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1 blockescence plc

2 Content Page Interim Consolidated Financial Statements Consolidated Statement of Financial Position as of 30 June 2018 Consolidated Income Statement for the period from 1 January to 30 June 2018 Consolidated Statement of Comprehensive Income for the period from 1 January to 30 June 2018 Consolidated Statement of Changes in Shareholders Equity for the period from 1 January to 30 June 2018 Consolidated Cash Flow Statement for the period from 1 January to 30 June 2018 I III IV V VI Notes to the Consolidated Financial Statements for the period from 1 January to 30 June 2018 VII/ 1-28

3 blockescence plc, Malta Consolidated Statement of Financial Position as of 30 June 2018 Assets 30 June December 2017 Notes A. Non-current assets I. Property, plant and equipment 7.1 2, II. Intangible assets , III. Trade and other receivables IV. Financial assets V. Shares in associated companies 7.4 5,359 0 VI. Deferred tax assets 8.9 7, Total non-current assets 208,923 3,291 B. Current assets I. Property inventories ,292 II. Trade and other receivables 7.6 8,569 2,789 III. Cash and cash equivalents 7.7 1, Total current assets 9,891 95,487 Total assets 218,814 98,778 See accompanying Notes to these Interim Consolidated Financial Statements I

4 blockescence plc, Malta Consolidated Statement of Financial Position as of 30 June 2018 Shareholders' equity and liabilities A. Shareholders' equity June December 2017 Notes I. Common stock 40,800 40,800 II. Capital reserves 1,125 6 III. Retained earnings (previous year: accumulated losses) 2,041-4,354 IV. Amounts recognised directly in equity relating to currency translation adjustments V. Non-controlling interest 101,321 3,515 Total shareholders' equity 145,255 39,959 B. Non-current liabilities I. Financial liabilities ,028 28,049 II. Leasing liabilities II. Other payables III. Deferred tax liabilities ,134 7,422 Total non-current liabilities 26,493 35,591 C. Current liabilities I. Financial liabilities 7.9 8,910 16,967 II. Leasing liabilities III. Trade payables ,707 1,124 IV. Current tax liabilities 101 1,122 V. Other payables , VI. Provisions ,694 3,324 Total current liabilities 47,066 23,228 Total shareholders' equity and liabilities 218,814 98,778 See accompanying Notes to these Interim Consolidated Financial Statements II

5 blockescence plc, Malta Consolidated Income Statement for the period 1 January to 30 June January to 1 January to 30 June June 2017 Notes Continuing operations Sales revenue 8.1 8, Other own work capitalised Other operating income Cost of purchased services 8.4-1,753 0 Personnel expenses 8.5-2,489 0 Other operating expenses 8.6-3, Earnings before interest, taxes, depreciation, and amortisation (EBITDA) 2, Depreciation and amortisation 8.7-2, Earnings before interest and taxes (EBIT) Financial expense Financial income Earnings before taxes (EBT) Income taxes Result from continuing operations, net of income tax Discontinued operations Result from discontinued operations ,093-1,786 Consolidated profit 5,757-2,003 Attributable to: Owners of the Company 5,851-1,842 Non-controlling interests Earnings per share 8.11 From continuing and discontinued operations From continuing operations See accompanying Notes to these Interim Consolidated Financial Statements III

6 blockescence plc, Malta Consolidated Statement of Comprehensive Income for the period 1 January to 30 June January to 1 January to 30 June June 2017 Notes Consolidated profit 5,757-2,003 Items that will be reclassified subsequently to profit and loss under certain conditions Exchange differences on translating foreign operations Items that will not be reclassified subsequently to profit and loss 0 0 Other comprehensive income, net of income tax Total comprehensive income 5,733-2,008 Atributable to: Owners of the Company 5,827-1,847 Non-controlling interests See accompanying Notes to these Interim Consolidated Financial Statements IV

7 blockescence plc, Malta Consolidated Statement of Changes in Shareholders' Equity for the period 1 January to 30 June 2018 Common stock Capital reserves Retained Earnings Amounts recognised directly in equity relating to currency translation adjustments Shareholders' equity attributable to owners of the parent Non-controlling interest Total shareholders' equity Shares Amount Amount Amount Amount Amount Amount Amount thousands Balance at 1 January ,800 40,800-1, ,197 4,026 46,223 Consolidated profit -1,842-1, ,003 Other comprehensive income Total comprehensive income , , ,008 Balance at 30 June ,800 40, ,350 3,865 44,215 Balance at 1 January ,800 40, , ,444 3,515 39,959 Consolidated profit 5,851 5, ,757 Other comprehensive income Total comprehensive income , , ,733 Addition of non-controlling interest (minority interest) due to disposal of shares Addition of non-controlling interest (minority interest) due to acquisition of projects Disposal of non-controlling interest (minority interest) due to disposal of subsidiaries -3,364-3,364 Disposal of granted option rights (minority interest) due to disposal of subsidiaries Addition of non-controlling interest (minority interest) due to business combinations 101, ,336 Proceeds from an unregistered capital increase 1,125 1,125 1,125 Balance at 30 June ,800 40,800 1,125 2, , , ,255 See accompanying Notes to these Interim Consolidated Financial Statements V

