Currency Exchange International
Annual Report 2014

Plain-text annual report

€ $ £ ¥ Currency Exchange International 2014 Annual Report FINANCIAL HIGHLIGHTS 2014 2013* Exchange Volume: In Millions Total Revenue: In Millions Total Assets: In Millions at Fiscal Year-End $1,456 $22.0 $39.7 $878 $16.0 $33.7 All amounts in this report are stated in USD unless otherwise noted. 2012 $605 $12.3 $18.2 2011 $409 $8.7 $9.9 Exchange Volume $ Millions 66% Year Over Year Total Revenue $ Millions 3 8% Year Over Year Total Assets $ Millions 18% Year Over Year 2014 2013* 2012 2011 2014 2013* 2012 2011 2014 2013 2012 2011 $300 $600 $900 $1,200 $1,500 $5 $10 $15 $20 $25 $8 $16 $24 $32 $40 Key Ratios Corporate Customers and Transacting Locations 2014 2013* 2014 2013* 2012 2011 Earnings Per Share $0.62 $0.49 Return On Assets 9.2% 9.1% Return On Equity 11.0% 10.4% Company-Owned Branch Locations Wholesale Company Relationships 32 26 23 18 469 364 245 123 Efficiency Ratio 67.3% 72.5% 2013 Key Ratios exclude a one-time non-cash gain of $458,241 from the revaluation of the Company’s income has been warrant annualized to conform to a twelve month period. liability and net *13 month period-ended October 31, 2013 Transacting Locations 8,274 5,741 2,455 1,983 Quarterly Stock Price (TSX:CXI) TSX stock prices are quoted in Cdn$ Q4 Ended 10/31/2014 Q3 Ended 7/31/2014 Q2 Ended 4/30/2014 Q1 Ended 1/31/2014 $18.65 $13.15 $13.30 $11.72 CXI Annual Report 2014 1 PRESIDENT’S LETTER Dear CXI Shareholders, Employees and Customers I am pleased to present the progress and achievements of Currency Exchange International for our fiscal year-ended October 31, 2014. All amounts expressed in USD unless otherwise noted. Continuing CXI’s Strong Growth During the last fiscal year, CXI commenced currency exchange services with more than 100 new wholesale companies, including several large financial institutions, representing over 2,500 new transacting locations for the company. This growth is attributable to adding new customers and increasing market-share combined with the company’s acquisition of certain assets of U.S. Exchange House in March 2014. CXI also added six new wholly-owned branch locations during the last fiscal year and now operates a total of 32 branches in the United States. We expect to continue to increase the number of branches during the coming year in strategic locations throughout the United States. CXI’s dedication to growing its branch network is attributed to the contributions the locations bring to the company’s financial assets. In addition to these company-owned and operated branches, CXI provides inventory on consignment to customers in 180 locations throughout the United States and Canada, mostly in banks and select high-traffic locations. These locations 2 CXI Annual Report 2014 Randolph W. Pinna President & CEO are able to provide immediate currency exchange services to their retail customers and are profitable for CXI, as there are no occupancy or payroll costs associated with this business. As a result of this impressive expansion, total exchange volume increased by 66% compared to the previous year, to just under $1.5 billion. Revenues also showed strong growth, increasing by $6.0 million to $22.0 million compared to $16.0 million for the previous year. Compared to the previous year, total assets increased to $39.7 million from $33.7 million, an increase of 18%, while shareholder’s equity increased to $33.0 million from $29.8 million. Net income grew to $3.4 million up from $2.6 in the previous year. Shareholder’s Equity $ Millions October 31, 2014 October 31, 2013 September 30, 2012 September 30, 2011 $33.0 $29.8 $16.2 $6.2 PRESIDENT’S LETTER Strategic Initiatives During 2014, CXI continued to invest resources to enhance its core, proprietary operating software - CEIFX.com. This web-based application is the core system of the company and is used to manage inventory, conduct foreign currency exchange transactions, clear foreign cheques, send wire payments, as well as provide for mandated regulatory reporting and record keeping. During 2014, the company continued to customize the software to meet the unique needs of its client base, as well as to win customers away from competitors. In addition, the company continued to make significant investments in its web-based platform to enhance the security and functionality of the system and satisfy the stringent requirements of our many financial institution clients. Shareholder Performance Graph Currency Exchange International, Corp. S&P/TSX Composite Index $300 $250 $200 $150 $100 $50 March 9, 2012 September 30, 2012 October 31, 2013 October 31, 2014 09/03/12 30/09/12 31/10/13 31/10/14 CXI/TSX S&P/TSX Composite Index $100 $100 $100 $98.51 $168.42 $106.86 $280.45 $116.87 This graph compares the yearly percentage change in the cumulative total shareholder return for Cdn$ invested in Currency Exchange International, Corp. on March 9, 2012, against the cumulative total shareholder return of the S&P/TSX Composite Index for the three most recently completed financial years of CXI, Corp., assuming the reinvestment of all dividends. Application for CXI Canada to Continue as Exchange Bank of Canada CXI submitted an application to the Office of the Superintendent of Financial Institutions (OSFI) in Canada in November 2012 to continue its wholly-owned subsidiary, Currency Exchange International of Canada Corp., as a Canadian Schedule 1 Bank. If approved, the bank will be known as “Exchange Bank of Canada” in English and “Banque d’échange du Canada” in French. CXI has been consistently working with OSFI throughout the year and believes that the progress made has been very positive. During the year, CXI appointed a new independent director with extensive executive level experience in personal and commercial banking, finance, audit and risk management. In addition, CXI appointed a new Chief Anti-Money Laundering Officer during the last fiscal year. These appointments enable the company to effectively manage its risk and compliance with all regulatory requirements now and for the anticipated significant growth forecasted over the next three years. The objective of becoming a Toronto based bank is to expand current and future business opportunities and become a leading banker’s bank for foreign exchange products and services. By obtaining a bank charter, the company will be able to bank with central banks, which will provide the company with a source of stable, cost-effective funds, in addition to enhancing the company’s existing bank relationships. Exchange Bank of Canada will not take deposits or make loans. Positioned for Growth in the Years Ahead The board of directors and CXI management team are extremely proud of the achievements made during the last year with the help and support of our outstanding employees, customers, and shareholders. I am personally very optimistic about the opportunities that the company expects to capitalize on in the coming years and I believe that we are well positioned to successfully navigate the continued expansion of our business. We continue to bring in new, prestigious banking clients and we believe that this growth will be further accelerated if the bank license is approved. In view of the current status of these initiatives, we believe that 2015 will be another profitable growth year and that our stock will continue to reflect the company’s strong performance. I personally thank all of CXI’s employees, shareholders, customers and friends for their continued support of Currency Exchange International. Should you have any questions or wish to discuss anything at all, I remain available to discuss our company and its goals with you personally. Sincerely, Randolph W. Pinna President and CEO CXI Annual Report 2014 3 company snapshot CXI launches its proprietary, web-based FX software solution: CEIFX. Three vaults are established in the U.S.: CXI’s main currency processing center in Miami, Florida and regional vaults in New York and California. CXI Canada opens for business and its Toronto vault is established. CXI completes its IPO on the Toronto Stock Exchange (TSX). Expiration of the Regulation S restriction from CXI.S Common Shares - now trades as CXI on the TSX. 98% of Common Share Purchase Warrants and Broker Compensation Units are exercised for total gross proceeds of Cdn$11.3 million. CXI begins operations: Randolph Pinna purchases eight retail branches of Foreign Currency Exchange Corp. from the Bank of Ireland Group. CXI commences services for financial institutions, allowing its wholesale partnerships to grow rapidly. CXI Canada files application to continue as a new Schedule 1 Bank in Canada. CXI purchases assets of U.S. Exchange House in U.S. and Canada. Market cap surpasses Cdn$ 100 million mark. CXI grows to 469 customers at 8,274 transacting locations. $1.5 billion worth of currency is exchanged through CXI. cxi key activities New Appointme nt to Board of D ire c tors a nd Chief Anti-M oney Launde ring Officer financial institutions. Ms. Houlihan holds the Certified Anti- Money Laundering Specialist (CAMS) designation. Ms. Linda A. Stromme joined CXI’s board of directors as an independent director and was appointed to the Audit Committee in July 2014. Ms. Stromme brings to CXI a successful 23 year career with the Bank of Montreal, with executive level roles in personal and commercial banking, finance, audit and risk management. Ms. Stromme is now the Principal and Founder of End Result Coaching & Consulting Inc., providing consulting services to financial institutions. Ms. Stromme graduated with a Bachelor of Commerce (Honours) from the University of Manitoba, is a Chartered Professional Accountant (CPA, CA), and holds a Certification in Risk Management Assurance (CRMA). Ms. Stromme replaced Dr. Sanford Pinna, who retired from the board after several years of service to its shareholders. As the original founder of Foreign Currency Exchange Corp. (FCE) in 1987, Dr. Pinna along with his son Randolph, grew FCE from a small operation in Tampa, Florida to an international, publicly-traded company, later merging with Bank of Ireland in 2003. In 2007, Randolph Pinna purchased the retail currency exchange division of FCE to create Currency Exchange International, Corp. where Dr. Pinna has provided insight and strategic advice as a valued director. Ms. Laura M. Houlihan joined CXI as Vice President and Chief Anti-Money Laundering Officer (CAMLO) of CXIC in July 2014. Ms. Houlihan was previously VP & Senior Global Financial Crimes Compliance Specialist at Bank of America. Ms. Houlihan brings to CXI more than 15 years of anti- money laundering (AML) and anti-terrorist financing (ATF) compliance experience in the financial services industry. In previous roles, she was responsible for developing, executing and maintaining AML/ATF compliance programs for Canadian 4 4 CXI Annual Report 2014 CXI Closes Purchase Agreement w ith U.S. Exchange House During the year, CXI acquired certain assets of U.S. Exchange House, Inc. (USEH) pertaining to the wholesale bank note operations located in the United States and Canada. CXI paid $2.35 million in cash on closing along with two additional contingent payments of up to $1.325 million payable on the first and second anniversary after closing. These additional payments will be based on the amount of revenue generated from the customers acquired. The assets acquired from USEH have been merged and integrated into CXI’s current banknote business and will continue to use the CXI brand name. Operational efficiencies were achieved due to the similar business operations and overlap of back office functions. CXI retained some of USEH’s currency trading staff, who have been used to open CXI’s Los Angeles, California vault in order to service the company’s U.S. based west coast operations. CXI Ends Fiscal Year with Reco rd Market Cap CXI ended October 31, 2014 with a stock price of Cdn$18.65 and 5,395,073 shares outstanding resulting in a market capitalization of more than Cdn$100 million on the Toronto Stock Exchange. This is a record fiscal year-end market cap for the company that began trading on the Toronto Stock Exchange after its IPO in March 2012 with an opening price of Cdn$6.65. Since that time, the stock has continued to increase in value year-over-year. The market cap underscores the market’s confidence in CXI’s business. cxi operations Bu siness Over v iew At its core, CXI is a business that successfully pairs its resources and relationships to provide the specialized service of foreign exchange to its customers. Whether it’s a financial institution, money-service business (MSB) or individual, CXI provides its services in a manner that leaves both the company and its clients better off. As an industry leader in foreign exchange, CXI has built a scalable currency exchange business that services financial institutions including top 10 U.S. banks, as ranked by number of locations, comprising of more than 8,200 transacting locations that interact with CXI as their currency exchange provider. The company has developed the highest consumer-rated* national foreign currency exchange branch network within the U.S., with more markets experiencing why exchanging with CXI is the best option each year. The company continues to fully dedicate its time and energy into expanding its customer base and services without sacrificing the quality of its service to any customer. The impressive growth of the company has been spurred on by its ability to continue to attract and retain new customers in the form of financial institutions, MSBs and other corporate clients in the United States and Canada. The company-owned branch network provides a balance of higher margin currency trades with individuals. Since the branch network is a net buyer of foreign currency for the company’s vaults, the higher margin transactions serve as a way to source foreign currencies that the company can then make available through its network of relationships, such as financial institutions, who are generally net sellers of foreign currency. Reducing the need for CXI to sell-off excess currency affords the company wider margins in all aspects of its bank note business. Company-Owne d Branch Netwo rk In the first quarter of the 2014 fiscal year, CXI opened the doors for two branches: one branch at Tysons Corner Center, a super- regional shopping mall in Tysons Corner, Virginia and another at The Florida Mall in Orlando, Florida, the second branch in the mall for CXI. Tysons Corner Center, located in northern Virginia, had a WMATA metro line open shortly after the CXI branch began transacting. This has linked the mall with Washington D.C. and provides better accessibility to the branch for those in the city center and those traveling through Washington Dulles International Airport. The Florida Mall marks the third shopping center where CXI has established a second exchange booth within the same mall. The Florida Mall has long been one of the highest trafficked locations and the expansion within the mall has given more exposure to CXI from mall patrons. The third location opened during the fiscal year, saw CXI retake ownership of the Citadel Outlets branch in Commerce, California. After transferring ownership of the branch to the mall management for eight months, an agreement was reached for CXI to once again run the branch operations. The next branch location was a first for CXI as it opened in a new market, Denver, Colorado in May 2014. CXI selected downtown Denver’s Cherry Creek Shopping Center as the site for its branch marking the ninth state to house a company-owned location. In the final three months of the 2014 fiscal year, CXI set its sights on one of its most successful markets, Manhattan, New York, by beginning to transact at two new Apple Bank implant locations. CXI’s Union Square location opened first in August 2014 with the Upper East Side location following in October. The partnerships established by CXI in New York City have confirmed to the company that there is still plenty of market-share opportunity in the largest tourist city in the United States. The CXI branch network currently consists of 32 company-owned currency exchange locations across the United States. These locations service clients in heavily touristed or affluent traveling regions of the U.S. targeting inbound foreign travelers, outbound locals traveling internationally, or in the best markets both. CXI branches are established in popular regional shopping centers or implanted within bank branches within these target markets. In the 2014 fiscal year, the company opened six branches in five states. The expansion of the company-owned branch network at the current rate displays the dedication to the strategic growth plan the company’s management team and board of directors have been crafting by expanding into areas beyond its previously existing markets, as well as pin-pointing opportunities within known markets. Every branch opening requires up-front investments in both personnel and capital. These internal investments have over time continuously proven their positive return for the company. 5 0 5 0 5 0 5 0 5 0 5 0 CURRENCY EXCHANGE Com pany-Ow ned Branch es 0 5 0 5 5 0 5 0 5 0 0 5 0 5 0 5 0 5 Customer Relationships 5 0 5 0 5 0 0 5 0 5 0 5 0 5 0 5 0 5 CURRENCY EXCHANGE Net buyer of foreign currency Wider margins on transactions Smaller transaction size Varying amounts of capital investment to open 32 locations in high tourist or affluent- BANK BRANCH traveling markets across nine states BANK BRANCH Financial institutions, MSBs, and corporations Net seller of foreign currency Smaller margins with larger volume trades Little to no investment upfront 469 company relationships accounting for 8,274 transacting locations * As an aggregate company average rate online through Google My Business and Yelp as rated by consumers of a currency exchange specific company operating in at least nine states within the U.S.. CXI Annual Report 2014 5 Uni ted States Business Env ironme nt the company and all of its customers the confidence that it is fully compliant with its regulatory obligations. cxi operations CXI changed the landscape of the foreign currency exchange marketplace when it completed the purchase of certain assets of U.S. Exchange House (USEH). At the time of the purchase, USEH was a strong competitor in the foreign bank note market in both the U.S. and Canada. The consolidation of customers underneath the CXI umbrella enabled the company to solidify a number of longstanding relationships and keep its business development team focused on financial institutions, which has been the main organic growth area for the company. New customers, either acquired or cultivated through business development channels, quickly find what makes CXI different from its competition and why existing customers remain loyal to the company. CXI fully embodies the belief that it is in business to create mutually beneficial relationships, in which all parties involved are better off than prior to their interaction. Between the acquisition of USEH and the business development process, CXI added more than 75 new customer relationships exceeding 2,400 new transacting locations across the United States. These relationships are with financial institutions, MSBs and other corporate clients. Each relationship varies in utilized services ranging from one or all of the following: foreign currency banknotes, international wire transfers, issuing foreign drafts, and clearing foreign denominated cheques. New and existing customers find numerous advantages when switching or starting foreign exchange programs with CXI. Not only is the pricing competitive for those dealing with CXI, the company is uniquely positioned to provide industry leading FX software, versatile service options, and service experience that combines to bring the best product to the table for clients. Whether a client’s situation calls for extensive integration into their current service offering by implementing CXI’s software to every station or as simple as calling in bulk shipments to traders, CXI has the resources, experience and knowledge to deliver the best service experience possible. Canadi an Business Env ironment The CXIC team has seen growth over the past fiscal year in both the customers it services and its executive staff. The newest executive brought on to enhance the team was Laura Houlihan, Vice President and Chief Anti-Money Laundering Officer. There has never been a time when compliance has been stressed to the degree as it is in today’s regulatory environment. CXI understands the responsibilities that come with working in the financial industry where “Know Your Customer” and other regulations mean tightly scrutinizing all customers who exchange with the company. The CXI team is always committed to following all oversight provisions determined by the various regulating bodies. The compliance staff within the company, its procedures and the tools at their disposal through the CEIFX software, gives 6 CXI Annual Report 2014 The other aspect of growth for the company was found in the number of customers taking advantage of the services provided by CXIC. The business has been active in the market gaining more than 25 new customer relationships with north of 125 distinct locations, which began to fully transact in fiscal year 2014. As more customers join CXI, the company creates new advocates for the transparent and customer-friendly manner in which it conducts its business. CEIFX Software Advantage Viewed as a leading application in foreign currency exchange, the CEIFX software continues to generate interest with new and potential customers. The core features allow for fully customized customer setups, compliance instinctual user interface, user management and robust reporting capabilities. integration, The web-based software accommodates all product lines offered by CXI including banknotes, traveler’s cheques, foreign cheque clearing, foreign draft issuance, multi-currency prepaid cards, and wire transfer payments. At its core, the system is driven by its Compliance Verification System (CVS). The CVS allows for live compliance checks of regulatory watch lists, easy to review matches, live-stop capabilities, branch-hopper aggregation, compliance reporting and it maintains compliance with all current U.S. and Canadian regulations. Even with such robust capabilities the system remains flexible for many setup types and deployment needs. The versatility of the software offers a full white-label environment, where the software can be deployed to look like the customer’s own website, allowing CXI to operate completely behind the scenes. The company is dedicated to maintaining and continually enhancing its software to keep its place as the leading foreign currency software in the industry. With financial regulations and customer needs always changing, CEIFX remains an integral part of the company’s competitive advantage. Wholesale Customers and Transacting Locations Wholesale Customers Transacting Locations 500 400 300 200 100 s r e m o t s u C e l a s e l o h W 10,000 8,000 6,000 4,000 2,000 s n o i t a c o L g n i t c a s n a r T Sept. 30, 2011 Sept. 30, 2012 Oct. 31, 2013 Oct. 31, 2014 Wholesale Customers Transacting Locations 2011 123 1,983 2012 245 2,455 2013 364 5,741 2014 469 8,274 7 CURRENCY EXCHANGE INTERNATIONAL, CORP. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE THREE MONTH PERIOD AND YEAR ENDED OCTOBER 31, 2014 AND FOUR MONTH AND THIRTEEN MONTH PERIODS ENDED OCTOBER 31, 2013 8 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Scope of Analysis This Management Discussion and Analysis (“MD&A”) covers the results of operations, and financial condition of Currency Exchange International, Corp. and its subsidiaries (the “Company,” or "CXI") for the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013, including the notes thereto. This document is intended to assist the reader in better understanding and assessing operations and the financial results of the Company. This MD&A has been prepared a s at January 13, 2015 in accordance with National Instrument 51- 102 – Continuous Disclosure Obligations adopted by the Canadian Securities Administrators. This information has been prepared by management of the Company in accordance with International Financial Reporting Standards (“IFRS”) and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended October 31, 2014 and the thirteen month period ended October 31, 2013, and the notes thereto. A detailed summary of the Company's significant accounting policies is included in Note 2 of the Company's audited consolidated financial statements. The functional currency of the Company and its U.S. subsidiary, Currency Exchange International America Corp. (“CXIA”), is the U.S. Dollar. The functional currency of the Company’s Canadian subsidiary, Currency Exchange International of Canada Corp. (“CXIC”), is the Canadian Dollar. The Company’s presentation currency is the U.S. Dollar. Unless otherwise noted, all references to currency in this MD&A refer to U.S. Dollars. The consolidated financial statements and the MD&A have been reviewed by the Company’s Audit Committee and approved by its Board of Directors. In this document, “our”, “Company,” and "CXI" refer to Currency Exchange International, Corp. collectively with its subsidiaries, CXIC and CXIA. Additional Information Additional information relating to the Company, including annual financial statements, is available on the Company’s SEDAR profile at www.sedar.com and on the Company’s website at www.ceifx.com (“CEIFX”). 9 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Forward Looking Statements This MD&A contains certain “forward-looking information” as defined in applicable securities laws. These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking information. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “budgeted”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. The forward-looking information in this MD&A speaks only as of the date of this MD&A or as of the date specified in such statements. The following table outlines certain significant forward-looking information contained in this MD&A and provides the material assumptions used to develop such forward-looking information and material risk factors that could cause actual results to differ materially from the forward looking information. Forward-looking information Assumptions Risk factors Status of CXI’s application to continue its subsidiary as a Canadian Schedule I bank, and the objectives for such bank Regulatory and governmental approval for the establishment of the bank will be received on a timely basis upon terms favorable to CXI; the bank will be able to attract and retain clients Approvals are made at the discretion of governmental bodies and may not be granted on terms favorable to CXI or at all; the bank has no history of operations Expectations regarding CXI’s ratio of operating expenses to total revenues Sensitivity analyses relating to foreign currencies and interest rates The operations of CXI in the near term, and the costs associated therewith, will be consistent with management’s current expectations; foreign exchange rates and other applicable economic conditions are favorable to CXI; CXI will be able to successfully execute its expansion plans The possibility that operations will not be consistent with recent history and management’s expectations; increases in transactional or other costs; fluctuations in foreign exchange markets; changes in economic conditions Exchange rate and interest rate fluctuations All factors other than the variable in question remain unchanged; CXI’s entire unhedged balance of foreign currency holdings is affected uniformly by changes in exchange rates; CXI’s interest-bearing instruments and obligations were constant during the period Inherent in forward-looking information are risks, uncertainties and other factors beyond the Company’s ability to predict or control. Please also make reference to those risk factors referenced in the “Risks Factors” section beginning on page 21 in the Company’s MD&A. Readers are cautioned that the above chart does not contain an exhaustive list of the factors or assumptions that may affect the forward-looking information in this MD&A, and that the assumptions underlying such statements may prove to be incorrect. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained in this MD&A. 10 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Forward Looking Statements (continued) Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking information. All forward-looking information herein is qualified by this cautionary statement. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information or future events or otherwise, except as may be required by applicable securities laws. If the Company does update any forward-looking information, no inference should be drawn that it will make additional updates with respect to that or other forward-looking information, unless required by applicable securities laws. Change in reporting period Effective February 2013, CXI changed its fiscal year end to October 31, 2013 to conform with the same change in fiscal year end made by its wholly-owned Canadian subsidiary corporation, CXIC, to comply with the reporting period for Canadian chartered banks as part of the ongoing process of CXIC applying for a bank license in Canada. As a result, the audited consolidated financial statements are presented as the year ended October 31, 2014 and the thirteen month period ended October 31, 2013. The MD&A is presented as the three month period and year ended October 31, 2014 compared to the four month and thirteen month periods ended October 31, 2013. Overview CXI is a publicly traded company (T SX : C X I ; OTC BB:CURN ) specializing in providing currency exchange and related products to banks, money service businesses, travel companies, and to clients through its company owned branches and inventory on consignment locations, throughout the United States and Canada, by utilizing the Company’s proprietary online software system, CEIFX. The Company has developed CEIFX, its proprietary customizable web-based software, as an integral part of its business and believes that it represents an important competitive advantage. CEIFX is also an on- line compliance and risk management tool. The trade secrets associated with CEIFX are protected via copyright and secure maintenance of source code by the head office. CEIFX is updated regularly and o n - g o i n g system development and enhancement is a core activity at the Company. On November 23, 2012, CXI submitted its application to continue its wholly-owned subsidiary, CXIC, as a new Canadian Schedule I bank. Subject to review and approval of the application by the Office of the Superintendent of Financial Institutions (“OSFI” - Canada) and the Minister of Finance (Canada), the new bank will be called "Exchange Bank of Canada" in English and "Banque d'échange du Canada" in French and will have its head office in Toronto. The objective of the Exchange Bank of Canada is to expand current and future business opportunities and become a leading banker's bank for foreign exchange products and services. Obtaining a Canadian bank charter benefits the Canadian banking system by becoming a domestic alternative in providing foreign exchange services to banks in Canada. The currency market for financial institutions in Canada is primarily serviced by foreign institutions. A Canadian bank charter affords the Company numerous advantages including the opportunity to bank with Central Banks, thereby obtaining a source of stable, cost-effective funds, collateral reductions with corresponding banks, and enhancing existing bank relationships. 11 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Overview (continued) On October 31, 2013 the Company added additional capital into CXIC as part of its bank application process. The Company is a reporting issuer in the provinces of British Columbia, Alberta and Ontario. The Company has the following sources of revenues which are reported as commissions and fees: ● Commission revenue is comprised of the spread between the cost and selling price of foreign currency products, including bank notes, wire transmissions, cheque collections and draft issuances and the revaluation of foreign exchange positions to market value, combined with the net gain or loss from foreign currency forward contracts used to offset the revaluation of inventory positions and commissions paid to bank and non-bank financial institutions on the sale and purchase of currency products. The amount of this spread is based on competitive conditions and the convenience and value added services offered; ● Fee revenue is comprised of the following: ○ Fees generated at the Company’s branch locations from foreign currency (bank note) exchange, foreign traveller’s cheques, and fees collected on payroll cheque cashing; and o Fees collected on foreign wire transfers, foreign drafts, and check collection transactions. 12 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Overview (continued) The following are some of the characteristics of the Company’s revenue streams:  The Company operates five vaults located within the United States and Canada that serve as distribution centers for its branch network as well as order fulfillment centers for its clients including banking institutions, money service businesses, and other corporate clients. Revenues generated from vaults have greater scale as the Company maintains a sales force to increase its geographic customer base. Exchange rate margins vary from customer to customer and are dependent on criteria such as exchange volumes and customer setup. On-boarding of new clients, specifically banking clients, normally require an upfront investment, such as training, and currency signage, as well as additional one-time shipping costs to distribute start-up materials. The Company also normally absorbs information technology costs to customize the CEIFX software for specific client use during the customer implementation phase. There are two common customer setups: o Centralized setup - For customers with a high volume of foreign currency exchange who maintain and manage their own inventory in central vault facilities, the Company offers bulk wholesale bank note trading. Trades of this nature are generally executed at lower margins as the cost per transaction is low and the average value is high. The customer implementation phase is normally shorter and the costs of on-boarding clients is low; o Decentralized setup - Many customers have determined that it is advantageous to avoid a currency inventory and allow their locations to buy and sell directly from CXI. Transactions in a decentralized setup typically are executed at a higher margin as the average transaction is low and the cost to fulfill each trade is higher than that of a centralized setup. Several of the Company's financial institutions outsource their currency needs in return for a commission based upon exchange volume. When a client outsources their currency needs, the Company is granted access to the entire branch network thus immediately increasing its geographic footprint and expanding its customer base. The customer implementation phase is normally longer in a decentralized setup and the cost of client on-boarding is higher as these clients normally require additional training and support; ● The Company operates 32 branch locations which are located in high tourist traffic areas, staffed by CXI employees, and located across the United States. These locations hold domestic and foreign currencies to buy and sell on demand. The currency exchange margins associated with the transactions occurring at these locations are generally higher in order to recapture costs of deployed capital in the form of domestic and foreign currencies, rent, payroll, and other general and administrative costs; ● CXI currently maintains inventory in the form of domestic and foreign bank notes in banks and other high traffic locations. These locations can be very profitable as there are no occupancy costs or payroll. Foreign exchange currency is placed in these locations on a consignment basis. At October 31, 2014, the Company had inventory on consignment in 180 locations, primarily located inside banks across the United States and Canada. To encourage inventory turnover, the Company pays commissions as a percentage on volumes generated by these locations; and ● Company owned branch locations generally act as a net buyer of foreign currency whereas CXI's bank and non-bank clients act as a net seller. Excess currency collected via the branch network can be redeployed to banks and non-bank clients which reduce the need to source currency through wholesale sources at a greater cost, thus increasing currency margins. 13 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Overview (continued) The Company has aggressively grown its branch network as well as the number of wholesale relationships over the years. Below is a list of the Company’s wholesale company relationships and transacting locations as well as a listing of its 32 branch locations: Store City State Apple Bank - Avenue of Americas New York Apple Bank - Grand Central Station New York Apple Bank - Penn Station Apple Bank - Union Square New York New York Apple Bank - Upper East Side New York NY NY NY NY NY Start Date (Fiscal Year) Store City State 2011 MacArthur Mall Norfolk 2011 Mainplace at Santa Ana Santa Ana 2013 Mechanics Bank - Berkeley Berkeley VA CA CA 2014 Mechanics Bank - San Francisco San Francisco CA 2014 Montgomery at Bethesda Bethesda Arundel Mills Mall Hanover MD 2012 Ontario Mills Mall Ontario Aventura Mall Booth #1 Aventura Mall Booth #2 Aventura Aventura FL FL 2008 Potomac Mills Mall Woodbridge 2012 San Francisco City Center San Francisco CA Century City Mall Los Angeles CA 2009 San Jose Great Mall San Jose CA Cherry Creek Citadel Outlets Denver CO 2014 Santa Monica Place Santa Monica CA Los Angeles CA 2014 Sawgrass Mills Mall Booth #1 Sunrise Copley Place Mall Boston MA 2009 Sawgrass Mills Mall Booth #2 Sunrise Dadeland Mall Dolphin Mall Florida Mall Booth #1 Florida Mall Booth #2 Miami Miami Orlando Orlando FL FL FL FL 2009 Shops at Northbridge 2009 SouthCenter Chicago Tukwila 2007 The Galleria at Fort Lauderdale Ft. Lauderdale FL 2014 Tyson's Corner Center Tyson’s Corner VA MD CA VA FL FL IL WA Start Date (Fiscal Year) 2009 2013 2007 2008 2013 2007 2007 2011 2011 2012 2007 2010 2013 2012 2013 2014 Company owned branch locations Wholesale company relationships Number of transacting locations FY 2008 9 26 88 FY 2009 FY 2010 14 61 190 15 70 267 FY 2011 18 123 1,983 FY 2012 23 245 2,455 FY 2013 26 364 5,741 FY 2014 32 469 8,274 The Company’s largest asset is cash. The cash position consists of local currency notes, both in U.S. and Canadian Dollars, held in inventory at its branch and consignment locations to facilitate the buying and selling of foreign currency, as well as foreign currency held at the Company's' vaults, branch locations, consignment locations, or cash inventory in transit between Company locations. The Company also has traditional bank deposits which act as reserves to maintain operations and as settlement accounts to facilitate currency transactions at various financial institutions. Accounts receivable consist primarily of bulk wholesale transactions where the Company is awaiting payment. Receivables are highly liquid and typically have a settlement time o f o n e t o two business days with most buyers being banks and other financial institutions. Accounts payable consist mainly of foreign currency transactions and commissions payable at period end where the Company receives currency from a customer and then remits payment at a later date. 14 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Initial Public Offering On March 9, 2012, the Company completed its initial public offering ("IPO," or "Offering") on the Toronto Stock Exchange ("TSX") by issuing 1,380,000 units at a price of Cdn$6.65 per unit for aggregate proceeds of Cdn$9,177,000. Each Unit was comprised of one common share in the capital stock of the Company (“Common Share”) and one Common Share Purchase Warrant (“Warrant”) which was able to be exercised at a price of Cdn$7.50 per share until an expiration of September 8, 2013. In addition, the Company issued 82,800 broker compensation units which were comprised of one Common Share and one Warrant which were able to be exercised at $7.50 per share. During the thirteen month period ended October 31, 2013, 82,680 broker units were exercised for proceeds of Cdn$549,822 ($548,264) and 1,435,725 warrants were exercised for proceeds of Cdn$10,767,938 ($10,384,109). Funds received were used to finance an asset acquisition, increase foreign currency inventories at vault locations, increase its branch and inventory on consignment network, and enhance its proprietary software, CEIFX, as well as for debt reduction. Purchase of assets from U.S. Exchange House, Inc. On March 28, 2014 the Company purchased certain assets of U.S. Exchange House, Inc. (“USEH”), pertaining to its bank note operations located in the United States and Canada. The Company acquired USEH’s customer trading relationships, certain prepaid and fixed assets and the USEH trading software used to operate the bank note business. CXI paid $2,350,000 in cash on closing and will have two additional contingent payments of up to a maximum of $1,325,000 each on the first and second anniversary after closing. The additional payments will be based on the amount of revenue generated from the customer trading relationships acquired. The Company recorded expenses of $141,353 in legal and other professional fees to complete the transaction. SELECTED FINANANCIAL DATA The below chart summarizes the performance of the Company over the last eight fiscal quarters. Operating income for prior periods has been adjusted to exclude the effects of depreciation and amortization. Date Period (unaudited) Three months ending Three months ending Three months ending Three months ending Four months ending Three months ending Three months ending Three months ending * Excludes depreciation and amortization expense 31-Oct-14 31-Jul-14 30-Apr-14 31-Jan-14 31-Oct-13 30-Jun-13 31-Mar-13 31-Dec-12 $ 6,552,184 6,839,330 4,487,432 4,127,007 6,463,406 3,799,683 2,919,292 2,808,053 Revenue Operating income* Net income Total assets Total equity $ 2,279,682 2,830,097 1,109,212 970,779 2,341,712 1,168,754 505,207 376,843 $ 1,045,192 1,456,004 466,774 451,156 1,669,609 1,466,835 (575,087) 80,338 $ 39,709,302 42,044,018 37,244,354 32,844,973 33,681,819 19,997,719 18,709,964 19,929,308 $ 33,025,175 32,185,439 30,586,996 29,835,415 29,763,976 17,607,201 16,255,314 16,734,553 Earnings per share (diluted) $ 0.19 0.26 0.09 0.08 0.39 0.38 (0.15) 0.02 Seasonality is reflected in the timing of when foreign currencies are in greater or lower demand. In a normal operating year there is seasonality to the Company's operations with higher revenues generally from March until September and lower revenues from October to February. This coincides with peak tourism seasons in North America when there are generally more travelers entering and leaving the United States and Canada. 