ASX Release

31 October 2018

Animoca Brands Q3 2018 Update: Consolidating Global Leadership Position in Blockchain Gaming

Financial Highlights:

Generated unaudited revenues of $4.6m during Q3 2018, representing an increase of 283% on the same period last year and bringing the total unaudited revenues for the year to date to $12.9m, an increase of 79% over the $7.2m recorded in the corresponding period in 2017

Cash receipts for Q3 2018 totalled $2.9m, up 73% on the same period last year

Cash receipts for the year to date totalled $8.9m, an increase of about 65% over the $5.4m recorded in the corresponding period in 2017

Raised a total of $6m via two oversubscribed placements to strategic investors including directors Yat Siu and Holly Liu, strategic advisor Wilhelm Taht, leading Hong Kong conglomerate Sun Hung Kai, and blockchain partners, including Lympo

The Company ended the quarter with $5.6m in cash and cash equivalents

Strategic Highlights:

Named one of the world’s Top 50 Developers of 2018 by PocketGamer.biz, the leading industry B2B publication

Increased investment into blockchain and AI technologies, and continues to position itself as a leader in blockchain gaming

Signed a memorandum with leading mobile handset maker HTC Corporation to develop opportunities for collaboration, as well as an agreement with HTC and Dapper Labs to distribute CryptoKitties on mobile

Animoca Brands’ subsidiary OliveX signed an agreement with Lympo to collaborate and integrate Lympo tokens (LYM) in the mobile exercise app 100 Squats Challenge, introducing the blockchain and crypto tokens to its fitness audience

Secured a license agreement with Beijing Bosi Interactive to develop, publish, and market the Android and HTML5 versions of Crazy Kings in China

Beta launch of Crazy Defense Heroes for Android devices in selected countries

Acquisitions:

Agreed to acquire 100% of independent mobile game company Pixowl, Inc., for an upfront consideration of US$4.875m (A$6.65m), of which US$519,512 (about A$709,133, or 10.7%) is cash and the rest is in shares, with a lock-up period of up to 24 months. Pixowl is an independent mobile game company focused on world builder games, with a portfolio that includes The Sandbox, Peanuts: Snoopy’s Town Tale, Garfield: Survival of the Fattest, and Goosebumps HorrorTown

Entered into an Earn-In Agreement to acquire a majority stake in Venture Classic Limited, the operational company of Zeroth SPC. Total consideration is $1.5m, comprised of $1m cash contribution earn-in, and $0.5m in Animoca Brands shares

Strategic Blockchain Investment Partnerships:

Partnered with OpenST Limited to develop products utilising blockchain technology developed by OST.com Limited (OST KIT, OpenST Protocol and OpenST Mosaic Protocol)

Signed a collaboration agreement with Decentraland to co-develop two games for the Decentraland platform

Subsequent to the end of the quarter, strategically partnered with six blockchain-focused developers and companies including Datum, LikeCoin, Musicoin, OST, Harmony, and I-House. Animoca Brands will conduct a mutual investment with each company via a share and token swap in aggregate totalling ~$1.4m, with Animoca Brands shares priced at about $0.10 each. Swapped shares and tokens will be subject to a 24-month escrow period

Following the quarter’s end, the Company strategically partnered with Mind Fund, a leading venture capital company, and Helix, an accelerator launched by Mind Fund and Hedera Hashgraph (Hedera Hashgraph recently raised US$120m). Mind Fund will subscribe to ~$1.4m worth of Animoca Brands shares, priced at A$0.10 per share

Animoca Brands Corporation Limited (ASX:AB1, the “Company”) is pleased to report that Q3 2018 has been one of both strong financial performance and strategic importance as the Company positions itself as a leader in the fields of AI and blockchain gaming.

Financial Results

The Company generated unaudited revenues of $4.6 million during Q3 2018, representing an increase of 283% on the same period last year and bringing the total, unaudited revenues for the year to date to $12.9 million. The total unaudited revenue for the year to date is $12.9 million, an increase of 79% over the $7.2 million recorded in the corresponding period in 2017.

Cash receipts for Q3 2018 totalled $2.9 million, up 73% on the same period last year. Cash receipts for the year to date totalled $8.9 million, an increase of about 65% over the $5.4 million recorded in the corresponding period in 2017.

