Interim report
Page 1
3 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Warsaw, 28 August 2025 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 20 25
Page 2
2 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. LETTER FROM THE MANAGEMENT BOARD Warsaw, 28 August 2025 DEAR SHAREHOLDERS AND INVESTORS, It is our pleasure to present to you the half -year report of 11 bit studios S.A. for the six months ended 30 June 2025. During the period, we earned PLN 57.24 million in revenue, a year -on-year increase of 86.09%. This growth was driven by the expansion of the Company’s portfolio to include a new proprietary title – The Alters , launched on 13 June 2025 for PCs and consoles (Xbox Series X|S and PlayStation®5). The game has been very well received by players and professional critics alike, earning scores of 8 .2/10 and 85/100, respectively, on Metacritic. By 8 July 2025, its sales exceeded 280 thousand copies. In addition to back-catalogue sales of games released in previous periods, an important contributor to the Company’s revenue during the first six months of 2025 was recurring income from Microsoft Corporation for making selected titles – primarily The Alters and Frostpunk 2 – available to players via their Game Pass service. At the same time, the Company’s operating expenses in the first half of 2025 went up by 11.70% year on year, to PLN 40.34 million. The rise was mainly due to a nearly fourfold increase in amortisation and depreciation expense relative to the year before, to a total of PLN 10.95 million, which reflected the recently commenced amortisation of The Alters and Frostpunk 2. 11 bit studios S.A. applies a declining -balance amortisation method for both titles, which affects the level of reported profits compared with earlier periods. Consequently, at the operating level, the Company earned PLN 18.07 million in the six-month reporting period, compared with an operating loss of PLN 5.35 million posted a year earlier. Net profit for the period amounted to PLN 8.48 milli on, or PLN 3.51 per share. Non -cash finance costs in excess of PLN 8 million, attributable to the necessary revaluation of financial assets in the form of cash held by the Company in foreign currencies The first half of 2025 was a particularly strong period for the Polish złoty, which appreciated against both the euro and US dollar – the currencies in which the majority of the Company’s revenue is earned. In the proprietary games segment, in parallel with the final stages of developing The Alters and preparing for its launch, during the first six months of 2025 the Company continued work on the console edition of Frostpunk 2, scheduled for release on 18 September 2025, and on the first of its paid DLCs, which will become available to the gaming community later this year (the next two will premiere in 2026). On its part, The Alters team, immediately after the June release, focused on implementing fixes and im provements requested by players and, during the summer period, began to work on a paid DLC, whose release is expected next year. In the publishing segment, 11 bit studios S.A. prepared for the planned 23 October 2025 Early Access release of Moonlighter 2: The Endless Vault, as well as the launch of Death Howl, also slated for this year. The former’s developer is the Spanish studio Digital Sun, while the latter is being created by The Outer Zone of Denmark. A key event in the early months of 2025 was the presentation of the Company’s strategic vision for the coming years, which took place at the Investor Conference in April. In accordance with the strategy, the operations of 11 bit studios S.A. over the next years will be organised around three core pillars. The first one will involve the development of entirely new games based on original or existing Company IP, created by in-house teams. This ‘new games internal dev’ pillar aims to build opportunities for ma jor product and commercial success. The second strategic focus will be on the long -term development of selected proprietary titles with large player bases, referred to as ‘platform games’. This pillar is designed to stabilise revenue, mitigate risk, and ex pand the Company’s IP portfolio. The third pillar will involve publishing. The plan is for the publishing division to diversify the Company’s business and pursue additional success opportunities on a title-by-title basis. As part of this strategy, by the end of 2024, the Company had already initiated work on its first platform game, Frostpunk 1886 . The title, planned for release in 2027, is an expanded and upgraded version of the original Frostpunk, which is being
Page 3
3 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. rebuilt on the new Unreal Engine 5. The project will ultimately involve a team of around 30 developers. Concept work on additional proprietary titles is already underway, most notably the projects codenamed P12 and P13, while further initiatives (P14 and P15) are expected to commence over the coming quarters. We would like to once again thank you for the trust you place in our Company and encourage you to read the report. Signed by: Przemysław Marszał President of the Management Board Michał Drozdowski Member of the Management Board Grzegorz Miechowski Member of the Management Board Paweł Feldman Member of the Management Board Marek Ziemak Member of the Management Board
Page 4
4 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. FINANCIAL HIGHLIGHTS PLN EUR 1 Jan– – 30 Jun 2025 1 Jan– – 30 Jun 2024 1 Jan– – 30 Jun 2025 1 Jan– – 30 Jun 2024 Revenue 57,241,575 30,760,568 13,561,783 7,135,533 Depreciation and amortisation (10,946,880) (2,917,748) (2,593,556) (676,830) Operating profit 18,068,721 (5,352,141) 4,280,876 (1,241,537) EBITDA 29,015,601 (2,434,393) 6,874,432 (564,706) Profit/(loss) before tax 10,458,196 128,069 2,477,776 29,708 Net profit/(loss) 8,482,905 (477,805) 2,009,786 (110,837) Net cash from operating activities (22,833) 19,703,457 (5,410) 4,570,613 Net cash from investing activities (14,589,894) (12,046,275) (3,456,666) (2,794,376) Net cash from financing activities (787,564) (837,953) (186,591) (194,380) Total net cash flows (15,400,291) 6,819,228 (3,648,666) 1,581,857 PLN EUR 30 Jun 2025 31 Dec 2024 30 Jun 2025 31 Dec 2024 Total assets 265,606,447 262,302,617 62,614,971 61,386,056 Non-current assets 177,214,328 169,650,820 41,777,111 39,702,977 Current assets 88,392,119 92,651,796 20,837,860 21,683,079 Equity 237,961,923 229,918,534 56,097,957 53,807,286 Non-current liabilities 3,927,388 4,553,101 925,856 1,065,551 Current liabilities 23,717,136 27,830,983 5,591,159 6,513,219 The financial highlights presented in the tables below have been translated into the euro at the rates specified below. ▪ Items of the statement of comprehensive income and statement of cash flows have been translated using the exchange rates calculated as the arithmetic means of the EUR/PLN mid rates quoted by the National Bank of Poland for the last day of each month in the reporting period. The exchange rates were as follows: EUR 1 = PLN 4.2208 from 1 January to 30 June 2025, and 1 EUR = PLN 4.3109 from 1 January to 30 June 2024. ▪ Items of assets, equity and liabilities in the statement of financial position have been translated using the EUR/PLN exchange rates quoted by the National Bank of Poland for the last day of the reporting period. The exchange rates were as follows: EUR 1 = PLN 4.2419 as at 30 June 2025, and EUR 1 = PLN 4.2730 as at 31 December 2024.
Page 5
3 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 5 TABLE OF CONTENTS LETTER FROM THE MANAGEMENT BOARD................................ ................................ ................................ .......................... 2 TABLE OF CONTENTS ................................ ................................ ................................ ................................ ................................ ..... 5 CONDENSED INTERIM FINANCIAL STATEMENTS ................................ ................................ ................................ ................. 6 INTERIM STATEMENT OF COMPREHENSIVE INCOME ................................ ................................ ................................ ..........7 INTERIM STATEMENT OF FINANCIAL POSITION ................................ ................................ ................................ ................... 8 INTERIM STATEMENT OF CHANGES IN EQUITY ................................ ................................ ................................ .................... 9 INTERIM STATEMENT OF CASH FLOWS ................................ ................................ ................................ ................................ .. 11 EXPLANATORY INFORMATION TO THE CONDENSED INTERIM FINANCIAL STATEMENTS ................................ ..... 12 NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS ................................ ................................ .................. 16 DIRECTORS’ REPORT ON THE OPERATIONS................................ ................................ ................................ ........................ 48 OVERVIEW ................................ ................................ ................................ ................................ ................................ .................. 490 FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. ................................ ................................ ................................ .................. 62 INTERIM STATEMENT OF COMPREHENSIVE INCOME ................................ ................................ ................................ ....... 63 INTERIM STATEMENT OF FINANCIAL POSITION ................................ ................................ ................................ ................. 65 INTERIM STATEMENT OF CASH FLOWS ................................ ................................ ................................ ................................ 67 BANK AND NON-BANK BORROWINGS IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ............... 69 LOANS ADVANCED IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................................ .................... 69 SURETIES AND GUARANTEES PROVIDED IN THE SIX MONTHS ENDED 30 JUNE 2025 AND OTHER MATERIAL OFF-BALANCE-SHEET ITEMS ................................ ................................ ................................ ................................ .................... 70 CURRENT ECONOMIC AND FINANCIAL CONDITION OF THE COMPANY AND ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT ................................ ................................ ................................ ................................ ..................... 70 DESCRIPTION AND ASSESSMENT OF FACTORS AND NON-RECURRING EVENTS WITH A BEARING ON THE COMPANY’S RESULTS IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................................ ............... 70 BUSINESS DEVELOPMENT AND GROWTH PROSPECTS OF 11 BIT STUDIOS S.A. ................................ ....................... 71
Page 6
6 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. CONDENSED INTERIM FINANCIAL STATEMENTS 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 PREPARED IN ACCORDANCE WITH IAS 34 INTERIM FINANCIAL REPORTING, AS ENDORSED BY THE EUROPEAN UNION
Page 7
7 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. INTERIM STATEMENT OF COMPREHENSIVE INCOME Note Period 6 months ended 30 Jun 2025 (unaudited) Period 6 months ended 30 Jun 2024 (unaudited) Period 3 months ended 30 Jun 2025 (unaudited) Period 3 months ended 30 Jun 2024 (unaudited) Revenue 1.1. 57,241,575 30,760,568 39,738,136 15,434,297 Other income 1.3 1,170,934 4,599 8,218 4,506 Total operating income 58,412,509 30,765,167 39,746,354 15,438,803 Depreciation and amortisation 1.2. (10,946,880) (2,917,748) (6,365,145) (2,005,336) Raw materials and consumables used 1.2. (301,072) (509,242) (149,193) (313,452) Services 1.2. (18,676,655) (17,262,742) (8,331,857) (8,903,660) Salaries, wages and employee benefits 1.2. (7,711,456) (13,316,140) (3,066,729) (7,304,251) Taxes and charges 1.2. (870,132) (502,670) 45,549 (367,541) Other expenses 1.3 (1,625,572) (1,608,765) (1,229,058) (865,762) Impairment of intangible assets (212,021) - (212,021) - Total operating expenses (40,343,788) (36,117,307) (19,308,454) (19,760,001) Operating profit 18,068,721 (5,352,141) 20,437,900 (4,321,199) Finance income 1.4 844,949 1,423,440 313,793 578,913 Finance costs 1.4 (8,169,506) (615,425) (3,782,325) (41,217) Share in profit/(loss) of associate (285,968) 4,672,195 (503,899) 5,043,814 Profit before tax 10,458,196 128,069 16,465,470 1,260,311 Income tax expense 1.5. (1,975,291) (605,874) (1,608,945) (132,450) NET PROFIT 8,482,905 (477,805) 14,856,524 1,127,861 Earnings per share: Basic 1.6 3.51 (0.20) 6.15 0.46 Diluted 1.6 3.51 (0.20) 6.15 0.46 NET PROFIT 8,482,905 (477,805) 14,856,524 1,127,861 Other comprehensive income - - - - TOTAL COMPREHENSIVE INCOME 8,482,905 (477,805) 14,856,524 1,127,861
Page 8
8 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. INTERIM STATEMENT OF FINANCIAL POSITION Note 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) ASSETS Non-current assets 177,214,328 169,650,820 Property, plant and equipment 2.1 21,587,334 22,403,337 Perpetual usufruct of land 2.2 4,084,374 4,112,515 Intangible assets 2.3 138,269,236 128,778,863 Deferred tax asset 2.4 7,108,158 8,472,130 Investments in associates 2.5 4,592,451 4,878,419 Other assets 2.7 461,729 84,344 Long-term investments 2.6 1,018,383 742,765 Financial instruments (IRS) 92,663 178,448 Current assets 88,392,119 92,651,796 Trade and other receivables 2.8 34,983,515 20,835,838 Income tax receivable 2.9 297,195 244,504 Merchandise 51,316 54,149 Other current assets 1,049,902 994,226 Financial instruments (IRS) 37,065 59,483 Current financial assets 2.10 57,912 5,011,394 Cash and cash equivalents 2.11 51,915,214 65,452,202 TOTAL ASSETS 265,606,447 262,302,617 Note 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) EQUITY AND LIABILITIES Equity 237,961,923 229,918,534 Share capital 2.12 241,720 241,720 Share premium 18,232,710 18,232,710 Statutory reserve funds 184,960,557 178,071,407 Share-based payment reserve 26,034,031 26,473,547 Retained earnings 8,492,905 6,899,150 Non-current liabilities 3,927,388 4,553,101 Borrowings 2.14 3,150,000 3,780,000 Employee benefit and other provisions 2.15 31,420 26,118 Lease liabilities 2.16 745,968 746,983 Current liabilities 23,717,136 27,830,983 Trade and other payables 2.17 3,646,678 4,651,132 Royalties payable 4,384,370 8,408,341 Borrowings 2.14 1,260,000 1,260,000 Employee benefit and other provisions 2.15 1,568,539 2,494,149 Lease liabilities 2.16 15,256 15,252 Contract liabilities 2.19 12,842,293 11,002,109 Total liabilities 27,644,524 32,384,084 TOTAL EQUITY AND LIABILITIES 265,606,447 262,302,617
Page 9
9 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. INTERIM STATEMENT OF CHANGES IN EQUITY Share capital Share premium Statutory reserve funds Capital reserve Retained earnings Total As at 1 Jan 2025 (audited) 241,720 18,232,710 178,071,407 26,473,547 6,899,150 229,918,534 Net profit for the financial year - - - - 8,482,905 8,482,905 Total comprehensive income 241,720 18,232,710 178,071,407 26,473,547 15,382,055 238,401,439 Allocation of profit to statutory reserve funds - - 6,889,150 - (6,889,150) - Recognition of costs of the 2021–2025 Incentive Scheme - - - (439,516) - (439,516) As at 30 Jun 2025 (unaudited) 241,720 18,232,710 184,960,557 26,034,031 8,492,905 237,961,923 Share capital Share premium Statutory reserve funds Capital reserve Retained earnings Total As at 1 Jan 2024 (audited) 241,720 18,232,710 172,043,090 36,229,989 317,524 227,065,033 Net profit for the financial year - - - - (477,805) (477,805) Total comprehensive income 241,720 18,232,710 172,043,090 36,229,989 (160,281) 226,587,228 Decrease in statutory reserve funds – correction for prior years - - (208,085) - 208,085 - Transfer from share-based payment reserve - - 5,710,793 (5,710,793) - - Allocation of profit to statutory reserve funds - - 525,609 - (525,609) - Recognition of costs of the 2021–2025 Incentive Scheme - - - 3,872,356 - 3,872,356 As at 30 Jun 2024 (unaudited) 241,720 18,232,710 178,071,407 34,391,552 (477,805) 230,459,584
Page 10
10 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Share capital Share premium Statutory reserve funds Capital reserve Retained earnings Total As at 1 Jan 2024 (audited) 241,720 18,232,710 172,043,090 36,229,989 317,524 227,065,033 Net profit for the financial year - - - - 6,899,150 6,899,150 Total comprehensive income - - - - - - Decrease in statutory reserve funds – correction for prior years - - (208,085) - 208,085 - Transfer from share-based payment reserve - - 5,710,793 (5,710,793) - - Allocation of profit to statutory reserve funds - - 525,609 - (525,609) - Recognition of costs of the 2021–2025 Incentive Scheme - - - (4,045,649) - (4,045,649) As at 31 Dec 2024 (audited) 241,720 18,232,710 178,071,407 26,473,547 6,899,150 229,918,534
Page 11
11 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. INTERIM STATEMENT OF CASH FLOWS Note 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Cash flows from operating activities Profit for period 8,482,905 (477,805) Adjustments: Depreciation and amortisation 1.2. 10,946,880 2,917,748 Impairment of property, plant and equipment and intangible assets 212,021 - Reallocation of Unreal Engine licence fees between projects (757,932) - Effect of income tax recognised in profit or loss 1.5. 1,975,291 605,874 Costs of the 2021–2025 Incentive Scheme 3.2. (439,516) 3,872,356 (Gain)/loss on change in fair value of financial assets at fair value through profit or loss (167,416) 387,393 Share of (profit)/loss of associate 285,968 (4,672,195) Net interest income (404,385) (597,100) Foreign exchange losses on cash (1,863,302) 1,508,324 Other adjustments 287,926 421,399 Changes in working capital: Change in trade and other receivables (12,773,287) (79,162) Change in withholding tax receivables (1,374,390) (836,023) Change in inventories 2,838 (45,800) Change in other assets (433,061) 80,323 Change in trade and other payables (5,029,435) 1,826,211 Change in contract liabilities 1,840,184 10,995,092 Change in provisions (920,309) 4,945,744 Cash provided by/(used in) operating activities (129,020) 20,852,378 Income tax paid 106,187 (1,148,921) Net cash from operating activities (22,833) 19,703,457 Cash flows from investing activities Loans to employees 24,760 577,329 Proceeds from interest on bank deposits with maturities of more than 3 months 530,398 595,919 Proceeds on maturity of bank deposits with maturities of more than 3 months 4,472,377 16,000,000 New bank deposits placed with maturities of more than 3 months - - Payments for property, plant and equipment and intangible assets (19,617,429) (29,219,524) Net cash from investing activities (14,589,894) (12,046,275) Cash flows from financing activities Proceeds/(repayments) under credit facility (630,000) (630,000) Payment of interest on credit facility (157,564) (207,953) Net cash from financing activities (787,564) (837,953) Increase in cash and cash equivalents (15,400,291) 6,819,228 Effect of exchange rate fluctuations on cash held 1,863,302 (1,508,324) Cash at beginning of reporting period 65,452,202 37,555,974 CASH AT END OF REPORTING PERIOD 51,915,214 42,866,878
Page 12
12 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. s I. EXPLANATORY INFORMATION TO THE CONDENSED INTERIM FINANCIAL STATEMENTS GENERAL ................................ ................................ ................................ ..................... BŁĄD! NIE ZDEFINIOWANO ZAKŁADKI. BASIS OF PREPARATION OF THE CONDENSED INTERIM FINANCIAL STATEMENTS ................................ ................ 13 FUNCTIONAL AND PRESENTATION CURRENCY OF THE FINANCIAL STATEMENTS ................................ ................. 14 COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ................................ ............................ 14 STATEMENT OF ACCOUNTING POLICIES ................................ ................................ ................................ ............................... 14 SIGNIFICANT JUDGMENTS AND ESTIMATES ................................ ................................ ................................ ......................... 14 SEGMENT REPORTING ................................ ................................ ................................ ................................ ................................ . 15
Page 13
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 13 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. GENERAL 11 bit studios S.A. (the “Company”) was incorporated by a notarial deed of 7 December 2009 before Paweł Andrzej Kania, Notary Public of Warsaw (number in the register of notarial deeds: Rep. 16069/2009). Company shares are traded in the public market. Business name: 11 bit studios Spółka Akcyjna Abbreviated name: 11 bit studios S.A. Registered office: Warsaw, Poland Registered address: ul. Brzeska 2, 03-737 Warsaw, Poland Principal business activity: in accordance with the Polish Classification of Business Activities – computer programming activities (62.01.Z) Registry court: District Court for the Capital City of Warsaw in Warsaw, 13th Commercial Division National Court Register (KRS) No.: 0000350888 TAX IDENTIFICATION NUMBER (NIP): 1182017282 Industry Identification Number (REGON): 142118036 The Company was established for indefinite time. The financial year of the Company is the same as the calendar year. The Company’s principal business activity includes: ▪ production of cross-platform computer games, ▪ sale of cross-platform computer games. The Company does not have any subsidiaries or interests in joint ventures but has associates. BASIS OF PREPARATION OF THE CONDENSED INTERIM FINANCIAL STATEMENTS These condensed interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting, as endorsed by the European Union (“IAS 34”) and the Regulation of the Minister of Finance of 6 June 2025 on current and periodic information to be provided by issuers of securities and on conditions under which information required by legal regulations of a third country may be recognised as equivalent (Dz.U. of 2025, item 755), and they present the financial position of 11 bit studios S.A . as at 30 June 2025 and 31 December 2024, and results of its operations and cash flows for the six months ended 30 June 2025 and 30 June 2024. These condensed interim financial statements do not include all the information and disclosures required in full-year financial statements and should be read in conjunction with the Company’s financial statements for the year ended 31 December 2024. These condensed interim financial statements have been prepared based on the assumption that the Company will continue as a going concern for the foreseeable future. As at the date of authorisation of these financial statements, no circumstances were identified which would indicate that the Company may be unable to continue as a going concern.