8 blockescence plc, Malta Consolidated Cash Flow Statement for the period 1 January to 30 June January to 1 January to 30 June June 2017 Notes Cash flows from operating activities Consolidated profit for the year 5,757-2,003 Income tax recognised in profit and loss Financial expense recognised in income statement 291 1,024 Financial income recognised in income statement Gain from sale of subsideries -7,065 - Depreciation and amortisation 2, Movements in working capital: Increase (-)/(decrease) in inventories as well as trade and other receivables -15,741 10,316 Increase/ decrease (-) in trade payables, provisions and other payables 6, Other non-cash income and expenses Cash generated from operations -8,188 9,147 Interest paid Interest received 1 25 Income taxes paid - 2 Net cash used in (-) /generated by operating activities -8,747 8,707 - thereof from discontinued operations -10,476 8,764 Cash flows from investing activities Net cash inflow from the acquisition of subsidiaries (cash and cash equivalents received) Net cash outflow from sale of subsidiaries (cash and cash equivalents given) Proceeds from the disposal of tangible assets - 32 Payments for the acquisition of property, plant and equipment Payments for the acquisition of intangible assets Net cash used in investing activities thereof from discontinued operations Cash flows from financing activities Proceeds from issuing equity instruments of the Company 7.8 1,125 0 Proceeds from borrowings 12,718 21,201 Payments for the repayment of loans -3,527-26,834 Payments for the granting of loans Net cash provided by/used in (-) financing activities 9,848-5,633 - thereof from discontinued operations 11,292-5,633 Net increase in cash and cash equivalents 916 2,899 Cash and cash equivalents at the beginning of the reporting period 406 1,461 Cash and cash equivalents at the end of the reporting period 1,322 4,360 See accompanying Notes to these Interim Consolidated Financial Statements VI

9 1 GENERAL INFORMATION blockescence plc ( the Company ) is a limited liability company founded in Malta on 21 March 2011 and renamed from Solidare Real Estate Holding plc in blockescence plc in the course of a realignment of the investment focus on 31 May The Company is the parent holding company of blockescence services AG and Samarion SE, Germany, which holds 35.53% of the shares and 53,1 % of the voting rights of gamigo AG, Germany, as a key investment of the Group. The blockescence plc and their subsidiaries form the blockescence-group. As of 30 June 2018, the major shareholder of blockescence plc was Bodhivas GmbH, Germany, with 73.65% of the shares of the Company. The Company is registered with the Registry of Companies in Malta, registration number C with its registered office at 168 St. Christopher Street, Valetta, VLT1467, Malta. blockescence focusses on the implementation of a distributed ledger technology (DLT or blockchain) in industries, that can be fundamentally changed by it. Business purpose is the selection of appropriate industries and the acquisition of key companies, to unlock and build up values through the application of DTL-technology and the active take-over of operative management for the blockescence as investment company. The online-gaming industry has been identified as a promising investment target by blockescence plc, whose essential problems can be solved with blockchain-based instruments and processes that are omnipresent in the whole sector. Therefore, the gamigo AG, as one of the leading companies in the online-gaming sector in Europe has been indirectly acquired. After this acquisition, the Board of Directors decided to accept an offer from Suryoyo Holding GmbH to dispose all shares in the solidare real estate holding GmbH that bundles the real estate business of the Group, to Suryoyo Holding GmbH. We refer to the sections 4 and 5 of these Notes for further details regarding the acquisition and disposal process. Furthermore, blockescence plc can acquire, hold and dispose other investments (e.g. shares, stocks, bonds, securities and other assets of companies as well as investments in fonds and assets) that support the above stated business purpose and that the Board of Directors consider necessary, as has been the case hitherto. 2 ACCOUNTING PRINCIPLES The interim consolidated financial statements of the blockescence-group have been prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and in consideration of the interpretation of the IFRS Interpretations Committee (IFRIC) as adopted by the EU. The interim consolidated financial statements as of 30 June 2018 were prepared in accordance with the principles of IAS 34. The Notes are presented in condensed form. The interim consolidated financial statements of the blockescence-group as of 30 June 2018 have been neither subject to a full scope audit nor subject to a limited review by a statutory auditor. In the preparation of the interim consolidated financial statements, the accounting standards and interpretation have been used valid as of 1 January Additionally the new leasing standard IFRS 16 has been adopted early as of 1 January The interim consolidated financial statements as of 30 June 2018 were prepared using the same accounting and valuation methods as the preceding consolidated financial statements as of 31 December 2017, except for the following: Change of the structure of the consolidated income statement In the reporting period, the interim consolidated income statement was structured in accordance with the nature of expense method for the first time. This leads to a changed composition and designation of the interim consolidated income statement items. The structure was changed because the management VII / 1

