CD Projekt — Interim / Quarterly Report 2022

Nov 28, 2022

CD PROJEKT Group - Selected financial data translated into EUR Table of contents Interim condensed consolidated income statement Interim condensed consolidated statement of comprehensive income Interim condensed consolidated statement of financial position Interim condensed statement of changes in consolidated equity Interim condensed consolidated statement of cash flows General information Presentation of the Group Subsidiaries Consolidation policies Consolidated companies Subsidiaries Basis of preparation of the interim condensed consolidated financial statements Going concern assumption Compliance with the International Financial Reporting Standards Amendments to standards or interpretations effective from 1 January 2022 applicable and adopted by the Group Standards published and endorsed by the EU which are not yet effective and their impact on the Group’s financial statements Standards and interpretations adopted by the IASB but not yet endorsed by the EU Functional currency and presentation currency Functional currency and presentation currency Transactions and balances Comparability of the financial statements and consistency of accounting policies Presentation changes Audit by the registered auditor Operating segments Presentation of the financial statements taking into account operating segments Description of differences in the basis for determining segments and the profit or loss of a segment compared with the last annual consolidated financial statements Information on individual operating segments Consolidated income statement by segments for the period from 01.07.2022 to 30.09.2022 Consolidated income statement by segments for the period from 01.01.2022 to 30.09.2022 Consolidated income statement by segments for the period from 01.07.2021 to 30.09.2021 Consolidated income statement by segments for the period from 01.01.2021 to 30.09.2021 Consolidated statement of financial position by segments as at 30.09.2022 Consolidated statement of financial position by segments as at 30.06.2022 Consolidated statement of financial position by segments as at 31.12.2021 Operating segments CD PROJEKT RED GOG.COM Description of the Issuer’s major achievements or failures in the third quarter of 2022 by operating segments CD PROJEKT RED GOG.COM Other events Factors affecting the Group’s future performance Impact of the political and economic situation in Ukraine on sales during the reporting period Impact on sales Risks associated with the current political and economic situation in Ukraine Seasonality or cyclicality of the Group’s operations CD PROJEKT RED GOG.COM Key customers Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact Note 2. Property, plant and equipment Changes in property, plant and equipment (by category) for the period 01.01.2022 – 30.09.2022 * Amounts of contractual commitments to purchase property, plant and equipment in the future Right-of-use assets relating to property, plant and equipment Note 3. Intangible assets and expenditure on development projects Changes in intangible assets and expenditure on development projects for the period 01.01.2022 – 30.06.2022 Amounts of contractual commitments to purchase intangible assets in future Note 4. Goodwill Note 5. Investment properties Change in investment properties for the period 01.01.2022 – 30.09.2022 Contractual liabilities on purchase of investment properties Note 6. Inventories Change in inventory write-downs Note 7. Trade and other receivables Change in write-downs of receivables Current and overdue trade receivables as at 30.09.2022 Other receivables Note 8. Other financial assets Note 9. Prepayments and deferred costs Note 10. Deferred income tax Deductible temporary differences underlying the deferred tax asset Taxable temporary differences underlying the deferred tax provision Net deferred tax asset/provision Income tax expense recognized in the income statement Note 11. Provision for retirement and similar benefits Note 12. Other provisions Change in other provisions Note 13. Other liabilities Note 14. Deferred income Note 15. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments Financial assets – classification and measurement Financial liabilities – classification and measurement Note 16. Sales revenue Sales revenue – geographical structure 2022 Sales revenue – geographical structure 2021 Sales revenue – by type of production Sales revenue – by distribution channel Note 17. Operating expenses Note 18. Other operating income and expenses Other operating income Other operating expenses Note 19. Finance income and costs Finance income Finance costs Note 20. Leases of low-value assets and short-term leases Note 21. Issue, redemption and repayment of debt and equity securities Issue of debt securities Issue of equity securities Note 22. Dividend paid (or declared) and received Note 23. Transactions with related entities Terms and conditions of transactions with related entities Transactions with related entity after consolidation eliminations Note 24. Unpaid loans or defaults on loan agreements in cases where no corrective measures were adopted by the balance sheet date Note 25. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year Contingent liabilities in respect of guarantees, sureties and collateral Note 26. Changes in the structure of the Group and Group companies during the reporting period Note 27. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders Note 28. Tax settlements Note 29. Explanations to the condensed consolidated statement of cash flows Note 30. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities Note 31. Post balance sheet date events Litigation pending Shareholding structure Shareholders holding directly or indirectly through subsidiaries at least 5% of the total number of votes at the Parent Company’s General Shareholders Meeting as at the date of publication of the quarterly report Changes in the shareholding structure of the Parent Company Parent Company’s shares held by members of the Management and Supervisory Boards Changes in the number of shares held by members of the Management and Supervisory Boards Reference to published estimates Interim condensed separate income statement Interim condensed separate statement of comprehensive income Interim condensed separate statement of financial position Interim condensed separate statement of changes in equity Interim condensed separate statement of cash flows Explanations to the condensed separate statement of cash flows Comparability of the financial statements and consistency of accounting policies Changes in accounting policies Presentation changes Notes to the separate financial statements of CD PROJEKT S.A. A. Deferred tax Deductible temporary differences underlying the deferred tax asset Taxable temporary differences underlying the deferred tax provision Net deferred tax asset/provision Income tax expense recognized in the income statement B. Other provisions Change in other provisions C. Goodwill D. Business combinations E. Dividend paid (or declared) and received F. Trade and other receivables Changes in write-downs of receivables Current and overdue trade receivables as at 30.09.2022 Other receivables G. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments Financial assets – classification and measurement Financial liabilities – classification and measurement H. Transactions with related entities Statement of the Management Board of the Parent Company On the fairness of preparation of the interim condensed consolidated financial statements The entity authorized to review the fairness of preparation of interim condensed consolidated financial statements Approval of the financial statements Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2019 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 1 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 20(all amounts in PLN thousand, unless Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements s are an integral part of these financial statements 2 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. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 3 CD PROJEKT Group - Selected financial data translated into EUR PLN EUR 01.01.2022 – 30.09.2022 01.01.2021 – 30.09.2021 01.01.2022 – 30.09.2022 01.01.2021 – 30.09.2021 Net sales of products, services, goods for resale and materials 623 507 615 109 133 001 134 937 Cost of sales of products, services, goods for resale and materials 180 561 215 123 38 516 47 192 Operating profit/(loss) 234 565 138 250 50 035 30 328 Profit/(loss) before tax 265 641 132 267 56 664 29 015 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 212 462 121 390 45 320 26 629 Net cash from operating activities 212 084 966 291 45 240 211 976 Net cash from investing activities (321 193) (334 339) (68 514) (73 344) Net cash from financing activities (103 788) (504 606) (22 139) (110 696) Net increase/(decrease) in cash and cash equivalents (212 897) 127 346 (45 413) 27 936 Number of shares (in thousands) 100 739 100 711 100 739 100 711 Net earnings/(loss) per share (in PLN) 2.11 1.21 0.45 0.26 Diluted earnings/(loss) per share (in PLN/EUR) 2.11 1.20 0.45 0.26 Book value per share (in PLN/EUR) 19.84 18.21 4.07 3.93 Diluted book value per share (in PLN/EUR) 19.83 18.20 4.07 3.93 Dividend declared or paid per share (in PLN/EUR) 1.00 5.00 0.21 1.10 PLN EUR 30.09.2022 31.12.2021 30.09.2022 31.12.2021 Total assets 2 230 805 2 158 735 458 090 469 351 Liabilities and provisions for liabilities (excluding accruals) 207 515 226 407 42 613 49 225 Non-current liabilities 35 584 36 112 7 307 7 851 Current liabilities 196 698 228 267 40 391 49 630 Equity 1 998 523 1 894 356 410 391 411 870 Share capital 100 739 100 739 20 686 21 903 The financial data presented above was translated into EUR as follows:  Items of the consolidated income statement and the consolidated cash flow statement were translated at exchange rates calculated as an arithmetic mean of the mid exchange rates announced by the National Bank of Poland for the euro applicable as at the last day of each month in a given reporting period. These rates were, respectively, as follows: from 1 January to 30 September 2022: 4.688 PLN/EUR and from 1 January to 30 September 2021: 4.5585 PLN/EUR.  Items of assets, liabilities and equity in the consolidated statement of financial position were translated at exchange rates announced by the National Bank of Poland for the euro applicable on the last day of the reporting period. These rates were, respectively, as follows: 4.8698 PLN/EUR as at 30 September 2022 and 4.5994 PLN/EUR as at 31 December 2021. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 4 Table of contents Key financial data of the CD PROJEKT Group ................................................................................................................................................................. 6 Interim condensed consolidated income statement ................................................................................................................................................ 7 Interim condensed consolidated statement of comprehensive income ........................................................................................................... 9 Interim condensed consolidated statement of financial position ...................................................................................................................... 10 Interim condensed statement of changes in consolidated equity ..................................................................................................................... 12 Interim condensed consolidated statement of cash flows ................................................................................................................................... 14 Notes to the interim condensed consolidated financial statements ........................................................................................................................ 17 General information.......................................................................................................................................................................................................... 18 Presentation of the Group .............................................................................................................................................................................................. 18 Consolidation policies ..................................................................................................................................................................................................... 19 Consolidated companies .......................................................................................................................................................................................... 19 Subsidiaries .................................................................................................................................................................................................................. 19 Basis of preparation of the interim condensed consolidated financial statements .................................................................................... 20 Going concern assumption ........................................................................................................................................................................................... 20 Compliance with the International Financial Reporting Standards................................................................................................................... 20 Amendments to standards or interpretations effective from 1 January 2022 applicable and adopted by the Group ............... 20 Functional currency and presentation currency ...................................................................................................................................................... 21 Functional currency and presentation currency ............................................................................................................................................... 21 Transactions and balances ...................................................................................................................................................................................... 21 Comparability of the financial statements and consistency of accounting policies ..................................................................................... 21 Presentation changes ............................................................................................................................................................................................... 22 Audit by the registered auditor .................................................................................................................................................................................... 22 Notes – operating segments of the CD PROJEKT Group .......................................................................................................................................... 23 Operating segments ....................................................................................................................................................................................................... 24 Information on individual operating segments ................................................................................................................................................. 25 Consolidated income statement by segments for the period from 01.07.2022 to 30.09.2022 ....................................................... 26 Consolidated income statement by segments for the period from 01.01.2022 to 30.09.2022 ........................................................ 27 Consolidated income statement by segments for the period from 01.07.2021 to 30.09.2021 ......................................................... 28 Consolidated income statement by segments for the period from 01.01.2021 to 30.09.2021 .......................................................... 29 Consolidated statement of financial position by segments as at 30.09.2022 ....................................................................................... 30 Consolidated statement of financial position by segments as at 30.06.2022 ....................................................................................... 32 Consolidated statement of financial position by segments as at 31.12.2021 ......................................................................................... 34 Operating segments ................................................................................................................................................................................................. 36 Description of the Issuer’s major achievements or failures in the third quarter of 2022 by operating segments ....................... 37 Factors affecting the Group’s future performance .......................................................................................................................................... 38 Impact of the political and economic situation in Ukraine on sales during the reporting period ..................................................... 39 Impact on sales ........................................................................................................................................................................................................... 39 Risks associated with the current political and economic situation in Ukraine ...................................................................................... 39 Seasonality or cyclicality of the Group’s operations ....................................................................................................................................... 40 Key customers ............................................................................................................................................................................................................. 41 Notes – other explanatory notes to the interim condensed consolidated financial statements .................................................................... 42 Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact .................................................................................................................................... 43 Note 2. Property, plant and equipment............................................................................................................................................................... 44 Note 3. Intangible assets and expenditure on development projects ...................................................................................................... 46 Note 4. Goodwill .......................................................................................................................................................................................................... 47 Note 5. Investment properties ................................................................................................................................................................................ 47 Note 6. Inventories .................................................................................................................................................................................................... 48 Note 7. Trade and other receivables ................................................................................................................................................................... 48 Note 8. Other financial assets ................................................................................................................................................................................ 50 Note 9. Prepayments and deferred costs .......................................................................................................................................................... 50 Note 10. Deferred income tax ................................................................................................................................................................................. 51 Note 11. Provision for retirement and similar benefits ..................................................................................................................................... 52 Note 12. Other provisions ........................................................................................................................................................................................ 52 Note 13. Other liabilities ........................................................................................................................................................................................... 53 Note 14. Deferred income ....................................................................................................................................................................................... 53 Note 15. Information on financial instruments ................................................................................................................................................... 54 Note 16. Sales revenue ............................................................................................................................................................................................ 56 Note 17. Operating expenses ................................................................................................................................................................................. 57 Note 18. Other operating income and expenses ............................................................................................................................................. 58 Note 19. Finance income and costs ..................................................................................................................................................................... 59 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 5 Note 20. Leases of low-value assets and short-term leases........................................................................................................................ 59 Note 21. Issue, redemption and repayment of debt and equity securities .............................................................................................. 60 Note 22. Dividend paid (or declared) and received ........................................................................................................................................ 60 Note 23. Transactions with related entities ....................................................................................................................................................... 60 Note 24. Unpaid loans or defaults on loan agreements in cases where no corrective measures were adopted by the balance sheet date .................................................................................................................................................................................................... 63 Note 25. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year ........ 64 Note 26. Changes in the structure of the Group and Group companies during the reporting period............................................ 66 Note 27. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders ........................................................................................................................................................................................................ 66 Note 28. Tax settlements ........................................................................................................................................................................................ 67 Note 29. Explanations to the condensed consolidated statement of cash flows .................................................................................. 68 Note 30. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities .............................. 70 Note 31. Post balance sheet date events ........................................................................................................................................................... 