Page 14
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 14 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. FUNCTIONAL AND PRESENTATION CURRENCY These condensed interim financial statements are presented in the Polish złoty (PLN). The Management Board decided that the Polish złoty would be the Company’s functional and presentation currency. In the case of an entity operating on international market s, the choice of the functional currency and the identification of the currency that should be recognised as the currency used in the principal economic environment in which the entity operates, is a subjective decision. The Company monitors its economic e nvironment for any material changes that could affect its choice of functional currency. Transactions carried out in a currency other than the functional currency (foreign currency transactions) are reported using the exchange rate effective at the date of the transaction. As at the reporting date, monetary assets and liabilities denominated i n foreign currencies are translated at the exchange rate effective on that date. Non-monetary items that are measured at fair value and denominated in a foreign currency are translated using the exchange rate effective on the date of the fair value measurement. Non -monetary items are measured at historical cost. Exchange differences arising on a monetary item are recognised in profit or loss for the period in which they arise. Most exchange differences arising in the Company’s operations are related to export sales and the related trade receivables. The Company presents exchange differences in finance income or costs, as appropriate, which facilitates a more thorough review of t he Company’s results as well as the sources of its income and expenses. COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS These condensed interim financial statements of the Company have been prepared in accordance with the accounting policies presented in the Company's most recent full -year financial statements for the year ended 31 December 2024. STATEMENT OF ACCOUNTING POLICIES In these condensed interim financial statements, significant accounting policies and significant judgements and estimates applied by the Company were the same as those described in the notes to the financial statements for 2024. SIGNIFICANT JUDGEMENTS AND ESTIMATES When applying the accounting policies adopted by the Company, the Company’s Management Board is required to make judgements, estimates and assumptions in the process of measuring assets and liabilities. Estimates and their underlying assumptions are based on historical experience and other factors considered material. Actual results may differ from those estimates. Professional judgement in accounting The principal judgements which the Management Board made in the process of applying the Company’s accounting policies and which have the most significant effect on the amounts recognised in these condensed interim financial statements are the same as those described in the financial statements for 2024. Uncertainty of estimates
Page 15
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 15 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. The principal judgements which the Management Board made in the process of applying the Company’s accounting policies and which have the most significant effect on the amounts recognised in these condensed interim financial statements are the same as those described in the financial statements for 2024. SEGMENT REPORTING For reporting purposes, the Company has identified operating segments corresponding to the Company’s components: ▪ that engage in business activities from which they may earn revenues and incur expenses; ▪ whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and ▪ for which discrete financial information is available. The Company’s chief operating decision maker that makes decisions about allocation of resources and assesses segment performance is the Management Board of 11 bit studios S.A. The Company has identified one operating segment: computer games production and publishing.
Page 16
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 16 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. II. NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS NOTES TO THE INTERIM STATEMENT OF COMPREHENSIVE INCOME ................................ ................................ .......... 18 1.1. REVENUE ................................................................................................................................................................................................ 19 1.2. OPERATING EXPENSES ..................................................................................................................................................................... 20 1.3. OTHER INCOME AND EXPENSES.................................................................................................................................................... 21 1.4. FINANCE INCOME AND COSTS ....................................................................................................................................................... 22 1.5. INCOME TAX .......................................................................................................................................................................................... 22 1.6. EARNINGS PER SHARE...................................................................................................................................................................... 23 NOTES TO THE INTERIM STATEMENT OF FINANCIAL POSITION ................................ ................................ ................... 25 2.1. PROPERTY, PLANT AND EQUIPMENT .......................................................................................................................................... 26 2.2. PERPETUAL USUFRUCT OF LAND................................................................................................................................................. 28 2.3. INTANGIBLE ASSETS ........................................................................................................................................................................... 28 2.4. DEFERRED TAX BALANCE ............................................................................................................................................................... 29 2.5. INVESTMENT IN ASSOCIATES .......................................................................................................................................................... 30 2.6. LONG-TERM INVESTMENTS ............................................................................................................................................................. 31 2.7. OTHER ASSETS..................................................................................................................................................................................... 32 2.8. TRADE AND OTHER RECEIVABLES ............................................................................................................................................... 32
Page 17
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 17 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 2.9. INCOME TAX RECEIVABLE ............................................................................................................................................................... 34 2.10. CURRENT FINANCIAL ASSETS......................................................................................................................................................... 34 2.11. CASH AND CASH EQUIVALENTS .................................................................................................................................................... 34 2.12. SHARE CAPITAL ................................................................................................................................................................................... 35 2.13. DIVIDENT PAYMENTS ........................................................................................................................................................................ 35 2.14. BORROWINGS ..................................................................................................................................................................................... 35 2.15. EMPLOYEE BENEFIT AND OTHER PROVISIONS ....................................................................................................................... 36 2.16. LEASE LIABILITIES ............................................................................................................................................................................... 36 2.17. TRADE AND OTHER LIABILITIES ..................................................................................................................................................... 37 2.18. CONTRACTUAL MATURITIES OF LIABILITIES ............................................................................................................................. 37 2.19. CONTRACT LIABILITIES ..................................................................................................................................................................... 38 NOTES TO FINANCIAL INSTRUMENTS ................................ ................................ ................................ ................................ .... 39 3.1. FINANCIAL INSTRUMENTS ............................................................................................................................................................... 39 3.2. SHARE-BASED PAYMENTS ............................................................................................................................................................... 41 OTHER NOTES ................................ ................................ ................................ ................................ ................................ ............... 43 4.1. RELATED-PARTY TRANSACTIONS ................................................................................................................................................ 44 4.2. OFF-BALANCE-SHEET COMMITMENTS ...................................................................................................................................... 46 4.3. CONTINGENT ASSETS AND LIABILITIES ....................................................................................................................................... 46 4.4. SEASONAL AND CYCLICAL CHANGES IN THE COMPANY’S BUSINESS DURING THE REPORTING PERIOD ........ 47 4.5. EVENTS SUBSEQUENT TO THE REPORTING DATE .................................................................................................................. 47
Page 18
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 18 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 1. NOTES TO THE INTERIM STATEMENT OF COMPREHENSIVE INCOME
Page 19
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 19 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 1.1. Revenue 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) Revenue 57,241,575 30,760,568 Total revenue 57,241,575 30,760,568 In the reporting period, revenue came in at PLN 57,241,575, up 86.09% from PLN 30,760,568 posted for the same period of the previous year. In the six months ended 30 June 2025, as in prior periods, the main source of revenue was sales of proprietary games as well as third -party developed games released by the Company as part of its publishing services. Revenue by geography The Company operates in eight main geographies: Poland, its home market, the European Union, the UK, the US, Japan, Hong Kong, China, and other countries (including Singapore, Korea, and Brazil). Below is presented revenue from external customers by geographical area. The classification is based on the place of registration of the third- party customers (mainly online platforms). 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) Poland 915,905 892,729 European Union 300,857 801,418 United Kingdom 7,514,863 3,387,589 US 44,889,900 23,392,781 Japan 1,499,553 1,351,938 Hong Kong 1,676,184 796,378 China 310,975 96,076 Other 133,338 41,659 Total 57,241,575 30,760,568 Revenue by category – product IP The table below presents the Company’s revenue by product IP, including proprietary and publishing division’s games as well as directly related products, such as soundtracks and board games. 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) The Alters 20,415,393 - Frostpunk 2 13,173,906 - Frostpunk 7,892,473 11,652,637 This War of Mine 4,500,370 3,069,164 The Thaumaturge 4,362,510 5,574,597 Other 6,896,923 10,464,170 Total 57,241,575 30,760,568 Revenue by distribution channel Of the total revenue amount, PLN 56,927,112 (PLN 30,629,138 the year before) was revenue from sales of games and products directly related to games (such as soundtracks). In the six months to 30 June 2025,
Page 20
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 20 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. the Company’s ten largest distribution partners, including Valve (Steam), Microsoft, Sony, Genba and Humble Bundle, accounted for 95.57% of total revenue from sales of games, with revenue from Valve representing more than 50% of the total. 1.2. Operating expenses 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) Depreciation and amortisation 10,946,880 2,917,748 Raw materials and consumables used 301,072 509,242 Services 18,676,655 17,262,742 Salaries, wages and employee benefits 7,711,456 13,316,140 Taxes and charges 870,132 502,670 Total operating expenses 38,506,195 34,508,542 Depreciation and amortisation 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) Depreciation and amortisation charges made during the year: Depreciation 1,155,289 1,230,973 Amortisation 10,333,680 2,305,004 Total 11,488,969 3,535,977 Allocation to project costs (570,230) (646,370) Land (including perpetual usufruct of land) 28,141 28,141 Total 10,946,880 2,917,748 The close to fourfold increase in depreciation and amortisation expense in the first half of 2025, to PLN 10,946,880 compared with PLN 2,917,748 in the previous year, was attributable to higher amortisation of intangible assets, comprising expenditure incurred on the development of proprietary games and games in the publishing portfolio, following the commencement of amortisation of the products released in recent quarters, mainly The Alters and Frostpunk 2 and the publishing division’s The Thaumaturge, INDIKA, and Creatures of Ava . In addition, effective from the fourth quarter of 2024, the Company changed the amortisation method for both its proprietary titles and the publishing portfolio from straight -line to declining-balance. For Frostpunk 2 and The Alters, the first two titles amortised under the latter method, the amortisation period is seven years. At the same time, 11 bit studios S.A. allocated a portion of the depreciation and amortisation charge incurred in the first half of 2025, totalling PLN 570,230 (PLN 646,370 in the comparative period), to project costs. Services The 8.19% increase in the cost of services in the first half of 2025, to PLN 18,676,655 from PLN 17,262,742 a year earlier, was primarily driven by higher spending on outsourced marketing services (PLN 4,202,116 vs. PLN 3,245,557 the year before) in connec tion with preparations for the launch of The Alters and titles from the publishing division, including the production of game trailers. Royalties, which also include licence fees payable to Epic Games for the use of the Unreal Engine in the Company’s productions, amounted to PLN 5,591,251 in the reporting period, down from PLN 5,923,466 in the comparative period. The decrease resulted from the release of provisions recognised in earlier periods for payments owed to third -party developers on the sales of their games. Singificant items under the cost of services in the first half of 2025 also included fees for management services (PLN 1,594,321) and for legal and accounting services (PLN 928,863). The Company’s total expenditure on intangible assets (game development), which was not included in services but capitalised during the first half of 2025 (primarily B2B services), amounted to PLN 11,614,397 compared with PLN 9,578,823 in the corresponding period of the previous year.
Page 21
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 21 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Salaries, wages and employee benefits The marked 42.09% decrease in salaries and wages (to PLN 7,711,456 from PLN 13,316,140 in the comparative period) was primarily due to the release of provisions recognised in connection with the 2021–2025 Incentive Scheme operated by the Company. In the re porting period, these provisions amounted to PLN 0, compared with PLN 3,872,536 in the prior year. The decision to release the provisions reflected the fact that the likelihood of achieving the performance targets set for the Incentive Scheme declined to zero following shifts in game release schedules, including for The Alters (which ultimately premiered on 13 June 2025), as well as non -cash impairment losses related to the termination of Project 8 and the impairment of intangible assets, events that adversely impacted 11 bit studios S.A.’s 2024 financial results. The Company’s expenditure on intangible assets (game development), which was not included in salaries, wages and employee benefits but was capitalised during the first half of 2025, amounted to PLN 7,402,649 compared with PLN 9,819,727 in the corresponding period of the previous year. 1.3. Other income and expenses Other income 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Reallocation of Unreal Engine licence fee 1,153,388 - Liabilities written off 10,223 685 Other 7,323 3,913 Total other income 1,170,934 4,599 Other expenses 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Expected credit loss allowances 6,411 24,407 Donations 127,729 564,783 Non-recoverable tax - - Other, including: 1,491,432 1,019,575 - cost of business travel 363,700 175,438 - advertising costs 1,004,117 752,214 - insurance costs 80,529 68,380 - trademark 29,701 22,858 - cost of merchandise and materials sold 11,221 - - other 2,164 684 Total other expenses 1,625,572 1,608,765
Page 22
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 22 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 1.4. Finance income and costs Finance income 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Interest on bank deposits 483,639 455,702 Interest on loans advanced 3,239 6,180 IRS for credit facility 76,391 102,596 Interest on public charges - 7,313 Measurement of financial instruments (Starward Industries S.A.) 275,617 - Measurement of IRS - 6,179 Allowances for expected credit losses on financial instruments 6,063 4,286 Exchange differences - 841,183 Other - - Total finance income 844,949 1,423,440 Finance costs 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Interest on public charges 832 - Other interest 130 145 Interest on credit facilities 157,564 207,953 Measurement of financial instruments (Starward Industries S.A.) - 393,572 Interest on leases 13,721 13,755 Measurement of IRS 108,202 - Exchange differences 7,889,057 - Total finance costs 8,169,506 615,425 1.5. Income tax expense Income tax recognised in profit or loss 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Current income tax: Attributable to current year 611,319 754,887 Deferred income tax: Attributable to current year 1,363,972 (149,013) Tax effect recognised in current year 1,975,291 605,874 With respect to income tax, 11 bit studios S.A. is bound by laws and regulations of general application. The Company does not conduct operations in any Special Economic Zone, which would entail the applicability of other rules for calculating taxes. The Company’s fiscal and accounting year is the same as the calendar year. Effective tax rate:
Page 23
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 23 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Profit before tax from continuing operations 9,745,377 128,069 Income tax at 19% tax rate 1,851,622 24,333 Tax effect of income which is not classified as income for tax purposes (205,130) (16,932) Tax effect of costs which are not deductible for tax purposes 246,507 952,824 Effect of IP Box tax relief settlement at 5% tax rate (1,711,693) (670,321) Other changes 1,793,985 315,969 Total 1,975,291 605,874 The tax rate applied in the above reconciliation in 2025 and 2024 is 19%. It is the statutory corporate income tax rate applicable in Poland. The effective tax rate was 20.27% in the six months ended 30 June 2025 and 473.09% in the six months ended 30 June 2024. With respect to sales of proprietary games the Company uses the IP Box relief, which was introduced on 23 October 2018 pursuant to the Act Amending the Personal Income Tax Act, the Corporate Income Tax Act, the Tax Legislation and certain other acts, and h as been in effect since 1 January 2019. Under the Act, the Company’s revenue from the sale of qualifying intellectual property rights (games) multiplied by the nexus index was taxed at a preferential CIT rate (5%). The IP Box relief amounted to PLN 1,711,693 in the six months ended 30 June 2025, and PLN 670,321 in the reference period. Tax laws relating to value added tax, corporate and personal income tax, property tax, and social security contributions are regularly amended. Tax settlements may be subject to inspection over a period of five years. As a result, the disclosures in the financial statements may change at a later date after their amount is finally determined by the tax authorities. To the best of its knowledge, the Management Board is not aware of any circumstances existing as at the date of these financial statements which would necessitate the recognition of provisions for future liabilities to the revenue office. Current tax receivable and payable 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) VAT refund receivable 1,822,478 1,706,558 CIT refund receivable 297,195 244,504 Current tax receivable and payable 2,119,673 1,951,062 Tax receivables included the IP Box tax relief described in Note 1.5 above (PLN 1,711,693), the tax remaining to be deducted upon receipt of returns from trading partners, and non -recovered withholding tax. 1.6. Earnings per share Basic earnings per share 30 Jun 2025 (unaudited) 30 Jun 2024 (unaudited)
Page 24
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 24 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Basic earnings per share: From continuing operations 3.51 (0.20) Total basic earnings per share 3.51 (0.20) Diluted earnings per share: From continuing operations 3.51 (0.20) Total diluted earnings per share 3.51 (0.20) Profit and weighted average number of ordinary shares used to calculate basic earnings per share: 30 Jun 2025 (unaudited) 30 Jun 2024 (unaudited) Profit for the financial year attributable to shareholders 8,482,905 (477,805) Total profit used to calculate basic earnings per share 8,482,905 (477,805) Profit used to calculate basic earnings 8,482,905 (477,805) per share from continuing operations 30 Jun 2025 (unaudited) 30 Jun 2024 (unaudited) Weighted average number of ordinary shares used to calculate earnings per share 2,417,199 2,417,199 Diluted earnings per share 30 Jun 2025 (unaudited) 30 Jun 2024 (unaudited) Profit for the financial year attributable to shareholders 8,482,905 (477,805) Total profit used to calculate diluted earnings per share 8,482,905 (477,805) Profit used to calculate diluted earnings per share from continuing operations 8,482,905 (477,805) The weighted average number of shares used to calculate diluted earnings per share is reconciled with the average used to calculate basic earnings per share in the following manner: 30 Jun 2025 (unaudited) 30 Jun 2024 (unaudited) Weighted average number of ordinary shares used to calculate basic earnings per share 2,417,199 2,417,199 Shares expected to be issued: Employee stock options 0 0 Weighted average number of ordinary shares used to calculate diluted earnings per share 2,417,199 2,417,199 The calculation of diluted earnings per share does not include Series H shares which may be issued for the purposes of the 2021–2025 Incentive Scheme as the financial targets of that Scheme were not achieved as at the reporting date.
