Remedy Entertainment Oyj : Financial Statement and Board of Directors’ report 2020

Remedy Entertainment Plc, 1017278-9	Financial statements 1.1.2020 - 31.12.2020

Remedy Entertainment Plc

Financial statement and annual report

1.1. - 31.12.2020

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Remedy Entertainment Plc, 1017278-9	Financial statements 1.1.2020 - 31.12.2020

REMEDY ENTERTAINMENT PLC

Luomanportti 3

02200 ESPOO, FINLAND VAT ID FI10172789

Contents

	Page
Annual report	3
Income statement	9
Balance sheet	10
Cash flow statement	12
Notes	13
Signatures to the financial statements	19
Auditor's note	19
List of financial records and materials	19

This financial statement is to be retained until 31.12.2030.

The financial statement has been executed by

Remedy Entertainment Plc Luomanportti 3

02200 ESPOO, FINLAND

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Remedy Entertainment Plc, 1017278-9	Financial statements 1.1.2020 - 31.12.2020

Annual report for the fiscal year 1.1.-31.12.2020

Relevant events during the fiscal year

In 2020, the company signed two publishing deals with Epic Games. Two expansions for Control game were launched and the company also continued other game development activities.

The company's revenue mostly consisted of royalties recognized from the game sales revenue of Control, as well as development fees received from Epic Games and the publishers of Control and Crossfire game projects. The revenue also included royalty income from previously released games.

The company's game development and operations have continued according to plans during Covid-19 pandemic and the project schedules have remained unchanged during the reporting period. The company has evaluated its assets and liabilities concluding that the pandemic has not had an impact on their valuation.

Financial development and key figures

The company's revenue was 41 085 822.26 EUR and profit for the fiscal year was 10 336

676.75 EUR. Operating profit for the fiscal year was 13 244 514.36 EUR, 32.24% of revenue. Return on equity was 41.83%. The company's equity ratio at the end of the fiscal year was 73.19%.

FISCAL YEAR	2020	2019	2018
Revenue	41 085 822.26	31 645 315.19		20 146 401.80
Operating profit/loss	13 244 514.36	6 534 493.02		609 268.01
Operating profit/loss %	32.24%	20.65%		3.02%
Return on equity %	41.83%	26.92%		3.04%
Equity ratio	73.19%	73.50%		79.09%

The company's salaries and compensations with employer contributions for the fiscal year were 20 758 479,06 EUR and average number of personnel was 265.

FISCAL YEAR	2020	2019	2018
Salaries and other compensations	20 758 479.06	17 200 955.39	11 677 169.05
including employer contributions
Average number of personnel	265	228	169

CALCULATION FORMULAS USED FOR THE INDICATORS

Operating profit % = operating profit / revenue

Return on equity % = earnings before taxes / equity (average of two fiscal years)

Equity ratio = total equity / balance sheet total less advances received

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Remedy Entertainment Plc, 1017278-9	Financial statements 1.1.2020 - 31.12.2020

Average number of personnel = sum of average of number of personnel in each month / 12

Future financial development outlook

Remedy expects its revenue and operating profit to increase during 2021. Majority of the revenue and operating profit is expected to materialize during second half-year period.

The company aims to create long-term profitable growth, primarily organically, by expanding the product portfolio and entering into new partnerships. The company intends to grow primarily organically.

Royalties and development fees received from publisher partners depend on future game projects, game release schedules and other terms and conditions of each cooperation. Fluctuations between quarterly results and even between fiscal years may be significant, depending on the amount and timing of received development fees as well as game release schedules.

Risks and uncertainties

The most substantial short-term risks and uncertainties are:

• The company's in-house game development may fail, and the company might not necessarily be able to realize the games it has planned with the sufficient quality, schedule or budget.
• Games developed by the company may fail commercially after their release.
• There is no certainty of the continuity of the company's major publisher partnerships and the company's publisher partners may present claims towards the company.
• The company might not be able to recruit or retain key employees and professionally skilled employees.
• Changes in foreign exchange rates may have a negative impact on the company's foreign currency-denominated receivables from its customers and payables for its vendors.

The above-mentioned risks might, if they materialize, have a significant negative impact on the company's business operations, result, financial position, outlook and share price.

Events after the end of the reporting period

Control was released on PlayStation 5 and Xbox Series X|S on 2 February 2021.

Statement on the scope of research and development activities

Significant part of the company's activities is research and development. The company has capitalized product development expenses for new projects that are based on the company's own game brands, effective from 1 January 2019. These projects were Vanguard, two unannounced projects signed Epic Games and fourth, not yet announced project, during the

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Remedy Entertainment Plc, 1017278-9	Financial statements 1.1.2020 - 31.12.2020

reporting period. Product development expenses for other projects were not capitalized during the reporting period. The company adheres to the FAS product capitalization rules.

A total of 5 111 006.64 EUR was capitalized during the fiscal year 1.1.-31.12.2020, which is presented on the income statement line production for own use, and as development costs on the balance sheet. In the cash flow statement, the capitalized development costs are presented in cash flow from investing activities.

Company shares

The company does not own its own shares at the end of the fiscal year on 31 December 2020. The number of shares in the company was 12 072 150 on 31 December 2020. All shares are of the same series. The shares were included in the book-entry system as of 5 May 2017 (ISIN:

FI4000251897).

Valid issuance authorizations

With its resolution on 6 April 2020, the Annual General Meeting authorized the Board of Directors to resolve on a share issue and issue of special rights entitling to shares. Under the authorization, The Board of Directors has the right to decide on one or several share issues from which a maximum of 2 000 000 new or existing company shares may be issued to be subscribed for a fee.

The authorization allows issuing shares also by deviating the pre-emptive subscription rights of the shareholders (directed issue share). Additionally, the authorization allows the Board of Directors to resolve on issue of option rights or other special rights pursuant to Chapter 10 Section 1 of the Companies Act within the aforementioned maximum number of shares. The authorization is valid for five (5) years from the date of the Annual General Meeting and it replaces the previous authorizations.

On 31 December 2020, the unused authorization allowed the Board of Directors to issue 1 600 000 new shares, options or other special rights.

Authorization for the directed repurchase of own shares

On 6 April 2020, the Annual General Meeting authorized the Board of Directors to resolve on the directed repurchase of the company's own shares. Under the authorization, a maximum of 500 000 shares can be repurchased at market price of the acquisition date from public trading on the First North Finland marketplace, organized and maintained by Nasdaq Helsinki Ltd. The authorization is valid until the closing of the next Annual General Meeting, however, no longer than 6 October 2021. The authorization replaces the previous authorization granted by the Annual General Meeting on 8 April 2019.

Valid option rights

The Board of Directors of Remedy Entertainment Plc has, by virtue of the authorization granted by the Annual General Meeting held on 26 March 2018, decided at its meeting held on 8 June 2018 to adopt an option plan "Option Plan 2018" directed to the key persons as decided separately by the Board of Directors. The maximum total number of option rights issued is 400 000, entitling their holders to subscribe for a maximum of 400 000 new shares of the

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