72 Additional information ........................................................................................................................................................................................................... 73 Litigation pending ....................................................................................................................................................................................................... 74 Shareholding structure ................................................................................................................................................................................................... 75 Parent Company’s shares held by members of the Management and Supervisory Boards .............................................................. 76 Reference to published estimates .............................................................................................................................................................................. 76 Interim condensed separate financial statements of CD PROJEKT S.A. ............................................................................................................... 77 Interim condensed separate income statement ......................................................................................................................................................78 Interim condensed separate statement of comprehensive income ................................................................................................................ 79 Interim condensed separate statement of financial position ............................................................................................................................. 79 Interim condensed separate statement of changes in equity ............................................................................................................................. 81 Interim condensed separate statement of cash flows.......................................................................................................................................... 83 Comparability of the financial statements and consistency of accounting policies .................................................................................... 85 Changes in accounting policies ............................................................................................................................................................................ 85 Presentation changes ............................................................................................................................................................................................... 85 Notes to the separate financial statements of CD PROJEKT S.A. .................................................................................................................... 86 A. Deferred tax....................................................................................................................................................................................................... 86 B. Other provisions ................................................................................................................................................................................................87 C. Goodwill ...............................................................................................................................................................................................................87 D. Business combinations ...................................................................................................................................................................................87 E. Dividend paid (or declared) and received ................................................................................................................................................ 88 F. Trade and other receivables......................................................................................................................................................................... 88 G. Information on financial instruments ......................................................................................................................................................... 90 H. Transactions with related entities............................................................................................................................................................... 92 Statement of the Management Board of the Parent Company ......................................................................................................................... 94 Approval of the financial statements ......................................................................................................................................................................... 95 Key financial data of the CD PROJEKT Group 1 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 7 Interim condensed consolidated income statement Note 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Sales revenue 245 514 623 507 144 463 615 109 Sales of products 16 203 189 489 057 104 262 471 248 Sales of services 16 308 1 622 420 4 132 Sales of goods for resale and materials 16 42 017 132 828 39 781 139 729 Cost of sales of products, services, goods for resale and materials 79 200 180 561 52 927 215 123 Costs of products and services sold 17 48 602 85 640 23 217 111 126 Cost of goods for resale and materials sold 17 30 598 94 921 29 710 103 997 Gross profit/(loss) on sales 166 314 442 946 91 536 399 986 Selling expenses 17 54 379 155 720 55 322 186 505 Administrative expenses 17 17 867 53 156 23 231 77 418 Other operating income 18 9 819 15 204 4 915 8 768 Other operating expenses 18 6 783 14 692 2 261 6 575 (Impairment)/reversal of impairment of financial instruments (9) (17) (5) (6) Operating profit/(loss) 97 095 234 565 15 632 138 250 Finance income 19 33 219 68 589 9 984 12 387 Finance costs 19 18 276 37 513 9 216 18 370 Profit/(loss) before tax 112 038 265 641 16 400 132 267 Income tax expense 10 13 334 53 179 58 10 877 Net profit/(loss) 98 704 212 462 16 342 121 390 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 98 704 212 462 16 342 121 390 Net earnings/(loss) per share (in PLN) - - - - Basic for the reporting period 0.98 2.11 0.16 1.21 Diluted for the reporting period 0.98 2.11 0.16 1.20 A significant increase in the amount of the Group’s Sales in the third quarter of 2022 in relation to the reference period was mainly due to a good reception of the Cyberpunk EDGERUNNERS update 1.6 which preceded the release on Netflix of the Cyberpunk: EDGERUNNERS anime series. The update included additional content for the game related to the series (side quests, locations, items, an arcade game) and a number of updates and technical improvements to the game. These events supported by a marketing and communication campaign contributed to an increase in the Sales of products in the CD PROJEKT RED segment, mainly resulting from: a) royalties in respect of the sales of the Cyberpunk 2077 game; b) recognition of income from licence fees in connection with the release of the CYBERPUNK: EDGERUNNERS series in September; c) royalties in respect of the sales of The Witcher 3: Wild Hunt game with the Hearts of Stone and Blood and Wine extensions; d) revenues generated by the Gwent: The Witcher Card Game project; e) income from licence fees associated with the games The Witcher 2: Assassins of Kings, The Witcher, Thronebreaker: The Witcher Tales, and income from licence fees on CD PROJEKT RED studio franchises. In the reporting period, the Group also recognized an increase in the Sales of goods for resale and materials, which comprised mainly the revenues from the digital distribution of games from third party providers to end customers through the GOG.COM platform. In the item Cost of products and services sold the Group mainly recognizes amortization of the expenditure on development work relating to the games developed by CD PROJEKT RED. Nevertheless, the amount of this cost item increased in relation to the reference period due to the fact that the total production costs of the CYBERPUNK: EDGERUNNERS series were recognized on a one-off basis in the reporting period with no amortization and depreciation costs relating to the GWENT game recognized in the comparative period. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 8 In accordance with the Group’s accounting policy, the expenditure on development projects which allow the reliable estimation of the sales volume and value is amortized by the Group in line with the expected consumption of economic benefits, which depends on the number of copies sold. Otherwise the Group amortizes the project value under the straight-line method. The following principles were adopted for the games whose development cost amortization was recognized in the third quarter of 2022: a) 40% of the total expenditure on Cyberpunk 2077 was recognized in the quarter of its release (the fourth quarter of 2020), and the remaining 60% will be recognized over the next 5 years of the asset’s use (3% per quarter); b) the expenditure on the update of Cyberpunk 2077 to new generation consoles Xbox Series X|S and PlayStation 5 is recognized on a straight-line basis from the period of its release up to the last period in which the expenditure on the base game is recognized; c) the expenditure on The Witcher 3: Wild Hunt for Nintendo Switch (released in October 2019) was charged to the income statement over three years from the end of development on the basis of the expected distribution of future revenues estimated based on the sales of historical products. The Cost of goods for resale and materials sold mainly corresponds to the cost of sales of goods for resale on the GOG.COM platform, the cost of sales of physical game components of the CD PROJEKT RED segment and, to a lesser extent, the cost of sales of goods for resale to end customers through the CD PROJEKT RED GEAR shop. In the third quarter of 2022, the Selling expenses comprised mainly the costs of publishing activities, ongoing advertising and promotion of the Company’s own titles, including remuneration (both fixed and performance-based) of the internal publishing teams, the costs of performance-based remuneration of the companies’ Management Boards, and other external services relating to the promotion of sales. The aforementioned costs are recognized in the CD PROJEKT RED segment. Another significant group of selling expenses comprised the costs of servicing the published titles. The main items of such costs in the reporting period were the costs of servicing the game Cyberpunk 2077 and the costs of maintenance and development of GWENT: The Witcher Card Game. The servicing costs were reduced significantly in relation to the third quarter of 2021, mainly due to a decrease in the costs of preparing Cyberpunk 2077 updates. This category also includes the costs of marketing activities relating to the GOG.COM portal (recognized in the GOG.COM segment), as well as the expenses on development and conducting sales through the portal. In the item Administrative expenses, the CD PROJEKT Group companies recognize: a) fixed and performance-based remuneration of administrative teams and the costs of external services classified in this category, which show a consistent upward trend in line with the Group’s development; b) the fixed part of the remuneration of the companies’ Management Boards; c) the cost of valuation of the entitlements granted under the incentive plan for the years 2020-2025, which decreased in relation to the reference period due to a negative assessment of the possibility of achieving the performance goals in the period of the plan’s duration and the change in the estimates introduced by the Management Board as at the end of 2021; d) the costs incurred on future games in the initial period (the research phase) before the beginning of project execution (the development phase) and capitalization as part of the Expenditure on development projects in Non-current assets, which are significantly lower than in the reference period due to the fact that the research phase was completed with respect to two projects and the development stage began. In the reporting period, Other operating income and expenses comprised mainly income from rental of office space (and the related costs of maintenance) generated by the CD PROJEKT RED in the real estate complex at ul. Jagiellońska 74 and 76 in Warsaw, proceeds from the subsidies received, as well as income and expenses resulting from one-off events, including mainly the Promised Land 2022 event in Łódź and marketing barter agreements (which were responsible for an increase in the value of this item) and income relating to writing off past liabilities of the GOG.COM segment. In the reporting period, the Group recognized an excess of Finance income over Finance costs, which was mainly due to an increase in interest income resulting from the global interest rate growth, but also due to generating net foreign exchange gains and hedging transactions relating to the foreign exchange risk associated with holding Treasury bonds denominated in foreign currencies. The corporate income tax recognized in the income statement for the third quarter of the current year and the effective tax rate increased significantly in relation to the third quarter of 2021. This was mainly due to the fact that a part of the tax collected in other jurisdictions on licence fees payable to the Parent Company (withholding tax) was recognized in corporate income tax. Having collected the documents confirming the amounts of withholding tax and the fact of its payment abroad, the Parent Company deducted the foreign withholding tax from the Polish corporate income tax, which (in a significant part) was calculated based on a preferential IP Box tax rate (5%), and charged the excess to the income statement. The consolidated Net profit of the Group generated in the third quarter of 2022 of PLN 98 704 thousand was significantly higher than in the third quarter of the previous year, mainly due to a considerable increase in the revenues of the CD PROJEKT RED segment. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 9 Interim condensed consolidated statement of comprehensive income 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Net profit/(loss) 98 704 212 462 16 342 121 390 Other comprehensive income subject to reclassification to gains or losses after specific conditions have been met (4 402) (10 841) 1 876 3 680 Exchange differences on measurement of foreign operations 1 896 3 448 83 109 Measurement of derivative financial instruments – fair value through other comprehensive income, taking into account the tax effect (6 298) (14 289) 1 793 3 571 Other comprehensive income not subject to reclassification to gains or losses - - - - Total comprehensive income 94 302 201 621 18 218 125 070 Total comprehensive income attributable to non- controlling interests - - - - Total comprehensive income attributable to owners of CD PROJEKT S.A. 94 302 201 621 18 218 125 070 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 10 Interim condensed consolidated statement of financial position Note 30.09.2022 30.06.2022 31.12.2021 NON-CURRENT ASSETS 1 092 237 1 039 127 905 846 Property, plant and equipment 2 131 431 129 155 119 588 Intangible assets 3 69 952 69 764 58 393 Expenditure on development projects 3 449 468 434 055 350 195 Investment properties 5 42 961 43 655 44 634 Goodwill 3.4 56 438 56 438 56 438 Shares in non-consolidated subsidiaries 72 195 67 055 38 520 Prepayments and deferred costs 9 29 619 24 247 11 434 Other financial assets 8.15 197 509 173 589 178 540 Deferred tax assets 10 41 877 40 435 47 418 Other receivables 7.15 787 734 686 CURRENT ASSETS 1 138 568 1 157 539 1 252 889 Inventories 6 14 492 15 136 15 886 Trade receivables 7.15 147 246 63 220 125 293 Current income tax receivable 1 332 2 454 98 Other receivables 7 48 536 51 411 113 498 Prepayments and deferred costs 9 28 067 20 717 13 763 Other financial assets 8.15 289 662 319 572 307 765 Bank deposits over 3 months 15 410 544 - 265 000 Cash and cash equivalents 15 198 689 685 029 411 586 TOTAL ASSETS 2 230 805 2 196 666 2 158 735 * restated data The item Expenditure on development projects, which comprises the expenditure on the production of games, new technologies and other products of a similar nature incurred and deferred by the Group, represented the biggest share of the balance of the Group's Non-current assets as at the end of the third quarter of 2022 and significantly contributed to its increase. The increase in this item in the reporting period was due to the fact that the expenditure incurred by the CD PROJEKT RED segment on the production of future games exceeded the amortization of completed projects. Moreover, the balance of Property, plant and equipment (constituting a part of non-current assets) increased in the reporting period due to the expenditure on construction work at the CD PROJEKT campus in Warsaw (fixed assets under construction). An increase in the balance of Shares in non-consolidated subordinated entities was mainly due to an increase in the capital of CD PROJEKT RED Vancouver Studio Ltd. and translation of the value of shares in subsidiaries of CD PROJEKT Inc. into the presentation currency of the CD Projekt S.A. Group. An increase in the balance of Other long-term financial assets is due to the conversion of some of the investments in Treasury bonds maturing in the reporting period, which had previously been recognized as Short-term current assets, to newly issued bonds with maturities exceeding 12 months year from 30 September 2022. The total balance of Other financial assets (both long- and short-term) did not change significantly. An increase in the consolidated balance of Prepayments and deferred costs, both short- and long-term, recognized as at the end of the analysed period, was mainly due to the new distribution contracts signed in the GOG-COM segment and the resulting recognition of minimum guarantees, i.e. the advances and prepayments provided by GOG.COM to the suppliers in association with licensing royalties for games distributed on the GOG.COM platform. The Group’s Other receivables at the end of September 2022 comprise mainly tax receivables and advance payments remitted by CD PROJEKT RED in relation to development projects, goods for resale and services. The reported increase in the consolidated balance of Trade receivables in relation to the balance as at 30 June 2022 was mainly due to an increase in sales in the current period which naturally resulted in an increase in the receivables in respect of royalties in the CD PROJEKT RED segment, which were not settled as at the balance sheet date. As at 30 September 2022, the aggregate value of Cash and cash equivalents, Bank deposits (maturity beyond 3 months) and liquid financial assets in the form of Treasury bonds held by the Group (recognized as short- and long-term Other financial assets) was PLN 1 095 722 thousand. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 11 Note 30.09.2022 30.06.2022 31.12.2021 EQUITY 1 998 523 1 903 244 1 894 356 Equity of the shareholders of CD PROJEKT S.A. 1 998 523 1 903 244 1 894 356 Share capital 21 100 739 100 739 100 739 Supplementary capital 1 530 035 1 560 842 1 425 647 Share premium 115 909 115 909 115 909 Other reserves 36 990 42 323 47 994 Foreign exchange differences on translation 5 039 3 143 1 591 Retained earnings (2 651) (33 458) (6 432) Net profit (loss) for the period 212 462 113 746 208 908 Non-controlling interests - - - NON-CURRENT LIABILITIES 35 584 32 729 36 112 Other financial liabilities 15 23 919 23 614 21 080 Other liabilities 13 2 680 2 740 2 860 Deferred income 14 4 135 5 504 6 424 Provision for retirement and similar benefits 11 380 380 380 Other provisions 12 4 470 491 5 368 CURRENT LIABILITIES 196 698 260 693 228 267 Other financial liabilities 15 38 591 29 724 25 802 Trade payables 15 67 726 64 042 53 380 Current income tax liabilities 6 468 - 24 446 Other liabilities 13 8 879 110 322 10 042 Deferred income 14 20 632 17 682 31 548 Provision for retirement and similar benefits 11 7 7 7 Other provisions 12 54 395 38 916 83 042 TOTAL LIABILITIES AND EQUITY 2 230 805 2 196 666 2 158 735 As at the end of the third quarter of 2022, the CD PROJEKT Group’s Equity amounted to PLN 1 998 523 thousand, i.e. PLN 95 279 thousand more than as at 30 June 2022, which was mainly due to the Net profit for the reporting period. An increase in both long- and short-term Other financial liabilities in the reporting period was mainly due to the revaluation of the instruments hedging currency risk associated with holding foreign Treasury bonds denominated in foreign currencies. This item also includes liabilities in respect of the perpetual usufruct of land relating to the Jagiellońska 74 and Jagiellońska 76 facilities in Warsaw and liabilities in respect of the deferred payment of a part of the purchase price for shares in The Molasses Flood. An increase in the consolidated balance of Other provisions (both long- and short-term) in the third quarter of 2022 was mainly due to an increase in the provision for remuneration dependent on current-period earnings. An increase in the balance of the Group’s Trade payables resulted from the ongoing operations of the CD PROJEKT RED segment. This item also includes the liabilities of the GOG.COM segment, mainly in respect of royalties relating to the sales executed in the current period. The balance of the Group’s Other liabilities in the reporting period mainly comprised current tax (VAT, PIT, withholding tax) and social insurance liabilities. A decrease in this balance compared with the end of June 2022 is a result of the dividend paid by CD PROJEKT S.A. during the reporting period. The balance of Deferred income of the CD PROJEKT Group as at the end of September 2022 comprised mainly:  CD PROJEKT RED – future period sales – minimum guarantees, i.e. licensing royalties received or receivable by the Company from its publishers and distribution partners in relation to future period sales;  CD PROJEKT RED and GOG.COM – deferrals related to subsidies;  GOG.COM – deferrals related to settlements with the Company’s clients (including store credit and Wallet contributions);  GOG.COM – future period sales – pre-orders for games scheduled for release in future reporting periods. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 12 Interim condensed statement of changes in consolidated equity Share capital Supplementary capital Share premium Other reserves Foreign exchange differences on translation Retained earnings Net profit (loss) for the period Equity attributable to owners of CD PROJEKT S.A. Non- controlling interests Total equity 01.01.2022 – 30.09.2022 Equity as at 01.01.2022 100 739 1 425 647 115 909 47 994 1 591 202 476 - 1 894 356 - 1 894 356 Costs of the incentive plan - - - 3 285 - - - 3 285 - 3 285 Appropriation of the net profit/offset of loss - 104 388 - - - (104 388) - - - - Payment of dividend - - - - - (100 739) - (100 739) - (100 739) Total comprehensive income - - - (14 289) 3 448 - 212 462 201 621 - 201 621 Equity as at 30.09.2022 100 739 1 530 035 115 909 36 990 5 039 (2 651) 212 462 1 998 523 - 1 998 523 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 13 Share capital Supplementary capital Share premium Other reserves Foreign exchange differences on translation Retained earnings Net profit (loss) for the period Equity attributable to owners of CD PROJEKT S.A. Non- controlling interests Total equity 01.01.2021 – 30.09.2021 Equity as at 01.01.2021 100 655 774 851 113 844 45 547 1 091 1 151 368 - 2 187 356 - 2 187 356 Corrections of errors - - - - - (4 179) - (4 179) - (4 179) Equity, as adjusted 100 655 774 851 113 844 45 547 1 091 1 147 189 - 2 183 177 - 2 183 177 Costs of the incentive plan - - - 26 820 - - - 26 820 - 26 820 Appropriation of the net profit/offset of loss - 649 927 - - - (649 927) - - - - Share-based payments 84 869 2 065 (869) - - - 2 149 - 2 149 Payment of dividend - - - - - (503 694) - (503 694) - (503 694) Total comprehensive income - - - 3 571 109 - 121 390 125 070 - 125 070 Equity as at 30.09.2021 100 739 1 425 647 115 909 75 069 1 200 (6 432) 121 390 1 833 522 - 1 833 522 The Group adjusted the calculation of the deferred tax asset as at 31 December 2020 by reclassifying a part of deductible temporary differences from the category of taxed at 19% to taxed at 5%. As a result of the adjustment, equity decreased by PLN 4,179 thousand. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 14 Interim condensed consolidated statement of cash flows Note 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 OPERATING ACTIVITIES Net profit/(loss) 98 704 212 462 16 342 121 390 Total adjustments: 29 (42 149) (18 150) 75 887 841 713 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties 3 425 10 771 4 396 13 284 Amortization of development projects recognized as cost of goods sold 48 325 84 541 22 876 69 383 Foreign exchange gains/(losses) (19 888) (24 769) (9 705) (11 719) Interest and participation in profits (9 168) (26 719) (17) 332 (Gains)/Losses on investing activities 13 796 15 282 9 460 14 111 Increase/(Decrease) in provisions 13 275 (36 914) (49 463) (285 827) (Increase)/Decrease in inventories 644 1 394 339 (9 607) (Increase)/Decrease in receivables (87 658) (15 016) 88 877 1 118 518 Increase/(Decrease) in liabilities, excluding loans and borrowings 4 762 12 285 12 747 (76 816) Change in other assets and liabilities (11 201) (45 874) (12 971) (18 152) Other adjustments 1 539 6 869 9 348 28 206 Cash from operating activities 56 555 194 312 92 229 963 103 Income tax expense 6 612 21 823 375 11 191 Withholding tax paid abroad 6 722 31 356 (317) (314) Income tax (paid)/refunded (454) (35 407) (6 456) (7 689) Net cash from operating activities 69 435 212 084 85 831 966 291 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 15 Note 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 INVESTING ACTIVITIES Inflows 92 054 553 821 506 239 764 Sale of intangible assets and property, plant and equipment 260 274 6 14 Repayment of loans granted - 12 202 - - Sale of shares in a subsidiary - 76 19 19 Expiry of bank deposits over 3 months - 265 000 - 164 368 Redemption of bonds 84 853 257 943 - 66 628 Interest on bonds 1 147 3 250 445 725 Inflows from execution of forward contracts - - - 7 887 Interest received on deposits 5 794 14 811 - 41 Other inflows from investing activities - 265 36 82 Outflows 546 181 875 014 63 738 574 103 Acquisition of intangible assets and property, plant and equipment 10 333 35 953 5 636 23 755 Expenditure on development projects 55 831 145 542 26 530 135 557 Acquisition of investment properties and capitalization of expenditure - 145 595 2 000 Loans granted - 3 400 600 4 340 Acquisition of a subsidiary - - 7 679 7 679 Contribution to the capital of a subsidiary 2 308 28 318 - - Purchase of bonds and cost of their purchase 57 380 225 500 22 623 350 699 Outflows from execution of forward contracts 9 785 25 548 75 - Other outflows on investing activities - 64 - - Placement of bank deposits over 3 months 410 544 410 544 - 50 073 Net cash from investing activities (454 127) (321 193) (63 232) (334 339) FINANCING ACTIVITIES Inflows 10 30 10 2 179 Net proceeds from the sale of shares and issue of shares in the execution of the incentive plan - - - 2 149 Payment of finance lease liabilities 10 30 10 30 Outflows 101 658 103 818 1 028 506 785 Dividends and other distributions to shareholders 100 739 100 739 - 503 694 Payment of lease liabilities 782 2 675 927 2 650 Interest paid 137 404 101 441 Net cash used in financing activities 30 (101 648) (103 788) (1 018) (504 606) Net increase/(decrease) in cash and cash equivalents (486 340) (212 897) 21 581 127 346 Change in cash and cash equivalents in the balance sheet (486 340) (212 897) 21 581 127 346 Cash and cash equivalents at the beginning of the period 685 029 411 586 669 100 563 335 Cash and cash equivalents at the end of the period 198 689 198 689 690 681 690 681 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 16 In the third quarter of 2022, the CD PROJEKT Group recognized positive Net cash flows from operating activities of PLN 69 435 thousand, i.e. PLN 16 396 thousand less than in the reference period. The consolidated net profit/ (loss) was adjusted for: I. Non-cash items (a net increase):  Amortization and depreciation;  Amortization of development projects recognized as cost of sales, comprising mainly the costs of production of the Cyberpunk: EDGERUNNERS anime series (which were charged to the income statement on a one-off basis) and amortization of development costs related to Cyberpunk 2077, together with its next-gen release for Xbox Series X|S and PlayStation 5;  Foreign exchange gain/(loss) – a decrease resulting from the valuation of foreign Treasury bonds;  Gain/(loss) on investing activities – an increase resulting from transactions on bonds and derivative financial instruments;  Change in provisions – an increase resulting mainly from a change in the amount of other provisions;  Other adjustments – an increase resulting mainly from elimination of the settlement of the incentive plan costs and adjustments of amortization and depreciation recognized in the cost of sales and operating expenses; II. Items relating to changes in current assets and short-term liabilities (a net decrease):  Change in inventories – an increase in the balance of flows resulting from a decrease in inventory;  Change in receivables – a decrease in the balance of flows resulting mainly from an increase in the receivables of the CD PROJEKT RED segment as at the end of the third quarter of 2022;  Change in liabilities excluding loans and borrowings – an increase in the balance of flows;  Change in other assets and liabilities – a decrease in the balance of flows, mainly as a result of an increase in the balance of minimum guarantees contractually agreed with suppliers by GOG.COM in the reporting period; III. An item recognized elsewhere in the cash flow statement: Interest and profit sharing, which caused a decrease in cash flows from operating activities; IV. Difference between the amount of income tax reported in the income statement and income tax actually paid in the third quarter of 2022, including withholding tax settlement (an increase). In the reporting period, the Group companies generated a negative balance of Net cash flows from investing activities, where the investments in assets (including financial assets) exceeded the current inflows received from the redemption of Treasury bonds and interest. During the period, the following outflows on investing activities occurred:  An increase in the balance of bank deposits over 3 months and investments in Treasury bonds and hedging instruments;  Expenditure on development projects, mainly relating to the projects executed by the CD PROJEKT RED segment;  Purchase of intangible assets and property, plant and equipment;  Additional capital contribution to a subsidiary CD PROJEKT RED Vancouver Studio Ltd. The balance of Net cash flows from financing activities was negative mainly due to a payment of dividend to the owners of CD PROJEKT S.A. Overall, in the third quarter of 2022 the CD PROJEKT Group generated negative Net cash flows of PLN 486 340 thousand which resulted mainly from an increase in the balance of deposits with banks with maturities exceeding 3 months of PLN 410 544 thousand and the payment of dividend of PLN 100 739 thousand. Notes to the interim condensed consolidated financial statements 2 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 18 General information Name of reporting entity: CD PROJEKT S.A. (there have been no changes in the name of the reporting entity since the end of the prior reporting period) Legal form: a joint stock company (spółka akcyjna) Registered office: ul. Jagiellońska 74, 03-301 Warsaw Country of registration: Poland Core activities: CD PROJEKT S.A. is the holding company of the CD PROJEKT Group which operates in the CD PROJEKT RED and GOG.COM segments. Principal place of business: Warsaw Registration body: District Court in Warsaw, 14th Business Department of the National Court Register. Statistical number REGON: 492707333 Tax identification number NIP: 7342867148 Number in the BDO register (national waste management database): 000141053 Duration of the Group: Unspecified Name of parent entity: CD PROJEKT S.A. Name of the top parent of the group: CD PROJEKT S.A. Presentation of the Group Subsidiaries CD PROJEKT S.A. GOG sp. z o.o. CD PROJEKT Inc. The Molasses Flood LLC CD PROJEKT SILVER Inc . Spokko sp. z o.o. CD PROJEKT RED STORE sp. z o.o. CD PROJEKT RED Vancouver Studio Ltd. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 19 Consolidation policies Consolidated companies % share in capital % share of voting rights consolidation method CD PROJEKT S.A. parent entity - - GOG sp. z o.o. 100% 100% acquisition accounting CD PROJEKT Inc. 100% 100% acquisition accounting Spokko sp. z o.o. 87.6% 87.6% not consolidated CD PROJEKT RED STORE sp. z o.o. 100% 100% acquisition accounting CD PROJEKT RED Vancouver Studio Ltd. 100% 100% not consolidated The Molasses Flood LLC 60% 60% not consolidated CD PROJEKT SILVER Inc. 100% 100% not consolidated In accordance with the accounting policy adopted by the Group, the parent entity does not have to consolidate a subsidiary using the acquisition accounting method, if:  the subsidiary’s share in the parent entity’s total assets does not exceed 2%;  the share in the parent entity’s revenue from sales and financial transactions does not exceed 1%; where those transactions between the subsidiary and its parent entity which would be eliminated during consolidation are not taken into account when determining whether the said thresholds have been exceeded. In total, the financial data of the subsidiaries excluded from consolidation cannot exceed:  5% of the share in the parent entity’s total assets;  2% of the share in the parent entity’s revenue from sales and financial transactions; where those transactions between the subsidiary and its parent entity which would be eliminated during consolidation are not taken into account when determining whether the said thresholds have been exceeded. Subsidiaries Subsidiaries are all and any entities over which the Group has control which manifests itself by, simultaneously:  having power, consisting of having substantive rights that give the Group the current ability to direct the relevant activities, i.e. those activities which significantly affect the entity’s financial results;  being exposed or having rights to variable returns, consisting of having the potential to change the financial results of the Group depending on the results of the subsidiary;  having the ability to use the power exercised to affect its returns from the subsidiary by using its power in order to affect the financial results attributable to the Group resulting from the involvement in the subsidiary Subsidiaries are fully consolidated from the date on which the Group assumed control over them. They cease to be consolidated from the date that control ceases. Revenue and costs, receivables and payables and unrealized gains on transactions between Group companies are eliminated for the purposes of the consolidated financial statements. Unrealized losses are also eliminated, unless the transaction is an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the accounting policies adopted by the Group. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 20 Basis of preparation of the interim condensed consolidated financial statements These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard No. 34 Interim Financial Reporting endorsed by the EU (“IAS 34”). The interim condensed consolidated financial statements do not comprise all the information and disclosures which are required in annual financial statements and should be read jointly with the consolidated financial statements of the Group for the year ended 31 December 2021 approved for publication on 14 April 2022. Going concern assumption These interim condensed consolidated financial statements have been prepared based on the assumption that the Group and the Parent Company will continue in operation as a going concern in the foreseeable future, i.e. in the period of at least 12 months after the balance sheet date. As at the date of signing these financial statements, the Management Board of the Parent Company has not identified any facts or circumstances which would indicate any threats to the Group continuing in operation as a going concern for a period of 12 months after the end of the reporting period as a result of intended or forced discontinuation or significantly curtailing its existing operations. By the date of preparing the consolidated financial statements for the period from 1 July to 30 September 2022, the Management Board of the Parent Company did not become aware of any events which should have been but were not recognized in the accounting records for the reporting period. At the same time, there were no significant prior year events undisclosed in these financial statements. Compliance with the International Financial Reporting Standards These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard No. 34 Interim Financial Reporting and in accordance with the relevant International Financial Reporting Standards (IFRS) applicable to interim financial reporting, approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) as applicable as at 30 September 2022. The Group intends to apply changes to IFRS published but not yet binding by the date of publication of these interim condensed consolidated financial statements in accordance with their effective dates. Information on standards and interpretations adopted for the first time, early adoption of the standards, standards effective on or after 1 January 2022 and the assessment of the impact of IFRS changes on the future consolidated financial statements of the Group have been presented in the second part of the Consolidated Financial Statements for 2021. Amendments to standards or interpretations effective from 1 January 2022 applicable and adopted by the Group  Amendments to IFRS 3 Business combinations, IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Annual Improvements to IFRS 2018-2020 (IFRS 1, IFRS 9, IFRS 16 and IAS 41) – approved on 28 June 2021, applicable to periods beginning on or after 1 January 2022. Standards published and endorsed by the EU which are not yet effective and their impact on the Group’s financial statements The Management Board analysed the impact of the application of the new standards on future financial statements. When approving these financial statements, the Group did not apply the following standards, amendments and interpretations published and endorsed by the EU, but not yet effective:  IFRS 17 Insurance Contracts – approved on 19 November 2021, applicable to reporting periods beginning on or after 1 January 2023, Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 21  Amendments to IAS 1 and Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 (published on 12 February 2021) – approved on 2 March 2022 and applicable to annual periods beginning on or after 1 January 2023,  Amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors – approved on 2 March 2022 and applicable to periods beginning on or after 1 January 2023,  Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction – approved on 11 August 2022 and applicable to periods beginning on or after 1 January 2023,  Amendments to IFRS 17 Insurance Contracts concerning Initial Application of IFRS 17 and IFRS 9 - Comparative Information – approved on 8 September 2022 and applicable to periods beginning on or after 1 January 2023. The Group does not expect the introduction of these amendments to have a material impact on the accounting policies adopted by the Group with regard to the Group’s operations or its financial results. Standards and interpretations adopted by the IASB but not yet endorsed by the EU When approving these financial statements, the Group did not apply the following standards, amendments and interpretations which have not yet been endorsed by the EU:  Amendment to IAS 1 Presentation of financial statements: Classification of liabilities as current or non-current – applicable to reporting periods beginning on or after 1 January 2024,  Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback – applicable to reporting periods beginning on or after 1 January 2024. The Group is analysing the estimated impact of the standards and amendments listed above on the Group’s financial statements. Functional currency and presentation currency Functional currency and presentation currency The functional currency of the Group and the Parent Company and the reporting currency of these financial statements is the Polish zloty (PLN). Unless stated otherwise, all data is presented in thousands of Polish zlotys (PLN ‘000). Transactions and balances Transactions denominated in foreign currencies are translated into the functional currency at the exchange rate as at the transaction date. Foreign exchange gains and losses on the settlement of these transactions and the translation of monetary assets and liabilities as at the balance sheet date are recognized in the income statement, unless they are deferred in equity, when they qualify for recognition as cash flow hedges and hedges of a net investment. Comparability of the financial statements and consistency of accounting policies The accounting policies applied in these interim condensed consolidated financial statements, material judgments made by the Management Board with regard to the accounting policies applied by the Group and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the annual consolidated financial statements of the CD PROJEKT Group for 2021, with the exception of changes in accounting policies and presentation changes described below. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 December 2021. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 22 Presentation changes In these interim condensed consolidated financial statements for the period from 1 July to 30 September 2022 changes were introduced in the presentation of selected financial data. In order to ensure comparability of the financial data in the reporting period, presentation of the data as at 30 September 2021 and as at 31 December 2021 was changed. The data is presented after the following changes:  In the statement of financial position as at 31 December 2021, presentation of some of the land held by the Group changed. Consequently, the following items changed: - Property, plant and equipment – an increase of PLN 4,354 thousand - Investment properties – a decrease of PLN 4,354 thousand. The change did not affect the net profit or loss and equity.  In the cash flow statement for the period from 1 January 2021 to 30 September 2021, presentation of interest received on deposits was changed. Consequently, the following items changed: - Other inflows from investing activities – a decrease of PLN 41 thousand - Interest on deposits – an increase of PLN 41 thousand. Audit by the registered auditor These interim condensed consolidated financial statements, including selected elements of the interim condensed separate financial statements were not audited or reviewed by an independent registered auditor. Notes – operating segments of the CD PROJEKT Group 3 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 24 Operating segments Presentation of the financial statements taking into account operating segments The scope of the financial information provided on the Group’s operating segments is consistent with the requirements of IFRS 8. The segments’ results are determined based on their net profits. Description of differences in the basis for determining segments and the profit or loss of a segment compared with the last annual consolidated financial statements The Group did not make any changes in determining segments or in the measurement of the profits or losses of the individual segments in relation to the financial statements for the year ended 31 December 2021. There are no differences between the measurement of the assets, liabilities, profits and losses of the Group’s reporting segments. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 25 Information on individual operating segments Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.07.2022 – 30.09.2022 Sales revenue 205 157 44 022 (3 665) 245 514 from external customers 201 560 43 954 - 245 514 between segments 3 597 68 (3 665) - Net profit/(loss) of the segment 97 377 1 306 21 98 704 Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.01.2022 – 30.09.2022 Sales revenue 500 722 132 773 (9 988) 623 507 from external customers 490 938 132 569 - 623 507 between segments 9 784 204 (9 988) - Net profit/(loss) of the segment 210 865 1 659 (62) 212 462 Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.07.2021 – 30.09.2021 Sales revenue 104 770 41 784 (2 091) 144 463 from external customers 102 771 41 692 - 144 463 between segments 1 999 92 (2 091) - Net profit/(loss) of the segment 21 081 (4 752) 13 16 342 Continuing operations Consolidation eliminations Total continuing operations CD PROJEKT RED GOG.COM 01.01.2021 – 30.09.2021 Sales revenue 476 710 148 117 (9 718) 615 109 from external customers 467 220 147 889 - 615 109 between segments 9 490 228 (9 718) - Net profit/(loss) of the segment 130 676 (9 210) (76) 121 390 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 26 Consolidated income statement by segments for the period from 01.07.2022 to 30.09.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 205 157 44 022 (3 665) 245 514 Sales of products 201 745 - 1 444 203 189 Sales of services 576 68 (336) 308 Sales of goods for resale and materials 2 836 43 954 (4 773) 42 017 Cost of sales of products, services, goods for resale and materials 50 916 31 672 (3 388) 79 200 Costs of products and services sold 48 657 4 (59) 48 602 Cost of goods for resale and materials sold 2 259 31 668 (3 329) 30 598 Gross profit/(loss) on sales 154 241 12 350 (277) 166 314 Selling expenses 44 304 10 387 (312) 54 379 Administrative expenses 16 285 1 611 (29) 17 867 Other operating income 7 817 2 891 (889) 9 819 Other operating expenses 6 810 808 (835) 6 783 (Impairment)/reversal of impairment of financial instruments (9) - - (9) Operating profit/(loss) 94 650 2 435 10 97 095 Finance income 33 984 3 563 (4 328) 33 219 Finance costs 18 245 4 374 (4 343) 18 276 Profit/(loss) before tax 110 389 1 624 25 112 038 Income tax expense 13 012 318 4 13 334 Net profit/(loss) 97 377 1 306 21 98 704 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 97 377 1 306 21 98 704 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 27 Consolidated income statement by segments for the period from 01.01.2022 to 30.09.