Animoca Brands 1Q18 Update

ASX Release - 30 April 2018

Animoca Brands 1Q18 Update

Animoca Brands Corporation Limited (ASX:AB1) (“the Company”) today released its Appendix 4C for the three-month period from 1 January 2018 to 31 March 2018 (1Q18 or “the Quarter”), and is pleased to provide an update on the activity of the Company.

Key points and milestones

Positive operating cash flow of $0.5 million received during the Quarter, compared with a net operating cash outflow of $0.8 million in 4Q17
The Company recognised unaudited revenues of $3.4 million and cash receipts of $3.4 million for the Quarter
Completed oversubscribed $3.3 million placement of approximately 54.2 million new shares to fund acquisitions and operations
Completed acquisition of 60% stake in Fuel Powered, accelerating capabilities in blockchain and AI
Completed acquisition of 100% stake in Tribeflame and its subsidiary Benji Bananas, significantly increasing the Company’s development capabilities and product portfolio
Investment in and co-location with artificial intelligence accelerator Zeroth.ai
Crazy Defense Heroes launched in January 2018 for iOS and rolled out worldwide (ex-Middle East) in phases over the Quarter; Android version in development
Crazy Kings franchise generated $2.8 million in the three months since the launch of the sequel Crazy Defense Heroes (8 January to 8 April 2018), or $2.6 million in the Quarter
Exclusive licensing and distribution agreement with Axiom Zen to publish CryptoKitties in Greater China
Beta launch of CryptoKitties in China with famous artist and Tuzki creator Momo Wang as brand ambassador
Set up new subsidiary OliveX to develop AI-based mobile products for the health and fitness markets, leveraging the capabilities acquired from strategic investment in Zeroth.ai and Fuel Powered
Signed agreement with Coolabi to leverage Crazy Defense Heroes for the highly popular children’s fantasy novels franchise Beast Quest

Positive operating cash flow

During the Quarter, receipts from customers grew markedly to $3.4 million and the Company recognised a positive operating cash inflow of $0.5 million, the first positive quarterly operating cash flow result since the Company was listed on the ASX in 2015.

The Company’s unaudited revenues in 1Q18 grew to $3.4 million, an increase of 54.5% over the corresponding period last year. The increase was driven largely by the successful launch of Crazy Defense Heroes, the sequel to Crazy Kings, which led to the game franchise generating $2.6 million during the Quarter, and $2.8 million in its first three months of operation (8 January to 8 April 2018).

Operating cash outflows during the quarter reflected, among other things, the launch of Crazy Defense Heroes (CDH), with advertising and marketing cash outflow increasing from $0.2 million in 4Q17 to $0.6 million in 1Q18. This increased advertising and marketing spend is directly supporting continued monthly revenue growth for the Crazy Kings franchise.

Investing activity

The Company acquired 60% of Fuel Powered, a US-based developer of blockchain based gaming services. This acquisition accelerates Animoca Brands’ capabilities in blockchain and artificial intelligence.

The Company also acquired 100% of Finland-based mobile game developer Tribeflame Oy and its subsidiary Benji Bananas Oy, publisher of Benji Bananas. The acquisition significantly increases the product portfolio and the development capabilities of Animoca Brands.

The Company paid $330,000 to the founders of Ticbits Oy pursuant to the share purchase agreement of 4 July 2016 as part of their earn-out payments. Ticbits Oy, the Company’s Finnish subsidiary, is the developer of Crazy Kings and Crazy Defense Heroes and was acquired by Animoca Brands in 2016.

Together these investments contributed to a net cash outflow due to investing activities of $1.9 million during the Quarter.

During the Quarter, the Company also paid $0.48 million to Zeroth.ai as part of its commitment to invest in the artificial intelligence accelerator (as disclosed on 18 December 2018), and Zeroth.ai has relocated to the Company’s headquarters. This amount which was expensed, as per the Company’s accounting policy. The investment grants the Company in-house access to industry-leading AI expertise, and provides equity exposure to Zeroth.ai’s investment portfolio.