10 of material subsidiaries as well as the Board of Directors of the Company use the cost of expenses for management control, due to the changes in the operative activities. The structure therefore increases the relevance for the addressees of the interim consolidated financial statements and improves the insight in the finance, earnings and asset situation of the blockescence-group. The change of the interim consolidated income statement structure did not affect the net result, nonetheless the comparative figures of the prior period have been adjusted because of a changed classification of own work capitalised by the Group. In accordance with the function-of-expense-method the expenses have been formally reduced by the corresponding own work capitalised, while they are stated in a separate position applying the nature-of-expense-method. The comparative figures for the period from 1 January 2017 to 30 June 2017 were therefore adjusted by own work capitalised amounting to 614, while the Group result has not changed. Because of the disposal of the solidare real estate holding GmbH in the first half of 2018 the adjusted interim consolidated income statement positions are included in the net income from discontinued operations, we also refer to section 8.10 of these Notes. Beyond that, the effects of the standards and interpretations, which became effective for the first time for fiscal years starting on 1 January 2018 are as follows: IFRS 9 Financial instruments Since 1 January 2018, the Group applies IFRS 9 Financial Instruments, which replaces the previous standard IAS 39. Additionally the Group applies the alteration to IFRS 9 regarding early terminable financial assets with a negative early discharge, since then. IFRS 9 includes a new classification and measurement approach for financial assets that reflects the business model in which the assets are held as well as the characteristics of their cash flows. These criteria determine whether the instrument is to be measured in the subsequent measurement at acquisition costs or at fair value. Compared to IAS 39, a further difference is the newly developed model of expected credit losses (Expected-Loss-Model). The basic principle of the Expected-Loss-Model is the disclosure of the development of deterioration or improvement in the credit quality of the financial instruments. Furthermore the standard contains changes regarding hedge accounting. Concerning the applicable valuation model there were no changes caused by the adoption of IFRS 9. All financial assets and liabilities are still measured at amortized costs. Excepted from this are the derivative financial liabilities, which are still measured at fair value. A complete reconciliation of the financial instruments from IAS 39 to IFRS 9 can be found in section 11.1 of these Notes. Even the application of the expected-loss-model did not lead to a different impairment requirement as of transition date. The changes regarding hedge accounting are irrelevant for the Group, as no hedging instruments are used as of transition date. The adoption of IFRS 9 therefore has no impact on the interim consolidated financial statements as of 30 June An adjustment of comparative information was not necessary either. IFRS 15 Revenue from Contracts with Customers Since 1 January 2018, the Group first-time applies IFRS 15, which specifies the revenue recognition. The standard introduces a new five-step model framework for the revenue recognition from contracts with customers: (1) Identify the contract(s) with a customer (2) Identify the performance obligations in the contract (3) Determine the transaction price (4) Allocate the transaction price to the performance obligations in the contract (5) Recognise revenue when (or as) the entity satisfies a performance obligation. VII / 2

11 The adoption of the standard does not have an impact on the various types of revenue (rental income, other income from asset management as well as income from the sale of real estate and other income from property development and sales) that occur as of transition date, as already explained in the consolidated financial statements as of 31 December Operating costs and the corresponding earnings are still shown unbalanced in the income statement according to IFRS 15, therefore the presentation is consistent and an explicit disclosure of net rent and rent including incidental cost is achieved. Also for the revenue recognition over time, there are no changes regarding the recognition of income from operating costs. Due to the fact that there are no changes regarding the other remaining revenue types either, the application of IFRS 15 has no impact on the consolidated financial statements. An adjustment of the comparative information of prior periods was not necessary either. IFRS 16 Leases The Group decided to early adopt IFRS 16 Leases as of 1 January 2018, which replaces IAS 17. For the lessee, the standard prescribes a new one (single) accounting model. This model causes the lessee to recognise all assets and liabilities from lease contracts in the statement of financial position (balance sheet), except for short-term leases and leases of low value assets (each option). According to IFRS 16, the lessee recognises a lease liability in the statement of financial position (balance sheet) for all leases in the amount of the present value of the future lease payments plus directly attributable costs and simultaneously activates a corresponding right to use the underlying asset. During the lease term, the lease liability is mathematically updated similar to the regulations of the previous IAS 17 for finance leases. Right-of-use assets that are not investment properties according to IAS 40 are amortised on schedule. Rights of use for investment properties that are measured at fair value according to IAS 40 are measured in accordance with the common accounting and valuation principles of IAS 40. The standard offers different possibilities for the consideration existing lease contracts as of transition date. The blockescence-group decided to use the modified retrospective approach, therefore an adjustment of the prior year figures was not necessary. Under this approach, the liabilities from leasing agreements as of transition date are measured with the present value of the future lease payments, discounted at the incremental borrowing rate. Assets from leasing agreements can be measured as of transition date with the value of the corresponding liabilities. Per transition date 1 January 2018, the Group examined all contracts and lease agreements and whether they fall within the scope of IFRS 16. The existing lease agreements of the Group as of transition date, however are within the scope of the exceptions for short-term leases (leased administrative offices and company cars) and for low value assets (office equipment). The Group made use of the accounting relief as of 1 January 2018, and therefore did not applied the right-of-use model according to IFRS 16 for the above mentioned lease agreements. With the acquisition of Samarion SE on 9 May 2018 blockescence plc also acquired lease agreements that are within the scope of IFRS 16. Because of the new affiliation to blockescence plc the prior Samarion SE subgroup had to retrospectively apply IFRS 16 as of 1 January Therefore the blockescence-group Recognised lease assets amounting to 1,178 and lease liabilities at an amount of 1,178 (thereof 847 short-term lease liabilities and 331 long-term lease liabilities) in the interim consolidated statement of financial position. VII / 3