Page 25
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 25 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 2. NOTES TO THE INTERIM STATEMENT OF FINANCIAL POSITION
Page 26
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 26 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 2.1. Property, plant and equipment Buildings and premises Property, plant and equipment under construction Plant and equipment Vehicles Other property, plant and equipment Total Gross amount as at 1 Jan 2025 24,605,051 89,565 4,634,210 1,002,778 3,614,638 33,946,243 Additions 16,150 227,585 87,726 - 7,826 339,286 Decreases - - (38,943) - - (38,943) Reclassification - (197,962) 180,536 - 17,426 - Gross amount as at 30 Jun 2025 24,621,201 119,188 4,863,528 1,002,778 3,639,890 34,246,586 Cumulative depreciation as at 1 Jan 2025 3,608,403 - 3,978,858 635,337 3,320,307 11,542,906 Depreciation 385,149 - 507,523 62,992 199,625 1,155,289 Decreases - - (38,943) - - (38,943) Cumulative depreciation as at 30 Jun 2025 3,993,552 - 4,447,437 698,329 3,519,933 12,659,252 Net amount as at 1 Jan 2025 20,996,648 89,565 655,352 367,441 294,331 22,403,337 Net amount as at 30 Jun 2025 20,627,649 119,188 416,091 304,448 119,957 21,587,334 Buildings and premises Property, plant and equipment under construction Plant and equipment Vehicles Other property, plant and equipment Total Gross amount as at 1 Jan 2024 24,499,942 56,466 6,005,121 1,002,778 3,617,187 35,181,493 Additions 32,600 244,237 301,165 - 43,238 621,239 Decreases - - (1,810,704) - (45,786) (1,856,490) Reclassification 72,510 (211,137) 138,627 - - - Gross carrying amount as at 31 Dec 2024 24,605,051 89,565 4,634,210 1,002,778 3,614,638 33,946,243 Cumulative depreciation as at 1 Jan 2024 2,840,932 - 4,916,788 509,352 2,711,860 10,978,931 Depreciation 767,472 - 872,774 125,985 654,234 2,420,464 Decreases - - (1,810,704) - (45,786) (1,856,490) Cumulative depreciation as at 31 Dec 2024 3,608,403 - 3,978,858 635,337 3,320,307 11,542,906
Page 27
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 27 QUARTERLY REPORT OF 11 BIT STUDIOS FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these condensed half-year financial statements. Net carrying amount as at 1 Jan 2024 21,659,010 56,466 1,088,333 493,425 905,327 24,202,561 Net carrying amount as at 31 Dec 2024 20,996,648 89,565 655,352 367,441 294,331 22,403,337
Page 28
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 28 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these condensed half-year financial statements. 2.2. Perpetual usufruct of land As at the issue date of these financial statements, the Company had one effective agreement on perpetual usufruct of land, concerning a developed property at ul. Brzeska 2 in Warsaw, purchased by the Company at the end of 2018 to house its new headquarters . Since 1 January 2019, the right of perpetual usufruct to the property located at ul. Brzeska 2 in Warsaw has been disclosed in the Company’s statement of financial position (under right -of-use assets and lease liabilities). The right is depreciated over the term of the perpetual usufruct agreement, i.e., until 27 October 2099. The lease payments are discounted at the lessee’s incremental borrowing rate. The incremental borrowing rate was estimated by the Company as the interest rate at the inception of the lease at which the lessee (the Company) would have to borrow funds necess ary to purchase a given asset for a similar term and with a similar security. The incremental borrowing rate used to measure the lease liability is 3.4%. 30 Jun 2025 31 Dec 2024 Perpetual usufruct of land – opening balance 4,112,515 4,168,798 Additions - - Decreases - - Depreciation and amortisation (28,141) (56,283) Perpetual usufruct of land – closing balance 4,084,374 4,112,515 2.3. Intangible assets Amortisation is calculated based on useful lives of the following intangible assets: Completed development work: As at 30 June 2025, completed video games development comprised games released in earlier periods as well as in the reporting period, including The Alters , Frostpunk 2 , The Invincible , The Thaumaturge, INDIKA and Creatures of Ava. Ongoing development work: As at 30 June 2025, expenditure on ongoing development work included mainly expenditure on the development of games, in particular the console version of Frostpunk 2 and DLCs for that title, as well as the publishing division’s Moonlighter 2: The Endless Vault and Death Howl. Expenditure on the largest of the projects accounted for 44.6% of total expenditure on ongoing development work. Testing ongoing development work for impairment: Key assumptions used to calculate the value in use of material ongoing development work based on the discounted cash flow model: The Company makes projections of revenue and expenses over a time horizon of up to five years from the financial statements date, and then discounts them with the weighted average cost of capital (WACC). The discount rate applied in these financial statements is 11.0%. The weighted average cost of capital was determined using the following capital valuation model: WACC = cost of debt x weight of debt + cost of equity x weight of equity. The cost of debt was estimated based on the incurred financial liabilities, i.e. the PLN 12,600,000 investment credit facility with PKO BP S.A. Revenue was estimated based on a detailed analysis of various areas of the games market using the Company’s long -time experience and sales results for 11 bit studios S.A.’ current game portfolio.
Page 29
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 29 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information forms an integral part of these financial statements. Expenses were estimated on the basis of costs already incurred and a projection of costs to be incurred until the forecast release date. A sensitivity analysis performed as at 30 June 2025 indicated a risk of impairment of completed development work on Creatures of Ava , which resulted in the recognition of PLN 212,021 impairment loss. Completed developmen t work (game engine) Completed development work (games) Licences Ongoing developme nt work Intangible assets – long-term investment s Total Gross amount as at 1 Jan 2025 6,813,631 142,385,430 1,406,361 59,181,088 3,439,120 213,225,630 Additions - - - 20,431,531 - 20,431,531 Reclassification of completed development work - 51,601,648 - (51,601,648) - - Decreases - - - (395,457) - (395,457) Gross amount as at 30 Jun 2025 6,813,631 193,987,079 1,406,361 27,615,514 3,439,120 233,261,704 Cumulative amortisation as at 1 Jan 2025 6,813,631 76,453,117 1,180,019 - - 84,446,767 Amortisation - 10,293,164 40,517 - - 10,333,680 Impairment tests on intangible assets - 212,021 - - - 212,021 Cumulative amortisation as at 30 Jun 2025 6,813,631 86,958,302 1,220,536 - - 94,992,468 Net amount as at 1 Jan 2025 - 65,932,313 226,342 59,181,088 3,439,120 128,778,863 Net amount as at 30 Jun 2025 - 107,028,777 185,826 27,615,514 3,439,120 138,269,236 Completed developmen t work (game engine) Completed development work (games) Licences Ongoing developmen t work Intangible assets – long-term investment s Total Gross amount as at 1 Jan 2024 6,813,631 45,032,214 1,388,211 149,621,045 - 202,855,101 Additions - - 18,150 59,506,642 - 59,524,792 Reclassification of completed development work - 97,353,216 - (97,353,216) - - Revaluation - - - (97,246) - (97,245) Reclassification - - - (3,439,120) 3,439,120 - Project 8 discontinuation costs - - - (49,057,019) - (49,057,019) Gross carrying amount as at 31 Dec 2024 6,813,631 142,385,430 1,406,362 59,181,088 3,439,120 213,225,631 Cumulative amortisation as at 1 Jan 2024 6,813,631 39,589,739 1,083,992 - - 47,487,362 Amortisation - 18,521,502 96,029 - - 18,617,531 Impairment tests on intangible assets - 18,341,876 - - - 18,341,876 Cumulative amortisation as at 31 Dec 2024 6,813,631 76,453,117 1,180,021 - - 84,446,768 Net carrying amount as at 1 Jan 2024 - 5,442,475 304,216 149,621,045 - 155,367,739 Net carrying amount as at 31 Dec 2024 - 65,932,313 226,342 59,181,088 3,439,120 128,778,863 There were no research and development costs that did not meet the criteria to be capitalised on initial recognition in the reporting period or the reference period. 2.4. Deferred tax (net)
Page 30
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 30 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these condensed half-year financial statements. Below is presented an analysis of the deferred tax asset shown in the statement of financial position. 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Deferred tax asset 8,289,801 9,742,673 Deferred tax liabilities (1,181,643) (1,270,543) Total 7,108,158 8,472,130 Movements in deferred tax assets/liabilities in the reporting period 1 Jan 2025 Recognised in profit or loss 30 Jun 2025 Deferred tax assets Deferred tax liabilities 344,713 (162,100) 182,613 Royalties payable 1,597,585 (979,212) 618,373 Liabilities 44,278 (5,653) 38,625 Remeasurement of financial assets 1,255,480 (53,519) 1,201,961 Amortisation and impairment of intangible assets 3,980,633 (252,195) 3,728,438 Lease liabilities 144,826 (193) 144,633 Tax-loss carry-forwards 2,375,158 - 2,375,158 Deferred tax liabilities Remeasurement of financial assets (474,456) 74,893 (399,563) Measurement of financial investments (14,709) 8,660 (6,049) Right-of-use assets – taxable temporary differences (781,378) 5,347 (776,031) Total 8,472,130 (1,363,972) 7,108,158 Movements in deferred tax assets/liabilities in the comparative period 1 Jan 2024 Recognised in profit or loss 30 Jun 2024 Deferred tax assets Deferred tax liabilities 304,353 675,245 979,598 Royalties payable 613,285 236,838 850,123 Liabilities 47,704 13,258 60,962 Remeasurement of financial assets 1,168,562 (13,126) 1,155,436 Depreciation and amortisation 13,585 6,268 19,853 Deferred tax liabilities Remeasurement of financial assets (59,290) (801,799) (861,089) Measurement of financial investments (48,727) 32,329 (16,398) Total 2,039,472 149,013 2,188,485 2.5. Investments in associates Information on the associate Name Fool’s Theory Sp. z o.o. Principal place of business Bielsko-Biała Country of incorporation Poland Ownership interest held 40% % of total voting rights 40% Investment recognition method equity method
Page 31
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 31 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. On 28 February 2022, the Company entered into an agreement to purchase 40 shares in Fool’s Theory Sp. z o.o. with a par value of PLN 50 per share, representing in total 40% of that company’s share capital. This holding gives 11 bit studios S.A. significant influence over Fool’s Theory Sp. z o.o. 11 bit studios S.A.’s payment for the acquired shares was divided into two tranches. The first tranche, of PLN 2,619,216, was paid on 9 March 2022. Under an Annex of 29 September 2023, the amount of the second tranche was set at PLN 1,571,529. It was to be settled seven months after the release of The Thaumaturge, developed by Fool’s Theory Sp. z o.o. 11 bit studios S.A. is the game’s publisher. On 9 February 2024, the Company signed Annex 2, providing that the second tranche would be paid within six months from the time when 11 bit studios S.A.’s net revenue from sales of The Thaumaturge exceeded PLN 45 million. This threshold must be exceeded before 20 February 2028. The Thaumaturge was released on 4 March 2024. Under Annex 2, the amount of the second tranche will depend on net revenue generated by the Company from sales of the game over six months from its release and the percentage of positive user ratings on Steam Reviews received by The Thaumaturge over that period. In accordance with Annex 2, the second tranche amount will range from PLN 1,571,529 to PLN 3,666,901. As at 30 June 2025, the second tranche was estimated at PLN 0, based on the assumption that 11 bit studios S.A.’s revenue from the sale of The Thaumaturge will not exceed PLN 45 million. Measurement of investment in Fool’s Theory Sp. z o.o. as at 30 June 2025 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Cost of shares – first tranche 2,619,216 2,619,216 Cost of shares – second tranche (estimate) - - Share of profit or loss of associate for 2023 (458,376) (458,376) Share of profit or loss of associate for 2024 2,717,580 2,717,580 Share of profit or loss of associate for H1 2025 (285,969) - Investment in associate Fool’s Theory Sp. z o.o. 4,592,451 4,878,419 Furthermore, on 28 February 2022, the Company concluded a shareholder agreement with Jakub Rokosz and Krzysztof Mąka, setting out detailed rules for managing Fool’s Theory Sp. z o.o.’s affairs and the mutual rights and obligations of its shareholders. The shareholders agreed to prepare an incentive scheme for key employees and independent contractors of Fool’s Theory Sp. z o.o., If Fool’s Theory Sp. z o.o. achieves the targets set in connection with the scheme, 11 bit studios S.A. will pay Jakub Rokosz and Krzysztof Mąka a bonus in the aggregate amount of PLN 1,000,000. In the Company’s opinion, this contingent consideration constitutes a service fee and as such it will be recognised in the Company’s under salaries, wages and personnel expenses on a straight-line basis over the period of service in accordance with IAS 19. The cost of this consideration will be recognised on a straight-line basis until the end of 2027. As at the reporting date, the Company did not recognise any amounts in respect of this cost item. Selected financial figures of Fool’s Theory Sp. z o.o. as at 30 June 2025 30 Jun 2025 Non-current assets 18,272,881 Current assets, including: 6,230,205 Cash 3,072,411 Equity 11,848,418 Current liabilities 11,395,459 Non-current liabilities 1,120,453 Accruals and deferrals 138,757 Net profit/(loss) (702,820) 2.6. Long-term investments
Page 32
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 32 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Shares in Starward Industries S.A. 1,018,383 742,765 Total long-term investments 1,018,383 742,765 As at 30 June 2025, 11 bit studios S.A. held 116,787 shares in Starward Industries S.A., or 5.99% of its share capital. The holding did not change relative to 31 December 2024. 2.7. Other assets 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Insurance 51,963 114,994 Domain names, licences, subscriptions 1,159,909 748,545 Prepaid expenses 39,792 26,238 Guarantees - 15,000 Property tax 72,185 - Perpetual usufruct of land 14,736 - Trademark 41,139 47,266 Royalties to be accounted for in next period 104,830 82,660 Other 27,077 43,867 Total other assets 1,511,631 1,078,570 including: - current 1,049,902 994,226 - non-current 461,729 84,344 Other current assets comprised prepayments and accrued income, including prepaid expenses related to industry events (trade fairs) in which the Company will take part in subsequent periods, as well as fees for Internet domain names, licences, property insurance, subscriptions, and stock exchange fees. 2.8. Trade and other receivables 30 Jun 2025 (audited) 31 Dec 2024 (audited) Trade receivables 33,065,375 19,091,308 Taxes, grants, customs duties and social security 1,822,478 1,706,558 Other 113,666 49,564 Impairment losses on trade receivables (18,004) (11,592) Total trade and other receivables 34,983,515 20,835,838 Trade receivables The Company recognised allowances for expected credit losses based on historical credit loss rates determined through an analysis of receivables repayment. The table below presents the historical credit loss rates for each past due period, broken down into receivables from sales of games and receivables from other sales. Expected credit loss rate: For receivables from sales of games (%) For receivables from other sales (%)
Page 33
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 33 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Not past due 0.04 0.12 1–30 days past due 0.19 1.06 31–60 days past due 4.75 3.72 61–90 days past due 7.47 4.50 91–120 days past due 7.93 4.72 121–359 days past due 46.44 54.06 The Company also recognises impairment losses for receivables that are past due more than 360 days, but there were no such receivables in the reporting period. Trade receivables are measured in the accounting books at amounts corresponding to transaction prices adjusted for impairment, if any, in accordance with the expected loss model. Since the Company has cooperated for years with the same trading partners with a very high financial standing and has never experienced any payment problems in those relations, it applies simplified methods to measure receivables at amortised cost, unless this would distort information contained in its statement of financial position, in particular where the period until the due date for payment is not long. Historically, there have been only minor changes to the list of trading partners through which the Company sells games. The balances disclosed as at 30 June 2025 included receivables from the Company’s largest customers, accounting for over 5% of total trade receivables. Receivables by customer: 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Company A 12,607,274 9,479,729 Company B 10,227,448 1,042,445 Company C 2,375,700 820,167 Company D 2,069,221 926,472 Company E 1,690,892 2,195,701 Ageing analysis of trade receivables 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Current 32,820,053 18,112,053 1–30 days past due 193,190 966,823 31–60 days past due 48,549 4,396 61–90 days past due 1,622 6,528 91–120 days past due 1,043 925 121–360 days past due 918 583 Over 360 days past due - - Total 33,065,375 19,091,308 Changes in impairment losses on impaired trade receivables: 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) As at beginning of reporting period 11,592 6,564 Recognition 31,558 83,274 Reversal (25,146) (78,246) As at end of reporting period 18,004 11,592 Ageing structure of allowances for expected credit losses: 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Current 14,689 8,506 1–30 days past due 657 2,115
Page 34
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 34 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 31–60 days past due 2,108 201 61–90 days past due 75 392 91–120 days past due 49 63 121–360 days past due 426 315 Over 360 days past due - - Total 18,004 11,592 As at 30 June 2025, there were no reasons to recognise individual impairment losses on past due receivables. 2.9. Income tax receivable 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Income tax receivable 297,195 244,504 Total income tax receivable 297,195 244,504 2.10. Current financial assets 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Loans to employees 57,912 90,960 Bank deposits with maturities of more than 3 months - 4,880,428 Remeasurement adjustment – bank deposits with maturities of more than 3 months - 40,006 Total current financial assets 57,912 5,011,394 Loans to employees are measured at amortised cost. They bear interest at 12M WIBOR plus 0.5pp margin per annum and are granted for a period of 12 months. Because the remaining term to maturity does not exceed one year, these loans are presented as current assets 2.11. Cash and cash equivalents 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Cash in bank accounts and in hand 42,867,170 52,935,808 Short-term deposits (up to 3 months) 9,068,247 12,542,660 Impairment losses on cash and cash equivalents (20,203) (26,266) Total 51,915,214 65,452,202 As at 30 June 2025, 50.67% of the Company's cash and cash equivalents were deposited with Powszechna Kasa Oszczędności Bank Polski S.A. Cash in hand and at banks as at 30 June 2025, by currency: ▪ PLN 728,232, ▪ USD 6,538,576 (PLN 23,646,108), ▪ EUR 4,354,800 (PLN 18,472,627). Cash in hand and at banks as at 31 December 2024, by currency: ▪ PLN 3,418,589, ▪ USD 10,394,092 (PLN 42,628,251), ▪ EUR 1,606,062 (PLN 6,862,702).
