Mr. Andre Itwaru reports

FIRST GLOBAL RELEASES 2017 YEAR END AUDITED FINANCIAL STATEMENTS

First Global Data Ltd. has published its 2017 year-end audited financial statements for the year ended Dec. 31, 2017. The company would like to highlight key items in the 2017 financial statements and certain other operational matters relating to the company.

ISPL (technology licences) licence program and revenue recognition issues

The company's strategy includes the sale of technology licences (ISPLs). ISPLs sold result in the creation of multiple websites which offer First Global services and which in turn drive new users, new active users and transactional revenues for the company. Although the company was relatively successful selling ISPLs, for the reasons highlighted below, the company was advised by its auditor that it would not be able to recognize revenues in respect of its 2017 financial year and prior year, respectively, for certain ISPL licences sold during the 2016 and 2017 financial years.

In reviewing the company's standard form ISPL agreement and reviewing such against International Accounting Standard 18 (IAS 18) and, in particular, IAS 18.14, the company's auditor cited the following concerns:

• The agreements lacked clarity on whether the company had relinquished control over the licence issued thereunder postsale;
• Significant payment had not yet been received as of the reporting period in question;
• The auditor felt that the costs related to the sale of an ISPL could not be determined reliably.

Consequently, during the process of working with its auditors on the 2017 financial statements, the company found that $2,722,162 in ISPL licensing sales for the year ended Dec. 31, 2016, was incorrectly classified as revenue. Accordingly, certain comparative information for the year ended Dec. 31, 2016, has been restated to reflect same. This restatement of the company's audited consolidated financial statements for the year ended Dec. 31, 2016, includes adjustments to the consolidated statement of financial position, the consolidated statement of operations and comprehensive income, and consolidated statement of cash flow as is set out in Note 13 of the 2017 financial statements.

As a result of the company's inability to recognize certain ISPL revenues, revenues in 2017 were significantly lower than expected. However, the company has made significant progress toward the deployment of solutions and revisions to the agreements and the ISPL licensing program in tandem with its auditor. The company will determine whether it will be able to recognize revenues for licences previously sold on a going-forward basis.

How amendments address auditor concerns

The contemplated amendments to the agreements would go toward addressing the auditor's concerns and assuring the company's auditor that the agreements minimize, if any, deviation in substance (and practice) from form. For example, the agreements would clarify that the company would retain no control or management over the licence postsale (other than as may be required to address default or other circumstances outside of the ordinary course) and would not, for example, honour a refund under any circumstances. The amended agreements would also better emphasize that the direct risks and rewards related to the agreement postsale would lay with licensees, while better identifying the nature and character of the product being delivered.

The company also intends to institute other changes in practice, such as issuing a unique ID to each licensee and systematically collecting at least partial payment within a reasonable and agreed-upon time frame.

Expenses and write-offs

Although the company was unable to recognize revenues from the sale of ISPLs, all related fees, expenses, taxes and royalties paid related to the ISPL licence program were nevertheless booked as expenses in the 2017 financial statements. Some of these ISPL-related expenses represent a significant portion of expenses categorized under selling, general and administrative.

The company also decided to write off, as bad debt, historical receivables associated with the Series G debentures (defined below), and other receivables, including some associated with the ISPL licence program.

During the course of the 2017 financial year, the company issued options to directors, officers and consultants, and the issuance of these options must be expensed. These expenses represent a significant portion of the expenses captured under salaries and related costs.

Liabilities

Liabilities increased significantly in the 2017 financial year as a result of the requirement that ISPL fees received during the 2017 financial year be booked as borrowings. As noted, the company is revising the ISPL licensing program and correcting deficiencies with input from its auditor and legal counsel, and management shall determine at that point whether it will be able to recognize revenues for previously sold licences on a going-forward basis.

Liabilities also increased from the company's decision to take back responsibility of the company's Series G debentures previously assigned to another company. See Series G debentures below.

Series G debentures

The company would also like to advise that the security offered to Series G debenture holders pledged by a Colombian company in connection with the Columbian transaction is being reviewed by a special committee of the board of directors. The company feels it has basis for investigating the current status of assets previously pledged and is thus working with counsel representing various parties related to the Colombian transaction toward either validating the assets pledged or arriving at an agreement on alternative assets that would be pledged as a replacement. Given that the Series G debentures represent a significant liability on the books of the company, management and the board of company are currently reviewing various scenarios that they had been actively pursuing prior to the failure-to-file cease trade order (CTO) issued by the Ontario Securities Commission (OSC) on May 4, 2018. As soon as the CTO is lifted, as detailed further below, management and the board of the company plan to commence working actively and aggressively with the Series G debenture holders toward an alternative solution such as a conversion of debt.

Cease trade order

Regarding the CTO currently in effect, the company is currently in the process of filing its Q1 2018 financial statements. Once this is done, the company plans to bring an application to the OSC for a revocation of the CTO and a concurrent application to the TSX Venture Exchange for reinstatement. The company expects said Q1 2018 financial statements to be published on or prior to Aug. 23, 2018. While the company does not expect protracted timelines, there can be no assurance as to the time when the CTO is lifted or when the TSX-V reinstatement will occur.

Next steps

The situation with revenue recognition and associated matters was challenging for the company to understand, given that it had launched the ISPL licensing program with review and advice from various advisers including previous legal counsel who were working directly and interactively with the auditor. As a result, the company has taken the extra time necessary to better understand the situation, to make informed decisions and to ensure that not only do its financial statements accurately reflect the adjustments required, but also that the same mistakes are not repeated. Although the company is not able to recognize ISPL revenues on its 2017 financial statements, as services related to said licensing program are deployed and necessary modifications to such program are made, the company shall determine if it will be possible to recognize these revenues in the financial year ending Dec. 31, 2018.

The company would also like to announce that Nayeem Alli, its interim chief financial officer is no longer with the company. Subsequent financial statements shall be prepared and reviewed by existing personnel and management. The company is actively pursuing a permanent replacement for the CFO position and will take the time necessary to retain a qualified candidate.

About First Global Data Ltd.

First Global is an international financial services technology company. The company's two main lines of business are mobile payments and cross-border payments. First Global's proprietary leading-edge technology enables the convergence of compliant domestic and cross-border payments, shopping, peer-to-peer (P2P), business-to-consumer (B2C) and business-to-business (B2B) payments. First Global enables its strategic partners and clients around the world with its leading-edge financial services technology platform.

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