12 3 CHANGES IN THE SCOPE OF CONSOLIDATION During the reporting period, the Company re-oriented its investment focus and investment strategy with the aim of generating accelerated and sustained value for its shareholders. The scope of consolidation has changed considerably due to the realignment in the reporting period due to the sale and acquisition of subsidiaries. Scope of consolidation fully consolidated subsidiaries Associated companies Total Balance at 1 January De-consolidations Subsidiaries included for the first-time in the scope of consolidation Balance at 30 June A list of all de-consolidated companies and companies included in the scope of consolidation for the first time is provided in section 3.1 (de-consolidations) and 3.2 (initial consolidation) of these Notes. 3.1 Deconsolidations The following companies were de-consolidated during the reporting period: Entity Place of incorporation Proportion of ownership interest Direct consolidated entities solidare real estate holding GmbH Germany % Indirect consolidated entities 4. Rigi Property GmbH Germany % 7. Rigi Property GmbH Germany % Pecunia Facility Services GmbH Germany % Pilatus II Holding GmbH Germany % Pilatus SR Holding GmbH Germany % Primus Asset Management GmbH Germany % Prodomi Wohnservice GmbH Germany % Promas Verwaltungsgesellschaft mbh Germany % solidare service GmbH Germany % solidare Wohnraum, Bau- und Planungsges. mbh Germany % Rigi Düsseldorf 2 GmbH Germany % Rigi Hamburg 1 GmbH Germany % Rigi Neuss 1 Property GmbH Germany % 2. Rigi Property GmbH Germany % ONO student GmbH Germany % Rigi Hausener Weg GmbH Germany % VSF Grundstücks AG Germany % 3. Rigi Property GmbH Germany % VII / 4

13 All these companies were completely de-consolidated as of 9 May 2018 due to the sale of all shares in solidare real estate holding GmbH to Suryoyo Holding GmbH. 3.2 Initial consolidation During the reporting period, the following companies were included in the scope of consolidation of the Company for the first time: Entity Place of incorporation Proportion of ownership interest Direct consolidated entities Samarion SE Germany % Indirect consolidated entities adspree media GmbH Germany % Aeria Games GmbH Germany % ElbSpree Media Holding GmbH Germany % gamigo Advertising GmbH Germany % gamigo Inc. USA % gamigo Portals GmbH Germany % gamigo Publishing GmbH Germany % Mediakraft GmbH Germany % Mediakraft Networks GmbH Germany % MK Productions GmbH Germany % Persogold GmbH Germany % Produktkraft Vermarktung GmbH Germany % Mediakraft PL Sp. z. o. o. Poland % Mediakraft Turkey Y. H. A.S. Turkey % gamigo AG Germany % Regarding the acquisition of Samarion SE and its subsidiaries, we refer to section 5 of the Notes. Four subsidiaries and one associated company of subordinate importance to the net assets, financial position and results from operations of the Group were not consolidated or not included at equity but instead stated at acquisition cost. Altogether, the financial figures of immaterial subsidiaries accounted for less than 0.4% of Group sale revenue, less than 0.3% of shareholders equity and less than 0.5% of total assets. As of 30 June 2018, blockescence plc holds 35.52% of the shares in gamigo AG, Germany but has the majority of voting rights due to voting agreements and does therefore have control in the sense of IFRS 10. Therefore, gamigo AG was included in the present interim consolidated financial statements as a fully consolidated subsidiary. VII / 5

14 4 DISPOSAL OF SHARES IN SOLIDARE REAL ESTATE HOLDING GMBH The shares in solidare real estate holding GmbH and its subsidiaries were completely disposed as of 9 May 2018 and subsequently the entity has been de-consolidated. The purchase price amounted to million EUR. The composition of the net assets on the date of transfer is shown in the following table: 9 May 2018 Assets Real estate property 103,859 Cash and cash equivalents 611 Fixed assets 438 Intangible Assets 759 Other assets 4,200 Liabilities Trade and other liabilities 2,623 Loans 56,008 Provisions 3,102 Deferred tax liabilities 7,466 Other liabilities 1,439 Total net assets transferred 39,229 Thereof attributable to non-controlling interest 3,364 The result of the de-consolidation therefore is as follows: 9 May 2018 Purchase price received 42,930 Less: net assets transferred 39,229 Plus: net assets attributable to non-controlling interest 3,364 Gain on sale 7,065 The gain on sale amounting to 7,065 is included in the result from the discontinued operation in the interim consolidated income statement (see section 8.10 of these Notes). VII / 6

15 5 ACQUISITION OF SAMARION SE On 9 May 2018, the Company acquired 100 % of the shares in Samarion SE, Germany from Bodhivas GmbH, Germany for 62,000. The purchase price was settled through various promissory notes and a cash component. With the acquisition of Samarion SE, blockescence plc also indirectly acquired 19 subsidiaries and two associated entities (of which 16 are fully consolidated and one is shown as associated entity in the interim consolidated financial statements as of 30 June 2018, whereas the remaining entities are not considered in the consolidation, because of their minor importance). Due to binding voting agreements, the Samarion SE holds the majority of voting rights of gamigo AG, which is the reason why the entity is fully consolidated in these interim consolidated financial statements. The acquisition of Samarion SE is a business combination in accordance of IFRS 3 Business combinations. The acquisition resulted in an identified goodwill. Because of the temporary proximity of this acquisition to the period end date of the interim consolidated financial statement as of 30 June 2018 the purchase price allocation is still preliminary. The purchase price allocation will be finalised in the second half of a) Acquired subsidiaries Core activity Acquisition Date Acquired Shares Acquisition cost Samarion SE Holding of gamigo AG (development and sale of online games) 09 May % 62,000 The Samarion SE and its subsidiary gamigo AG were acquired with the purpose, to unlock and build up values through the application of DTL-technology in close cooperation with the operative management for the blockescence as investment company. b) Consideration transferred Promissory Note I 42,000 Promissory Note II 16,000 Promissory Note III 4,000 Total 62,000 VII / 7

