

The vendor is the principal to the transaction if it exerts controls over the specified goods or services prior to their delivery to the client. A principal vendor may itself discharge the delivery promise and recognize gross revenues to which it is entitled in exchange for delivery of goods or services.

The vendor is an agent if its obligation is discharged by ensuring that the goods or services are delivered by another party. An agent vendor recognizes its revenues as any fees or royalties to which – in its own view – it will be entitled in exchange for facilitating delivery of goods or services by a third party.

The above considerations may have an effect only on those revenues which the Group obtains in its GOG.com segment in association with distribution of licenses obtained from third parties. In this activity segment the Group concludes contracts with end users in its own name and on its own account, on the basis of distribution licenses for the electronic content which is distributed to end users. The Group also directly maintains and distributes the electronic content in question (i.e. game files). This indicates that the nature of the Group's promise to the customer is to deliver specific goods or services and not to subcontract such delivery to a third party (i.e. the Group is the principal and not an agent).

Additional arguments which support the view that the Group acts as the principal and not an agent are as follows:

corporate liability under the appropriate customer protection legislation;
undertaking credit risk with regard to the payments owed by customers;
pledge to provide technical support and liability for product defects;
implementation of reward systems (such as store credit granted to customers) for which the Group is solely liable.

According to IFRS 15 a sale with a right of return occurs when the vendor offers the customer a right of return of the purchased product. In line with the new standard, the right of return does not constitute a separate liability; however, potential returns may result in variable revenues since actual sales revenues will now depend on future events (i.e. returns).

The standard stipulates that the entity should avoid recognizing revenues for goods which, in its estimates, are going to be returned. In order to provide this estimate, the entity may apply either of two methods provided for by the standard:

the expected value method,
the most likely outcome method.

When estimating the value of returns the entity should acknowledge all available information, both historical and forwardlooking. In light of the expected returns and the corresponding partial loss of revenues, the entity should recognize liabilities in correspondence with the appropriate reduction of revenues in its profit and loss account. In addition, the entity should recognize an asset which reflects the recovery of products or goods returned by clients. The value of this asset corresponds to the cost of creation or purchase of the relevant products of goods less any applicable recovery costs. Such assets are aggregated with inventories, in correspondence with the appropriate reduction in selling costs in the profit and loss account.

In its GOG.com segment the Group has instituted a returns policy under which any customer is entitled to return any games within 30 days of purchase in case of technical issues or errors which cannot be otherwise resolved and which prevent the customer from completing the game. The Group performs an assessment of the value of returns by applying the most likely outcome method, applying historical data to compute the expected average quantity of returns during a given period. If the value of actual returns is greater than or equal to the expected average value, the Group does not adjust its selling costs or the corresponding cost of goods and materials sold.

In addition, the Group recognizes the obligation to return games in cases of unlawful activity or irregularities in the payment process. In such cases, the volume of returns is estimated on the basis of reports submitted by entities which process electronic payments on behalf of the Group. Such entities log reports which initiate returns, and present the Group with summaries of contested payments whose final status is verified within 90 days.

The Group had initially planned to aggregate the effects of initial application of IFRS 15 in its opening balance of retained earnings; however, given the fact that the assets and liabilities associated with returns calculated for 1 January 2018 in accordance with the new rules are not materially different from allowances already reported in the Group's financial statement for 31 December 2017, the Group has instead decided to forgo adjusting its opening balance of retained earnings in association with applying IFRS 15 for the first time

Advance payments from clients

The Group obtains short-term advance payments from its clients. Prior to introduction of IFRS 15 such advance payments were reported as deferred revenues in the statement of financial position, and did not correspond to any cost item.

Following introduction of IFRS 15 the recognition of short-term advance payments follows the simplified procedure provided for by the new standard. With regard to such advance payments the Group will continue to forgo recognizing the corresponding cost items as long as it expects that – at the moment the relevant agreement is concluded – the period between the collection of payment for the product or service and the actual delivery of said product of service to the client will not exceed 1 year.

Requirements related to presentation and disclosure of information

IFRS 15 introduces new requirements related to presentation and disclosure of information. In meeting these requirements the Group has decided to provide additional disclosures related to (see Note 13):

own and external products,
main distribution channels: physical and digital distribution,
clients' countries of residence.

Amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

Changes concern application of the new standard (IFRS 9 Financial Instrument) prior to implementation of a new standard concerning insurance contract which is currently under development. In order to mitigate temporal variations in financial reporting associated with implementation of IFRS 9, changes in IFRS 4 specify that two approaches are permissible: the overlay approach and the deferral approach. These changes complement options which existing standards already provide. They have no impact on the accounting practices in force at the Group or on its financial data.

Amendments to IFRS 2 Share-based Payment

Amendments clarify the classification and measurement of share-based cash-settled payment transactions and the effects of changes to an equity-settled share-based payment. They have no significant impact on the accounting practices in force at the Group or on its financial data.

Amendments to IFRS (2014-2016) adopted during the annual IFRS improvements cycle

Amendments to IFRS 1 First-time Adoption of IFRS concern deletion of short-term exemptions provided for under §E3–E7 IFRS 1 since these exemptions were applicable to past reporting periods and have now served their purpose. Additional amendments have also been introduced in IAS 28 Investments in Associates and Joint Ventures, clarifying that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organization, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-byinvestment basis, upon initial recognition. These amendments have no significant impact on the accounting practices in force at the Group or on its financial data.

Amendments to IAS 40 Investment Property: Transfers of investment property

The amendment provides clarifications and guidance on transfers to, or from, investment properties. In line with the amended standard, such a transfer should only be made only when there is evidence of a change in the use of the property. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management's intentions for the use of a property by itself does not constitute evidence of a change in use. These amendments have no significant impact on the accounting practices in force at the Group or on its financial data.

IFRIC 22 Foreign currency transactions and advance considerations

The IFRIC 22 interpretation concerns the exchange rate to be applied to foreign currency transactions which involve receipt or payment of advance consideration prior to recognition of the related asset, expense or income. This interpretation cannot be applied if the relevant asset, expense or income was initially estimated at fair value. This interpretation has no significant impact on the accounting practices in force at the Group or on its financial data.

Presentation changes

In this condensed interim consolidated financial statement for the period between 1 January and 31 March 2018 the Group introduced certain adjustments in the presentation of financial data. In order to maintain comparability of financial data, the corresponding adjustments were also introduced in the presentation of data covering the period between 1 January and 31 March 2017. Specifically, the following adjustments were made:

In the consolidated statement of financial position for 31 March 2017 the presentation of settlements with Management Board members was adjusted as follows:
Other liabilities adjusted by 92 thousand PLN,
Trade liabilities adjusted by (92) thousand PLN,

These adjustments have no impact on the Group's financial result or equity.

In the consolidated statement of cash flows for the period between 1 January and 31 March 2017 the Group rectified an error in the presentation of short-term bank deposits with maturity periods beyond 3 months. The following line items were adjusted:
Cash and cash equivalents at beginning of period adjusted by (339 835) thousand PLN
Closing bank deposits (maturity beyond 3 months) adjusted by 339 835 thousand PLN
In the consolidated statement of cash flows for the period between 1 January and 31 March 2017 the presentation of videogame development expenses incurred prior to commencement of sales was adjusted as follows:
Depreciation of fixed assets and intangibles adjusted by 222 thousand PLN,
Other adjustments adjusted by (222) thousand PLN.

Financial audit

This condensed interim consolidated financial statement with elements of the condensed interim separate financial statement was not submitted to a formal review or audit by a licensed auditor.

Supplementary information – CD PROJEKT Capital Group activity segments

Activity segments

Presentation of results by activity segment

The scope of financial disclosures in relation to each of the Group's activity segments is regulated by IFRS 8. For each segment the result is based on net profit.

Description of changes in the differentiation of activity segments, or of the assessment of persegment profit or loss compared to the most recent annual consolidated financial statement

No changes in the differentiation of activity segments occurred during the reporting period as compared to 31 December 2017.

Disclosure of activity segments

	Continuing operations		Consolidation eliminations	Total (continuing
	CD PROJEKT RED	GOG.com	(incl. from business combinations)	operations)
01.01.2018 – 31.03.2018
Sales revenues	51 917	25 780	(2 262)	75 435
sales to external clients	49 655	25 780	-	75 435
sales between segments	2 262	-	(2 262)	-
Segment net profit/(loss)	23 751	(859)	-	22 892

	Continuing operations		Consolidation eliminations	Total (continuing operations)
	CD PROJEKT RED	GOG.com	(incl. from business combinations)
01.01.2017 – 31.03.2017
Sales revenues	75 521	32 871	(9 050)	99 342
sales to external clients	66 475	32 867	-	99 342
sales between segments	9 046	4	(9 050)	-
Segment net profit/(loss)	43 700	1 559	-	45 259

Segmented consolidated profit and loss account for the period between 01.01.2018 and 31.03.2018

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
Sales revenues	51 917	25 780	(2 262)	75 435
Revenues from sales of products	49 755	2 045	417	52 217
Revenues from sales of services	1 108	-	(1 103)	5
Revenues from sales of goods and materials	1 054	23 735	(1 576)	23 213
Cost of products, goods and materials sold	1 292	16 365	(1 524)	16 133
Cost of products and services sold	392	-	(364)	28
Value of goods and materials sold	900	16 365	(1 160)	16 105
Gross profit (loss) from sales	50 625	9 415	(738)	59 302
Other operating revenues	540	90	(311)	319
Selling costs	14 928	8 507	(660)	22 775
General and administrative costs	7 482	1 400	(78)	8 804
Other operating expenses	509	126	(311)	324
(Impairment losses)/Reversal of impairment losses of financial instruments	168	13	-	181
Operating profit (loss)	28 414	(515)	-	27 899
Financial revenues	1 632	93	(89)	1 636
Financial expenses	11	456	(89)	378
Profit (loss) before taxation	30 035	(878)	-	29 157
Income tax	6 284	(19)	-	6 265
Net profit (loss)	23 751	(859)	-	22 892
Net profit (loss) attributable to equity holders of the parent entity	23 751	(859)	-	22 892

Segmented consolidated profit and loss account for the period between 01.01.2017 and 31.03.2017

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
Sales revenues	75 521	32 871	(9 050)	99 342
Revenues from sales of products	72 784	1 566	3 360	77 710
Revenues from sales of services	1 189	-	(1 146)	43
Revenues from sales of goods and materials	1 548	31 305	(11 264)	21 589
Cost of products, goods and materials sold	1 834	21 409	(8 420)	14 823
Cost of products and services sold	420	158	(516)	62
Value of goods and materials sold	1 414	21 251	(7 904)	14 761
Gross profit (loss) from sales	73 687	11 462	(630)	84 519
Other operating revenues	439	127	(133)	433
Selling costs	14 966	8 126	(658)	22 434
General and administrative costs	7 064	1 348	28	8 440
Other operating expenses	272	109	(133)	248
Operating profit (loss)	51 824	2 006	-	53 830
Financial revenues	3 850	23	(4)	3 869
Financial expenses	860	8	(4)	864
Profit (loss) before taxation	54 814	2 021	-	56 835
Income tax	11 114	462	-	11 576
Net profit (loss)	43 700	1 559	-	45 259
Net profit (loss) attributable to equity holders of the parent entity	43 700	1 559	-	45 259

Commentary on the Q1 2018 result of the GOG.com segment

In the first quarter of 2018 the Group reported lower sales revenues in its GOG.com segment than during the corresponding period in 2017. The reported Q1` 2018 sales revenues were 25 780 thousand PLN, compared to 32 871 thousand PLN in Q1 2017. Note, however, that when denominated in USD (the principal currency in which GOG conducts its sales), the aggregate sales revenues from the online platform and the GOG Galaxy client application amounted to 9 248 thousand USD, i.e. 1 226 thousand USD more than during the first quarter of 2017 (8 022 thousand USD).