15 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Selected Financial Results for the three months and year ended October 31, 2014 and the four month and thirteen month period ended October 31, 2013 Revenue Operating expenses* Net operating income Total other income (expense), net EBITDA** Net income Basic earnings per share Diluted earnings per share Three Months October 31, 2014 (Unaudited) $ 6,552,184 4,272,502 2,279,682 (17,851) 2,261,831 1,045,192 0.19 0.19 Four months ended October 31, 2013 (Unaudited) $ Year ended October 31, 2014 (Audited) $ Thirteen month period ended October 31, 2013 (Audited) $ 6,463,406 4,121,694 2,341,712 232,146 2,573,858 1,669,609 0.39 0.39 22,005,953 14,816,184 7,189,769 (177,226) 7,012,543 3,419,125 0.63 0.62 15,990,434 11,597,919 4,392,515 199,363 4,591,878 2,641,694 0.64 0.64 * Excludes depreciation and amortization expense ** Earnings before interest, taxes, depreciation and amortization Total assets Total long term financial liabilities Total equity October 31, 2014 October 31, 2013 (audited) $ 39,709,302 585,144 33,025,175 (audited) $ 33,681,819 - 29,763,976 Results of operations – year ended October 31, 2014 compared to thirteen month period ended October 31, 2013 A breakdown of revenues by geographic location is presented below: Total revenues Year ended October 31, 2014 $ Thirteen month period ended October 31, 2013 $ United States Canada Total 11,949,822 10,056,131 22,005,953 14,382,012 1,608,422 15,990,434 During the year ended October 31, 2014 revenues increased by 38% to $22,005,953 compared to $15,990,434 for the thirteen month period ended October 31, 2013. Revenue growth resulted from establishing six new Company-owned branch locations as well as 105 new wholesale relationships, of which 61 were added as a result of the acquisition of customer trading relationships from USEH, making up 2,533 new locations since October 31, 2013. Additionally, there was a continuation of higher trading volumes of exotic currencies, such as the Iraqi Dinar and the Vietnamese Dong which are primarily speculative in nature. Due to their speculative nature, the Company charges a premium when buying and selling these currencies. On October 31, 2013, the Company restructured its operations to add additional capital into CXIC as part of its bank application process. As a result, the cash and capital in the Canadian subsidiary increased substantially. For the year ended October 31, 2014, the Company realized revenues of $7,291,089 in its Canadian subsidiary that would have previously been recognized in the United States operating company. 16 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – year ended October 31, 2014 compared to thirteen month period ended October 31, 2013 (continued) If the aforementioned revenues of $7,291,089 (as stated above) were to be subtracted from Canada and added back to the United States for the year ended October 31, 2014, commission revenue would increase 34% to $19,240,911 from $14,382,012 compared to the thirteen month period ended October 31, 2013 and relate primarily to new revenue generated from the Company's branch locations, increases in same store sales, instituting an increased pricing strategy during peak periods on the weekends, establishing new relationships with bank and non-bank locations, and increases in volumes of exotic currencies. Since October 31, 2013, the Company has added six Company-owned branch locations and also added 78 new wholesale relationships representing nearly 2,407 locations in the United States. After adjusting revenues downward by $7,291,089 (as stated above), revenues increased 72% in Canada to $2,765,042 during the year ended October 31, 2014 from $1,608,422 for the thirteen month period ended October 31, 2013; and are related to the growth of the Canadian wholesale operation. CXIC has added 27 new wholesale relationships with 126 locations since October 31, 2013. During the year ended October 31, 2014, operating expenses increased 28% to $14,816,184 compared to $11,597,919 for the thirteen month period ended October 31, 2013, the major components of which are presented below: Year ended October 31, 2014 $ Thirteen month period ended October 31, 2013 $ Salaries and benefits Rent Legal, professional and director's fees Postage and shipping Stock based compensation Other general and administrative Total operating expenses 7,363,075 2,024,290 915,745 1,729,684 567,055 2,216,335 14,816,184 5,742,923 1,683,547 1,089,853 1,187,081 289,019 1,605,496 11,597,919 Change $ 1,620,152 340,743 (174,108) 542,603 278,036 610,839 3,218,265 Change % 28% 20% -16% 46% 96% 38% 28%  Salaries and benefits increased 28% to $7,363,075 from $5,742,923 which is attributed to increases in the Company’s employment base for the period. As of October 31, 2014, the Company employs 195 full and part-time employees in the United States and Canada compared to 161 full and part-time employees at October 31, 2013. The increase in staffing is a result of adding six company owned branch locations and opening a new Los Angeles vault as well as the addition of employees engaged in the areas of compliance, information technology, operations, including vault operations, sales, management, and other administrative positions. The Company also had increases in remuneration to key employees as part of its short-term incentive plan;  Rent increased 20% to $2,024,290 from $1,683,547 due to the opening of new branch outlets and the addition of one new vault location in Los Angeles. The Company has opened six outlets since October 31, 2013 and has relocated and enlarged its vault facilities in Toronto and Miami and also moved its corporate headquarters in Orlando, Florida;  Legal, professional and directors fees decreased 16% to $915,745 from $1,089,081. During the thirteen month period ended October 31, 2013, the Company incurred costs of $49,789 in connection with registering its shares for listing on the Over the Counter Bulletin Board (“OTCBB”) and additional legal and consulting fees of $66,856 relating to the restructuring of its operations; 17 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – year ended October 31, 2014 compared to thirteen month period ended October 31, 2013 (continued)   Postage and shipping increased 46% to $1,729,684 from $1,187,081 and is due to an increase in the frequency of inbound and outbound shipments. The Company incurs shipping fees from couriers and armored carriers to transport currency between the Company’s stores and customers. During the year ended October 31, 2014, the Company added several new transacting locations which have increased transactional activity thus increasing shipping costs. Additionally, the Company has increased the frequency of inbound and outbound armored shipments due to an increase in high value, bulk shipments to centralized clients. Shipping fees collected by the Company are netted against shipping charges charged to the Company; Stock based compensation increased to $567,055 from $289,019 for the vested portion of stock options granted pursuant to the Company's stock option plan. The options have an expiry date of five years from the date of the grant, unless otherwise stated by the Board of Directors, and have a weighted average exercise price of Cdn$10.54. There were 486,581 options outstanding at October 31, 2014 compared to 378,060 options outstanding at October 31, 2013; and  Other general and administrative increased 38% to $2,216,335 from $1,605,496. Other expenses are comprised of insurance, travel and lodging, software maintenance, utilities, bank service charges, foreign exchange gains and losses through profit and loss, and other general and administrative expenses. The increase is a result of foreign exchange losses on the revaluation of foreign financial assets and liability balances, non-capitalized costs for opening new offices in Toronto, Canada, Orlando, Florida, and Miami, Florida as well as expenditures to support the expansion of the Company’s branch network. The ratio of operating expenses to total revenue for the year ended October 31, 2014 was 67% compared to 73% for the thirteen month period ended October 31, 2013. The ratio traditionally is higher during the winter months and lower during the summer months due to higher exchange volume. This is due to the cyclical nature of the business as the Company typically experiences higher exchange volumes from March to September resulting in the Company being better able to redeploy the currency it purchases in the summer months from its branch locations and resell it to other ban k and non-bank customers, thus bypassing currency wholesalers and widening its gross margin. The Company expects this ratio to remain relatively steady in the short term. In time, the Company can increase its operating efficiency by the addition of new bank and non-bank financial institutions in Canada and the United States and by redeploying excess currency purchased by its branches, affiliate partners, and other clientele. 18 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – year ended October 31, 2014 compared to thirteen month period ended October 31, 2013 (continued) Other income and expenses are comprised of the following: Other income (expense) Fair value change in warrant liability Interest and accretion expense Expenses related to bank application Expenses related to USEH asset acquisition Depreciation and amortization Income tax expense Total other income/(expense) Year ended October 31, 2014 $ Thirteen month period ended October 31, 2013 $ 90,225 - (66,482) (126,098) (141,353) (924,225) (2,602,711) (3,770,644) 13,126 458,241 (37,874) (272,004) - (347,052) (1,565,258) (1,750,821)  Other income increased to $90,225 from $13,126 and relates primarily to interest collected for surplus cash deposits held at various financial institutions in Canada and the United States;     Fair value change in warrant liability is $Nil during the year ended October 31, 2014 from a gain of $458,241 for the thirteen month period ended October 31, 2013 and relates to a marked to market adjustment of the Company’s issued and outstanding warrant liability. On September 8, 2013 warrants that had not been exercised expired, and the fair value adjusted liability was extinguished at that time; Interest and accretion expense increased to $66,483 from $37,874 and relates to interest payments on credit lines; Expenses pertaining to filing and processing the bank license application decreased to $126,098 from $272,004; Expenses related to asset acquisition increased to $141,353 from $Nil for legal and other professional fees incurred to complete the acquisition of the assets of the bank note business of USEH;  Depreciation and amortization to amortization of the Company’s intangible assets as well as fixed assets being depreciated over their estimated economic life. Approximately $525,000 of the increase was attributable to amortization of the assets acquired from USEH; and from $347,052 and relates to $924,225 increased  Income tax expense increased to $2,602,711 from $1,565,258 and is a total of federal income tax as well as various state and provincial taxes for the jurisdictions in which the Company operates. 19 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – three month period ended October 31, 2014 compared to the four month period ended October 31, 2013 A breakdown of revenues by geographic location is presented below: Total revenues Three months ended October 31, 2014 $ Four months ended October 31, 2013 $ United States Canada Total 3,590,745 2,961,439 6,552,184 5,840,939 622,467 6,463,406 During the three month period ended October 31, 2014 revenues increased 1% to $6,552,184 compared to $6,463,406 for the four month period ended October 31, 2013 due primarily to using three month and four month comparative periods. Revenue growth resulted from establishing six new Company owned branch locations as well as establishing new wholesale relationships with 105 companies representing 2,533 new locations since October 31, 2013. Additionally, there was a continuation of higher trading volumes of exotic currencies, such as the Iraqi Dinar and the Vietnamese Dong which are primarily speculative in nature. The Company charges a premium when buying and selling these currencies. On October 31, 2013 the Company restructured its operations to add additional capital into CXIC as part of its bank application process. As a result, the cash and capital in the Canadian subsidiary increased substantially. Additionally for the three month period ended October 31, 2014, the Company realized revenues of $2,163,513 in its Canadian subsidiary that would have previously been classified as being recognized in the United States operating company. If the aforementioned revenues of $2,163,513 (as stated above) were to be subtracted from Canada and added back to the United States, commission revenue would decrease 2% to $5,727,258 from $5,840,939 for the four month period ended October 31, 2013. Slower revenue growth was due primarily to using three month and four month comparative periods. Since October 31, 2013, the Company has added six Company-owned branch locations and also added 78 new wholesale relationships representing 2,407 new locations in the United States. After adjusting revenues downward by $2,163,513 (as stated above), revenues increased 28% in Canada to $797,926 during the three month period ended October 31, 2014 from $622,467 for the four month period ended October 31, 2013 and are related to the growth of the Canadian wholesale operation. Since October 31, 2013, the Company has added 27 new customers representing approximately 126 new locations in Canada. 20 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – three month period ended October 31, 2014 compared to the four month period ended October 31, 2013 (continued) During the three month period ended October 31, 2014, operating expenses increased 4% to $4,272,502 compared to $4,121,694 for the four month period ended October 31, 2013, the major components of which are presented below: Salaries and benefits Rent Legal, professional and director's fees Postage and shipping Stock based compensation Other general and administrative Total operating expenses Three months ended October 31, 2014 $ Four months ended October 31, 2013 $ 2,130,256 591,201 255,056 560,668 125,114 610,207 4,272,502 2,077,222 562,584 447,357 429,718 93,911 510,902 4,121,694 Change $ 53,034 28,617 (192,301) 130,950 31,203 99,305 150,808 Change % 3% 5% -43% 30% 33% 19% 4%  Salaries and benefits increased 3% to $2,130,256 from $2,077,222 which is attributed to increases in the Company’s employment base for the period. As of October 31, 2014, the Company employs 195 full and part-time employees in the United States and Canada compared to 161 full and part-time employees at October 31, 2013. The increase in staffing is a result of adding six company owned branch locations and opening a new Los Angeles vault as well as the addition of employees engaged in the areas of compliance, information technology, operations, management, and other administrative positions. The Company also had increases in remuneration to key employees as part of its short-term incentive plan; including vault operations, sales,  Rent increased to $591,201 from $562,584 due to the opening of new branch outlets and the addition of one new vault location in Los Angeles, California. The Company has opened six outlets since June 30, 2013 and has relocated and enlarged its vault facilities in Toronto and Miami, and also moved its corporate headquarters in Orlando;    Legal, professional and directors fees decreased 43% to $255,056 from $447,357. During the four months ended October 31, 2013, the Company incurred one-time costs in connection with registering its shares for listing on the OTCBB and additional legal and consulting fees of $66,856 relating to the restructuring of its operations; Postage and shipping increased to $560,668 from $429,718 and are due to an increase in the frequency of inbound and outbound shipments. The Company incurs shipping fees from couriers and armored carriers to transport currency between the Company’s stores and customers. During the three month period ended October 31, 2014, the Company added several new transacting locations which have increased transactional activity thus increasing shipping costs. Additionally, the Company has increased the frequency of inbound and outbound armored shipments due to an increase in high value, bulk shipments to centralized clients. Shipping fees collected by the Company are netted against shipping charges charged to the Company; Stock based compensation increased to $125,114 from $93,911 for the vested portion of stock options granted pursuant to the Company's stock option plan. The options have an expiry date of five years from the date of the grant, unless otherwise stated by the Board of Directors, and have a weighted average exercise price of Cdn$10.54. There were 486,581 options outstanding at October 31, 2014 compared to 378,060 options outstanding at October 31, 2013; and 21 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – three month period ended October 31, 2014 compared to the four month period ended October 31, 2013 (continued)  Other general and administrative increased to $610,207 from $510,902. Other expenses are comprised of insurance, travel and lodging, software maintenance, utilities, bank service charges, foreign exchange gains and losses through profit and loss, and other general and administrative expenses. The increase is a result of foreign exchange losses on the revaluation of foreign financial assets and liability balances, non-capitalized costs for opening new offices in Toronto, Canada, Orlando, Florida, and Miami, Florida, as well as expenditures to support the expansion of the Company’s branch network. The ratio of operating expenses to total revenue for the three month period ended October 31, 2014 was 65% compared to 64% for the four month period ended October 31, 2013. The ratio traditionally is higher during the winter months and lower during the summer months due to higher exchange volume. This is due to the cyclical nature of the business as the Company typically experiences higher exchange volume from March to September resulting in the Company being better able to redeploy the currency it purchases in the summer months from its branch locations and resell it to other bank and non-bank customers, thus bypassing currency wholesalers and widening its gross margin. Other income and expenses are comprised of the following: Other income (expense) Fair value change in warrant liability Interest and accretion expense Expenses related to bank application Expenses related to USEH asset acquisition Depreciation and amortization Income tax expense Total other income/(expense) Three months ended October 31, 2014 $ Four months ended October 31, 2013 $ 4,876 - (21,485) (19,387) (3,340) (335,806) (859,348) (1,234,490) 4,890 278,288 (22,875) (51,032) - (134,295) (747,079) (672,103)  Other income decreased to $4,876 from $4,890 and relates primarily to income collected for surplus cash deposits held at various financial institutions in Canada and the United States;    Fair value change in warrant liability is $Nil during the three month period ended October 31, 2014 from a gain of $278,288 for the four month period ended October 31, 2013 and relates to a marked to market adjustment of the Company’s issued and outstanding warrant liability. On September 8, 2013 warrants that had not been exercised expired, and the liability was extinguished at that time; Interest and accretion expense increased to $21,486 from $22,875 and relates to interest payments on credit lines; Expenses pertaining to filing and processing the bank license application decreased to $19,387 from $51,032; 22 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Results of operations – three month period ended October 31, 2014 compared to the four month period ended October 31, 2013  Depreciation and amortization to amortization of the Company’s intangible assets as well as fixed assets being depreciated over their economic life. Approximately $225,000 of the increase was attributable to amortization of assets acquired from USEH; and from $134,295 and relates to $335,806 increased  Income tax expense increased to $859,348 from $747,079 and is a total of federal income tax as well as various state and provincial taxes for the jurisdictions in which the Company operates. Cash flows Cash flows from operating activities year ended October 31, 2014 resulted in an inflow of $2,216,775 compared to an inflow of $4,556,326 during thirteen month period ended October 31, 2013. The reason for the decrease in operating cash was due to increases in accounts receivable. The actual amount of accounts receivable and accounts payable fluctuate from period to period due to the volume of activity and timing differences. In most instances accounts receivable and accounts payable have a settlement cycle of 24 to 48 hours. Operating cash flow is generated by commission and fee income, and is offset by operating expenses. Cash used in investing activities during the year ended October 31, 2014 resulted in an outflow of $3,035,843 compared to an outflow of 598,182 during the thirteen month period ended October 31, 2013. During the year ended October 31, 2014, the Company paid $2,350,000 to acquire USEH’s customer trading relationships, prepaid and fixed assets, and software. Cash provided by financing activities during the year ended October 31, 2014 was $31,264 resulting from 4,600 options exercised at a price of Cdn$7.50. During the thirteen month period ended October 31, 2013 cash provided from financing activities was $10,932,373 resulting from the exercise 82,680 broker options at a price of Cdn$6.65 per option and 1,435,725 warrants exercised at a price of Cdn$7.50. Liquidity and capital resources At October 31, 2014, the Company had working capital of $28,973,117 (October 31, 2013 - $28,935,018). The Company maintains a Cdn$2,000,000 credit line with a shareholder and a revolving line of credit with BMO Harris Bank, N.A. for up to $6,000,000 to assist with its short-term cash flow needs. The Company had total available unused lines of credit of $8,000,000 at October 31, 2014. 