16 c) Acquired assets and liabilities recognised at the acquisition date 9 May 2018 Assets Intangible assets 57,190 Cash and cash equivalent 754 Fixed assets 2,638 Financial assets 5,614 Issued loans 840 Deferred tax assets 7,141 Other assets 6,850 Liabilities Trade and other liabilities 17,330 Loans 21,576 Provisions 3,277 Other liabilities 14,408 Net assets 24,436 The receivables acquired in the course of the transaction, which mainly consists of trade receivables, have a fair value of 3,843 and a gross contractual value of 3,843 as well. It is expected that these claims will be fully recoverable. d) Goodwill The Company made use of the accounting option in accordance with IFRS 3.19, to measure the noncontrolling interest at its fair value, as this provides more relevant information to the addressees of the consolidated financial statement according to the Board of Directors. The goodwill resulting from the business combinations composes as shown in the following table: Samarion SE in Fair Value of the acquired subsidiary Less: acquired net assets Goodwill The goodwill amounting to EUR million includes non-separable intangible assets, such as knowhow of the employees (assembled workforce), expected effects resulting from the use of the blockchaintechnology, as well as expected acquisitions. The purchase price allocation is preliminary, because a detailed analysis of the assets and liabilities has not yet been completed. There have been incidental acquisition cost caused in the course of the described business combination at an amount of 163, which are not included in the purchase price and are recognised as other operative expenses in the interim consolidated income statement. VII / 8

17 e) Net cash outflow In the course of the acquisition of Samarion SE there has been no cash outflow until 30 June However, there has been an inflow of cash amounting to 754 due to the acquisition of Samarion SE. f) Impact of the acquisition on the Group result The acquired business operation contributed revenue amounting to 9.2 million EUR and a net loss of 1.3 million EUR to the Group result, considering the effects of the purchase price allocation and integration costs, for the period between the acquisition date and the 30 June If the entities operation would have been considered from 1 January 2018 in the interim consolidated financial statement the revenue would amount to 21.5 million EUR and the profit after tax -0.1 million EUR. 6 SEGMENT REPORTING A business segment as defined by IFRS 8 is a component of an entity that engages in business activities from which it may earn revenues and incur expenses and whose operating results are regularly reviewed by the entity's chief operating decision maker (Board of Directors) to make decisions about resources to be allocated to the segment and assess its performance for which discrete financial information is available. The blockescence-group business activity until 9 May 2018 was the development and trade with real estate in the area of micro-apartments and was not divided into different segment due to the consistent characteristics of the operation. With the disposal of the shares in solidare real estate holding GmbH and the acquisition of Samarion SE the Group solely operates in the blockchain-technology sector and therein focusses on the online gaming market for the moment. The Group controlling and management of the operational results is made globally without a differentiation between geographic markets. The group operated in the real estate and online gaming segment during the reporting period. Information relating the assets, liabilities, expenses and earnings for the real estate segment can be found in section 4 or the result from discontinued operations in section 8.10 of these Notes, respectively. The corresponding information for the online-gaming segment can be found in the interim consolidated statement of financial position and the interim consolidated income statement (continuing operations). VII / 9

18 7 EXPLANATIONS ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSTION 7.1 Property, plant and equipment The book value of the property, plant and equipment as of the reporting date can be derived from the following table: 30 Jun Dec 2017 Property, plant and equipment 2, Total 2, The development of book values was as follows: Property, plant and equipment Balance at 1 January Additions 121 Acquisitions through business combination 2,638 Depreciation 307 Disposals Balance at 30 June ,565 Property, plant and equipment primarily consists of operating and business equipment as well as IT equipment, which also relate to the main additions. 7.2 Intangible assets The book value of the intangible assets as of the reporting date can be derived from the following table: 30 Jun Dec 2017 Goodwill 138,895 0 Other intangible assets 51, Self-constructed intangible assets 2,657 0 Advance payments on intangible assets Total 193, Includes assets reclassified to assets held for sale and sales of such business units. VII / 10