The following detrimental factors are regarded as significant with regard to the difference in GOG.com sales results between Q1 2017 and Q1 2018:

1. Revenues from GWENT-related sales – which represent the most important component of GOG.com aggregate revenues – following the transnational merger between GOG Ltd. and GOG Poland sp. z o.o. and the corresponding changes in attribution of revenues associated with the project

Up until the merger date, GOG Ltd. had been excluded from the GWENT development consortium, which consisted solely of CD PROJEKT S.A. and GOG Poland sp. z o.o. As a result, any revenues obtained by GOG Ltd. from sales of GWENT items to final customers prior to the merger (along with the corresponding sales margins) were attributable entirely to GOG Ltd. and therefore reported in the GOG.com segment without being subject to division among consortium partners. GOG Ltd. subsequently recognized licensing royalties payable to its supplier, i.e. the consortium consisting of CD PROJEKT S.A. and GOG Poland sp. z o.o. These royalties were aggregated with the cost of products sold by GOG Ltd. and – on the supplier side – recognized as sales revenues proportionally by each member of the GWENT consortium. This included GOG Poland sp. z o.o. whose own results belong to the GOG.com segment, with the appropriate consolidation eliminations applied.

Following the merger the entirety of retail sales revenues associated with GWENT are recognized within the consortium and split between partners in accordance with the consortium agreement signed by CD PROJEKT S.A. and GOG sp. z o.o. Thus, the situation which existed before the merger changed as follows:

GWENT sales revenues reportable in the GOG.com segment decreased,
CD PROJEKT RED share of GWENT sales revenues increased,
consolidation eliminations related to sales of goods and materials by the Group decreased this is due to the merger between GOG Ltd. and GOG Poland sp. z o.o., which resulted in cessation of mutual transactions carried out between these parties.

The current reporting period. i.e. 1 January – 31 March 2018 – is the first full reporting period during which GOG Poland sp. z o.o. and GOG Ltd. constitute a single entity.

2. Strengthening of PLN against currencies in which GOG.com carries out sales; primarily USD

The PLN/USD exchange rate applied to Q1 2018 results was 3.3882, compared to 4.0224 in Q1 2017. This major strengthening of PLN against USD means that – when applying exchange rates as specified in this consolidated financial statement – for each dollar in realized sales the revenues of the GOG.com segment were 0.63 PLN lower than during the comparative period in 2017. Note also that exports account for over 90% of GOG.com sales.

The above circumstances negatively affected both the revenues and the sales margins in the GOG.com segment compared to Q1 2017.

3. Operating costs

The reported reduction in sales revenues was compounded by a slight increase (by 5%) of operating costs when compared to the first quarter of 2017. This increase is primarily due to increased involvement of GOG sp. z o.o. in the GWENT project and its correspondingly greater share of GWENT promotional and development costs (aggregated with selling costs and general and administrative expenses) during Q1 2018.

4. Financial expenses – negative exchange rate differences

In addition, as a consequence of the aforementioned strengthening of PLN against the currencies in which GOG.com carries out the majority of its sales and settlements with copyright holders, GOG sp. z o.o. reported 443 thousand PLN in surplus negative exchange rate differences during Q1 2018. The corresponding Q1 2017 figure, calculated jointly for GOG Poland sp. z o.o. and GOG Ltd., was 4 thousand PLN.

Segmented consolidated statement of financial position as of 31.03.2018

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
FIXED ASSETS	279 785	15 104	(15 484)	279 405
Tangible assets	16 206	2 663	-	18 869
Intangible assets	44 644	1 854	-	46 498
Expenditures on development projects	155 548	9 616	-	165 164
Goodwill	46 417	-	-	46 417
Investments in subsidiaries	15 484	-	(15 484)	-
Shares in subsidiaries not subject to consolidation	452	-	-	452
Deferred income tax assets	533	971	-	1 504
Other long-term receivables	501	-	-	501
CURRENT ASSETS	661 611	66 315	(7 339)	720 587
Inventories	272	-	-	272
Trade receivables	19 107	3 231	(885)	21 453
Current income tax receivables	1 224	213	-	1 437
Other receivables	22 482	1 490	(6 454)	17 518
Prepaid expenses	2 130	15 738	-	17 868
Cash and cash equivalents	38 479	45 643	-	84 122
Bank deposits (maturity beyond 3 months)	577 917	-	-	577 917
TOTAL ASSETS	941 396	81 419	(22 823)	999 992

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
EQUITY	885 239	38 873	(15 484)	908 628
Equity attributable to shareholders of the parent company	885 239	38 873	(15 484)	908 628
Share capital	96 120	136	(136)	96 120
Supplementary capital	550 780	5 668	(4 672)	551 776
Other reserve capital	18 166	1 796	(1 796)	18 166
Exchange rate differences on valuation of foreign entities	(50)	(315)	470	105
Retained earnings	196 472	32 447	(9 350)	219 569
Net profit (loss) for the reporting period	23 751	(859)	-	22 892
LONG-TERM LIABILITIES	2 850	42	-	2 892
Deferred revenues	2 772	39	-	2 811
Provisions for employee benefits and similar liabilities	78	3	-	81
SHORT-TERM LIABILITIES	53 307	42 504	(7 339)	88 472
Other financial liabilities	233	-	-	233
Trade liabilities	5 842	26 503	(885)	31 460
Liabilities from current income tax	154	234	-	388
Other liabilities	1 105	9 842	(6 454)	4 493
Deferred revenues	587	3 204	-	3 791
Provisions for retirement benefits and similar liabilities	1	-	-	1
Other provisions	45 385	2 721	-	48 106
TOTAL EQUITY AND LIABILITIES	941 396	81 419	(22 823)	999 992

Segmented consolidated statement of financial position as of 31.12.2017

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
FIXED ASSETS	258 617	13 150	(16 232)	255 535
Tangible assets	16 022	2 810	-	18 832
Intangible assets	44 741	2 112	-	46 853
Expenditures on development projects	135 210	7 276	-	142 486
Goodwill	46 417	-	-	46 417
Investments in subsidiaries	15 280	-	(15 280)	-
Shares in subsidiaries not subject to consolidation	452	-	-	452
Deferred income tax assets	-	952	(952)	-
Other long-term receivables	495	-	-	495
CURRENT ASSETS	660 328	72 668	(7 018)	725 978
Inventories	323	-	-	323
Trade receivables	37 253	10 208	(1 200)	46 261
Other receivables	22 278	1 122	(5 818)	17 582
Prepaid expenses	934	13 362	-	14 296
Cash and cash equivalents	19 011	47 976	-	66 987
Bank deposits (maturity beyond 3 months)	580 529	-	-	580 529
TOTAL ASSETS	918 945	85 818	(23 250)	981 513

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
EQUITY	858 547	39 632	(15 280)	882 899
Equity attributable to shareholders of the parent company	858 547	39 632	(15 280)	882 899
Share capital	96 120	136	(136)	96 120
Supplementary capital	550 780	3 227	(4 672)	549 335
Other reserve capital	15 212	1 592	(1 592)	15 212
Exchange rate differences on valuation of foreign entities	(37)	(315)	470	118
Retained earnings	12 200	18 994	(9 350)	21 844
Net profit (loss) for the reporting period	184 272	15 998	-	200 270
LONG-TERM LIABILITIES	5 039	43	(952)	4 130
Other financial liabilities	148	-	-	148
Deferred income tax liabilities	2 830	-	(952)	1 878
Deferred revenues	1 983	40	-	2 023
Provisions for employee benefits and similar liabilities	78	3	-	81
SHORT-TERM LIABILITIES	55 359	46 143	(7 018)	94 484
Other financial liabilities	190	-	-	190
Trade liabilities	9 256	29 469	(1 351)	37 374
Liabilities from current income tax	2 227	1 230	-	3 457
Other liabilities	2 058	10 379	(5 667)	6 770
Deferred revenues	587	2 465	-	3 052
Provisions for retirement benefits and similar liabilities	1	-	-	1
Other provisions	41 040	2 600	-	43 640
TOTAL EQUITY AND LIABILITIES	918 945	85 818	(23 250)	981 513

Segmented consolidated statement of financial position as of 31.03.2017*

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
FIXED ASSETS	193 540	8 864	(14 027)	188 377
Tangible assets	13 205	2 941	-	16 146
Intangible assets	43 447	2 816	-	46 263
Expenditures on development projects	76 032	3 032	-	79 064
Goodwill	46 417	-	-	46 417
Investments in subsidiaries	13 952	-	(13 952)	-
Deferred income tax assets	-	75	(75)	-
Other long-term receivables	487	-	-	487
CURRENT ASSETS	680 280	46 913	(6 835)	720 358
Inventories	490	-	-	490
Trade receivables	40 716	3 350	(4 103)	39 963
Current income tax receivables	5 266	112	-	5 378
Other receivables	17 442	1 134	(2 732)	15 844
Prepaid expenses	1 232	11 019	-	12 251
Cash and cash equivalents	92 857	31 298	-	124 155
Bank deposits (maturity beyond 3 months)	522 277	-	-	522 277
TOTAL ASSETS	873 820	55 777	(20 862)	908 735

	CD PROJEKT RED	GOG.com	Consolidation eliminations (incl. from business combinations)	Total
EQUITY	810 493	26 695	(13 952)	823 236
Equity attributable to shareholders of the parent company	810 493	26 695	(13 952)	823 236
Share capital	96 120	136	(136)	96 120
Supplementary capital	402 004	5 669	(4 672)	403 001
Other reserve capital	7 278	263	(263)	7 278
Exchange rate differences on valuation of foreign entities	13	1 991	470	2 474
Retained earnings	261 378	17 077	(9 351)	269 104
Net profit (loss) for the reporting period	43 700	1 559	-	45 259
LONG-TERM LIABILITIES	2 292	8	(75)	2 225
Other financial liabilities	233	-	-	233
Deferred income tax liabilities	1 113	-	(75)	1 038
Deferred revenues	891	6	-	897
Provisions for employee benefits and similar liabilities	55	2	-	57
SHORT-TERM LIABILITIES	61 035	29 074	(6 835)	83 274
Credits and loans	-	2	-	2
Other financial liabilities	234	-	-	234
Trade liabilities	3 888	18 693	(4 103)	18 478
Liabilities from current income tax	83	401	-	484
Other liabilities	4 718	5 766	(2 732)	7 752
Deferred revenues	748	2 850	-	3 598
Provisions for retirement benefits and similar liabilities	71	76	-	147
Other provisions	51 293	1 286	-	52 579
TOTAL EQUITY AND LIABILITIES	873 820	55 777	(20 862)	908 735

* adjusted data

Activity segments

In the first quarter of 2018 the Capital Group conducted activities in two key segments:

CD PROJEKT RED,
GOG.com.

