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