23 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Selected annual and quarterly financial information The following tables set out selected consolidated financial information of the Company for the periods indicated. Each investor should read the following information in conjunction with those financial statements for the relevant period and notes related thereto. The operating results for any past period are not necessarily indicative of results for any future period. The selected financial information set out below has been derived from the consolidated financial statements of the Company. Year ended October 31, 2014 Audited $ 22,005,953 7,189,769 3,419,125 0.63 0.62 39,709,302 6,684,127 585,144 28,973,117 Thirteen months ended October 31, 2013 (1) Year ended September 30, 2012 Audited $ Audited $ 15,990,434 4,392,515 2,641,694 0.64 0.64 33,681,819 3,917,843 - 28,935,018 12,314,473 3,822,328 2,717,652 0.83 0.83 18,225,628 1,998,654 - 15,651,326 Year ended September 30, 2011 Audited $ 8,683,705 2,949,260 1,489,686 0.66 0.66 9,914,292 3,754,954 110,924 5,861,804 Revenues Net operating income (2) Net income Basic earnings per share (3) Diluted earnings per share (3) Total assets Total liabilities Total non-current financial liabilities Working capital Notes: 1. 2. Operating income for prior periods has been adjusted to exclude depreciation and amortization expense. 3. Adjusted for a 2:1 share split effective June 28, 2011. The Company changed its year-end to October 31, and reported on the thirteen month period ended October 31, 2013. The following is a summary of unaudited financial data for the most recently completed eight quarters. The Company has restated operating expenses and operating income to exclude the effects of depreciation and amortization. Period (unaudited) Three months ending Three months ending Three months ending Three months ending Four months ending Three months ending Three months ending Three months ending Date Revenue Operating income* Total assets $ $ 31-Oct-14 6,552,184 31-Jul-14 6,839,330 30-Apr-14 4,487,432 31-Jan-14 4,127,007 31-Oct-13 6,463,406 30-Jun-13 3,799,683 31-Mar-13 2,919,292 31-Dec-12 2,808,053 2,279,682 2,830,097 1,109,212 970,779 2,341,712 1,168,754 505,207 376,843 $ 39,709,302 42,044,018 37,244,354 32,844,973 33,681,819 19,997,719 18,709,964 19,929,308 *Excludes depreciation and amortization expense 1. 4 month period ended October 31, 2013. 24 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Commitments and contingencies On October 1, 2011, the Company entered into an employment agreement with the President and CEO of the Company. Such agreement contains clauses requiring additional payments of a minimum of $450,000 to be made upon the occurrence of certain events such as a change of control of the Company or termination for reasons other than cause. As the likelihood of a change of control of the Company is not determinable, the contingent payments have not been reflected in the consolidated financial statements. The Company has entered into non-cancellable operating leases with terms in excess of one year for the use of certain facilities. The minimum rental payments associated with these leases are $4,206,234 and are payable as follows: Year ended Remaining minimum payments required October 31, 2015 October 31, 2016 October 31, 2017 October 31, 2018 October 31, 2019 and there after Total $1,512,998 $1,012,842 $891,438 $559,577 $229,379 $4,206,234 On March 28, 2014 the Company purchased certain assets of USEH. The Company paid $2,350,000 in cash on closing and will have two additional contingent payments of up to a maximum of $1,325,000 each and payable on the first and second anniversary after closing. The additional payments will be based on the amount of revenue generated from the customer trading relationships acquired. The Company has estimated the likelihood of future revenues to determine the estimated contingent consideration. Management has estimated these payments for the first and second annivers ary at $892,723 and $585,144, respectively, for total contingent consideration of $1,477,867. Off-balance sheet arrangements There are currently no off-balance sheet arrangements which could have an effect on current or future results or operations, or on the financial condition of the Company. 25 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Hedging activity Other than as noted below, the Company does not engage in any form of hedged, derivative or leveraged trading. The Company does not extend margin or leverage to any of its customers. The Company enters into non-deliverable foreign currency forward contracts on a daily basis to mitigate the risk of fluctuations in the exchange rates of its holdings of major currencies. Changes in the fair value of the contracts and the corresponding gains or losses are recorded daily and are included in commissions on the consolidated statements of income and comprehensive income. The Company’s management strategy is to reduce the risk of fluctuations associated with foreign exchange rate changes. The foreign currency forward contracts can be closed immediately resulting in the collateral being liquidated. At October 31, 2014 and October 31, 2013 approximately $714,121 and $200,707, respectively, were being held as collateral on these contracts and are reflected as restricted cash held in escrow in the consolidated statements of financial position. Transactions with related parties The remuneration of directors and key management personnel during the three month period and year ended October 31, 2014 and the four and thirteen month periods ended October 31, 2013 were as follows: Three months ended October 31, 2014 Four months ended October 31, 2013 Year ended October 31, 2014 Thirteen month period ended October 31, 2013 $ $ $ $ Short-term benefits Post-employment benefits Stock based compensation 608,642 21,650 120,298 750,590 664,728 1,275,100 8,250 81,052 30,123 542,876 754,030 1,848,099 1,090,856 18,700 255,535 1,365,091 The Company incurred legal and professional fees in the aggregate of $6,867 and $138,218 for the three month period and year ended October 31, 2014 (four and thirteen month periods ended October 31, 2013 $42,736 and $86,171, respectively) charged by entities controlled by directors or officers of the Company. 26 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Option grants The Company adopted an incentive stock option plan dated April 28, 2011 (the "Plan"). The Plan is a rolling stock option plan, under which 10% of the outstanding shares at any given time are available for issuance thereunder. The purpose of the Plan is to promote the profitability and growth of the Company by facilitating the efforts of the Company to attract and retain directors, senior officers, employees and management. Vesting terms under the Plan will occur 1/3 upon the first anniversary, 1/3 upon the second anniversary and 1/3 upon the third anniversary of the grant unless otherwise specified by the Board of Directors. Below is information related to each option grant: Date of Grant Expiry Date Share price at grant date Amount granted Risk- free interest rate May 4, 2012 May 4, 2017 Cdn$7.30 90,000 0.78% Dec. 17, 2012 Dec. 18, 2017 Cdn$6.75 116,000 0.74% May 3, 2013 Oct. 29, 2013 Oct. 29, 2013 July 9, 2014 Oct. 30, 2014 Oct. 30, 2014 May 3, 2018 Cdn$7.35 22,000 0.73% Oct. 29, 2018 Cdn$10.86 35,640 1.29% 35% Cdn$10.86 Oct. 29, 2018 Cdn$10.86 114,420 1.29% 35% Cdn$10.86 July 9, 2019 Cdn$13.24 1,762 1.70% 29% Cdn$13.24 Oct. 30, 2019 Cdn$18.00 87,215 1.61% 27% Cdn$16.21* * Exercise price determined by average share price for previous 20 trading days Oct. 30, 2019 Cdn$18.00 24,144 1.61% 27% Cdn$16.21* Expected volatility Exercise Price 45% 49% 38% Cdn$7.50 Cdn$7.50 Cdn$7.65 Fair value of option at grant date $2.84 $2.66 $2.42 $3.44 $3.44 $3.58 $4.97 $4.97 The outstanding options at October 31, 2014 and October 31, 2013 and the respective changes during the periods are summarized as follows: Outstanding at October 1, 2012 Granted Outstanding at October 31, 2013 Granted Exercised Outstanding at October 31, 2014 Number of options Exercise price # Cdn$ 90,000 288,060 378,060 113,121 (4,600) 486,581 7.50 9.26 8.84 16.16 7.50 10.54 27 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Option grants (continued) The following options are outstanding and exercisable at October 31, 2014 Options Outstanding and Exercisable Grant Date Exercise price Number outstanding Average remaining contractual life Number exercisable May 4, 2012 December 17, 2012 May 3, 2013 October 29, 2013 October 29, 2013 July 9, 2014 October 30, 2014 Total Cdn$ $7.50 $7.50 $7.65 $10.86 $10.86 $13.24 $16.21 # (years) 90,000 111,400 22,000 35,640 114,420 1,762 87,423 462,645 2.51 3.13 3.50 3.99 3.99 4.69 5.00 # 60,000 34,066 7,333 35,640 38,140 1,762 - 176,941 Subsequent events for the year ended October 31, 2014 On November 1, 2014, the Company completed a reorganization of its corporate structure resulting in a one-time increase in income taxes of approximately $190,000. This tax liability occurred as a result of the fair value increase in its investment in a subsidiary and will be recorded in the first quarter of 2015. Accounting standards and policies The Company's accounting policies are described in Note 2 to the Company's audited consolidated financial statements for the year ended October 31, 2014. Risk factors The operations of the Company are speculative due to the high-risk nature of its business and its present stage of development. These risk factors could materially affect the Company’s financial condition and/or future operating results and could cause actual events to differ materially from those described in forward- looking statements relating to the Company. Although the following are major risk factors identified by management, they do not comprise a definitive list of all risk factors related to the Company, and other risks and uncertainties not presently known by management could impair the Company and its business in the future. Limited operating history The Company has only a limited operating history upon which an evaluation of the Company and its prospects can be based. Although the Company anticipates increases in revenues, it is also incurring substantial expenses in the establishment of its business. To the extent that such expenses do not result in appropriate revenue increases, the Company’s long-term viability may be materially and adversely affected. 28 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) A significant portion of the Company’s financial resources have been and will continue to be, directed to the development of its business and marketing activities. The success of the Company will ultimately depend on its ability to generate cash from its business. There is no assurance that the future expansion of the Company’s business will be sufficient to cover the related operational cost as well as costs associated with continuing the development of its business and marketing activities. Future capital needs and uncertainty of additional financing The Company may need to raise funds in order to support more rapid expansion, develop new or enhanced services and products, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. The Company may be required to raise additional funds through public or private financing, strategic relationships or other arrangements. There can be no assurance that such additional funding, if needed, will be available on terms attractive to the Company, or at all. Furthermore, any additional equity financing may be dilutive to shareholders and debt financing, if available, may involve restrictive covenants. If additional funds are raised through the issuance of equity securities, the percentage ownership of the shareholders of the Company will be reduced, shareholders may experience additional dilution in net book value per share, or such equity securities may have rights, preferences or privileges senior to those of the holders of Common Shares. If adequate funds are not available on acceptable terms, the Company may be unable to develop or enhance its business, take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on the Company's business, financial condition and operating results. Competition The Company faces competition from established competitors such as Travelex Group, Wells Fargo Bank, Bank of America and American Express, and also from competitors using alternative technologies. While the market for foreign currency exchange is highly fragmented in the United States, the Company believes that it must continue to develop new products and services and introduce enhancements to its existing products and services in a timely manner if it is to remain competitive. Even if the Company introduces new and enhanced products and services, it may not be able to compete effectively because of the significantly greater financial, technical, marketing and other resources available to some of its competitors. As the markets for the Company’s products and services expand, additional competition may emerge and competitors may commit more resources to competitive products and services. There can be no assurance that the Company will be able to compete successfully in these circumstances. Management of Growth The Company has recently experienced, and may continue to experience, rapid growth in the scope of its operations. This growth has resulted in increased responsibilities for the Company’s existing personnel, the hiring of additional personnel and, in general, higher levels of operating expenses. In order to manage its current operations and any future growth effectively, the Company will need to continue to implement and improve its operational, financial compliance and management information systems, as well as hire, manage and retain its employees and maintain its compliant corporate culture including technical and customer service standards. There can be no assurance that the Company will be able to manage such growth effectively or that its management, personnel or systems will be adequate to support the Company’s operations. 29 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk Factors (continued) Credit Risk Credit risk is the risk of financial loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash in bank accounts and accounts receivable. All customer relationships are negotiated by senior management. The Company maintains accounts in high quality financial institutions. At various times, the Company's bank balances exceed the federally insured limits. The credit risk associated with accounts receivable is limited, as the Company's receivables consist primarily of bulk currency trades with a settlement cycle of 24 to 48 hours. There is minimal counterparty risk as the majority of the Company's receivables reside with banks and other financial institutions. The Company has longstanding relationships with most of its money service business customers and has a strong repayment history. For the purpose of risk control, the customers are grouped as follows: domestic and international banks, money service businesses, and other customers. Credit limits are established for each customer, whereby the credit limit represents the maximum open amount without requiring payments in advance. These limits are reviewed regularly by senior management. A breakdown of accounts receivable by category is set out below: At October 31, 2014 At October 31, 2013 Customer type Domestic and international banks Money service businesses Other Total $ 2,953,383 1,204,410 20,765 $ 443,739 584,109 5,511 4,178,558 1,033,359 The maximum exposure to credit risk is represented by the carrying amount of each financial asset on the statement of financial position. There are no commitments that could increase this exposure to more than the carrying amount. Foreign Currency Risk The volatility of the Company's foreign currency holdings may increase as a result of the political and financial environment of the corresponding issuing country. Several currencies have limited exchange rate exposure as they are pegged to the U.S. Dollar, the reporting currency of the Company. Management believes its exposure to foreign currency fluctuations is mitigated by the short-term nature and rapid turnover of its foreign currency inventory, as well as the use in certain instances of forward contracts to offset these fluctuations. Due to their nature, some minor and exotic foreign currencies cannot be hedged or are cost prohibitive to hedge. In order to mitigate the risks associated with holding these foreign currencies, the Company assigns wider bid/ask spreads and maintains specific inventory targets to minimize the impact of exchange rate fluctuations. These targets are reviewed regularly and are increased or decreased to accommodate demand. The amount of unhedged inventory held in vaults, tills and in transit at October 31, 2014 was approximately $5,725,000 (2013 - $3,040,000). The amount of currency that is unhedged and that is not pegged to the U.S. Dollar is approximately $4,090,000 (2013 - $1,550,000). A 2% increase/decrease in the market price for the aggregate of the Company's unhedged/un-pegged foreign currencies would result in an exchange gain/loss of approximately +$80,000/-80,000 (2013 gain/loss of approximately +$30,000/-$30,000). 