CD PROJEKT RED

Videogame development is the main area of activity of the CD PROJEKT RED studio, a distinct operating segment of CD PROJEKT S.A. The activity covers creation and publication of videogames, licensing the associated distribution rights, coordinating marketing activities. as well as manufacturing tie-in products which exploit the commercial appeal of brands owned by the Company. In addition, the Company acts a publisher, shaping promotional campaigns which cover its own products, directly communicating with the gaming community via electronic communication channels and social media, and regularly participating in trade fairs.

The segment's videogame portfolio includes The Witcher, The Witcher 2: Assassins of Kings and The Witcher 3: Wild Hunt, along with two expansion packs – Hearts of Stone and Blood and Wine, sold separately and as part of the Game of the Year Edition bundle.

CD PROJEKT S.A. has formed a consortium with GOG sp. z o.o. to jointly develop GWENT: The Witcher Card Game, a F2P online multiplayer game with optional microtransactions. This game is currently undergoing public beta tests on the PC, PlayStation 4 and Xbox One, with a closed beta of the Chinese edition currently underway in the People's Republic of China.

CD PROJEKT RED also continues its work on the most ambitious project in the Studio's history – the upcoming Cyberpunk 2077 RPG.

GOG.com

Global digital distribution of videogames is the core activity of the GOG.com segment, carried out by GOG sp. z o.o. This activity involves selling and delivering videogames directly to the end users' devices via the Company's proprietary GOG.com platform and the GOG Galaxy application. The platform currently offers over 2 400 videogames licensed from over 550 developers, copyright holders and publishers worldwide.

All games are distributed free of cumbersome DRM restrictions. GOG sp. z o.o. also guarantees full compatibility of its videogames with popular versions of operating systems (MS Windows, Mac OS and Linux), depending on the specific support features of each game.

The GOG.com platform is available in seven languages: English, German, French, Russian, Portuguese (Brazilian edition), Chinese and Polish. Customers may remit payment in thirteen currencies and choose from a variety of convenient electronic payment methods, depending on their country of residence.

GOG.com has formed a consortium with CD PROJEKT RED to jointly develop and operate GWENT: The Witcher Card Game. In the framework of this consortium, GOG.com is responsible for the game's server infrastructure and networking features as well as for player support (jointly with CD PROJEKT RED).

Disclosure of the issuer's significant accomplishments and shortcomings in each activity segment in the first quarter of 2018

CD PROJEKT RED

GWENT: product development

In February 2018 CD PROJEKT RED unveiled and subsequently launched a new GWENT gameplay mode – the Arena – which comes with a range of gameplay improvements and additional cards.

In April the Company announced its plans concerning further development of GWENT in 2018. Under the GWENT: Homecoming project the card game will be subjected to changes which aim to bring it closer to its roots and to fine-tune its core aspects. The project will culminate with the end of the public beta phase and the official release of Thronebreaker – a single-player campaign offering multiple hours of gameplay.

The marketing activities of CD PROJEKT RED in the first quarter of 2018 focused on unveiling the Arena mode and on e-sports tournaments organized by CD PROJEKT RED in the framework of the GWENT Masters series.

Three tournaments were held by the publication date of this statements – two GWENT Open events (in January and March) and one GWENT Challenger event (in April). On 28-29 April 2018, in the Wieliczka Salt Mine, nearly 100 meters below ground, the Company held its third GWENT Challenger tournament, with a prize pool of 100 000 USD. The grand prize went to Damian "TailBot" Kaźmierczak. The event proved popular with GWENT fans around the world.

Events related to The Witcher games

On 6 March 2018 the Studio added support for running The Witcher 2: Assassins of Kings on Xbox One X in the backward compatibility mode, in near-4K resolution, with a ninefold increase in the number of pixels, remastered textures and improved antialiasing effects. Previously, the game had only been available on Xbox 360.

On 15 March 2018 Bandai Namco Entertainment and CD PROJEKT RED jointly announced that Geralt of Rivia would be making a guest appearance in Soulcalibur VI as one of the game's playable characters, and that the Witcher's visage would be featured on the game's box.

In March 2018 Game Informer – the most widely circulated gaming magazine in the world – released its 300th issue. To mark the occasion, its editors organized a survey where readers could vote on the world's best videogames of all time. The ranking, published on 19 March 2018, was topped by The Witcher 3: Wild Hunt.

GOG.com

Publishing activities

In Q1 2018 the catalogue of PC classics offered on GOG.com was expanded with (among others) Carmageddon TDR 2000, the Close Combat series (adapted for state-of-the-art platforms by GOG.com), MAFIA II and The Curse of Monkey Island – a widely anticipated and not otherwise available successor to LicasArts' hit point-and-click adventure game series. Brand-new releases published during this period included Kingdom Come: Deliverance, Surviving Mars and Into the Breach. The latter game was covered by a special offer whereby purchasers also received a free copy of FTL – its developer's previous release.

Sales support

In the first three months of 2018, in addition to weekly sales, GOG.com also organized several targeted promotional campaigns. In January, as part of the New Year's Resolutions sale the platform offered discounts on games associated with specific resolutions. 2018 also marks the first time GOG.com celebrates the Chinese New Year.

In Q1 2018 GOG.com initiated cooperation with several notable live streamers, including one of the most prominent personalities worldwide – CohhCarnage, who now features GOG.com and his collection of favorite games during his streams. This enables GOG.com to reach the nearly 1 million viewers who follow CohhCarnage's webcasts on Twitch.tv. Similar cooperation was also initiated with streamers representing other territories: Germany (Bonjwa), France (MisterMV) and Poland (ROJO).

Other achievements

On 16 March 2018 CD PROJEKT S.A. entered the WIG20 index which aggregates twenty of the largest and most liquid companies on the Warsaw Stock Exchange. CD PROJEKT S.A. stock contributes 3.83% to the value of the index.

On 26 March 2018 CD PROJEKT again (for the third time in a row) won top honors in the XIX edition of the prestigious Stock Exchange Company of the Year ranking published by Puls Biznesu. The Company took first place in the Management Competence category and second place in the Product and Service Innovation and Success in 2017 categories. The ranking is based on a survey conducted among approximately 100 capital market specialists – analysts, stock brokers and investment advisors.

Disclosure of factors which may affect future Group results

Similarly to other entities which conduct activities on the domestic and international market, CD PROJEKT member companies are affected by a wide range of external factors, including changes in micro- and macroeconomic conditions, new legal regulations and fiscal reforms.

With regard to the upcoming quarterly periods, the CD PROJEKT Capital Group intends to continue carrying out activities in its two core segments – CD PROJEKT RED and GOG.com. Specific vectors of development are laid out in the Strategy of the CD PROJEKT Capital Group for 2016-2021, announced in March 2016 and available on the Company website at https://www.cdprojekt.com/en/capital-group/strategy/.

Concerning external factors, in the opinion of the Board of CD PROJEKT S.A. the financial results of the CD PROJEKT RED segment and therefore of the entire Capital Group will be strongly affected by future sales of The Witcher 3: Wild Hunt along with its two expansion packs – Hearts of Stone and Blood and Wine. These products will be promoted throughout 2018 using both traditional and digital distribution channels, in particular during seasonal sales.

Future results of the Capital Group will also depend on popular reception of the GWENT "Homecoming" project, during which the game is being modified and updated in preparation for its official release in the second half of the year. Favorable opinions on the part of gamers may result in improved player acquisition and retention, and therefore better economic prospects associated with this product. The release of Thronebreaker – a complex single-player campaign which combines RPG and card gameplay features – is scheduled to occur in the same period, presenting – in the Company's opinion – an opportunity to attract fans of The Witcher series to GWENT, and also to entice card game aficionados to try their hand at The Witcher 3: Wild Hunt.

In 2018 the Company intends to continue organizing GWENT Masters e-sports tournaments. Success of the GWENT Open and GWENT Challenger events scheduled for 2018, as well as of the GWENT Masters World Championship, measured as the number of concurrent viewers and aggregate viewing time, may result in enhanced product visibility and increased interest in GWENT on the part of gamers. On the other hand, organizing and promoting regular e-sports events will result in further expenses in the upcoming quarters of 2018.

In the GOG.com segment further growth will depend on expanding the platform's catalogue with additional products, and reaching an ever greater customer base.

GOG sp. z o.o. is in talks with leading global videogame publishers and continues to expand its portfolio. Each new release on GOG.com contributes to the platform's popularity and drives up sales. In addition to adding new products GOG sp. z o.o. also seeks to increase its user base by attracting new players – those who have not yet set up a GOG.com account. The Company has been successful in this regard, owing to its PR activities and synergies resulting from cooperation with CD PROJEKT S.A. The GOG.com customer pool continues to grow at a steady pace.

Further growth of activities in the GOG.com segment, including the potential to acquire unique know-how and experience, and to fully exploit the Company's technological expertise, will be influenced by the Company's involvement in the GWENT project, where GOG.com is responsible for networking and user support. GWENT's market success should translate into better market recognition of GOG.com, allowing the Company to reach new potential customers around the world.

Disclosure of seasonal or cyclical activities

CD PROJEKT RED

CD PROJEKT RED usually takes between 2 and 4 years to produce a game. Initial development work occurs before the previous game in the series is complete and ready to be released. The Witcher 2 debuted on the PC in May 2011 while the Xbox 360 edition was released on 17 April 2012. The release of The Witcher 3: Wild Hunt took place on 19 May 2015. Sales of the base game were bolstered by two expansion packs: Hearts of Stone and Blood and Wine (both released within twelve months of the original launch) as well as by The Witcher 3: Wild Hunt – Game of the Year Edition, released in August 2016.

GWENT – The Witcher Card Game (currently in development) is conceived as a "game as a service" where the scope of development, resources committed to the project and future sales revenues depend on the popularity of the service. GWENT will ultimately be available both as a multiplayer platform and a single-player campaign-based game. CD PROJEKT RED is also continuing with its work on Cyberpunk 2077 – the largest development project in the Company's history.

Figure 1 Effect of releases on CD PROJEKT RED quarterly sales revenues (PLN thousands).

GOG.com

The digital videogame distribution market, which is the main area of activity of GOG.com, is characterized by seasonal fluctuations in revenues. On an annual basis, the highest revenues are typically obtained in the fourth quarter while the lowest revenues correspond to the third quarter. Sales in Q2 and Q4 are boosted by promotional activities organized in these periods. Ultimately, however, sales volume is primarily dependent on the release schedule.

Figure 2 GOG.com quarterly revenues from sales to external clients; 2011-2017 (PLN thousands)

The high revenues obtained in Q2 2015 were strongly affected by the release of The Witcher 3: Wild Hunt. In turn, the most important release of Q2 2016 was that of Blood and Wine – an expansion pack for The Witcher 3. The spike observed in the second quarter of 2017 was conditioned by revenues from microtransactions in GWENT: The Witcher Card Game for the PC, which was released as an open beta on 24 May 2017 on GOG.com.

