Executive Summary

The below report is filed annually with Companies House in accordance with UK law. We plan to publish a more comprehensive report that will also include 2018 US business activities at the end of the year.

In 2018, the Cloud Imperium Group set a new high for revenue, play time, new players, game publishes and releases while also posting a small loss, £818k shown here in the UK filings. This was within our forecast as we continue to invest in growing the game, the company and the project.

We will continue to deliver more to the game and to our players moving forward, and are forever grateful for the support of our players and backers.

-Simon Elms

Chief Financial Officer

Cloud Imperium

Letter to Companies House

The directors present their strategic report of the Company for the year ended 31 December 2018.

Principal Activities

Established since December 2013 Cloud Imperium UK Limited (formerly Cloud Imperium Games UK Limited) operates from the UK, managing the Worldwide, outside of America, rights to the Star Citizen and Squadron 42 PC video games. Through its revenues it funds directly the Cloud Imperium Games (formerly Foundry 42) development team, the largest development presence within the Cloud Imperium Group, and the Roberts Space Industries International Publishing activities supporting the ‘Outside of the USA’ market.

Business Review

Group turnover has increased in 2018 to £17.9m (2017: £16.96m) with higher engagement stemming from the quarterly releases of Star Citizen, allowing a greater number of users to play more sections of the game whilst it is being developed. Costs have also risen to £21.4m (2017: £18.2m) in line with the longer-term plans of the group, as it continues to progress the development and publishing of the games concentrating upon its release plans relative to its trading and funding position.

Despite the £0.82m loss for the year the group still retained profit reserves of £2.9m as of 31 December 2018, and during the year the Company raised a further £17m from a minority equity investment, the UK part of the $46M worldwide investment into the Cloud Imperium Group made in 2018. This investment was to provide added security and additional funds to allow it to push the games to fruition and market them to a wider audience.

Information about this investment was widely publicized at the time on the Company information sites and forums, and undoubtedly the added security this brings gives additional comfort at a time when the economic and competitive environment is expected to remain challenging during the year ahead, particularly with uncertainties surrounding Brexit and related issues.

However, the directors are aiming to minimize such macro risks whilst focusing in upon the micro challenges of the projects they are undertaking and are confident that the current business model will continue to operate efficiently and effectively. Investment into the development and publishing activities of the Company will help maintain its competitive position within the industry and continue the significant progress made in the game development, evidenced by its regular and sustained release strategy maintained throughout 2018 and continuing into 2019 and to date.

Principal Risks and Uncertainties

The key business risks affecting the Company are competition in the market place, reduction in market demand and the cost of the publishing and development resource required for delivering the game.

The Company’s management mitigate these risks by monitoring numerous key performance indicators, mainly within the publishing and development entities feeding into the Company and by carrying out regular strategic and operational business reviews.

Key Performance Indicators

Key performance indicators are monitored on a regular basis. For development these are focused around labour efficiencies and the quality and quantity of output against benchmarked comparators and the development objectives of the business. For publishing, looking at customer satisfaction, service levels, minimized downtime and customer engagement against comparators and internal goals.

Financial Risk Management

The business manages it financial risk by scaling its operation based upon the volume and value of subscribers and players of the games under development and reacting to changes accordingly. The Company is exposed to a limited number of external financial risks, collecting revenue from its publishing subsidiary and using this to pay for development through its development subsidiary. The Company has adequate financing facilities in place via cash generated from operating activities and banking facilities to meet its funding requirements.

Our People

The Company maintains the belief that its people are the key to the long-term success of the business. The Company has continued to grow its internal team in 2018 with focus still on development and delivery, within a managerial infrastructure that can support this growing group of people. To create such a substantial, ground-breaking and ambitious game and virtual universe was always going to have its challenges but the current and future success of this venture is significantly down to the skill and expertise of the people engaged in that process, both within the group and the stakeholders participating fully in the process.

On behalf of the Board,

Erin Roberts

Director

Cloud Imperium