30 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) On a consolidated basis, the Company is also exposed to foreign currency fluctuations between the U.S. Dollar and the Canadian Dollar, being the functional currency of its Canadian subsidiary, CXIC. The Company does not hedge its net investment in its Canadian subsidiary and the related foreign cur- rency translation of local earnings. Interest Rate Risk At October 31, 2014, the Company had access to interest bearing financial instruments in cash and short term accounts payable. A significant amount of the Company's cash is held as foreign currency bank notes in tills and vaults. These amounts are not subject to interest rate risk. Cash held in some of the Company’s accounts are interest bearing; however, since prevailing interest rates are low there is minimal interest rate risk. Borrowings bear interest at fixed and variable rates. Cash and borrowings issued at variable rates expose the Company to cash flow interest rate risk. For the interest rate profile of the Company's interest bearing financial liabilities, refer to Note 13 in its financial statements for the year ended October 31, 2014. The Company manages interest rate risk in order to reduce the volatility of the financial results as a consequence of interest rate movements. For the decision whether new borrowings should be arranged at either a variable or fixed interest rate, senior management focuses on an internal long-term benchmark interest rate and considers the amount of cash currently held at a variable interest rate. Currently the interest rate exposure is un-hedged. If interest rates had been 50 basis points higher/lower with all other variables held constant, after tax profit for the year ended October 31, 2014 would have been approximately +$4,500/-$4,500 higher/lower as a result of credit lines held at variable interest rates (October 31, 2013 - +$1000/-$1,000 higher/lower). Liquidity Risk Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The CFO informs the CEO, the Board of Directors, and the Audit Committee of capital and liquidity issues as they occur in accordance with established policies and guidelines. The Company targets to have a cash reserve or credit lines greater than 15% of the Company's prior year's revenues. The following are non-derivative contractual financial liabilities: Non-derivative financial liabilities Carrying amount Estimated contractual amount Next fiscal year Future fiscal years At October 31, 2014 Accounts payable Accrued expenses Contingent consideration Non-derivative financial liabilities Accounts payable Accrued expenses $ 2,903,669 1,239,367 1,477,867 $ 2,903,669 1,093,044 1,477,867 $ 2,903,669 1,093,044 892,723 $ $Nil $Nil 585,144 At October 31, 2013 Carrying amount $ 2,918,054 801,166 Contractual amount Next fiscal year Future fiscal years $ 2,918,054 757,237 $ 2,918,054 757,237 $ $Nil $Nil The Company had available unused lines of credit amounting to $8,000,000 at October 31, 2014 (October 31, 2013 - $4,000,000). 31 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, obtaining loan financing, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis. The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its cash flows based on operating expenditures, and other investing and financing activities related to its daily operations. The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, obtaining loan financing, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis. Product Development and Rapid Technological Change The advent of the “cashless society” may erode the physical bank note currency markets resulting in a significant adverse effect upon the Company’s continued growth and profitability. While the enabling technology has existed for over a decade, the development of a truly cashless society continues to be slowed by such factors as issues respecting infrastructure, cultural resistance, distribution problems and patchwork regulations. Nevertheless, the success of the Company could be seriously affected by a competitor’s ability to develop and market competing technologies. To remain competitive, the Company must continue to enhance and improve the responsiveness, functionality and features of its technology and website, CEIFX. The Internet and the e-commerce industry are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices that could render the Company’s existing operations and proprietary technology and systems obsolete. The Company’s success will depend, in part, on its ability to develop leading technologies useful in its business, enhance its existing services, develop new services and technology that address the increasingly sophisticated and varied needs of its existing and prospective customers and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of Internet based and other proprietary technology entails significant technical, financial and business risks. There can be no assurance that the Company will successfully implement new technologies or adapt its website, proprietary technology and transaction-processing systems to customer requirements or emerging industry standards. If the Company is unable to adapt in a timely manner in response to changing market conditions or customer requirements for technical, legal, financial or other reasons, the Company’s business could be materially adversely affected. Intellectual Property Proprietary rights are important to the Company’s success and its competitive position. Although the Company seeks to protect its proprietary rights, its actions may be inadequate to protect any trademarks and other proprietary rights or to prevent others from claiming violations of their trademarks and other proprietary rights. In addition, effective copyright and trademark protection may be unenforceable or limited in certain countries, and the global nature of the Internet makes it impossible to control the ultimate protection of the Company’s intellectual work product. Any of these claims, with or without merit, could subject the Company to costly litigation and the diversion of the time and attention of its technical management personnel. 32 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) Government Regulation and Compliance Any non-compliance with regulatory currency licensing and transaction reporting procedures could result in significant financial penalties and the possibility of criminal prosecution. While the Company is largely exempt from these procedures given that (i) transactions originating with hospitality sector clients are subject to certain floor limits that represent a small fraction of the reporting threshold limits, and (ii) transactions originating with banks are subject to the bank’s own internal compliance reporting procedures, effectively relieving the Company of this reporting responsibility, the risk is nevertheless present. Several countries prohibit non-banks from providing currency exchange transaction services. While the Company believes the possibility is remote, the risk does exist that the jurisdictions in which it operates may someday institute regulations to prohibit non-banks from providing foreign currency exchange services. Network Security Risks Despite the implementation of network security measures by the Company, its infrastructure is potentially vulnerable to computer break-ins and similar disruptive problems. Concerns over Internet security have been, and could continue to be, a barrier to commercial activities requiring consumers and businesses to send confidential information over the Internet. Computer viruses, break-ins or other security problems could lead to misappropriation of proprietary information and interruptions, delays or cessation in service to the Company’s clients. Moreover, until more comprehensive security technologies are developed, the security and privacy concerns of existing and potential clients may inhibit the growth of the Internet as a medium for commerce. to protect its systems against damage Risk of System Failure or Inadequacy The Company’s operations are dependent on its ability to maintain its equipment in effective working order and loss, telecommunications failure or similar events. In addition, the growth of the Company’s customer base may strain or exceed the capacity of its computer and telecommunications systems and lead to degradations in performance or systems failure. The Company may in the future experience failure of its information systems which may result in decreased levels of service delivery or interruptions in service to its customers. While the Company continually reviews and seeks to upgrade its technical infrastructure and maintains a fully integrated, offsite, backup server farm to limit the likelihood of systems overload or failure, any damage, failure or delay that causes interruptions in the Company’s operations could have a material and adverse effect on the Company’s business. fire, natural disaster, power from In addition, some of the Company’s applications are hosted by third parties. Any failure on the part of third parties to maintain their equipment in good working order and to prevent system disruptions could have a material and adverse effect on the Company’s business. 33 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) Theft and Risk of Physical Harm to Personnel The Company stores and transports bank notes as part of its daily business and faces the risk of theft and employee dishonesty. The Company maintains a crime insurance policy which provides coverage against theft and employee dishonesty, but any particular claim is subject to verification that it is within policy limits which may not be assured and may require legal proceedings to enforce coverage. Of particular concern are circumstances where employees could collude with customers to engage in theft by evasion of internal and other controls and cause damage which may not be predictable or within the terms of existing insurance coverage. The Company’s Audit Committee monitors internal controls and the CEIFX technology monitors and accounts for all fund balances in real time. In addition, employees and agents of the Company are potentially subject to physical harm if subjected to a forcible robbery. The Company’s Risk Committee oversees the deployment of a comprehensive security program which includes surveillance cameras, alarms, safe/vault equipment alarms and additional intrusion protection devices, as well as multiple staff on site at all times. Reliance on Key Personnel The Company currently has a small senior management group, which is sufficient for the Company's present level of activity. The Company's future growth and its ability to develop depend, to a significant extent, on its ability to attract and retain highly qualified personnel. The Company relies on a limited number of key employees, consultants and members of senior management and there is no assurance that the Company will be able to retain such key employees, consultants and senior management. The loss of one or more of such key employees, consultants or members of senior management, if not replaced, could have a material adverse effect on the Company's business, financial condition and prospects. The development of the Company is dependent upon its ability to attract and retain key personnel, particularly the services of the President and CEO, Randolph W. Pinna. The loss of Mr. Pinna’s services could have a materially adverse impact on the business of the Company. There can be no assurance that the Company can retain its key personnel or that it can attract and train qualified personnel in the future. The Company currently has key person insurance on Mr. Pinna of $4.5 million. Control of the Company Randolph W. Pinna, the Chief Executive Officer and Chairman of the Company, is the principal shareholder of the Company and the promoter of the Company. Mr. Pinna beneficially owns approximately 25% of the issued and outstanding Common Shares. By virtue of his status as the principal shareholder of the Company and by being a director and officer of the Company, Randolph W. Pinna has the power to exercise significant influence over all matters requiring shareholder approval, including the election of directors, amendments to the Company’s articles and by-laws, mergers, business combinations and the sale of substantially all of the Company’s assets. As a result, the Company could be prevented from entering into transactions that could be beneficial to the Company or its other shareholders. Also, third parties could be discouraged from making a take-over bid. As well, sales by Randolph W. Pinna of a substantial number of Common Shares could cause the market price of Common Shares to decline. 34 Management Discussion and Analysis (All amounts expressed in U.S. Dollars unless otherwise noted) For the three month period and year ended October 31, 2014 and the four month and thirteen month periods ended October 31, 2013 Risk factors (continued) Mr. Randolph Pinna's influence over the control of the Company is mitigated by the Company's appointment of a Lead Independent Director, Chirag Bhavsar, on December 7, 2012 as well as the independent majority of its Board of Directors and its Committees. Global Economic and Financial Market Conditions Market events and conditions, including disruption in the U.S. and Canadian, international credit markets and other financial systems and the deterioration of U.S. and Canadian, global economic conditions, could, among other things, impact tourism and impede access to capital or increase the cost of capital, which would have an adverse effect on the Company's ability to fund its working capital and other capital requirements. Market disruptions could, among other things, make it more difficult for the Company to obtain, or increase its cost of obtaining, capital and financing for its operations. The Company's access to additional capital may not be available on terms acceptable to the Company or at all. Market Price and Volatile Securities Markets Market forces may render it difficult or impossible for the Company to secure purchasers to purchase its securities at a price which will not lead to severe dilution to existing shareholders, or at all. In addition, shareholders may realize less than the original amount paid on dispositions of their Common Shares during periods of such market price decline. International Issuer, Management and Directors The Company is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada. Substantially all of the Company’s assets are located outside of Canada. Certain of the officers and directors of the Company reside outside of Canada. Although the Company and such persons have appointed Peterson Law Professional Company as their agents for service of process in Canada, it may not be possible for investors to enforce judgments obtained in Canada against the Company or such persons. 35 CURRENCY EXCHANGE INTERNATIONAL, CORP. Consolidated Financial Statements For the year ended October 31, 2014 and the thirteen month period ended October 31, 2013 (Expressed in U.S. Dollars) 36 CURRENCY EXCHANGE INTERNATIONAL, CORP. Consolidated Financial Statements For the year ended October 31, 2014 and the thirteen month period ended October 31, 2013 (Expressed in U.S. Dollars) TABLE OF CONTENTS Independent Auditor’s Report Consolidated Statements of Financial Position Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Notes to the Consolidated Financial Statements 38-39 40 41 42 43 44-65 37 Independent auditor’s report Grant Thornton LLP Suite 300 3600 Dundas Street Burlington, ON L7M 4B8 T +1 289 313 0300 F +1 289 313 0355 www.GrantThornton.ca To the shareholders of Currency Exchange International, Corp. We have audited the accompanying consolidated financial statements of Currency Exchange To the shareholders of International, Corp., which comprise the consolidated statements of financial position as at Currency Exchange International, Corp. October 31, 2014 and October 31, 2013, and the consolidated statements of income and comprehensive income, consolidated statements of changes in equity and consolidated We have audited the accompanying consolidated financial statements of cash flows for the year and thirteen-month period then ended, and a summary of statements of Currency Exchange International, Corp., which significant accounting policies and other explanatory information. comprise the consolidated statements of financial position as at October 31, 2014 and October 31, 2013, and the consolidated statements of income and comprehensive income, consolidated Management’s responsibility for the financial statements statements of changes in equity and consolidated statements of Management is responsible for the preparation and fair presentation of these consolidated cash flows for the year and thirteen-month period then ended, and financial statements in accordance with International Financial Reporting Standards, and for a summary of significant accounting policies and other explanatory such internal control as management determines is necessary to enable the preparation of information. consolidated financial statements that are free from material misstatement, whether due to fraud or error. Management’s responsibility for the financial statements Auditor’s responsibility Management is responsible for the preparation and fair Our responsibility is to express an opinion on these consolidated financial statements based on presentation of these consolidated financial statements in our audits. We conducted our audit in accordance with Canadian generally accepted auditing accordance with International Financial Reporting Standards, and standards. Those standards require that we comply with ethical requirements and plan and for such internal control as management determines is necessary to perform the audit to obtain reasonable assurance about whether the consolidated financial enable the preparation of consolidated financial statements that are statements are free from material misstatement. free from material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and Auditor’s responsibility disclosures in the consolidated financial statements. The procedures selected depend on the Our responsibility is to express an opinion on these consolidated auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements based on our audits. We conducted our audit consolidated financial statements, whether due to fraud or error. In making those risk in accordance with Canadian generally accepted auditing standards. assessments, the auditor considers internal control relevant to the entity’s preparation and fair Those standards require that we comply with ethical requirements presentation of the consolidated financial statements in order to design audit procedures that and plan and perform the audit to obtain reasonable assurance are appropriate in the circumstances, but not for the purpose of expressing an opinion on the about whether the consolidated financial statements are free from effectiveness of the entity’s internal control. An audit also includes evaluating the material misstatement. appropriateness of accounting policies used and the reasonableness of accounting estimates An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order 38 2 made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Currency Exchange International, Corp. as at October 31, 2014 and October 31, 2013, and its financial performance and its cash flows for the year and thirteen-month period then ended in accordance with International Financial Reporting Standards. Burlington, Canada January 13, 2015 Chartered Accountants Licensed Public Accountants 39 CURRENCY EXCHANGE INTERNATIONAL, CORP. Consolidated Statements of Financial Position October 31, 2014 and October 31, 2013 (Expressed in U.S. Dollars) Current assets Cash (Note 6) Accounts receivable (Note 15) Restricted cash held in escrow (Note 7) Other current assets (Note 23) Total current assets Property and equipment (Note 9) Intangible assets (Note 10) Other assets Net deferred tax asset (Note 11) ASSETS October 31, 2014 October 31, 2013 $ 29,630,744 4,178,558 714,121 548,677 35,072,100 668,080 3,730,374 69,650 169,098 $ 31,130,866 1,033,359 200,707 439,795 32,804,727 461,273 371,130 44,689 - Total assets 39,709,302 33,681,819 LIABILITIES AND EQUITY Current liabilities Accounts payable Accrued expenses Income taxes payable (Note 11) Contingent consideration - current (Note 4) Total current liabilities Contingent consideration - long term (Note 4) Deferred tax liability (Note 11) Total liabilities Equity Share capital Equity reserves Retained earnings Total equity Total liabilities and equity Commitments and contingencies (Notes 4 and 22) Subsequent events (Note 24) Approved on behalf of Board of Directors: 2,903,669 1,239,367 1,063,224 892,723 6,098,983 585,144 - 2,918,054 801,166 150,489 - 3,869,709 - 48,134 6,684,127 3,917,843 5,395,073 17,032,203 10,597,899 33,025,175 39,709,302 5,390,473 17,194,729 7,178,774 29,763,976 33,681,819 (signed) "Randolph Pinna", Director (signed) "Chirag Bhavsar", Director The accompanying notes are an integral part of these consolidated financial statements. 