Disclosure of key clients

The CD PROJEKT Capital Group collaborates with external clients whose share in revenues exceeds 10% of the consolidated sales revenues of the Capital Group.

Within the CD PROJEKT RED segment the activities of CD PROJEKT S.A. carried out in collaboration with one external client generated revenues (calculated incrementally until the end of Q1 2018) which exceeded 10% of the consolidated sales revenues of the CD PROJEKT Capital Group – specifically, 17 914 thousand PLN, which represents 23.7% of the Group's consolidated sales revenues.

The abovementioned client is not affiliated with CD PROJEKT S.A. or any of its subsidiaries. In other activity segments no single client accounted for more than 10% of the consolidated sales revenues of the Capital Group.

Supplementary information – additional notes and clarifications regarding the condensed interim consolidated financial statement

The Group's assets, liabilities, equity and cash flows during the first quarter of 2018 were primarily affected by ongoing sales of The Witcher 3: Wild Hunt, together with its expansion packs (Hearts of Stone and Blood and Wine), as well as development of future CD PROJEKT RED releases (Cyberpunk 2077, GWENT: The Witcher Card Game and GWENT: Thronebreaker).

No circumstances affecting assets, liabilities, equity, net financial result or cash flows which could be considered unusual due to their type, size or effect occurred during the reporting period.

On 28 November 2017 the parent Company took part in a call for bids to acquire the commercial property located at Jagiellońska 76 in Warsaw, directly adjacent to the Company's current registered office. In the course of this process the bid submitted by the Company was deemed best and a preliminary purchase agreement was duly signed on 11 January 2018. In line with this agreement, the Company remitted an advance payment in the amount of 1 666 666.65 PLN. As of the submission date of this report, outstanding payments associated with the aforementioned purchase agreement amount to 9 444 444.35 PLN. The corresponding final agreement should be signed and ownership of the property transferred to the Company by 11 January 2019, pending approval of the sale of the property by the State Solicitors' Office.

Note 2. Tangible fixed assets

Changes in fixed assets (by category) between 01.01.2018 and 31.03.2018

	Buildings and structures	engineering objects Civil	Machinery equipment and	Vehicles	Other fixed assets	Fixed assets construction under	Total
Gross carrying amount as of 01.01.2018	13 192	-	20 528	2 036	1 195	637	37 588
Increases from:	1 122	140	1 049	-	81	398	2 790
purchases	224	-	1 046	-	81	398	1 749
reclassification from fixed assets under construction	-	-	3	-	-	-	3
reclassification	869	140	-	-	-	-	1 009
acquisition free of charge	29	-	-	-	-	-	29
Reductions from:	10	-	6	-	-	1 009	1 025
sales	-	-	4	-	-	-	4
reclassification	-	-	-	-	-	1 009	1 009
others	10	-	2	-	-	-	12
Gross carrying amount as of 31.03.2018	14 304	140	21 571	2 036	1 276	26	39 353
Depreciation as of 01.01.2018	3 517	-	13 482	1 035	722	-	18 756
Increases from:	364	4	1 184	97	87	3	1 739
depreciation	364	4	1 184	97	87	-	1 736
reassignment from fixed assets under construction	-	-	-	-	-	3	3
Reductions from:	6	-	5	-	-	-	11
sales	-	-	4	-	-	-	4
others	6	-	1	-	-	-	7
Depreciation as of 31.03.2018	3 875	4	14 661	1 132	809	3	20 484
Impairment write-downs as of 01.01.2018	-	-	-	-	-	-	-
Impairment write-downs as of 31.03.2018	-	-	-	-	-	-	-
Net carrying amount as of 31.03.2018	10 429	136	6 910	904	467	23	18 869

Contractual commitments for future acquisition of fixed assets

	31.03.2018	31.12.2017	31.03.2017
Leasing of passenger cars	490	736	882
Acquisition of office space	9 444	-	-
Total	9 934	736	882

Note 3. Intangibles and expenditures on development projects

Changes in intangibles and expenditures on development projects 01.01.2018 and 31.03.2018

	Development projects in progress	Development projects completed	Trademarks	Patents and licenses	Copyrights	Computer software	Goodwill	Intangibles under construction	Others	Total
Gross carrying amount as of 01.01.2018		142 486 162 155	32 199	1 646	6 530	24 965	46 417	54	1	416 453
Increases from:	22 678	-	-	56	-	289	-	184	-	23 207
purchases	-	-	-	56	-	289	-	184	-	529
own creation	22 678	-	-	-	-	-	-	-	-	22 678
Reductions from:	-	-	-	-	-	-	-	-	-	-
others	-	-	-	-	-	-	-	-	-	-
Gross carrying amount as of 31.03.2018		165 164 162 155	32 199	1 702	6 530	25 254	46 417	238		1 439 660
Depreciation as of 01.01.2018		- 162 155	-	764	-	17 777	-	-	1	180 697
Increases from:	-	-	-	61	-	823	-	-	-	884
depreciation	-	-	-	61	-	823	-	-	-	884
Reductions from:	-	-	-	-	-	-	-	-	-	-
others	-	-	-	-	-	-	-	-	-	-
Depreciation as of 31.03.2018		- 162 155	-	825	-	18 600	-	-	1	181 581
Impairment write		-	-	-	-	-	-	-	-	-
downs as of 01.01.2018	-
Impairment write downs as of 31.03.2018	-	-	-	-	-	-	-	-	-	-

Contractual commitments for future acquisition of intangibles

Not applicable.

Note 4. Goodwill

No changes in goodwill occurred between 1 January and 31 March 2018.

Note 5. Inventories

Changes in inventories

	31.03.2018	31.12.2017	31.03.2017
Goods	253	300	462
Other materials	19	23	28
Gross inventories	272	323	490
Inventory impairment write-downs	-	-	-
Net inventories	272	323	490

Changes in inventory impairment write-downs

None reported.

Note 6. Trade and other receivables

Changes in receivables

	31.03.2018	31.12.2017	31.03.2017
Trade and other receivables	38 971	63 843	55 807
from affiliates	93	45	10
from external entities	38 878	63 798	55 797
Impairment write-downs	2 899	3 081	4 123
Gross receivables	41 870	66 924	59 930

Changes in impairment allowances on receivables

	Trade receivables	Other receivables
OTHER ENTITIES
Impairment allowances as of 01.01.2018	2 349	732
Increases from:	-	-
creation of allowances for past-due and contested receivables	-	-
Reductions from	182	-
elimination of allowances due to collection of receivables	181	-
dissolution of allowances (writeoffs)	1	-
Impairment write-downs as of 31.03.2018	2 167	732

Impairment allowances on current and overdue trade receivables as of 31.03.2018

			Days overdue
	Total	Not overdue	1 – 60	61 – 90	91 – 180	181 – 360	>360
AFFILIATES
gross receivables	55	1	29	-	25	-	-
non-fulfillment ratio		0%	0%	0%	0%	0%	0%
impairment write downs as determined by non-fulfillment ratio	-	-	-	-	-	-	-
impairment write downs as individually assessed	-	-	-	-	-	-	-
total expected credit loss	-	-	-	-	-	-	-
Net receivables	55	1	29	-	25	-	-

		Not overdue	Days overdue
	Total		1 – 60	61 – 90	91 – 180	181 – 360	>360
EXTERNAL ENTITIES
gross receivables	23 565	20 833	395	-	6	-	2 331
non-fulfillment ratio		0%	0%	0.18%	1.96%	11.50%	5.74%
impairment write downs as determined by non-fulfillment ratio	-	-	-	-	-	-	-
impairment write downs as individually assessed	2 167	-	-	-	3	-	2 164
total expected credit loss	2 167	-	-	-	3	-	2 164
Net receivables	21 398	20 833	395	-	3	-	167
Total
gross receivables	23 620	20 834	424	-	31	-	2 331
Impairment write-downs	2 167	-	-	-	3	-	2 164
Net receivables	21 453	20 834	424	-	28	-	167

Other receivables as of 31.03.2018

	31.03.2018	31.12.2017	31.03.2017
Other receivables, including:	17 518	17 582	15 844
tax returns except corporate income tax	13 468	14 205	13 258
advance payments for supplies	1 656	2 195	1 165
deposits	141	125	82
prepaid licensing royalties	451	51	553
advance payments for fixed assets	1 667	940	-
employee settlements	113	52	45
others	22	14	741
Impairment write-downs	732	732	732
Other gross receivables	18 250	18 314	16 576

Other receivables comprise mostly tax receivables, in particular receivables associated with withholding tax deducted at source by purchasers of licenses from the Group and reported in its annual fiscal statement, as well as VAT receivables and advance payments remitted to suppliers. In addition, this category includes damages which the Group has claimed in a lawsuit against an external contractor for improper rendition of services. Due to the protracted litigation, a full-value impairment allowance has been recognized in association with this amount.

Note 7. Prepaid expenses

	31.03.2018	31.12.2017*	31.03.2017
Non-life insurance	82	122	51
Minimum guarantees; payments advanced to GOG	15 161	12 714	10 527
Access to online legal support portal	9	12	50
Software, licenses	954	736	965
Business travel (airfare, hotels, insurance)	72	60	92
IT security	340	415	-
Production of marketing materials	363	-	1
Fair-related expenditures	508	-	2
Other prepaid expenses	379	237	563
Total prepaid expenses	17 868	14 296	12 251

* adjusted data

Note 8. Deferred income tax

Negative temporary differences requiring recognition of deferred tax assets

	31.12.2017	increases	reductions	31.03.2018
Provisions for other employee benefits	101	18	3	116
Provisions for compensation dependent on financial result	42 998	3 376	184	46 190
Tax loss	1 047	-	-	1 047
Negative exchange rate differences	935	586	937	584
Employee compensation and social security expenses payable in future reporting periods	3	4	3	4
Purchase returns from the preceding period	-	16	-	16
Deferred revenues associated with adding funds to virtual wallets and participation in the additional benefits program	2 386	114	-	2 500
Other provisions	519	182	517	184
Total negative temporary differences	47 989	4 296	1 644	50 641
Tax rate (Poland)	19%	19%	19%	19%
Deferred tax assets	9 118	816	312	9 622

Positive temporary differences requiring recognition of deferred tax provisions

	31.12.2017	increases	reductions	31.03.2018
Difference between net carrying value and net tax value of fixed assets and intangibles	21 571	1 598	19	23 150
Income in the current period invoiced in the following period, and sales returns in the current period	34 950	13 322	29 715	18 557
Positive exchange rate differences	953	1 491	1 684	760
Other sources	399	-	138	261
Total positive temporary differences	57 873	16 411	31 556	42 728
Tax rate (Poland)	19%	19%	19%	19%
Deferred tax provisions	10 996	3 118	5 996	8 118

Balance of deferred tax assets/provisions

	31.03.2018	31.12.2017	31.03.2017
Deferred tax assets	9 622	9 118	10 060
Deferred tax provisions	8 118	10 996	11 098
Net deferred tax assets (provisions)	1 504	(1 878)	(1 038)

Income tax reported in profit/loss account

	01.01.2018 - 31.03.2018	01.01.2017 - 31.03.2017
Current income tax	9 647	17 737
Changes in deferred income tax	(3 382)	(6 161)
Income tax reported in profit/loss account	6 265	11 576

Note 9. Provisions for employee benefits and similar liabilities

Provisions for employee benefits and similar liabilities

	31.03.2018	31.12.2017	31.03.2017
Provisions for retirement benefits and pensions	82	82	58
Provisions for other employee benefits	-	-	146
Total, including:	82	82	204
long-term provisions	81	81	57
short-term provisions	1	1	147

No changes in provisions for employee benefits and similar liabilities occurred between 1 January and 31 March 2018.