19 The development of book values was as follows: Goodwill Other intangible assets Selfconstructed intangible assets Advance payments on intangible assets Total Balance at 1 January Additions Acquisitions through business combination 2 138,895 54,312 2, ,085 Amortisation 0 1, ,006 Disposals 3 0 2, ,031 Balance at 30 June ,895 51,258 2, ,465 Material intangible assets Other intangible assets mainly include rights and licenses from online-games (EUR 46,347), which were received as part of the acquisition of Samarion SE and were reduced by scheduled amortisation based on their economic useful life. 7.3 Financial assets 30 Jun Dec 2017 Loans carried at amortised cost Other investments (participations) Loans to related parties Total The other investments relate to the shares in Group companies, which were not included in the interim consolidated financial statements as fully consolidated subsidiaries or associates owing to their immaterial importance for the Group. 7.4 Shares in associated companies As of 30 June 2018, the Group reports shares in associated companies in the amount of 5,359 (previous year: 0). They are relating to the investment in an US-based LLC, which was also acquired on 9 May 2018 as part of the acquisition of Samarion SE. Goodwill results from the acquisition of Samarion SE 3 Includes assets reclassified to assets held for sale and sales of such business units. VII / 11

20 7.5 Property inventories With the disposal of solidare real estate holding GmbH, blockescence has completely divested itself of activities in the real estate sector and properties. The development in the financial year is shown in the following table: Property inventories Balance at 1 January ,292 Additions 9,062 Capitalised modernisation costs & development 2,505 Capitalisation of interest on borrowings 0 Disposals 4 103,859 Balance at 30 June Due to the classification of real estate sector as a discontinued operation, no borrowing costs were capitalised in the reporting period (previous year: 170). 7.6 Trade and other receivables 30 Jun Dec 2017 Trade receivable 4,219 2,733 - less impairment Subtotal trade recivables 4,091 2,638 Other receivables 3,745 2,527 - less impairment -15-1,500 Subtotal other receivables 3,730 1,027 Prepaid expenses Total 8,569 3,720 thereof non-current thereof current 8,569 2,789 Trade receivables in the amount of 4,219 (previous year: 2,733) relate to sales from onlinegames and marketing services. Due to expected uncollectibility, individual trade receivables had been impaired. Other receivables with a book value of 3,730 (previous year: 1,027) primarily relate to sales of licences. Includes assets reclassified to assets held for sale and sales of such business units. VII / 12

21 Prepaid expense items are shown for expenses that represent expenses for future periods after 30 June 2018 and mainly relate to prepayments to suppliers as well as to insurances whose maturity exceeds 30 June The above-mentioned receivables include amounts (see age structure analysis below), which are overdue as of the reporting date, for which the Group, however, has not recognised impairments. No impairments were made in these cases, as the collectability and legal enforceable nature of the claim is considered to be given. Book value 1-30 days days Über 180 days Overdue trade receivables Overdue other receivables Total In the first half of 2018, impairment losses on trade receivables and other receivables were recognised in the amount of 96 (previous year: 1,595) in the interim consolidated income statement. The following table shows the receivables according to their maturities: Less than 1 year 1 to 5 years 5 years + Total Trade receivables 4, ,091 (31 December 2017) (1,707) (0) (931) (2,638) Other receivables 3, ,730 (31 December 2017) (1,027) (0) (0) (1,027) Prepaid expenses (31 December 2017) (55) (0) (0) (55) Total 8, ,569 Receivables with a maturity period of more than one year will be discounted at a market interest rate. 7.7 Cash and cash equivalents In the consolidated statement of financial position as of 30 June 2018 cash and cash equivalents amounted to 1,322 (previous year: 406). 7.8 Shareholders equity Blockescence plc has an authorised capital of 300,000,000 ordinary shares (common stock) as of 30 June 2018 with a nominal value of EUR 1,00 which do not entitle the subscriber to a fixed profit. As of 30 June 2018, 40,800,000 ordinary shares (previous year: 40,800,000 ordinary shares) were issued and fully paid. VII / 13

22 Number of shares Common stock Capital reserves (additional paid-in capital) 30 Jun Dec Jun Dec Jun Dec 2017 thousand thousand Issued and fully paid-in capital: ordinary shares of par value EUR ,800 40,800 40,800 40,800 1,125 6 The movement in issued and paid-in ordinary shares of blockescence plc did not change during the reporting period, but on 27 July 2018 a resolution on increase of capital in the amount of 16,000 was passed and was registered in Maltese Commercial Register on 13 August Furthermore, a capital increase of 2,550 was passed on 7 August 2018; the corresponding capital was already partially paid-in as of 30 June 2018 and fully paid in by 3 August 2018, it has been registered in the Maltese Commercial Register on 24 September The capital already paid-in by 30 June 2018, less the related costs, has already been recognised in the interim consolidated financial statements due to the very high probability of being entered in the capital reserves as of 30 June In the consolidated statement of financial position as of 30 June 2018, the retained earnings in the amount of 2,041 (previous year: -4,354) include losses carried forward of -4,354, the consolidated profit for the period of 5,851 (previous year: -1,842) as well as 544 resulting from the decrease in the shares in 7. Rigi Property GmbH. As a transaction between the owners, the transaction was recognised directly in shareholders equity. As of 30 June 2018, non-controlling interests (minority interests) in the blockescence-group of 101,321 (previous year: 3,515) existed stemming from all group companies, in which the Company does not hold 100% of the shares. In the period from 1 January to 30 June 2018, the blockescence -Group did not grant any share-based options or payments. As of 30 June 2018, there are comprehensive option right agreements for the acquisition of non-controlling interests in gamigo AG. The Board of Directors has the discretion to exercise of these options, but the target is to acquire 100% of the shares in gamigo AG by 31 December With regard to option right agreements with related parties, we also refer to section 10 of these Notes. 7.9 Financial liabilities 30 Jun Dec 2017 Unsecured amortised cost Loans granted from related parties 3,631 8,630 Loans granted from third parties 2,769 0 Bank loans ,400 8,942 Secured amortised cost Bank loans 14,538 8,025 Loans granted from third parties 0 28,049 Loans granted from related parties ,538 36,074 Total 20,938 45,016 VII / 14

