Current report no 8/2021 .

18 March 2021

March 18, 2021

Current report no 8/2021

Date of preparation: 2021-03-18

Abbreviated name of the issuer TEN SQUARE GAMES S.A.

Subject: Information regarding non-cash correction of deferred revenue in 2020

Legal basis: Article 17 (1) MAR – confidential information.

Content of the report:

With a view to ensuring a transparent and effective information policy, the Management Board of Ten Square Games S.A. “Company” announces that it has made a non-cash adjustment to defer recognition in time of 2020 revenues.
A portion of revenue in Fishing Clash – the Company’s leading product – is generated through the sale of so-called virtual durables to players. Until 2019, the Company recognized revenue from the sale of durables in the month the user made payment. Since virtual durables can be used by players for an extended period of time (during the period of their active stay in the game), therefore, according to the requirements of IFRS 15, revenue from the sale of durables should be recognized over time. In the 2019 financial statements, the Company has exercised the option (specified in IFRS 15 par. 44) not to account for durables, due to the technical impossibility of making a reasonable measurement of the extent to which the performance obligation to users has been fully met.
In the course of 2020, the Company made changes to its IT systems, which made it technically feasible to collect data to analyze users’ usage of durables over time. Based on the data acquired, the Company has made – as of December 31, 2020 – an estimate of the amount of the ‘liability under user agreements’ for the provision of durable goods in the game – revenues relating to the purchase of durable virtual goods (and commission expenses of digital distribution platforms such as Google Play and App Store relating to such revenues) are recognized over the estimated average play period of paying users.
In view of the above, the Management Board of the Company has decided to adjust and reduce the 2020 revenue by PLN 43.2 million (including payments made by Fishing Clash players) and the operating profit by PLN 30.2 million, which was preliminarily confirmed today with the auditor auditing the 2020 financial statements.
The Management Board of Ten Square Games S.A. emphasizes that the discussed adjustment is non-cash and does not have any impact on its cash flows or business performance. In connection with the method of making the adjustment resulting from the application of the provisions of IFRS 15, i.e. without adjusting prior years’ results, the Company estimates that making a similar adjustment in 2021 will have a significantly smaller percentage impact on its revenues and operating profit than in 2020.
Management also announces that this report contains data that is being audited and may differ from the final data that the Company intends to publish on March 22, 2021.