Note 10. Other provisions

	31.03.2018	31.12.2017	31.03.2017
Provisions for warranty-covered repairs and returns	55	62	46
Provisions for liabilities, including:	48 051	43 578	52 533
financial statement audit and review expenses	-	40	67
provisions for bought-in services	149	163	314
provisions for bonuses dependent on financial result	47 856	42 998	51 965
provisions for licensing liabilities	-	-	56
provisions for licenses and fixed assets	-	-	52
provisions for other expenses	46	377	79
Total, including:	48 106	43 640	52 579
long-term provisions	-	-	-
short-term provisions	48 106	43 640	52 579

Changes in other provisions

	Provisions for warranty covered repairs and returns	Provisions for bonuses dependent on financial result	Other provisions	Total
As of 01.01.2018	62	42 998	580	43 640
Provisions created during fiscal year	16	5 043	96	5 155
Benefits paid out	23	185	481	689
Adjustments due to exchange rate differences	-	-	-	-
As of 31.03.2018, including:	55	47 856	195	48 106
long-term provisions	-	-	-	-
short-term provisions	55	47 856	195	48 106

Note 11. Other liabilities

	31.03.2018	31.12.2017	31.03.2017*
Liabilities due to other taxes, duties, social security and similar expenses except corporate income tax	4 451	6 114	3 775
VAT	3 226	4 508	2 811
Flat-rate tax deducted at source	26	159	17
Personal income tax	514	937	343
Social security (ZUS) payments	645	471	528
National Fund for the Rehabilitation of the Disabled (PFRON) payments	23	22	39
PIT-8A settlements	17	17	37
Other liabilities	42	656	3 977
Liabilities associated with employee compensation	-	409	-
Other settlements with employees	14	2	22
Other settlements with members of the management boards of Capital Group member companies	20	6	120
Social Benefits Fund (ZFŚS) – other settlements	(2)	(17)	(19)
Advance payments from foreign clients	10	256	3 854
Total other liabilities	4 493	6 770	7 752

* adjusted data

Note 12. Disclosure of financial instruments

Fair value of financial instruments per class

The Management Board of the Group has performed an analysis of each class of financial instruments and came to the conclusion that the carrying amount of each instrument matches their respective fair value both as of 31 March 2018, 31 December 2017 and 31 March 2017.

Financial assets – classification and appraisal

	31.03.2018	31.12.2017	31.03.2017
Financial assets held at amortized cost	683 993	694 272	686 882
Other long-term receivables	501	495	487
Trade receivables	21 453	46 261	39 963
Cash and cash equivalents	84 122	66 987	124 155
Bank deposits (maturity beyond 3 months)	577 917	580 529	522 277
Capital market instruments held at purchase price	452	452	-
Shares in subsidiaries excluded from consolidation	452	452	-
Total financial assets	684 445	694 724	686 882

Financial liabilities – classification and appraisal

	31.03.2018	31.12.2017	31.03.2017
Financial liabilities held at amortized cost	31 693	37 712	18 945
Trade liabilities	31 460	37 374	18 478
Other financial liabilities	233	338	467

Note 13. Sales revenues

Sales revenues by territory

		01.01.2018-31.03.2018		01.01.2017-31.03.2017
	PLN	%	PLN	%
Domestic sales	4 080	5.41%	4 430	4.46%
Exports, including:	71 355	94.59%	94 912	95.54%
Europe	23 605	31.30%	27 734	27.92%
North America	41 216	54.64%	57 255	57.63%
South America	642	0.85%	1 160	1.17%
Asia	4 295	5.69%	6 941	6.99%
Australia	1 399	1.85%	1 552	1.56%
Africa	198	0.26%	270	0.27%
Total	75 435	100%	99 342	100%

Sales revenues by production type

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Own products	52 217	77 710
External products	23 213	21 589
Other revenues	5	43
Total	75 435	99 342

Condensed interim consolidated financial statement of the CD PROJEKT Capital Group for the period between 1 January and 31 March 2018 (all figures quoted in PLN thousands unless indicated otherwise)

The appended information constitutes an integral part of the consolidated financial statement.

Sales revenues by distribution channel

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Physical distribution (box) of video games	6 618	11 128
Digital distribution of videogames	68 072	87 801
Other revenues	745	413
Total	75 435	99 342

Note 14. Operating costs

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017*













Total	47 712	45 697

* adjusted data

Note 15. Other operating revenues and expenses

Other operating revenues

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Dissolution of provisions for employee benefits	-	52
Dissolution of provisions for liabilities	-	10
Subsidies	46	46
Write-downs on expired liabilities	-	33
Reinvoicing revenues	151	95
Dissolution of other provisions	25	10
Repossession gains received	27	3
Insurance claims and compensation for damages	16	118
Goods received free of charge	29	-
Other sales	17	43
Other miscellaneous operating revenues	8	23
Total operating revenues	319	433

Other operating expenses

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Revaluation of other receivables	-	1
Donations	41	-
Reinvoicing revenues	157	95
Unrecoverable withholding tax	20	3
Disposal of materials and goods	15	-
Expenses associated with other sales	56	108
Other miscellaneous operating expenses	35	41
Total	324	248

Note 16. Financial revenues and expenses

Financial revenues

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Revenues from interest:	1 636	3 401
on short-term bank deposits	1 636	3 401
Other financial revenues, including:	-	468
forward currency contracts	-	94
profit from sales of shares	-	374
Total financial revenues	1 636	3 869

Financial expenses

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Interest payments:	12	2
on lease agreements	3	1
on budget commitments	9	1
Other financial expenses, including:	366	862
surplus negative exchange rate differences	366	809
forward currency transactions	-	53
Total financial expenses	378	864
Net financial expenses	1 258	3 005

Note 17. Issue, buyback and redemption of debt and capital securities

Issue of debt securities

Not applicable.

Issue of capital securities

	31.03.2018	31.12.2017	31.03.2017
Stock volume (thousands)	96 120	96 120	96 120
Nominal value per share (PLN)	1	1	1
Share capital	96 120	96 120	96 120

Note 18. Dividends declared or paid out

No dividends were declared or paid out by the Company between 1 January and 31 March 2018.

Note 19. Transactions with affiliates

Rules governing transactions with affiliates

Intragroup transactions are conducted in accordance with the Directive of the Finance Minister of 10 September 2009 specifying the rules for estimating the income of legal entities and avoiding double taxation when adjusting the income of affiliated legal entities (unified text: Journal of Laws of the Republic of Poland 2014, item no. 1186), as well as with OECD guidelines regarding transfer prices.

In each case, selection of the appropriate pricing model is preceded by careful analysis of the given transaction, specifically, the assignment of responsibilities and financial exposure of each party, along with the associated risks, costs and business strategies. As a result, transactions between member companies of the CD PROJEKT Capital Group closely reflect similar transactions concluded by unaffiliated entities.

For significant transactions exceeding the limits specified in Art. 9a of the corporate income tax law all participating entities submit the required tax forms.

Transactions with affiliates following consolidation eliminations

	Sales to affiliates		Purchases for affiliates
	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
SUBSIDIARIES
CD PROJEKT Co., Ltd.	29	-	780	-
GROUP MEMBER COMPANY EXECUTIVES
Marcin Iwiński	2	2	-	-
Adam Kiciński	1	1	-	-
Piotr Nielubowicz	1	1	-	-
Michał Nowakowski	2	2	-	-
SUPERVISORY BOARD MEMBERS
Katarzyna Szwarc	-	-	-	5

Transactions with affiliates following consolidation eliminations

	Receivables from affiliates				Liabilities due to affiliates
	31.03.2018	31.12.2017	31.03.2017	31.03.2018	31.12.2017	31.03.2017
SUBSIDIARIES
CD PROJEKT Co., Ltd.	55	25	-	337	663	-
	GROUP MEMBER COMPANY EXECUTIVES
Marcin Iwiński	23	7	7	19	1	19
Adam Kiciński	1	1	-	1	1	5
Michał Nowakowski	4	7	2	-	-	4
Adam Badowski	3	3	1	-	-	-
Piotr Karwowski	-	2	-	-	-	-
Oleg Klapovskiy	7	-	-	-	4	92

* adjusted data

Note 20. Bad loans and breaches of loan agreements not subject to remedial proceedings as of the balance sheet date

Not applicable.

Note 21. Changes in conditional liabilities and assets since the close of the most recent fiscal year

Conditional liabilities from sureties and collateral pledged

	Type of agreement	Currency	31.03.2018	31.12.2017	31.03.2017
mBank S.A.
Declaration of submission to enforcement	Collateral for credit card agreement	PLN	920	920	920
Promissory note agreement	Framework agreement concerning forward and derivative transactions	PLN	7 710	7 710	7 710
Promissory note agreement	Collateral for lease agreement	PLN	667	667	667
Ingenico Group S.A. (formerly Global Collect Services BV)
Contract of guarantee	Guarantee of discharge of liabilities by GOG sp. z o.o.	EUR	155	155	155
Ministry of the Economy
Promissory note agreement	Co-financing agreement no. POIG.06.05.02-00-146/13-00	PLN	-	-	265
Promissory note agreement	Co-financing agreement no. POIG.06.05.02-00-148/13-00	PLN	-	-	235
Polish Agency for Enterprise Development (Polska Agencja Rozwoju Przedsiębiorczości)
Promissory note agreement	Co-financing agreement no. UDA-POIG.08.02.00-14-524/13-00; POIG Task 8.2	PLN	798	798	798
National Centre for Research and Development (Narodowe Centrum Badań i Rozwoju)
Promissory note agreement	Co-financing agreement no. POIR.01.02.00-00-0105/16	PLN	7 934	7 934	7 934
Promissory note agreement	Co-financing agreement no. POIR.01.02.00-00-0110/16	PLN	5 114	5 114	5 114
Promissory note agreement	Co-financing agreement no. POIR.01.02.00-00-0112/16	PLN	3 857	3 857	3 857
Promissory note agreement	Co-financing agreement no. POIR.01.02.00-00-0118/16	PLN	5 324	5 324	5 324
Promissory note agreement	Co-financing agreement no. POIR.01.02.00-00-0120/16	PLN	1 234	1 234	-

Raiffeisen Bank Polska S.A.
Declaration of submission to enforcement	PLN	25 000	25 000	75 000
BZ WBK Leasing S.A.
Promissory note agreement	Lease agreement no. CZ5/00007/2016	PLN	-	320	320
Promissory note agreement	Lease agreement no. CZ5/00013/2017	PLN	185	403	403
Promissory note agreement	Lease agreement no. CZ5/00036/2017	PLN	80	175	175
BZ WBK S.A.
Promissory note agreement	Framework agreement concerning treasury transactions	PLN	6 500	6 500	6 500

Note 22. Changes in the structure of the Capital Group and its member entities occurring during the reporting period

None reported.