Page 35
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 35 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. When measuring its cash, including in foreign currencies, as at 30 June 2025, the Company also measured expected credit losses (ECL), but the effect was not material. 2.12. Share capital As at 30 June 2025, the Company’s share capital consisted of 2,417,199 fully paid -up ordinary shares totalling PLN 241,719.9. Ordinary shares fully paid Number of shares Share capital Share premium As at 31 Dec 2024 2,417,199 241,720 18,232,710 Increase/decrease - - - As at 30 Jun 2025 2,417,199 241,720 18,232,710 Each fully paid ordinary share, with a par value of PLN 0.10, confers one vote at the General Meeting and pays dividends. 2.13. Dividends paid No dividends were paid by the Company in the period from 1 January to 30 June 2025 or in 2024. The Annual General Meeting held on 12 June 2025 resolved to transfer the Company’s entire 2024 net profit, of PLN 6,889,150, to statutory reserve funds. 2.14. Credit facility 30 Jun 2025 31 Dec 2024 Opening balance 5,040,000 6,405,000 Principal repayment (630,000) (1,365,000) Interest accrued 157,564 423,736 Interest paid (157,564) (423,736) Closing balance 4,410,000 5,040,000 including: - current 1,260,000 1,260,000 - non-current 3,150,000 3,780,000 On 19 December 2018, the Company announced that it had entered into a PLN 12,600,000 investment credit facility agreement with PKO BP S.A. to partly finance the purchase of a developed property located at ul. Brzeska 2 in Warsaw. The facility repayment date is 11 December 2028. The facility is repayable in monthly instalments. As at 30 June 2025, the Company had no delays or arrears in its repayment. The facility bears interest at 1M WIBOR plus a fixed bank margin of 0.9pp. Interest rate risk related to the facility is hedged with an interest rate swap over the entire term of the facility. The interest rate is 3.4%. Repayment of the facility is secured with a blank promissory note issued by the Company, together with a promissory note declaration, a contractual mortgage of up to PLN 20,223,000 over perpetual usufruct of land and ownership title to the building erected on the property, and an assignment of cash receivables under an insurance contract for the property in favour of PKO BP S.A. On 26 June 2023, the Company signed a PLN 20,000,000 multi-purpose credit facility agreement with PKO BP S.A. On 25 June 2025, the facility expired without any utilisation or renewal. Financial liabilities (borrowings) of 11 bit studios S.A.
Page 36
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 36 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Lender Borrowed amount Currency As at 30 Jun 2025 As at 31 Dec 2024 Interest rate Repayment deadline PKO BP S.A. 12,600,000 PLN 4,410,000 5,040,000 1M WIBOR + 0.9pp 11 Dec 2028 Total 12,600,000 4,410,000 5,040,000 2.15. Employee benefit and other provisions Provision for costs of discontinued P8 project* Retirement and disability provision Provision for unused holiday entitlement Provision for bonuses for Management Board members and employees Provision for B2B bonuses and remuneration Total As at 1 Jan 2025 833,276 27,351 1,018,890 208,916 431,832 2,520,265 Increases: Recognition - 5,336 879,482 51,774 237,909 1,174,501 Decreases: Utilisation (833,276) - (634,765) - - (1,468,041) Reversal - (18) - (208,916) (417,832) (626,766) As at 30 Jun 2025 - 32,669 1,263,607 51,774 251,909 1,599,959 including: - short-term - 1,249 1,263,607 51,774 251,909 1,568,539 - long-term - 31,420 - - - 31,420 Retirement and disability provision Provision for unused holiday entitlement Provision for bonuses for Management Board members and employees Provision for B2B bonuses and remuneration Total As at 1 Jan 2024 30,214 903,528 766,449 791,317 2,491,508 Increases: Recognition 2,875 1,034,986 2,227,723 2,238,529 5,504,113 Decrease: Utilisation - (526,257) - (17,501) (543,758) Reversal (7,245) - - (7,367) (14,612) As at 30 Jun 2024 25,844 1,412,257 2,994,172 3,004,978 7,437,252 including: - short-term 1,227 1,412,257 2,994,172 3,004,978 7,412,635 - long-term 24,617 - - - 24,617 2.16. Lease liabilities 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Lease liabilities – opening balance 762,235 764,215 Additions - - Decreases - - Charges for perpetual usufruct of land (1,011) (1,980) Lease liabilities – closing balance 761,224 762,235 including: - current 15,256 15,252
Page 37
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 37 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. - non-current 745,968 746,983 2.17. Trade and other payables 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Trade payables 1,422,271 1,304,939 Provisions for product returns 603,618 391,009 Guarantee deposits – Brzeska 2 16,196 5,300 Taxes, customs duties, insurance and other dues 1,084,834 2,395,157 Accruals and deferred income (provision for audit and other invoices) 469,888 496,398 Amounts payable to employees 8,074 16,536 Other 41,797 41,793 Total 3,646,678 4,651,132 Ageing analysis of trade payables: 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Current 1,027,973 1,012,269 1–30 days past due 290,000 197,353 31–60 days past due 77,961 10,327 61–90 days past due 23,330 13,457 91–120 days past due - 64,139 121–360 days past due 3,007 7,394 Over 360 days past due - - Total 1,422,271 1,304,939 The Company has financial risk management policies in place to ensure timely payment of liabilities. 2.18. Contractual maturities of liabilities Time to maturity as at 30 Jun 2025 Up to 1 month 1–3 months 3–12 months 1–5 years Over 5 years Nominal (undiscounted) amount Trade payables 1,421,071 1,200 - - - 1,422,271 Lease liabilities 2,456 4,912 22,104 117,888 2,217,777 2,365,137 Royalties payable - 1,931,691 2,452,679 - - 4,384,370 Credit facility 105,000 210,000 945,000 3,150,000 - 4,410,000
Page 38
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 38 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Time to maturity as at 31 Dec 2024 Up to 1 month 1–3 months 3–12 months 1–5 years Over 5 years Nominal (undiscounted) amount Trade payables 1,226,970 77,969 - - - 1,304,939 Lease liabilities 2,456 4,912 22,104 117,888 2,217,777 2,365,137 Royalties payable - 3,941,590 4,466,750 - - 8,408,341 Credit facility 105,000 210,000 945,000 3,780,000 - 5,040,000 2.19. Contract liabilities 30 Jun 2025 (unaudited) 31 Dec 2024 (audited) Contract liabilities 12,842,293 11,002,109 Total 12,842,293 11,002,109 As at the reporting date and 31 December 2024, contract liabilities comprised obligations towards players who purchased the Deluxe edition of Frostpunk 2 , which includes three paid DLCs planned for release in the coming quarters.
Page 39
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 39 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 3. NOTES ON FINANCIAL INSTRUMENTS 3.1. Financial instruments
Page 40
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 40 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. As at the reporting date, the Company analysed its financial assets And concluded that the carrying amounts of the instruments measured at amortised cost did not differ from their fair values as at 30 June 2025 and 31 December 2024. In the case of instruments measured at fair value, the measurement was based on their market value as at the reporting date. Financial assets and liabilities Classes of financial instruments as at 30 Jun 2025 Measured at amortised cost Measured at fair value through profit or loss Measured using the equity method Total Financial assets Cash 51,915,214 - - 51,915,214 Current financial assets 57,912 - - 57,912 Long-term investments - 1,018,383 - 1,018,383 Investments in associates - - 4,592,451 4,592,451 Trade and other receivables 34,983,515 - - 34,983,515 IRS - 129,729 - 129,729 Total 86,501,961 1,148,111 4,592,451 92,697,203 Financial liabilities Trade and other payables 3,646,678 - - 3,646,678 Royalties payable 4,384,370 - - 4,384,370 Credit facility 4,410,000 - - 4,410,000 Total 12,441,048 - - 12,441,048 Classes of financial instruments as at 31 Dec 2024 Measured at amortised cost Measured at fair value through profit or loss Measured using the equity method Total Financial assets Cash 65,452,202 - - 65,452,202 Current financial assets 5,011,394 - - 5,011,394 Long-term investments - 742,765 - 742,765 Investments in associates - - 4,878,419 4,878,419 Trade and other receivables 20,835,838 - - 20,835,838 IRS - 237,930 - 237,930 Total 91,299,434 980,695 4,878,419 97,158,549 Financial liabilities Trade and other payables 4,651,132 - - 4,651,132 Royalties payable 8,408,341 - - 8,408,341 Credit facility 5,040,000 - - 5,040,000 Total 18,099,473 - - 18,099,473 Fair value of the Company’s financial assets and liabilities not measured at fair value In the opinion of the Company’s Management Board, the carrying amounts of trade receivables and payables and cash presented in these financial statements approximate their fair values. Fair value measurement methods The Company did not change the methods used to measure financial instruments relative to the prior reporting period. The fair value of financial assets and liabilities listed on active markets is determined based on their quoted prices (Level 1 inputs). The fair value of other items is determined based on either directly or indirectly observable inputs (Level 2 inputs) or unobservable inputs (Level 3 inputs). The fair value of loans for employees is determined based on future cash flows, discounted at the current interest rate on loans.
Page 41
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 41 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Financial assets measured at fair value: 30 Jun 2025 31 Dec 2024 Fair value hierarchy Starward Industries S.A. shares 1,018,383 742,765 Level 1 Measurement of IRS 129,729 237,930 Level 2 3.2. Share-based payments Employee stock option plan for 2021–2025 Pursuant to Resolution No. 03/01/2021 of the Company’s Extraordinary General Meeting of 21 January 2021, the Company operates an Incentive Scheme for members of the Management Board, employees and independent contractors. Persons who signed Incentive Schem e participation agreements with the Company will be entitled to acquire Series C subscription warrants convertible into Series H shares, subject to meeting the targets set for the Company and defined in the Incentive Scheme Rules. The Incentive Scheme covers the years 2021 –2025. Persons who have the right to acquire the warrants will be entitled to exercise them by subscribing for Series H shares by 30 June 2029. Pursuant to Resolution No. 05/01/2021 of the Extraordinary General Meeting of 21 January 2021, the Company may issue up to 125,000 Series H shares with a par value of PLN 0.10 per share and total par value of PLN 12,500 for the purposes of the Incentive Sc heme. Upon proposal from the Company’s Management Board, the Supervisory Board will pass a resolution, promptly after the Annual General Meeting approving the Company’s financial statements for the financial year 2025, to grant Series C subscription warrants to the Incentive Scheme participants, in such number as specified in the Management Board’s proposal. The grant of the warrants is subject to the achievement of the following financial targets (in PLN) by the Company: Total revenue of 11 bit studios S.A., 2021–2025 656,000,000 Total profit before tax of 11 bit studios S.A., 2021 –2025 328,000,000 If the financial targets are not fully met, the pool of shares offered under the Incentive Scheme will be reduced by 4% for each 1% of the underperformance. If the financial targets are exceeded, the issue price of Series H shares will be reduced by 1% for each incremental 2% of the overperformance, however, the discount amount may not exceed 10% of the issue price. The issue price of Series H shares under the 2021 –2025 Incentive Scheme was set at PLN 474.93. Recognition of the 2021–2025 Incentive Scheme The fair value of warrants granted under the Incentive Scheme has been estimated using the Damodaran warrant pricing model, which takes into account the Company's share price as at the date of signing the Incentive Scheme participation agreement (the grant date) and its annual volatility. Costs of the Incentive Scheme are recognised in the statement of profit or loss over the entire term of the Incentive Scheme, with a corresponding entry in capital reserves. The terms and conditions of the incentive scheme are based on the achievement of the general corporate objectives rather than targets set for individual persons (Scheme participants). Therefore, as the condition of direct allocation to an asset is not satisfied, these costs do not meet the capitalisation requirement and are recognised in the Company’s profit or loss. The key parameters of the model used to calculate the fair value of the potential Incentive Scheme premium and the costs to be charged to the statement of comprehensive income in a given period are presented below:
Page 42
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 42 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Number of warrants 125,000 Start date of the Scheme 1 Jan 2021 Vesting date 31 Dec 2025 First tranche Second tranche Total Grant date 10 Mar 2021 22 Sep 2023 - 11 bit studios S.A. share price on grant date (PLN) 517 697 - Six-month volatility of 11 bit studios S.A. share price (%) 34.43 29.40 - Risk-free rate (%) 0.86 5.25 - Number of Incentive Scheme warrants granted as at 30 Jun 2025 81,750 18,969 100,719 Measurement of warrants (PLN) 199.84 336.30 - Scheme valuation as at 30 Jun 2025 (PLN) Statement of profit or loss – employee benefits expense in 2021 (PLN) - - 3,347,377 Statement of profit or loss – employee benefits expense in 2022 (PLN) - - 2,955,683 Statement of profit or loss – employee benefits expense in 2023 (PLN) - - (1,817,900) Statement of profit or loss – employee benefits expense in 2024 (PLN) - - (4,045,649) Statement of profit or loss – employee benefits expense in H1 2025 (PLN) - - (439,516) Total Incentive Scheme cost remaining to be recognised (PLN) - - 0 Total - - 0 As at the reporting date, the Company did not recognise any 2021–2025 Incentive Scheme costs in the statement of comprehensive income as it assumed that the Scheme would not be implemented. As at the reporting date, the Company reassessed the total expected costs of the 2021 –2025 Incentive Scheme, reducing the estimate to PLN 0 (31 December 2024: PLN 612,169). This led to a decrease in the costs of the Incentive Scheme recognised in the first half of 2025. The costs of the 2021 –2025 Incentive Scheme are recognised over the entire vesting period. The financial objectives set out in the Incentive Scheme are Group-wide and have not been set for individual persons (participants of the Scheme). All costs of the Incentive Scheme are recognised as they are incurred in the statement of comprehensive income and are not partly capitalised in the statement of financial position.
Page 43
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 43 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 4. OTHER NOTES
Page 44
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 44 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 4.1. Related-party transactions Related parties include members of the Company’s Management and Supervisory Boards (key personnel): ▪ Przemysław Marszał – President of the Management Board ▪ Grzegorz Miechowski – Member of the Management Board ▪ Michał Drozdowski – Member of the Management Board ▪ Paweł Feldman – Member of the Management Board ▪ Marek Ziemak – Member of the Management Board ▪ Radosław Marter – Chair of the Supervisory Board ▪ Jacek Czykiel – Deputy Chair of the Supervisory Board ▪ Marcin Kuciapski – Member of the Supervisory Board ▪ Piotr Wierzbicki – Member of the Supervisory Board ▪ Milena Olszewska -Miszuris – Member of the Supervisory Board. In addition, the Company’s related parties include the following relative of a member of the key management: ▪ Paweł Miechowski – PR Expert, brother of Grzegorz Miechowski, Member of the Management Board Fool’s Theory Sp. z o.o. has been classified as a related party since 28 February 2022. Commercial transactions In addition to the services provided by the Members of the Company’s Management Board, discussed in Section II.4, The Company entered into the following related-party transactions in the periods from 1 January to 30 June 2025 and from 1 January to 30 June 2024: 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Arkona – Paweł Miechowski* 150,206 147,684 Marek Ziemak* 173,928 150,918 Paweł Feldman* 174,737 152,177 Fool’s Theory Sp. z o.o. 175,988 532,700 Total 674,859 983,480 * The entity provides B2B services to the Company and receives consideration from the Company. Loans advanced to related parties During the reporting period, the Company did not grant any loans to its related parties. On 5 June 2023, 11 bit studios S.A. signed a surety agreement with Powszechna Kasa Oszczędności Bank Polski S.A., under which it issued a surety to secure a PLN 3,500,000 one -year multi -purpose credit facility agreement concluded by PKO BP S.A. with Fool’s Theory Sp. z o.o. on 5 June 2023. In accordance with an annex signed on 4 June 2024, the surety for up to PLN 5,250,000 is valid until 4 June 2028. It was granted on arm’s length terms. On 4 Ju ne 2025, PKO BP S.A. released the Company from this surety. Borrowings from related parties The Company did not receive any loans from its related parties in the period from 1 January to 30 June 2025 or in 2024.
