Change Financial Ends June Quarter Prepared for New Phase of Growth

SYDNEY, AUSTRALIA and LOS ANGELES, CA / ACCESSWIRE / July 31, 2018 / U.S-based fintech, banking software, and blockchain investment company, Change Financial Limited (ASX: CCA) (OTCQX: CNGFF) (“Change Financial” or “the Company”) is pleased to present its quarterly report for the three months ending 30 June 2018.

Restructured leadership for a new phase of growth

Operationally, a significant portion of the June quarter was devoted to Change Financial’s restructure of its leadership and capital raising for a strategic acquisition of the Ivy Entities (‘Ivy’), as the Company embarks on a new phase of growth.

On July 4, Change Financial announced that they had appointed Eric Bachman as CEO effective 1 August 2018, with Managing Director Ash Shilkin remaining on the Board and moving to an Executive Director. Mr. Bachman is an institutional payments veteran with over 30 years’ experience in banking, payments, and building new companies. Mr. Bachman’s experience reaches across key brands, such as Wells Fargo, US Bank, Visa, BankServ, and NextCard. He was part of the team that built and launched Marqeta’s leading payment card issuing and processing services and analytics platform. With the support of key leadership which includes alumni of Westpac, PayPal and Goldman Sachs, Mr. Bachman is ideally placed to lead Change Financial to execute its monetization strategy and bring its enterprise solution to market.

Capital raising and acquisition of Ivy

To support its evolution, in early July, Change Financial raised approximately US$2.62 million in a heavily oversubscribed placement. Net proceeds from the placement are being used to fund working capital, the deployment and marketing of its enterprise solution and for the purchase of the option to acquire Ivy (US$250,000).

Ivy is developing a platform which aims to solve one of cryptocurrency’s biggest challenges, the issue of anonymity associated with payments recorded on a blockchain and how they interact with the existing financial ecosystem. Ivy’s platform will embed comprehensive Know-your-Customer (KYC) and Know-your-Transaction (KYT) information into the Ivy token to assist in the satisfaction of anti-money laundering (AML) requirements. The aim of Ivy’s technology is to bridge the gap between the significant volume of blockchain-based payments (up to US$92 million in the US alone in 2017 according to Bloomberg) and financial institutions. Furthermore, the vision for Ivy is to ultimately be an alternative to the global incumbent payment networks which transfer more than US$5 trillion per day[1].

Change Financial intends to integrate the Ivy platform into its enterprise solution and award-winning consumer product as it continues to evolve its unified payments platform. Further to this, Ivy announced during the quarter a partnership with HiveEx, a leading cryptocurrency trading platform, to launch IvyPay, a platform which will turn cryptocurrency into AUD instantly and allow it to be used to make payments.

Finalized testing of the enterprise solution

Change Financial made further progress towards the launch of its enterprise solution which will provide turn-key services targeting 7,000 Federal Deposit Insurance Corporation (FDIC) banks in the US with innovative, cost-effective mobile banking services. Incoming CEO Mr. Bachman has six years of experience with Marqeta successfully rolling out similar product offerings; Marqeta recently achieved a valuation of US$545 million.

The Company has been working with its partners Mastercard (MA), Discovery Financial Services’ (DFS) subsidiary Pulse and the Central Bank of Kansas City to become one of the small number of processors that is fully integrated with Mastercard globally. Change Financial completed interconnection testing during the quarter and, post the quarter end, began testing programs for registration as a Mastercard third-party processor, including system messaging, key exchange and transactional testing.

Change Financial is on track to begin testing customer accounts and is targeting a full launch in 2H FY19. Change Financial expects the appointment of Mr. Bachman, who has extensive experience and connections in the payments industry, will greatly expedite the progress of the enterprise solution as it moves through development into full launch.

The size of the addressable market for the enterprise solution is extremely large, with the global payments industry projected to grow its revenues to $2.2 trillion annually by 2021, driven by global GDP growth and the increasing transactional needs of businesses and consumers worldwide[2].

Strategic review of consumer product underway

Change Financial’s award-winning consumer mobile banking app, ChimpChange, achieved total transaction volume (TTV) of US$35 million with deposits of US$11.9 million and a continued record efficiency of cost of acquiring customers (CAC) of just US$10 per customer. Compared to the prior comparable period (June quarter 2017), loads were up 39%, purchases were up 37% up and TTV was up 40%. ChimpChange not only provides an excellent customer-facing mobile banking solution but also supports the Company’s SaaS enterprise solution by providing a valuable testing ground for forging mobile banking best practices.

Change Financial is currently conducting a strategic review of ChimpChange which includes evaluating additional monetization opportunities and the exploration of other methods of unlocking value from its customer base.

Cash flow

Cash at the end of the June quarter was $1.67 million. All financial figures in the following Appendix 4C, Quarterly Cash Flow Report as filed with the Australian Stock Exchange, are denominated in US dollars, unless stated otherwise. Furthermore, after the close of the quarter, as mentioned above, the Company completed a raise of US$2.62 million through a private placement.

Change Financial Executive Director Ash Shilkin: “I am excited by the opportunities presented by our enterprise solution and the Ivy business. I am confident Mr. Bachman will be effective in leading our strong team as we challenge and disrupt the payments industry. We look forward to integrating our consumer, enterprise and blockchain capabilities in a way that delivers on our promise of creating better banking through technology.”

About Change Financial

Change Financial Limited (ASX: CCA) (OTCQX: CNGFF) is a US-focused fintech company revolutionizing the way traditional currencies and digital assets flow between consumers, businesses and financial institutions through its range of innovative, globally scalable payments’ services. Change Financial’s solutions include a registered Mastercard enterprise processor, a blockchain-based payments platform and cryptocurrency and an award-winning consumer digital banking platform.