Note 23. Agreements which may, in the future, result in changes in the proportion of shares held by shareholders and bondholders

On 24 May 2016 the General Meeting of Shareholders voted to institute a new incentive program covering the years 2016-2021. According to the program's conditions, a maximum of 6 000 000 entitlements may be granted. Implementation of the program may be carried out by issuing and assigning series B subscription warrants, entitling holders to claim parent Company shares issued as a conditional increase in the Company share capital, or by presenting entitled parties with an offer to buy existing shares which the Company will have previously bought back on the open market. In either case, implementation of the program is contingent upon meeting specific result goals (80% of entitlements) and market goals (20% of entitlements), in addition to a loyalty criterion which applies to each entitled party until such time as the attainment of either goal is officially declared.

In conjunction with assignment of Series B subscription warrants, the parent Company is also discretionarily empowered to present each entitled party with an offer to repurchase said warrants, in part or in whole, for redemption.

Note 24. Fiscal settlements

Fiscal settlements and other areas of activity governed by legal regulations (such as import duties or currency exchange) may be subject to audits by administrative bodies authorized to impose high penalties and sanctions. The lack of entrenched legal regulations in Poland leads to numerous ambiguities and inconsistencies in this regard. Interpretation of existing tax law frequently varies from state organ to state organ as well as between state organs and business entities, giving rise to areas of uncertainty and conflict. These conditions increase tax risks in Poland beyond the level encountered in states with more developed fiscal systems.

Fiscal settlements may be subject to state audits within five years following the end of the period in which tax payment was effected.

On 15 July 2016 the Tax Code was amended to reflect the stipulations of the General Anti-Avoidance Rule (GAAR). The goal of GAAR is to discourage creation and exploitation of fictitious legal structures which serve primarily as a means of avoiding taxation. GAAR defines tax avoidance as any activity which is carried out specifically to obtain fiscal relief in a manner contrary to the goal and substance of the applicable tax laws. Under GAAR, such activities provide no fiscal relief if carried out under false pretenses. Specifically, (i) unnecessary partitioning of activities; (ii) involving intermediaries despite the lack of economic justification for such involvement; (iii) activities which produce a state identical or materially similar to the state which existed prior to initiation of such activities; (iv) mutually compensating or counterbalancing activities or (v) activities which carry excessive economic risk given the expected benefits, except for fiscal benefits, giving rise to the conclusion that a rational entity would not have undertaken such risk – all such activities may be regarded as carried out under false pretenses and therefore subject to GAAR. The introduction of GAAR will mandate much more diligent assessment of the fiscal consequences of transactions carried out by the Company.

GAAR is applicable to transactions carried out following its introduction as well as to preceding transactions, if such transactions continued to generate tax benefits on the date of introduction of GAAR. Implementation of the abovementioned rules enables Polish tax authorities to question legal agreements concluded by taxable entities, such as restructurization and reorganization of the Capital Group, and also, in certain cases, refuse to issue binding interpretations upon which fiscal settlements can be carried out.

Note 25. Clarifications regarding the condensed interim consolidated statement of cash flows

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017*
Total cash and cash equivalents reported in the cash flow statement	84 122	124 155
Cash on balance sheet	84 122	124 155
Depreciation	1 186	1 183
Depreciation of intangibles	304	623
Depreciation of fixed assets	882	560
Interest and profit sharing consists of:	(1 636)	(3 401)
Interest collected	(1 636)	(3 401)
Profit (loss) from investment activities consists of:	(29)	249
Revenues from sales of fixed assets	-	(1)
Net value of fixed assets sold	-	2
Net value of shares sold	-	195
Fixed assets received free of charge	(29)	-
Revaluation of short-term financial assets	-	53
Changes in provisions consist of:	4 466	7 401
Balance of changes in provisions for liabilities	4 466	7 548
Balance of changes in provisions for employee benefits	-	(147)
Changes in inventories consist of:	51	(89)
Balance of changes in inventories	51	(89)
Changes in receivables consist of:	24 866	36 016
Balance of changes in short-term receivables	23 435	30 749
Balance of changes in long-term receivables	(6)	-
Income tax set against withholding tax	3 547	7 133
Adjustments for current income tax	(2 110)	(1 866)
Changes in short-term liabilities except financial liabilities consist of:	(7 706)	(12 059)
Balance of changes in short-term liabilities	(11 217)	(14 608)
Adjustments for current income tax	3 069	3 278
Changes in financial liabilities	(43)	(171)
Adjustments for changes in credits and loans	-	(2)
Adjustments for liabilities associated with purchases of fixed assets	234	(431)
Adjustments for changes in liabilities due to purchase of intangibles	251	(125)
Changes in other assets and liabilities consist of:	(2 045)	3 160
Balance of changes in prepaid expenses	(3 572)	2 473
Balance of changes in deferred revenues	1 527	687
Other adjustments consist of:	2 955	1 271
Costs of incentive program	2 954	2 483
Depreciation aggregated with cost of sales	8	21
Exchange rate differences	(7)	(1 233)

* adjusted data

Note 26. Events occurring after the balance sheet date

On 18 May 2018 CD PROJEKT concluded an agreement to purchase the Wrocław-based Strange New Things (SNT) development studio. This purchase expands the CD PROJEKT RED team with around 20 professionals who possess longstanding videogame development experience. The purchase will enable CD PROJEKT RED to establish a branch in Wrocław, tasked with activities related to Cyberpunk 2077.

The acquisition of SNT was carried out by way of the purchase of an enterprise from Strange New Things sp. z o.o. sp. k. On 8 May 2018 the General Meeting of Shareholders of CD PROJEKT S.A. adopted a resolution authorizing the Company to finance this purchase in part with 21 105 shares of CD PROJEKT S.A. stock which will have previously been bought back on the open market. These shares would be turned over to existing shareholders of Strange New Things sp. z o.o. sp. k. and subjected to temporary lock-up, facilitating a long-term bond between resources committed to the project and the outcomes of the studio's activities.

Due to the to-date scale of activities of SNT and the value of the acquisition this event does not constitute a significant transaction in the sense of the reporting regulations applicable to the Company.

Supplementary information

Legal proceedings

The following legal proceedings took place during the reporting period (the presented status is valid for the publication date of this statement):

Litigation in which CD PROJEKT S.A. is the plaintiff or claimant

CD PROJEKT S.A. (formerly Optimus S.A.) vs. State Treasury

On 15 February 2006 the Management Board of Optimus S.A. filed a complaint in the District Court for the City of Kraków, 1st Civil Department seeking monetary damages from the State Treasury in the amount of 35 650.6 thousand PLN in relation to decisions issued by the Inspector of Treasury Control concerning VAT liabilities allegedly incurred by the Company's legal predecessor. On 24 November 2003 the Supreme Administrative Court in Warsaw vacated these decisions as unlawful.

On 9 December 2008 the District Court for the City of Kraków issued an interlocutory judgment holding the Optimus claim valid in rem. This judgment concerned the validity of the Company's claim for monetary damages. On 19 May 2009 this judgment was vacated by the Appellate Court for the City of Kraków, 1st Civil Department, which remanded the case to the District Court for further proceedings.

On 1 August 2014 the District Court for the City of Kraków issued a final judgment closing the proceedings in the court of first instance. The District Court's judgment awarded the Company 1 090.5 thousand PLN plus statutory interest for the period between 15 November 2005 and the remittance date, dismissing the lawsuit on all other counts.

On 9 October 2014 the Company filed an appeal against the District Court's judgment with regard to those sections in which the District Court dismissed the Company's claims, and also the section concerning the cost of legal proceedings associated with the case. A parallel appeal against the section in which the District Court affirms the Company's claims was filed by the State Treasury.

The case is currently pending before the Appellate Court in Kraków, which, having heard statements by both Parties and by the court expert whose opinion constituted the grounds for the judgment of the court of first instance, decided to appoint another expert to prepare a second opinion. This new opinion was prepared on 19 March 2018 and delivered to the relevant court.

No significant court proceedings, arbitration proceedings or administrative proceedings involving the Company or its subsidiaries were initiated during the reporting period. Additionally, no significant changed occurred with regard to other proceedings disclosed in the Company's annual financial statement for 2017.

Shareholder structure

Shareholders who control, directly or through subsidiaries, at least 5% of the total number of votes at the General Meeting of Shareholders of the parent entity as of the publication date of this quarterly statement

	Quantity of votes at the GM	% share in total number of votes at the GM
Marcin Iwiński	12 150 000	12.64%
Michał Kiciński 1	10 486 106	10.91%
Piotr Nielubowicz	6 135 197	6.38%
Nationale-Nederlanden PTE 2	4 998 520	5.20%
Swedbank Robur Fonder AB3	4 844 406	5.04%
free float	57 505 771	59.83%

1 As disclosed in Current Report no. 49/2016 of 6 December 2016

² As disclosed in Current Report no. 15/2017 of 13 July 2017

³ As disclosed in Current Report no. 2/2018 of 19 January 2018

The percentage share in the share capital of the parent entity held by the above listed parties is equivalent to the amount of votes controlled by these parties at the General Meeting.

Changes in shareholder structure of the parent entity

No changes involving shareholders who control more than 5% of the total number of votes at the General Meeting occurred during the reporting period.

Company shares held by members of the Management Board and Supervisory Board

Changes in number of shares held by members of the Management Board and the Supervisory Board

Name	Position	As of 01.01.2018	As of 31.03.2018	As of 24.05.2018
Adam Kiciński	President of the Board	3 322 481	3 322 481	3 322 481
Marcin Iwiński	Vice President of the Board	12 150 000	12 150 000	12 150 000
Piotr Nielubowicz	Vice President of the Board	6 135 197	6 135 197	6 135 197
Adam Badowski	Board Member	150 000	150 000	150 000
Michał Nowakowski	Board Member	101 149	101 149	101 149
Piotr Karwowski	Board Member	8 000	8 000	8 000
Oleg Klapovskiy	Board Member	1 042	1 042	1 042
Katarzyna Szwarc	Chairwoman of the Supervisory Board	10 010	10 010	10 010
Maciej Nielubowicz	Supervisory Board Member	51	51	51

Validation of published projections

The Group had not published any projections referring to the reporting period.

Condensed interim separate financial statement of CD PROJEKT S.A.