40 CURRENCY EXCHANGE INTERNATIONAL, CORP. Consolidated Statements of Income and Comprehensive Income Year ended October 31, 2014 and thirteen month period ended October 31, 2013 (Expressed in U.S. Dollars) Revenues Commissions from trading Fee income Total revenues (Note 5) Operating expenses (Note 20) Net operating income Other income (expense) Other income Fair value change in warrant liability (Note 17) Expenses related to asset acquisition (Note 4) Expenses related to bank application (Note 21) Total other income (expense) Earnings before interest, taxes, depreciation and amortization Interest and accretion expense Depreciation and amortization Income before income taxes Income tax expense (Note 11) Year ended Thirteen month period ended October 31, 2014 October 31, 2013 $ 20,442,242 1,563,711 22,005,953 14,816,184 7,189,769 90,225 - (141,353) (126,098) (177,226) 7,012,543 (66,482) (924,225) 6,021,836 (2,602,711) $ 14,674,438 1,315,996 15,990,434 11,597,919 4,392,515 13,126 458,241 - (272,004) 199,363 4,591,878 (37,874) (347,052) 4,206,952 (1,565,258) Net income for the period 3,419,125 2,641,694 Other comprehensive income, after tax Net income Items that may subsequently be reclassified to profit or loss Exchange differences on translating foreign operations Total other comprehensive income Earnings per share (Note 19) -Basic -Diluted Weighted average number of common shares outstanding (Note 19) -Basic -Diluted 3,419,125 (756,245) 2,662,880 $0.63 $0.62 5,391,053 5,509,753 2,641,694 (286,670) 2,355,024 $0.64 $0.64 4,126,996 4,133,075 The accompanying notes are an integral part of these consolidated financial statements. 41 l a t o T d e n i a t e R i s g n n r a E s e v r e s e R y t i u q E l a t i p a C e r a h S ) s r a l l o D S U n . i d e s s e r p x E ( . P R O C , I L A N O T A N R E T N I E G N A H C X E Y C N E R R U C y t i u q E n i s e g n a h C f o s t n e m e t a t S d e t a d i l o s n o C $ $ $ # 6 7 9 , 3 6 7 , 9 2 4 7 7 , 8 7 1 , 7 8 2 4 , 3 5 3 0 6 0 , 8 7 3 5 5 0 , 7 6 5 4 6 2 , 1 3 ) 5 4 2 , 6 5 7 ( - - - 5 2 1 , 9 1 4 , 3 5 2 1 , 9 1 4 , 3 5 5 0 , 7 6 5 1 2 1 , 3 1 1 - - - - ) 4 3 4 , 2 1 ( ) 0 0 6 , 4 ( 5 7 1 , 5 2 0 , 3 3 9 9 8 , 7 9 5 , 0 1 9 4 0 , 8 0 9 1 8 5 , 6 8 4 $ - - - - - - # - - - - - - t n u o m A t n u o m A s n o i t p O k c o t S s n o i t p O r e k o r B - - $ $ $ # r e h t O d e t a l u m u c c A e v i s n e h e r p m o C ) s s o L ( e m o c n I e r a h S i m u m e r p t n u o m A s e r a h S ) 0 7 6 , 6 8 2 ( 1 7 9 , 7 2 1 , 7 1 3 7 4 , 0 9 3 , 5 3 7 4 , 0 9 3 , 5 3 1 0 2 , 1 r e b m e v o N t a e c n a l a B - - - ) 8 1 e t o N ( n o i t a s n e p m o c d e s a b k c o t S - ) 5 4 2 , 6 5 7 ( - - - - - - 8 9 0 , 9 3 0 0 6 , 4 0 0 6 , 4 s n o i t p o k c o t s f o i e s c r e x e n o m u m e r p i e r a h s d n a l a t i p a c e r a h s f o e u s s I ) 8 1 t e o N ( n o i t l a s n a r t y c n e r r u c i n g e r o f n o s s o L e m o c n i t e N ) 5 1 9 , 2 4 0 , 1 ( 9 6 0 , 7 6 1 , 7 1 3 7 0 , 5 9 3 , 5 3 7 0 , 5 9 3 , 5 4 1 0 2 , 1 3 r e b o t c O , e c n a l a B 4 7 9 , 6 2 2 , 6 1 0 8 0 , 7 3 5 , 4 9 0 4 , 4 6 0 0 0 , 0 9 2 1 5 , 9 2 1 0 0 8 , 2 8 ) 4 1 4 , 9 3 ( 3 7 3 , 2 3 9 , 0 1 - 9 1 0 , 9 8 2 ) 0 7 6 , 6 8 2 ( - - - - - 4 9 6 , 1 4 6 , 2 4 9 6 , 1 4 6 , 2 - - - - - - - - - - 9 1 0 , 9 8 2 0 6 0 , 8 8 2 6 7 9 , 3 6 7 , 9 2 4 7 7 , 8 7 1 , 7 8 2 4 , 3 5 3 0 6 0 , 8 7 3 - - - - - - - - - - ) 8 8 1 ( ) 0 2 1 ( ) 4 2 3 , 9 2 1 ( ) 0 8 6 , 2 8 ( - - - - - - ) 0 7 6 , 6 8 2 ( 5 0 9 , 3 2 6 , 7 8 6 0 , 2 7 8 , 3 8 6 0 , 2 7 8 , 3 2 1 0 2 , 1 r e b o t c O , e c n a l a B 8 6 9 , 3 1 4 , 9 5 0 4 , 8 1 5 , 1 5 0 4 , 8 1 5 , 1 ) 8 1 e t o N ( s e r a h s f o e c n a u s s I - - - 8 8 1 0 1 9 , 9 8 - - - - - - - - - - ) 8 1 e t o N ( s n o i t p o r e k o r b i f o e s c r e x E ) 8 1 e t o N ( s n o i t p o r e k o r b f o y r i p x E ) 8 1 e t o N ( n o i t a s n e p m o c d e s a b k c o t S n o i t l a s n a r t y c n e r r u c n g e r o f i n o s s o L e m o c n i t e N ) 0 7 6 , 6 8 2 ( 1 7 9 , 7 2 1 , 7 1 3 7 4 , 0 9 3 , 5 3 7 4 , 0 9 3 , 5 3 1 0 2 , 1 3 r e b o t c O , e c n a l a B . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n i g n y n a p m o c c a e h T 42 CURRENCY EXCHANGE INTERNATIONAL, CORP. Consolidated Statements of Cash Flows Year ended October 31, 2014 and thirteen month period ended October 31, 2013 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash flows from operating activities Depreciation and amortization Stock based compensation (Note 18) Gain on disposal of assets Deferred taxes Year ended Thirteen month period ended October 31, 2014 October 31, 2013 $ $ 3,419,125 2,641,694 924,225 567,055 - (217,232) 347,052 289,019 (6,380) 11,524 Fair value change in warrant liability - (458,241) Increase/(Decrease) in cash due to change in: Accounts receivable Restricted cash held in escrow Other assets Accounts payable, accrued expenses, and income taxes payable Net cash inflows from operating activities Cash flows from investing activities Purchase of property and equipment Purchase of intangible assets Proceeds from sale of equipment Net cash outflows from investing activities Cash flows from financing activities Proceeds from exercise of stock options, broker options and share warrants (Note 18) Net cash inflows from financing activities Net change in cash Cash, beginning of period Exchange difference on foreign operations Cash, end of period SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for income taxes Cash paid during the period for interest, net (3,188,445) (513,414) (137,113) 1,362,574 2,216,775 (502,350) (2,533,493) - (3,035,843) 31,264 31,264 (787,804) 31,130,866 (712,318) 29,630,744 1,900,273 20,448 (461,760) (73,530) (140,794) 2,407,741 4,556,326 (355,693) (260,797) 18,308 (598,182) 10,932,373 10,932,373 14,890,517 16,564,453 (324,104) 31,130,866 1,540,733 19,797 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Warrants issue on conversion of broker options - 39,414 43 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 1. Nature of Operations and Basis of Presentation Nature of operations Currency Exchange International, Corp. (the "Company") was originally incorporated under the name Currency Exchange International, Inc. under the Florida Corporations Act on April 7, 1998. The Company changed its name to Currency Exchange International, Corp. on October 19, 2007 and commenced its current business operations at that time. The Company is a public corporation whose shares are listed and posted for trading on the Toronto Stock Exchange (TSX) under the symbol "CXI" and the over the counter market (OTCBB) under the symbol “CURN”. The Company operates as a money service business and provides currency exchange, wire transfer, and cheque cashing services at its locations in the United States and Canada. The Company currently maintains a head office and three vaults that serve Canada and United States as well as two small vaults that serve local markets on the West Coast and Northeast regions of the United States. The Company also operates 32 branch locations. The Company’s registered head office is located at 6675 Westwood Boulevard, Suite 300, Orlando, Florida, 32821, United States of America. Change in reporting period Effective February 2013, the Company changed its fiscal year end to October 31st to conform to the reporting period for Canadian chartered banks. Basis of presentation The presentation currency of the Company's consolidated financial statements is the U.S. Dollar. The accounting policies set out in Note 2 have been applied consistently to all periods presented in these consolidated financial statements. These consolidated financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which are stated at their fair value: financial instruments classified as fair value through profit or loss (“FVTPL”), foreign currency forward contracts and share-based payment plans. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements were authorized for issue and approved by the Board of Directors on January 13, 2015. Significant management judgment in applying accounting policies and estimation uncertainty When preparing the financial statements, management makes a number of judgments, estimates, and assumptions about the recognition and measurement of assets, liabilities, income and expense. Significant management judgment The following are significant management judgments in applying the accounting policies of the Company and have the most significant effect on the financial statements: Carrying value of internally developed software The Company makes significant judgments about the value of its proprietary software, www.ceifx.com. Once the scope of a project is deemed technologically feasible, the Company capitalizes costs incurred for the planning, development, and testing phases of modules developed within its software. Subsequent to the completion of the software development cycle, each module is amortized over its estimated useful economic life, which has been assessed as a period of five years. Costs relating to software maintenance, regular software updates, and minor software customizations are expensed as incurred. The Company reviews completed software modules within www.ceifx.com for impairment on an ongoing basis. 44 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 1. Nature of Operations and Basis of Presentation (continued) Income taxes and recoverability of potential deferred tax assets In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company considers whether relevant tax planning opportunities are within the Company’s control, are feasible, and are within management’s ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period. Estimation uncertainty Estimates and underlying assumptions are reviewed on an ongoing basis. Information about estimates and assumptions that have the most significant effect on recognition and measurements of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Share-based payments including broker options Management determines the overall expense for share-based payments using market-based valuation techniques. The fair value of the market-based and performance-based share awards are determined at the date of grant using generally accepted valuation techniques. The determination of the most appropriate valuation model is dependent on the terms and conditions of the grant. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future employee turnover rates, future employee stock option exercise behaviors and corporate performance. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in Note 18. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates. Assets’ carrying values and impairment charges In the determination of carrying values and impairment charges, management looks at the higher of recoverable amount or fair value less costs to sell (in the case of non-financial assets) and at objective evidence, for a significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period. The Company reviews property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Amortization expense The Company's property and equipment and intangible assets are amortized over their estimated useful economic lives. Useful lives are based upon management's best estimates of the length of time that the assets will generate revenue, which is reviewed at least annually for appropriateness. Changes to these estimates can result in variations in the amounts charged for amortization and in the assets' carrying amounts. 45 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 1. Nature of Operations and Basis of Presentation (continued) Fair value measurement Management uses valuation techniques to determine the fair value of certain financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as much as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date. Contingencies The Company is subject to contingencies that are not recognized as liabilities because they are either:   possible obligations that have yet to be confirmed whether the Company has a present obligation that could lead to an outflow of resources embodying economic benefits; or present obligations that do not meet recognition criteria because either it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made. Refer to Notes 4 and 22. 2. Accounting Policies Principles of consolidation The consolidated financial statements comprise the financial statements of the Company and its wholly- owned subsidiaries, Currency Exchange International of Canada Corp. (“CXIC”), a corporation incorporated under the Canada Business Corporations Act and Currency Exchange International America Corp. (“CXIA”), a corporation incorporated under the Florida Business Corporation Act. Subsidiaries are entities over which the Company has control, where control is defined as the power to govern financial and operating policies of an entity so as to obtain benefit from its activities. Subsidiaries are fully consolidated from the date control is transferred to the Company, and are de-consolidated from the date control ceases. All material intercompany transactions are eliminated on consolidation. Cash Cash includes, but is not limited to:      local and foreign currency notes; local and foreign currencies held in tills and vaults; local and foreign currencies in transit; local and foreign currencies in branches or distribution centers; and cash in bank accounts. Foreign cash is recorded at fair value based on foreign exchange rates as of October 31, 2014 and 2013, respectively. 46 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 2. Accounting Policies (continued) Accounts receivable Trade accounts receivable are stated net of an allowance for doubtful accounts. Accounts receivable consist primarily of bulk currency trades with a settlement cycle of 24 to 48 hours. The amount of accounts receivable varies widely from period to period due to the volume of activity and timing differences. There is minimal counter-party risk as the bulk of the Company's receivables reside with banks and other financial institutions. The Company has longstanding relationships with most of its money service business customers and has a strong repayment history. Management estimates the allowance based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer's ability to pay. The Company does not accrue interest on past due receivables. Management determined that allowance for doubtful accounts was $Nil as of October 31, 2014 and 2013, respectively. Revenue recognition Commissions from trading are the difference between the cost and selling price of foreign currency products, including bank notes, wire transmissions, cheque collections and draft issuances (foreign currency margin) and the revaluation of open foreign exchange positions to market value, together with the net gain or loss from foreign currency forward contracts used to offset the changes in foreign exchange positions and commissions paid on the sale and purchase of currencies. The amount of this spread is based on competitive conditions and the convenience and value added services offered. These revenue streams are all reflected in commissions from trading and are recognized at the time each transaction takes place or at the end of each reporting period when revaluations of foreign exchange positions take place. Fee income includes fees collected on cheque cashing, wire transfers, cheque collections, and currency exchange transactions. Fee income is recognized when the transaction is made on a trade date basis. Foreign currency translation Transactions denominated in foreign currencies are translated at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the consolidated statement of financial position date are translated at rates at that date. Exchange gains and losses, which arise from normal trading activities, are included in operating expenses in the consolidated statements of income and comprehensive income when incurred. The functional currency of CXIC is the Canadian Dollar and the functional currency of the Company and CXIA is the U.S. Dollar. In situations where the functional currency is not the same as the presentation currency, foreign currency denominated assets and liabilities are translated to their U.S. Dollar equivalents using foreign exchange rates in effect at the consolidated statement of financial position date. Revenues and expenses are translated at average rates of exchange during the period. Exchange gains or losses arising on foreign currency translation of the Canadian subsidiary are included in accumulated other comprehensive income. On disposal of a foreign operation, the related cumulative translation differences recognized in equity reserves are reclassified to profit or loss and are recognized as part of the gain or loss on disposal. Foreign currency forward contracts Foreign currency forward contracts are recognized on the Company's consolidated statement of financial position when the Company becomes a party to the contractual provisions of the instrument. The instrument is derecognized from the consolidated statement of financial position when the contractual rights or obligations arising from that instrument expire or are extinguished. Forward currency contracts are recognized at fair value. The gain or loss on fair value is recognized immediately in the consolidated statement of income and comprehensive income. 47 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 2. Accounting Policies (continued) Leases The Company has entered into various operating leases. Payments on operating lease agreements are recognized and expensed on a straight-line basis over the term of the lease. Associated costs, such as maintenance and insurance, are expensed as incurred. Property and equipment Property and equipment is initially recorded at its cost and depreciated over its estimated useful life. Cost includes expenditures which are directly attributable to bringing the asset into working condition for its intended use. Depreciation is calculated on a straight line basis, as follows: Vehicles Computer equipment Furniture and equipment Leasehold improvements 3 years 3 years 3 years lesser of the lease term or useful life When parts of an asset have different useful lives, depreciation is calculated on each separate part. In determining the useful lives of the component parts, the Company considers both the physical condition of the parts as well as technological life limitations. Estimates of remaining useful lives and residual values are reviewed annually. Changes in estimates are accounted for prospectively. Provisions Provisions are recognized when, (a) the Company has a present obligation (legal or constructive) as a result of a past event, and (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the consolidated statement of income and comprehensive income net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Intangible assets Intangible assets are comprised of the Company's internally developed software (“CEIFX”) and its related modules as well as software and customer trading relationships purchased from U.S. Exchange House, Inc. (“USEH”) (Note 4). Costs that are directly attributable to a project’s development phase are recognized as intangible assets, provided they have met the following recognition requirements:      the development costs can be measured reliably; the project is technically and commercially feasible ; the Company intends to and has sufficient resources to complete the project; the Company has the ability to use or sell the software; and the software will generate probable future economic benefits. Development costs not meeting these criteria for capitalization are expensed as incurred. Amortization for intangibles is computed on an individual basis over the estimated economic life using the straight-line method as follows: Internally developed software Software purchased from USEH Customer trading relationships 5 years 2 years 5 years 48 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 2. Accounting Policies (continued) Residual values and useful lives are reviewed at each reporting date. Share-based payments including broker options The Company's share option plan allows certain employees, directors and consultants to acquire shares of the Company. Equity settled share based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a graded vesting basis over the period during which the employee, director or consultant becomes unconditionally entitled to the equity instruments, based on the Company's estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves. Financial instruments Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs, except for those carried at FVTPL which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities is described below. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires. Financial assets Financial assets within the scope of International Accounting Standards (“IAS”) 39 Financial Instruments: Recognition and Measurement (“IAS 39”) are classified as financial assets at FVTPL, loans and receivables, held-to-maturity investments or available-for-sale financial assets for purposes of subsequent measurement. The Company determines the classification of its financial assets at initial recognition. Note that the Company does not hold any held-to-maturity or available-for-sale financial assets. All financial assets except for those at FVTPL are reviewed for impairment at least at each reporting date to identify whether there is any objective evidence that a financial asset or group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below. Fair value through profit or loss Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or they meet certain conditions and are designated at FVTPL upon initial recognition. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. Assets within this category are initially recognized at fair value with changes in fair value recorded through income. The fair values of financial assets in this category are determined by reference to active market transaction or using a valuation technique where no active market exists. Cash in local and foreign currencies held in tills, vaults, or in transit as well as derivatives are included in this category of financial assets. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re-measured to their fair value at each reporting date. The resulting gain or loss is recognized in profit or loss immediately. A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities. 49 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 2. Accounting Policies (continued) Loans and receivables Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Financial assets including accounts receivable, financial instruments included in other current assets and restricted cash held in escrow are all classified as loans and receivables. Individually significant receivables are considered for impairment when they are past due or when objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the type of counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group. Financial liabilities Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss or other financial liabilities. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value. The Company's financial liabilities include accounts payable, accrued expenses and contingent consideration. All financial liabilities are classified as other financial liabilities, with the exception of contingent consideration, which is classified as fair value through profit or loss. Other financial liabilities Other financial liabilities are recognized initially at fair value net of any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest and any transaction costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or (where appropriate) to the net carrying amount on initial recognition. Financial instruments recorded at fair value Financial instruments recorded at fair value in the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:    Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: unobservable inputs for the asset or liability. Earnings per share The Company presents basic and diluted earnings per share data for its common shares, calculated by dividing the earnings attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by adjusting the earnings attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive warrants and options outstanding that may add to the total number of common shares. 50 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 2. Accounting Policies (continued) Income taxes Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the consolidated statement of financial position date. Deferred income taxes are calculated using the liability method on temporary differences. Tax losses available to be carried forward as well as other income tax credits are assessed for recognition as deferred tax assets. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted at the consolidated statement of financial position date. This provision is not discounted. Deferred tax liabilities are generally recognized in full, although IAS 12 Income Taxes (“IAS 12”) specifies limited exemptions. Deferred tax assets are recognized to the extent that it is probable that they will be able to be offset against future taxable income. Management bases its assessment of the probability of future taxable income on the Company's latest approved forecasts, which are adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The specific tax rules in the numerous jurisdictions in which the Company operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, that deferred tax asset is recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. Changes in deferred tax assets and liabilities are recognized as a component of tax expense in the consolidated statement of income and comprehensive income, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. 3. New Accounting Policies and Future Accounting Pronouncements New accounting policies IFRS 10 Consolidated Financial Statements (“IFRS 10”) supersedes IAS 27 Consolidated and Separate Financial Statements (“IAS 27”) and SIC 12 Consolidation – Special Purpose Entities. IFRS 10 revises the definition of control and provides extensive new guidance on its application. These new requirements have the potential to affect which of the Company’s investees are considered to be subsidiaries and therefore to change the scope of consolidation. The requirements on consolidation procedures, accounting for changes in non-controlling interests and accounting for loss of control of a subsidiary are unchanged. The Company has adopted this standard for the annual period commencing November 1, 2013. The adoption of this standard had no measurement impact on the Company’s financial results. IFRS 12 Disclosure of Involvement with Other Entities (“IFRS 12”) requires a parent company to disclose information about significant judgments and assumptions it has made in determining whether it has control, joint control, or significant influence over another entity and the type of joint arrangement when the arrangement has been structured through a separate vehicle. An entity should also provide these disclosures when changes in facts and circumstances affect the entity’s conclusion during the reporting period. The Company has adopted this standard for the annual period commencing November 1, 2013. The adoption of this standard had no disclosure impact on the Company’s financial results. 51 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 3. New Accounting Policies and Future Accounting Pronouncements (continued) FRS 13 Fair Value Measurement (“IFRS 13”) defines fair value, sets out in a single IFRS a framework for measuring fair value and identifies required disclosures about fair value measurements. The Company has adopted this standard for the annual period commencing November 1, 2013. The adoption of this standard had no measurement impact on the Company’s financial results. Enhanced disclosures have been included in Note 14 of the consolidated financial statements. Future accounting pronouncements Certain pronouncements were issued by the IASB or International Financial Reporting Interpretations Committee (“IFRIC”). Many are not applicable or do not have a significant impact to the Company and have been excluded. The following standards have not yet been adopted and are being evaluated to determine their impact on the Company. IFRS 9 Financial Instruments (“IFRS 9”) was issued in July 2014. IFRS 9 replaces IAS 39. The new standard includes guidance on recognition and derecognition of financial assets and financial liabilities, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Company is currently evaluating the impact of IFRS 9 on its consolidated financial statements. IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) was issued in May 2014. IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction Contracts, and some revenue related Interpretations. IFRS 15 establishes a new control-based revenue recognition model and is effective for annual periods beginning on or after January 1, 2017, with early adoption permitted. The Company is currently evaluating the impact of IFRS 15 on its consolidated financial statements. IFRIC 21 Levies (“IFRIC 21”) was issued in May 2013 and is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. A levy is an outflow of resources embodying economic benefits that is imposed by government on entities in accordance with legislation, other than income taxes within the scope of IAS 12 and fines or other penalties imposed for breaches of legislation. IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual periods beginning on or after January 1, 2014, with early adoption permitted. The Company is currently evaluating the impact of IFRIC 21 on its consolidated financial statements. IAS 32 Financial Instruments – Presentation (“IAS 32”) was amended to clarify the criteria that should be considered in determining whether an entity has a legally enforceable right of set off in respect of its financial instruments. Amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014, with early adoption permitted. The Company is currently evaluating the impact of the amendments to IAS 32 on its consolidated financial statements. 52 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 4. Purchase of assets from U.S. Exchange House, Inc. On March 28, 2014 the Company purchased certain assets of USEH, pertaining to its bank note operations located in the United States and Canada. The Company acquired USEH’s customer trading relationships, certain prepaid and fixed assets and the USEH trading software used to operate the bank note business. The Company paid $2,350,000 in cash on closing and will have two additional contingent payments of up to a maximum of $1,325,000 each and payable on the first and second anniversary after closing. The additional payments will be based on the amount of revenue generated from the customer trading relationships acquired. The Company has estimated the likelihood of future revenues to determine the estimated contingent consideration. Management has estimated these payments for the first and second anniversary at $892,723 and $585,144, respectively, for total contingent consideration of $1,477,867. The Company allocated this contingent consideration to customer trading relationships. An increase (decrease) in the estimate of the amount of revenue generated from the customer trading relationships acquired of +/- 10% would increase (decrease) the fair value of the contingent consideration by approximately $480,000. This transaction did not meet the criteria of an acquisition of a business under IFRS 3 thus the transaction did not result in any goodwill being recognized. The Company allocated the purchase price and contingent consideration of $3,827,867 as follows: Customer trading relationships Fixed and prepaid assets Computer software Total $3,288,283 59,584 480,000 $3,827,867 The Company recorded expenses of $141,353 in legal and other professional fees to complete the transaction. 53 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 5. Geographical Segments The Company only has a single reportable segment, but operates in both the United States and Canada. The Company's revenue from external customers and information about its assets by geographical location are detailed below: Revenues ($) United States Canada Total Year ended October 31, 2014 11,949,822 10,056,131 22,005,953 Thirteen months ended October 31, 2013 14,382,012 1,608,422 15,990,434 Assets Cash At October 31, 2014 At October 31, 2013 United States Canada Total United States Canada Total $ $ $ $ $ $ 2,241,023 27,389,721 29,630,744 6,451,236 24,679,630 31,130,866 Accounts receivable 19,610 4,158,948 4,178,558 59,640 973,719 1,033,359 Restricted cash held in escrow - 714,121 714,121 - 200,707 200,707 Other current assets 273,774 274,903 548,677 297,838 141,957 439,795 Property and equipment 528,048 140,032 668,080 348,001 113,272 461,273 Intangible assets 2,675,720 1,054,654 3,730,374 371,130 - 371,130 Other assets 34,137 35,513 69,650 31,636 13,053 44,689 Deferred tax asset 174,890 (5,792) 169,098 - - - Total assets 5,947,202 33,762,100 39,709,302 7,559,481 26,122,338 33,681,819 On October 31, 2013 the Company restructured its operations to add additional capital into its wholly- owned subsidiary, CXIC, as part of its bank application process. As a result, cash and capital in CXIC increased substantially. Additionally, for the year ended October 31, 2014 the Company realized revenues of $7,291,089 in its Canadian subsidiary that would have previously been recognized in the United States operating company. 6. Cash Included within cash of $29,630,744 at October 31, 2014 (2013 - $31,130,866) are the following balances: At October 31, 2014 At October 31, 2013 Cash held in transit, vaults, tills and consignment locations Cash deposited in bank accounts in jurisdictions in which the Company operates Total $ 21,826,848 7,803,896 29,630,744 $ 15,427,028 15,703,838 31,130,866 54 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 7. Restricted cash held in escrow Certain of the Company's secured transactions and derivative contracts require the Company to post cash collateral or maintain minimum cash balances in escrow. The foreign currency forward contracts can be closed immediately resulting in the collateral being liquidated. The Company had cash collateral amounts of $714,121 at October 31, 2014 (2013 - $200,707). 8. Operating Leases The Company and its subsidiary companies entered into non-cancellable operating leases with terms in excess of one year for the use of certain facilities. The rent expense associated with these leases for the year ended October 31, 2014 was $2,024,290 (thirteen month period ended October 31, 2013 - $1,683,547). The following is a schedule of future minimum rental payments under these agreements as of October 31, 2014: Year ended October 31, 2015 October 31, 2016 October 31, 2017 October 31, 2018 October 31, 2019 and thereafter Total Remaining minimum payments required $1,512,998 $1,012,842 $891,438 $559,577 $229,379 $4,206,234 The Company is also responsible for its proportionate share of operating costs. 9. Property and equipment Property and equipment consisted of the following at October 31, 2014: Cost Balance, September 30, 2012 Additions Disposals Balance, October 31, 2013 Additions Disposals Net exchange differences Balance, October 31, 2014 Depreciation Balance, September 30, 2012 Depreciation Disposals Balance, October 31, 2013 Depreciation Disposals Net exchange differences Balance, October 31, 2014 Carrying amounts Balance, October 31, 2013 Balance, October 31, 2014 Vehicles Computer equipment Furniture and equipment Leasehold improvements Total $ 66,373 31,683 (49,853) 48,203 16,918 - - 65,121 $ 124,484 33,564 (25,812) 132,236 86,157 (2,891) (1,506) 213,996 $ 171,826 33,327 (6,861) 198,292 118,853 - (3,628) 313,517 $ $ 952,170 589,487 353,532 254,958 (98,838) (16,312) 828,133 1,206,864 499,092 277,164 (46,583) (43,692) (13,062) (7,928) 1,053,677 1,646,311 Vehicles Computer equipment Furniture and equipment Leasehold improvements $ 42,246 14,231 (37,926) 18,551 15,150 - - 33,701 Vehicles $ 29,652 31,420 $ 86,644 31,003 (25,811) 91,836 42,339 (2,891) (655) 130,629 $ 96,748 41,733 (6,861) 131,620 49,502 - (2,146) 178,976 $ 335,407 184,489 (16,312) 503,584 173,534 (43,692) 1,499 634,925 Computer equipment Furniture and equipment Leasehold improvements $ 40,400 83,367 $ 66,672 134,541 $ 324,549 418,752 Total $ 561,045 271,456 (86,910) 745,591 280,525 (46,583) (1,302) 978,231 Total $ 461,273 668,080 55 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 10. Intangible assets Intangible assets consisted of the following at October 31, 2014: Acquired software Internally developed software Customer trading relationships Total Cost Balance, September 30, 2012 Additions Balance, October 31, 2013 Additions Balance, October 31, 2014 Amortization Balance, September 30, 2012 Amortization Balance, October 31, 2013 Amortization Net exchange differences Balance, October 31, 2014 $ 231,590 260,797 492,387 234,620 727,007 $ - - - 480,000 480,000 $ - - - $ 231,590 260,797 492,387 3,288,283 4,002,903 3,288,283 4,495,290 Internally developed software Acquired software Customer trading relationships $ 45,661 75,596 121,257 119,864 - 241,121 $ - - - 140,000 - 140,000 $ - - - 383,836 (41) 383,795 Internally developed software Acquired software Customer trading relationships Total $ 45,661 75,596 121,257 643,700 (41) 764,916 Total Carrying amounts Balance, October 31, 2013 Balance, October 31, 2014 $ 371,130 485,886 $ - 340,000 $ - $ 371,130 2,904,488 3,730,374 11. Income taxes The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of October 31, 2014 and 2013 consist of the following: Deferred tax assets Accrued expenses Stock based compensation Other Total deferred tax assets Deferred tax liabilities Intangible assets Net property and equipment Total deferred tax liabilities Net deferred tax asset/(liability) October 31, 2014 October 31, 2013 $ $ 45,444 340,748 27,811 414,003 (187,175) (57,730) (244,905) 169,098 63,468 137,837 - 201,305 (144,741) (104,698) (249,439) (48,134) Reconciliation of the provision for income taxes to the amount calculated using the Company’s statutory tax rate for the year ended October 31, 2014 and the thirteen month period ended October 31, 2013 are as follows: Income before taxes Statutory tax rate Tax expense at statutory rate Tax on dividend income Withholding tax payment Foreign tax rate adjustment Other non-deductible differences (benefit) Income tax expense October 31, 2014 $ 6,021,836 38.5% 2,318,407 210,192 79,541 (70,252) 64,823 2,602,711 October 31, 2013 $ 4,206,952 38% 1,598,642 - - - (33,384) 1,565,258 56 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 11. Income taxes (continued) The enacted tax rates in Canada of 26.5% (2013 – 26.5%) and in the United States of 38.5% (2013 – 38%) where the Company operates are applied in the tax provision calculation. The Canadian rate remained unchanged, whereas the increase in the United States rate was due to change in income allocations amongst the states. The provisions for income taxes for the year ended October 31, 2014 and the thirteen month period ended October 31, 2013 consists of the following: Current tax expense Deferred tax (benefit) expense Income tax expense October 31, 2014 October 31, 2013 $ 1,553,734 11,524 1,565,258 $ 2,819,943 (217,232) 2,602,711 12. Seasonality of Operations Seasonality is reflected in the timing of when foreign currencies are in greater or lower demand. In a normal operating year there is some seasonality to the Company's operations with higher commissions generally from March until September and lower commissions from October to February. This coincides with peak tourism seasons in North America when there are generally more travelers entering and leaving the United States and Canada. 13. Lines of credit The Company maintains two lines of credit for liquidity during peak business periods. The Company has a revolving line of credit with BMO Harris Bank, N.A. for up to $6,000,000. The credit line is secured against the Company’s cash and other non-cash assets. The line of credit bears interest at Libor plus 2.0% (at October 31, 2014 – 2.16%). At October 31, 2014, the balance outstanding was $Nil (2013 - $Nil). On January 4, 2011, the Company entered into an unsecured Master Purchasing Agreement with a shareholder of the Company. The Company has available credit of Cdn$2,000,000 under the agreement. Specific repayment terms and interest rates are negotiated when drawings are made. Any and all drawings from the credit facility are subordinate to the line of credit with BMO Harris Bank, N.A. At October 31, 2014, the balance outstanding was $Nil (2013 - $Nil). 14. Fair Value Measurement of Financial Instruments Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as outlined in Note 2. The fair value determination is the estimated amount that the Company would receive to sell a financial asset or pay to transfer a financial liability in an orderly transaction between market participants at the measurement date. 57 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 14. Fair Value Measurement of Financial Instruments (continued) The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value at October 31, 2014: Financial assets Cash Forward contract positions Total assets Financial Liabilities Contingent consideration Total liabilities Financial assets Cash Forward contract positions Total assets Level 1 $ Level 2 $ Level 3 $ Total $ At October 31, 2014 29,630,744 - 29,630,744 - - - 117,732 117,732 - - - - - 1,477,867 1,477,867 At October 31, 2013 29,630,744 117,732 29,748,476 1,477,867 1,477,867 Level 1 $ Level 2 $ Level 3 $ Total $ 31,130,866 - 31,130,866 - 83,430 83,430 - - - 31,130,866 83,430 31,214,296 *There were no transfers between Level 1 and Level 2 during the year ended October 31, 2014. Cash (Level 1) The Company’s cash consisting of local and foreign currency notes held in vaults, tills, bank accounts, and in transit are based upon foreign exchange rates quoted in active markets as of October 31, 2014 and 2013, respectively. Forward contract positions (Level 2) The Company’s forward contract positions are not traded in active markets. These have been fair valued using observable forward exchange rates. The effects of non-observable inputs are not significant for foreign contract positions Contingent Consideration (Level 3) The fair value of contingent consideration, related to the USEH asset acquisition described in Note 4, is estimated based on the amount of revenue generated from the acquired customer trading relationships. The significant input for the fair value estimate is management’s estimate of revenues from acquired customers to continue transacting with the Company. For information about the sensitivity of the fair value measurement to the changes in the input at October 31, 2014, see Note 4. The fair value estimate of cash outflows is $1,477,867 at October 31, 2014. This reflects management’s best estimate of a retention rate of key acquired customers in year 1 and in year 2. Due to their short term nature, the carrying value of the following financial instruments approximates their fair value at the balance sheet date: Accounts receivable   Restricted cash held in escrow  Accounts payable and accrued expenses 15. Risk Management The Company's activities expose it to a variety of financial risk: credit risk, foreign currency risk, interest rate risk, and liquidity risk. The Company's risk management policies are designed to minimize the potential adverse effects on the Company's financial performance. 