23 The financial liabilities existing as at the reporting date of 30 June 2018, serve as long-term financing in the amount of 12,028 (previous year: 28,049) and as short-term financing in the amount of 8,910 (previous year: 16,967) of the Company. The blockescence-group has concluded a contract with UniCredit Bank AG for the granting of a credit account limit and a credit agreement in the amount of EUR 17 million, as well as UniCredit Bank AG as its principal and main bank. As part of this, the Group has two loans of EUR 6 million each. The two loans carry an interest rate of 6% p.a. In addition to the loans, a current account credit line of EUR 5 million will be granted. The utilization will be charged with an interest of 8% p.a. In order to secure these loans as well as the current account credit line, a general assignment has been agreed for the trade receivables of gamigo AG and Aeria Games GmbH, as well as an assignment of the existing account balance of the Gamigo Group to third-party banks. A further credit line of EUR 2 million is also available with an interest rate of 8% p.a. to and is secured by pledging games rights of Aeria Games GmbH. In the past, the Group company gamigo AG has received a loan from former principal shareholder Axel Springer Digital GmbH (formerly: Axel Springer Venture GmbH). The bullet loan has a maturity of more than one year. During the term of the loan, repayments in the amount of a minimum amount of 100 are permitted. The lender has declared a subordination in respect of its payment claims under the loan agreement. The interest on the loan is based on a fixed interest rate of 3.9% over the maturity. With regard to loans from related parties, we refer to section 10 of these Notes. The following table shows the remaining maturity date of the financial liabilities as of 30 June 2018: Remaining maturity date until 1 year Remaining maturity date 1 to 5 years Remaining maturity date over 5 years Total Loans granted from related parties 0 3, ,631 Loans granted from third parties 2, ,769 Bank loans 6,851 7, ,538 Total 8,910 12, , Trade payables In the consolidated statement of financial position as of 30 June 2018, trade payables of 8,707 (previous year: 1,124) are disclosed resulting from the Group s operating activities. Liabilities to affiliated companies are not included in trade payables (previous year: also). VII / 15

24 7.11 Other payables 30 Jun Dec 2017 Other financial liabilities Liabilities from the acquisition of shares 22,204 0 Derivative financial liabilities Deposits 0 46 Total other financial liabilities 22, Other non-financial liabilities Liabilities to tax authorities 1, Deferred income 1, Liabilities from wages and salaries 4 16 Other Total other non-financial liabilities 2, Total 24, The other financial liabilities primarily relate to outstanding liabilities from the acquisition of Samarion SE ( 20,000). Other non-financial liabilities relate to value-added tax and wage tax liabilities, liabilities for social securities contributions well as deferred income. Deferred income items are primarily formed for payments received, which represent income for the upcoming periods after 30 June All other liabilities are classified as current (previous year: 691) Provisions The balances of the provisions are as follows: 30 Jun Dec 2017 Personnel provisions Audit and year-end fees Land reclamation 0 2,967 Other provisions 2, Total 3,694 3,324 As of 30 June 2018, all provisions are short-term in their nature. VII / 16

25 Personnel expenses Audit and year-end fees Land reclamation Other provisions Total Balance at 1 January , ,324 Additional provisions recognised Acquisitions through business combinations Reductions arising from payments/other sacrifices of future economic benefits ,331 3, Disposal from the sale of shares 0 0 2, ,102 Balance at 30 June ,714 3,694 The other provisions ( 2,714; prior year: 357) mainly relate to outstanding invoices for legal, consulting and auditing costs as well as license fees and revenue shares. Due to the allocation to the short-term field, a cash outflow in connection with these provisions is expected within one year. 8 NOTES TO THE CONSOLIDATED INCOME STATEMENT 8.1 Revenue Revenue consist of income from online and mobile games (casual-games, role-playing games and strategy games) and of income from business-to-business (B2B)-services (platform and advertising services). Since 9 May 2018 they form part of the sales of the blockescence-group. 01 Jan Jun Jan Jun2017 Revenue Games (business to consumer) 6,861 0 Platform services (business to business) 2,035 0 Other revenue 0 30 Total 8, Other own work capitalised The other own work capitalised ( 704) mainly consists of personnel expenses relating to the capitalisation of development cost for the gamigo platform and for games, that were capitalised as incidental acquisition cost for acquired intangible assets. VII / 17

26 8.3 Other operating income The other operating income consists of the following items: 01 Jan Jun Jan Jun 2017 Other operating income Reimbursements Currency exchange gains 63 0 Others 56 0 Total The other operating income mainly contains reimbursements ( 690) as well as currency exchange gains ( 63). The income relates to the operative activities of the gamigo-group. 8.4 Expenses for purchased services The expenses for purchased services ( 1,753) mainly consists of cost for revenue shares, royalties and technical services. 8.5 Personnel expenses The remuneration of the entities employees is shown in the personnel expenses. The personnel cost consist of the following items: 01 Jan Jun Jan Jun 2017 Wages and Salaries 2,131 0 Social contributions Total 2,489 0 VII / 18