Condensed interim separate profit and loss account

	Note	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Sales revenues		51 284	75 037
Revenues from sales of products		49 755	72 784
Revenues from sales of services		475	705
Revenues from sales of goods and materials		1 054	1 548
Cost of products, goods and materials sold		1 293	1 834
Cost of products and services sold		393	420
Value of goods and materials sold		900	1 414
Gross profit (loss) from sales		49 991	73 203
Other operating revenues		547	452
Selling costs		15 117	15 401
General and administrative costs		6 776	6 329
Other operating expenses		515	282
(Impairment losses)/Reversal of impairment losses of financial instruments		169	-
Operating profit (loss)		28 299	51 643
Financial revenues		1 633	3 860
Financial expenses		11	861
Profit (loss) before tax		29 921	54 642
Income tax	A	6 199	11 030
Net profit (loss)		23 722	43 612
Net earnings per share (in PLN)
Basic for the reporting period		0.25	0.45
Diluted for the reporting period		0.24	0.44

Condensed interim separate statement of comprehensive income

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
Net profit (loss)	23 722	43 612
Other comprehensive income which will be entered as profit (loss) following fulfillment of specific criteria	-	-
Other comprehensive income which will not be entered as profit (loss)	-	-
Total comprehensive income	23 722	43 612

Condensed interim separate statement of financial position

	Note	31.03.2018	31.12.2017	31.03.2017
FIXED ASSETS		273 540	252 551	188 568
Tangible assets		15 863	15 649	12 679
Intangibles		85 059	85 155	83 862
Expenditures on development projects		155 578	135 229	76 032
Investments in subsidiaries	F	16 247	16 023	14 135
Other financial assets	F	-	-	1 373
Deferred income tax assets	A	292	-	-
Other long-term receivables	F	501	495	487
CURRENT ASSETS		661 032	660 004	679 009
Inventories		272	323	490
Trade receivables	E,F	18 848	37 058	40 521
Current income tax receivables		1 224	-	5 267
Other receivables	E	22 425	22 219	17 384
Other financial assets	F	327	444	480
Prepaid expenses		2 096	932	1 182
Cash and cash equivalents	F	37 923	18 499	91 408
Bank deposits (maturity beyond 3 months)	F	577 917	580 529	522 277
TOTAL ASSETS		934 572	912 555	867 577

	Nota	31.03.2018	31.12.2017	31.03.2017
EQUITY		878 356	851 680	803 671
Equity attributable to shareholders of the entity		878 356	851 680	803 671
Share capital	17*	96 120	96 120	96 120
Supplementary capital		539 294	539 294	390 518
Other reserve capital		18 166	15 212	7 278
Retained earnings		201 054	16 441	266 143
Net profit (loss) for the reporting period		23 722	184 613	43 612
LONG-TERM LIABILITIES		2 850	5 280	2 531
Other financial liabilities	F	-	148	233
Deferred income tax liabilities	A	-	3 071	1 353
Deferred revenues		2 772	1 983	891
Provisions for employee benefits and similar liabilities		78	78	54
SHORT-TERM LIABILITIES		53 366	55 595	61 375
Other financial liabilities	F	233	190	234
Trade liabilities	F	6 058	9 972	4 312
Current income tax liabilities		-	2 158	-
Other liabilities		1 104	1 650	4 718
Deferred revenues		587	586	748
Provisions for employee benefits and similar liabilities		1	1	71
Other provisions		45 383	41 038	51 292
TOTAL EQUITY AND LIABILITIES		934 572	912 555	867 577

* Detailed information regarding changes in this line item can be found in the notes accompanying the condensed interim consolidated financial statement.

Condensed interim statement of changes in separate equity

	Share capital	Supplementary capital	Other reserve capital	Retained earnings	Net profit (loss) for the reporting period	Total equity
01.01.2018 – 31.03.2018
Equity as of 01.01.2018	96 120	539 294	15 212	201 054	-	851 680
Cost of incentive program	-	-	2 954	-	-	2 954
Total comprehensive income	-	-	-	-	23 722	23 722
Equity as of 31.03.2018	96 120	539 294	18 166	201 054	23 722	878 356

	Share capital	Supplementary capital	Other reserve capital	Retained earnings	Net profit (loss) for the reporting period	Total equity
01.01.2017 – 31.12.2017
Equity as of 01.01.2017	96 120	390 518	4 795	266 143	-	757 576
Cost of incentive program	-	-	10 417	-	-	10 417
Allocation of net profit/coverage of loss	-	148 776	-	(148 776)	-	-
Dividend payments	-	-	-	(100 926)	-	(100 926)
Total comprehensive income	-	-	-	-	184 613	184 613
Equity as of 31.12.2017	96 120	539 294	15 212	16 441	184 613	851 680

	Share capital	Supplementary capital	Other reserve capital	Retained earnings	Net profit (loss) for the reporting period	Total equity
01.01.2017 - 31.03.2017
Equity as of 01.01.2017	96 120	390 518	4 795	266 143	-	757 576
Cost of incentive program	-	-	2 483	-	-	2 483
Total comprehensive income	-	-	-	-	43 612	43 612
Equity as of 31.03.2017	96 120	390 518	7 278	266 143	43 612	803 671

Condensed interim statement of changes in separate cash flows

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017*
OPERATING ACTIVITIES
Net profit (loss)	23 722	43 612
Total adjustments:	19 957	43 733
Depreciation of fixed assets and intangibles	581	432
Profit (loss) from exchange rate differences	(13)	77
Interest and profit sharing (dividends)	(1 545)	(3 389)
Profit (loss) from investment activities	(29)	248
Change in provisions	4 345	7 682
Change in inventories	51	(89)
Change in receivables	17 998	40 225
Change in liabilities excluding credits and loans	(3 887)	(3 629)
Change in other assets and liabilities	(374)	(55)
Other adjustments	2 830	2 231
Cash flows from operating activities	43 679	87 345
Income tax on profit (loss) before taxation	6 199	11 030
Income tax (paid)/reimbursed	(12 944)	(26 260)
Net cash flows from operating activities	36 934	72 115

INVESTMENT ACTIVITIES

Inflows	183 416	343 349
Liquidation of intangibles and fixed assets	-	1
Repayment of long-term loans granted	-	124
Closing bank deposits	181 871	339 835
Other inflows from investment activities	1 545	3 389
Outflows	200 952	501 191
Purchases of intangibles and fixed assets	2 595	1 820
Expenditures on development projects	19 098	15 039
Long-term loans granted	-	2 055
Opening bank deposits (maturity beyond 3 months)	179 259	482 277
Net cash flows from investment activities	(17 536)	(157 842)

FINANCIAL ACTIVITIES

Inflows	130	-
Credits and loans	130	-
Outflows	104	3 413
Payment of liabilities associated with financial lease agreements	104	297
Other outflows from financial activities (incl. cash pool activities)	-	3 116
Net cash flows from financial activities	26	(3 413)
Total net cash flows	19 424	(89 140)
Balance of inflows and outflows	19 424	(89 140)
Cash and cash equivalents at beginning of period	18 499	180 548
Cash and cash equivalents at end of period	37 923	91 408

* adjusted data

Clarifications regarding the separate statement of cash flows

	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017
The "other adjustments" line item comprises:	2 830	2 231
Cost of incentive program	2 729	2 198
Depreciation aggregated with cost of sales and consortium settlements	101	33

Assumption of comparability of financial statements and changes in accounting policies

The accounting practices applied in preparing this condensed interim separate financial statement, the Management Board's professional judgment concerning the Company's accounting practices as well as the main sources of uncertainty in estimations are in all material aspects consistent with the practices applied in preparing the Separate Financial Statement of CD PROJEKT S.A. for 2017, except for changes in practices and presentation-related adjustments described below. This condensed interim separate financial statement should be read in conjunction with the Company's separate financial statement for the year ending 31 December 2017.

Changes in accounting policies

Changes in accounting practices applicable to the Company are in all matters analogous to those described in the section entitled "Assumption of comparability of financial statements and changes in accounting policies" of the consolidated financial statement for the period between 1 January and 31 March 2018, with the exception of changes resulting from initial application of IFRS 15 in the scope of differentiating between principal and agent, and sales with the right of return.

Presentation changes

In this condensed interim separate financial statement for the period between 1 January and 31 March 2018 the Company introduced certain adjustments in the presentation of financial data. In order to maintain comparability of financial data, the corresponding adjustments were also introduced in the presentation of data covering the period between 1 January and 31 March 2017. Specifically, the following adjustments were made:

In the separate statement of cash flows for the period between 1 January and 31 March 2017 the Company rectified an error in the presentation of short-term bank deposits with maturity periods beyond 3 months. The following line items were adjusted:
Cash and cash equivalents at beginning of period adjusted by (339 835) thousand PLN
Closing bank deposits (maturity beyond 3 months) adjusted by 339 835 thousand PLN.

Changes in allowances and provisions introduced in this condensed interim separate financial statement of CD PROJEKT S.A. for the period between 1 January and 31 March 2018 are as follows:

169 thousand PLN elimination of depreciation allowances due to collection of receivables,
1 thousand PLN elimination of depreciation allowances due to writeoffs of unrecoverable receivables,
4 861 thousand PLN creation of provisions for conditional compensation contingent upon the Company's financial result,
184 thousand PLN reduction in provisions for conditional compensation contingent upon the Company's financial result due to partial use,
29 thousand PLN creation of other provisions,
361 thousand PLN reduction in other provisions due to partial use.

A. Deferred income tax

Negative temporary differences requiring recognition of deferred tax assets

	31.12.2017	increases	reductions	31.03.2018
Provisions for other employee benefits	101	18	3	116
Provisions for compensation dependent on financial result	40 663	3 193	184	43 672
Negative exchange rate differences	309	313	309	313
Other provisions	289	22	274	37
Total negative temporary differences	41 362	3 546	770	44 138
Tax rate (Poland)	19%	19%	19%	19%
Total deferred tax assets	7 858	674	146	8 386

Positive temporary differences requiring creation of deferred tax provisions

	31.12.2017	increases	reductions	31.03.2018
Difference between net carrying amount and net tax value of fixed assets and intangibles	22 424	1 559	-	23 983
Revenues obtained in the current period but invoiced in future periods	34 619	12 891	29 202	18 308
Positive exchange rate differences	81	55	84	52
Other sources	398	-	141	257
Total positive temporary differences	57 522	14 505	29 427	42 600
Tax rate (Poland)	19%	19%	19%	19%
Total deferred tax provisions	10 929	2 756	5 591	8 094

Balance of deferred tax assets/provisions

	31.03.2018	31.12.2017	31.03.2017
Deferred tax assets	8 386	7 858	9 823
Deferred tax provisions	8 094	10 929	11 176
Net deferred tax assets (provisions)	292	(3 071)	(1 353)

Income tax reported in profit and loss account

	01.01.2018 - 31.03.2018	01.01.2017 - 31.03.2017
Current income tax	9 562	17 315
Change in deferred income tax	(3 363)	(6 285)
Income tax reported in profit and loss account	6 199	11 030

B. Goodwill

Goodwill from business combinations

	31.03.2018	31.12.2017	31.03.2017
CD Projekt Red sp. z o.o.	39 147	39 147	39 147
Total	39 147	39 147	39 147

Changes in goodwill

No changes in goodwill occurred between 1 January and 31 March 2018.

C. Business combinations

The Company did not merge with any other entity between 1 January and 31 March 2018.

D. Dividends paid out or collected

The Company did not pay out or collect any dividends between 1 January and 31 March 2018.