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 500 722 132 773 (9 988) 623 507 Sales of products 485 216 - 3 841 489 057 Sales of services 2 582 204 (1 164) 1 622 Sales of goods for resale and materials 12 924 132 569 (12 665) 132 828 Cost of sales of products, services, goods for resale and materials 94 733 94 880 (9 052) 180 561 Costs of products and services sold 85 821 47 (228) 85 640 Cost of goods for resale and materials sold 8 912 94 833 (8 824) 94 921 Gross profit/(loss) on sales 405 989 37 893 (936) 442 946 Selling expenses 124 890 31 261 (431) 155 720 Administrative expenses 48 637 4 775 (256) 53 156 Other operating income 13 178 5 074 (3 048) 15 204 Other operating expenses 15 189 2 680 (3 177) 14 692 (Impairment)/reversal of impairment of financial instruments (17) - - (17) Operating profit/(loss) 230 434 4 251 (120) 234 565 Finance income 70 316 8 007 (9 734) 68 589 Finance costs 37 244 10 068 (9 799) 37 513 Profit/(loss) before tax 263 506 2 190 (55) 265 641 Income tax expense 52 641 531 7 53 179 Net profit/(loss) 210 865 1 659 (62) 212 462 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 210 865 1 659 (62) 212 462 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 28 Consolidated income statement by segments for the period from 01.07.2021 to 30.09.2021 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 104 770 41 784 (2 091) 144 463 Sales of products 101 642 1 984 636 104 262 Sales of services 964 73 (617) 420 Sales of goods for resale and materials 2 164 39 727 (2 110) 39 781 Cost of sales of products, services, goods for resale and materials 24 023 30 546 (1 642) 52 927 Costs of products and services sold 22 051 1 357 (191) 23 217 Cost of goods for resale and materials sold 1 972 29 189 (1 451) 29 710 Gross profit/(loss) on sales 80 747 11 238 (449) 91 536 Selling expenses 40 976 14 511 (165) 55 322 Administrative expenses 21 344 2 013 (126) 23 231 Other operating income 5 155 321 (561) 4 915 Other operating expenses 2 731 237 (707) 2 261 (Impairment)/reversal of impairment of financial instruments (5) - - (5) Operating profit/(loss) 20 846 (5 202) (12) 15 632 Finance income 10 782 1 966 (2 764) 9 984 Finance costs 9 215 2 792 (2 791) 9 216 Profit/(loss) before tax 22 413 (6 028) 15 16 400 Income tax expense 1 332 (1 276) 2 58 Net profit/(loss) 21 081 (4 752) 13 16 342 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 21 081 (4 752) 13 16 342 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 29 Consolidated income statement by segments for the period from 01.01.2021 to 30.09.2021 CD PROJEKT RED GOG.COM Consolidation eliminations Total Sales revenue 476 710 148 117 (9 718) 615 109 Sales of products 461 580 6 330 3 338 471 248 Sales of services 5 946 212 (2 026) 4 132 Sales of goods for resale and materials 9 184 141 575 (11 030) 139 729 Cost of sales of products, services, goods for resale and materials 116 098 107 406 (8 381) 215 123 Costs of products and services sold 107 655 4 184 (713) 111 126 Cost of goods for resale and materials sold 8 443 103 222 (7 668) 103 997 Gross profit/(loss) on sales 360 612 40 711 (1 337) 399 986 Selling expenses 142 624 44 841 (960) 186 505 Administrative expenses 71 546 6 098 (226) 77 418 Other operating income 10 214 1 193 (2 639) 8 768 Other operating expenses 8 359 852 (2 636) 6 575 (Impairment)/reversal of impairment of financial instruments (6) - - (6) Operating profit/(loss) 148 291 (9 887) (154) 138 250 Finance income 7 685 4 702 - 12 387 Finance costs 12 444 5 998 (72) 18 370 Profit/(loss) before tax 143 532 (11 183) (82) 132 267 Income tax expense 12 856 (1 973) (6) 10 877 Net profit/(loss) 130 676 (9 210) (76) 121 390 Net profit/(loss) attributable to owners of CD PROJEKT S.A. 130 676 (9 210) (76) 121 390 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 30 Consolidated statement of financial position by segments as at 30.09.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total NON-CURRENT ASSETS 1 075 120 34 197 (17 080) 1 092 237 Property, plant and equipment 129 858 3 558 (1 985) 131 431 Intangible assets 69 942 10 - 69 952 Expenditure on development projects 447 993 1 487 (12) 449 468 Investment properties 42 961 - - 42 961 Goodwill 56 438 - - 56 438 Investments in subsidiaries 15 073 - (15 073) - Shares in non-consolidated subsidiaries 72 195 - - 72 195 Prepayments and deferred costs 3 535 26 084 - 29 619 Other financial assets 197 509 - - 197 509 Deferred tax assets 38 829 3 058 (10) 41 877 Other receivables 787 - - 787 CURRENT ASSETS 1 080 000 62 252 (3 684) 1 138 568 Inventories 14 492 - - 14 492 Trade receivables 146 628 4 302 (3 684) 147 246 Current income tax receivable 122 1 210 - 1 332 Other receivables 46 908 1 628 - 48 536 Prepayments and deferred costs 8 211 19 856 - 28 067 Other financial assets 288 980 682 - 289 662 Bank deposits over 3 months 410 544 - - 410 544 Cash and cash equivalents 164 115 34 574 - 198 689 TOTAL ASSETS 2 155 120 96 449 (20 764) 2 230 805 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 31 CD PROJEKT RED GOG.COM Consolidation eliminations Total EQUITY 1 978 506 35 106 (15 089) 1 998 523 Equity of the shareholders of CD PROJEKT S.A. 1 978 506 35 106 (15 089) 1 998 523 Share capital 100 739 136 (136) 100 739 Supplementary capital 1 502 549 33 001 (5 515) 1 530 035 Share premium 115 909 - - 115 909 Other reserves 38 003 371 (1 384) 36 990 Foreign exchange differences on translation 4 090 (65) 1 014 5 039 Retained earnings 6 351 4 (9 006) (2 651) Net profit (loss) for the period 210 865 1 659 (62) 212 462 Non-controlling interests - - - - NON-CURRENT LIABILITIES 35 565 1 362 (1 343) 35 584 Other financial liabilities 23 919 1 343 (1 343) 23 919 Other liabilities 2 680 - - 2 680 Deferred income 4 128 7 - 4 135 Provision for retirement and similar benefits 368 12 - 380 Other provisions 4 470 - - 4 470 CURRENT LIABILITIES 141 049 59 981 (4 332) 196 698 Other financial liabilities 38 591 648 (648) 38 591 Trade payables 26 499 44 119 (2 892) 67 726 Current income tax liabilities 6 468 - - 6 468 Other liabilities 4 406 4 473 - 8 879 Deferred income 14 774 5 858 - 20 632 Provision for retirement and similar benefits 6 1 - 7 Other provisions 50 305 4 882 (792) 54 395 TOTAL LIABILITIES AND EQUITY 2 155 120 96 449 (20 764) 2 230 805 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 32 Consolidated statement of financial position by segments as at 30.06.2022 CD PROJEKT RED GOG.COM Consolidation eliminations Total NON-CURRENT ASSETS 1 029 020 28 417 (18 310) 1 039 127 Property, plant and equipment 115 255 4 921 8 979 129 155 Intangible assets 69 754 10 - 69 764 Expenditure on development projects 432 371 1 697 (13) 434 055 Investment properties 55 830 - (12 175) 43 655 Goodwill 56 438 - - 56 438 Investments in subsidiaries 15 095 - (15 095) - Shares in non-consolidated subsidiaries 67 055 - - 67 055 Prepayments and deferred costs 5 833 18 414 - 24 247 Other financial assets 173 589 - - 173 589 Deferred tax assets 37 066 3 375 (6) 40 435 Other receivables 734 - - 734 CURRENT ASSETS 1 084 507 75 735 (2 703) 1 157 539 Inventories 15 136 - - 15 136 Trade receivables 63 008 2 915 (2 703) 63 220 Current income tax receivable 1 698 756 - 2 454 Other receivables 49 779 1 632 - 51 411 Prepayments and deferred costs 5 630 15 087 - 20 717 Other financial assets 319 572 - - 319 572 Cash and cash equivalents 629 684 55 345 - 685 029 TOTAL ASSETS 2 113 527 104 152 (21 013) 2 196 666 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 33 CD PROJEKT RED GOG.COM Consolidation eliminations Total EQUITY 1 884 553 33 823 (15 132) 1 903 244 Equity of the shareholders of CD PROJEKT S.A. 1 884 553 33 823 (15 132) 1 903 244 Share capital 100 739 136 (136) 100 739 Supplementary capital 1 503 561 62 796 (5 515) 1 560 842 Share premium 115 909 - - 115 909 Other reserves 43 336 394 (1 407) 42 323 Foreign exchange differences on translation 2 194 (65) 1 014 3 143 Retained earnings 5 339 (29 791) (9 006) (33 458) Net profit (loss) for the period 113 475 353 (82) 113 746 Non-controlling interests - - - - NON-CURRENT LIABILITIES 32 705 2 426 (2 402) 32 729 Other financial liabilities 23 614 2 402 (2 402) 23 614 Other liabilities 2 740 - - 2 740 Deferred income 5 492 12 - 5 504 Provision for retirement and similar benefits 368 12 - 380 Other provisions 491 - - 491 CURRENT LIABILITIES 196 269 67 903 (3 479) 260 693 Other financial liabilities 29 692 808 (776) 29 724 Trade payables 16 580 49 424 (1 962) 64 042 Other liabilities 105 477 4 845 - 110 322 Deferred income 12 037 5 645 - 17 682 Provision for retirement and similar benefits 5 2 - 7 Other provisions 32 478 7 179 (741) 38 916 TOTAL LIABILITIES AND EQUITY 2 113 527 104 152 (21 013) 2 196 666 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 34 Consolidated statement of financial position by segments as at 31.12.2021 CD PROJEKT RED GOG.COM Consolidation eliminations Total NON-CURRENT ASSETS 906 304 17 860 (18 318) 905 846 Property, plant and equipment 105 236 5 316 9 036 119 588 Intangible assets 58 382 11 - 58 393 Expenditure on development projects 347 802 2 318 75 350 195 Investment properties 57 082 - (12 448) 44 634 Goodwill 56 438 - - 56 438 Investments in subsidiaries 14 978 - (14 978) - Shares in non-consolidated subsidiaries 38 520 - - 38 520 Prepayments and deferred costs 4 741 6 693 - 11 434 Other financial assets 178 540 - - 178 540 Deferred tax assets 43 899 3 522 (3) 47 418 Other receivables 686 - - 686 CURRENT ASSETS 1 177 941 78 794 (3 846) 1 252 889 Inventories 15 886 - - 15 886 Trade receivables 123 605 3 875 (2 187) 125 293 Current income tax receivable 98 - - 98 Other receivables 113 724 1 433 (1 659) 113 498 Prepayments and deferred costs 4 154 9 609 - 13 763 Other financial assets 307 765 - - 307 765 Bank deposits over 3 months 265 000 - - 265 000 Cash and cash equivalents 347 709 63 877 - 411 586 TOTAL ASSETS 2 084 245 96 654 (22 164) 2 158 735 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 35 CD PROJEKT RED GOG.COM Consolidation eliminations Total EQUITY 1 875 936 33 352 (14 932) 1 894 356 Equity of the shareholders of CD PROJEKT S.A. 1 875 936 33 352 (14 932) 1 894 356 Share capital 100 739 136 (136) 100 739 Supplementary capital 1 368 366 62 796 (5 515) 1 425 647 Share premium 115 909 - - 115 909 Other reserves 49 007 276 (1 289) 47 994 Foreign exchange differences on translation 642 (65) 1 014 1 591 Retained earnings 2 595 - (9 027) (6 432) Net profit (loss) for the period 238 678 (29 791) 21 208 908 Non-controlling interests - - - - NON-CURRENT LIABILITIES 36 079 2 691 (2 658) 36 112 Other financial liabilities 21 080 2 658 (2 658) 21 080 Other liabilities 2 860 - - 2 860 Deferred income 6 403 21 - 6 424 Provision for retirement and similar benefits 368 12 - 380 Other provisions 5 368 - - 5 368 CURRENT LIABILITIES 172 230 60 611 (4 574) 228 267 Other financial liabilities 25 661 869 (728) 25 802 Trade payables 15 703 39 787 (2 110) 53 380 Current income tax liabilities 24 445 1 - 24 446 Other liabilities 4 134 7 567 (1 659) 10 042 Deferred income 26 072 5 476 - 31 548 Provision for retirement and similar benefits 6 1 - 7 Other provisions 76 209 6 910 (77) 83 042 TOTAL LIABILITIES AND EQUITY 2 084 245 96 654 (22 164) 2 158 735 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 36 Operating segments In the third quarter of 2022, the Group’s operations were carried out in two business segments:  CD PROJEKT RED;  GOG.COM. CD PROJEKT RED The scope and model of operations The operations of the CD PROJEKT RED segment are executed within the structures of CD PROJEKT S.A. (the domestic holding company of the CD PROJEKT Group), CD PROJEKT Inc. (USA) and CD PROJEKT RED STORE sp. z o.o. (an online shop). These operations consist in creating and publishing video games, selling licences for their distribution, coordinating sales promotions, and the production, sales or licensing of the accompanying products which support and enhance the brands owned. The production and publishing of the computer games is executed by the CD PROJEKT RED studio and is based on the brands owned by the Parent Company – the Witcher and Cyberpunk. The studio is globally known for its Cyberpunk 2077 game and the Witcher game series, the flagship brands of CD PROJEKT RED. In addition to the said franchises, the studio started internal concept work on the third franchise under which the creation of a video game with the code name Hadar is planned. As part of the publishing operations, the Parent Company is responsible for the design of the campaigns which promote its own products and independently maintains direct communication with players via electronic media channels and social media and by participating in industry events. The segment also comprised the operations of the gear.cdprojektred.com mail order shop which offered products for fans of CD PROJEKT RED’s games. Key products Currently, the portfolio of the studio’s main products includes video games which comprise the Witcher trilogy: The Witcher, The Witcher 2: Assassins of Kings, The Witcher 3: Wild Hunt with two expansions: Hearts of Stone and Blood and Wine, and Cyberpunk 2077 - the studio’s first game in the Cyberpunk universe launched on 10 December 2020. On 15 February 2022, the CD PROJEKT RED studio released the Cyberpunk 2077 version dedicated for new generation consoles. Since 2018, a network game Gwent: The Witcher Card Game is available (PC, macOS, iOS, Android). Moreover, the Parent Company’s offer includes a game based on its mechanics, Thronebreaker: The Witcher Tales ((PC, iOS, Nintendo Switch, Xbox One, PlayStation 4, Android). A single-player expansion titled Gwent: Rogue Mage was released on 7 July 2022 (for Microsoft Windows, iOS, Android). GOG.COM The scope and model of operations GOG.COM is currently one of the world’s most popular independent digital distribution platforms for computer games, which is distinguished by offering digital products without security features that make it difficult for users to use the games they have purchased (DRM). The platform is available in English, French, German, Chinese and Polish, offering customers not only a fully localized website or games, but also dedicated customer service, technical support, direct marketing activity in the language and popular local payment methods. On GOG.COM, games are available for Windows PCs, as well as for macOS and Linux operating systems. The operations of the GOG.COM segment consists in digital distribution of the games via own GOG.COM shop and GOG GALAXY application. The platform makes it possible to purchase the game, pay for the game and download it to one’s own computer; in addition, the GOG GALAXY application enables, among other things, automatic updates, saving the game in the cloud, network play, including between platforms, and is also responsible for GWENT’s network functionalities, sales support and handling of payments made in the PC version of the game. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 37 Description of the Issuer’s major achievements or failures in the third quarter of 2022 by operating segments CD PROJEKT RED Events relating to Cyberpunk 2077 On 4 September 2022, at the PAX West event in Seattle (USA), CD PROJEKT RED organized preview shows of the anime CYBERPUNK: EDGERUNNERS. More than 500 visitors had the opportunity to view the first two episodes of the series. On 6 September, a special episode of Night City Wire premiered. After a segment on CYBERPUNK: EDGERUNNERS, a representative of CD PROJEKT RED discussed the studio’s plans for the development of the game and the brand. A gameplay trailer of the upcoming expansion for Cyberpunk 2077 entitled “Phantom Liberty” was presented and finally a special announcement was aired from Keanu Reeves himself, who confirmed his return to the Cyberpunk 2077 universe. This was followed by a live stream, during which studio representatives presented the most important new features awaiting Cyberpunk 2077 players in update 1.6 (EDGERUNNERS UPDATE) released on the same day. The update released included additional content for the game related to the series (side quests, locations, items, an arcade game) and a number of updates and technical improvements to the game. Alongside the update, a free mobile game Roach Race, brought straight from Cyberpunk 2077 to mobile screens, has appeared in the Google Play and Apple Store mobile app shops. On 13 September, the anime CYBERPUNK: EDGERUNNERS - a 10-episode story created by CD PROJEKT RED in collaboration with the Japanese Studio Trigger – made its debut on the Netflix platform. The series has received positive reviews from both critics and viewers. It received a rating of 8.9 among users on Metacritic and a 100% recommendation among reviewers on Rotten Tomatoes. In its premiere week, the anime debuted at number 8 on the ‘Netflix Top 10’ chart (in the non-English category) – a global ranking of the most popular productions on the platform – where it remained for the next four weeks. On 4 October, in the CD PROJEKT Group Strategy Update , the studio confirmed the further development of the Cyberpunk franchise by announcing, among other things, a project codenamed Orion, a sequel to Cyberpunk 2077. Events relating to the Witcher series games On 7 July 2022, a single-player expansion titled Gwent: Rogue Mage was released. The game combines roguelike, deckbuilding, and strategy elements with the mechanics of Gwent card battles. The game is available to buy as a standalone title for PC (GOG.COM and Steam), as well as on iOS and Android. On 4 October, during the conference on the CD PROJEKT Group Strategy Update , the studio announced that it was working on developing the Witcher franchise by announcing, among other things, a new Witcher trilogy (which will be launched with a game codenamed Polaris) and two other projects in the Witcher world (Sirius and Canis Majoris). On 6–8 October, the Game Industry Conference took place, the most important event for video game developers in Poland. CD PROJEKT RED is the gold sponsor of the event. During the ongoing conference and accompanying trade fair Poznań Games Arena 2022, Gwent: Rogue Mage was awarded the statuette for best mobile game of the year by the CEEGA (Central & Eastern European Game Awards). On 26 October, on the occasion of the 15th anniversary of the release of The Witcher, CD PROJEKT RED announced that work was in progress on a new version (remake) of the first part of Geralt of Rivia’s adventures (Canis Majoris project). The game will be developed on Unreal Engine 5 and the execution of the project will be the responsibility of Fool’s Theory, a studio specializing in role-playing games. CD PROJEKT RED has full creative oversight of the game’s development. On 14 November, CD PROJEKT RED announced a release date of 14 December 2022 for the Witcher 3: Wild Hunt update, which takes advantage of the possibilities offered by the newest generation of consoles and PC. The update will include a range of graphical and technical improvements, a wide selection of community-created mods and additional content inspired by the Witcher series from Netflix. GOG.COM Digital distribution of games As at the date of publication of this report, the product range on GOG.COM comprises more than 7,000 items. In the third quarter of 2022, the GOG.COM catalogue expanded to include, among other things, The Elder Scrolls V: Skyrim, Middle- Earth: Shadow of Mordor, Warhammer 40,000: Space Marine, The Cult of the Lamb, Mortal Kombat Trilogy, Baldur’s Gate: Dark Alliance II, Mafia Trilogy, LEGO DC Super-Villains, Hard West 2, South of the Circle, Destroy All Humans! 2. Sales promotion Sales promotion in the digital distribution of games mainly consists of adding new items of interest to users to the catalogue and running seasonal promotional campaigns. In the period discussed, in addition to the weekly promotions, special promotion campaigns took place on GOG.COM, including the GOG Sale, the Find Your Indie Sale, the Moon Festival Sale and the GOG Birthday Sale. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 38 In July, August and September, GOG organized a series of promotional campaign with a national theme. These were the French Week, the Ukrainian Games Sale and the Made in DACH Sale, respectively, which celebrated and recognized the great games created and released in these specific markets. Each of these events featured special offers and releases from French, Ukrainian and German, Austrian and Swiss game developers, as well as dedicated editorials by the GOG.COM team. On the occasion of the 20th anniversary of CD PROJEKT RED, GOG.COM organized a special sale campaign of all games from the Witcher and Cyberpunk 2077 series and held a giveaway of digital bonus materials from the studio’s games. Other events 1 July 2022 saw the launch of the first ever coordinated Summer Internship Programme at CD PROJEKT RED. Out of the 3,571 applications received from those wishing to take up an internship (plus more than 1,200 applications in the Ukrainian programme), 31 interns were finally selected to begin their adventure with the gaming industry in various departments of the studio, in Warsaw, Kraków and Wrocław. After three months of internship, 25 people remained in the studio to develop their skills and work on developing new games. In September 2022, after a four-year break, the Parent Company organized the Promised Land festival in Łódź. It is addressed to professional artists who want to develop their skills and exchange experiences with leading film and gaming professionals from around the world. The festival, organized in partnership with EC1 Łódź – City of Culture, attracted nearly 900 participants who attended more than 30 hours of workshops and were able to hear lectures by nearly 60 speakers. 5 September saw the launch of the second edition of the “Girls in the Game!” programme, organized by CD PROJEKT RED together with the Perspektywy Foundation, a scholarship and mentoring project in homage to Karolina Grochowska addressed t young girls from the final grades of secondary schools who would like to associate their career with the video games industry. The application period ended on 30 October. From among approximately 1,000 applications, 20 participants were selected and will have the opportunity to develop their skills under the guidance of CD PROJEKT RED experts, as well as receive a one-year study scholarship. Factors affecting the Group’s future performance For the future growth of the Company and the group, the ability to retain and offer growth opportunities to a team of world-class creative professionals and experts, and to attract a growing number of specialists, both domestic and foreign, to work on the Group’s future releases is of critical importance. Strategic directions related to talent acquisition, team development and support and transformation of the game creation process are presented in the CD PROJEKT Group Strategy Update of 2021 (including its discussion in the form of a video commentary ) and in CD PROJEKT Group Sustainable Development Report for 2021. Material Group-specific external and internal factors which may negatively affect the Group’s operations and development identified by the Management Board and the risk management system functioning within the Company are described in the risks section of the Management Report on the operations of CD PROJEKT Group for 2021 . Strategy update – Long-term product outlook On 4 October 2022, the CD PROJEKT Group published the Strategy Update which expanded the last year’s update, focusing on the long-term development of key projects. In the coming years, the studio plans to publish a number of productions in the Witcher and Cyberpunk franchises and to conduct internal development work on the third proprietary IP as part of which a game under the code name Hadar is planned to be created in future. The CD PROJEKT Group announced opening a new hub in Boston (separate from The Molasses Flood studio) which, together with the growing Vancouver team, will become the CD PROJEKT RED North America studio. It will enable the group to access the North American talent pool. Moreover, CD PROJEKT announced adding a multiplayer to the majority of the future project and continuing the idea of a franchise flywheel consisting of expanding an ecosystem of mutually growth-promoting products based on the potential of the franchises held. Consequently, the Group opened up to cooperation with external teams to ensure new, exciting ways of being in touch with the Group’s brands and, at the same time, to facilitate focusing on creating revolutionary role-playing games for the internal team. In the coming years, the perceived directions of the Groups strategic development are as follows:  continuing to increase production capacity to provide more content to players while maintaining top quality;  enhancing CD PROJEKT RED’s game experiences with multiplayer features;  continuing to expand franchises. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 39 CD PROJEKT RED In the CD PROJEKT RED segment, expansion of the operations is directly linked to new projects implemented, the scale of their production and popularity among players. In this context, the current results of the CD PROJEKT Group are driven by the popularity of the games in the Cyberpunk and Witcher universe already issued by the Company, and in the coming periods they will be driven by the progress of the production work and the market reception of the successive productions realized by the Company. In the perspective of the coming quarters, the activities of particular importance for the CD PROJEKT RED studio will include releasing the Witcher 3: Wild Hunt game, including expansions, in the version for new generation consoles and a premiere of a large expansion of Cyberpunk 2077 titled “Phantom Liberty” planned for 2023. These events should positively contribute to the level of sales revenue and the Group’s net profit or loss in the periods discussed. Another important process in the context of the development of the CD PROJEKT RED will be the continued integration of the developer work with the new engine, Unreal Engine 5, following the start of strategic cooperation with Epic Games in March 2022. The new engine used should contribute to making the process of games creation more efficient and enable the studio creators to focus on creative aspects of the video game productions. The strategic partnership assumes improving the UE5 engine in terms of handling “open world” games and adaptation and optimization of its elements to creative concepts of the next projects. It also involves dedicated technical support on the part of Epic Games for titles released by CD PROJEKT RED. Moreover, starting work on the EU5 engine broadens the perspectives for recruitment to the studio’s development teams due to the good knowledge of the Unreal Engine technology among game creators. GOG.COM In the GOG.COM segment, the growing consumer propensity to buy games in the so-called digital distribution model in recent years was a factor supporting sales, as well as, in 2020-2021, increased popularity of computer games in the period of restrictions relating to the COVID-10 pandemic. For the further development of the GOG.COM platform, it is important to acquire further premiere products. GOG sp. z o.o. is proactively talking with leading international game developers and publishers, constantly expanding the range of suppliers and products on offer. Successive first releases of new games on GOG-COM each time contribute to increasing user activity and translate to sales growth. In addition to continuously expanding the list of products offered, expansion of GOG sp. z o.o.’s operations also requires growing the user base by reaching new players around the world who have not yet had an account on the GOG.COM platform. In this respect, in recent years, a constant growth of the number of users has been achieved, due to both own PR activities and synergies resulting from cooperation with CD PROJEKT S.A. The results and development of the activities carried out as part of the GOG.COM segment, including acquisition of unique knowledge and experience and the full use of technological solutions possessed will be affected by the development of functionalities which support the sale of games on the platform, including better integration of monetization mechanisms of the GOG GALAXY application with the GOG.COM shop, as well as increased activity to expand the offer of classic games on the platform. Other The growth of the CD PROJEKT Group will also be affected by development work and other activities undertaken by its subsidiary The Molasses Flood, which is working on a new game set up in the Witcher universe (code name Sirius) designed having in mind both the existing and new fans of the Witcher . Impact of the political and economic situation in Ukraine on sales during the reporting period Impact on sales In response to the Russian armed invasion of Ukraine, on 3 March 2022 the Management Board of CD PROJEKT decided to suspend sales of CD PROJEKT Group products as well as games distributed on the GOG.COM platform in the territory of Russia and Belarus. The Parent Company estimates that in the 12 months since March 2021 to February 2022, the total share of Russia and Belarus in sales of products in the CD PROJEKT RED segment and in the sales of the GOG.COM segment amounted to, respectively, approximately 5.4% and approximately 3.7%. Risks associated with the current political and economic situation in Ukraine The Parent Company continually monitors the impact of the current political and economic situation in Ukraine, Russia and Belarus on the activities of the CD PROJEKT Group. The Parent Company terminated cooperation with the Russian and Belarussian suppliers and is currently not considering engaging in new collaboration. As of the publication date of these financial statements, the Group’s operating activities are undisturbed and the effect of the Russian armed invasion of Ukraine does not have a significant negative impact on the Group’s operations. In the opinion of the Management Board, the current political and economic situation in Ukraine does not affect the quantitative data presented in the Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 40 financial statements, has not resulted in any indications of impairment of assets, should not have a significant negative effect on the Group’s results in the next quarter of 2022, and does not pose any risks to the Company’s continuing as a going concern within 12 months of the end of the reporting period. Given the unprecedented nature of the current situation and the related significant uncertainty, particularly the inability to predict the duration of the Russian invasion, as at the date of publication of these financial statements, it is impossible to reliably estimate the long-term impact of the invasion of the Russian armed forces on Ukraine on the long-term performance and condition of the Company and its Group. Any assessments and forecasts in this regard are uncertain and will be subject to further monitoring and analysis by the Group. The above assessment has been prepared to the best of the Company’s knowledge at the date of preparing these financial statements. Seasonality or cyclicality of the Group’s operations CD PROJEKT RED Segment revenues and results are strongly affected by the videogame release schedule. CD PROJEKT RED usually takes between 2 and 5 years to produce a game. Typically, initial development work on a new game starts before the production of the previous game has been completed and the game release to the market. CD PROJEKT RED also engages in smaller-scale projects – such as add-ons for its own games or adapting the existing products to work on new gaming platforms. Such projects may be carried out directly by the Company or by its external partners, and their implementation usually takes from less than ten to below twenty months. With regard to games which have already been released, their yearly sales breakdown is dependent on the schedule of periodic sale campaigns. In most cases, strong sales are reported in the second and fourth quarter, while the first and the third quarter (the latter of which overlaps with the summer vacation season) see weaker sales. In addition to pure development activities, the Company also actively develops its franchises in other fields, with a view to continually expanding its audience and exploring other types of media and platforms – with the anime series CYBERPUNK: EDGERUNNERS released on 13 September being a successful example. Chart1 Effect of new releases on the quarterly sales of products, goods for resale and materials of the CD PROJEKT RED segment in 2011-2022 (in PLN thousands) 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 41 GOG.COM The digital videogame distribution market on which GOG.COM operates is characterized by seasonal fluctuations in revenues. On an annual basis, the highest revenues are typically obtained in the second and fourth quarter while the lowest revenues in the first and third quarter. Sales in the second and fourth quarters are temporarily boosted by promotional campaigns typically organized in these quarters. The sales volume may also be strongly affected by the list of new products introduced in a given reporting period – a unique example of which is the revenue level in the fourth quarter of 2020 presented in the chart below related to the launch of the Cyberpunky 2077 game. Chart 2 Quarterly distribution of sales of goods for resale and materials of the GOG.COM segment in 2018-2022 (PLN thousand) Key customers The CD PROJEKT Group cooperates with external customers whose share in the consolidated revenues of the Group exceeds 10%. In the CD PROJEKT RED segment, the sales operations conducted by CD PROJEKT S.A. in cooperation with three customers generated sales in excess of 10% of the total consolidated sales of the Group (cumulatively up to the end of the third quarter of 2022), in the amount of PLN 185 087 thousand, 102 394 thousand and 70 401 thousand, i.e. 29.7%, 16.4% and 11.3% of the Group’s total sales, respectively. The customers referred to above are not related to CD PROJEKT S.A. or its subsidiaries. None of the other external customers of the Group exceeded the 10% threshold. 0 40000 80000 120000 160000 200000 Q1 Q2 Q3 Q4 2018 2019 2020 2021 2022 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 42 Notes – other explanatory notes to the interim condensed consolidated financial statements 4 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 43 Note 1. Description of those items affecting assets, liabilities, equity, net profit or loss and cash flows which are not typical in terms of their type, size and impact The following unusual events relating the CD PROJEKT RED segment had a material impact on the results, assets, liabilities & equity and cash flows of the CD PROJEKT Group in the third quarter of 2022 (which was not observed in the reference period):  recognition of the income and costs relating to completing the production of CYBERPUNK: EDGERUNNERS anime series on a one-off basis in connection with its release on Netflix;  recognition in the income statement (under corporate income tax) of a part of withholding tax collected in other jurisdictions on licence fees paid to the Parent Company, which is not deductible due to the application of a preferential IP Box tax rate. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 44 Note 2. Property, plant and equipment Changes in property, plant and equipment (by category) for the period 01.01.2022 – 30.09.2022 * Land Buildings and structures Civil and marine engineering facilities Plant and machinery Vehicles Other fixed assets Fixed assets under construction Total Gross carrying amount as at 01.01.2022 40 435 75 861 1 876 52 127 3 243 4 930 2 327 180 799 Increase due to: - 4 659 277 7 341 609 687 13 221 26 794 purchase - 154 - 6 920 609 648 13 101 21 432 lease contracts concluded - 4 154 4 - - - - 4 158 transfer from investment properties - 112 273 - - - 120 505 transfer from fixed assets under construction - 239 - 34 - 39 - 312 reclassification - - - 81 - - - 81 free of charge receipt - - - 306 - - - 306 Decrease due to: - 816 212 2 625 739 173 424 4 989 sale - - - 288 739 - - 1 027 disposal - 816 212 2 104 - 92 24 3 248 transfer from fixed assets under construction - - - - - - 312 312 reclassification - - - - - 81 88 169 other - - - 233 - - - 233 Gross carrying amount as at 30.09.2022 40 435 79 704 1 941 56 843 3 113 5 444 15 124 202 604 Accumulated depreciation at 01.01.2022 1 250 19 797 558 35 145 1 792 2 669 - 61 211 Increase due to: 425 5 079 187 7 696 400 711 - 14 498 depreciation charge 425 5 072 158 7 645 400 711 - 14 411 transfer from investment properties - 7 29 - - - - 36 reclassification - - - 51 - - - 51 Decrease due to: - 964 76 2 621 753 122 - 4 536 sale - - - 279 739 - - 1 018 disposal - 816 76 2 085 - 71 - 3 048 reclassification - - - - - 51 - 51 other - 148 - 257 14 - - 419 Accumulated depreciation at 30.09.2022 1 675 23 912 669 40 220 1 439 3 258 - 71 173 Impairment write-downs as at 01.01.2022 - - - - - - - - Impairment write-downs as at 30.09.2022 - - - - - - - - Net carrying amount as at 01.01.2022 39 185 56 064 1 318 16 982 1 451 2 261 2 327 119 588 Net carrying amount as at 30.09.2022 38 760 55 792 1 272 16 623 1 674 2 186 15 124 131 431 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 45 Amounts of contractual commitments to purchase property, plant and equipment in the future 30.09.2022 30.06.2022 31.12.2021 Leasing of passenger cars 600 600 429 Total 600 600 429 Right-of-use assets relating to property, plant and equipment 30.09.2022 Gross amount Accumulated depreciation Net amount Land 14 540 617 13 923 Real properties 12 106 7 932 4 174 Civil and marine engineering facilities 99 87 12 Vehicles 2 173 602 1 571 Total 28 918 9 238 19 680 30.06.2022 Gross amount Accumulated depreciation Net amount Land 14 540 566 13 974 Real properties 10 988 6 978 4 010 Civil and marine engineering facilities 103 73 30 Vehicles 2 142 458 1 684 Total 27 773 8 075 19 698 31.12.2021 Gross amount Accumulated depreciation Net amount Land 14 540 464 14 076 Real properties 8 037 6 698 1 339 Civil and marine engineering facilities 94 47 47 Vehicles 1 504 257 1 247 Total 24 175 7 466 16 709 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 46 Note 3. Intangible assets and expenditure on development projects Changes in intangible assets and expenditure on development projects for the period 01.01.2022 – 30.06.2022 Expenditure on development projects in progress Expenditure on completed develop ment projects Trademarks Patents and licences Copyright Computer software Goodwill Intangible assets under construction Total Gross carrying amount as at 01.01.2022 95 169 841 986 33 199 2 154 18 331 36 018 56 438 19 1 083 314 Increase due to: 185 866 42 323 - 2 405 138 12 827 - 422 243 981 purchase - - - 2 405 30 12 724 - 422 15 581 assets internally generated 185 866 - - - - - - - 185 866 transfer from expenditure on development projects in progress - 42 323 - - - - - - 42 323 transfer from intangible assets under construction - - - - 108 - - - 108 reclassification - - - - - 103 - - 103 Decrease due to: 63 438 - - 103 - - - 122 63 663 disposal 283 - - - - - - - 283 utilization of impairment write- downs 20 806 - - - - - - - 20 806 transfer from expenditure on development projects in progress 42 323 - - - - - - - 42 323 transfer from intangible assets under construction - - - - - - - 108 108 reclassification 26 - - 103 - - - 14 143 Gross carrying amount as at 30.09.2022 217 597 884 309 33 199 4 456 18 469 48 845 56 438 319 1 263 632 Accumulated depreciation at 01.01.2022 - 552 378 - 1 928 173 29 227 - - 583 706 Increase due to: - 85 373 - 716 93 3 199 - - 89 381 amortization charge - 85 373 - 716 93 3 199 - - 89 381 Decreases - - - - - - - - - Accumulated depreciation at 30.09.2022 - 637 751 - 2 644 266 32 426 - - 673 087 Impairment write- downs as at 01.01.2022 20 806 13 776 - - - - - - 34 582 Increase due to: 911 - - - - - - - 911 impairment 911 - - - - - - - 911 Decrease due to: 20 806 - - - - - - - 20 806 reversal of write- downs (write-off) 20 806 - - - - - - - 20 806 Impairment write-downs as at 30.09.2022 911 13 776 - - - - - - 14 687 Net carrying amount as at 01.01.2022 74 363 275 832 33 199 226 18 158 6 791 56 438 19 465 026 Net carrying amount as at 30.09.2022 216 686 232 782 33 199 1 812 18 203 16 419 56 438 319 575 858 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 47 Amounts of contractual commitments to purchase intangible assets in future Not applicable. Note 4. Goodwill There were no changes in goodwill in the period from 1 July to 30 September 2022. Note 5. Investment properties The Parent Company owns a real estate complex located at ul. Jagiellońska 76 in Warsaw. Given that part of the properties purchased is leased out to third parties, including CD PROJEKT Group companies, the Group decided to partly classify these properties as investment properties. The remaining part of the property is used for own needs of the activities conducted. The Group measures the properties purchased at cost less accumulated depreciation. Change in investment properties for the period 01.01.2022 – 30.09.2022 Gross carrying amount as at 01.01.2022 48 170 Increase due to: 214 capitalized expenditure 214 Decrease due to: 505 reclassification to other asset categories 505 Gross carrying amount as at 30.09.2022 47 879 Accumulated depreciation at 01.01.2022 3 536 Increase due to: 1 418 depreciation charge 1 418 Decrease due to: 36 reclassification to other asset categories 36 Accumulated depreciation at 30.09.2022 4 918 Impairment write-downs as at 01.01.2022 - Increase - Decreases - Impairment write-downs as at 30.09.2022 - Net carrying amount as at 30.09.2022 42 961 * restated data Contractual liabilities on purchase of investment properties Not applicable. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 48 Note 6. Inventories 30.09.2022 30.06.2022 31.12.2021 Goods for resale 14 488 15 121 15 843 Other materials 4 15 43 Gross inventories 14 492 15 136 15 886 Inventory write-downs - - - Net inventories 14 492 15 136 15 886 Change in inventory write-downs Not applicable. Note 7. Trade and other receivables 30.09.2022 30.06.2022 31.12.2021 Trade and other receivables, gross 197 397 116 184 240 288 Write-downs 828 819 811 Trade and other receivables 196 569 115 365 239 477 from related entities 1 383 1 556 1 238 from other entities 195 186 113 809 238 239 Change in write-downs of receivables Trade receivables Other receivables Total OTHER ENTITIES Write-downs as at 01.01.2022 79 732 811 Increases, including: 17 - 17 write-downs recognized for past-due and disputed receivables 17 - 17 Decreases - - - Write-downs as at 30.09.2022 96 732 828 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 49 Current and overdue trade receivables as at 30.09.2022 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 1 382 238 - - - 1 144 - default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 1 382 238 - - - 1 144 - Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 145 960 145 397 413 - 11 43 96 default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 96 - - - - - 96 total expected credit losses 96 - - - - - 96 Net receivables 145 864 145 397 413 - 11 43 - Total gross receivables 147 342 145 635 413 - 11 1 187 96 impairment write- downs 96 - - - - - 96 Net receivables 147 246 145 635 413 - 11 1 187 - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 50 Other receivables 30.09.2022 30.06.2022 31.12.2021 Other gross receivables, including: 50 055 52 877 114 916 tax receivables, other than corporate income tax 36 816 40 163 77 067 prepayments for inventories 7 095 6 892 5 391 prepayments for development projects 3 860 3 649 30 435 security deposits 1 108 1 050 998 prepayments for property, plant and equipment and intangible assets 141 75 34 provisions for sales revenue – prepayments 41 121 67 settlements with employees 13 7 5 settlements with members of the Management Boards of the Group companies 1 7 7 prepayments on investment properties - - 79 other 980 913 833 Write-downs 732 732 732 Other receivables, including: 49 323 52 145 114 184 current 48 536 51 411 113 498 non-current 787 734 686 * restated data Note 8. Other financial assets 30.09.2022 30.06.2022 31.12.2021 Loans granted - - 8 890 Bonds 486 489 493 161 477 415 Derivative financial instruments 682 - - Other financial assets, including: 487 171 493 161 486 305 current 289 662 319 572 307 765 non-current 197 509 173 589 178 540 Note 9. Prepayments and deferred costs 30.09.2022 30.06.2022 31.12.2021 Minimum guarantees, advance payments and prepayments GOG.COM 45 218 32 604 15 230 Software, licences 6 381 6 323 3 905 Costs of future marketing services 1 642 1 686 1 734 Fees for pre-emptive rights 1 298 1 324 1 378 Costs of repairs and maintenance 1 222 1 304 1 470 Property and personal insurance 769 146 525 Costs of IT security resources 409 543 421 Business travel (tickets, hotels, insurance) 278 360 64 Fees for perpetual usufruct of land 71 142 - Participation in fairs 13 124 7 Marketing campaigns - - 19 Other prepayments and deferred costs 385 408 444 Prepayments and deferred costs, including: 57 686 44 964 25 197 current 28 067 20 717 13 763 non-current 29 619 24 247 11 434 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 51 Note 10. Deferred income tax Deductible temporary differences underlying the deferred tax asset 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 30.09.2022 Provision for other employee benefits 387 - 387 Provision for costs of performance-related and other remuneration 39 543 (9 873) 29 670 Tax loss 15 133 (7 877) 7 256 Foreign exchange losses 3 275 3 273 6 548 Difference between the carrying and tax amount of expenditure on development projects 24 780 (22 640) 2 140 Salaries and wages and social security payable in future periods 61 (15) 46 Deferred income in respect of virtual wallet top- ups and fringe benefit scheme 3 401 488 3 889 Other provisions 48 839 (24 017) 24 822 Research and development relief 303 891 - 303 891 Prepayments recognized as revenue for tax purposes 1 469 4 284 5 753 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 12 - 12 Measurement of forward contracts 142 (142) - Other 83 289 372 Total deductible differences, including: 441 016 (56 230) 384 786 taxed at 5% 60 423 (22 929) 37 494 taxed at 19% 379 384 (33 601) 345 783 deferred tax charged abroad 1 209 300 1 509 Deferred income tax asset 75 350 (7 477) 67 873 * restated data Taxable temporary differences underlying the deferred tax provision 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 30.09.2022 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 14 431 876 15 307 Current period revenue invoiced in the subsequent period/accrued income 129 257 8 171 137 428 Foreign exchange gains 14 963 (13 111) 1 852 Difference between the carrying and tax amount of expenditure on development projects 272 934 (45 005) 227 929 Measurement of forward contracts - 682 682 Other 86 182 268 Total taxable differences, including: 431 671 (48 205) 383 466 taxed at 5% 386 324 (51 593) 334 731 taxed at 19% 45 347 3 388 48 735 Deferred tax provision 27 932 (1 936) 25 996 * restated data Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 52 The deferred part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, or at the rate of 5% for the tax base corresponding to income from qualifying intellectual property (the so-called IP BOX). When determining the appropriate tax rate for temporary differences, the Group relied on forecasts of which tax base will give rise to the realization of the temporary differences recognized. Net deferred tax asset/provision 30.09.2022 30.06.2022 31.12.2021 Deferred income tax assets 67 873 69 929 75 350 Deferred tax provision 25 996 29 494 27 932 Net deferred tax - assets/(provisions) 41 877 40 435 47 418 Income tax expense recognized in the income statement 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Current income tax, including: 14 776 47 638 6 634 60 566 withholding tax paid abroad 6 722 31 356 (317) (314) Change in deferred tax (1 442) 5 541 (6 576) (49 689) Income tax expense recognized in the income statement 13 334 53 179 58 10 877 Note 11. Provision for retirement and similar benefits 30.09.2022 30.06.2022 31.12.2021 Provision for retirement and disability bonuses 387 387 387 Total, including: 387 387 387 current 7 7 7 non-current 380 380 380 During the period from 1 July to 30 September 2022 there were no changes in provisions for retirement and similar benefits. Note 12. Other provisions 30.09.2022 30.06.2022 31.12.2021 Provision for liabilities, including: 58 865 39 407 88 410 provision for costs of the audit and review of the financial statements 68 69 160 provision for costs of external services 1 232 1 360 1 042 provision for costs of performance-related and other remuneration 41 402 22 128 44 856 provision for other costs 16 163 15 850 42 352 Total, including: 58 865 39 407 88 410 current 54 395 38 916 83 042 non-current 4 470 491 5 368 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 53 Change in other provisions Provision for costs of performance-related and other remuneration Other provisions Total As at 01.01.2022 44 856 43 554 88 410 Provisions recorded during the year 41 407 29 825 71 232 Provisions utilized 44 561 55 759 100 320 Provision released 300 157 457 As at 30.09.2022, including: 41 402 17 463 58 865 current 41 402 12 993 54 395 non-current - 4 470 4 470 Note 13. Other liabilities 30.09.2022 30.06.2022 31.12.2021 Taxes (other than corporate income tax), customs duty, social security and other payables 8 451 9 131 9 536 VAT 3 909 4 324 5 515 Withholding tax 767 785 905 Personal income tax 1 488 1 442 1 835 Social security contributions 2 143 2 463 1 164 State Disabled Persons Fund (PFRON) 66 68 56 PIT-8AR (personal income tax) settlements 78 49 61 Other liabilities 3 108 103 931 3 366 Liabilities in respect of pre-emptive rights and costs of future marketing services 2 680 2 740 2 860 Other settlements with employees 102 136 125 Other settlements with members of the Management Boards 6 - 36 Dividends payable - 100 739 - Prepayments received from foreign customers - - 13 Other liabilities 320 316 332 Total other liabilities 11 559 113 062 12 902 current 8 879 110 322 10 042 non-current 2 680 2 740 2 860 Note 14. Deferred income 30.09.2022 30.06.2022 31.12.2021 Subsidies 5 976 7 347 8 277 Sales relating to future periods 14 483 11 628 25 715 GOG wallet 4 268 4 166 3 947 Rental of company phones 40 45 33 Deferred income, including: 24 767 23 186 37 972 current 20 632 17 682 31 548 non-current 4 135 5 504 6 424 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 54 Note 15. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments The Management Boards of the Group analysed specific classes of financial instruments. Based on the analysis, it was concluded that the carrying amounts of the instruments do not materially differ from their fair values, as at both 30 September 2022, 30 June 2022 and 31 December 2021. 30.09.2022 30.06.2022 31.12.2021 LEVEL 1 Assets measured at fair value Assets measured at fair value through other comprehensive income 269 169 249 800 228 661 bonds issued by foreign governments – EUR 26 164 25 318 24 517 bonds issued by foreign governments – USD 243 005 224 482 204 144 LEVEL 2 Assets measured at fair value through profit or loss Derivatives 682 - - currency forwards – EUR 46 - - currency forwards – USD 636 - - Liabilities measured at fair value through profit or loss Derivatives 28 701 20 528 18 047 currency forwards – EUR 471 147 486 currency forwards – USD 28 230 20 381 17 561 * restated data Financial Instruments measured at fair value are classified to 3-stage fair value hierarchy: Level 1 – quoted prices on active markets for identical assets or liabilities. Level 2 – fair value based on observable market data. Level 3 – fair value based on market data that is not observable in the market. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 55 Financial assets – classification and measurement 30.09.2022 30.06.2022 31.12.2021 Financial assets measured at amortized cost 974 586 992 344 1 060 209 Other non-current receivables 787 734 686 Trade receivables 147 246 63 220 125 293 Cash and cash equivalents 198 689 685 029 411 586 Bank deposits over 3 months 410 544 - 265 000 Treasury bonds and bonds guaranteed by the State Treasury 217 320 243 361 248 754 Loans granted - - 8 890 Financial assets measured at fair value through profit or loss: 682 - - Derivative financial instruments 682 - - Assets measured at fair value through other comprehensive income 269 169 249 800 228 661 Bonds issued by foreign governments 269 169 249 800 228 661 Total financial assets 1 244 437 1 242 144 1 288 870 Financial liabilities – classification and measurement 30.09.2022 30.06.2022 31.12.2021 Financial liabilities measured at amortized cost 101 535 96 852 82 215 Trade payables 67 726 64 042 53 380 Other financial liabilities 33 809 32 810 28 835 Financial liabilities measured at fair value through profit or loss 28 701 20 528 18 047 Derivative financial instruments 28 701 20 528 18 047 Total financial liabilities 130 236 117 380 100 262 * restated data In accordance with the requirements of IFRS 9 Financial Instruments, the Parent Company analysed the business model for managing financial assets and examined the characteristics of contractual cash flows for each component of the bond portfolio, and concluded that:  the purpose of investments in domestic and foreign Treasury bonds and domestic bonds guaranteed by the Polish State Treasury is to hold them to maturity and to collect contractual cash flows;  investment mandates for managing the foreign bonds portfolio allow selling bonds before maturity as part of the adopted strategy;  all bonds purchased meet the SPPI test. As a result of the analysis conducted, purchased bonds were classified into two financial asset management models which differ in terms of the entity managing the bond portfolio. Polish Treasury bonds and bonds guaranteed by the Polish State Treasury are measured at amortized cost, because they are held to collect contractual cash flows. Foreign Treasury bonds are measured at fair value through other comprehensive income, because of the investment mandate which allows the possibility of the portfolio to be managed by an Asset Manager. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 56 Note 16. Sales revenue Sales revenue – geographical structure 2022 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 in PLN in % in PLN in % Domestic sales 7 474 3.04% 22 337 3.58% Export sales, including: 238 040 96.96% 601 170 96.42% Europe 35 513 14.46% 111 951 17.96% North America 185 753 75.67% 433 794 69.57% South America 881 0.36% 2 411 0.39% Asia 14 055 5.72% 47 029 7.54% Australia 1 788 0.73% 5 735 0.92% Africa 50 0.02% 250 0.04% Total 245 514 100% 623 507 100% Sales revenue – geographical structure 2021 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 in PLN in % in PLN in % Domestic sales 9 280 6.42% 18 992 3.09% Export sales, including: 135 183 93.58% 596 117 96.91% Europe 33 546 23.22% 85 580 13.91% North America 87 073 60.28% 453 838 73.77% South America 599 0.41% 2 071 0.34% Asia 11 840 8.20% 48 416 7.88% Australia 1 991 1.38% 5 823 0.95% Africa 134 0.09% 389 0.06% Total 144 463 100% 615 109 100% * restated data Sales revenue from export sales in Europe includes sales from the Russian market. In previous financial statements, the Russian market was disclosed under Asia. ** The data presented relates to the place of residence of the customers of the Group companies: for CD PROJEKT S.A. – distributors, and for retail sales conducted by GOG sp. z o.o., CD PROJEKT RED STORE sp. z o.o., CD PROJEKT Inc. – end customers. Sales revenue – by type of production 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Own production 203 189 489 057 104 262 471 248 Third party production 42 017 132 828 39 781 139 729 Other revenue 308 1 622 420 4 132 Total 245 514 623 507 144 463 615 109 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 57 Sales revenue – by distribution channel 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Games – box issues 1 640 19 076 4 082 57 111 Games – digital issues 194 033 540 872 130 794 533 806 Other revenue 49 841 63 559 9 587 24 192 Total 245 514 623 507 144 463 615 109 Note 17. Operating expenses 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties, including: 3 425 10 771 4 396 13 284 depreciation on leased buildings 394 1 291 505 1 615 depreciation of leased vehicles 115 288 55 187 Materials and energy used 964 2 181 443 2 081 External services, including: 28 345 84 019 31 497 100 235 costs of short-term leases and low value leases 175 518 116 348 Taxes and fees 533 1 086 292 872 Salaries and wages, social insurance and other benefits 36 932 106 596 41 344 145 336 Business travel 1 078 1 640 266 334 Cost of using company cars 55 172 65 161 Cost of goods for resale and materials sold 30 598 94 921 29 710 103 997 Costs of products and services sold 48 602 85 640 23 217 111 126 Other costs 914 2 411 250 1 620 Total 151 446 389 437 131 480 479 046 Selling expenses 54 379 155 720 55 322 186 505 Total administrative expenses, including: 17 867 53 156 23 231 77 418 cost of research work 404 4 308 1 718 16 170 Cost of sales 79 200 180 561 52 927 215 123 Total 151 446 389 437 131 480 479 046 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 58 Note 18. Other operating income and expenses Other operating income 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Other sales 3 296 3 337 52 118 Write-off of past liabilities of the GOG.COM segment 2 230 2 230 - - Subsidies 1 823 2 754 1 898 1 934 Rental income 1 696 5 046 1 577 4 602 Release of provisions for minimum guarantees - 376 - - Fixed assets and goods for resale received free of charge 306 306 283 284 Gains on disposal of non-current assets 256 265 3 4 Income from re-invoicing 197 595 303 861 Release of unused provisions for costs - 232 274 408 Settlement of the financial liabilities in respect of leases - - 18 18 Damages received - 2 454 457 Other 15 61 53 82 Total other operating income 9 819 15 204 4 915 8 768 Other operating expenses 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Cost of sales of other sales 3 925 3 957 35 35 Cost of rental 994 2 825 804 2 948 Impairment write-downs of tangible fixed assets, intangible assets and expenditure on development work 911 911 - - Depreciation of investment properties 462 1 391 454 1 330 Costs relating to re-invoicing 197 595 303 862 Donations 89 1 312 50 67 Cost of destruction of materials and goods for resale 12 2 771 1 482 Disposal of fixed assets and intangible assets - 483 593 693 Disposal of investment properties - - - 51 Help Me Refund – funds to be returned - - - 33 Inventory count deficits - - - 7 VAT written off - - 4 8 Other 193 447 17 59 Total other operating expenses 6 783 14 692 2 261 6 575 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 59 Note 19. Finance income and costs Finance income 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Interest income 9 344 27 363 322 729 on current bank deposits 5 794 14 811 - 41 on bonds 3 550 12 337 274 578 on loans - 215 48 110 Other finance income 23 875 41 226 9 662 11 658 net foreign exchange gains 15 890 11 907 7 696 - gain on redemption of bonds 4 929 22 437 - - settlement and measurement of derivative financial instruments 3 056 6 880 1 966 11 648 forward contracts – Management Board - 2 - 7 other finance income - - - 3 Total finance income 33 219 68 589 9 984 12 387 Finance costs 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Interest expense 206 923 346 1 153 on bonds 39 240 204 620 on lease contracts 137 404 101 441 on liabilities to the State Treasury 30 278 40 91 on trade payables - 1 1 1 Other finance costs 18 070 36 590 8 870 17 217 net foreign exchange losses - - - 15 637 settlement and measurement of derivative financial instruments 17 990 36 343 8 787 - loss on redemption of bonds - - - 1 305 commission and fees on purchase of bonds 80 247 83 275 Total finance costs 18 276 37 513 9 216 18 370 Net finance income/expense 14 943 31 076 768 (5 983) Note 20. Leases of low-value assets and short-term leases The Group concluded lease contracts for office equipment (multifunctional photocopiers, kitchen appliances) and residential premises which potentially meet recognition criteria for leases under the new IFRS 16. However, the Group considered these contracts to be short-term leases and leases of low-value assets and decided not to apply the new requirements for leases to these assets, as permitted by paragraph 5 of the standards. In such cases, lease payments are charged to costs of the period to which they relate, either on a straight-line basis or in some other systematic way that reflects the distribution of costs over the life of the contract (information on the cost of these leases incurred in the period from 1 July to 30 September 2022 is included in Note 17). As at 30 September 2022, 30 June 2022 and 31 December 2021, future minimum payments in respect of irrevocable short-term leases and leases of low-value assets were as follows: 30.09.2022 30.06.2022 31.12.2021 Up to 1 year 138 226 121 From 1 to 5 years 140 131 149 Total 278 357 270 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 60 Note 21. Issue, redemption and repayment of debt and equity securities Issue of debt securities Not applicable. Issue of equity securities Specification 30.09.2022 30.06.2022 31.12.2021 Number of shares in thousands 100 739 100 739 100 739 Par value of shares in PLN 1 1 1 Share capital 100 739 100 739 100 739 Note 22. Dividend paid (or declared) and received On 28 June 2022, the Annual General Meeting of Shareholders of CD PROJEKT S.A. made a decision to allocate a part of the profit earned by the Parent Company in 2021 for distribution among the shareholders in the form of dividend. In accordance with the resolution, on 12 July 2022 the Parent Company paid out a total of PLN 100 739 thousand, i.e. PLN 1 per share. 100 738 800 shares of the Parent Company carried the right to a dividend. Note 23. Transactions with related entities Terms and conditions of transactions with related entities The terms and conditions of intra-group transactions were determined on an arm’s length basis. The essence of this principle is based on the premise that the terms and conditions agreed in transactions between related parties should not differ from those that would be agreed between independent parties in a comparable situation. In the process of determining prices in controlled transactions related entities belonging to the CD PROJEKT Group refer to methods provided for in OECD Guidelines and in the national legislation, including the safe harbour legislation. The selection of an appropriate method of verifying transfer prices is preceded by a detailed analysis of each transaction which involves, among other things, the distribution of functions between parties to the transaction, assets engaged by the parties and the distribution of risks. Prices are determined using the most appropriate method for a given type of transaction in such a way that the terms of transactions between the CD PROJEKT Group companies correspond to the terms which independent entities would agree to adopt in comparable circumstances. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 61 Transactions with related entity after consolidation eliminations Sales to related entities Purchases from related entities 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 SUBSIDIARIES CD PROJEKT Co., Ltd. (liquidated) - - - - - - 1 016 4 171 Spokko sp. z o.o. 324 1 061 684 1 071 - - - - CD PROJEKT RED Vancouver Studio Ltd. 4 33 - - 4 342 12 124 1 648 1 648 The Molasses Flood LLC 2 2 - - 9 737 20 048 - - MEMBERS OF THE MANAGEMENT BOARDS OF GROUP COMPANIES Marcin Iwiński - 1 2 18 - - - - Adam Kiciński - - - 4 - - - - Piotr Nielubowicz - 2 2 7 - - - - Michał Nowakowski 2 5 1 11 - - - - Adam Badowski 1 6 - 1 - - - - Piotr Karwowski 2 6 1 3 - - - - Urszula Jach - Jaki - 1 - 1 - - - - Maciej Gołębiewski - 1 - - - - - - Paweł Zawodny - 7 - - - - - - Jeremiah Cohn - 1 - - - - - - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 62 Receivables from related entities Liabilities to related entities 30.09.2022 30.06.2022 31.12.2021 30.09.2022 30.06.2022 31.12.2021 SUBSIDIARIES Spokko sp. z o.o. 238 445 9 113 - - - CD PROJEKT RED Vancouver Studio Ltd. 1 144 1 104 1 008 465 419 164 The Molasses Flood LLC - - - 2 530 995 1 019 MEMBERS OF THE MANAGEMENT BOARDS OF GROUP COMPANIES Marcin Iwiński - - - - - 19 Adam Kiciński - - - - - 5 Michał Nowakowski - - - 1 - 7 Adam Badowski 1 1 7 - - 5 Urszula Jach - Jaki - - - 5 - - Paweł Zawodny - 6 - - - - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 63 Note 24. Unpaid loans or defaults on loan agreements in cases where no corrective measures were adopted by the balance sheet date Not applicable. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 64 Note 25. Changes in contingent liabilities or contingent assets which occurred after the end of the last financial year Contingent liabilities in respect of guarantees, sureties and collateral Specification Currency 30.09.2022 30.06.2022 31.12.2021 mBank S.A. Voluntary submission to execution Agreement for payment cards PLN 920 920 920 Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 50 000 50 000 Bill of exchange agreement Bank guarantee securing a rental contract PLN - - 667 Bill of exchange agreement Bank guarantee securing a rental contract PLN 427 427 - Ingenico Group S.A. (previously: Global Collect Services BV) Contractual surety Surety against liabilities of GOG sp. z o.o. EUR - - 155 Mazowiecka Jednostka Wdrażania Programów Unijnych Contractual commitment Commitment to incur operating and renovation expenditures on leased space PLN 21 23 58 Narodowe Centrum Badań i Rozwoju Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0105/16 PLN 7 711 7 711 7 711 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0110/16 PLN 3 846 3 846 3 846 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0112/16 PLN 3 692 3 692 3 692 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0118/16 PLN 1 358 5 324 5 324 Bill of exchange agreement Subsidy agreement POIR.01.02.00-00-0120/16 PLN 1 204 1 204 1 204 Pekao Leasing Sp. z o.o. Bill of exchange agreement Lease contract 37/1991/21 PLN 352 388 442 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 65 Santander Bank Polska S.A. (previously: BZ WBK S.A.) Bill of exchange agreement Framework agreement on financial market transactions PLN 23 500 23 500 23 500 Bank Polska Kasa Opieki Spółka Akcyjna Bill of exchange agreement Framework agreement on financial market transactions PLN 50 000 50 000 35 000 BNP Paribas Bank Polska S.A. Bill of exchange agreement Framework agreement on financial market transactions PLN 26 600 26 600 26 600 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 66 Note 26. Changes in the structure of the Group and Group companies during the reporting period On 20 July 2022, an increase in the share capital of Spokko sp. z o.o. was entered in the Register of Businesses. The increase resulted from the adoption on 24 May 2022 by the Extraordinary Shareholders Meeting of that company of a resolution on an increase in the share capital. The share capital of Spokko sp. z o.o. was increased by creating 589 new shares of PLN 50.00 par value each, i.e. from PLN 25 000.00 to PLN 54 450.00 584 newly created shares in the increased share capital were taken up by CD PROJEKT S.A., and the remaining 5 shares, by one of the Company’s shareholders, Maciej Weiss. As a result of the said transactions, the share capital of CD PROJEKT S.A. in the voting rights and the capital of Spokko sp. z o.o. increased from 74.0% to 87.6%. On 8 August 2022, the Extraordinary Shareholders Meeting of CD PROJEKT RED STORE sp. z o.o. adopted a resolution on increasing the share capital of that company by creating 100 new shares with a par value of PLN 50 each, i.e. from PLN 24 000.00 to PLN 29 000.00. All newly created shares were taken up by CD PROJEKT S.A. i.e. the sole shareholder. The newly created shares were fully paid up by a contribution in cash of PLN 500 000.00. The share premium was recognized as part of the company’s supplementary capital. The increase in the share capital was registered in the Register of Businesses of the National Court Register on 17 August 2022. On 17 September 2022, the Parent Company received confirmation of completing the process of liquidation of its subsidiary CD PROJEKT Co., Ltd. 7 June 2022 was indicated as the date of the effective completion of the liquidation of that company. On 26 September 2022, the share capital of CD PROJEKT RED Vancouver Studio Ltd. was increased. As part of the increase, 640 000 new shares in that company were created. All newly created shares were taken up by CD PROJEKT S.A. i.e. the sole shareholder. The newly created shares were fully paid up by a contribution in cash of CAD 640 000.00. The objective of increasing the capital of CD PROJEKT RED Vancouver Studio Ltd. was to finance the expansion of its IT infrastructure and office. Note 27. Agreements that may result in future changes in the proportions of shares held by shareholders and bondholders On 24 May 2016, the General Shareholders Meeting of the Parent Company passed a resolution introducing an incentive plan for 2016-2019. As a result of a positive verification of the achievement of the plan’s objectives conducted in 2020, a total of 5,167,500 entitlements were subject to execution by eligible persons. As part of the settlement of the plan, the Parent Company disposed of 516,700 own shares purchased from the market for this purpose for the benefit of the eligible persons. The remaining part of the entitlements was realized in the form of issuing 4,650,800 subscription warrants. As at the end of the reporting period, rights from 4,618,800 from among a total of 4,650,800 subscription warrants giving rights to take up the Parent Company’s shares of the new issue as part of the conditional increase in the share capital of the Parent Company remained exercised. On 17 October 2022, in its current report no. 43/2022 , the Management Board of the Company announced that that on the same date, an entitled participant of the incentive program submitted to the Company a statement which indicates the take-up of 32,000 Series M ordinary bearer shares of the Parent Company as a result of exercising the rights incorporated by previously assigned Series B subscription warrants, each of which entitled its holder to claim one share at an issue price of PLN 25.70. The rights incorporated by the shares will emerge on the day the shares are entered on the securities account belonging to the participant (by registration in the securities depository maintained by the National Depository of Securities). A one-year lock-up period applies to the shares. Consequently, 100% of rights incorporated by the warrants issued by the Parent Company under the Incentive Program 2016-2019 have now been exercised. Based on the resolutions of the Company’s General Shareholders Meeting of 28 July 2020 and 22 September 2020, another, third issue of the incentive plan was introduced for 2020-2025. In accordance with the adopted assumptions, no more than 4,000,000 entitlements may be assigned under the plan. The incentive plan may be realized alternatively through the issue and allocation to the entitled persons of subscription warrants which give them the right to subscribe for separately issued shares of the Parent Company as part of the conditional share capital increase, or through offering to the entitled persons shares acquired by the Parent Company as part of the buy-back of its own shares carried out for this purpose. Taking up and the exercising of rights from the subscription warrants or, as the case may be, purchasing the Parent Company’s shares by the eligible persons will be conditional upon the Parent Company’s determining that the objectives and criteria of the plan have been met. The plan includes performance-related objectives (80% of entitlements), market related objectives (20% of entitlements), individual objectives in selected cases and, in each case, the loyalty criterion which applies until the date of determining that the plan objectives and criteria have been met. As at the date of publication of these financial statements, 2,132,000 of the entitlements granted remained in the incentive plan for 2020-2025. Based on the results achieved in 2020 and 2021 and the assumptions for the subsequent years of the plan, the Management Board of the Parent Company assessed the possibility of achieving the performance targets set in the programme over the entire period of the plan duration and revised the estimates, considering it most likely that the performance targets would not be achieved over the period of the incentive plan for 2020-2025. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 67 Note 28. Tax settlements Tax settlements and other areas of activities regulated by the tax law may be subject to inspections by administrative bodies which are entitled to impose high penalties or sanctions. The lack of reference to established legal regulations in Poland results in ambiguities and inconsistencies in the binding regulations. Frequent differences of opinion as to the legal interpretation of tax regulations, both internally within the state bodies and between the state bodies and enterprises, result in areas of uncertainty and conflict arising. Due to these factors, the tax risk in Poland is considerably higher than that usually existing in countries with better developed tax systems. In accordance with the general rule, tax settlements may be subject to inspections within five years from the end of the year in which tax was paid. Following the fulfilment of the criteria set out in Article 19 of the Act of 30 May 2008 on certain forms of innovation support (consolidated text, Journal of Laws of 2021, item 706), the Minister of Development and Technology, by decision No. DNP-V.4241.16.2022 of 11 August 2022, maintained the status of a research and development centre granted to the Parent Company by decision 4/CBR/18 of 19 June 2018. The status allows the Parent Company to use the research and development relief provided for in the Act of 15 February 1992 on corporate income tax (consolidated text, Journal of Laws of 2021, item 1800). With effect from 1 January 2019, provisions were introduced into the Act on corporate income tax granting preferential taxation at the 5% tax rate for qualified income earned by a taxpayer from qualified intellectual property rights. Having met the prerequisites and formal conditions contained in the said legislation, the Group accounts for income (in respect of selected sources of income) taking this tax relief into account. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 68 Note 29. Explanations to the condensed consolidated statement of cash flows 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Cash and cash equivalents reported in the statement of cash flows 198 689 198 689 690 681 690 681 Cash and cash equivalents in the balance sheet 198 689 198 689 690 681 690 681 Depreciation and amortization 3 425 10 771 4 396 13 284 Amortization of intangible assets 535 1 615 767 2 386 Amortization of expenditure on development projects 211 833 522 1 501 Depreciation of property, plant and equipment 2 672 8 297 3 097 9 368 Depreciation of investment properties 7 26 10 29 Foreign exchange gains/(losses) arising on the following items: (19 888) (24 769) (9 705) (11 719) Foreign exchange gains/(losses) on measurement of bonds (19 888) (24 769) (9 705) (11 719) Interest and shares in profits comprise: (9 168) (26 719) (17) 332 Interest on bank deposits (5 794) (14 811) - (41) Interest on bonds (3 511) (12 097) (70) 42 Interest accrued on loans granted - (215) (48) (110) Interest on lease contracts 137 404 101 441 (Gains)/losses on investing activities arising on the following items: 13 796 15 282 9 460 14 111 Sale of property, plant and equipment (260) (274) (6) (14) Net carrying amount of property, plant and equipment 4 9 3 10 Net carrying amount of non-current assets scrapped - 200 593 690 Net carrying amount of intangible assets scrapped - 283 - 3 Net carrying amount of investment properties scrapped - - - 51 Impairment write-downs of property, plant and equipment, intangible assets and expenditure on development work 911 911 - - Settlement and measurement of derivative financial instruments 17 990 36 343 8 787 11 791 Commission and fees on purchase of bonds 80 247 83 275 Proceeds from redemption of bonds (34 672) (192 373) - (66 631) Value of bonds purchased 29 743 169 936 - 67 936 Change in provisions results from the following items: 13 275 (36 914) (49 463) (285 827) Change in provisions for liabilities 19 458 (29 545) (49 246) (373 920) Change in provision for costs of performance-related and other remuneration recognized under expenditure on development projects (6 183) (7 369) (217) 88 093 Change in inventories results from the following items: 644 1,394 339 (9,607) Change in inventories 644 1,394 339 (9,607) Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 69 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Change in receivables results from the following items: (87 658) (15 016) 88 877 1 118 518 Change in current receivables in the balance sheet (80 029) 41 775 81 968 1 109 741 Change in non-current receivables in the balance sheet (53) (101) (16) (25) Change in prepayments for investment properties - (79) - - Withholding tax paid abroad (6 720) (31 353) 317 315 Income tax settled against withholding tax - 27 961 - - Adjusted for current income tax (1 133) (26 751) - - Change in prepayments for development projects 211 (26 575) 6 722 8 456 Change in prepayments for property, plant and equipment and intangible assets 66 107 (114) 31 Change in current liabilities, excluding loans and borrowings, results from the following items: 4 762 12 285 12 747 (76 816) Change in current receivables in the balance sheet (82 424) 7 994 21 601 (11 783) Adjusted for current income tax (6 468) 17 978 (495) (53 192) Change in other financial liabilities (8 867) (12 789) (8 313) (12 285) Change in liabilities in respect of security deposits - - - (73) Change in liabilities resulting from purchase of property, plant and equipment 1 788 (933) (199) 334 Change in liabilities resulting from purchase of intangible assets (6) 25 153 183 Change in liabilities resulting from dividend from retained earnings 100 739 - - - Change in liabilities resulting from purchase of investment properties - 10 - - Change in other assets and liabilities results from the following items: (11 201) (45 874) (12 971) (18 152) Change in prepayments and accruals in the balance sheet (12 722) (32 489) (14 425) (12 359) Change in deferred income in the balance sheet 1 581 (13 205) 1 517 (5 613) Adjusted for accruals reported under liabilities (60) (180) (60) (180) Other - - (3) - “Other adjustments” comprise: 1 539 6 869 9 348 28 206 Costs of the incentive plan 967 3 285 8 901 26 703 Measurement of derivative financial instruments (714) (651) (260) (438) Amortization and depreciation written off, reported under cost of sales, consortium settlements and other operating expenses - 1 046 - - Amortization and depreciation reported under cost of sales, consortium settlements and other operating expenses 806 2 470 644 1 853 Foreign exchange differences on translation 480 781 81 106 Other adjustments - (62) (18) (18) Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 70 Note 30. Cash flows and non-monetary changes resulting from changes in liabilities in financing activities 01.07.2022 Cash flows Non-monetary changes 30.09.2022 Takeover of leased fixed assets Termination of a lease contract Foreign exchange gains and losses Interest accrued Adoption of resolution on the payment of dividend Transfer of own shares Lease liabilities 19 362 (909) 194 - 167 137 - - 18 951 Liabilities to shareholders in respect of dividend payment 100 739 (100 739) - - - - - - - Total 120 101 (101 648) 194 - 167 137 - - 18 951 01.01.2022 Cash flows Non-monetary changes 30.09.2022 Takeover of leased fixed assets Termination of a lease contract Foreign exchange gains and losses Interest accrued Adoption of resolution on the payment of dividend Transfer of own shares Lease liabilities 16 655 (3 049) 4 775 - 168 404 - - 18 953 Liabilities to shareholders in respect of dividend payment - (100 739) - - - - 100 739 - - Total 16 655 (103 788) 4 775 - 168 404 100 739 - 18 953 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 71 01/07/2021 Cash flows Non-monetary changes 30.09.2021 Takeover of leased fixed assets Termination of a lease contract Foreign exchange gains and losses Interest accrued Adoption of resolution on the payment of dividend Transfer of own shares Lease liabilities 17 719 (1 018) 143 (18) 72 101 - - 16 999 Total 17 719 (1 018) 143 (18) 72 101 - - 16 999 01.01.2021 Cash flows Non-monetary changes 30.09.2021 Takeover of leased fixed assets Termination of a lease contract Foreign exchange gains and losses Interest accrued Adoption of resolution on the payment of dividend Transfer of own shares Lease liabilities 18 939 (3 061) 551 (18) 147 441 - - 16 999 Liabilities to shareholders in respect of dividend payment - (503 694) - - - - 503 694 - - Receivables from eligible persons in the incentive plan - 2 149 - - - - - (2 149) - Total 18 939 (504 606) 551 (18) 147 441 503 694 (2 149) 16 999 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 72 Note 31. Post balance sheet date events On 4 October 2022, in current report no. 37/2022, the Management Board of the Parent Company informed of the adoption of the Long-Term Strategic Growth Outlook of the CD PROJEKT Group. The following were identified as directions of the Group’s strategic development in the coming years: continuing to increase production capacity, enhancing game experiences with multiplayer features and continuing to expand franchises. The full content of the document is attached to the current report. On 4 October 2022, in current report no. 38/2022, the Management Board of the Parent Company informed that the Company had received Mr Marcin Iwiński’s resignation as Vice-President for International Contacts and Member of the Management Board of the Company, effective at the end of the day on 31 December 2022 and information on his intention to run for the position of Supervisory Board Chairman from the day immediately following the expiration of his membership of the Management Board. On 4 October 2022, in current report no. 39/2022, the Management Board of the Parent Company informed that the Company had received Mr Piotr Pągowski’s resignation as a Member of the Supervisory Board and Member of the Audit Committee of the Company, effective as of the end of the day on 31 December 2022. On 4 October 2022, in current report no. 40/2022 (corrected by current report no. 40/2022K), the Management Board of the Parent Company informed that based on Resolution no. 4 of the Extraordinary Shareholders Meeting of 29 November 2016, the Management Board decided on the conditions of and procedure for conducting a buyback of the Parent Company’s shares with a view to their voluntary redemption. As a result of the buyback conducted based on that decision, the Parent Company purchased 860,290 of its own shares representing 0.854% of its share capital between 5 October and 24 October 2022. The buyback was conducted on the assumption that the Parent Company would purchase no more than 2 million own shares for a total of no more than PLN 100 million. The Management Board of the Parent Company provided detailed information on the course of the buyback in current reports nos. 42/2022, 44/2022 and 45/2022. On 17 October 2022, in its current report no. 43/2022, the Management Board of the Parent Company announced that on the same date, an entitled participant of the incentive program executed in 2016-2019 submitted to the Company a statement which indicates the take-up of 32,000 Series M ordinary bearer shares of the Parent Company as a result of exercising the rights incorporated by previously assigned Series B subscription warrants, each of which entitled its holder to claim one share at an issue price of PLN 25.70. The rights incorporated by the shares will emerge on the day the shares are entered on the securities account belonging to the participant (by registration in the securities depository maintained by the National Depository of Securities). A one-year lock-up period applies to the shares. Consequently, 100% of rights incorporated by the warrants issued by the Parent Company under the Incentive Program 2016-2019 have now been exercised. On 18 October 2022, as a result of decisions adopted by the Board of Directors of CD PROJEKT Inc. and the Management Board of its sole shareholder CD PROJEKT S.A. the share capital of CD PROJEKT Inc. was increased from USD 3 million 500 thousand to USD 5 million, i.e. by USD 1 million 500 thousand, by increasing the value of the existing 10,000 shares by USD 150 each. The increased value of the existing shares was paid up in full by a cash contribution of USD 1 million 500 thousand made by CD PROJEKT S.A. The capital increase was intended to enable finalizing the first stage of the process of acquisition of shares in The Molasses Flood LLC (payment of the second tranche relating to acquisition of 60% of shares in that company). On 16 November 2022, in current report no. 46/2022 , the Management Board of the Parent Company informed that Mr Marcin Iwiński, as an entitled shareholder representing more than one twentieth of the share capital of the Company, submitted a request to convene an Extraordinary General Meeting and to include in the agenda of the said Meeting a vote on the appointment of Mr. Marcin Iwiński as a member of Supervisory Board of the Company. In connection with the submitted request, Mr. Marcin Iwiński has officially presented his candidature and made the legally required statements in this respect. On 17 November 2022, in current report no. 47/2022, the Management Board of the Parent Company informed that a merger plan between the Company, as the surviving company, and its wholly-owned subsidiary CD PROJEKT RED STORE sp. z o.o. as the target company was agreed and signed. The planned merger will be effected by transferring all assets of the target company to the Parent Company in accordance with Article 492 § 1 item 1 of the Commercial Companies Code (merger by acquisition) in connection with Article 516 § 6 of the Commercial Companies Code, without increasing the share capital of the Parent Company and without exchanging the shares in the target company for shares in the Parent Company. The merger is intended to simplify the structure of the Group in connection with the plans to continue the existing operations of the Target Company in cooperation with a specialized third party – in line with the Long-Term Strategic Growth Outlook of CD PROJEKT Group. The content of the Merger Plan has been attached to the current report. On 22 November 2022, the Management Board of the Parent Company announced convening an Extraordinary Shareholders Meeting of the Parent Company to be held on 20 December 2022. The agenda of the Extraordinary Shareholders Meeting will include, firstly, resolutions on the appointment of Mr Marcin Iwiński to the Supervisory Board, changes to the remuneration of Members of the Supervisory Board, cancellation of the 2020-2025 Incentive Plan, introduction of the 2023-2027 Incentive Plan and the related issue of subscription warrants and the conditional increase in the share capital, and the merger of the Parent Company with CD PROJEKT RED STORE sp. z o.o. The full agenda, including additional information in this respect, is presented in current report no. 49/2022. Draft resolutions are available in current report no. 50/2022 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2017 (all amounts in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 73 Additional information 5 Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 74 Litigation pending During the reporting period, the following litigation was pending (as at the date of publication of the financial statements). Criminal cases in which CD PROJEKT S.A. has the status of the aggrieved party Case against private individuals (including former members of the Management Board of Optimus S.A.) for acts to the detriment of the Company On 27 October 2016, the Regional Court in Warsaw, in case ref. no. XVIII K 126/09 as a result of the indictment of the Public Prosecutor’s Office of the Regional Prosecutor’s Office in Warsaw to the Regional Court, passed a sentence convicting Michał L., Piotr L. and Michał D., ascribing to them the commission of acts under Article 296 § 1 of the Penal Code and Article 296 § 3 of the Penal Code and others. The Parent Company acted as an auxiliary prosecutor at first instance (a status it retains until the end of the proceedings). The scope of damages awarded under Article 46 of the Penal Code amounted to a total of PLN 210 thousand, with the damage ascertained by the court amounting to at least PLN 16 million according to the operative part of the verdict (this method of determining damage results from the principles of adjudication in criminal proceedings). The Company appealed against the judgment, requesting that it be amended, including, inter alia, in the part relating to the amount of damages awarded to the Company. Appeals were also filed by the defendants’ counsels - against the entire decision. On 26 October 2017, the Court of Appeals overturned the judgment of the Court of First Instance in the case in its entirety and remitted the case to the Court of First Instance for retrial in its entirety. The Parent Company is acting as an auxiliary prosecutor in the case. Cases in which CD PROJEKT S.A. has the status of the defendant Class action lawsuit against CD PROJEKT S.A. concerning US securities On 25 December 2020 and 15 January 2021, the Management Board of the Parent Company received confirmation from a law firm cooperating with the Company of the filing of civil class actions before the United States District Court for the District of Central California, by law firms acting on behalf of groups of holders of US financial instruments listed under the symbols “OTGLY” and “OTGLF” and based on the Company’s shares. The plaintiffs seek a judicial determination whether the actions of the Company and its Management Board Members in connection with the launch of the Cyberpunk 2077 game constituted a violation of federal regulations by, among other things, misleading investors, thereby leading to losses on their part. In the following months, the Company became aware of two other lawsuits also filed in the local court, identical in subject matter and directed against CD PROJEKT. The contents of all the said lawsuits did not specify the value of the claim. On 18 May 2021, the Company was informed that the court consolidated the lawsuits filed and selected a lead plaintiff. Following consolidation, all four lawsuits filed are being dealt with in a single proceeding. On 29 June 2021, the Company received a copy of the lawsuit filed against the Company, as well as the members of its Management Board, by the law firm representing the lead plaintiff and the other qualifying holders of US securities listed under the symbols “OTGLY” and “OTGLF”. The content of the lawsuit filed did not differ in subject matter from the previously filed unconsolidated lawsuits in this regard, nor did it specify the value of the claims. On 12 August 2021, the Company filed a response to the claim seeking dismissal of the action. Subsequently, on 5 October 2021, the Company received a pleading from the plaintiffs challenging the motion to dismiss, to which the Company responded on 17 November 2021, again seeking dismissal of the action. On 7 December 2021, the Company entered into settlement negotiations with the plaintiffs, resulting in the signing of a Settlement Term Sheet on 16 December 2021, whereby the Company agreed to pay the plaintiffs the amount of USD 1 850 thousand in exchange for the waiver of all claims against the Company. A settlement agreement with the Company’s insurer, Colonnade Insurance S.A., branch in Poland, was also obtained. On 27 January 2022, the Company entered into a formal settlement document, the Stipulation Agreement, confirming the findings of the Settlement Term Sheet. The Stipulation Agreement, like the Settlement Term Sheet previously entered into, contains a statement that there is no admission of any fault on the part of the Company or the other defendants. The company expects to complete the procedure to obtain a settlement within the next few months. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 75 Shareholding structure Shareholders holding directly or indirectly through subsidiaries at least 5% of the total number of votes at the Parent Company’s General Shareholders Meeting as at the date of publication of the quarterly report The Parent Company’s share capital amounts to PLN 100 738 800 and consists of 100 738 800 shares with a nominal value of PLN 1 each. The shareholding structure, including the percentage share in the share capital and at the General Shareholders Meeting of the Parent Company, is updated on the basis of formal notifications received by the Parent Company from shareholders holding at least 5% of the total number of votes at the General Shareholders Meeting of the Parent Company. Number of votes at the GSM % of votes at the GSM Marcin Iwiński 12 873 520 12.78% Michal Kiciński 1 10 433 719 10.36% Piotr Nielubowicz 6 858 717 6.81% The Goldman Sachs Group, Inc. 2 6 827 314 6.78% 1 According to current report no. 33/2021 of 26 May 2021. 2 According to current report no. 41/2022 of 6 October 2022, the total percentage share of The Goldman Sachs Group, Inc.’s votes resulting from shares (1.76%) and other financial instruments held (5.02%) was 6.78% as at 3 October 2022. According to the notification in this respect received by the Parent Company, The Goldman Sachs Group, Inc. holds indirectly 1 775 065 of votes attached to shares, 1 850 802 votes which may be obtained as a result of exercising or conversion of a financial instrument constituting securities that are the subject of a loan and 3 201 447 votes resulting from financial instruments of another type. Changes in the shareholding structure of the Parent Company In the period presented, the Parent Company received notifications concerning qualifying changes in the number or votes or the Company’s shares held solely with respect to the percentage share of votes held by The Goldman Sachs Group, Inc. The most recent data in this respect received by the Parent Company is presented in the section above. After the balance sheet date, a buyback of the Parent Company’s shares was conducted. The Management Board of the Parent Company informed of the decision taken in this regard in current report no. 40/2022 (corrected by current report no. 40/2022K ). As a result of the buyback conducted based on that decision, the Parent Company purchased 860,290 of its own shares representing 0.854% of its share capital between 5 October and 24 October 2022. The Management Board of the Parent Company provided detailed information on the course of the buyback in current reports nos. 42/2022, 44/2022 and 45/2022. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 76 Parent Company’s shares held by members of the Management and Supervisory Boards Changes in the number of shares held by members of the Management and Supervisory Boards Name and surname Position As at 01.01.2022 As at 30.09.2022 As at 28.11.2022 Adam Kiciński President of the Management Board 4 046 001 4 046 001 4 046 001 Marcin Iwiński Vice-President of the Management Board 12 873 520 12 873 520 12 873 520 Piotr Nielubowicz Vice-President of the Management Board 6 858 717 6 858 717 6 858 717 Adam Badowski Member of the Management Board 692 640 692 640 692 640 Michał Nowakowski Member of the Management Board 580 290 580 290 580 290 Piotr Karwowski Member of the Management Board 108 728 108 728 108 728 Paweł Zawodny Member of the Management Board n/a 18 508 18 508 Katarzyna Szwarc Chair of the Supervisory Board 10 10 10 Piotr Pągowski Deputy Chair of the Supervisory Board - - 33 Maciej Nielubowicz Supervisory Board Member 51 51 51 * Based on statements and notifications submitted to the Company. Reference to published estimates The Group did not publish estimated data relating to the period presented. Interim condensed separate financial statements of CD PROJEKT S.A. 6 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 78 Interim condensed separate income statement Note 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Sales revenue 203 081 494 049 103 206 470 379 Sales of products 201 452 485 205 101 643 461 621 Sales of services 359 1 495 509 4 137 Sales of goods for resale and materials 1 270 7 349 1 054 4 621 Cost of sales of products, services, goods for resale and materials 49 835 90 842 23 017 111 571 Costs of products and services sold 48 617 85 397 21 871 106 873 Cost of goods for resale and materials sold 1 218 5 445 1 146 4 698 Gross profit/(loss) on sales 153 246 403 207 80 189 358 808 Selling expenses 44 650 125 992 41 455 144 423 Administrative expenses 14 906 44 223 19 657 66 606 Other operating income 7 881 13 499 5 238 10 371 Other operating expenses 6 874 15 467 2 804 8 497 (Impairment)/reversal of impairment of financial instruments (9) (17) (5) (6) Operating profit/(loss) 94 688 231 007 21 506 149 647 Finance income 33 955 70 305 10 783 7 717 Finance costs 18 740 40 114 9 199 12 393 Profit/(loss) before tax 109 903 261 198 23 090 144 971 Income tax expense A 13 030 52 465 1 403 12 919 Net profit/(loss) 96 873 208 733 21 687 132 052 Net earnings/(loss) per share (in PLN) - - - - Basic for the reporting period 0.96 2.07 0.22 1.31 Diluted for the reporting period 0.96 2.07 0.22 1.31 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 79 Interim condensed separate statement of comprehensive income 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Net profit/(loss) 96 873 208 733 21 687 132 052 Other comprehensive income subject to reclassification to gains or losses after specific conditions have been met (6 298) (14 289) 1 793 3 571 Measurement of derivative financial instruments – fair value through other comprehensive income, taking into account the tax effect (6 298) (14 289) 1 793 3 571 Other comprehensive income not subject to reclassification to gains or losses - - - - Total comprehensive income 90 575 194 444 23 480 135 623 Interim condensed separate statement of financial position Note 30.09.2022 30.06.2022 31.12.2021 NON-CURRENT ASSETS 1 053 387 1 009 939 887 663 Property, plant and equipment 129 180 114 400 103 986 Intangible assets 70 754 70 530 59 086 Expenditure on development projects 448 004 432 382 347 822 Investment properties 42 961 55 831 57 082 Goodwill C 49 168 49 168 49 168 Investments in subsidiaries 73 364 71 052 43 447 Prepayments and deferred costs 3 535 5 834 4 741 Other financial assets G 197 509 173 589 178 540 Deferred tax assets A 38 515 36 771 43 418 Other receivables F,G 397 382 373 CURRENT ASSETS 1 073 205 1 077 337 1 173 501 Inventories 10 807 10 747 13 539 Trade receivables F,G 147 332 63 394 123 821 Current income tax receivable - 1 587 - Other receivables F 46 475 49 081 113 163 Prepayments and deferred costs 8 093 5 386 4 015 Other financial assets G 288 980 319 572 308 168 Bank deposits over 3 months G 410 544 - 265 000 Cash and cash equivalents G 160 974 627 570 345 795 TOTAL ASSETS 2 126 592 2 087 276 2 061 164 * restated data Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 80 Note 30.09.2022 30.06.2022 31.12.2021 EQUITY 1 966 039 1 874 497 1 869 049 Share capital 21 100 739 100 739 100 739 Supplementary capital 1 502 147 1 502 147 1 366 952 Share premium 115 909 115 909 115 909 Other reserves 38 511 43 842 49 515 Retained earnings - - (4 179) Net profit (loss) for the period 208 733 111 860 240 113 NON-CURRENT LIABILITIES 28 134 25 984 29 756 Other financial liabilities G 16 489 16 890 14 757 Other liabilities 2 680 2 740 2 860 Deferred income 4 127 5 495 6 403 Provision for retirement and similar benefits 368 368 368 Other provisions B 4 470 491 5 368 CURRENT LIABILITIES 132 419 186 795 162 359 Other financial liabilities G 30 579 22 177 18 620 Trade payables G 27 015 16 611 16 028 Current income tax liabilities 6 468 - 24 445 Other liabilities 4 545 105 553 4 059 Deferred income 13 509 9 957 23 042 Provision for retirement and similar benefits 5 5 5 Other provisions B 50 298 32 492 76 160 TOTAL LIABILITIES AND EQUITY 2 126 592 2 087 276 2 061 164 * Detailed information on changes in items are presented in the relevant notes to the interim condensed consolidated financial statements. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 81 Interim condensed separate statement of changes in equity Share capital Supplementary capital Share premium Other reserves Retained earnings Net profit (loss) for the period Total equity 01.01.2022 – 30.09.2022 Equity as at 01.01.2022 100 739 1 366 952 115 909 49 515 235 934 - 1 869 049 Costs of the incentive plan - - - 3 285 - - 3 285 Appropriation of the net profit/offset of loss - 135 195 - - (135 195) - - Payment of dividend - - - - (100 739) - (100 739) Total comprehensive income - - - (14 289) - 208 733 194 444 Equity as at 30.09.2022 100 739 1 502 147 115 909 38 511 - 208 733 1 966 039 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 82 Share capital Supplementary capital Share premium Other reserves Retained earnings Net profit (loss) for the period Total equity 01.01.2021 – 30.09.2021 Equity as at 01.01.2021 100 655 737 542 113 844 47 068 1 132 235 - 2 131 344 Corrections of errors - - - - (4 179) - (4 179) Equity, as adjusted 100 655 737 542 113 844 47 068 1 128 056 - 2 127 165 Costs of the incentive plan - - - 26 820 - - 26 820 Appropriation of the net profit/offset of loss - 628 541 - - (628 541) - - Share-based payments 84 869 2 065 (869) - - 2 149 Payment of dividend - - - - (503 694) - (503 694) Total comprehensive income - - - 3 571 - 132 052 135 623 Equity as at 30.09.2021 100 739 1 366 952 115 909 76 590 (4 179) 132 052 1 788 063 The Company adjusted the calculation of the deferred tax asset as at 31 December 2020 by re-classifying a part of deductible temporary differences from the category of taxed at 19% to taxed at 5%. As a result of the adjustment, equity decreased by PLN 4,179 thousand. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 83 Interim condensed separate statement of cash flows 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 OPERATING ACTIVITIES Net profit/(loss) 96 873 208 733 21 687 132 052 Total adjustments: (20 126) 16 816 72 617 899 472 Depreciation and amortization of property, plant and equipment, intangible assets, expenditure on development projects and investment properties 2 650 8 150 3 092 9 588 Amortization of development projects recognized as cost of goods sold 48 327 84 464 21 521 65 205 Foreign exchange gains/(losses) (19 888) (24 747) (9 729) (11 787) Interest and participation in profits (8 663) (25 629) (43) 245 (Gains)/Losses on investing activities 14 299 18 182 9 461 14 032 Increase/(Decrease) in provisions 15 602 (34 126) (49 399) (276 146) (Increase)/Decrease in inventories (60) 2 732 73 (9 887) (Increase)/Decrease in receivables (87 792) (14 747) 88 651 1 148 644 Increase/(Decrease) in liabilities, excluding loans and borrowings 11 849 10 526 982 (57 601) Change in other assets and liabilities 1 718 (14 863) (1 293) (10 137) Other adjustments 1 832 6 874 9 301 27 316 Cash from operating activities 76 747 225 549 94 304 1 031 524 Income tax expense 6 310 21 112 1 720 13 233 Withholding tax paid abroad 6 720 31 353 (317) (314) Income tax (paid)/refunded - (34 188) (6 456) (6 806) Net cash from operating activities 89 777 243 826 89 251 1 037 637 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 84 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 INVESTING ACTIVITIES Inflows 91 538 553 707 808 241 867 Sale of intangible assets and property, plant and equipment 256 262 54 829 Expenditure on development projects provided as part of a consortium - - 152 152 Repayment of loans granted - 13 220 93 1 105 Sale of shares in a subsidiary - 76 19 19 Expiry of bank deposits over 3 months - 265 000 - 164 368 Redemption of bonds 84 853 257 943 - 66 628 Interest on bonds 1 147 3 250 445 725 Interest received on deposits 5 282 13 679 - 41 Inflows from execution of forward contracts - - - 7 887 Other inflows from investing activities - 277 45 113 Outflows 546 554 879 370 63 654 573 997 Acquisition of intangible assets and property, plant and equipment 10 206 35 371 5 554 23 741 Expenditure on development projects 55 831 145 542 26 506 135 443 Acquisition of investment properties and capitalization of expenditure - 145 617 2 022 Loans granted - 4 000 600 4 340 Acquisition of a subsidiary - - 7 679 7 679 Contribution to the capital of a subsidiary 2 808 32 720 - - Purchase of bonds and cost of their purchase 57 380 225 500 22 623 350 699 Outflows from execution of forward contracts 9 785 25 548 75 - Placement of bank deposits over 3 months 410 544 410 544 - 50 073 Net cash from investing activities (455 016) (325 663) (62 846) (332 130) FINANCING ACTIVITIES Inflows 10 30 10 2 179 Net proceeds from the sale of shares and issue of shares in the execution of the incentive plan - - - 2 149 Payment of finance lease liabilities 10 30 10 30 Outflows 101 367 103 014 788 506 088 Dividends and other distributions to shareholders 100 739 100 739 - 503 694 Payment of lease liabilities 499 1 901 704 2 009 Interest paid 129 374 84 385 Net cash from financing activities (101 357) (102 984) (778) (503 909) Net increase/(decrease) in cash and cash equivalents (466 596) (184 821) 25 627 201 598 Change in cash and cash equivalents in the balance sheet (466 596) (184 821) 25 627 201 598 Cash and cash equivalents at the beginning of the period 627 570 345 795 598 885 422 914 Cash and cash equivalents at the end of the period 160 974 160 974 624 512 624 512 * restated data Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 85 Explanations to the condensed separate statement of cash flows 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 “Other adjustment” comprise: 1 832 6 874 9 301 27 316 Costs of the incentive plan 963 3 112 8 458 25 017 Amortization and depreciation written off, reported under cost of sales, consortium settlements and other operating expenses - 1 046 861 2 317 Amortization and depreciation reported under cost of sales, consortium settlements and other operating expenses 869 2 716 - - Other adjustments - - (18) (18) Comparability of the financial statements and consistency of accounting policies The accounting policies applied in these interim condensed separate financial statements, material judgments made by the Management Board with regard to the accounting policies applied by the Company and the main sources of estimating uncertainties are consistent, in all material respects, with the policy adopted for preparing the annual financial statements of CD PROJEKT S.A. for 2021, with the exception of changes in the accounting policies and presentation changes described below. These condensed financial statements should be read in conjunction with the financial statements for the year ended 31 December 2021. Changes in accounting policies Changes in accounting policies relating to the Company are the same as those described in the section Comparability of the financial statements and consistency of accounting policies of the consolidated financial statements for the period from 1 July to 30 September 2022. Presentation changes In these interim condensed separate financial statements for the period from 1 July to 30 September 2022 changes were introduced in the presentation of selected financial data. In order to ensure comparability of the financial data in the reporting period, presentation of the data as at 30 September 2021 and as at 31 December 2021 was changed. The data is presented after the following changes:  In the statement of financial position as at 31 December 2021, presentation of some of the land held by the Group changed. Consequently, the following items changed: - Property, plant and equipment – an increase of PLN 4,354 thousand - Investment properties – a decrease of PLN 4,354 thousand. The change did not affect the net profit or loss and equity.  In the cash flow statement for the period from 1 January 2021 to 30 September 2021, presentation of interest received on deposits was changed. Consequently, the following items changed: - Other inflows from investing activities – a decrease of PLN 41 thousand - Interest on deposits – an increase of PLN 41 thousand. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 86 Notes to the separate financial statements of CD PROJEKT S.A. A. Deferred tax Deductible temporary differences underlying the deferred tax asset 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 30.09.2022 Provision for other employee benefits 372 - 372 Provision for costs of performance-related and other remuneration 39 400 (10 001) 29 399 Foreign exchange losses 2 286 (268) 2 018 Difference between the carrying and tax amount of expenditure on development projects 24 792 (22 640) 2 152 Salaries and wages and social security payable in future periods 61 (18) 43 Other provisions 47 501 (24 278) 23 223 Research and development relief 301 954 - 301 954 Prepayments recognized as revenue for tax purposes 1 469 4 284 5 753 Total deductible differences, including: 417 835 (52 921) 364 914 taxed at 5% 60 417 (22 929) 37 488 taxed at 19% 357 418 (29 992) 327 426 Deferred income tax asset 70 931 (6 845) 64 086 Taxable temporary differences underlying the deferred tax provision 31.12.2021 Differences affecting the deferred tax recognized in the profit or loss 30.09.2022 Difference between the net carrying amount and tax amount of property, plant and equipment and intangible assets 14 129 1 170 15 299 Current period revenue invoiced in the subsequent period/accrued income 128 789 8 638 137 427 Foreign exchange gains 14 786 (13 619) 1 167 Difference between the carrying and tax amount of expenditure on development projects 271 672 (44 488) 227 184 Other 91 58 149 Total taxable differences, including: 429 467 (48 241) 381 226 taxed at 5% 386 323 (51 591) 334 732 taxed at 19% 43 144 3 350 46 494 Deferred tax provision 27 513 (1 943) 25 571 The deferred part of the income tax was determined either at the corporate income tax rate of 19% for the tax base corresponding to income from other sources, or at the rate of 5% for the tax base corresponding to income from qualifying intellectual property (the so-called IP BOX). When determining the appropriate tax rate for temporary differences, the Company relied on forecasts of which tax base will give rise to the realization of the temporary differences recognized. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 87 Net deferred tax asset/provision 30.09.2022 30.06.2022 31.12.2021 Deferred income tax assets 64 086 65 999 70 931 Deferred tax provision 25 571 29 228 27 513 Net deferred tax - assets/(provisions) 38 515 36 771 43 418 Income tax expense recognized in the income statement 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 Current income tax, including: 14 775 47 563 6 654 60 119 withholding tax paid abroad 6 720 31 353 (317) (314) Change in deferred tax (1 745) 4 902 (5 251) (47 200) Income tax expense recognized in the income statement 13 030 52 465 1 403 12 919 B. Other provisions 30.09.2022 30.06.2022 31.12.2021 Provision for liabilities, including: 54 768 32 983 81 528 provision for costs of the audit and review of the financial statements 68 69 102 provision for costs of performance-related and other remuneration 41 131 22 066 44 714 provision for other costs 13 569 10 848 36 712 Total, including: 54 768 32 983 81 528 current 50 298 32 492 76 160 non-current 4 470 491 5 368 Change in other provisions Provision for costs of performance-related and other remuneration Other provisions Total As at 01.01.2022 44 714 36 814 81 528 Provisions recorded during the year 41 131 28 143 69 274 Provisions utilized 44 506 51 185 95 691 Provision released 208 135 343 As at 30.09.2022, including: 41 131 13 637 54 768 current 41 131 9 167 50 298 non-current - 4 470 4 470 C. Goodwill During the period from 1 July to 30 September 2022 there were no changes in goodwill. D. Business combinations In the period from 1 July to 30 September 2022, the Company had no business combinations with another entity. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 88 E. Dividend paid (or declared) and received On 28 June 2022, the Annual General Meeting of Shareholders of CD PROJEKT S.A. made a decision to allocate a part of the profit earned by the Parent Company in 2021 for distribution among the shareholders in the form of dividend. In accordance with the resolution, on 12 July 2022 the Parent Company paid out a total of PLN 100 739 thousand, i.e. PLN 1 per share. 100 738 800 shares of the Parent Company carried the right to a dividend. F. Trade and other receivables 30.09.2022 30.06.2022 31.12.2021 Trade and other receivables, gross 195 032 113 676 238 168 Write-downs 828 819 811 Trade and other receivables 194 204 112 857 237 357 from related entities 5 178 4 088 5 179 from other entities 189 026 108 769 232 178 Changes in write-downs of receivables Trade receivables Other receivables Total OTHER ENTITIES Write-downs as at 01.01.2022 79 732 811 Increases, including: 17 - 17 write-downs recognized for past-due and disputed receivables 17 - 17 Decreases - - - Write-downs as at 30.09.2022 96 732 828 Current and overdue trade receivables as at 30.09.2022 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 RELATED ENTITIES gross receivables 5 178 3 135 885 14 - 1,144 - default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually - - - - - - - total expected credit losses - - - - - - - Net receivables 5 178 3 135 885 14 - 1 144 - Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 89 Total Not overdue Overdue, in days 1 – 60 61 – 90 91 – 180 181 – 360 >360 OTHER ENTITIES gross receivables 142 250 141 980 159 - 11 3 97 default ratio - 0% 0% 0% 0% 0% 0% write-down resulting from the ratio - - - - - - - write-down determined individually 96 - - - - - 96 total expected credit losses 96 - - - - - 96 Net receivables 142 154 141 980 159 - 11 3 1 Total gross receivables 147 428 145 115 1 044 14 11 1 147 97 impairment write- downs 96 - - - - - 96 Net receivables 147 332 145 115 1 044 14 11 1 147 1 Other receivables 30.09.2022 30.06.2022 31.12.2021 Other gross receivables, including: 47 604 50 195 114 268 tax receivables, other than corporate income tax 35 077 38 182 75 562 prepayments for inventories 7 043 6 842 5 076 prepayments for development projects 3 860 3 649 30 435 security deposits 678 660 650 prepayments for property, plant and equipment and intangible assets 141 75 34 settlements with employees 12 7 3 settlements with members of the Management Boards 1 7 7 consortium settlements - - 1 659 prepayments on investment properties - - 79 other 792 773 763 Write-downs 732 732 732 Other receivables, including: 46 872 49 463 113 536 current 46 475 49 081 113 163 non-current 397 382 373 * restated data Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 90 G. Information on financial instruments Fair values and hierarchy of specific classes of financial instruments The Management Boards of the Company analysed specific classes of financial instruments. Based on the analysis, it was concluded that the carrying amounts of the instruments do not materially differ from their fair values, as at both 30 September 2022, 30 June 2022 and 31 December 2021. 30.09.2022 30.06.2022 31.12.2021 LEVEL 1 Assets measured at fair value Assets measured at fair value through other comprehensive income 269 169 249 800 228 661 bonds issued by foreign governments – EUR 26 164 25 318 24 517 bonds issued by foreign governments – USD 243 005 224 482 204 144 LEVEL 2 Liabilities measured at fair value through profit or loss Derivatives 28 701 20 496 17 906 currency forwards – EUR 472 100 455 currency forwards – USD 28 229 20 396 17 451 * restated data Financial Instruments measured at fair value are classified to 3-stage fair value hierarchy: Level 1 – quoted prices in active markets for identical assets or liabilities. Level 2 – fair value based in observable market data. Level 3 – fair value based on market data that is not observable in the market. Financial assets – classification and measurement 30.09.2022 30.06.2022 31.12.2021 Financial assets measured at amortized cost 936 567 934 707 993 036 Other non-current receivables 397 382 373 Trade receivables 147 332 63 394 123 821 Cash and cash equivalents 160 974 627 570 345 795 Bank deposits over 3 months 410 544 - 265 000 Treasury bonds and bonds guaranteed by the State Treasury 217 320 243 361 248 755 Loans granted - - 9 292 Assets measured at fair value through other comprehensive income 269 169 249 800 228 661 Bonds issued by foreign governments 269 169 249 800 228 661 Total financial assets 1 205 736 1 184 507 1 221 697 Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 91 Financial liabilities – classification and measurement 30.09.2022 30.06.2022 31.12.2021 Financial liabilities measured at amortized cost 45 382 35 182 31 499 Trade payables 27 015 16 611 16 028 Other financial liabilities 18 367 18 571 15 471 Financial liabilities measured at fair value through profit or loss 28 701 20 496 17 906 Derivative financial instruments 28 701 20 496 17 906 Total financial liabilities 74 083 55 678 49 405 * restated data In accordance with the requirements of IFRS 9 Financial Instruments, the Company analysed the business model for managing financial assets and examined the characteristics of contractual cash flows for each component of the bond portfolio, and concluded that:  the purpose of investments in domestic and foreign Treasury bonds and domestic bonds guaranteed by the Polish State Treasury is to hold them to maturity and to collect contractual cash flows;  investment mandates for managing the foreign bonds portfolio allow selling bonds before maturity as part of the adopted strategy;  all bonds purchased meet the SPPI test. As a result of the analysis conducted, purchased bonds were classified into two financial asset management models which differ in terms of the entity managing the bond portfolio. Polish Treasury bonds and bonds guaranteed by the Polish State Treasury are measured at amortized cost, because they are held to collect contractual cash flows. Foreign Treasury bonds are measured at fair value through other comprehensive income, because of the investment mandate which allows the possibility of the portfolio being managed by an Asset Manager. Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 92 H. Transactions with related entities Sales to related entities Purchases from related entities 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 01.07.2022 – 30.09.2022 01.01.2022 – 30.09.2022 01.07.2021 – 30.09.2021 01.01.2021 – 30.09.2021 SUBSIDIARIES GOG sp. z o.o. 3 692 10 148 2 073 10 289 731 2 234 293 1 691 CD PROJEKT Inc. 100 271 113 397 3 538 11 762 2 427 9 512 CD PROJEKT Co., Ltd. (liquidated) - - - - - - 1 016 4 171 Spokko sp. z o.o. 324 1 061 684 1 031 - - - - CD PROJEKT RED STORE sp. z o.o. 268 1 003 155 740 43 113 20 108 CD PROJEKT RED Vancouver Studio Ltd. 4 33 - - 4 342 12 124 1 648 1 648 The Molasses Flood LLC 2 2 - - 9 737 20 048 - - MANAGEMENT BOARD Marcin Iwiński - 1 2 18 - - - - Adam Kiciński - - - 4 - - - - Piotr Nielubowicz - 1 1 5 - - - - Michał Nowakowski 2 3 1 11 - - - - Adam Badowski 1 6 - 1 - - - - Piotr Karwowski - - - 1 - - - - Paweł Zawodny - 7 - - - - - - Jeremiah Cohn - 1 - - - - - - Interim condensed separate financial statements of CD PROJEKT S.A. for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 93 Receivables from related entities Liabilities to related entities 30.09.2022 30.06.2022 31.12.2021 30.09.2022 30.06.2022 31.12.2021 SUBSIDIARIES GOG sp. z o.o. 2 885 1 977 3 411 665 545 232 CD PROJEKT Inc. 100 108 511 1 221 1 267 948 Spokko sp. z o.o. 238 445 9 113 - - - CD PROJEKT RED STORE sp. z o.o. 810 449 421 3 73 158 CD PROJEKT RED Vancouver Studio Ltd. 1 144 1 102 1 008 465 419 164 The Molasses Flood LLC - - - 2 530 995 1 018 MANAGEMENT BOARD Marcin Iwiński - - - - - 20 Adam Kiciński - - - - - 5 Michał Nowakowski - - - 1 - 7 Adam Badowski 1 1 7 - - 5 Paweł Zawodny - 6 - - - - Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 94 94 Statement of the Management Board of the Parent Company On the fairness of preparation of the interim condensed consolidated financial statements In accordance with the requirements of the Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State, the Management Board of the Parent Company declares that, to the best of its knowledge, these interim condensed consolidated financial statements and comparative data has been prepared in accordance with the accounting policies applicable in the CD PROJEKT Group and that they reflect in a true, fair and clear manner the Group’s financial position and its results of operations. These interim condensed consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) endorsed by the European Union published and effective as at 1 January 2022, and to the extent not governed by the said standards, in accordance with the Accounting Act of 29 September 1994 and the implementing legislation issued on the basis thereof and to the extent required by Regulation of the Minister of Finance of 29 March 2018 on current and periodical information submitted by issuers of securities and conditions for considering as equivalent the information required under the legislation of a non-Member State. The entity authorized to review the fairness of preparation of interim condensed consolidated financial statements On 9 March 2022, the Supervisory Board of the Parent Company selected Grant Thornton Polska spółka z ograniczoną odpowiedzialnością spółka komandytowa with its registered office in Poznań, as recommended by the Audit Committee, as auditor to carry out the review of semi-annual and the audit of the annual financial statements of the Company and its Group for 2022 and 2023. Grant Thornton Polska spółka z ograniczoną odpowiedzialnością spółka komandytowa has been entered on the list of entities authorized to audit financial statements by the National Chamber of Statutory Auditors with the number 4055. Interim condensed consolidated financial statements of the CD PROJEKT Group for the period from 1 July to 30 September 2022 (all amounts are in PLN thousand, unless stated otherwise) The attached notes are an integral part of these financial statements 95 95 Approval of the financial statements This report for the period from 1 July to 30 September 2022 has been signed and approved for publication by the Management Board of CD PROJEKT S.A. on 28 November 2022. Warsaw, 28 November 2022 Adam Kiciński Marcin Iwiński Piotr Nielubowicz President of the Management Board Vice-President of the Management Board Vice-President of the Management Board Adam Badowski Michał Nowakowski Piotr Karwowski Member of the Management Board Member of the Management Board Member of the Management Board Paweł Zawodny Jeremiah Cohn Krystyna Cybulska Member of the Management Board Member of the Management Board Chief Accountant 96 96