Unaudited Interim Report to 30 June 2020

11 August 2020

TechFinancials, Inc.

("TechFinancials" or the "Company" or the "Group")

Unaudited Interim Report for the Six Months Ended 30 June 2020

TechFinancials Inc. (AQSE: TECH), a fintech software provider of financial solutions including blockchain-based digital assets and traditional financial trading solutions for retail clients, today announces its unaudited interim results for the six month period ended 30 June 2020 ("H1 2020").

The Company was listed on AIM until January 2020 and is currently listed solely on the Aquis Stock Exchange.

Financial Overview

Asaf Lahav, Group Chief Executive Officer of TechFinancials, commented:

"In the first half of the year we have gained full control of Footies, following a conversion of a convertible loan in March 2020 and the signing of a separation agreement with Footies partners which led to holdings of 100% of Footies by the Group. The Group also decided to get full control over Cedex and, in March 2020, exercised its option that led to holdings of 97.3% of Cedex' issued share capital (90.81% on a fully diluted basis)."

"Nonetheless, the Covid-19 crisis has affected dramatically all the plans of the Company. Footies' plan to complete the development of its ticketing solution and launching the product in 2020 was put on hold. It is unclear when and how the Event market will return to normal. It is clear that event organizers are suffering major losses and may not be in a position to try new technologies. Therefore, the Company will take a decision in the near future whether or not to continue to pursue this opportunity.  The Company's plans to sell all or part of its interest in Cedex to a third party were also slowed down as a result of the new business atmosphere."

"The Company will cease its core software licensing business by the end of October this year. It is still uncertain how long the Covid-19 disruption will continue and what  ongoing effect it will have on the remaining business of the Group."

The directors of the Company accept responsibility for the contents of this announcement.

For further information:

Chairman's Statement

In H1 2020 the Company gained full control over the remaining businesses it owns (Footies and Cedex). Nevertheless, and in light of the Covid-19 epidemic, the plans to take these businesses forward were disrupted.

Outlook

The next twelve months will continue to be challenging for the Company. In the next few months we will close our B2B business and the entire historical trading solutions of the Group. We will make decisions regarding the feasibility to continue the remaining businesses (Footies and Cedex) in light of the negative business conditions that currently exist in the market. We will continue to look for opportunities to materialize our assets or join forces with other companies in order to be able move forward.

I would like to thank our shareholders and staff for their continued support in what has been a difficult period globally as well as to the Group.  

We look forward to updating the market on our progress in due course.

Eitan Yanuv

Independent Non-Executive Chairman

11 August 2020

Chief Executive's Statement

Financial Results

The Group's turnover in the six months ended 30 June 2020 decreased to US$0.62m (H1 2019: US$2.07m). Revenues in the core software licencing business decreased to US$0.34m from US$0.41m.

The Group also recorded US$0.27m from recognition of deferred revenues related to the token sale initiated in 2018 by the first time consolidated subsidiary Cedex, while in H1 2019 it recorded blockchain trading technology revenues of US$0.89m provided to Cedex which are eliminated on the consolidation in these reports.

Gross profit decreased by 59% to US$0.54m from US$1.31m in H1 2019, predominantly due to the reduced revenues of the Group.

The operating loss for the period was US$0.54m (H1 2019: loss of US$ 1.12m); the decrease in the loss is due to operating expenses decrease in line with the decrease in revenues compared to H1 2019.

Other income for the period was US$ 0.08m, attributed predominantly to US$0.82m gain from intangible assets realization and revaluation and a loss of US$0.75m from investments write off in subsidiaries that has been struck off. 

The loss after taxation for the period attributable to shareholders of the Company was US$ 0.55m (H1 2019: loss of US$ 1.09m).

The Group's cash position for the period ended 30 June 2020 was US$0.72m (31 December 2019: US$0.67m).

The unaudited interim financial results have not been reviewed by the Company's auditor.

Asaf Lahav

Chief Executive Officer of the Group

11 August 2020

Statement of Comprehensive Income

For the six month period ended 30 June 2020

Consolidated Statement of financial position

As of 30 June 2020

Consolidated Statement of changes in equity

For the six month period ended 30 June 2020

Consolidated statement of cash flows

For the six month period ended 30 June 2020

Notes to the financial statements

1.    General Information

Techfinancials Inc (the "Company") and its subsidiaries (together, the "Group") are engaged in the development of blockchain-based digital assets solutions and licensing of financials trading platforms to businesses. The financial statements present the consolidated results of the Group for each of the periods ending 30 June 2020, 30 June 2019 and 31 December 2019.

Group changes in the period

In March 2020, the Company exercised its option to acquire additional shares in Cedex Holdings Limited. Following the exercise, the Company increased its holding in Cedex from 2% to 97.3% of Cedex' shares.

As a result, these financial statements consolidate for the first time the results of Cedex Holdings Limited.