Page 45
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 45 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. Remuneration of members of the Management Board, key personnel and members of the Supervisory Board The Company’s key management personnel are its Management Board and Supervisory Board. Remuneration of members of the Company’s Management and Supervisory Boards for discharging managerial and supervisory duties in the six months to 30 June 2025 and in the comparative period is presented below. Remuneration of the Management Board as at 30 June 2025 – total: Przemysław Marszał Grzegorz Miechowski Michał Drozdowski Paweł Feldman Marek Ziemak Remuneration for managerial responsibilities 313,870 315,093 311,520 184,167 183,480 Provision for annual bonus 71,016 71,016 71,016 71,016 71,016 Remuneration under civil-law contracts 35,931 35,400 35,400 - - Remuneration under service contracts - - - 174,737 173,928 Total 420,817 421,510 417,936 429,920 428,424 Remuneration of the Management Board as at 30 June 2024 – total: Przemysław Marszał Grzegorz Miechowski Michał Drozdowski Paweł Feldman Marek Ziemak Remuneration for managerial responsibilities 314,580 314,812 311,520 205,028 204,101 Provision for annual bonus 301,591 301,591 301,591 301,591 301,591 Remuneration under civil-law contracts 35,931 35,400 35,400 - - Remuneration under service contracts - - - 152,177 150,918 Total 652,102 651,803 648,511 658,796 656,610 In addition, members of the Management Board received consideration for services under civil -law contracts and service contracts. The members of the Management Board did not receive any other remuneration in the form of profit distributions or stock options for the six months ended 30 June 2025 or the six months ended 30 June 2024. Members of the Management Board participate in the 2 021–2025 Incentive Scheme, as described in detail (together with the valuation) in Note 3.2 to these financial statements. As at 30 June 2025, Przemysław Marszał (President of the Management Board), Grzegorz Miechowski (Member of the Management Board) and Michał Drozdowski (Member of the Management Board) will each have the right to subscribe for 6,500 Series C warrants convertible into Series H shares, on the basis of the 2021 -2025 Incentive Scheme participation agreements they have signed. Paweł Feldman and Marek Ziemak (Members of the Management Board) will each have the right to subscribe for 5,500 Series C warrants convertible into Series H shares. As at 30 June 2025, the total number of warrants to be acquired by pe rsons participating in the 2021 –2025 Incentive Scheme with whom the Company has signed participation agreements is 100,719. Short-term benefits – Supervisory Board: 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Radosław Marter (Chair of the Supervisory Board) 57,000 57,000 Jacek Czykiel (Deputy Chair of the Supervisory Board) 55,047 55,047 Marcin Kuciapski (Member of the Supervisory) 36,540 36,540 Piotr Wierzbicki (Member of the Supervisory Board) 39,540 39,540 Milena Olszewska-Miszuris (Member of the Supervisory Board) 39,540 39,540 Total 227,667 227,667
Page 46
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS 46 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. On 6 June 2024, the Company’s Annual General Meeting passed a resolution (No. 17/06/2024) to adopt a remuneration policy for members of the Company’s Management and Supervisory Boards. The full text of the remuneration policy is available on the Company’s website in the Investor Relations tab. In accordance with the remuneration policy, members of the Management Board are entitled to an annual bonus, whose amount depends on the Company’s net profit earned in a given period. Other related-party transactions Apart from the transactions described above, the Company did not enter into any other related-party transactions. Information on related-party transactions No transactions were executed on a non -arm’s length basis in the period from 1 January to 30 June 2025 or in the comparative period. 4.2. Off-balance-sheet commitments As at the reporting date, the Company had off - balance-sheet commitments to incur expenditure (on intangible assets only) of EUR 2,283,206, PLN 639,651, and USD 244,322. The commitments are related to publishing agreements executed by the Company with third-party development studios. 4.3. Contingent assets and liabilities Contingent liabilities Security for an investment credit facility contracted with PKO BP S.A. in December 2018 to finance a part of the purchase price for the property at ul. Brzeska 2 in Warsaw, comprising a blank promissory note issued by the Company, together with a promissory note declaration, contractual mortgage of up to PLN 20,223,000 over perpetual usufruct of land and ownership title to the building situated on the property, and assignment of cash receivables under an insurance contract for the property in favour of PKO BP. Security for a multi -purpose credit facility agreement signed by the Company with PKO BP S.A. on 26 June 2023 to finance the Company's day - to-day operations, The agreement expired on 25 June 2025. Its security comprised a blank promissory note issued by th e Company, together with a promissory note declaration, PLN 16,000,000 guarantee issued by Bank Gospodarstwa Krajowego, contractual mortgage of up to PLN 30,000,000 (it replaced the contractual mortgage for the investment credit facility of December 2018) over perpetual usufruct of land and ownership title to the building situated on the property, and assignment of cash receivables under an insurance contract for the property in favour of PKO BP S.A. Surety agreement with Powszechna Kasa Oszczędności Bank Polski S.A., under which the Company issued a surety to secure a PLN 3,500,000 one-year multi -purpose credit facility agreement concluded by PKO BP S.A. with Fool's Theory Sp. z o.o. on 5 June 2023. I n accordance with an annex signed on 4 June 2024, the surety for up to PLN 5,250,000 is valid until 4 June 2028. It was granted on arm’s length terms. On 4 June 2025, PKO BP S.A. released the Company from this surety. Promissory note declaration (blank promissory note) in favour of the National Centre for Research and Development as security for the proper performance of obligations under co -funding agreement No. POIR.01.01.01-00-0231/20-00. Contingent assets As at 30 June 2025 and in the comparative period, the Company did not recognise any contingent assets.
Page 47
NOTES TO THE CONDENSED HALF-YEAR FINANCIAL STATEMENTS 47 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these interim financial statements. 4.4. Seasonal and cyclical changes in the Company’s business during the reporting period No seasonal or cyclical fluctuations of a non - recurring nature were reported in the six months to 30 June 2025. 4.5. Events subsequent to the reporting date By the date of authorisation of these interim condensed financial statements by the Company’s Management Board, i.e., 28 August 2025, no events with a material bearing on these financial statements occurred.
Page 48
48 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 DIRECTORS’ REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025
Page 49
OVERVIEW 49 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 I. OVERVIEW GOVERNING BODIES ................................ ................................ ................................ ................................ ................................ .... 50 SHAREHOLDING STRUCTURE AS AT THE DATE OF THIS REPORT ................................ ................................ .................... 54 COMPANY SHARES HELD BY MEMBERS OF ITS MANAGEMENT AND SUPERVISORY PERSONNEL ....................... 54 MANAGEMENT OF THE COMPANY’S RISKS ................................ ................................ ................................ ............................ 55 MAJOR ACHIEVEMENTS IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................................ .............. 59 MATERIAL LITIGATION, ARBITRATION OR ADMINISTRATIVE PROCEEDINGS ................................ ................................ . 61
Page 50
OVERVIEW 50 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 GOVERNING BODIES Management Board ▪ Przemysław Marszał – President ▪ Grzegorz Miechowski – Member ▪ Michał Drozdowski – Member ▪ Paweł Feldman – Member ▪ Marek Ziemak – Member There were no changes in the composition of 11 bit studios S.A.’s Management Board in the reporting period. The term of office of the members of the Management Board expires on the date the Annual General Meeting receives the Company’s full -year financial statements for the financial year ending 31 December 2025. Experience and qualifications of the Management Board members Przemysław Marszał, President of the Management Board Graduate of the Faculty of Architecture at the University of Ecology and Management. Member of the Management Board of Metropolis Software in 2005 – 2009. He started his career in the gaming industry as a graphic designer. As the chief artist, he is responsible for the final appearance of all 11 bit studios S.A. games, from the first sketch to the day of their release. He designed the entire ‘charcoal drawing’ appearance, which became one of the most distinctive features of This War of Mine . One of the key authors of Frostpunk. His responsibilities in the Management Board include strategy and planning, and overseeing the T&C (Team&Culture) division. Grzegorz Miechowski, Member of the Management Board Graduate of the Faculty of Information Technology and Management at the Wrocław University of Technology. He has been involved in developing computer games since the early 1990s, when he founded Metropolis Software House, one of the first game development studios in Poland. He headed it from 1999 to 2009. One of the founders of 11 bit studios S.A. and the author of the original concept of This War of Mine , a game which proved to be a worldwide success. Co -author of the Frostpunk concept. His responsibilities on the Management Board include overseeing the financial, IT and administration divisions.
Page 51
OVERVIEW 51 HALF-YEAR REPORT OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2023 (all amounts in PLN unless stated otherwise) The accompanying information is an integral part of these condensed half-year financial statements. Michał Drozdowski , Member of the Management Board Graduate of the Faculty of Economics and Management at the Higher School of Commerce and Law. He worked as a designer for Lead 3D in 2002–2005. In 2006, he joined Metropolis Software, where he served as the Design Director from 2007. At 11 bit studios S.A. , Michał Drozdowski was responsible for the design of all 11 bit studios S.A. games, including titles from the Anomaly series, Funky Smugglers , This War of Mine and Frostpunk. His responsibilities on the Management Board include all matters related to game creation. Paweł Feldman – Member of the Management Board Graduate of the Faculty of Management of the University of Warsaw. He has many years of experience in the gaming industry, both from the publisher and developer perspective. He has worked on numerous critically acclaimed titles, such as Witcher, This War of Mine and Frostpunk. He focuses mainly on the strategy, business, sales and marketing activities. He has worked for 11 bit studios since 2012, supervising sales and the publishing business line, among other things. His responsibilities on the Management Board include matters related to development of the Company’s new business lines, including IP, as well as the PR and marketing departments.
Page 52
OVERVIEW 52 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Marek Ziemak, Member of the Management Board Graduate of the Cybernetics Faculty of the Military University of Technology with a major in Computer Science: IT Management Systems. Completed postgraduate Master of Business Administration programme for IT personnel at Kozminski University. He started hi s professional career in the computer game industry in 2006 when he joined the CD Projekt RED team as a game tester. He later served as a gameplay designer and developer. He left the ranks of CD Projekt RED in 2014 when he joined the nascent publishing div ision of 11 bit studios. Executive Producer of publishing projects since 2019, and Head of External Development since 2020. His responsibilities on the Management Board include all matters related to the production of proprietary and third-party developed games.
Page 53
OVERVIEW 53 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Supervisory Board ▪ Radosław Marter – Chair ▪ Jacek Czykiel – Deputy Chair ▪ Marcin Kuciapski – Member ▪ Piotr Wierzbicki – Member ▪ Milena Olszewska-Miszuris – Member. There were no changes in the composition of 11 bit studios S.A.’s Supervisory Board in the reporting period. The term of office of the members of the Supervisory Board expires on the date the Annual General Meeting receives the Company’s full -year financial statements for the financial year ending 31 December 2025. Experience and qualification of the Supervisory Board members Radosław Marter – Chair of the Supervisory Board Mr Marter has worked in the pharmaceutical/medical and technology industries for over 20 years. From 2000 to 2007, he was involved in managing Media Vision’s sales department. Between 2007 and 2017, he was a co - founder and Vice President of the Management Board of Active Pharm, a company which he managed for over 10 years, implementing projects in the area of multi -channel marketing, clinical trials, medical systems and applications, as well as marketing strategies for the largest pharmaceutical corporations. Author of publications and articles on digital transformation based on organisations’ gamification platforms. In addition to his work in the pharmaceutical and technology sectors, he has gained experience in supporting non -profit organisations by implementing strategies for image building, management and execution of social campaigns. At present, he is Managing Partner at the one2tribe Group and CEO at OnePharma. His passion is new media and technologies as well as challenging projects, which he often communicated as a speaker at conferences, in publications and in social media. Jacek Czykiel – Deputy Chair of the Supervisory Board In 1996, he graduated from the Social Economy department of the Faculty of Economics at the University of Warsaw Branch in Rzeszów (major in Labour Economics and Social Policy). In 1997, Mr Czykiel completed post -graduate courses in corporate finance and accounting at the University of Warsaw. In 1998, he received the qualification certificate authorising him to provide bookkeeping services. In 1999–2000, he worked as an accountant for Ernst & Young Usługi Księgowe Sp. z o.o. Since 2000, he has been the Chief Financial Officer at Beijer Ref Polska Sp. z o.o. Marcin Kuciapski – Member of the Supervisory Board Graduate of the Maritime Academy in Gdynia (M. Sc. in Commodity Studies). He also graduated from Hochschule Bremenhaven (Business and Economics) as part of the Erasmus Programme. Since 2008, he has held a securities broker license. Winner of numerous award s and distinctions, including 1st place in the Forbes ranking of Institutional Brokers 2013. In 2008−2010, he worked for DM PKO BP, initially at the Equity Research Team, and then at the Institutional Sales Team as Institutional Broker. In 2010, he moved to the same position with the Brokerage Office of BZ WBK, to be promoted to Executive Director in 2012. Since 2017 with Santander Bank Polska as Head of the Institutional Brokerage Team at the Institutional Sales Department. Founder (May 2019) of Pure Alpha Investments, a company active in the area of investments in the public and private markets. Piotr Wierzbicki – Member of the Supervisory Board Graduate of the Warsaw School of Economics (SGH). He has also completed a number of training programmes in finance, management, financial reporting (IAS, US GAAP) and project management, including the Business Programme for Top Executives at IMD Business S chool, and ACCA Training. In 1993–1996 he worked at PWC as a Senior - Audit&Business Advisory Services. In 1996 –2008, with Sun Microsystems, initially as CFO and, from 2002, as CEO. In 2009 –2010, he was employed at Sygnity as Executive VP, CFO. In the following years, he worked at a number of companies, including EMC, YieldPlanet (currently as member of the company’s Supervisory Board) and again at Sygnity. In May 2018, he took the position of Managing Director, Country Manager, at Atos Polska. Since June 2 023, he has served as President of the Management Board of Capgemini Polska Sp. z o.o.
Page 54
OVERVIEW 54 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Milena Olszewska -Miszuris – Member of the Supervisory Board. Graduate of two faculties of the SGH Warsaw School of Economics: Quantitative Methods and Information Systems and Finance and Banking with a major in Investment Banking. She holds three international finance certifications: CFA (Chartered Financial Analyst ), ACCA (Association of Chartered Certified Accountants) and FSA Credential (Fundamentals of Sustainability Accounting). From 2004 to 2015, she worked at international brokerage offices as an equity analyst, specialising in the TMT, retail, and energy sect ors. Currently, she leads a boutique consulting firm that supports enterprises in building value, storytelling, financial reporting, sustainable development, and investor relations. She is a member of the Governance, Risk and Performance Global Forum at ACCA, an expert in sustainable corporate governance at UN Global Compact Network Poland, and Co-Chair of the social campaign 30% Club Poland. She has served as an independent member on the supervisory boards of Ten Square Games, R22, and STS Holding. SHAREHOLDING STRUCTURE AS AT THE DATE OF THIS REPORT Name Number of shares % of share capital Number of voting rights % of total voting rights at GM Grzegorz Miechowski* 170,413 7.05 170,413 7.05 N-N PTE** 124,949 5.17 124,949 5.17 Esaliens TFI*** 120,965 5.00 120,965 5.00 Przemysław Marszał 120,003 4.96 120,003 4.96 Michał Drozdowski 98,844 4.09 98,844 4.09 Paweł Feldman 9,336 0.39 9,336 0.39 Marek Ziemak 1,002 0.04 1,002 0.04 Other shareholders 1,771,687 73.30 1,771,687 73.30 Total 2,417,199 100.00 2,417,199 100.00 * Held jointly with a related party ** Number of shares registered at the Annual General Meeting held on 12 June 2025. *** Number of shares registered at the Extraordinary General Meeting held on 9 February 2023. No changes occurred in the shareholding structure of 11 bit studios S.A. during the reporting period or in the period between the end of the reporting period and the issue date of this Report. COMPANY SHARES HELD BY MEMBERS OF ITS MANAGEMENT AND SUPERVISORY STAFF Position Number of shares held as at the issue date of this report Number of shares held as at 31 Mar 2025 Number of shares held as at 31 Dec 2024 Przemysław Marszał President of the Management Board 120,003 120,003 120,003 Grzegorz Miechowski* Member of the Management Board 170,413 170,413 170,413 Michał Drozdowski Member of the Management Board 98,844 98,844 98,844 Paweł Feldman Member of the Management Board 9,336 9,336 9,336 Marek Ziemak Member of the Management Board 1,002 1,002 1,002 Piotr Wierzbicki Member of the Supervisory Board 550 550 550
Page 55
OVERVIEW 55 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2024 Marcin Kuciapski** Member of the Supervisory Board 2,940 2,940 2,940 * Held jointly with a related party ** Held jointly with a related party According to the submitted declarations, no members of the Company’s Supervisory Board other than Marcin Kuciapski and Piotr Wierzbicki hold shares in 11 bit studios S.A. During the reporting period and in the period between the end of the reporting period and the issue date of this Report, there were no changes in the holdings of Company shares by the management and supervisory personnel. MANAGEMENT OF THE COMPANY’S RISKS The Company’s activities, financial position and results of operations have been, and may be in the future, subject to the risks described below. The occurrence of even some of the following risks may have a material adverse effect on the Company’s operations, financial position and financial results, and may bring a loss of some or all of the capital invested. Risk factors and uncertainties other than described below, including factors and uncertainties that the Company is currently not aware of or which it considers immaterial, may also have a material adverse effect on the Company’s financial positio n and results of operations, and may bring a loss of some or all of the capital invested. Risk factors related to the Company’s operating activities Risk of the Company failing to achieve its strategic objectives The strategic objective of the Company for the coming years is to increase the scale of its operations by continuing to build a diversified portfolio of high- quality computer games and by further developing its publishing business. The Company’s Management Board warrants that they will make every effort to ensure that the Company achieves the key strategic objectives in the coming years. Nevertheless, the Management Board can give no assurance that all the strategic objectives will be effectively reached. T he Company’s future position on the gaming market, which has a direct impact on its revenues and profits, depends on the ability to develop and implement a growth strategy that proves successful in the long term. Risk of varied and unpredictable demand for the Company’s products Work on the Company’s products typically takes from 12 to 60 months, depending on the size of the project. The market success of a product, measured by the size of demand and sales revenue, allows the Company to recover the expenses incurred during the game’s production process and to earn profits, if any. The popularity of a product and, as a consequence, the amount of revenue it generates depend to a large extent on the changing consumer tastes, hard -to-predict trends on the gaming market, and existing co mpetitor products. Therefore, there is a high risk of an ‘unsuccessful’ product, i.e. one that prospective customers are not interested in because it does not suit their preferences. This may be due to poor quality or wrong targeting. For this reason, when launching a new product, we are not able to predict customer reactions and, consequently, to foresee with a high degree of p robability the expected amount of revenue. Risk related to possible delays in game production The computer game production process includes many stages, which entails the risk of delays in individual stages and in the entire project. The individual stages take place one after another and depend on the outcome or successful completion of the preceding work. Some stages of the production process depend on the development team only while others are dependent on third parties such as service providers, partners and licensors. The Management Board has limited control over the timeliness of these third parties’ activities. The work of project teams may be delayed as well, as a result of unforeseen difficulties in working on a demanding product such as a computer game. Delayed completion of the production work on computer games may have an adverse effect on our financial performance in a given period. Risk related to obtaining platform -holder approvals Given the nature of our business, closed digital platforms constitute a primary distribution channel for our games. 11 bit studios S.A. develops games for
Page 56
OVERVIEW 56 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 the closed -console ecosystems managed by Sony, Microsoft, and Nintendo. These platform holders reserve the right to evaluate and approve each product prior to its release on their respective platforms. Consequently, there is a risk that a completed product may not receive the necessary approval from a platform holder, thereby potentially limiting distribution opportunities and negatively impacting our anticipated revenues. Risk related to the launch and continuation of publishing activities by the Company In March 2014, a new publishing department was set up within the Company. Its purpose is the production and distribution of games made by 11 bit studios S.A. or third -party developers from Poland and abroad. The Company’s engagement in those activities may entail the following risks: Risk of the lack of attractive titles to be acquired by the publishing division The supply of attractive third -party projects is limited. It may happen that for a long time the Company will not be able to find a product that would meet all expectations. Risk of strong competition from other publishers In the Company’s immediate environment there are at least a few companies looking for similar products that satisfy the same evaluation criteria. The more limited the supply of attractive projects, the more difficult it is to stand out from the competition and offer something unique to developers. Risk of missing significant market trends The gaming market is rapidly evolving, with new technological trends constantly emerging. Failure to identify these trends early and adapt accordingly may result in losses if the Company markets products which are not aligned with current trends. Risk associated with higher prices of software used to create games A more limited availability (due to changes in pricing policies or other reasons) of popular 3D engines used to develop independent games may complicate the manufacturing process and indirectly extend the time required to create a game, resulting in a reduction in the number of new products. Risk related to the growing popularity of crowd - sourcing portals and self-publishing As a result of the growing popularity of crowd - sourcing portals, the demand for publishing services, one of the most important advantages of which was financing or co -financing of production, is diminishing. The projects that have the biggest chance of success in crowd-sourcing campaigns are those with high market potential, that is those that are also interesting from the perspective of publishing activities. As a result, the Company loses many potentially profitable projects. Growing number of entities providing publishing services for small and medium-sized developers The increase in the number of companies offering publishing services consisting in co -financing production and supporting marketing activities may bring about a drop in prices/commissions charged for publishing services and difficulties in acquiring new projects. Risk of limited effectiveness of PR activities The declining reach of industry media may significantly reduce the effectiveness of PR activities and make it impossible to use the existing know - how. In such conditions, the Company may be required to undertake costly promotional activities to effectively inform potential customers about the products it offers. Risk related to the Company’s key independent contractors The Company is still a business relatively small in size, in particular as regards the structure of resources in managerial and specialist positions. Most tasks, especially in the area of commercial cooperation with trading partners, are performed by individual people. The most qualified managerial staff are the Company’s founders. Any loss of key independent contractors with the greatest knowledge and experience in management and operating activities could cause a deterioration in the quality and timeliness of the Company’s services in the short term. If this situation continues in a medium or long term, it may affect the Company’s expected profits. The Company’s business consists in creating computer games. The quality of its services and products depends on the experience and skills of independent contractors. Loss of such personnel entails the need to recruit, train and on - board new people. The employment contracts concluded by the Company with its employees and other contracts made with independent contractors contain clauses prohibiting the provision of services to other entities or trading partners after the end of cooperation with the Company.
