DIGITALX LIMITED — Interim / Quarterly Report 2016

Oct 31, 2016

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ASX ANNOUNCEMENT

31 October 2016

September 2016 Quarterly Report

Highlights

• DigitalX’s mobile top ups and bill pay and remittance application, AirPocket ended the quarter with over 5000 user installs

• AirPocket reach extended globally beyond Latin America via partnership with TransferTo for an addressable market of 4.5 billion mobile phone users

• Appointment of leading industry expert Faisal Khan increases the boards expertise during the roll out of cross border remittance

• Subsequent to the end of the September quarter, DigitalX announced a strategic partnership with AT&T Mexico and has progressed negotiations with several other top tier counterparties.

DigitalX Limited (ASX: DCC) (the “Company” or “DigitalX”) is pleased provide the following report on activities completed in the quarter ended 30 September 2016.

Quarterly Overview

AirPocket

DigitalX’s money transfer application AirPocket went live during the quarter as a mobile top ups payment application for Telefonica users. The global telecommunications giant Telefónica commenced marketing to their user base with a direct SMS campaign targeting a portion of the 230 million connected Telefonica mobile devices. The message to these users has been further optimised based on initial analytics and insights and will continue to be refined as the campaign is extended to the entire user base in the ramp up towards the holiday trading period.

Social and google adwords campaigns have also been employed to acquire USA based AirPocket installs to build an addressable user base for the upcoming launch of remittance services. The marketing campaign grew installs to over 5000 by quarter end. The Company expects this user base to grow significantly with the recently announced partnership with AT&T Mexico and as further partnerships are secured.

DigitalX Direct and Trading Operations

Trading Operations suffered during the quarter with revenue at $6.09m, down approximately 60% due to a number of factors. Trading volumes are inherently volatile month to month owing to the volatility of Bitcoin however volumes did not recover during the quarter. The hack of two Bitcoin exchanges saw the decision to suspend all post-paid customers and suspend Market Making operations.

Level 4 16 Milligan Street Perth WA 6000 ● T: +61 8 9321 4000 ● F: +61 8 9321 4333

The Company’s first Blockchain-based application, DigitalX Direct has significant interest as a pre-paid model and as a software tool for other large trading operators. DigitalX Direct revenues grew to $2.7m, up 14% from the previous quarter despite the adverse factors affecting the Company and the Bitcoin market. The Company is currently reviewing the decision to continue to grow the pre-paid model.

The Bitcoin side of the Business has been invaluable for the Company to gain development expertise in Blockchain-based applications that are truly differentiated from the market. The development of AirPocket applications will see the Company achieve success with its patent pending intellectual property.

Corporate Overview

Summary of Working Capital Position

DigitalX Ltd had total cash and cash equivalents of $891k at quarter end. The cash burn over the quarter was largely attributed to partner integration costs, development of new features in AirPocket, and losses from customers during post paid trading operations. The Company has committed to reducing cash burn with the implementation of a cost reduction program throughout the organization. This will lead to a significant reduction in salaries and a decrease in projected expenses.

Outlook

The last quarter of the calendar year will see DigitalX partnering with a major remittance Company which will enable money transfer services to the US and Latin American corridor. Furthermore, growing interest in mobile bill payments and remittance is leading several groups into discussions with DigitalX to bring AirPocket solutions to market.

DigitalX’s Chief Executive Officer, Alex Karis, commented: “AirPocket is generating significant interest from major telecommunication, bill pay and remittance providers and we are well placed to deliver on these in the short term. With AirPocket’s imminent launch of cross-border money transfer, acquiring new users daily and entering into new partnerships it is an incredibly exciting time for DigitalX.”

-ENDS-

For further information, please contact:

Alex Karis Leigh Travers Chief Executive Officer Investor Relations Tel: +1 (617) 544-3150 (x) 1010 Tel: +1 (617) 544-3150

About DigitalX

DigitalX is a Blockchain-based software solutions group disrupting the payments industry. Its products allow consumers to make secure and cost-effective money transfers worldwide. Partners can use DigitalX’s technology to offer new financial products. DigitalX is based in Boston and has offices in New Jersey and Australia.

Level 4 16 Milligan Street Perth WA 6000 ● T: +61 8 9321 4000 ● F: +61 8 9321 4333

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

+Rule 4.7B

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

DigitalX Limited

ABN 59 009 575 035

Quarter ended (“current quarter”) 30 September 2016

Consolidated statement of cash flows	Current quarter US$’000	Year to date ( 3 months) US$’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) advertising and marketing (c) leased assets (d) staff costs (e) administration and corporate costs (f) professional fees 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 1.8 Other (provide details if material) (a) Power and hosting of bitcoin mining equipment (b) Purchase of bitcoins for Liquidity Desk 1.9 Net cash from / (used in) operating activities	6,941 - (63) - (405) (152) (149) - - - - -	6,941 - (63) - (405) (152) (149) - - - - -
	-	-
	(6,645)	(6,645)
	(473)	(473)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10)	- -	- -

• See chapter 19 for defined terms

1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Current quarter US$’000	Year to date ( 3 months) US$’000
(c) investments (d) intellectual property (e) other non-current assets 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 (a) loan to related party 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities	- (228) - - - - - - 152 - -	- (228) - - - - - - 152 - -
	(76)	(76)
3. 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 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	401 - - - - - - - -	401 - - - - - - - -
	401	401
4. Net increase / (decrease) in cash and cash equivalents for the period 4.1 Cash and cash equivalents at beginning of quarter/year to date 4.2 Net cash from / (used in) operating activities (item 1.9 above) 4.3 Net cash from / (used in) investing activities (item 2.6 above)	1,042 (473) (76)	1,042 (473) (76)

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Current quarter US$’000	Year to date ( 3 months) US$’000
4.4 Net cash from / (used in) financing activities (item 3.10 above) 4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of quarter	401 (4)	401 (4)
	891	891

5. 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 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)	734 157	274 769
	891	1,042
6. Payments to directors of the entity and their associates Current quarter US$'000 6.1 Aggregate amount of payments to these parties included in item 1.2 204 6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3 - 6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2
		Current quarter US$'000
		204
		-

Salary, Director fees

7.	Payments to related entities of the entity and their	Current quarter
	associates	US$'000
7.1	Aggregate amount of payments to these parties included in item 1.2	25
7.2	Aggregate amount of cash flow from loans to these parties included	152
	in item 2.3
7.3	Include below any explanation necessary to understand the transactions included in
	items 7.1 and 7.2

Reimbursement of corporate costs. Repayment of loan by related entity

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

	8. 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.	Total facility amount at quarter end US$’000	Amount drawn at quarter end US$’000
		-	-
		-	-
		-	-

9. 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 9.4 Leased assets 9.5 Staff costs	- - 34 - 267
9.6 Administration and corporate costs	101
9.7 Other (provide details if material)
(a) intellectual property	209
(b) professional fees	134
(c) share buy-back ¹	402
(d) power and hosting	150
9.8 Total estimated cash outflows	1,297

Note 1: On 25 August 2016, the Company had announced that it has entered into an agreement to buy-back 17,633,839 shares at AU$0.03 per share, held by entities controlled by Mr Tsvetnenko, with these shares to be cancelled upon completion of the transaction. The buy-back is conditional upon shareholder approval.

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

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

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Sign here: ............................................................ Date: 31 October 2016 (Managing Director)

Print name: Alexander Karis

Notes

1. 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.

2. 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.

3. 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.

4. See chapter 19 for defined terms 1 September 2016

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