All, I wanted to give an update on the Catheon Gaming strategy in the 1st quarter of 2023. Given the events of the last few months, we are likely to be in a lower-for-longer market downturn scenario and therefore we are reprioritising our business strategy.

Here are the key observations on the current economic environment:

• While we remain fully committed to blockchain gaming, we operate in a highly cyclical market that is impacted by cryptocurrency interest and where retail interest (whether measured by pricing, users, or volume) has declined by over 90% over the course of the later half of last year
• We are seeing increased cautiousness and slowdown of large institutions entering this space, particularly given the number of high-profile bankruptcies at the back end of last year
• Central governments around the world will continue to raise interest rates given real interest rates remain near zero, which will put pressure on asset prices and economic activity
• In the traditional gaming space, desktop hardcore games are generating ~40% less revenue on average vs previous year as a result of the current economic slowdown negatively impacting ad spend and discretionary income
• We are even coming across games that have seen significant declines of over >90% in both users and revenue, and have now no option but to shut down
• We are also seeing numerous small to medium blockchain companies, whether gaming or technology focused, run out of cash and unable to raise investment given the current VC climate

As a result of these observations, we have implemented the following strategy:

• It is possible that the market downturn will last a number of years, and we have enacted a significant pause on all non-essential costs to ensure that we can survive through the downturn. We are advising our game partners to do something similar. As a result, we expect delays in the development of the games in our portfolio and other parts of our gaming ecosystem
• We are not seeing the response that we would normally expect from large announcements. Releasing major updates or releasing games when the market is weak and where we will not get much in terms of reception will result in poor game releases and a waste of ammo. As a result, we expect to defer major new updates and game releases until we can see positive retail interest from those announcements
• We have collected data on a large universe of over 100,000 legacy traditional games that have seen significant falls in revenue and users, and we have started to approach and have conversations with the developers. Many of these are very high quality games that have valuable IP but have been negatively impacted by the market and are now in sticky situations with limited options. We can take advantage of these opportunities by either partnering up, investing, or becoming a publishing partner. By doing this, we expect to be able to sign new contracts and continue to build the size of the largest blockchain gaming portfolio, and we are very well positioned to do this in the market given our team’s unique special situations investing experience
• We also see similar situations in the Web3 blockchain space, where there are teams that have built great blockchain technology that have great synergies with the Catheon Gaming ecosystem but have run out of runway. We see this as a great opportunity to buy these tech solutions cheaply and bolt them into the Catheon Gaming portfolio

In conclusion, we recognize the state of the current market environment and we have enacted measures to maximize Catheon Gaming’s long-term results. While this means we will be slower in the short-term with big updates, we are setting ourselves up so that we can save our ammo for when market conditions come back.

The weaker market has, on the other hand, presented a number of publishing, investment, and buying opportunities where we can assist struggling game developers or blockchain technology developers. I’m super excited at the opportunities that we have identified and that we are currently in discussions with. This is a time for consolidating our market position, which will set Catheon Gaming to emerge out of this downturn with the highest and largest portfolio of blockchain games. I look forward to the next update.

Thank you for your continued support.

Sincerely,

William Wu

CEO, Catheon Gaming

About Catheon Gaming

Catheon Gaming is the fastest-growing integrated blockchain gaming and entertainment company globally, with a portfolio of over 20 games as of 10 June 2022. The company’s flagship franchise, SolChicks, entered the market following successful fundraising from various venture capital investors, institutions, and launchpad partners. The company brings technical, gaming, and marketing expertise together with deep roots in the blockchain industry. The company’s strategy is to partner with leading game developers and IP-holders to incubate and launch “best-in-class” blockchain games and bring them to the widest possible audience.