58 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 15. Risk Management (continued) Financial risk management is carried out by the Chief Financial Officer (“CFO”) under policies approved by the senior management and the Board of Directors. Policies are in place to evaluate and monitor risk and in some cases, prescribe that the Company hedge its financial risks. The analysis below presents information about the Company's exposure to each of the risks arising from financial instruments and the Company's objectives, policies and processes for measuring and managing these risks. Credit Risk Credit risk is the risk of financial loss associated with a counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash in bank accounts, accounts receivable, and forward contracts from hedging counterparties. All customer relationships are negotiated by senior management. The Company maintains accounts in high quality financial institutions. At various times, the Company's bank balances exceed the federally or provincially insured limits. The credit risk associated with accounts receivable is limited, as the Company's receivables consist primarily of bulk currency trades with a settlement cycle of 24 to 48 hours. There is minimal counterparty risk as the majority of the Company's receivables reside with banks and other financial institutions. The company has longstanding relationships with most of its money service business customers and has a strong repayment history. For the purpose of risk control, the customers are grouped as follows: domestic and international banks, money service businesses, and other customers. Credit limits are established for each customer, whereby the credit limit represents the maximum open amount without requiring payments in advance. These limits are reviewed regularly by senior management. A breakdown of accounts receivable by category is below: At October 31, 2014 At October 31, 2013 Customer type Domestic and international banks Money service businesses Other Total $ 2,953,383 1,204,410 20,765 $ 443,739 584,109 5,511 4,178,558 1,033,359 The maximum exposure to credit risk is represented by the carrying amount of each financial asset on the statement of financial position. There are no commitments that could increase this exposure to more than the carrying amount. 59 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 15. Risk Management (continued) Foreign Currency Risk The volatility of the Company's foreign currency holdings may increase as a result of the political and financial environment of the corresponding issuing country. Several currencies have limited exchange rate exposure as they are pegged to the U.S. Dollar, the reporting currency of the Company. Management believes its exposure to foreign currency fluctuations is mitigated by the short-term nature and rapid turnover of its foreign currency inventory, as well as the use in certain instances of forward contracts to offset these fluctuations. Due to their nature, some minor and exotic foreign currencies cannot be hedged or are cost prohibitive to hedge. In order to mitigate the risks associated with holding these foreign currencies, the Company assigns wider bid/ask spreads and maintains specific inventory targets to minimize the impact of exchange rate fluctuations. These targets are reviewed regularly and are increased or decreased to accommodate demand within acceptable risk tolerances The amount of unhedged inventory held in vaults, tills and in transit at October 31, 2014 was approximately $5,725,000 (2013 - $3,040,000). The amount of currency that is unhedged and that is not pegged to the U.S. Dollar is approximately $4,090,000 (2013 - $1,550,000). A 2% increase/decrease in the market price for the aggregate of the Company's unhedged/un-pegged foreign currencies would result in an exchange gain/loss of approximately +$80,000/-80,000 (2013 - gain/loss of approximately +$30,000/-$30,000). On a consolidated basis, the Company is also exposed to foreign currency fluctuations between the U.S. Dollar and the Canadian Dollar, being the functional currency of its Canadian subsidiary, CXIC. The Company does not hedge its net investment in its Canadian subsidiary and the related foreign cur- rency translation of local earnings. Interest Rate Risk At October 31, 2014, the Company had access to interest bearing financial instruments in cash and short term accounts payable. A significant amount of the Company's cash is held as foreign currency banknotes in tills and vaults. These amounts are not subject to interest rate risk. Cash held in some of the Company’s accounts are interest bearing; however, since prevailing interest rates are low there is minimal interest rate risk. Borrowings bear interest at fixed and variable rates. Cash and borrowings issued at variable rates expose the Company to cash flow interest rate risk. For the interest rate profile of the Company's interest bearing financial liabilities, refer to Note 13. The Company manages interest rate risk in order to reduce the volatility of the financial results as a consequence of interest rate movements. For the decision whether new borrowings shall be arranged at a variable or fixed interest rate, senior management focuses on an internal long-term benchmark interest rate and considers the amount of cash currently held at a variable interest rate. Currently the interest rate exposure is un-hedged. If interest rates had been 50 basis points higher/lower with all other variables held constant, after tax profit for the twelve month period ended October 31, 2014 would have been approximately +$4,500/- $4,500 higher/lower (October 31, 2013 +$1,000/-$1,000 higher/lower) as a result of credit lines held at variable interest rates. Liquidity Risk Liquidity Risk is the risk that the Company will not be able to meet its financial obligations as they fall due. CFO informs the Chief Executive Officer (“CEO”), the Board of Directors, and the Audit Committee of capital and liquidity issues as they occur in accordance with established policies and guidelines. The Company targets to have a minimum cash reserve or credit lines greater than 15% of the Company's prior year's revenues. 60 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 15. Risk Management (continued) The following are non-derivative contractual financial liabilities: Non-derivative financial liabilities Carrying amount Estimated contractual amount Next fiscal year Future fiscal years At October 31, 2014 Accounts payable Accrued expenses Contingent consideration Non-derivative financial liabilities Accounts payable Accrued expenses $ 2,903,669 1,239,367 1,477,867 $ 2,903,669 1,093,044 1,477,867 $ 2,903,669 1,093,044 892,723 $ $Nil $Nil 585,144 At October 31, 2013 Carrying amount $ 2,918,054 801,166 Contractual amount Next fiscal year Future fiscal years $ 2,918,054 757,237 $ 2,918,054 757,237 $ $Nil $Nil The Company had available unused lines of credit amounting to $8,000,000 at October 31, 2014 (2013 - $4,000,000). Capital Management The Company manages working capital through its financial and operational forecasting processes. The Company defines working capital as total current assets less other current liabilities. The Company reviews its working capital and forecasts its cash flows based on operating expenditures, and other investing and financing activities related to its daily operations. October 31, 2014 October 31, 2013 Current assets 35,072,100 32,804,727 Current liabilities (6,098,983) (3,869,709) Capital 28,973,117 28,935,018 The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, obtaining loan financing, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis. 16. Foreign Currency Forward Contracts The Company enters into non-deliverable foreign currency forward contracts to mitigate the risk of fluctuations in the exchange rates of its holdings of major currencies. Changes in the fair value of the contracts and the corresponding gains or losses are recorded daily and are included in commissions on the consolidated statements of income and comprehensive income. The Company’s management strategy is to reduce the risk of fluctuations associated with foreign exchange rate changes. The foreign currency forward contracts can be closed immediately resulting in the collateral being liquidated. At October 31, 2014 and 2013, $714,121 and $200,707, respectively, were being held as collateral on these contracts and are reflected as restricted cash held in escrow in the consolidated statements of financial position. See Note 7. The fair value of the forward positions on October 31, 2014 and 2013 were $117,732, and $83,430, respectively (Note 23). 61 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 17. Warrant Liability On March 9, 2012, the Company completed a public offering by issuing 1,380,000 units for gross proceeds of Cdn$9,177,000 (Note 18). Each unit was comprised of one common share and one common share purchase warrant and expired on September 12, 2013. The grant date fair value of $1,381,235 was allocated to the warrants based on the Black-Scholes option pricing model using the following inputs: Risk-free interest rate Expected volatility Expected dividend yield Expected life (years) Fair value of common share at grant date March 9, 2012 0.20% 59% Nil 1.5 Cdn$5.66 Warrants issued by the Company to purchase common shares, for a fixed price stated in Canadian Dollars, a currency other than the Company’s functional currency of US Dollars, and not offered pro rata to all existing shareholders of the same class at the time of issuance, are considered derivative financial liabilities under IFRS. Such warrants are required to be measured and recognized at fair value as a liability with changes subsequent to initial recognition included in the consolidated statement of income and comprehensive income. Subsequently, the warrants became publically traded and the fair value of the warrants is based on the quoted market price of the warrants at each reporting date. The warrant liability is classified as Level 1 within the fair value hierarchy. On December 24, 2012, 59,634 broker compensation options described in Note 18 were exercised enabling each option holder one common share and one common share purchase warrant. In February 2013, 40 broker compensation options described in Note 18 were exercised enabling each option holder one common share and one common share purchase warrant. In March of 2013, 23,006 broker compensation options described in Note 18 were exercised enabling each option holder one common share and one common share purchase warrant. Prior to the expiry date, a total of 1,435,725 warrants were converted in to common shares and 26,955 warrants remained outstanding. At the time of expiry, the warrant liability was extinguished and the gain was recognized on the consolidated statement of income and comprehensive income. During the year ended October 31, 2014, the Company realized a non-cash gain of $Nil on the revaluation and expiration of the liability (thirteen-month period ended October 31, 2013 - non-cash gain of $458,241). 18. Equity Share Capital The authorized share capital consists of 100,000,000 common shares. The common shares have a par value of $1.00. During the thirteen month period ended October 31, 2013, 82,680 broker compensation units were exercised at a price of Cdn$6.65 per unit, for proceeds of $548,264 (Cdn$549,822). In August and September of 2013, 1,435,725 common share purchase warrants were exercised, each for one common share of stock at a price of Cdn$7.50, for proceeds of $10,384,109 (Cdn$10,767,938). In September of 2014, 4,600 employee stock options were exercised at a price of Cdn$7.50, for proceeds of $31,264 (Cdn$34,500). 62 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 18. Equity (continued) Stock options The Company adopted an incentive stock option plan dated April 28, 2011 (the "Plan"). The Plan is a rolling stock option plan, under which 10% of the outstanding shares at any given time are available for issuance thereunder. The purpose of the Plan is to promote the profitability and growth of the Company by facilitating the efforts of the Company to attract and retain directors, senior officers, employees, and management. Vesting terms under the Plan will occur 1/3 upon the first anniversary, 1/3 upon the second anniversary and 1/3 upon the third anniversary of the grant unless otherwise specified by the Board of Directors. Below is information related to each option grant: May 4, 2017 Expiry Date Date of Grant May 4, 2012 December 17, 2012 December 18, 2017 May 3, 2013 October 29, 2013 October 29, 2013 July 9, 2014 October 30, 2014 October 30, 2014 May 3, 2018 October 29, 2018 October 29, 2018 July 9, 2019 October 30, 2019 October 30, 2019 Share price at grant date Cdn$7.30 Cdn$6.75 Cdn$7.35 Cdn$10.86 Cdn$10.86 Cdn$13.24 Cdn$18.00 Cdn$18.00 Amount granted 90,000 116,000 22,000 35,640 114,420 1,762 87,215 24,144 Risk- free interest rate 0.78% 0.74% 0.73% 1.29% 1.29% 1.70% 1.61% 1.61% Expected Exercise volatility Price 45% Cdn$7.50 49% Cdn$7.50 38% Cdn$7.65 35% Cdn$10.86 35% Cdn$10.86 Cdn$13.24 29% 27% Cdn$16.21* 27% Cdn$16.21* Fair value of option at grant date $2.84 $2.66 $2.42 $3.44 $3.44 $3.58 $4.97 $4.97 * Exercise price determined by average share price for previous 20 trading days The outstanding options at October 31, 2014 2013 and the respective changes during the periods are summarized as follows: Outstanding at October 1, 2012 Granted Outstanding at October 31, 2013 Granted Exercised Outstanding at October 31, 2014 Number of options Exercise price # Cdn$ 90,000 288,060 378,060 113,121 (4,600) 486,581 7.50 9.26 8.84 16.16 7.50 10.54 The following options are outstanding and exercisable at October 31, 2014: Options Outstanding and Exercisable Grant Date Exercise price Number outstanding May 4, 2012 December 17, 2012 May 3, 2013 October 29, 2013 October 29, 2013 July 9, 2014 October 30, 2014 Total Cdn$ $7.50 $7.50 $7.65 $10.86 $10.86 $13.24 $16.21 # 90,000 111,400 22,000 35,640 114,420 1,762 111,359 486,581 Average remaining contractual life (years) 2.51 3.13 3.50 3.99 3.99 4.69 5.00 Number exercisable # 60,000 34,066 7,333 35,640 38,140 1,762 - 176,941 63 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 19. Earnings per Share The calculation of earnings per share is presented below. Diluted earnings per share for the year ended October 31, 2014 and for the thirteen month period ended October 31, 2013 included all stock options outstanding. Basic Net income Weighted average number of shares outstanding Basic earnings per share Diluted Net income Weighted average number of shares outstanding Diluted earnings per share Year ended Thirteen month period ended October 31, 2014 October 31, 2013 $3,419,125 5,391,053 $0.63 $3,419,125 5,509,753 $0.62 $2,641,694 4,126,996 $0.64 $2,641,694 4,133,075 $0.64 20. Operating expenses Year ended Thirteen month period ended October 31, 2014 October 31, 2013 Salaries and benefits Rent Legal and professional Postage and shipping Stock based compensation $ 7,363,075 2,024,290 915,745 1,729,684 567,055 Other general and administrative 2,216,335 $ 5,742,923 1,683,547 1,089,853 1,187,081 289,019 1,605,496 Operating expenses 14,816,184 11,597,919 21. Expenses Related to Bank Application On November 23, 2012, the Company submitted its application to continue its wholly-owned subsidiary, CXIC, as a new Canadian Schedule I bank. Subject to review and approval of the application by the Office of the Superintendent of Financial Institutions (“OSFI”) and the Minister of Finance, the new bank will be called "Exchange Bank of Canada" in English and "Banque d'échange du Canada" in French and will have its head office in Toronto. The Company continues to hold regular communications with OSFI in pursuit of its banking license. During the year ended October 31, 2014, the Company recognized legal and administrative expenses of $126,098 in relation to the application process (thirteen month period ended October 31, 2013 – $272,004). 64 CURRENCY EXCHANGE INTERNATIONAL, CORP. Notes to Consolidated Financial Statements Year ended October 31, 2014 and thirteen month period ended October 31, 2013 22. Compensation of Key Management Personnel and Related Party Transactions In accordance with IAS 24 Related Party Disclosures, key management personnel are those persons having authority and responsibility for planning, directing and controlling activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. The remuneration of directors and other members of key management personnel during the year ended October 31, 2014 and the thirteen month period ended October 31, 2013 was as follows: Short-term benefits Post-employment benefits Stock based compensation Year ended Thirteen month period ended October 31, 2014 October 31, 2013 $ 1,275,100 30,123 542,876 1,848,099 $ 1,090,856 18,700 255,535 1,365,091 On October 1, 2011, the Company entered into an employment agreement with the President and CEO of the Company. Such agreement contains clauses requiring additional payments of a minimum of $450,000 to be made upon the occurrence of certain events such as a change of control of the Company or termination for reasons other than cause. As the likelihood of a change of control of the Company is not determinable, the contingent payments have not been reflected in the consolidated financial statements. The Company incurred legal and professional fees in the aggregate of $138,218 for the year ended October 31, 2014 (thirteen month period ended October 31, 2013 $86,171) charged by entities controlled by directors or officers of the Company. 23. Other current assets Prepaid rent Prepaid insurance Due on debit and credit cards Forward contract positions Other assets Total At October 31, 2014 At October 31, 2013 $ 171,428 105,522 40,177 117,732 113,818 548,677 $ 131,034 92,871 33,447 83,430 99,013 439,795 24. Subsequent Events On November 1, 2014, the Company completed a reorganization of its corporate structure resulting in a one-time increase in income taxes of approximately $190,000. This tax liability occurred as a result of the fair value increase in its investment in a subsidiary and will be recorded in the first quarter of 2015. 65 Board of directors Randolph W. Pinna CEO, President, Chairman of the Board Mr. Pinna was appointed the Chief Executive Officer, President and Director of CXI when it began operating in October 2007. From 1989 to 2003, Mr. Pinna was President, Chief Executive Officer and Director of Foreign Currency Exchange Corp. and remained in this role after the friendly acquisition by Bank of Ireland Group until October 2007. Mr. Pinna was responsible for the growth of Foreign Currency Exchange Corp. from a small, one location operation in Tampa, Florida to an international, publicly-traded company on the TSX. Mr. Pinna has more than 25 years of experience in international banking with an emphasis on foreign exchange. Joseph August Director of CXI Independent Board Member Chirag Bhavsar Lead Director of CXI Independent Board Member Mark D. Mickleborough Director of CXI Board Member Linda Stromme Director of CXI Independent Board Member V. James Sardo Director of CXI Independent Board Member James D.A. White Director of CXI Independent Board Member CXI Annual Report 2014 66 Currency Exchange International 6675 Westwood Boulevard, Suite 300 Orlando, FL 32821 USA www.ceifx.com U.S.A. (888) 998 3948 Canada (888) 223 3934 Email: InvestorRelations@ceifx.com Currency Exchange International of Canada 390 Bay Street Toronto, Ontario M5H 2Y2 Canada www.ceifx.com

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