Sale to iCandy

The Company expects the closing of the sale of its casual game portfolio to iCandy Interactive (ASX:ICI) announced on 15 November 2017 to occur 30 days after the ICI Annual General Meeting (AGM). ICI has confirmed it will be holding its AGM on 22 May 2018, after which the Company will receive a payment of $0.75 million plus about 25 million ICI ordinary shares as part of the consideration.

Placement

On 25 January 2018, the Company announced the completion of an oversubscribed $3.3 million placement of approximately 54.2 million new shares. The new capital provides the Company with funding for acquisitions, investments and operations.

At the end of the Quarter, the Company had a cash equivalent balance of $2.2 million.

Milestones

In January 2018, the Company launched the mobile game Crazy Defense Heroes, which performed strongly and also helped to boost the performance of its prequel Crazy Kings. In the first three months since the launch of Crazy Defense Heroes (8 January to 8 April 2018), the two games in the franchise together generated about $2.8 million in revenue, or $2.6 million during the Quarter. Both games are developed by the Company’s Finland-based subsidiary TicBits, acquired in 2016, and are owned by Animoca Brands.

During the Quarter, the Company completed the acquisition of 100% of the shares of Finland-based mobile game developer Tribeflame Oy (Tribeflame) and its subsidiary Benji Bananas Oy, publisher of Benji Bananas, a well known casual game franchise that has been downloaded over 107 million times and earned an estimated €2.3 million in gross revenues since launch in 2013.

The Tribeflame acquisition significantly increases the product portfolio and the development capabilities of Animoca Brands. The Tribeflame team has been assigned to collaborate with iCandy Interactive and Nitro Interactive to co-develop the Masterchef licensed mobile game, enabled by a license agreement signed last year between Animoca Brands and Endemol Shine North America; additionally, Tribeflame is working on the development of Crazy Defense Heroes for Android devices.

The Company announced a partnership with Vancouver-based Axiom Zen to publish CryptoKitties in Greater China. CryptoKitties is a crypto-collectible game operating on the Ethereum network, and is one of the world's first and most successful consumer products built on blockchain. Animoca Brands is entitled to a share of revenue generated by the game in Greater China.

Subsequently, the Company beta-launched CryptoKitties for iPhone and iPad in China and secured internationally recognised illustrator Momo Wang as brand ambassador for the game. Momo Wang, a Beijing-based artist and the creator of the highly popular character Tuzki, is collaborating with Axiom Zen and Animoca Brands to design limited edition cats for CryptoKitties. Animoca Brands is entitled to worldwide royalties from Momo Wang’s designs and associated transactions. The Company is continuing to work on the game’s commercial release in Greater China.

During the Quarter, Animoca Brands launched its new subsidiary OliveX (HK) Limited (OliveX), formerly known as Family Fit, which targets the lucrative health and fitness apps, wearable technology, and Internet of Things (IoT) market segments. Animoca Brands holds an 85% stake in OliveX, with the subsidiary’s board and management holding the remaining 15%. Keith Rumjahn, founder and former CEO of Coachbase, a top-ranked paid app for iOS, Android, and Mac that was acquired by Animoca Brands in 2017, serves as CEO of OliveX. Sonny Vu, founder of MisFit, a wearable tech company acquired by Fossil Group for US$260 million in November 2015, has invested in the new company and joined its board. OliveX is creating new products that leverage the Company’s experience in gaming and gamification as well as the industry-leading capabilities in artificial intelligence and blockchain conferred by the Company’s recent acquisitions and investments.

Finally, the Company recently signed an agreement with Coolabi Licensing Limited to develop a mobile game based on Beast Quest, a highly popular series of children’s fantasy novels with 120 published titles and over 18 million copies sold. Coolabi will make payments to Animoca Brands to partially fund the production and distribution of the game, which will leverage technology and game play adapted from the Company’s own Crazy Kings and Crazy Defense Heroes titles. The Company continues to pursue licensing opportunities to maximise the value of its existing products and technology.

- ENDS

About Animoca Brands
Animoca Brands (ASX: AB1) publishes globally a broad portfolio of mobile games and subscription products including several games and e-books based on popular intellectual properties such as Garfield, Thomas & Friends™, Ever After High and Doraemon. 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 +.