To learn more, please visit: www.changefinancial.com

Forward-Looking Statements

This press release contains forward-looking statements regarding Change Financial Limited’s Consumer, Enterprise, Blockchain and blockchain (including its interest in IvyKoin) divisions. All forward-looking statements contained in this press release are subject to various risks and uncertainties that could materially affect these matters including, without limitation, whether the acquisition proposal will result in a negotiated agreement, and if so, whether that agreement will be consummated. In addition, the Company’s most recent annual report and other financial reports and filings with the Australian Securities Exchange, available on its website www.changefinancial.com contain disclosures about important risks and uncertainties that may affect the Company’s business, and investors may wish to refer to those filings for Change Financial Limited’s statements regarding such matters.

Footnotes:

[1] https://www.fincen.gov/sites/default/files/shared/Appendix_D.pdf
[2] https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/A%20mixed%202015%20for%20the%20global%20payments%20industry/Global-Payments-2016.ashx

For more information, please contact:

Investors and Media (US)

Mark Collinson, Compass Investor Relations
mcollinson@compass-ir.com
714.222.5161

Investors and Media (Australia)

Julia Maguire, The Capital Network
julia@thecapitalnetwork.com.au
+61 419.815.386

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Name of Entity: Change Financial Limited

ABN: 34 150 762 351

Quarter ended (“current quarter”): 30 June 2018

Consolidated statement of cash flows

Current quarter

$US’000

Year to date (12 months)

$US’000

Cash flows from operating activities

193

877

1.1

Receipts from customers

1.2

Payments for

(877
)

(3,312
)

(a)staff costs

(b)advertising and marketing

(157
)

(1,934
)

(c)other

(735
)

(3,837
)

1.3

Dividends received (see note 3)

1.4

Interest received

1.5

Interest and other costs of finance paid

1.6

Income taxes paid

1.7

Government grants and tax incentives

158

1.8

Other (provide details if material)

1.9

Net cash from / (used in) operating activities

(1,496
)

(8,024
)

Cash flows from investing activities

2.1

Payments to acquire:

(a)software

(29
)

(274
)

(b)payment for investment

(c)physical non-current assets

(100

)

(100

(16

)

2.2

Proceeds from disposal of:

(a)property, plant and equipment

(b)businesses (see item 10)

(c)investments

(d)intellectual property

(e)other non-current assets

2.3

Cash flows from loans to other entities

2.4

Dividends received (see note 3)

2.5

Other (provide details if material)

2.6

Net cash from / (used in) investing activities

(33
)

(390
)

+ See Chapter 19 for defined terms
1 September 2016

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Cash flows from financing activities

3.1

Proceeds from issues of shares

3.2

Proceeds from issue of convertible notes

3.3

Proceeds from exercise of share options

686

3.4

Transaction costs related to issues of shares, convertible notes or options

3.5

Proceeds from borrowings

3.6

Repayment of borrowings

3.7

Transaction costs related to loans and borrowings

3.8

Dividends paid

3.9

Other (provide details if material)

3.10

Net cash from / (used in) financing activities

686

Net increase / (decrease) in cash and cash equivalents for the period

4.1

Cash and cash equivalents at beginning of quarter/year to date

3,245

9,468

4.2

Net cash from / (used in) operating activities (item 1.9 above)

(1,496
)

(8,024
)

4.3

Net cash from / (used in) investing activities (item 2.6 above)

(33
)

(390
)

4.4

Net cash from / (used in) financing activities (item 3.10 above)

686

4.5

Effect of movement in exchange rates on cash held

(44
)

(68
)

4.6

Cash and cash equivalents at end of quarter

1,672

+ See Chapter 19 for defined terms
1 September 2016

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Reconciliation of cash and cash equivalents

at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

Current quarter

$US’000

Previous quarter

$US’000

5.1

Bank balances

1,672

3,245

5.2

Call deposits

5.3

Bank overdrafts

5.4

Other (provide details)

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

1,672

3,245

Payments to directors of the entity and their associates

Current quarter

$US’000

6.1

Aggregate amount of payments to these parties included in item 1.2

102

6.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

6.3

Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

Item 6.1 comprises payments to the Directors including remuneration paid to the Managing Director.

+ See Chapter 19 for defined terms
1 September 2016

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Payments to related entities of the entity and their associates

Current quarter

$US’000

7.1

Aggregate amount of payments to these parties included in item 1.2

7.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

7.3

Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

Financing facilities available

Add notes as necessary for an understanding of the position

Total facility amount at quarter end

$US’000

Amount drawn at quarter end

$US’000

8.1

Loan facilities

8.2

Credit standby arrangements

8.3

Other (please specify)

8.4

Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

+ See Chapter 19 for defined terms
1 September 2016

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Estimated cash outflows for next quarter

$US’000

9.1

Research and development

9.2

Product manufacturing and operating costs

9.3

Advertising and marketing

(196
)

9.4

Leased assets

9.5

Staff costs

(823
)

9.6

Administration and corporate costs

9.7

Purchase of Ivy Option

(250
)

9.8

Other (provide details if material)

(294
)

9.9

Total estimated cash outflows

(1,563
)

10.

Acquisitions and disposals of business entities

(items 2.1(b) and 2.2(b) above)

Acquisitions

Disposals

10.1

Name of entity

10.2

Place of incorporation or registration

10.3

Consideration for acquisition or disposal

10.4

Total net assets

10.5

Nature of business

+ See Chapter 19 for defined terms
1 September 2016

Compliance statement

This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.
This statement gives a true and fair view of the matters disclosed.

By Order of the Board,

Gillian Nairn, Company Secretary
30 June 2018

Notes

The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.
If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.
Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

SOURCE: Change Financial Limited

ReleaseID: 507461

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