27 8.6 Other operating expenses Other operating expenses ( 3,431; prior year: 218) include the following expenses: 01 Jan Jun Jan Jun 2017 IT-services 1,783 0 Marketing and media costs Rental costs Commissions Legal, audit and consulting services Out-of-pocket expenses 60 0 Other Total 3, Depreciation and amortisation Depreciation and amortisation include amortisations of intangible assets in the amount of 1,909 (previous year: 0) and the depreciation on property, plant and equipment in the amount of 268 (previous year: 15). No impairments on intangible assets and property, plant and equipment have been recognised during the reporting period. 8.8 Financial result The financial result is broken down as follows: 01 Jan Jun Jan Jun 2017 Financial result Financial expense Financial income 17 1 Total The financial expense primarily results from interest paid and deferred interest for loans received. The financial income results from interest on cash and cash equivalents as well as from interest on interestbearing loans and receivables issued by the blockescence. VII / 19

28 8.9 Income taxes In Malta, no separate corporate income tax system exists. A company is subject to the income tax like an individual person. All companies located in Malta are subject to a nominal income tax rate of 35%. Since the introduction of the income tax in Malta in 1948 there is an imputation system of income taxes, e.g. the income taxes paid by a company will be imputed/refunded on the level of its shareholders at the time of a dividend payment. This system applies for Maltese shareholders as well as for non-resident shareholders. The Board of Directors of blockescence plc plans to generate revenues via dividend income from its German subsidiary Samarion SE. From an income tax perspective, Samarion SE basically generates profit form the following two sources of income streams: Dividend income/capital gains which would be exempted from income taxes in Malta through the application of the participation exemption under the Maltese tax law. Other income. Foreign income taxes are calculated using the tax rate applicable in the respective countries, which varies from 12.3% to 32.25% (previous year: 0.0% to 35.0%). Besides Malta the blockescence-group is also represented in Germany, Poland, Turkey, Switzerland and USA with Group companies. In Germany all subsidiaries are structured as corporation and therefore are subject to corporation tax, trade tax and the solidarity surcharge. The entities therefore are subject to a formal income tax rate of %. Since the majority of the operational activity is attributed to the German subsidiaries, this tax rate is the most relevant for the Group. The Swiss entity is subject to ordinary taxation, the tax on capital and the income tax rate is 12.3%. In the US, a new tax law was signed by the President on 22 December 2017 that significantly reduces tax rates in 2018 in the United States of America since the beginning of the calendar year. The new tax rate at the federal level is 21%. Together with the local corporate income tax, the nominal income tax burden in the US is 26.5% and is perpetual. While the nominal tax rate for corporations in Turkey is 22%, it remained unchanged at 19% in Poland for many years. The deferred taxes for lox carryforwards are measured based on the corresponding local tax rate. The components of the income taxes of the blockescence-group for the reporting period from 1 January 2018 to 30 June 2018 are as follows: 01 Jan Jun Jan Jun 2017 Current taxes (- expenses / + earnings) Malta 0 0 Abroad -1 0 Deferred taxes (- expenses / + earnings) Income taxes (- expenses / + earnings) VII / 20

29 8.10 Result from discontinued operations As of 9 May 2018 the previous real estate business has been disposed through the sale of the shares of solidare real estate holding GmbH and its subsidiaries. As a result, the result of the real estate business was classified as a discontinued business segment until it was distributed to its shareholders: 01 Jan Jun Jan Jun 2017 Sales revenue 191 1,780 Other own work capitalised 2, Other operating income Cost of materials and purchased services -1,867-1,194 Personnel expenses Other operating expenses -1,203-1,088 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Earnings before interest and taxes (EBIT) Financial expense -1,074-1,009 Financial income 7 24 Other financial expense 0 0 Earnings before taxes (EBT) -1,894-1,652 Income taxes Gain on disposal of the business 7,065 0 Loss for the period from discontinued operations 5,093-1, Earnings per share Information about earnings per share is in accordance with IAS 33: 01 Jan Jun Jan Jun 2017 From continuing operations From discountinued operations Total VII / 21

30 The results and the weighted average number of shares for basic earnings per share are as follows: 01 Jan Jun Jan Jun 2017 Profit for the period attributable to the owners of the Company 5,847-1,842 Profit for the period used in the calculation of basic earnings per share 5,847-1,842 Loss from discontinued operations used in the calculation of basic earnings per share from discontinued operations 5,094 0 Profit for the period from continuing operations used in the calculation of basic earnings per share from continuing operations 754-1, Jan Jun Jan Jun 2018 thousand thousand Weighted average number of shares for the calculation of basic earnings per share 40,800 40,800 In the reporting period, no dilutive effects were taken into account when calculating earnings per share. 9 LEGAL DISPUTES Following several M&A transactions, the Company is predominantly active in a legal dispute with the contractual partners regarding the interpretation of the contracts and the contractual objects. In addition to the already deferred lawyer and court costs, the Company assumes that there will be no further burdens, more likely a decrease in its burden is expected. In addition, the Group was not involved in any further legal disputes as of 30 June VII / 22