Page 57
OVERVIEW 57 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Risk related to difficulties in finding experienced employees The education system in Poland does not prepare university graduates for the profession of a game developer. Therefore, the gaming industry is affected by shortages of qualified and experienced employees on the local labour market. It is difficult to find specialists who satisfy the Company’s requirements. This risk is related to insufficient number of qualified employees to satisfy the needs of a dynamically growing company. Copyright-related risks involved in contracts for specific work concluded by the Company When signing contracts with employees, in particular members of the Management Board, who are the most qualified management staff at the Company, the Company relies to some extent on flexible forms of employment, in particular by entering into civil-law contracts for specific work or specific tasks ( umowa o dzieło , umowa zlecenie ). The contracts for specific work concluded by the Company contain description of the work, provisions regarding the transfer to the Company of copyrights to the work, and confidentiality clauses binding the contractor in relation to materials and documents made available by the Company. When referring to the provisions of contracts for specific work, it should be pointed out that in accordance with the applicable copyright laws, for the transfer of copyrights to be effective the contract must enumerate the specific fields of use to which copyrights are being transferred. Importantly, it is not possible to transfer copyrights to all fields of use that are yet to emerge in the future because such a contractual clause is invalid (Art. 41.2 of the Copyright and Related Rights Act of 4 February 1994 contains a rule of significant importance to the sale of copyrights, according to which the provisions of a contract for copyrights apply only to the fields of use that are expressly enumerated in the contract). In the light of the rapid technological progress, also in computer game development, there is a risk that the Company may use the acquired works in a field of use other than those specified in the copyright transfer contract and, consequently, may be required to pay additional remuneration to the authors. There is also a potential risk arising from Art. 44 of the Copyright and Related Rights Act of 4 February 1994, that is a risk of authors claiming additional remuneration if games based on IP acquired from them turn out to be more successful than expected. The right to raise such claims cannot be contractually restricted. Risk related to licence agreements concluded by the Company In connection with the nature of its business, the Company has signed a number of licence agreements for the use of specific software which is necessary in the course of its operations. The agreements are not based on a single model form but on the standar ds contract forms used by the licensors. Some of them provide for short termination notice periods. In addition, in many cases the licensor is entitled to terminate the agreement without notice, i.e. with immediate effect. Frequently, a licence agreement d oes not entitle the Company to distribute its in -house developed computer programs as part of its business activities in its own name. Under the Polish laws, the Company’s use of software made available by licensors is governed by the provisions of the Copyright and Related Rights Act of 4 February 1994 (consolidated text in Dz.U. of 2006, No. 90, item 631, as amended). In addition, the majority of the agreements are governed by laws other than the laws of Poland, e.g. the laws of the state of Washington, w hich significantly hinders correct assessment of the contractual obligations for the Company and the scope of its liability. Risk related to contracts concluded with foreign partners The contracts entered into by the Company with foreign trading partners are also governed by foreign laws or contain no provisions specifying the governing law, which makes it necessary to determine the applicable law for the contract on a case by case basis. In some cases, the applicable law turns out to be a foreign law of which the Company has limited knowledge. In addition, the Company has also entered into agreements with jurisdiction clauses indicating foreign courts or with no provisions specifying t he competent courts. This creates a risk that in the event of a dispute with a trading partner the Company will be required to conduct the dispute before foreign courts. Given the Company’s limited knowledge of foreign laws (both material and procedural), this entails the risk of incurring increased legal costs in Poland and abroad. Due to the lack of the choice of law provisions, it is not possible to unambiguously assess the validity of individual contractual clauses, e.g. regarding the liability of the parties for non -performance or improper performance of the obligations. Risk related to the shareholding structure of the Company
Page 58
OVERVIEW 58 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 As at the date of issue of this half-year report for the six months ended 30 June 2025, the founding shareholders held, directly and indirectly, a total of 389,260 shares in the Company, representing 16.10% of the share capital and conferring the right to 16.10% of total voting rights at the General Meeting. In the case of concerted actions of the abovementioned shareholders, they will have a significant impact on the activities of the Company. In addition, considering the fact that the said shareholders ar e also members of the Company’s governing bodies, they can practically decide on resolutions adopted by the General Meeting in all matters relevant to the Company. Risk related to distribution agreements and licence agreements The Company has concluded a number of distribution and licence agreements regarding the rules for distribution or sharing of games developed by the Company through various types of platforms or data carriers. A significant part of these agreements have been subjected to a regime of and are governed by regulations other than Polish laws (e.g. laws of England, Germany, or the state of Texas). Subjecting contractual relations to regulations of a country other than Poland entails the risk of incorrect or insufficient assessment of the legal effects of an agreement and incorrect interpretation of its individual provisions. In the event of a disput e with trading partners with whom the Company has signed the aforementioned agreements, it will be necessary to use the services of advisers and professional attorneys from foreign countries, which may expose the Company to significant costs. In addition, each of these agreements contains provisions limiting the possibility of providing information to third parties to the extent such information may be deemed confidential. The Company is obliged to ensure protection of confidential information received from its partners at a level at least not worse than the protection afforded to its own confidential information. The Company’s default on this obligation may result in the Company’s liability for damages caused by the default. Risk factors related to the environment in which the Company operates Risk related to macroeconomic conditions in the Company’s sales markets The Company’s business depends on macroeconomic conditions prevailing in the markets where the Company distributes or intends to distribute its products. The effectiveness, and in particular the profitability, of the Company’s operations depends on such fa ctors as the rate of economic growth, the level of public consumption, fiscal and monetary policies of the state, or the inflation rate. All these factors indirectly affect the Company’s revenues and other financial results. They may also influence impleme ntation of the growth strategy adopted by the Company. Risk of changes in the legal environment Laws in Poland are subject to frequent changes, as are interpretations and application practices. While some changes may benefit businesses, others can have adverse effects. Changing laws or their differing interpretations, in particular in relation to tax laws, business laws, labour and social security laws, or securities laws may have negative consequences for the Company. Changes in the interpretations of tax regulations ar e particularly frequent and involve significant risks. There is no uniformity in the practice of their application by tax authorities and in judicial decisions in the area of taxation. If tax authorities adopt an interpretation of tax laws which is different from the interpretation applied by the Company, this may result in a deterioration of the Company’s financial position and thus adversely affect its performance and growth prospects. Regulations in the abovementioned branches of law are subject to frequent changes and thus treatment of business entities by administrative bodies and courts is sometimes inconsistent and unpredictable. The laws also contain contradictory and conflicting provisions and ambiguities which cause differences of opinion as to their legal interpretations both between state authorities and between state authorities and companies. For example, tax settlements may be subject to inspection by the authorities, which, if irregularities are found, are entitled to assess tax arrears with interest. Corporate tax returns may be subject to inspection by the tax authorities for a period of fi ve years, and some transactions carried out during that period, including transactions with related parties, may be questioned for tax purposes by the competent tax authorities. As a result, the amounts disclosed in the financial statements may change at a later date after their amount is finally determined by the tax authorities. The following branches of law are of particular relevance because changes in their current
Page 59
OVERVIEW 59 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 regulations may have a material effect on the Company’s business: ▪ Laws on copyright and related rights, ▪ commercial law, ▪ private business law, ▪ tax law, ▪ labour law, ▪ social security law, ▪ securities law. Undoubtedly, many of those laws are subject to frequent changes. The Company’s activities are particularly affected by the laws on copyright and related rights, whose provisions are strictly dependent on EU regulations and their amendments made by the European Parliament or the European Commission, but also on Polish laws, which differ in some respects from the legal norms of other Member States. Also, due to the nature of the Company’s activities, its operations may be affected by regulatory changes in the United States. There is a significant risk of changes to regulations in each of those areas of law given that some of them are still in the process of being adapted to EU requirements. Possible regulatory changes will always have an impact on the Company’s legal environment, triggering the obligation to take measures to ensure compliance. Any change to normative regulations causes problems, in particular related to interpretative doubts concerning new laws, which creates a risk of discrepancies in the practice of public a uthorities, including courts. Differences in the interpretation of the laws by public authorities and by courts (including the EU courts) complicate the operation of businesses in the Polish legal system, which is not fully harmonised with the EU system. Risk of currency exchange rate fluctuations In its operations the Company is exposed to the risk of fluctuations of foreign exchange rates. As the Company sells its products in foreign markets (North America, Western Europe, Central and Eastern Europe, China and Japan), the main settlement currencies in foreign transactions are the US dollar (85% share) and the euro (13% share). Consequently, the amount of the Company’s revenue is negatively cor related with the value of the Polish złoty. Strengthening of the Polish currency means deterioration of the Company’s revenue from sale of computer games in the złoty. Risk related to competition For the Company, the risk related to competition results primarily from significant difficulties in defining and describing the competitors due to significant fragmentation of the industry. In the event that any competition stronger than expected appears on the market, this may affect customers’ interest in the products offered by the Company. In addition, as the number of entities offering similar products for the same platforms is increasing, there may be growing difficulties in obtaining authorisations from platform manufacturers for the production of games for a given platform. Risk related to the development of the industry in which the Company operates The Company operates on the market of computer games for direct distribution to mobile and fixed hardware platforms. The conditions and demand for products in the gaming industry are driven by many factors, such as economic growth and, consequently, rising wealth of the societies and increasing consumption levels, the pace and directions of the IT market growth, competition and the development of new innovative technologies and services. Ale of those factors are beyond the Company’s control. Risk of unpredictable events Due to the possibility of unpredictable events, such as disasters or armed conflicts, there is a risk of deterioration of the economic conditions on the global and Polish market. Such an event may have a material effect on the Company’s economic position. MAJOR ACHIEVEMENTS IN THE SIX MONTHS ENDED 30 JUNE 2025 The key drivers of 11 bit studios S.A.’s revenue in the first six months of 2025 were sales of The Alters and Frostpunk 2 , as well as The Invincible , The Thaumaturge and INDIKA (the last three are the publishing division’s titles), bolstered by strong revenue from sales of other products (the back catalogue), led by Frostpunk, This War of Mine , Moonlighter, and Children of Morta . Monetisation was supported by promotional and sale campaigns
Page 60
OVERVIEW 60 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 (e.g. Publisher Sale on Steam and other distribution platforms). Game development In the six months to 30 June 2025, 11 bit studios S.A. continued work on the development of the following proprietary games: The Alters (premiered on 13 June 2025), the console edition of Frostpunk 2 (scheduled to debut on 18 September 2025), and DLCs for that title, which are planned to launch in subsequent quarters. Total expenditure on game development in the reporting period amounted to PLN 20,431,531, compared with PLN 29,611,891 the year before. This amount also included expenditure on financing third -party development of games to be published by 11 bit studios S.A. The release of The Alters was preceded by a high - impact marketing campaign. A strategic element was a two-day hands-on event held by the Company in Warsaw, which concluded on 15 May 2025 and was attended by several dozen guests from across the world, including representatives of l eading international gaming media outlets and high-reach influencers. The June launch on PC, Xbox X/S, and PS5 (also with day-one availability through Microsoft Corporation’s Game Pass) fully met the Company’s business and financia l objectives. Peak concurrent players reached 18,120, and the title featured among the leading sellers on Steam. The strong sales momentum was supported by enthusiastic critical and gamer reception: as at the date of this Report, on Metacritic the average critic scores were 85, 86, and 83 for the PC, Xbox X/S, and PS5 editions, respectively, with user scores of 8.2/10 on PC and 9.0/10 on both consoles. On 8 July 2025, the Company disclosed (see Current Report No. 15/2025) that until 7 July 2025 (inclusive), The Alters sold a total of 280,000 copies across PC, Xbox X/S and PS5. This figure is net of refunds and complimentary test copies (e.g., for reviewers) and includes pre -orders recorded on Xbox Series X|S and PS5 in the period from 24 April 2025 to the release date. The Company further reported that the number of Steam wishlist sign-ups for The Alters, as at the date of that Current Report, exceeded 1 million; the count reflected active wishlists only and excluded users who had already purchased the game or removed it from their lists. In the weeks following the launch, 11 bit studios S.A. prioritised making quality updates to the game, including based on user feedback. Hotfix 1.0.2 was released on 26 June 2025, followed by patch 1.1.0 on 14 July 2025, which implemented material improvements to gameplay. The team continues efforts to deliver further enhancements to The Alters, including the first paid DLC, currently scheduled for release over the coming quarters. Development on Frostpunk 2 remained similarly active throughout the reporting period. This included the release, on 8 May 2025, of patch 1.3, which addressed a range of community feedback. The development team (66-strong as at the date of this Report) also continued work on the con sole edition of Frostpunk 2, which is expected to debut on 18 September 2025, as well as on paid DLCs scheduled for release in subsequent quarters, with the aim of extending the title’s monetisation lifecycle. In the area of proprietary game development, in the first half of 2025 the Company also intensified work, initiated late last year, on its first platform title, Frostpunk 1886 . The game, planned for release in 2027, is an expanded and upgraded version of the original Frostpunk, which is being rebuilt on the new Unreal Engine 5. The project’s team, which as at the date of this Report numbered 15 developers, will ultimately be scaled to approximately 30. As at the date of this Report, the Company was also conducting concept development on another proprietary title, codenamed P12, involving a team of six. In early August, concept work commenced on a project codenamed P13. Over the coming quarters, 11 bit studios S.A. also intends to undertake concept development on further proprietary titles (“P14” and “P15”). Publishing division In the six months ended 30 June 2025, 11 bit studios S.A.’s publishing division focused on producing and launching new games developed by third -party studios and acquiring new titles for the publishing portfolio as well as monetising the titles released in prior periods, that is The Invincible , The Thaumaturge, INDIKA, Creatures of Ava , Moonlighter, and Children of Morta . As at the reporting date, the publishing portfolio of 11 bit studios S.A. comprised two titles: Moonlighter 2: The Endless Vault (developed by the Spanish studio Digital Sun) and Death Howl (from Denmark’s The Outer Zone). Subsequent to the reporting period, the Company announced (see Current Report No. 16/2025 dated 19 August 2025) that the Early Access release of Moonlighter 2: The Endless Vault for PC will take place on 23 October 2025. The launch of the console edition is planned at a later date. Moonlighter 2: The Endless Vault is a sequel to the most successful title in the Company’s publishing portfolio, originally released i n 2018, which up to 30 June 2025 had generated over PLN 82 million in revenue. The second title will also debut in 2025,
Page 61
OVERVIEW 61 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 although the specific date has not yet been set. On release, Death Howl will be available on PC. Other developments On 24 April 2025, the Management Board of 11 bit studios S.A. approved strategic objectives for the Company. Over the medium -term horizon, the operations of 11 bit studios S.A. will be organised around three pillars. The first one will involve the development of entirely new games based on original or existing Company IP, created by in-house teams. This ‘new games internal dev’ pillar aims to build opportunities for major product and commercial success. The second strategic focus will be on the long -term de velopment of selected proprietary titles with large player bases, referred to as ‘platform games’. This pillar is designed to stabilise revenue, mitigate risk, and expand the Company’s IP portfolio. The third pillar will involve publishing. The plan is for the publishing division to diversify the Company’s business and pursue additional success opportunities on a title -by-title basis. On 12 June 2025, the Annual General Meeting decided to allocate the Company’s 2024 earnings, of PLN 6,889,150, to statutory reserve funds. MATERIAL LITIGATION, ARBITRATION OR ADMINISTRATIVE PROCEEDINGS On 19 February 2025, the Company was served with a lawsuit alleging wrongful termination of an employment contract. The amount in dispute indicated by the plaintiff, in accordance with Article 23.1 of the Code of Civil Procedure, is PLN 110,484. The case f alls within the jurisdiction of the competent District Court (Labour and Social Insurance Division), which has ordered the trial to commence on 1 December 2025. Apart from the lawsuit discussed above, the Company is neither the subject of nor a party to any material proceedings pending before a court, a competent arbitration body or a state administration authority.
