ASX Release 31 January 2020
Animoca Brands 4Q19 Update
Animoca Brands Corporation Limited (ASX:AB1) (“the Company”) today released its Appendix 4C for the three-month period from 1 October 2019 to 31 December 2019 (4Q19 or “the Quarter”). Please note: all dollar amounts indicate Australian dollars unless otherwise indicated.
The Company reported cash receipts from customers of $10.1 million for the quarter and $25.1 million for the year with net cash from operating activities of -$5.4 million. The cash receipts from customers include a reclassification of receipts related to the reported unearned income, totalling $5.6 million, previously offset against corporate costs. Excluding this amount, the Company recorded record receipts from customers of $19.5 million.
As part of the acquisition of nWay, the Company announced unsecured loan agreements of $2.5 million with attached 12-month options, of which $2 million are not yet collected.
The Company has been focused on improving its financial disclosure and corporate governance. As part of this process, the Company has been working to address from an accounting perspective the relatively large number of acquisitions and investments made over the past 18 months, and this is reflected in the Q4 2019 Appendix 4C.
During the Quarter, the Company had several significant one-off expenses related to investments and acquisitions that were not considered expenses during the ordinary course of business. These one-off items included legal expenses for the year 2019 and investments that, due to the consolidation of accounts post-acquisition, were moved from balance sheet items to operational expenses requiring reclassification upon completion of the related acquisitions:
In the case of Stryking, funds previously recorded as investment post-consolidation have now been recorded as operating cashflow expenses including acquisition support costs for the Stryking business and its integration into the Company totalled $1.397 million
Professional consultants’ fees, primarily legal fees and accounting costs across the Company, accounted for approx. $1.5 million for the year (of which approx. $868,000 was for Q4)
After consultation with the Company’s auditor, $5.6 million in unearned revenue related to SAND and other prepaid revenue were transferred to receipts from customers; consequently, the related expenditure is now recorded as corporate costs
Other costs across the Company (including currency adjustments arising from movements both favourable and unfavourable in Australia dollar against US dollar and Euro and adjustments to the translation of Argentine peso against US dollar) of approx. $881,000 for the Quarter
TSB Gaming Ltd. (the holding company for The Sandbox, which is expected to launch in the first half of 2020) had a total of $3.8 million in costs for the year due to increased staff costs in 2019 of which $2.2 million was capitalised as deferred expenditures, which was financed through the sale of SAND tokens (the in-game currency for The Sandbox) and SAFE notes
The Company has prepared the following table to explain the impact of the one-off expenses described above:

A further $3.06 million of the SAND token and SAFE issue is recorded under cashflow from financing activities for the entire year 2019.
The Company wishes to advise, as previously disclosed in the Q3 Appendix 4C, that it raised further capital in SAFE and SAND tokens post the 23 May 2019 announcement, which became the subject of lengthy discussions with ASX, and consequently the Company was unable to announce the capital raise to the market. The Company has not issued further SAFE and SAND tokens in Q4 or since. Discussions withASX remain on-going (refer to ASX announcement of 24 December 2019).
Investment in Sky Mavis
During the Quarter, the Company announced that it is acquiring US$420,000 (approx. A$610,000) worth of shares of Sky Mavis in a cash and scrip deal consisting of US$125,000 (approx. A$182,000) in cash and US$295,000 (approx. A$429,000) in AB1 shares issued at $0.18 per share. The Company led Hashed, Pangea Blockchain Fund, ConsenSys, and 500 Startups in an investment round totalling US$1.465m (approx. A$2.13m) into Sky Mavis, the maker of the highly-rated blockchain game Axie Infinity. The Company signed an Advisory Agreement with Sky Mavis to receive advisory and consultation services in the areas of scarcity models and non-fungible tokens (NFTs). The Company also signed a memorandum of understanding to explore further collaboration with Sky Mavis. Axie Infinity is among the highest-grossing blockchain games, with sales of over US$1.1m (approximately A$1.6m), and partners that include Samsung, Klaytn (Kakao), MakerDAO, and Loom Network.
Investment in nWay
During the Quarter, Animoca Brands announced that it intends to acquire nWay, Inc. (“nWay”) for US$7.69 million (approx. A$11.4 million) of which US$1.94 million (approx. A$2.9 million) is in cash and US$5.75 million (approx. A$8.5 million) in shares. The share consideration will be based on a price per share of the higher of A$0.18 or the 30-day VWAP as of the effective date. The cash consideration includes US$250,000 (approx. A$369,000) to the Sellers and a US$1.69 million (approx. A$2.5 million) cash investment into nWay for operating purposes.
nWay is a game developer and publisher of high-quality AAA games on console, PC, and mobile platforms, with revenue (unaudited) in the first 8 months of 2019 of US$6.98 million (approx. A$10.2 million), and EBITDA loss of US$1.3m (approx. A$1.88m). nWay has a global license granted by Lionsgate and Hasbro to make use of the Power Rangers brand, including in POWER RANGERS: Legacy Wars, nWay’s award-winning mobile game with over 50 million downloads. The nWayPlay platform (in development) will provide developers with complete backend and fully managed live-ops services to quickly develop and operate competitive multiplayer cross-platform games (the service is currently available to alpha partners).
nWay developers and executives have worked at major technology companies including Google, Tencent, Sony, Electronic Arts, Nintendo, LucasArts, Blizzard, Kabam, Nexon, and NCSoft; the current management will continue to operate nWay. This acquisition brings to Animoca Brands nWay’s portfolio of games, experienced team, a powerful suite of technologies, and a platform to enter the rapidly growing competitive multiplayer gaming space.
This announcement has been authorised for release by the Board. If you have any queries in relation to this announcement, please contact John Madden, co-company secretary, at johnm@animocabrands.com.
-ENDS
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 Formula 1®, Garfield, Snoopy, Thomas & Friends™, Ever After High and Doraemon. Animoca Brands’ portfolio of blockchain investments and partnerships includes Lucid Sight, Dapper Labs (creators of CryptoKitties), WAX, Harmony, and Decentraland. The Company is based in Hong Kong, Canada, Finland, and Argentina. For more information visit www.animocabrands.com or get updates by following Animoca Brands on Facebook or Twitter.Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.
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