The Company ended the quarter with $5.6 million in cash and cash equivalents. The total net cash inflow from operating activities for the quarter was positive.

The major contributor to revenue during the quarter was the continued strong performance of the core gaming business, including branded games like those featuring Garfield, Doraemon, and various Mattel brands, as well as in-house franchises like Crazy Kings and Crazy Defense Heroes. In addition, Q3 2018 saw revenue contributions from blockchain gaming from CryptoKitties, published by the Company in Greater China, as well as 100 Squats Challenge, also published by the Company and developed by the Company’s OliveX health and fitness subsidiary.

Expenses during the quarter chiefly comprised operating and marketing expenditures related to the development and publishing of mobile games. The resulting cash outflow for operations was $2.9m, representing a decrease of 9% over the same period in 2017, and a decrease of 12% over the previous quarter. The total net cash inflow from operations was positive.

Investments

Animoca Brands made a number of strategic investments during and immediately after the quarter. The Company agreed to acquire 100% of independent mobile game company Pixowl, Inc., for an upfront consideration of US$4.875 million (A$6.65 million), of which US$519,512 is cash with the balance in shares. The shares are subject to a lock-up period of up to 24 months.

Pixowl is an independent mobile game company focused on world builder games, with a portfolio that includes The Sandbox, Peanuts: Snoopy’s Town Tale, Garfield: Survival of the Fattest, and Goosebumps HorrorTown. This acquisition is highly strategic as Pixowl is a leader in branded gaming that adds new strategic brand partnerships to the Company’s portfolio (e.g., Snoopy and Goosebumps); additionally, Pixowl’s hit franchise The Sandbox is one of the most-anticipated blockchain games.

The Company also entered into an Earn-In Agreement to acquire a majority stake in Venture Classic Limited, the operational company of Zeroth SPC. The total consideration is $1.5 million, comprised of $1 million cash contribution earn-in, and $0.5 million in Animoca Brands shares. The Company is already an investor in Zeroth SPC (see ASX announcement of 18 December 2017), and this Earn-In Agreement consolidates the partnership between the Company and Asia’s first artificial intelligence accelerator.

Strategic Blockchain Investment Partnerships

The third quarter marked an increase in the Company’s activities related to blockchain gaming, specifically partnerships with OpenST, Decentraland, Datum, LikeCoin, Musicoin, Harmony, I-House, Mind Fund, and Helix. The Company is pursuing a strategy to cement leadership in the blockchain space by building its network of technology and brand partners, driving blockchain adoption and development, enhancing the value and utility of existing digital tokens, and accelerating the progress toward the future of blockchain gaming: mass consumer markets.

Animoca Brands expects that the strategic agreements with each blockchain partner, combined with the Company’s expertise in gaming, artificial intelligence, blockchain, software development, publishing, and branded IP collaboration, will increase the value of the partners’ tokens and thereby ultimately increase Animoca Brands’ shareholder value above and beyond the revenues directly generated by each collaboration.

Additionally, the cryptowallet technology being developed by the Company, which is utilised in its upcoming WalletPet gamified wallet mobile app, will be compatible with (but not limited to) the tokens of the partners, further reinforcing the benefits of collaboration with the Company and integration with its products.

Outlook

Following strong financial performance and oversubscribed fundraises to strategic investors totalling $6m during Q3, the Company is well-positioned to capitalise on the investments in Zeroth and Pixowl as well as its strategic blockchain partnerships. The Company ended the quarter with positive cashflow, having $5.65 million in cash and cash equivalents. Q3 2018 marked the Company’s third consecutive quarter of positive cashflow.



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About Animoca Brands

Animoca Brands (ASX: AB1) leverages gamification, blockchain, and artificial intelligence technologies to develop and publish a broad portfolio of mobile products including games such as The Sandbox, Crazy Kings, and Crazy Defense Heroes as well as products based on popular intellectual properties such as Garfield, Thomas & Friends™, Ever After High and Doraemon. Animoca Brands is the exclusive China distributor of CryptoKitties. The Company is based in Hong Kong, Canada, and Finland. For more information visit www.animocabrands.com or get updates by following Animoca Brands on Facebook, Twitter or Google +.

Contact: press@animocabrands.com