Page 62
OVERVIEW 62 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 II. FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. INTERIM STATEMENT OF COMPREHENSIVE INCOME ................................ ................................ ................................ ......... 63 INTERIM STATEMENT OF FINANCIAL POSITION ................................ ................................ ................................ .................... 65 INTERIM STATEMENT OF CASH FLOWS ................................ ................................ ................................ ................................ .. 67 BANK AND NON-BANK BORROWINGS IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................... 69 LOANS ADVANCED IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................................ ....................... 69 SURETIES AND GUARANTEES PROVIDED IN THE SIX MONTHS ENDED 30 JUNE 2025 AND OTHER MATERIAL OFF-BALANCE-SHEET ITEMS ................................ ................................ ................................ ................................ ..................... 70 CURRENT ECONOMIC AND FINANCIAL CONDITION OF THE COMPANY AND ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT ................................ ................................ ................................ ................................ ...................... 70 DESCRIPTION AND ASSESSMENT OF FACTORS AND NON-RECURRING EVENTS WITH A BEARING ON THE COMPANY’S RESULTS IN THE SIX MONTHS ENDED 30 JUNE 2025 ................................ ................................ .................. 70
Page 63
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 63 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 INTERIM STATEMENT OF COMPREHENSIVE INCOME 1 Jan–30 Jun 2025 (unaudited) 1 Jan–30 Jun 2024 (unaudited) Change y/y (%) Continuing operations Revenue 57,241,575 30,760,568 86.09 Other income 1,170,934 4,599 25,360.62 Total operating income 58,412,509 30,765,167 89.87 Depreciation and amortisation (10,946,880) (2,917,748) 275.18 Raw materials and consumables used (301,072) (509,242) (40.88) Services (18,676,655) (17,262,742) 8.19 Salaries, wages and employee benefits (7,711,456) (13,316,140) (42.09) Taxes and charges (870,132) (502,670) 73.10 Other expenses (1,625,572) (1,608,765) 1.04 Impairment of intangible assets (212,021) - - Total operating expenses (40,343,788) (36,117,307) 11.70 Operating profit 18,068,721 (5,352,141) - Finance income 844,949 1,423,440 (40.64) Finance costs (8,169,506) (615,425) 1,227.46 Share in profit/(loss) of associate (285,968) 4,672,195 - Profit before tax 10,458,196 128,069 8,066.06 Income tax expense (1,975,291) (605,874) 226.02 NET PROFIT 8,482,905 (477,805) - Earnings per share: Basic 3.51 (0.20) - Diluted 3.51 (0.20) - NET PROFIT 8,482,905 (477,805) - Other comprehensive income - TOTAL COMPREHENSIVE INCOME 8,482,905 (477,805) - In the six months ended 30 June 2025, 11 bit studios S.A. posted revenue of PLN 57,241,575, up 86.09% year on year, from PLN 30,760,568 in the corresponding period of 2024. The increase was primarily driven by the expansion of the Company's product portfolio following the recent launch of two new proprietary titles. The reporting period saw the release of The Alters (13 June 2025) for PC, Xbox X/S and PS5, while Frostpunk 2 has been available on PC since 20 September 2024. As a result, revenue generated by proprietary titles accounted for as much as 80% of 11 bit studios S.A.'s total sales in the six months to 30 June 2025. (vs. 48% a year earlier). In the reporting period, the Company maintained tight discipline on operating expenses, which totalled PLN 40,343,788, up 11.70% year on year. This rise was mainly driven by a 275.18% increase in depreciation and amortisation expense, which amounted to PLN 10,946,880 in the six months to 30 June 2025, compared with PLN 2,917,748 the year before. This change reflects the commencement of amortisation for The Alters from its commercial release and for Frostpunk 2 since the last quarter pf 2024. Both titles are amortised using the declining- balance method over seven years. The cost of services also increased year on year, to PLN 18,676,655, or 8.19%. This was mainly attributable to higher marketing expenditure in preparation for the launch of The Alters and for new titles from the publishing division, which are slated to debut later in the year. The cost of services includes also royalties paid to third -party developers using the Company’s publishing services, and costs of independent contractors (B2B co ntracts). Conversely, salaries and wages declined markedly, by 42.09%, reflecting the release of a non -cash provision recognised in prior periods in connection with the Company’s 2021 –2025 Incentive Scheme, for which the performance targets are no longer expected to be met. In the comparative period, the provision stood at PLN 3,872,356. In the first half of 2025, within other expenses, a major item was other expenses by nature, which totalled PLN 1,625,572 and included costs of advertising and business travel.
Page 64
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 64 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 As revenue growth outpaced operating expenses in the six months ended 30 June 2025, 11 bit studios S.A. reported an operating profit of PLN 18,068,721 for the period, compared with an operating loss of PLN 5,352,141 a year earlier. Accordingly, the operati ng profit margin for the period was 31.57%. EBITDA came in at PLN 29,015,601 (with a 50.69% margin), versus negative PLN 2,434,393 in the comparative period. Due to continuing high interest rates, cash reserves earned 11 bit studios S.A. interest income of PLN 563,269 in the first six months of 2025, compared with PLN 564,478 the year before. At PLN 281,680, other finance income was markedly lower year on year (H1 2024: PLN 858,962), and included a gain on the remeasurement of 11 bit studios S.A.’s shareholding in Starward Industries S.A. The prior - year comparative benefited from remeasurement gains on surplus cash held in foreign currencies as the Polish złoty depreciated against the USD and EUR over the six months ended 30 June 2024. In the reporting period, the PLN appreciated, particularly against the USD, which resulted in significant non - cash finance costs for the Company. Total finance costs were PLN 8,169 ,506 (H1 2024: PLN 615,425), of which foreign-exchange differences accounted for PLN 7,889,057. The remaining finance costs included interest expense on the investment credit facility contracted with PKO BP S.A. in December 2018. As a result, in the six months to 30 June 2025, 11 bit studios S.A. reported net finance costs of PLN (7,610,525), which includes the portion of Fool’s Theory Sp. z o.o.’s net loss attributable to the Company (H1 2024: net finance income of PLN 5,480,210). Despite net finance costs, the Company’s profit before tax for the six months to 30 June 2025 reached PLN 10,458,196, up by as much as 8,066.06% from PLN 128,069 a year earlier. The Company’s income tax for the reporting period was PLN 1,975,291 (H1 2024: PLN 605,874) and included the effect of the IP Box tax relief used by the Company. In the first half of 2025, the IP Box tax relief amounted to PLN 1,711,693, an increase relative to PLN 670,321 in the same period of the previous year. Consequently, net profit for the first half 2025 came in at PLN 8,482,905 (equivalent to PLN 3.51 per share), versus a net loss of PLN 477,805 in the comparative period (loss of PLN 0.20 per share). 4.79 5.71 15.8 23.17 27.01 19.19 82.11 71.22 87.1 70.12 74.27 52.27 140.54 57.24 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 1H 2025 Revenue (PLN million)
Page 65
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 65 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 INTERIM STATEMENT OF FINANCIAL POSITION As at 30 June 2025, the Company’s total assets amounted to PLN 265,606,447, up by 1.26% from PLN 262,302,617 as at 31 December 2024. 30 Jun 2025 (unaudited) Share (%) 31 Dec 2024 (audited) Share (%) ASSETS Non-current assets 177,214,328 66.72 169,650,820 64.68 Property, plant and equipment 21,587,334 8.13 22,403,337 8.54 Perpetual usufruct of land 4,084,374 1.54 4,112,515 1.57 Intangible assets 138,269,236 52.06 128,778,863 49.10 Deferred tax asset 7,108,158 2.68 8,472,130 3.23 Investments in associates 4,592,451 1.73 4,878,419 1.86 Other assets 461,729 0.17 84,344 0.03 Long-term investments 1,018,383 0.38 742,765 0.28 Financial instruments (IRS) 92,663 0.03 178,448 0.07 Current assets 88,392,119 33.28 92,651,796 35.32 Trade and other receivables 34,983,515 13.17 20,835,838 7.94 Income tax receivable 297,195 0.11 244,504 0.09 Merchandise 51,316 0.02 54,149 0.02 Other assets 1,049,902 0.40 994,226 0.38 Financial instruments (IRS) 37,065 0.01 59,483 0.02 Current financial assets 57,912 0.02 5,011,394 1.91 Cash and cash equivalents 51,915,214 19.55 65,452,202 24.95 TOTAL ASSETS 265,606,447 100 262,302,617 100 30 Jun 2025 (unaudited) Share (%) 31 Dec 2024 (audited) Share (%) EQUITY AND LIABILITIES Equity 237,961,923 89.59 229,918,534 87.65 1.34 1.01 9.18 11.56 12.93 3.56 37.55 23.73 37.36 28.68 22.89 0.52 6.9 8.48 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 1H 2025 Net profit (PLN million)
Page 66
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 66 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Share capital 241,720 0.09 241,720 0.09 Share premium 18,232,710 6.86 18,232,710 6.95 Statutory reserve funds 184,960,557 69.64 178,071,407 67.89 Share-based payment reserve 26,034,031 9.80 26,473,547 10.09 Retained earnings 8,492,905 3.20 6,899,150 2.63 Non-current liabilities 3,927,388 1.48 4,553,101 1.74 Borrowings 3,150,000 1.19 3,780,000 1.44 Employee benefit and other provisions 31,420 0.01 26,118 0.01 Lease liabilities 745,968 0.28 746,983 0.28 Current liabilities 23,717,136 8.93 27,830,983 10.61 Trade and other payables 3,646,678 1.37 4,651,132 1.77 Royalties payable 4,384,370 1.65 8,408,341 3.21 Borrowings 1,260,000 0.47 1,260,000 0.48 Employee benefit and other provisions 1,568,539 0.59 2,494,149 0.95 Lease liabilities 15,256 0.01 15,252 0.01 Contract liabilities 12,842,293 4.84 11,002,109 4.19 Total liabilities 27,644,524 10.41 32,384,084 12.35 TOTAL EQUITY AND LIABILITIES 265,606,447 100 262,302,617 100 As at 30 June 2025, non -current assets represented the majority (66.72%) of the Company’s total assets, amounting to PLN 177,214,328 (year -end 2024: PLN 169,650,820), up 4.46% year on year. As at 31 December 2024, non -current assets accounted for 64.68% of total assets. As at the reporting date, intangible assets were the main component of non- current assets. They stood at PLN 138,269,236, up 7.37% from PLN 128,778,863 as at 31 December 2024, and their share in total assets rose to 52.06% from 49.10% at year-end 2024. Intangible assets primarily comprised partially amortised capitalised development expenditure (PLN 107,028,777) on proprietary games, including The Alters and Frostpunk 2, and titles from the publishing division, which were released in the reporting period or earlier. A further significant item was ongoing development work (PLN 27,615,514), notably on the console editions of and DLCs for Frostpunk 2, and the publishing division’s projects Moonlighter 2: The Endless Vault and Death Howl. Another component of non-current assets as at 30 June 2025, with a value significantly lower than that of intangible assets, was property, plant and equipment of PLN 21,587,334 (31 December 2024: PLN 22,403,337). The largest single item in this category remained t he office building located at ul. Brzeska 2 in Warsaw, which the Company purchased in late 2018 for its new head office. Other significant non-current assets included non-current financial assets, i.e. shareholdings in Fool's Theory Sp. z o.o. and Starward Industries S.A. As at 30 June 2025, they were measured at, respectively, PLN 4,592,451 (a decrease of 5.86% from half a year earlier, reflecting a portion of the associate’s H1 2025 net loss attributable to 11 bit studios S.A.) and PLN 1,018,383, an increase of 37.11%, driven by the rise in the latter company’s share price on NewConnect. As at the end of June 2025, 11 bit studios S.A.’s current assets were PLN 88,392,119, down 4.60% on the end of the comparative period, when they amounted to PLN 92,651,796. Just like at year -end 2024, cash and cash equivalents were the largest item, with a value of PLN 51,915,214 as at the reporting date, up 20.68% relative to 31 December 2024. This means that cash and cash equivalents accounted for 19.55% of the Company's total assets as at the reporting date. Six months earlier, their share was 24.95%. Th e value of current financial assets dropped sharpy, to PLN 57,912 from the impressive PLN 5,011,394 at year-end 2024. They comprised only employee loans, while as at 31 December 2024 they also included bank deposits with maturities of more than three months. Trade and other receivables of PLN 34,983,515 were also a material component of the Company’s current assets as at the reporting date, representing 13.17% of total assets. As at the end of 2024, they amounted to PLN 20,835,838 (7.94% of total assets). The item included a part of the payment due to 11 bit studios S.A. under the agreement with Microsoft Corporation signed in the second quarter of 2023. A minor item, representing 0.11% of total assets, was income tax receivable of PLN 297,195, compared with PLN 244,504 as at 31 December 2024.
