Digital Bros S p A : Draft Financial Statements as of June 30th, 2022 –

Digital Bros S.p.A. financial statements

as of June 30th, 2022

Digital Bros S.p.A.

Via Tortona, 37 - 20144 Milan, Italy

VAT number IT095

Share capital: Euro 6,024,334.80 of which Euro 5,704,334.80 subscribed Milan Companies House No. 290680-Vol. 7394 Chamber of Commerce number 1302132

This report is available in the Investor Relations section of the Company's website at

www.digitalbros.com

Please consider that this is an Italian to English translation and that the Italian version shall always

prevail in case of any discrepancy or inconsistency

Index
Directors' Report ........................................................................................................................	4
1.	The videogames market ....................................................................................................	4
2.	Alternative performance ratios..........................................................................................	6
3.	Seasonality effects.............................................................................................................	6
4.	Significant events during the reporting period..................................................................	7
5.	Profit and loss statement for the period ended June 30th, 2022.......................................	10
6.	Balance sheet as of June 30th, 2022.................................................................................	12
7.	Financial ratios ................................................................................................................	13
8.	Intercompany and related party transactions and atypical/unusual transactions.............	14
9.	Treasury shares................................................................................................................	14
10.	Research and development..............................................................................................	15
11.	Operational risks, financial risks and financial instruments............................................	15
12.	Contingent assets and liabilities ......................................................................................	17
13.	Subsequent events ...........................................................................................................	17
14.	Business outlook .............................................................................................................	17
15.	Other information............................................................................................................	18
Digital Bros S.p.A. Financial statements as of June 30th, 2022..............................................	19
Balance sheet as of June 30th, 2022 ........................................................................................	20
Profit and loss statement for the period ended June 30th, 2022 ..............................................	21
Comprehensive income statement as of June 30th, 2022 ........................................................	22
Cash flow statement as of June 30th, 2022..............................................................................	23
Statement of changes in equity as of June 30th, 2022 .............................................................	24
Profit and loss statement for the period ended June 30th, 2022 prepared in accordance with
Consob resolution no. 15519 of July 27th, 2006 .....................................................................	25
Balance sheet as of June 30th, 2022 prepared in accordance with Consob resolution no. 15519
of July 27th, 2006 ....................................................................................................................	26
Profit and loss statement for the period ended June 30th, 2022 prepared in accordance with
Consob resolution no. 15519 of July 27th, 2006 .....................................................................	27
Notes to Digital Bros S.p.A. Financial statements as of June 30th, 2022...............................	28
1.	Content and other general information............................................................................	29
2.	Accounting policies.........................................................................................................	32
3.	Discretionary items and significant estimates.................................................................	50
4.	Balance sheet as of June 30th, 2022.................................................................................	52
5.	Profit and loss statement for the period ended June 30th, 2022.......................................	71
6.	Financial instruments and financial risk management (IFRS 7) .....................................	76
	Digital Bros S.p.A. financial statements as of June 30th, 2022

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7.	Non-recurring income and expenses ...............................................................................	84
8.	Contingent assets and liabilities ......................................................................................	84
9.	Related party transactions ...............................................................................................	85
10.	Atypical or unusual transactions .....................................................................................	86
11.	Other information............................................................................................................	87
12.	Share ownership structure (pursuant to article 123-bis of the T.U.F.)............................	88
13.	Assets revaluation ...........................................................................................................	89
14.	Loans granted to executives and supervisory bodies ......................................................	89
15.	Audit fees ........................................................................................................................	89
16.	Allocation of net profit for the year.................................................................................	89
Statement pursuant to art. 154- bis (5) of the T.U.F. ..............................................................	90

Digital Bros S.p.A. financial statements as of June 30th, 2022

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DIRECTORS' REPORT

Digital Bros S.p.A. distributes in Italy, video games acquired from international publishers under the Halifax brand. The games are marketed through a direct sales network of key accounts and through an indirect sales network of sales agents. The Company also distributes Yu-Gi-Oh! trading cards in Italy.

The Company also performs management and coordination activities in its capacity as Parent Company of the Digital Bros Group.

Analysis of revenue by geographical area can be found in the Notes to Digital Bros S.p.A. Financial Statements.

1. THE VIDEOGAMES MARKET

The video games market represents one of the most important segments of the entertainment industry. Movies, books and magazines, video games and toys are part of the industry and share the same characteristics, brands, features and intellectual properties.

The market is constantly evolving and growing, driven by the continuous technological upgrades. Gaming is no longer limited to personal computers and traditional consoles (Sony, Microsoft and Nintendo), but has expanded to mobile phones and tablet devices. High speed connectivity, fiber optic networks and smart phones have made video games increasingly diversified, sophisticated and interactive and have expanded the gaming population to adults and women. Streaming gaming is also becoming increasingly popular.

The video games market follows the continuous technological evolution of consoles. At the launch of a new console, as it happened in the reporting period, the prices of the hardware and the related video games are high and relatively low quantities are sold. Across their lifecycle, console and video game prices gradually decline, while the volumes and the video games quality increase.

Video games are sold through digital marketplaces, however highly popular and high-quality video games are also distributed through the traditional sales channel. In this case, the value chain is as follows:

Gamers

The COVID-19 pandemic further accelerated the decline of the video games retail distribution being replaced by digital distribution.

Developers

Developers are the creators and programmers of a video game, usually based on an original idea, a successful brand, a movie, sports simulations etc.. It is becoming very common for a highly popular video game to be turned into a movie, TV series etc..

Even if developers sometimes retain the intellectual property, they often assign the rights to an international video game publisher for a contractually defined period of time. Therefore, publishers are

Digital Bros S.p.A. financial statements as of June 30th, 2022

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key in the value chain: they are essential to the completion of the video game, in building and fostering the video game community and its international distribution through their direct or indirect commercial networks.

The developer can directly publish and market the video game. In such a scenario, the financial and operational risks for the developer increase significantly.

Publishers

The publisher is responsible for the launch of the video game, defines the global commercial policy and assumes all the risks related. Publishers usually finance the video game development process and often acquire the video game intellectual property on a permanent basis.

Console manufacturers

The console manufacturer designs and manufactures the hardware through which the video game is played. Sony produces the Sony PlayStation, Microsoft the Microsoft Xbox and Nintendo the Nintendo Switch. In case of physical distribution, the console manufacturer reproduces the physical disk on behalf of the publishers. The console manufacturer also operates as a video game publisher.

Distributors

The role of the distributor is losing importance as a result of the digital transition. In the future, retail distribution will be concentrated on a limited number of specialized operators.

Retailers

Retailers may be international retail chains specialized in the sale of video games, independent shops or web sites that sell directly to the public.

Console manufacturers have created marketplaces where video games can be directly purchased in a digital format without involving a distributor or retailer. In this case, as for smartphone and tablet video games, the value chain involves a lower number of players, as illustrated below:

Gamers

The main marketplaces on which console video games are sold are Sony's PlayStation Store, Microsoft's Xbox Live and Nintendo's eShop. Steam is the global leader in the digital distribution of video games for personal computers. The US company Epic launched Epic Games Store, a new marketplace for PC games.

The digitalization of the market has led both Microsoft (with Microsoft Xbox Game Pass) and Sony (with Sony PlayStation Now) to create digital platforms on which players can access the full library of video games by paying a subscription fee. Revenues are recognized to publishers based on the utilization of their video games. More recently Amazon has set up a similar platform, Luna, while Apple has launched Apple Arcade, a platform dedicated to mobile video games.

Digital Bros S.p.A. financial statements as of June 30th, 2022

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