In March 2020, DragonFinancials Limited, a company owned 51% by TechFinancials Inc has been struck off.

During the period of the report, the Company increased its holding in Footies Ltd from 75% to 100% of Footies shares, following a conversion of a convertible loan and an acquisition of the entire shares held by the non-controlling partners of Fotties Ltd, and as such, these financial statements fully consolidates the results of Footies Ltd.

In March 2020, B.O. TradeFinancials Ltd the Company's fully owned subsidiary has been struck off.

Basis of preparation

As permitted, the Group has chosen not to adopt International Accounting Standard 34 'Interim Financial Reporting' in preparing these interim financial statements. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The interim financial information set out above does not constitute statutory accounts. The information has been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union.

The accounting policies applied in preparing the interim financial information are consistent with those that have been adopted in the Group's 2019 audited financial statements. Statutory financial statements for the year ended 31 December 2019 were approved by the Board of Directors on 18 June 2020. The report of the auditors on those financial statements were not modified in respect of the matter mentioned, however, has drawn attention to material uncertainty related to going concern.

The Directors approved these condensed interim financial statements on 11 August 2020.

Risks and uncertainties

The key risks that could affect the Group's short and medium term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2019 Annual Report and Financial Statements, a copy of which is available on the Company's website: www.techfinancials.com. The Group's key financial risks are the availability of adequate funding and the COVID-19 lockdown restrictions on the events industry.

2.    Accounting policies

The condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financials assets and liabilities at fair value through the statement of profit and loss.

The business is not subject to seasonal variations.

The financial information for the 6 months ended 30 June 2020 and the 6 months ended 30 June 2019 has not been audited.

No dividends have been paid in the period (2019: $nil).

Critical accounting estimates and judgements

The preparation of condensed consolidated interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates and have not changed during the interim period and are set out in note 3(v) of the Group's 2019 Annual Report and Financial Statements.

Critical accounting estimates and judgements of deferred revenue related to the new consolidated subsidiary

In determining the deferred revenue, the calculation includes determining future cost estimates associated with utilisation of the token sale proceeds as detailed in notes 4.1 and 7. The calculation of the amount deferred requires assumptions such as application of cost estimates and utilisation. The revenue recognised is periodically reviewed and updated based on the facts and circumstances available at the time.

3.    Earnings per share

The calculation of earnings per share is based on the following losses and number of shares:

4.    Intangible assets net

        Current estimates of the useful economic life of intangible assets are as follows:

Impairment review and estimates of intangible assets are as follows:

The intangible assets are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

4.1  Crypto assets

The Crypto assets are measured at the available fair values as of 30 June 2020.

4.2  Trading Platform related products

The net balance of intangible assets as of 30 June 2020 and 31 December 2019 represents the Trading solution for CFD Project.

5.    Trade and other receivables

*Other receivables balance relates mostly to VAT and tax advances on account of income tax payables.

The carrying amounts of trade and other receivables approximate their fair values.

6.    Trade and other payables

7.    deferred revenues and deferred income liability

The deferred income liability balance in the amount of US$0.631m relates to a subsidiary consolidated for the first time, Cedex Holdings Limited. The subsidiary performed a token sale during 2018 and the proceeds were received in crypto assets, predominantly Ether and Bitcoin, which are presented as intangible assets.

The deferred revenues related to the token sale exits in the subsidiary's historical financial statements since 2018, where a portion of the token sale proceeds has been deferred and a proportion of the consideration has been recognised as deferred revenue.

The deferred revenues from the above token sale proceeds that has been recognised in the reported period is in the amount of US$0.273m.

8.    OTHER INCOME AND EXPENSES NET

9.    Non - Controlling Interest  changes

In March 2020 the company has converted a US$0.3 million loan provided to its subsidiary Footies Ltd, following this conversion the Company holdings has increased to 82.5%.

In addition, in May 2020 the Company has signed a separation agreement with Footies partners in which TechFinancials shall purchase from Footies partners all of the Footies partners Shares (the "Purchased Shares") at no cost, so that following the purchase of the Purchased Shares TechFinancials holdings will increase from 82.5% to 100% of the issued share capital of Footies Ltd. on a fully diluted basis. In return Footies partners will receive the basic source code of the Footies Ltd. as it existed on 31 May 2019. The ownership in the Basic Source Code will be jointly owned by the Company and Footies partners and each side will be free to continue and develop the product on its own.

As such in these reports Footies Ltd has no longer non-controlling interest holders (NCI holdings in 2019 reports were 25% holdings in Footies Ltd results).

In March 2020 the Company exercised its option over Cedex Holdings Limited. Following the exercise, the Company will hold 97.3% of Cedex' issued share capital (90.81% on a fully diluted basis).

As such these reports includes non-controlling interest holders of 2.7% over Cedex Holdings Ltd results.