Page 67
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 67 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 The most significant item of the Company’s equity and liabilities was statutory reserve funds, which reached PLN 184,960,557 as at 30 June 2025, i.e. 69.64% of total equity and liabilities. Six months earlier, it stood at PLN 178,071,407 (67.89% of total equity and liabilities). The increase in the statutory reserve funds was due partly to the allocation of the Company’s net profit for 2024, in line with the Annual General Meeting’s resolution of 12 June 2025 to reinvest all the earnings for 2024 (PLN 6,889 ,150) in the Company. Another major item under 11 bit studios S.A.'s equity and liabilities as at the end of June 2025 (PLN 26,034,031 vs PLN 26,473,547 at year- end 2024) was the share -based payment reserve, created, among other things, in connection with the 2021–2025 Incentive Scheme. As at the reporting date, it accounted for 9.80% of the Company's total equity and liabilities (31 December 2024: 10.09%). The share premium account remained unchanged at PLN 18,232,710. As at 30 June 2025, it accounted for 6.86% of total equity and liabilities, compared with 6.95% six months earlier. As at 30 June 2025, the Company’s liabilities totalled PLN 27,644,524, compared with PLN 32,384,084 at year-end 2024. They declined by 14.64%, and their share in total equity and liabilities fell to 10.41% from 12.35% six months earlier. As at the end of June 2025, the Company’s non -current liabilities stood at PLN 3,927,388, down 13.74% from PLN 4,553,101 as at 31 December 2024. Their main component (PLN 3,150,000) was borrowings under a PLN 12,600,000 investment credit facility contracted by the Company w ith PKO BP S.A. at the end of 2018 to finance the purchase of the property at ul. Brzeska 2 in Warsaw (all repayments to date have been made on schedule). As at 30 June 2025, the Company’s current liabilities fell by 14.78%, to PLN 23,717,136 (31 December 2024: 27,830,983), and their share in total equity and liabilities decreased to 8.93% from 10.61% six months earlier. The decline was mainly attributable to lower (PLN 4,384,370 vs PLN 8,408,341 six months earlier) royalties payable to third-party develope rs under the Company’s publishing arrangements. The item also includes licence fees payable to Epic Games for the use of the Unreal Engine. Trade payables likewise decreased to PLN 3,646,678 (31 December 2024: PLN 4,651,132) and comprise mainly payments arising from the Company’s day -to-day operations. By contrast, contract liabilities increased by nearly 17%, to PLN 12,842,293 (31 December 2024: PLN 11,002,109). This item includes obligations towards gamers who purchased the Deluxe edition of Frostpunk 2, which, apart from the core game, comprises three paid DLCs yet to be launched by the Company (with the first one scheduled for release later this year). INTERIM STATEMENT OF CASH FLOWS 1 Jan– – 30 Jun 2025 (unaudited) 1 Jan– – 30 Jun 2024 (unaudited) Cash flows from operating activities Profit for period 8,482,905 (477,805) 6.91 7.92 17.02 28.76 42.13 46.22 89.91 119.74 164.65 197.34 226.03 227.91 229.92 237.96 31.12.12 31.12.13 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 31.12.19 31.12.20 31.12.21 31.12.22 31.12.23 31.12.24 30.06.25 Equity (PLN million)
Page 68
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 68 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 Adjustments: Depreciation and amortisation 10,946,880 2,917,748 Impairment of property, plant and equipment and intangible assets 212,021 - Reallocation of Unreal Engine licence fees between projects (757,932) - Effect of income tax recognised in profit or loss 1,975,291 605,874 Costs of the 2021–2025 Incentive Scheme (439,516) 3,872,356 (Gain)/loss on change in fair value of financial assets at fair value through profit or loss (167,416) 387,393 Share of (profit)/loss of associate 285,968 (4,672,195) Net interest income (404,385) (597,100) Foreign exchange losses on cash (1,863,302) 1,508,324 Other adjustments 287,926 421,399 Changes in working capital: Change in trade and other receivables (12,773,287) (79,162) Change in withholding tax receivables (1,374,390) (836,023) Change in inventories 2,838 (45,800) Change in other assets (433,061) 80,323 Change in trade and other payables (5,029,435) 1,826,211 Change in contract liabilities 1,840,184 10,995,092 Change in provisions (920,308) 4,945,744 Cash provided by/(used in) operating activities (129,020) 20,852,378 Income tax paid 106,187 (1,148,921) Net cash from operating activities (22,833) 19,703,457 Cash flows from investing activities Loans to employees 24,760 577,329 Proceeds from interest on bank deposits with maturities of more than 3 months 530,398 595,919 Proceeds on maturity of bank deposits with maturities of more than 3 months 4,472,377 16,000,000 New bank deposits placed with maturities of more than 3 months - - Payments for property, plant and equipment and intangible assets (19,617,429) (29,219,524) Net cash from investing activities (14,589,894) (12,046,275) Cash flows from financing activities Proceeds/(repayments) under credit facility (630,000) (630,000) Payment of interest on credit facility (157,564) (207,953) Net cash from financing activities (787,564) (837,953) Increase in cash and cash equivalents (15,400,291) 6,819,228 Effect of exchange rate fluctuations on cash held 1,863,302 (1,508,324) Cash at beginning of reporting period 65,452,202 37,555,974 CASH AT END OF REPORTING PERIOD 51,915,214 42,866,878 In the six months ended 30 June 2025, the Company generated negative cash flows from operating activities of PLN (129,020) (H1 2024: cash flows provided by operating activities of PLN 20,852,378). The outflow was driven primarily by a PLN 12,773,287 increase in trade receivables. A further negative effect came from a PLN 5,029,435 increase in trade payables and a PLN 1,374,390 increase in the withholding tax receivable. These developments were partly offset by materially higher amortisation (PLN 10,946,880 versus PLN 2,917,748 a year earlier), reflecting the commencement of amortisation for Frostpunk 2 (from Q4 2024) and The Alters (from release on 13 June 2025). Both titles are amortised on a declining -balance basis over seven years. As a result, net cash from operating activities (after income tax paid of PLN 106,187) in the six months ended 30 June 2025 was negative, amounting to PLN (22,833) (H1 2024: net cash from operating activities of PLN 19,703,457). In the first six months of 2025, the Company reported negative cash flows from investing activities of PLN (14,589,894) (H1 2024: PLN (12,046,275)). The largest investing cash outflows in the reporting period comprised payments for property, plant and equi pment and intangible assets (primarily related to the production of games in the proprietary and publishing portfolios). In the six months ended 30 June 2025, this expenditure totalled PLN 19,617,429, up 32.86% year on year, from PLN 29,219,524 as at 30 Ju ne 2024. An item with a positive effect on cash flows from investing activities in the six months ended 30 June 2025 was proceeds
Page 69
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 69 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 on maturity of bank deposits with maturities exceeding three months (PLN 4,472,377) and interest received on those deposits (PLN 530,398). Cash flows from financing activities in the six months ended 30 June 2025 included payments related to the servicing of the 10 -year investment credit facility contracted from PKO BP S.A. in late 2018 to purchase the property at ul. Brzeska 2 in Warsaw. In the first six months of 2025, 11 bit studios S.A. spent PLN 630,000 (unchanged from a year earlier) on repayment of the principal, with interest payments amounting to PLN 157,564 (H1 2024: PLN 207,953). In the six months to 30 June 2025, net cash from fin ancing activities was negative, at PLN (787,564) (H1 2024: PLN (837,953)). As at 30 June 2025, the Company held cash and cash equivalents of PLN 51,915,214 versus PLN 42,866,878 as at 30 June 2024, an increase of 21.11% or PLN 9,048,336 year on year. BANK AND NON-BANK BORROWINGS IN THE SIX MONTHS ENDED 30 JUNE 2025 In the reporting period, 11 bit studios S.A. did not enter into any new credit facility agreements. Since 19 December 2018, the Company has used a 10-year investment credit facility from PKO BP S.A. contracted to finance a part of the purchase price for the office building at ul. Brzeska 2 in Warsaw (the Company's current headquarters). For full details, see Note 2.14. In addition, on 26 June 2023, the Company signed a PLN 20,000,000 multi -purpose credit facility agreement with Powszechna Kasa Oszczędności Bank Polski S.A. to finance its day-to-day operations. The interest rate was set at 1M WIBOR/1M EUROIBOR plus bank m argin of 1.3pp (per annum, with interest charged only on the amounts drawn). On 25 June 2025, the facility expired without any utilisation or renewal. LOANS ADVANCED IN THE SIX MONTHS ENDED 30 JUNE 2025 In the reporting period, the Company entered into three loan agreements with its employees and independent contractors, totalling PLN 33,500. The loans are to be used to finance the borrowers’ needs. As at 30 June 2025, the total amount outstanding under this type of loans, including loans advanced in previous periods, was PLN 57,912 (inclusive of interest). 3.46 3.74 7.77 22.97 29.11 31.23 56.34 82.21 96.13 107.41 87.28 54.39 70.46 51.92 31.12.12 31.12.13 31.12.14 31.12.15 31.12.16 31.12.17 31.12.18 31.12.19 31.12.20 31.12.21 31.12.22 31.12.23 31.12.24 30.06.25 Cash (PLN million)
Page 70
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 70 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 SURETIES AND GUARANTEES PROVIDED IN THE SIX MONTHS ENDED 30 JUNE 2025 AND OTHER MATERIAL OFF-BALANCE-SHEET ITEMS In the reporting period, 11 bit studios S.A. did not issue any new sureties or guarantees. On 5 June 2023, 11 bit studios S.A. signed a surety agreement with Powszechna Kasa Oszczędności Bank Polski S.A., under which it issued a surety to secure a PLN 3,500,000 one -year multi -purpose credit facility agreement concluded by PKO BP S.A. with Fool’s Theory Sp. z o.o. on 5 June 2023. In accordance with an annex signed on 4 June 2024, the surety for up to PLN 5,250,000 remains valid until 4 June 2028. It was granted on arm’s length terms. On 4 June 2025, PKO BP S.A. released the Company from this surety. For information on other off -balance sheet items related to 11 bit studios S.A.’s publishing activities, see Note 4.2. CURRENT ECONOMIC AND FINANCIAL CONDITION OF THE COMPANY AND ASSESSMENT OF FINANCIAL RESOURCES MANAGEMENT The Company’s current economic and financial condition is stable. The Management Board has not identified any threats to the Company’s liquidity position or solvency. DESCRIPTION AND ASSESSMENT OF FACTORS AND NON-RECURRING EVENTS WITH A BEARING ON THE COMPANY’S RESULTS IN THE SIX MONTHS ENDED 30 JUNE 2025 In the reporting period, there were no events of a non-recurring nature with a bearing on the results of the Company’s operations.
Page 71
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 71 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 III. BUSINESS DEVELOPMENT AND GROWTH PROSPECTS OF 11 BIT STUDIOS S.A.
Page 72
DEVELOPMENT AND PROSPECTS OF 11 BIT STUDIOS S.A. 72 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 DESCRIPTION OF THE MARKET IN WHICH THE COMPANY OPERATES 11 bit studios S.A. operates within the dynamic landscape of the global computer games market. Video games have consistently been the fastest - growing segment of the entertainment industry and have already surpassed both the film and music sectors in terms of market value. According to estimates by Newzoo, a Dutch -based provider of games analytics, the global video game market reached a value of USD 182.7 billion in 2024, up 3.2% from USD 176.9 billion a year earlier. This confirms the successful resumption o f the industry’s long - term growth trajectory after a one-year correction in 2022. Newzoo’s original 2024 forecast had been somewhat more upbeat, at USD 187.7 billion (+6.1% year on year). The shortfall is attribut able, among other factors, to weaker console game sales: in 2024 the console segment contracted by 2.5% year on year, largely due to the rising popularity of subscription services, which have cannibalised traditional unit sell -through. By contrast, the PC games segment outperformed expectations, ri sing 4.4% year on year in 2024. Growth was driven by China, where demand was buoyed by new releases rooted in local mythology, such as Black Myth: Wukong. Similarly, strong Chinese consumer demand supported the mobile segment, which expanded by 5.5% in 2024, to USD 100.3 billion, representing 55% of the total gaming market. In the same year, the PC segment was worth USD 39.0 billion (21% share), while the console segment totalled USD 43.5 billion (24%). According to Newzoo, approximately 3.42 billion people worldwide engaged in gaming in 2024, a 4.5% increase year on year and a significant rise from the 2.88 billion gamers in 2020 and slightly over 3.06 billion in 2021. Asia –Pacific had the largest gamer base – almost 1.81 billion, or 47% of the total. Europe ranked second with 454 million players (18% share), up 2.4% relative to 2023. Latin America grew much faster, up 5.6% to 356 million, while North America reached 244 million players (+2.9% year on year). The fastest growth came from the Middle East & Africa, where the gamer base increased by nearly 11% year on year. Newzoo projects robust growth in the global gamer base over the coming years. By 2026, the number of gamers is projected to reach 3.675 billion, translating into a compound annual growth rate (CAGR) of 3.7% in the period from 2021 to 2026. Of these, nearly 2.8 billion will be mobile gamers, with PC and console gamers accounting for 867 million and 625 million, respectively. Newzoo likewise forecasts further expansion in market value. In 2025, global consumer spend on video games is projected at USD 188.9 billion (+ 3.4% year on year), a figure surpassing the previous record set in 2021 at the height of the pandemic, when people – confined at home and facing widespread
Page 73
DEVELOPMENT AND PROSPECTS OF 11 BIT STUDIOS S.A. 73 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 work disruptions – turned to video games en masse to pass the time. Mobile will remain the largest segment in 2025, with expected spend of USD 103.1 billion (+2.9% year on year). After a modest decline in 2024, console software is expected to rebound, reaching USD 45.9 billion (up USD 2.4 billion or 5.5% year on year). The PC segment is expected to grow more slowly, by 2.5% to USD 39.9 billion. Industry projections for the next few years remain highly encouraging. Analysts expect the global video games market to grow at a CAGR of 3.3% in 2024–2027, reaching USD 201.4 billion by 2027. The console segment has the strongest outlook, with a projected 5.6% CAGR to USD 51.2 billion by 2027. Drivers cited include a robust slate of premium releases, notably Grand Theft Auto VI, the successful recent launch of Nintendo Switch 2, and higher pricing for console titles, particularly on Xbox Series X|S and Nintendo Switch 2. For PC, forecasts point to a 3.0% CAGR to USD 42.5 billion by 2027. Growth is expected to be supported by rising average selling prices and the increasing purchasing power of Asian players, who are more frequently buying full-price PC titles. After years as the industry’s growth engine, the mobile segment looks set to underperform throughout the forecast period: Newzoo estimates a 2.4% CAGR to USD 107.7 billion by 2027. Spend should be underpinned by new franchises such as Delta Force Mobile and Valorant Mobile , while regulatory changes in certain markets (notably the United States and Europe) are expected to pressure distribution and monetisation models. GROWTH PROSPECTS 11 bit studios S.A. is a producer of cross -platform computer games sold worldwide, mainly through specialised online platforms, with Steam in the lead. In the six months ended 30 June 2025, export sales accounted for 98.39% of the Company’s total revenue (97.10% the year before). The long -term objective of 11 bit studios S.A. is to grow at a rate significantly faster than the overall computer gaming market (for a description and forecasts for the global market, see pp. 71–73 of this Report), which has been the fastest growing segment of the entertainment industry for a number of years. The success of This War of Mine , Frostpunk, and Frostpunk 2 consolidated the Company’s position as one of the leading developers in the indie (independent) segment of the gaming industry. By the end of June 2025, cumulative revenue from This War of Mine and its paid DLCs across all platforms was approaching PLN 150
Page 74
DEVELOPMENT AND PROSPECTS OF 11 BIT STUDIOS S.A. 74 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 million. Revenue from sales of Frostpunk IP-based products exceeded PLN 250 million (over a little more than five years since the initial PC launch), while Frostpunk 2 alone generated nearly PLN 83 million within slightly over nine months following its PC release. In the near term, through the end of the third quarter of 2025, 11 bit studios S.A.’s financial performance will be driven primarily by the monetisation of proprietary titles released in recent months, i.e. Frostpunk 2 and The Alters, supported by sales from the publishing slate: The Thaumaturge, The Invincible , INDIKA, and Creatures of Ava , all launched over the last few quarters. A key development for the third quarter will be the 18 September 2025 launch of the console edition of Frostpunk 2 for PlayStat ion and Xbox. Later this year, players will also be able to purchase the first of three paid DLCs for Frostpunk 2, as well as two new titles in the publishing portfolio: Death Howl and Moonlighter 2: The Endless Vault. Revenue will be further supplemented by back -catalogue sales, most notably Frostpunk and This War of Mine, both of which continue to see healthy demand despite limited marketing activity by the Company. Looking ahead, over the next several years 11 bit studios S.A.’s financial results will be driven chiefly by the release cadence of new proprietary titles. In late 2024 and early 2025, we initiated work on two additional games. The first, built on the Frostpunk IP, is being developed by a team that will ultimately scale to around 30 and is targeted for completion within two years and release in 2027. The second project is larger in scope, with a planned commercial window of 2028–2029. As at the date of this Report, 15 people were assigned to the first project and six to the second; both teams will expand over the coming months and quarters. Consistent with the Company’s strategic objectives as presented at our April Investor Conference, we will focus on three core pillars. The first one will involve the development of entirely new games based on original or existing Company IP, created by in-house teams. This ‘new games internal dev’ pillar aims to build opportunities for major product and commercial success. The second strategic focus will be on the long -term development of selected proprietary titles with large player bases, referred to as ‘ platform games’. This pillar is designed to stabilise revenue, mitigate risk, and expand the Company’s IP portfolio. The third pillar will involve publishing. The plan is for the publishing division to diversify the Company’s business and pursue additional success opportunities on a title -by-title basis. EXTERNAL AND INTERNAL DRIVERS OF THE COMPANY’S GROWTH 11 bit studios S.A. operates on international markets. Therefore, its strategy and financial results are influenced not only by local factors but also by global economic and political developments, including macroeconomic conditions, tax regulations, and the legal environment. For a detailed discussion of major external and internal factors that may adversely affect the Company’s operations, see the risk section (pp. 53–58 of this Report). The ongoing technological advancements and market shifts within the computer gaming industry are crucial for the Company, impacting the production, distribution and sales of games. Key trends include the rising importance of subscription models in game distribution (e.g., Microsoft’s Game Pass) and initiatives by major hardware and technology companies to build out game - streaming/cloud-gaming markets. Another factor with a potentially strong impact on 11 bit studios S.A.’s growth is increasing competition among digital distribution platforms, as it leads to reduced sales commissions for developers and publishers, a trend favourable to 11 bit studios S.A. Among the internal factors crucial for the growth of 11 bit studios S.A., it is important to highlight the diversification of business activities and revenue sources. In addition to the production of games, since 2015 the Company has also been engaged in their publishing (the publishing division). The publishing portfolio should continue to have a material impact on our financial results. In the game development area, in the six months to 30 June 2025 the Company operated several development teams, an approach enabling it to sustain multiple product lines (IP/brands). Running multiple teams and product lines supports resource optimisation and utilisation and contributes to more stable financial performance. FEASIBILITY OF INVESTMENT PLANS
Page 75
DEVELOPMENT AND PROSPECTS OF 11 BIT STUDIOS S.A. 75 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 As at 30 June 2025, the Company held PLN 51,915,214 in cash and cash equivalents (31 December 2024: PLN 65,452,202) and PLN 57,912 in current financial assets (31 December 2024: PLN 5,011,394). On this basis, the Company’s cash resources totalled PLN 51,973,126, a 26.24% decrease relative to PLN 70,463,596 at year-end 2024. With receivables of PLN 34,983,515 (comprising mainly trade receivables; 31 December 2024: PLN 20,835,838) and an income tax receivable of PLN 297,195 (31 December 2024: PLN 244,504), th e Company’s broadly defined financial assets amounted to PLN 87,253,836 as at 30 June 2025 (31 December 2024: PLN 91,543,938). Liabilities (current and non -current) totalled PLN 27,644,524 as at 30 June 2025 (31 December 2024: PLN 32,384,084). This total included contract liabilities of PLN 12,842,293, representing mainly obligations towards players who purchased the Deluxe Edition of Frostpunk 2, which includes three paid DLCs to be released successively in the quarters to come. Another significant item of liabilities was royalties payable to third -party developers for published titles, which amounted to PLN 4,384,370 as at 30 June 2025, compared to PLN 8,408,341 a year earlier. A major item, valued at PLN 4,410,000 as at 30 June 2025, was liabilities under the investment credit facility contracted by the Company with PKO BP at the end of 2018 to finance the purchase of a property at ul. Brzeska 2 in Warsaw, housing the Company’s new headquarters since March 2020. The facility is being repaid in a timely manner. At year-end 2024, the amount outstanding under the facility was PLN 5,040,000. With the abundant cash resources, far exceeding its liabilities, the Company should be able to finance its day-to-day operations and planned growth investments (development of games and expansion of the publishing division) with internally generated funds at least in the next few quarters, and does not need to use external funding (including funds raised on the capital market) or funds provided by trading partners (game publishers and distributors). However, the Company does not rule out such an option.
Page 76
FINANCIAL CONDITION OF 11 BIT STUDIOS S.A. 76 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025 MANAGEMENT BOARD’S REPRESENTATION We hereby represent that this half -year report of 11 bit studios S.A. for the six months ended 30 June 2025 comprises: The letter from the President of the Management Board, financial highlights, financial statements, and Directors’ Report on the operations of 11 bit studios S.A. for the six months ended 30 June 2025. We represent that, to the best of our knowledge, the financial statements and the comparative financial data have been prepared in accordance with the applicable International Financial Reporting Standards (IFRSs) as endorsed by the European Union, and that they give a clear, true and fair view of the Company’s assets, financial position and financial results, and that the Directors’ Report on the Company’s operations for the six months ended 30 June 2025 gives a fair view of the Company’s development, achi evements and position, and describes the key risks and threats. Based on a representation of the Supervisory Board, the Management Board of 11 bit studios S.A. hereby states that: ▪ The audit firm which audited the financial statements of 11 bit studios S.A. for the six months ended 30 June 2025 was appointed in accordance with applicable laws, including regulations governing the selection of an audit firm and the relevant selection procedure; ▪ The audit firm and members of the audit team met the conditions required to prepare an impartial and independent audit report on full- year financial statements in accordance with applicable laws, professional standards and rules of ethics; ▪ 11 bit studios S.A. complied with applicable laws and regulations concerning the required rotation of audit firms and lead statutory auditors, as well as the mandatory grace periods; ▪ 11 bit studios S.A. has a policy in place for the selection of an audit firm and for the provision of additional non -audit services to the Company by the audit firm, its associate or member of its network, including services conditionally exempted from the prohibition of providing non-audit services by the audit firm. Signed by: Przemysław Marszał President of the Management Board Michał Drozdowski Member of the Management Board Grzegorz Miechowski Member of the Management Board Paweł Feldman Member of the Management Board Marek Ziemak Member of the Management Board
Page 77
77 DIRECTORS' REPORT ON THE OPERATIONS OF 11 BIT STUDIOS S.A. FOR THE SIX MONTHS ENDED 30 JUNE 2025