E. Trade and other receivables

Changes in receivables

	31.03.2018	31.12.2017	31.03.2017
Trade and other receivables	41 273	59 277	57 905
from affiliates	7 167	6 811	6 597
from external entities	34 106	52 466	51 308
Impairment allowances	2 899	3 069	5 267
Gross trade and other receivables	44 172	62 346	63 172

Changes in impairment allowances on receivables

	Trade receivables	Other receivables
OTHER ENTITIES
Impairment allowances as of 01.01.2018	2 337	732
Increases from:	-	-
creation of allowances for past-due and contested receivables	-	-
Reductions from:	170	-
dissolution of allowances due to collection of receivables	169	-
dissolution of allowances (writeoffs)	1	-
Impairment allowances as of 31.03.2018	2 167	732

Calculation of impairment allowances as of 31.03.2018

			Days overdue
	Total	Not overdue	1 – 60	61 – 90	91 – 180	181 – 360	>360
AFFILIATES
gross receivables	682	628	29	-	25	-	-
non-fulfillment ratio		0%	0%	0%	0%	0%	0%
impairment write-downs as determined by non fulfillment ratio	-	-	-	-	-	-	-
impairment write-downs as individually assessed	-	-	-	-	-	-	-
total expected credit loss	-	-	-	-	-	-	-
Net receivables	682	628	29	-	25	-	-

		Not overdue	Days overdue
	Total		1 – 60	61 – 90	91 – 180	181 – 360	>360
EXTERNAL ENTITIES
gross receivables	20 333	17 702	294	-	6	-	2 331
non-fulfillment ratio		0%	0%	0.18%	1.96%	11.50%	5.74%
impairment write-downs as determined by non fulfillment ratio	-	-	-	-	-	-	-
impairment write-downs as individually assessed	2 167	-	-	-	3	-	2 164
total expected credit loss	2 167	-	-	-	3	-	2 164
Net receivables	18 166	17 702	294	-	3	-	167
Total
gross receivables	21 015	18 330	323	-	31	-	2 331
Impairment write-downs	2 167	-	-	-	3	-	2 164
Net receivables	18 848	18 330	323	-	28	-	167

Other receivables as of 31.03.2018

	31.03.2018	31.12.2017	31.03.2017
Other receivables, including:	22 425	22 219	17 384
tax returns except corporate income tax	12 703	13 181	12 695
advance payments for supplies	1 460	2 183	1 150
cash pool guarantees	-	-	2 051
consortium settlements	6 454	5 818	681
deposits	52	35	24
others	7	10	738
advance payments for fixed assets	1 667	940	-
employee settlements	82	52	45
Impairment write-downs	732	732	732
Other gross receivables	23 157	22 951	18 116

Other receivables comprise mostly tax receivables, in particular receivables associated with withholding tax deducted at source by purchasers of licenses from the Company and reported in its annual fiscal statement, as well as VAT receivables and advance payments remitted to suppliers. In addition, this category includes damages which the Company has claimed in a lawsuit against an external contractor for improper rendition of services. Due to the protracted litigation, a full-value impairment allowance has been recognized in association with this amount.

F. Disclosure of financial instruments

Fair value of financial instruments per class

The Company Board has assessed each class of financial instruments held by the Company and reached the conclusion that their carrying amount does not significantly differ from their corresponding fair value both as of 31 March 2018, 31 December 2017 and 31 March 2017.

Financial assets – classification and appraisal

	31.03.2018	31.12.2017	31.03.2017
Financial assets held at amortized cost	635 516	637 025	656 546
Other long-term receivables	501	495	487
Trade receivables	18 848	37 058	40 521
Other financial assets	327	444	1 853
Cash and cash equivalents	37 923	18 499	91 408
Bank deposits (maturity beyond 3 months)	577 917	580 529	522 277
Capital market instruments held at purchase price	16 247	16 023	14 135
Investments in subsidiaries	16 247	16 023	14 135
Total financial assets	651 763	653 048	670 681

Financial liabilities – classification and appraisal

	31.03.2018	31.12.2017	31.03.2017
Financial liabilities held at amortized cost	6 291	10 310	4 779
Trade liabilities	6 058	9 972	4 312
Other financial liabilities	233	338	467

G. Transactions with affiliates

Sales to affiliates		Purchases from affiliates
01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017	01.01.2018 – 31.03.2018	01.01.2017 – 31.03.2017

SUBSIDIARIES

GOG sp. z o.o. (formerly GOG Poland sp. z o.o.)	1 909	545	31	4
GOG Ltd.*	-	7 692	-	50
CD PROJEKT Inc.	7	183	1 280	1 402
CD PROJEKT Co., Ltd.	29	-	605	-

COMPANY EXECUTIVES

Marcin Iwiński	2	2	-	-
Adam Kiciński	1	1	-	-
Piotr Nielubowicz	1	1	-	-
Michał Nowakowski	2	2	-	-

SUPERVISORY BOARD MEMBERS

Katarzyna Szwarc	-	-	-	5

* up until the merger date

	Receivables from affiliates		Liabilities due to affiliates
	31.03.2018	31.12.2017	31.03.2017	31.03.2018	31.12.2017	31.03.2017
SUBSIDIARIES
GOG sp. z o.o. (formerly GOG Poland sp. z o.o.)	7 081	6 765	2 774	-	58	2
GOG Ltd.*	-	-	3 809	-	-	52
CD PROJEKT Inc.	327	444	1 857	348	773	570
CD PROJEKT Co., Ltd.	55	25	-	287	613	-
COMPANY EXECUTIVES
Marcin Iwiński	23	8	7	19	1	16

Adam Kiciński	1	1	-	1	1	5
Michał Nowakowski	4	7	2	-	-	4
Adam Badowski	3	3	1	-	-	-
Piotr Karwowski	-	2	-	-	-	-

* up until the merger date

Statement of the Management Board of the parent entity

With regard to the correctness of the condensed interim consolidated financial statement

Pursuant to the directive of the Finance Minister of 29 March 2018 regarding the publication of periodic and current reports by issuers of securities and the conditions for regarding as equivalent the information required under the laws of a non-member state (Journal of Laws of the Republic of Poland, 2018, item no. 757), the Management Board of the parent entity hereby states that, to the best of its knowledge, this condensed interim consolidated financial statement and comparative data contained herein have been prepared in accordance with all accounting regulations applicable to the CD PROJEKT Capital Group and that they constitute a true, unbiased and clear description of the finances and assets of the Capital Group as well as its current profit and loss balance.

This condensed interim consolidated financial statement conforms to International Financial Reporting Standards (IFRS) approved by the European Union and in force as of 31 December 2017. Where the above mentioned standards are not applicable the statement conforms to the Accounting Act of 29 September 1994 (Journal of Laws of the Republic of Poland, 2018, item no. 395 as amended) and to any secondary legislation based on said Act, as well as to the directive of the Finance Minister of 29 March 2018 regarding the publication of periodic and current reports by issuers of securities and the conditions for regarding as equivalent the information required under the laws of a non-member state (Journal of Laws of the Republic of Poland, 2018, item no. 757).

Approval of financial statement

This financial statement covering the period between 1 January and 31 March 2018 was signed and approved for publication by the Management Board of CD PROJEKT S.A. on 24 May 2018.

Warsaw, 24 May 2018

Adam Kiciński	Marcin Iwiński	Piotr Nielubowicz	Adam Badowski
President of the Board	Vice President of the Board	Vice President of the Board	Board Member



Michał Nowakowski	Oleg Klapovskiy	Piotr Karwowski	Rafał Zuchowicz
Board Member	Board Member	Board Member	Accounting Officer

AI assistant

CD Projekt — Interim / Quarterly Report 2018

5556_rns_2018-05-24_e302f5b8-17ef-4720-ac41-19793906c1b1.pdf

Disclaimer

CD PROJEKT Capital Group – Selected financial highlights converted into EUR

Condensed interim consolidated profit and loss account

Condensed interim consolidated statement of comprehensive income

Condensed interim consolidated statement of financial position

Condensed interim statement of changes in consolidated equity

Condensed interim consolidated cash flow statement

Clarifications regarding the condensed interim consolidated financial statement

General information

Structure of the Capital Group

Affiliates

Consolidation principles

Entities subjected to consolidation

Subsidiaries

Basis for the preparation of the condensed interim consolidated financial statement

Assumption of going concern

Compliance with International Financial Reporting Standards

Standards and interpretations approved by the IASB but not yet approved by the EU

Functional currency and presentation currency

Functional currency and presentation currency

Transactions and balances

Assumption of comparability of financial statements and changes in accounting policies

Changes in accounting policies

IFRS 9 Financial instruments

IFRS 15 and clarifications regarding IFRS 15 – Revenues from contracts with customers

Licensing royalties associated with distribution of videogames

Revenues from sales of virtual goods via microtransactions

Principal compensation vs. agent compensation in the GOG.com segment

Advance payments from clients

Requirements related to presentation and disclosure of information

Amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

Amendments to IFRS 2 Share-based Payment

Amendments to IFRS (2014-2016) adopted during the annual IFRS improvements cycle

Amendments to IAS 40 Investment Property: Transfers of investment property

IFRIC 22 Foreign currency transactions and advance considerations

Presentation changes

Financial audit

Supplementary information – CD PROJEKT Capital Group activity segments

Activity segments

Presentation of results by activity segment

Disclosure of activity segments

Segmented consolidated profit and loss account for the period between 01.01.2018 and 31.03.2018

Segmented consolidated profit and loss account for the period between 01.01.2017 and 31.03.2017

Commentary on the Q1 2018 result of the GOG.com segment

1. Revenues from GWENT-related sales – which represent the most important component of GOG.com aggregate revenues – following the transnational merger between GOG Ltd. and GOG Poland sp. z o.o. and the corresponding changes in attribution of revenues associated with the project

2. Strengthening of PLN against currencies in which GOG.com carries out sales; primarily USD

3. Operating costs

4. Financial expenses – negative exchange rate differences

Segmented consolidated statement of financial position as of 31.03.2018

Segmented consolidated statement of financial position as of 31.12.2017

Segmented consolidated statement of financial position as of 31.03.2017*

Activity segments

CD PROJEKT RED

GOG.com

Disclosure of the issuer's significant accomplishments and shortcomings in each activity segment in the first quarter of 2018

CD PROJEKT RED

GWENT: product development

Events related to The Witcher games

GOG.com

Publishing activities

Sales support

Other achievements

Disclosure of factors which may affect future Group results

Disclosure of seasonal or cyclical activities

CD PROJEKT RED

GOG.com

Disclosure of key clients

Note 2. Tangible fixed assets

Changes in fixed assets (by category) between 01.01.2018 and 31.03.2018

Contractual commitments for future acquisition of fixed assets

Note 3. Intangibles and expenditures on development projects

Changes in intangibles and expenditures on development projects 01.01.2018 and 31.03.2018

Contractual commitments for future acquisition of intangibles

Note 4. Goodwill

Note 5. Inventories

Changes in inventories

Changes in inventory impairment write-downs

CD Projekt Interim / Quarterly Report 2018