Animoca Brands 2Q18 Update

ASX Release

31 July 2018

Animoca Brands 2Q18 Update: Positive Operating Cash Flow Continues with Record Cash Receipts

Animoca Brands Corporation Limited (ASX:AB1) (“the Company”) today released its Appendix 4C for the three-month period from 1 April 2018 to 30 June 2018 (2Q18 or “the Quarter”).

Key points:

The Company recognised record cash receipts of $3.6 million for the quarter
Record unaudited revenues of approximately $8.2 million for the quarter, including one-off items
Positive operating cash flow of $0.26 million received during the quarter
The Board of Directors is strengthened by the addition of Holly Liu and Chris Whiteman, as well as Wilhelm Taht joining as a strategic advisor
The Company announces a global licensing deal with the Coolabi Group to develop a mobile game based upon the hit children’s fantasy novel franchise Beast Quest
Animoca Brands partners with Red Robot KK to develop, market, and operate a gamified cryptocurrency wallet app
Proposal by the Company is awarded a grant by a Hong Kong government fund to develop an AI-based exercise app
Post the quarter, Animoca Brands raised $4.5 million in a heavily oversubscribed placement to strategic investors and signed a landmark deal with HTC Corporation, a global leader in the innovation and design of smartphones, connected devices, and virtual reality

Positive operating cash flow and record cash receipts

During the Quarter, receipts from customers grew 7% quarter-on-quarter and 92% year-on-year to a record $3.6 million. The Company recognised a second consecutive quarter of positive operating cash inflow ($0.26 million), continuing the strong performance of Q1 2018.

Operating cash outflows during the quarter included an increase in staff costs on Q1 2018 as a result of certain annual bonus payments and salary increases, while cost of sales (reflected as “product manufacturing” in 1.2(b) on the 4C) rose as a result of the increased revenues recognised. Advertising and marketing expenditure continued in line with Q1 2018, with spending geared towards key product lines such as the Crazy Kings franchise and CryptoKitties.

The Company ended the quarter with $2.4 million in cash, which represents a net increase of approximately $218,000 on the cash at the end of Q1 2018.

Post the quarter, Animoca Brands raised $4.5 million in a heavily oversubscribed placement to strategic investors, including directors Yat Siu and Holly Liu, strategic advisor Wilhelm Taht, and strategic blockchain partners.

Record quarterly revenues

Animoca Brands received record unaudited revenues during the quarter of approximately $8.2 million, including a one-off gain of $5 million on the sale of assets to iCandy Interactive Limited (“ICI”). Excluding the one-off gain from the sale to ICI (the majority of which was received in shares), the pro forma unaudited revenues of Q2 2018 are still the second-highest unaudited quarterly revenues recorded by the Company since its IPO (after the unaudited $3.4 million recorded in Q1 2018). The unaudited revenues of approximately $8.2 million represent an increase of more than 355% on the same period last year, during which the Company recorded Q2 2017 unaudited revenues of $1.8 million.

Update on asset sale to iCandy

As disclosed on 24 May 2018, the Company will receive a payment of $0.75 million in five monthly instalments beginning in July 2018, plus 25 million ordinary shares in iCandy Interactive Limited (ICI) as part of the consideration. The Company received the 25,000,000 shares in ICI prior to the end of the quarter. In addition, as announced on 25 June 2018, the Company will also receive a migration and maintenance fee of approximately $500,000, in cash or shares, within three months of the completion of the sale.

Milestones during the Quarter

The Company announced a global licensing deal with Coolabi Group to develop a mobile game based upon the hit children’s fantasy novel franchise Beast Quest. This new game will leverage technology and game play from the highly successful Crazy Kings and Crazy Defense Heroes mobile games.

The Company entered a joint venture with Red Robot KK to develop, market, and operate a gamified cryptocurrency wallet app. This app will contain features and tutorials to educate everyday consumers and represents a significant opportunity to gain market share in the rapidly growing cryptocurrency and blockchain wallet market.

The Animoca Brands subsidiary Olive X partnered with the North Point Kai Fong Welfare Advancement Association to produce an AI-based mobile app for Android and iOS to teach Baduanjin qigong, a form of Chinese exercise with documented health benefits. The project was awarded a grant of approximately $770,000 by the Hong Kong Government’s Innovation and Technology Fund for Better Living.

Mr. Chris Whiteman and Ms. Holly Liu were appointed as Non-Executive Directors to the Company’s board of directors. Mr. Whiteman is currently senior advisor to one of Australia’s leading energy companies and was formerly with Taylor Collison, Santos Limited, TXU Australia, and Credit Suisse First Boston. Ms. Liu is the co-Founder of the mobile gaming company Kabam, whose assets sold to Netmarble in February 2017 for approximately A$1 billion.

Mr. Wilhelm Taht was appointed as a strategic advisor to the Company. Mr. Taht is a former executive vice president of Rovio, the developer and publisher of Angry Birds, one of the most influential and successful video games in history.

Post the quarter, the Company signed an MOU with HTC Corporation, a global leader in the innovation and design of smartphones, connected devices, and virtual reality, to develop opportunities for collaboration. The first outcome is an agreement with HTC and Dapper Labs, a subsidiary of Axiom Zen, to distribute CryptoKitties on mobile. This agreement grants HTC a limited, non-transferable right and license to publish, distribute, commercialise and promote CryptoKitties on HTC phones, including HTC’s U12+ flagship mobile device.

- ENDS

About Animoca Brands
Animoca Brands (ASX: AB1) publishes and develops a broad portfolio of mobile games and subscription products including games such as Crazy Kings, Crazy Defense Heroes as well as products based on popular intellectual properties such as Garfield, Thomas & Friends™, Ever After High and Doraemon; in addition, Animoca Brands is the exclusive China distributor of CryptoKitties. The Company is based in Hong Kong and Finland. For more information visit www.animocabrands.com or get updates by following Animoca Brands on Facebook, Twitter or Google +.